INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made as of this October 22, 2004, between Vanguard
Horizon Funds, a Delaware statutory trust (the "Trust"), and Acadian Asset
Management, Inc. (the "Advisor").
W I T N E S S E T H
WHEREAS, the Trust is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust offers a series of shares known as Vanguard Global
Equity Fund (the "Fund"); and
WHEREAS, the Trust desires to retain the Advisor to render investment
advisory services to the Fund, and the Advisor is willing to render such
services.
NOW THEREFORE, in consideration of the mutual promises and undertakings set
forth in this "Agreement," the Trust and the Advisor hereby agree as follows:
1. APPOINTMENT OF ADVISOR. The Trust hereby employs the Advisor as
investment advisor, on the terms and conditions set forth herein, for the
portion of the assets of the Fund that the Trust's Board of Trustees (the "Board
of Trustees") determines in its sole discretion to assign to the Advisor from
time to time (referred to in this Agreement as the "Acadian Portfolio"). As of
the date of this Agreement, the Acadian Portfolio will consist of the portion of
the assets of the Fund that the Board of Trustees has determined to assign to
the Advisor, as communicated to the Advisor on behalf of the Board of Trustees
by The Vanguard Group, Inc. ("Vanguard"). The Board of Trustees may, from time
to time, make additions to, and withdrawals from, the assets of the Fund
assigned to the Advisor. The Advisor accepts such employment and agrees to
render the services herein set forth, for the compensation herein provided.
2. DUTIES OF ADVISOR. The Trust employs the Advisor to manage the
investment and reinvestment of the assets of the Acadian Portfolio; to
continuously review, supervise, and administer an investment program for the
Acadian Portfolio; to determine in its discretion the securities to be purchased
or sold and the portion of such assets to be held uninvested; to provide the
Fund with all records concerning the activities of the Advisor that the Fund is
required to maintain; and to render regular reports to the Trust's officers and
Board of Trustees concerning the discharge of the foregoing responsibilities.
The Advisor will discharge the foregoing responsibilities subject to the
supervision and oversight of the Trust's officers and the Board of Trustees, and
in compliance with the objectives, policies and limitations set forth in the
Fund's prospectus and Statement of Additional Information, any additional
operating policies or procedures that the Fund communicates to the Advisor in
writing, and applicable laws and regulations. The Advisor agrees to provide, at
its own expense, the office space, furnishings and equipment, and personnel
required by it to perform the services on the terms and for the compensation
provided herein.
3. SECURITIES TRANSACTIONS. The Advisor is authorized to select the brokers
or dealers that will execute purchases and sales of securities for the Acadian
Portfolio, and is directed to use its best efforts to obtain the best available
price and most favorable execution for such transactions. To the extent
expressly permitted by the written policies and procedures established by the
Board of Trustees, and subject to Section 28(e) of the Securities Exchange Act
of 1934, as amended, any interpretations thereof by the Securities and Exchange
Commission (the "SEC") or its staff, and other applicable law, the Advisor is
permitted, but is not required, to pay a broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if the Advisor determines in good faith that such amount of
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of either that
particular transaction or the Advisor's overall responsibilities to the accounts
as to which it exercises investment discretion. The execution of such
transactions in conformity with the authority expressly referenced in the
immediately preceding sentence shall not be deemed to represent an unlawful act
or breach of any duty created by this Agreement or otherwise. The Advisor agrees
to use its best efforts to comply with any directed brokerage or other brokerage
arrangements that the Fund communicates to the Advisor in writing. The Fund
acknowledges that directed brokerage may result in the Fund paying higher
commissions than would be the case if the Advisor were able to select brokers
freely. Directed brokerage in many cases limits the Advisor's ability to
negotiate commissions for the Fund and its ability to aggregate orders and may
result in an inability to obtain volume discounts or best execution for the Fund
in some transactions. The Advisor may manage other portfolios and expects that
the Fund and other portfolios it manages will, from time to time, purchase or
sell the same securities. The Advisor may aggregate orders for the purchase or
sale of securities on behalf of the Fund with orders on behalf of other
portfolios the Advisor manages, to the extent consistent with the Advisor's duty
to seek best execution and to ensure the fair and equitable allocations of
aggregated securities. Securities purchased or proceeds of securities sold
through aggregated orders will be allocated to the account of each portfolio
managed by the advisor that bought or sold such securities at the average
execution price. If less than the total of the aggregated orders is executed,
the securities or proceeds will generally be allocated pro rata among the
participating portfolios in proportion to their planned participation in the
aggregated orders. If the securities or proceeds are not allocated pro rata
among the participating portfolios, the Advisor will allocate such securities or
proceeds in a manner that is fair and equitable to all participating portfolios,
and will record the basis of such non-pro rata allocation in writing or in
electronic form and maintain such records in a manner consistent with applicable
recordkeeping requirements under the Investment Company Act of 1940 and the
Investment Advisers Act of 1940. The Advisor will promptly communicate to the
Trust's officers and the Board of Trustees any information relating to the
portfolio transactions the Advisor has directed on behalf of the Acadian
Portfolio as such officers or the Board may reasonably request.
4. COMPENSATION OF ADVISOR. For services to be provided by the Advisor
pursuant to this Agreement, the Fund will pay to the Advisor, and the Advisor
agrees to accept as full compensation therefore, an investment advisory fee at
the rate specified in Schedule A to this Agreement. The fee will be calculated
based on annual percentage rates applied to the average month-end net assets of
the Acadian Portfolio and will be paid to the Advisor quarterly.
5. REPORTS. The Fund and the Advisor agree to furnish to each other current
prospectuses, proxy statements, reports to shareholders, certified copies of
their financial
statements, and such other information with regard to their affairs as each may
reasonably request, including, but not limited to, information about changes in
partners of the Advisor. The Fund acknowledges receipt of Part II of the
Advisor's Form ADV.
6. COMPLIANCE.
6.1. COMPLIANCE WITH APPLICABLE LAW AND BOARD REQUIREMENTS. The Advisor
agrees to comply with all Applicable Law and all policies, procedures or
reporting requirements that the Board of Trustees of the Trust reasonably
adopts and communicates to the Advisor in writing, including, without
limitation, any such policies, procedures or reporting requirements
relating to soft dollar or directed brokerage arrangements.
6.2. DISCLOSURE OF COMPLIANCE MATTERS. If the Advisor receives any written
or other communication concerning or constituting a material Compliance
Matter, then the Advisor shall provide the Trust a written summary of the
material facts and circumstances concerning such material Compliance Matter
within five (5) calendar days of the earlier of the date on which such
material Compliance Matter was received by the Advisor, or the date on
which the general counsel's office of the Advisor obtained actual knowledge
of such material Compliance Matter. The Advisor shall provide the Trust
with a written summary of any material changes in the facts or
circumstances concerning any material Compliance Matter within (5) calendar
days of the occurrence of such changes. The written summary may exclude
information that is specifically prohibited from disclosure to third
parties by a written confidentiality agreement to which the Advisor is
party or by a fiduciary duty of confidentiality applicable to the Advisor;
provided, however, that the written summary shall be written in a manner
that continues to include a summary of the material facts and circumstances
concerning the Compliance Matter.
6.3. CERTAIN DEFINITIONS. "Applicable Law" means (i) the "federal
securities laws" as defined in Rule 38a-1(e)(1) under the 1940 Act, as
amended from time to time, and (ii) any and all other laws, rules, and
regulations, whether foreign or domestic, in each case applicable at any
time and from time to time to the investment management operations of the
Advisor. "Compliance Matter" means any written or other communication sent
to the Advisor by any foreign, federal or state agency or regulatory
authority or any self-regulatory authority in connection with any of the
following: (i) the Advisor's compliance with, or failure to comply with,
Applicable Law as they relate to the Advisor's investment management
operations; (ii) the business or affairs of the Advisor or any current or
former client of the Advisor as they relate to the Advisor's investment
management operations; or (iii) compliance by any person other than the
Advisor with, or such person's failure to comply with, Applicable Law as
they relate to the Advisor's investment management operations.
7. STATUS OF ADVISOR. The services of the Advisor to the Fund are not to be
deemed exclusive, and the Advisor will be free to render similar services to
others so long as its services to the Fund are not impaired thereby. The Advisor
will be deemed to be an independent
contractor and will, unless otherwise expressly provided or authorized,
have no authority to act for or represent the Fund in any way or otherwise
be deemed an agent of the Fund or the Trust.
8. LIABILITY OF ADVISOR. No provision of this Agreement will be deemed to
protect the Advisor against any liability to the Fund or its shareholders to
which it might otherwise be subject by reason of any willful misfeasance, bad
faith or gross negligence in the performance of its duties or the reckless
disregard of its obligations with respect to the Advisor's management of the
Acadian Portfolio under this Agreement.
9. DURATION; TERMINATION; NOTICES; AMENDMENT. This Agreement will become
effective on the date hereof and will continue in effect for a period of two
years thereafter, and shall continue in effect for successive twelve-month
periods thereafter, only so long as this Agreement is approved at least annually
by votes of the Trust's Board of Trustees who are not parties to such Agreement
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. In addition, the question of continuance
of the Agreement may be presented to the shareholders of the Fund; in such
event, such continuance will be affected only if approved by the affirmative
vote of a majority of the outstanding voting securities of the Fund.
Notwithstanding the foregoing, however, (i) this Agreement may at any time
be terminated without payment of any penalty either by vote of the Board of
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund, on thirty days' written notice to the Advisor, (ii) this
Agreement will automatically terminate in the event of its assignment, and (iii)
this Agreement may be terminated by the Advisor on ninety days' written notice
to the Fund. Any notice under this Agreement will be given in writing, addressed
and delivered, or mailed postpaid, to the other party as follows:
If to the Fund, at:
Vanguard Horizon Funds - Vanguard Global Equity Fund
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Advisor, at:
Acadian Asset Management, Inc.
Xxx Xxxx Xxxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: Xxxxxxxxx X. Xxxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
This Agreement may be amended by mutual consent, but the consent of the Trust
must be approved (i) by a majority of those members of the Board of Trustees who
are not parties to this Agreement or interested persons of any such party, cast
in person at a meeting called for the purpose of voting on such amendment, and
(ii) to the extent required by the 1940 Act, by a vote of a majority of the
outstanding voting securities of the Fund of the Trust.
As used in this Section 9, the terms "assignment," "interested persons,"
and "vote of a majority of the outstanding voting securities" will have the
respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and Section
2(a)(42) of the 1940 Act.
10. SEVERABILITY. If any provision of this Agreement will be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement will not be affected thereby.
11. CONFIDENTIALITY. The Advisor shall keep confidential any and all
information obtained in connection with the services rendered hereunder and
relating directly or indirectly to the Fund, the Trust, or Vanguard and shall
not disclose any such information to any person other than the Trust, the Board
of Directors of the Trust, Vanguard, and any director, officer, or employee of
the Trust or Vanguard, except (i) with the prior written consent of the Trust,
(ii) as required by law, regulation, court order or the rules or regulations of
any self-regulatory organization, governmental body or official having
jurisdiction over the Advisor, or (iii) for information that is publicly
available other than due to disclosure by the Advisor or its affiliates or
becomes known to the Advisor from a source other than the Trust, the Board of
Directors of the Trust, or Vanguard.
12. PROXY POLICY. The Advisor acknowledges that Vanguard will vote the
shares of all securities that are held by the Fund unless other mutually
acceptable arrangements are made with the Advisor with respect to the Acadian
Portfolio.
13. GOVERNING LAW. All questions concerning the validity, meaning, and
effect of this Agreement shall be determined in accordance with the laws
(without giving effect to the conflict-of-law principles thereof) of the State
of Delaware applicable to contracts made and to be performed in that state.
IN WITNESS WHEREOF, the parties hereto have caused this Investment
Advisory Agreement to be executed as of the date first set forth herein.
Acadian Vanguard Horizon Funds
/s/Xxxxxxxxx R Xxxxx 9/29/04 /s/ Xxxx X. Xxxxxxx 9/28/04
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Signature Date Signature Date
Xxxxxxxxx R Xxxxx Xxxx X. Xxxxxxx
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Print Name Date Print Name Date
Vanguard Global Equity Fund
Investment Advisory Agreement Addendum
Effective July 1, 2006
This Addendum amends certain sections of the Investment Advisory Agreement dated
October 22, 2004, between Vanguard Horizon Funds (the "Trust") and Acadian Asset
Management, Inc. ("Acadian," or the "Advisor") for the management of Vanguard
Global Equity Fund, a series of the Trust (the "Fund"), as follows:
A. AMENDMENT TO SECTION 2 (DUTIES OF ADVISOR)
The following sentence shall be added to the end of Section 2 of the Agreement:
The Advisor is prohibited from consulting with other advisors of the Fund
concerning transactions for the Fund in securities or other assets.
B. AMENDMENT TO SECTION 4 (COMPENSATION OF ADVISOR)
The following shall replace Section 4 of the Agreement in its entirety:
4. COMPENSATION OF ADVISOR. For services to be provided by the Advisor pursuant
to this Agreement, the Fund will pay to the Advisor, and the Advisor agrees to
accept as full compensation therefor, an investment advisory fee at the rate
specified in Schedule A to this Agreement. The fee will be calculated based on
annual percentage rates applied to the average daily net assets of the Acadian
Portfolio and will be paid to the Advisor quarterly.
C. AMENDMENT TO SCHEDULE A.
The following shall replace Section 13.1 of Schedule A of the Agreement in its
entirety:
13.1. CALCULATION OF THE BASE FEE. The Base Fee for each fiscal quarter of the
Fund is calculated by multiplying an Annual Percentage Rate (shown below) to the
average daily net assets of the Acadian Portfolio during such fiscal quarter,
and dividing the result by 4. The Fund's fiscal quarter ends are the months
ending March, June, September, and December.
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ANNUAL PERCENTAGE RATE SCHEDULE
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D. MISCELLANEOUS
Except as specifically amended hereby, all of the terms and conditions of the
Investment Advisory Agreement are unaffected and shall continue to be in full
force and effect and shall be binding upon the parties in accordance with its
terms. In particular, and notwithstanding Sections B and C of this Amendment,
the performance adjustment will continue to be applied to an asset-base that is
calculated using the average month-end net assets over the applicable
performance period.
ACADIAN ASSET MANAGEMENT, INC. VANGUARD HORIZON FUNDS
/s/Xxxx X. Minchiello 10/10/06 /s/Xxxx X. Xxxxxxx 10/10/06
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Signature Date Signature Date
Xxxx X. Minchiello Xxxx X. Xxxxxxx
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Print Name Print Name
