VANGUARD XXXXXX GROWTH FUND
INVESTMENT ADVISORY AGREEMENT ADDENDUM
Effective September 1, 2002
This Addendum amends Section 3 of the Investment Advisory Agreement dated
April 1, 1996 between Vanguard XXXXXX GROWTH FUND (the "Fund") and WELLINGTON
MANAGEMENT COMPANY, LLP (the "Adviser") as follows.
3. Compensation of the Adviser. For the services to be rendered by the Adviser
as provided in Section 1 of this Agreement, the Fund shall pay to the Adviser at
the end of each of the Fund's fiscal quarters, a Basic Fee calculated by
applying a quarterly rate, based on the following annual percentage rates, to
the WMC Portfolio's average month-end net assets for the quarter:
.175% on the first $500 million of net assets;
.100% on the next $500 million of net assets;
.075% on the net assets in excess of $1 billion.
Subject to the Transition Rule described in Section 3.1, the Basic Fee, as
provided above, will be increased or decreased by applying a Performance Fee
Adjustment (the "Adjustment") based on the investment performance of the WMC
Portfolio relative to the investment performance of the Xxxxxxx 3000 Growth
Index. The investment performance of the WMC Portfolio will be based on the
cumulative return over a trailing 36-month period ending with the applicable
quarter, relative to the cumulative total return of the Xxxxxxx 3000 Growth
Index for the same time period. The Adjustment applies as follows:
Cumulative 36-Month Performance of the WMC Performance Fee Adjustment as a
Portfolio vs. the Xxxxxxx 3000 Growth Index Percentage of the Basic Fee*
------------------------------------------- ----------------------------
Trails by -12% or more -0.50 x Basic Fee
Trails by more than -6% up to -12% -0.25 x Basic Fee
Trails/Exceeds from -6% to 6% 0.00 x Basic Fee
Exceeds by more than 6% but less than 12% +0.25 x Basic Fee
Exceeds by 12% or more +0.50 x Basic Fee
-------------------------
* For purposes of determining the Adjustment, the quarterly rate is
applied against the net assets of the WMC Portfolio averaged over the same time
period for which the performance is measured.
3.1 Transition Rule for Calculating the Adviser's Compensation. The fee
structure described in Section 3 will not be fully operable until the
quarter ending September 30, 2005. Until that date, the Adjustment will be
determined by linking the investment performance of the Xxxxxxx 3000 Growth
Index and that of the Growth Fund Stock Index.
1. Quarter Ending September 30, 2002. The Adjustment will be determined by
linking the investment performance of the Growth Fund Stock Index for the
eleven quarters and two months ending August 31, 2002, with that of the
Xxxxxxx 3000 Growth Index for the one month ending September 30, 2002.
2. Quarter Ending December 31, 2002. The Adjustment will be determined by
linking the investment performance of the Growth Fund Stock Index for the
ten quarters and two months ending August 31, 2002, with that of the
Xxxxxxx 3000 Growth Index for the one month and one quarter ending December
31, 2002.
3. Quarter Ending March 31, 2003. The Adjustment will be determined by linking
the investment performance of the Growth Fund Stock Index for the nine
quarters and two months ending August 31, 2002, with that of the Xxxxxxx
3000 Growth Index for the one month and two quarters ending March 31, 2003.
4. Quarter Ending June 30, 2003. The Adjustment will be determined by linking
the investment performance of the Growth Fund Stock Index for the eight
quarters and two months ending August 31, 2002, with that of the Xxxxxxx
3000 Growth Index for the one month and three quarters ending June 30,
2003.
5. Quarter Ending September 30, 2003. The Adjustment will be determined by
linking the investment performance of the Growth Fund Stock Index for the
seven quarters and two months ending August 31, 2002, with that of the
Xxxxxxx 3000 Growth Index for the one month and four quarters ending
September 30, 2003.
6. Quarter Ending December 31, 2003. The Adjustment will be determined by
linking the investment performance of the Growth Fund Stock Index for the
six quarters and two months ending August 31, 2002, with that of the
Xxxxxxx 3000 Growth Index for the one month and five quarters ending
December 31, 2003.
7. Quarter Ending March 31, 2004. The Adjustment will be determined by linking
the investment performance of the Growth Fund Stock Index for the five
quarters and two months ending August 31, 2002, with that of the Xxxxxxx
3000 Growth Index for the one month and six quarters ending March 31, 2004.
8. Quarter Ending June 30, 2004. The Adjustment will be determined by linking
the investment performance of the Growth Fund Stock Index for the four
quarters and two months ending August 31, 2002, with that of the Xxxxxxx
3000 Growth Index for the one month and seven quarters ending June 30,
2004.
9. Quarter Ending September 30, 2004. The Adjustment will be determined by
linking the investment performance of the Growth Fund Stock Index for the
three quarters and two months ending August 31, 2002, with that of the
Xxxxxxx 3000 Growth Index for the one month and eight quarters ending
September 30, 2004.
10. Quarter Ending December 31, 2004. The Adjustment will be determined by
linking the investment performance of the Growth Fund Stock Index for the
two quarters and two months ending August 31, 2002, with that of the
Xxxxxxx 3000 Growth Index for the one month and nine quarters ending
December 31, 2004.
11. Quarter Ending March 31, 2005. The Adjustment will be determined by linking
the investment performance of the Growth Fund Stock Index for the one
quarter and two months ending August 31, 2002, with that of the Xxxxxxx
3000 Growth Index for the one month and ten quarters ending March 31, 2005.
12. Quarter Ending June 30, 2005. The Adjustment will be determined by linking
the investment performance of the Growth Fund Stock Index for the two
months ending August 31, 2002, with that of the Xxxxxxx 3000 Growth Index
for the one month and eleven quarters ending June 30, 2005.
13. Quarter Ending September 30, 2005. The benchmark transition is complete.
No Effect on Other Provisions. Except with respect to these fee schedules, all
other provisions of the Investment Advisory Agreement dated April 1, 1996 remain
in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed this 22nd day of July, 2002.
ATTEST: VANGUARD XXXXXX GROWTH FUND
By /s/ Xxxxx Xxxxxxxx _/s/________________________________________
Chairman, CEO and President
ATTEST: WELLINGTON MANAGEMENT COMPANY, LLP
By /s/_______________________ By Xxxx X. Xxxxx
Title Senior Vice President
ATTEST:
By /s/
