INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made as of this 1st day of December 2005, between
Vanguard Explorer Fund, a Delaware statutory trust (the "Trust"), and ▇▇▇▇▇▇▇▇
Investment Management, Inc., a Massachusetts 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"); and
WHEREAS, the Trust offers a series of shares known as Vanguard
Explorer Fund (the "Fund"); and
WHEREAS, the Trust retained the Advisor to render investment advisory
services to the Fund under an Investment Advisory Agreement, dated as of August
1, 2000, and amended January 31, 2003; and
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 "▇▇▇▇▇▇▇▇ Portfolio").
As of the date of this Agreement, the ▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇ Portfolio; to
continuously review, supervise, and administer an investment program for the
▇▇▇▇▇▇▇▇ 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
▇▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇▇ 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 and procedures
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 ▇▇▇▇▇▇▇▇ 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 partial 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, including, but not limited to,
information about changes in partners of the Advisor. The Fund acknowledges
receipt of Part I1 of the Advisor's Form ADV.
6. Compliance. 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 other brokerage arrangements.
"Applicable Law" means (i) the "federal securities laws" as defined in Rule
38a-1 (e)(l) 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.
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.
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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
▇▇▇▇▇▇▇▇ Portfolio 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 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 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 Explorer Fund
P.0; ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to the Advisor, at:
▇▇▇▇▇▇▇▇ Investment Management, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
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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 ▇▇▇▇▇▇▇▇
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 Investment
Advisory Agreement to be executed as of the date first set forth herein.
▇▇▇▇▇▇▇▇ INVESTMENT MANAGEMENT, INC. VANGUARD EXPLORER FUND
/S/ ▇▇▇▇ ▇ ▇▇▇▇▇▇▇▇ 12/1/05 /S/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 12/1/05
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Signature Date Signature Date
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 12/1/05 ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 12/1/05
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