INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made as of this 19th day of December, 2005, between the
Vanguard Windsor Funds, a Delaware business trust (the "Trust"), and Barrow,
Hanley, Xxxxxxxxx & Xxxxxxx, INC., a Nevada corporation (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");
WHEREAS, the Trust offers a series of shares known as Vanguard Windsor II Fund
(the "Fund");
WHEREAS, the Trust retains the Advisor to render investment advisory services
to the Fund under an Investment Advisory Agreement, dated as of November 1, 2000
(the "Prior Agreement");
WHEREAS, the Trust desires to amend and restate such Investment Advisory
Agreement in certain respects, and the Advisor is willing to render investment
advisory services to the Fund in accordance with such amendments.
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 BHMS Portfolio"). As of the date of this
Agreement, the BHMS 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"), including cash that may be directed to The Vanguard
Group, Inc. for cash management purposes. 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 BHMS Portfolio; to continuously review,
supervise, and administer an investment program for the BHMS 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 BHMS
Portfolio, and is directed to use its best efforts to obtain best execution for
such transactions. In selecting brokers or dealers to execute trades for the
BHMS Portfolio, the Advisor will comply with all applicable statutes, rules,
interpretations by the Securities and Exchange Commission or its staff, other
applicable law, and the written policies established by the Fund's Board of
Trustees and communicated to the Advisor in writing.
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, a Basic Fee at the rate specified in
Schedule A to this Agreement. The Basic Fee will be calculated based on annual
percentage rates applied to the average month-end net assets of the BHMS
Portfolio and will be paid to the Advisor quarterly.
Notwithstanding the foregoing, for services rendered pursuant to this
Agreement, the Fund shall pay to the Advisor, for the first fiscal quarter
within which this Agreement is in effect, a Basic Fee calculated as described in
Schedule B.
The Basic Fee, as provided above, will be increased or decreased by applying a
Performance Fee Adjustment (the "Adjustment") as specified in Schedule A.
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.
6. 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. "Applicable Law" means (i) the "federal
securities laws" as defined in Rule 38a-l(e)(l) under the 1940 Act, as amended
from time to time, as they relate to the services provided by the Advisor to
the Trust pursuant to this Agreement, 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.
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 under this Agreement.
9. Limitations on Consultations. The Advisor is prohibited from consulting with
other advisors of the Fund, except Vanguard, concerning transactions for the
Fund in securities or other assets.
10. Duration; Termination; Notices; Amendment. This Agreement will become
effective on the date hereof and shall continue in effect for successive
twelve-month periods, 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 effected 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 Windsor II Fund
X.X. Xxx 0000
Xxxxxx Xxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: 000-000-0000
Facsimile: 000-000-0000
If to the Advisor, at:
Barrow, Hanley, Xxxxxxxxx & Xxxxxxx, Inc.
JPMorgan Chase Tower
0000 Xxxx Xxxxxx
00 xx Xxxxx
Xxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
Phone: 000-000-0000
Fax: 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 10, 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.
11. 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.
12. 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 Trustees 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
Trustees of the Trust, or Vanguard.
13. 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 BHMS Portfolio.
14. 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 Amended and Restated
Investment Advisory Agreement to be executed as of the date first set forth
herein.
Barrow, Hanley,
Xxxxxxxxx & Xxxxxxx, Inc. Vanguard Windsor Funds
/S/ XXXXX X. XXXXXX 12/19/05 XXXX X. XXXXXXX 12/20/05
__________________________ __________ _____________________ ______
Signature Date Signature Date
Xxxxx X. Xxxxxx Xxxx X. Xxxxxxx
_____________________ ___________________
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