PRIMECAP Management Co

Item 5: Fees and Compensation

PRIMECAP provides investment management services to a limited number of separately
managed institutional clients, the PRIMECAP Odyssey Funds, several mutual funds for
the Vanguard group, and the Private Funds. All accounts managed by PRIMECAP pay
PRIMECAP a management fee based on a percentage of assets under management.

Fee schedule for Separately Managed Accounts:
The fee schedule for separately managed accounts is fixed and nonnegotiable and is
payable in arrears. When an account is opened or terminated, the fee is prorated to the
opening or termination date. The investment advisory contract may be terminated by
either party as provided in the investment advisory contract.

The client’s fee is calculated by multiplying the account’s asset base by the fee schedule
below.

      Investment Account Value                            Annual Fee Rate
       On the first $50 million                              .500 of 1%
       Next $200 million                                     .450 of 1%
       Next $250 million                                     .375 of 1%
       Next $1.75 billion                                    .250 of 1%
       Next $2.75 billion                                    .200 of 1%
       Next $5.00 billion                                    .175 of 1%
       Over $10.00 billion                                   .150 of 1%

Clients can include the methodology for calculating fees and the asset base in the
investment advisory agreement. Currently, the asset base for certain clients is
calculated using a daily average, or three- month average of the month-end values
during the quarter. Other clients use the quarter-end values. In addition, certain clients
have the asset base adjusted for material cash flows or calculate the fees by dividing
the annual fee by four. Finally, certain clients with multiple accounts have the accounts
combined for billing purposes. Each account’s month-end asset value is reconciled to
the client’s custodian account value. PRIMECAP utilizes its middle office service
provider to calculate client fees, which are subsequently reviewed by PRIMECAP.

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Clients select the custodians used for their accounts and are responsible for fees
charged by the custodian for the custodian’s services. Client accounts also incur
brokerage and other transactions costs. Please refer to Item 12 – Brokerage Practices
of this brochure for additional information.

Vanguard Mutual Funds Advisory Fees and Expenses:
Per the request of Vanguard, PRIMECAP entered into a performance-based fee
arrangement for the investment advisory services it provides to the following Vanguard
Funds:

  •   Vanguard PRIMECAP Fund
  •   Vanguard Capital Opportunity Fund
  •   Vanguard PRIMECAP Core Fund
  •   Vanguard Variable Insurance Fund – Capital Growth

Vanguard calculates the performance and the performance-based fees, which are
reviewed by PRIMECAP before or at the time of the payment, which are payable in
arrears.

PRIMECAP charges an asset-based fee for the following Vanguard Fund:

  •   Vanguard U.S. Opportunities Fund (offshore mutual fund)

For the Vanguard U.S. Opportunities Fund, Vanguard calculates the fees, which are
reviewed by PRIMECAP before or at the time of payment, on month end net assets and
are payable in arrears.

The fee arrangement for each fund is described in each fund’s Prospectus and
Statement of Additional Information (“SAI”) at www.vanguard.com.

PRIMECAP Odyssey Funds Advisory Fees and Expenses:
PRIMECAP charges an asset-based fee for the investment advisory services it provides
to the PRIMECAP Odyssey Funds. The funds include:

  •   PRIMECAP Odyssey Stock Fund
  •   PRIMECAP Odyssey Growth Fund
  •   PRIMECAP Odyssey Aggressive Growth Fund

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The fee arrangement for each Fund is described in each fund’s Prospectus and Statement
of Additional Information (“SAI”) at www.primecap.com. The fee for each of the Odyssey
Funds is calculated by the Funds’ third-party administrator and reviewed internally by
PRIMECAP.

Prior to making any investment in the PRIMECAP Odyssey Funds, investors and
prospective investors should carefully review the Prospectus and SAI for a
comprehensive understanding of the terms and conditions applicable for investment.

The PRIMECAP Odyssey Funds may be purchased through brokers or agents
unaffiliated with PRIMECAP. The total expense ratio for the share classes of each fund
is disclosed in the relevant Prospectus.

PRIMECAP Private Funds Advisory Fees and Expenses:
Each Private Fund is a series of a Delaware limited liability company (the “Series LLC”),
which was formed by the Private Fund’s manager (“Manager”). Further, each Private
Fund is divided into several investor classes of interests (each a “Class”). The total
annual asset-based fee for each Class ranges from 0.29 of 1% to 0.65 of 1%, depending
on the Private Fund and the investor’s Class (“Total Annual Fee”).

The Total Annual Fee for a specific Class is intended to include any advisory fees and
operating expenses associated with an investment in that particular Class. To the extent
that operating expenses are less than the aggregate fees collected from investors
pursuant to the Total Annual Fee schedule, the difference is paid by the Fund to the
Firm as an advisory fee. Alternatively, if the operating expenses are greater than the
aggregate fees collected from investors, the difference is paid by the Firm to the Fund
(and indirectly to investors) as a fee reimbursement; this reimbursement in effect serves
as an operating expense cap.

The Total Annual Fee is accrued daily and payable monthly in arrears, based on each
Class’s daily net asset value. Operating expenses include custodian fees, an
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Item 7: Types of Clients

PRIMECAP has a select group of institutional clients, which includes employee benefit
and pension plans, endowments, foundations, mutual funds for the Vanguard Group,
a collective investment trust, a sovereign fund, and Private Funds. In addition,
PRIMECAP acts as the investment adviser to the PRIMECAP Odyssey Funds.

For PRIMECAP’s institutional clients, the minimum initial account size is $150 million.
However, PRIMECAP may depart from the minimum on a case-by-case basis.

The PRIMECAP Odyssey Stock Fund, Odyssey Growth Fund, and Odyssey Aggressive
Growth Fund are open to new investors, and each fund has a required minimum
investment of $2,000 for regular accounts, $1,000 for IRA accounts, and $100 for
additional investments.

For information regarding the required minimum investment for the Vanguard Funds,
please refer to the Vanguard Funds’ Prospectus and Statement of Additional
Information at www.vanguard.com.

The Vanguard Capital Opportunity Fund is currently closed to new shareholders.
Interests in the Private Funds are offered pursuant to the exemptions from registration
under the Securities Act of 1933 (the “Securities Act”) and the Private Funds are exempt
from registration as investment companies under the Investment Company Act of 1940
(the “Investment Company Act”). Accordingly, interests in the Private Funds are offered
only to persons who are “accredited investors” (as defined in Regulation D under the
Securities Act). Additionally, all of the investors are required to be “qualified
purchasers,” as defined in the Investment Company Act.