<PAGE> 1
VANGUARD/MORGAN GROWTH FUND, INC.
PROSPECTUS SUPPLEMENT
FEBRUARY 2, 1996
The Board of Directors of Vanguard/Morgan Growth Fund, Inc. (the "Fund") has
approved a revised investment advisory agreement with Wellington Management
Company ("WMC"), one of the Fund's investment advisers. The new agreement
involves a reduction in the annual rate of advisory fees to be paid to WMC.
Under the terms of the new agreement, the Fund will pay WMC a basic
advisory fee at the end of each fiscal quarter, based on the average month-end
net assets of the Fund managed by WMC during the quarter. The quarterly rate
is applied according to the following annual fee schedule:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL BASIC FEE RATE
---------- ---------------------
<S> <C>
First $500 million 0.175%
Next $500 million 0.100
Over $1 billion 0.075
</TABLE>
Both the current and revised agreements provide that the Basic Fee may be
increased or decreased by applying an incentive/penalty fee adjustment based on
investment performance relative to the Growth Fund Stock Index, (the Index
measures the performance of the common stock holdings of the 50 largest growth
mutual funds, as calculated by Morningstar, Inc.). The following table sets
forth the incentive/penalty adjustment to the basic advisory fee payable by the
Fund to WMC under the new advisory agreement:
<TABLE>
<CAPTION>
Cumulative 36-Month Performance Performance Fee
versus the Growth Fund Stock Index Adjustment
---------------------------------- ----------
<S> <C>
Less than -12% -0.50 x Basic Fee*
Between -12% and -6% -0.25 x Basic Fee
Between -6% and 6% 0 x Basic Fee
Between 6% and 12% 0.25 x Basic Fee
More than 12% 0.50 x Basic Fee
</TABLE>
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* For purposes of this calculation, the Basic Fee is calculated by applying a
quarterly rate based on the Annual Basic Fee Rate using average assets over the
same 36-month period over which the performance is measured.
This revised investment advisory agreement replaces the Fund's original
agreement with the adviser dated April 24, 1990, and will go into effect on or
about April 1, 1996. (Under the rules of the Securities and Exchange
Commission, the new incentive/penalty fee will not be fully operable until the
quarter ending June 30, 1999, and until that date, will be calculated according
to certain transition rules.) Until the effective date, the adviser has agreed
to waive its advisory fees to the extent necessary to abide by the new fee
schedule.
AFMG
