VANGUARD WHITEHALL FUNDS INC, N-1A EL/A, 1996-02-13

VANGUARD WHITEHALL FUNDS INC
N-1A EL/A, 1996-02-13

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT (NO. 33-64845) UNDER

THE SECURITIES ACT OF 1933

PRE-EFFECTIVE AMENDMENT NO. 2 /X/

POST-EFFECTIVE AMENDMENT NO.

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940

AMENDMENT NO. 2

VANGUARD WHITEHALL FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

P.O. BOX 2600, VALLEY FORGE, PA 19482
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)

REGISTRANT'S TELEPHONE NUMBER (610) 669-1000

RAYMOND J. KLAPINSKY, ESQUIRE
P.O. BOX 876
VALLEY FORGE, PA 19482

IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE:

on February 15, 1996.

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
As soon as practicable after this Registration Statement becomes effective.

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VANGUARD WHITEHALL FUNDS, INC.

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
FORM N-1A
ITEM NUMBER LOCATION IN PROSPECTUS
<C> <S> <C>
Item 1. Cover Page.................................. Cover Page
Item 2. Synopsis.................................... Highlights
Item 3. Condensed Financial Information............. N/A
Item 4. General Description of Registrant........... Investment Objectives; Investment
Limitations; Investment Policies; General
Information
Item 5. Management of the Fund...................... Directors and Officers; Management of the
Fund; The Vanguard Group
Item 6. Capital Stock and Other Securities.......... Opening an Account and Purchasing Shares;
Selling Your Shares; The Share Price of
Each Portfolio; Dividends, Capital Gains,
and Taxes; General Information
Item 7. Purchase of Securities Being Offered........ Cover Page; Opening an Account and
Purchasing Shares
Item 8. Redemption or Repurchase.................... Selling Your Shares
Item 9. Pending Legal Proceedings................... Not Appliable
</TABLE>

<TABLE>
<CAPTION>
FORM N-1A LOCATION IN STATEMENT
ITEM NUMBER OF ADDITIONAL INFORMATION
<C> <S> <C>
Item 10. Cover Page.................................. Cover Page
Item 11. Table of Contents........................... Cover Page
Item 12. General Information and History............. Investment Objectives and Policies
Item 13. Investment Objective and Policies........... Investment Objectives and Policies;
Investment Limitations
Item 14. Management of the Fund...................... Management of the Fund
Item 15. Control Persons and Principal Holders of
Securities.................................. Management of the Fund
Item 16. Investment Advisory and Other Services...... Management of the Fund
Item 17. Brokerage Allocation........................ Not Applicable
Item 18. Capital Stock and Other Securities.......... Financial Statement
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered.................... Purchase of Shares; Redemption of Shares
Item 20. Tax Status.................................. Appendix
Item 21. Underwriters................................ Not Applicable
Item 22. Calculations of Yield Quotations of Money
Market Fund................................. Not Applicable
Item 23. Financial Statements........................ Financial Statement
</TABLE>
<PAGE> 3
VANGUARD
SELECTED VALUE
PORTFOLIO
Prospectus
February 15, 1996

- ------------------

A Portfolio of
Vanguard
Whitehall Funds

[COVER PAGE: GRAPHIC - TALL SHIP]

A member of
THE VANGUARD GROUP
<PAGE> 4
VANGUARD SELECTED VALUE PORTFOLIO A Value Stock
Mutual Fund

INVESTMENT OBJECTIVE AND POLICIES

Vanguard Selected Value Portfolio (the "Portfolio") is a diversified mutual
fund.

The Portfolio seeks to provide long-term growth of capital and income
by investing mainly in equity securities of medium-size U.S. companies. The
Portfolio uses a "value" investment approach, emphasizing companies with
relatively low price/earnings ratios, reasonable financial strength, and strong
cash flows. These companies tend to be out of favor with investors.

Vanguard Selected Value Portfolio is part of Vanguard Whitehall Funds,
Inc. (the "Funds"), an open-end investment management company.

IT IS IMPORTANT TO NOTE THAT THE PORTFOLIO'S SHARES ARE NOT GUARANTEED
OR INSURED BY THE FDIC OR ANY OTHER AGENCY OF THE U.S. GOVERNMENT. AS WITH ANY
INVESTMENT IN COMMON STOCKS, WHICH ARE SUBJECT TO WIDE FLUCTUATIONS IN MARKET
VALUE, YOU COULD LOSE MONEY BY INVESTING IN THE PORTFOLIO.

FEES AND EXPENSES

The Portfolio is offered on a no-load basis, which means that you pay no sales
commissions or 12b-1 marketing fees. You will, however, incur expenses for
investment advisory, management, administrative, and distribution services,
which are included in the expense ratio.

ADDITIONAL INFORMATION ABOUT THE PORTFOLIO

A Statement of Additional Information containing more information about the
Portfolio is, by reference, part of this prospectus and may be obtained without
charge by writing to Vanguard or by calling our Investor Information Department
at 1-800-662-7447.

WHY READING THIS PROSPECTUS IS IMPORTANT

This prospectus explains the objective, risks, and strategies of the Selected
Value Portfolio. To highlight terms and concepts important to mutual fund
investors, we have provided "Plain Talk" explanations along the way. Reading the
prospectus will help you to decide whether the Portfolio is the right investment
for you. We suggest that you keep it for future reference.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

CONTENTS
<TABLE>
<CAPTION>

<S> <C>
Portfolio Expenses 2
A Word About Risk 3
The Portfolios Objective 3
Investment Strategies 4
Investment Policies 6
Investment Limitations 7
Investment Performance 7
Dividends, Capital Gains,
and Taxes 8
The Portfolio and Vanguard 8
Investment Adviser 9
General Information 10
Investing with Vanguard 11
Services and Account Features 12
Types of Accounts 12
Distribution Options 13
Buying Shares 14
Redeeming Shares 15
Fund and Account Updates 17
Glossary Inside Back Cover
</TABLE>
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PORTFOLIO PROFILE Vanguard Selected Value Portfolio

WHO SHOULD INVEST (page 3)

- - Investors seeking a stock mutual fund that emphasizes undervalued, mid-size
companies as part of a balanced and diversified investment program.
- - Investors seeking growth of their capital and income over the long term--at
least five years.

WHO SHOULD NOT INVEST

- - Investors seeking current dividend income.
- - Investors unwilling to accept significant fluctuations in share price.

RISKS OF THE PORTFOLIO (pages 3-6)

This Portfolio's total return will fluctuate within a wide range, so an investor
could lose money over short, or even extended, periods (this is generally known
as market risk). The Portfolio is also subject to manager risk (the chance that
poor security selection will cause it to lag the stock market as a whole) and,
as a mid-cap value stock fund, to objective risk (the chance that returns from
mid-cap or value stocks will trail returns from the overall stock market).

DIVIDENDS AND CAPITAL GAINS (page 8)

Paid annually in December.

INVESTMENT ADVISER (page 9)

Barrow, Hanley, Mewhinney & Strauss, Inc., Dallas, TX

INCEPTION DATE: February 15, 1996

NET ASSETS AS OF 2/15/96: $100,000

PORTFOLIO'S ESTIMATED EXPENSE RATIO: 0.73% of net assets per year

LOADS, 12B-1 MARKETING FEES: None

SUITABLE FOR IRAs: Yes

MINIMUM INITIAL INVESTMENT: $3,000; $1,000 for IRAs and custodial accounts

NEWSPAPER ABBREVIATION: SelValu

VANGUARD FUND NUMBER: 934

ACCOUNT FEATURES (page 12)

- - Telephone Redemption
- - Vanguard Direct Deposit Servicesm
- - Vanguard Automatic Exchange Servicesm
- - Vanguard Fund Express(R)
- - Vanguard Dividend Express(SM)

1
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VANGUARD SELECTED VALUE PORTFOLIO A Value Stock
Mutual Fund

INVESTMENT OBJECTIVE AND POLICIES

Vanguard Selected Value Portfolio (the "Portfolio") is a diversified mutual
fund.

Vanguard Selected Value Portfolio is part of Vanguard Whitehall Funds,
Inc. (the "Funds"), an open-end investment management company.

FEES AND EXPENSES

ADDITIONAL INFORMATION ABOUT THE PORTFOLIO

WHY READING THIS PROSPECTUS IS IMPORTANT

CONTENTS
<TABLE>
<CAPTION>

THE COSTS OF INVESTING

Costs are an important consideration in choosing a mutual fund. That's because
you, as a shareholder, pay the costs of operating a fund, plus any transaction
costs associated with buying, selling, or exchanging shares. These costs can
erode a substantial portion of the gross income or capital appreciation a fund
achieves. Even seemingly small differences in fund expenses can, over time, have
a dramatic impact on a fund's performance.

Plain Talk About

FUND EXPENSES

All mutual funds have operating expenses. These expenses, which are deducted
from a fund's gross income, are expressed as a percentage of the net assets of
the fund. Vanguard Selected Value Portfolio's expense ratio in fiscal year 1996
is expected to be 0.73%, or $7.30 per $1,000 of average net assets. The average
mid-cap equity mutual fund had expenses in 1995 of 1.43%, or $14.30 per $1,000
of average net assets, according to Lipper Analytical Services, Inc., which
reports on the mutual fund industry.

PORTFOLIO EXPENSES

The examples below are designed to help you understand the various costs you
would bear, directly or indirectly, as an investor in the Portfolio.

As noted in this table, you do not pay fees of any kind when you buy, sell,
or exchange shares of the Portfolio:

SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases: None
Sales Load Imposed on Reinvested Dividends: None
Redemption Fees: None
Exchange Fees: None

The next table illustrates the operating expenses that you would incur as a
shareholder of the Portfolio. These expenses are deducted from the Portfolio's
income before it is paid to you. Expenses include investment advisory fees as
well as the costs of maintaining accounts, administering the Fund, providing
shareholder services, and other activities of the Portfolio. The expenses shown
in the table are estimates for the Portfolio's first full year since the
Portfolio was not in operation as of the date of this prospectus.

ESTIMATED ANNUAL PORTFOLIO OPERATING EXPENSES
<TABLE>
<S> <C> <C>
Management and Administrative Expenses: 0.31%
Investment Advisory Expenses: 0.38%
12b-1 Marketing Fees: None
Other Expenses
Marketing and Distribution Costs: 0.02%
Miscellaneous Expenses (e.g., Taxes, Auditing): 0.02%
----
Total Other Expenses: 0.04%
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TOTAL OPERATING EXPENSES (EXPENSE RATIO): 0.73%
====
</TABLE>

The following example illustrates the hypothetical expenses that you would
incur on a $1,000 investment over various periods. The example assumes (1) that
the Portfolio provides a return of 5% a year and (2) that you redeem your
investment at the end of each period.

<TABLE>
<CAPTION>
- ----------------------------------------
1 YEAR 3 YEARS
- ----------------------------------------
<S> <C>
$7 $23

</TABLE>

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE, WHICH MAY BE HIGHER OR LOWER THAN
THOSE SHOWN.

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A WORD ABOUT RISK

This prospectus describes the risks you'll face as an investor in Vanguard
Selected Value Portfolio. It is important to keep in mind one of the main axioms
of investing: the higher the risk of losing money, the higher the potential
reward. The reverse, also, is generally true: the lower the risk, the lower the
potential reward. However, as you consider an investment in the Selected Value
Portfolio, you should also take into account your personal tolerance for the
daily fluctuations of the stock market.

Look for this "warning flag" symbol [GRAPHIC] throughout the prospectus.
It is used to mark detailed information about each type of risk that you, as a
shareholder of the Portfolio, may confront.

================================================================================

THE PORTFOLIO'S OBJECTIVE

The Portfolio seeks to provide long-term growth in capital and income. This
objective is fundamental, which means that it cannot be changed unless a
majority of shareholders vote to do so. Dividend income is not a main objective.
[GRAPHIC]

- BECAUSE OF THE SEVERAL TYPES OF RISK DESCRIBED IN THE FOLLOWING PAGES,
YOUR INVESTMENT IN THE PORTFOLIO, AS WITH ANY INVESTMENT IN COMMON STOCKS,
COULD LOSE MONEY.

WHO SHOULD INVEST

The Portfolio may be a suitable investment for you if:

- - You wish to add a stock fund that emphasizes undervalued, medium-size
companies to your existing holdings, which could include other stock as
well as bond money market, and tax-exempt investments.

- - You are seeking growth of capital over the long term--at least five years.
- - You are not looking for significant levels of current income from dividends
or interest.
- - You characterize your investment temperament as "moderately aggressive."

This Portfolio is not an appropriate investment if you are a market-timer.
Investors who engage in excessive in-and-out trading activity generate
additional costs that are borne by all of the Portfolio's shareholders. To
minimize such costs, which reduce the ultimate returns achieved by you and other
shareholders, the Portfolio has adopted the following policies:

Plain Talk About

VALUE FUNDS AND
GROWTH FUNDS

Value funds generally emphasize companies that--considering their assets and
earnings history--have relatively low stock prices. Growth funds emphasize
companies seeking growth in market value over dividend income. Value and growth
stocks have, in the past, produced similar long-term returns, though each has
had periods when it outperforms the other. In general, growth funds appeal to
investors who will accept more volatility in hope of a greater increase in share
price, while value funds are appropriate for investors who want the potential
for capital gains but are less tolerant of share price fluctuations.

Plain Talk About

INVESTING FOR THE
LONG TERM

Vanguard Select Value Portfolio is intended to be a long-term investment vehicle
and is not designed to provide investors with a means of speculating on
short-term fluctuations in the stock market.

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Plain Talk About

COSTS AND
MARKET TIMING

Some investors try to profit from "market timing"--switching money into
investments when they expect prices to rise, and taking money out when they
expect the market to fall. As money is shifted in and out, a fund incurs
expenses for buying and selling securities. These costs are borne by all fund
shareholders, including the long-term investors who do not generate the costs.
Therefore, the Portfolio discourages short-term trading by, among other things,
limiting the number of exchange redemptions it permits.

Plain Talk About

LARGE-CAP, MID-CAP,
AND SMALL-CAP STOCKS

Stocks of publicly traded companies--and mutual funds that hold these
stocks--can be classified by the companies' market value, or capitalization.
Vanguard defines small-capitalization, or small-cap, funds as those holding
stocks of companies with an average total market value of less than $750
million. Large-capitalization funds generally hold stocks of companies with an
average market value exceeding $5 billion. Medium-capitalization, or mid-cap,
funds generally hold stocks of companies with an average market value between
$750 million and $5 billion.

- - The Portfolio reserves the right to reject any purchase request--including
exchanges from other Vanguard Funds--that it regards as disruptive to the
efficient management of the Portfolio. This could be because of the timing
of the investment or because of a history of excessive trading by the
investor.
- - There is a limit on the number of times you can exchange into or out of the
Portfolio (see "Redeeming Shares" in the INVESTING WITH VANGUARD section).
- - The Portfolio reserves the right to stop offering shares at any time.

INVESTMENT STRATEGIES

This section explains how the Portfolio's investment adviser pursues the
objective of long-term growth in capital. It also explains three important
risks--securities market risk, objective risk, and manager risk--faced by
investors in the Portfolio. Unlike the Portfolio's investment objective, the
adviser's investment strategies are not fundamental and can be changed by the
Portfolio's Board of Directors without shareholder approval. However, before
making any important change in its strategies, the Portfolio will give
shareholders 30-days notice, in writing.

MARKET EXPOSURE

The Portfolio invests chiefly in medium-capitalization common stocks with low
prices in relation to corporate earnings and book value.
[GRAPHIC]

- THE PORTFOLIO IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT
STOCK PRICES OVERALL WILL DECLINE OVER SHORT OR EVEN EXTENDED PERIODS.
STOCK MARKETS TEND TO MOVE IN CYCLES, WITH PERIODS OF RISING STOCK PRICES
AND PERIODS OF FALLING STOCK PRICES.

To illustrate the volatility of stock prices, the following table shows the
best, worst, and average total returns (dividend income plus change in market
value) for the U.S. stock market over various periods as measured by the
Standard & Poor's 500 Composite Stock Price Index, a widely used barometer of
stock market activity. Note that the returns shown do not include the costs of
buying and selling stocks or other expenses that a real-world investment
portfolio would incur. Note, also, how the gap between best and worst tends to
lessen over the long term.

The table covers all of the 1-, 5-, 10-, and 20-year periods from 1926
through 1995. For example, while the average return on stocks for the 5-year
period was +10.3%, returns ranged from a negative -12.5% average from 1928
through 1932, to +23.9% from 1951 through 1955. These average returns reflect
past performance on

4
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
U.S. Stock Market Returns (1926-1995)
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years 20 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Best +53.9% +23.9% +20.1% +16.9%
Worst -43.3 -12.5 -0.9 +3.1
Average +12.5 +10.3 +10.7 +10.7
- --------------------------------------------------------------------------------
</TABLE>

common stocks and should not be regarded as an indication of future returns from
either the stock market as a whole or this Portfolio in particular.

Finally, the Selected Value Portfolio emphasizes stocks of
mid-capitalization companies, but will also include small-cap as well as
large-cap companies. At all times, however, the majority of the Portfolio's
assets will be invested in mid-cap companies. Mid- and small-cap stocks have
historically been more volatile--and at times have performed quite differently
from--the large-cap stocks found in the S&P 500 Index. This is due to several
factors, including less-certain growth and dividend prospects for smaller
companies. For these reasons and because the Selected Value Portfolio does not
hold the same securities held in the Standard & Poor's 500 Index or any other
market index, the performance of the Portfolio will not mirror the returns of
any particular index.

[GRAPHIC] THE PORTFOLIO IS SUBJECT TO OBJECTIVE RISK, WHICH IS THE POSSIBILITY
THAT RETURNS FROM MID-CAP VALUE STOCKS WILL TRAIL RETURNS FROM THE
OVERALL STOCK MARKET. AS A GROUP, VALUE STOCKS TEND TO GO THROUGH
CYCLES OF RELATIVE UNDERPERFORMANCE AND OUTPERFORMANCE IN COMPARISON
TO COMMON STOCKS IN GENERAL. THESE PERIODS HAVE, IN THE PAST, LASTED
FOR AS LONG AS SEVERAL YEARS.

SECURITY SELECTION AND PORTFOLIO DIVERSIFICATION

Barrow, Hanley, Mewhinney & Strauss (BHM&S), adviser to the Portfolio, seeks out
what it considers to be undervalued mid-size companies through extensive
research and meetings with company management. A company is considered
undervalued if, according to BHM&S, its earnings potential is not reflected in
its stock's share price. These stocks generally have low price/earnings ratios.
BHM&S holds the stock until the share price reflects the company's underlying
value. The top ten holdings are expected to make up 40% to 50% of the
Portfolio's total net assets.

The Portfolio is run by BHM&S according to traditional methods of "active"
investment management, which means securities are bought and sold according to
BHM&S's judgments about companies and their financial prospects, and about the
stock market and the economy in general.

[GRAPHIC] THE PORTFOLIO IS SUBJECT TO MANAGER RISK, WHICH IS THE POSSIBILITY
THAT BHM&S MAY DO A POOR JOB OF SELECTING STOCKS.

Plain Talk About

PORTFOLIO
DIVERSIFICATION

In general, the more diversified a fund's portfolio of stocks, the less likely
that a specific stock's poor performance will hurt the fund--and the less likely
that the fund's price will fluctuate. One measure of a fund's level of
diversification is the percentage of assets represented by its ten largest stock
holdings. The average U.S. equity mutual fund has about 25% of its assets
invested in its ten largest holdings, while some less-diversified mutual funds
have more than 50% of their assets invested in the stocks of just ten companies.

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Plain Talk About

PORTFOLIO TURNOVER

Before investing in a mutual fund, you should review its portfolio turnover rate
for an indication of the potential effect of transaction costs on the fund's
future returns. In general, the greater the volume of buying and selling by the
fund, the greater the impact that brokerage commissions and other transaction
costs will have on its return. Also, funds with high portfolio turnover rates
may be more likely than low-turnover funds to generate capital gains that must
be distributed to shareholders as taxable income. The average turnover rate for
actively managed funds investing in common stocks is 76%.

Plain Talk About

DERIVATIVES

A derivative is a financial contract whose value is based on (or "derived" from)
a traditional security (such as a stock or a bond), an asset (such as a
commodity like gold), or a market index (such as the S&P 500 Index). Futures and
options are derivatives that have been trading on regulated exchanges for more
than two decades. These "traditional" derivatives are standardized contracts
that can easily be bought and sold, and whose market values are determined and
published daily. It is these characteristics that differentiate futures and
options from the relatively new, exotic types of derivatives--some of which can
carry considerable risks.

PORTFOLIO TURNOVER

Although the Portfolio generally seeks to invest for the long term, it retains
the right to sell securities regardless of how long they've been held. The
Portfolio's average turnover rate is expected to be about 30%. (A turnover rate
of 33% would incur, for example, if one-third of the securities in the Portfolio
were sold and replaced with other securities within a one-year period.)

INVESTMENT POLICIES

Besides investing in common stocks of medium-size companies, the Portfolio may
follow a number of investment policies to achieve its objective.

[GRAPHIC] THE PORTFOLIO RESERVES THE RIGHT TO INVEST, TO A LIMITED EXTENT, IN
STOCK FUTURES AND OPTIONS CONTRACTS, WHICH ARE TRADITIONAL TYPES OF
DERIVATIVES. HOWEVER, USING DERIVATIVES IS NOT A STANDARD PART OF
THE ADVISER'S APPROACH TO INVESTING.

Futures and options contracts are the only derivatives, if any, that the
Portfolio will use. Losses involving futures contracts can sometimes be
substantial--in part because a relatively small price movement in a futures
contract may result in an immediate and substantial loss (or gain) for a
Portfolio. This Portfolio will not use futures and options contracts for
speculative purposes or as leveraged investments that magnify the gains or
losses of an investment. Rather, the Portfolio will keep separate cash or
short-term, cash-equivalent securities in the amount of the obligation
underlying the futures contract. Only a limited percentage of the Portfolio's
assets--up to 5% if required for deposit and no more than 20% of total
assets--may be committed to such contracts.

The reasons for which the Portfolio may use futures and options contracts
are:

- - To keep cash on hand to meet shareholder redemptions or other needs while
simulating full investment in stocks.
- - To make it easier to trade.
- - To reduce costs by buying futures instead of actual stocks when futures are
cheaper.

The Portfolio will usually hold only a small percentage of its assets in
cash reserves, although if the investment adviser believes that market
conditions warrant it, the Portfolio will do so, without limit, as a temporary
defensive measure.

6
<PAGE> 12
INVESTMENT LIMITATIONS

To reduce risk and maintain diversification, the Portfolio has adopted limits on
some of its investment policies. Specifically, the
Portfolio will not:

- - Invest more than 5% of its assets in the securities of companies that have
been in business for less than three years.

- - Invest more than 25% of its assets in any one industry.

- - Borrow money, except for the purpose of meeting shareholder
requests to redeem shares.

With respect to 75% of its assets, this Portfolio will not:

- - Invest more than 5% in the securities of any one company.

- - Buy more than 10% of the outstanding voting securities of any company.

The limitations listed in this prospectus and in the Statement of Additional
Information are fundamental and may be changed only by approval of a majority of
the Portfolio's shareholders.

INVESTMENT PERFORMANCE

Vanguard Selected Value Portfolio invests primarily in common stocks, so its
performance is somewhat correlated to the performance of the overall stock
market. Historically, stock market performance has been characterized by sharp
up-and-down swings in the short term and by more stable growth over the long
term.

From time to time, the Vanguard Funds advertise yield and total return
figures. Yield is an historical measure of dividend income, and total return is
a measure of past dividend income plus capital appreciation. Neither yield nor
total return should be used to predict the future performance of the fund.

Plain Talk About

PAST PERFORMANCE

Whenever you see information on a fund's performance, do not consider the
figures to be an indication of the performance you could expect by making an
investment in the fund today. The past is an imperfect guide to the future;
history does not repeat itself in neat, predictable patterns.

SHARE PRICE

The Portfolio's share price, called its net asset value, is calculated each
business day after the close of regular trading (generally 4:00 p.m. Eastern
time) of the New York Stock Exchange. Net asset value per share is computed by
adding up the total value of the Portfolio's investments and other assets,
subtracting any of its liabilities, or debts, and then dividing by the number of
outstanding shares of the Portfolio:

TOTAL ASSETS - LIABILITIES
NET ASSET VALUE = ----------------------------
NUMBER OF SHARES OUTSTANDING

Daily net asset value, or NAV, is useful to you as a shareholder because the
NAV, multiplied by the number of Portfolio shares you

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own, gives you the dollar amount that you would have received had you sold all
of your shares back to the Portfolio that day.

The Portfolio's share price can be found daily in the mutual fund listings
of most major newspapers under the heading Vanguard Group. Different newspapers
use different abbreviations of the Portfolio's name, but the most common is
SELVALU.

Plain Talk About

DISTRIBUTIONS

As a shareholder, you are entitled to your share of the fund's income from
interest and dividends, and gains from the sale of investments. You receive such
earnings as either income dividends or capital gains distributions. Income
dividends come from the dividends that the fund earns from its holdings as well
as interest it receives from its money market and bond investments. Capital
gains distributions are realized when the fund sells securities for higher
prices than it paid for them. The capital gains are either short-term or
long-term according to whether the fund held the securities for less than or
more than one year.

Plain Talk About

"BUYING A DIVIDEND"

Unless you are investing in a tax-sheltered retirement account (such as an IRA),
it is not to your advantage to buy shares of a fund shortly before it makes a
distribution, because part of your investment will come back to you as a taxable
distribution. This is known as "buying a dividend." For example: on December 15,
you invest $5,000, buying 250 shares for $20 each. If the fund pays a
distribution of $1 per share on December 16, its share price would drop to $19
(not counting market change). You would still have only $5,000 (250 shares x $19
= $4,750 in share value, plus 250 shares x $1 = $250 in distributions), but you
would owe tax on the $250 distribution you received, even if you had reinvested
the dividends in more shares. To avoid "buying a dividend," check a fund's
distribution schedule before you invest.

DIVIDENDS, CAPITAL GAINS, AND TAXES

Each year in December, the Portfolio distributes to shareholders virtually all
of its income from interest and dividends, as well as any capital gains realized
from the sale of securities. You can receive distributions of income or capital
gains in cash, or you may have them automatically reinvested in more shares of
the Portfolio. In either case, distributions of dividends and capital gains that
are declared in December--even if paid to you in January--are taxed as if they
had been paid to you in December. Vanguard will process your dividend
distribution and send you a statement each year showing the tax status of all
your distributions.

- - The dividends and short-term capital gains distributions that you receive
are taxable to you as ordinary dividend income. Any distributions of net
long-term capital gains by the Portfolio are taxable to you as long-term
capital gains, no matter how long you've owned shares in the Portfolio. Both
dividends and capital gains distributions are taxable to you whether
received in cash or reinvested in additional shares. Although the Portfolio
does not seek to realize any particular amount of capital gains during a
year, such gains are realized from time to time as by products of the
ordinary investment activities of the Portfolio. Consequently, distributions
may vary considerably from year to year.

- - If you sell or exchange shares of the Portfolio, any gain or loss you have
is a taxable event, which means that you may have a capital gain to report
as income, or a capital loss to report as a deduction, when you complete
your Federal income tax return.

- - Distributions of dividends or capital gains, and capital gains or losses
from your sale or exchange of Portfolio shares, may be subject to state and
local taxes as well.

The tax information in this prospectus is provided as general information.
You should consult your own tax adviser about the tax consequences of an
investment in the Portfolio.

THE PORTFOLIO AND VANGUARD

The Fund is a member of The Vanguard Group of Investment Companies, a family of
more than 30 investment companies with more than 90 distinct investment
portfolios and total net assets of

8
<PAGE> 14
more than $180 billion. All of the Vanguard Funds share in the expenses
associated with business operations, such as personnel, office space, equipment,
and advertising.

Vanguard also provides marketing services to the Funds. Although
shareholders do not pay sales commissions or 12b-1 marketing fees, each Fund
pays its allocated share of The Vanguard Group's costs.

A list of the Fund's Directors and Officers, and their present and principal
occupations during the past five years, can be found in the Statement of
Additional Information.

INVESTMENT ADVISER

The Portfolio employs Barrow, Hanley, Mewhinney & Strauss, Inc., 3232 McKinney
Avenue, Dallas, TX 75204, as its investment adviser. BHM&S manages the Portfolio
subject to the control of the Officers and Directors of the Fund.

Each quarter, BHM&S is paid a base advisory fee based on average month-end
net assets of the Portfolio:

<TABLE>
<CAPTION>
---------------------------------------------------------
ASSETS MANAGED ANNUALIZED BASE FEE
---------------------------------------------------------
<S> <C>
First $100 million 0.40%
Next $200 million 0.35
Next $300 million 0.25
Next $400 million 0.20
Assets over $1 billion 0.15
---------------------------------------------------------
</TABLE>

Beginning with the quarter ending April 30, 1997, the base fee may be
increased or decreased, depending on the Portfolio's investment performance
compared to the Russell Midcap Index, a market benchmark that covers the
smallest 800 of the 1,000 largest companies in the United States. The Portfolio
adds or subtracts the following performance adjustments to the quarter's base
fee payable to BHM&S:

<TABLE>
<CAPTION>
---------------------------------------------------------
DIFFERENCE BETWEEN THE
PORTFOLIO'S AND THE RUSSELL INCENTIVE/PENALTY
MIDCAP INDEX'S 36-MONTH PERFORMANCE
CUMULATIVE RETURN ADJUSTMENT
---------------------------------------------------------
<S> <C>
Less than -12% -0.50 x Base Fee
From -12% to -6% -0.25 x Base Fee
Between -6% and +6% 0
From +6% to +12% +0.25 x Base Fee
More than +12% +0.50 x Base Fee
---------------------------------------------------------
</TABLE>

The incentive/penalty fee structure will not be in full operation until the
quarter ending April 30, 1999. Until then, the incentive/penalty fee will be
calculated using certain transition rules. The incentive/penalty fee schedule
and calculation process for the

Plain Talk About

VANGUARD'S UNIQUE
CORPORATE STRUCTURE

The Vanguard Group, Inc. is the only mutual mutual fund company. It is owned
jointly by the Funds it oversees and by the shareholders in those funds. Other
mutual funds are operated by for-profit management companies that may be owned
by one person, a group of individuals, or by investors who bought the management
company's publicly traded stock. Because of its structure, Vanguard operates its
Funds at cost. Instead of distributing profits as other mutual fund companies
do, Vanguard returns profits to Fund shareholders in the form of lower operating
expenses.

Plain Talk About

THE PORTFOLIO'S ADVISER

Barrow, Hanley, Mewhinney & Strauss, Inc., an investment advisory firm founded
in 1979, manages more than $16 billion in stock and bond portfolios for a
limited number of institutional clients. BHM&S has managed the majority of the
assets for Vanguard/Windsor II since 1985. The managers responsible for
overseeing the implementation of BHM&S's strategy for Vanguard Selected Value
Portfolio are:

JAMES S. MCCLURE, Principal at BHM&S; 23 years investment experience; BA and
MBA from University of Texas. From 1989 through July 1995, he was senior
portfolio manager of the Goldman Sachs Capital Growth Fund.

JOHN P. HARLOE, Principal at BHM&S; 19 years investment experience; BA and
MBA from University of South Carolina. From 1986 through July 1995, he was
equity portfolio manager at Sterling Capital Management.

Both spent about ten years together at American National Insurance Company,
American Capital Management & Research, and Oppenheimer & Co., Inc.

9
<PAGE> 15
Portfolio's first three years are described in the Portfolio's Statement of
Additional Information. This report can be obtained by writing to or calling
Vanguard.

The agreement authorizes BHM&S to choose brokers or dealers to handle the
purchases and sales of the Portfolio's securities, and directs BHM&S to use
every effort to get the best available price and most favorable execution from
these brokers with respect to all transactions.

The Board of Directors may, without prior approval from shareholders, change
the terms of the advisory agreement or hire a new investment adviser, either as
a replacement for BHM&S or as an additional adviser. However, no such change
would be made before giving shareholders 30-days notice, in writing.

GENERAL INFORMATION

The Selected Value Portfolio is a Portfolio of Vanguard Whitehall Funds, Inc.,
which is a corporation organized under the laws of the State of Maryland.

Shareholders of the Selected Value Portfolio have rights and privileges
similar to those enjoyed by other corporate shareholders. For example,
shareholders will not be responsible for any liabilities of the corporation. If
any matters are to be voted on by shareholders (such as a change in a
fundamental investment objective or the election of directors), each share
outstanding at that point would be entitled to one vote. Although the Portfolio
does not usually hold an annual meeting, shareholders may request one under
certain circumstances, which are described in the Statement of Additional
Information.

10
<PAGE> 16
INVESTING WITH VANGUARD

Are you looking for the most convenient way to open or add money to a Vanguard
account? Obtain instant access to Fund information? Establish an account for a
minor child or for your retirement savings?

Vanguard can help. Our goal is to make it easy and pleasant for you to
do business with us.

The following sections of the prospectus briefly explain the many
services we offer you as a Vanguard Selected Value Portfolio shareholder.
Booklets providing detailed information are available on the services marked
with a [graphic]. Please call us to request copies.

SERVICES AND ACCOUNT FEATURES

We offer a variety of options designed to fit your financial planning needs,
including ...

- - Automatic methods for depositing your paycheck or government check, and
moving money between Vanguard Fund accounts or between your Vanguard Fund
account and your bank account.

- - A cost-effective way to complement your Vanguard mutual fund shares with
individual stocks, bonds, and options.

TYPES OF ACCOUNTS

You can establish an account for yourself (or yourself and another party), a
minor child, a trust, or an organization, or as a third-party trustee
retirement investment. We also offer retirement accounts for individuals,
self-employed people, small businesses, partnerships, corporations, and
tax-exempt institutions.

DISTRIBUTION OPTIONS

You can receive your dividends and capital gains in cash, or reinvest them in
additional Portfolio shares.

BUYING SHARES

It's easy to open an account or add money to an existing account.

REDEEMING SHARES

You can withdraw money you have invested in the Portfolio by selling or
exchanging shares.

FUND AND ACCOUNT UPDATES

- - Our clear, concise Portfolio Summaries and tax statements help you keep track
of your Vanguard investments throughout the year as well as when you are
preparing your income tax returns.

- - Twice each year, you will receive comprehensive fund reports about Vanguard
Selected Value Portfolio. These reports include an assessment of the
Portfolio's performance (and a comparison to its benchmark index) as well as
a complete listing of its holdings.

- - Vanguard Tele-Account(R) offers toll-free Fund and account information 24
hours a day from any TouchTone(TM) telephone.

- - You can use your personal computer to obtain share price, yield, and total
return -- as well as general investment information -- through Vanguard
Online(SM) and the World Wide Web.

<PAGE> 17
INVESTOR INFORMATION 1-800-662-7447 CLIENT SERVICES 1-800-662-2739
TELE-ACCOUNT 1-800-662-6273
- --------------------------------------------------------------------------------

SERVICES AND ACCOUNT FEATURES

Vanguard offers many services that make it convenient to purchase, sell, or
exchange shares.

- --------------------------------------------------------------------------------
TELEPHONE REDEMPTIONS Automatically set up for this Portfolio unless you
(SALES AND EXCHANGES) notify us otherwise.
- --------------------------------------------------------------------------------
VANGUARD DIRECT DEPOSIT Automatic method for depositing your paycheck or U.S.
SERVICE Government payment (including Social Security and
[GRAPHIC] Government pension checks) into your account.*
- --------------------------------------------------------------------------------
VANGUARD AUTOMATIC Automatic method for moving a fixed amount of money
EXCHANGE SERVICE from one Vanguard Fund account to another.*
[GRAPHIC]
- --------------------------------------------------------------------------------
VANGUARD FUND EXPRESS Electronic method for purchasing or selling shares:
[GRAPHIC] transferring money between your Vanguard Fund account
and an account at your bank, savings and loan, or
credit union--on a systematic schedule or whenever
you wish.*
- --------------------------------------------------------------------------------
VANGUARD DIVIDEND Electronic method for transferring dividends and/or
EXPRESS capital gains distributions directly from your
[GRAPHIC] Vanguard Fund account to your bank, savings and loan,
or credit union account or to another Vanguard Fund
account.
- --------------------------------------------------------------------------------
VANGUARD BROKERAGE A way to trade stocks, bonds, and options on major
SERVICES (VBS) exchanges, Nasdaq, and other domestic
[GRAPHIC] over-the-counter markets at reduced rates, and to buy
and sell shares of non-Vanguard mutual funds. Call
VBS (1-800-992-8327) for additional information and
the appropriate forms.
- --------------------------------------------------------------------------------

*Can be used to "dollar-cost average" [GRAPHIC] or to contribute to an IRA or
other retirement plan.

TYPES OF ACCOUNTS

INDIVIDUAL OR OTHER ENTITY
Vanguard's account registration form can be used to establish a variety of
account types.

- --------------------------------------------------------------------------------
FOR ONE OR MORE PEOPLE To open an account in the name of one (individual) or
more (joint tenants) people. $3,000 minimum initial
investment.
- --------------------------------------------------------------------------------
FOR A MINOR CHILD To open an account as an UGMA/UTMA (Uniform
[GRAPHIC] Gifts/Transfers to Minors Act). Age of majority and
other transfer requirements are set by state law.
$1,000 minimum initial investment.
- --------------------------------------------------------------------------------
FOR HOLDING TRUST ASSETS To register assets held in an existing trust
[GRAPHIC] agreement. $3,000 minimum initial investment.
- --------------------------------------------------------------------------------

12
<PAGE> 18
INVESTOR INFORMATION 1-800-662-7447 CLIENT SERVICES 1-800-662-2739
TELE-ACCOUNT 1-800-662-6273
- --------------------------------------------------------------------------------

TYPES OF ACCOUNTS (CONTINUED)

- --------------------------------------------------------------------------------
FOR THIRD-PARTY TRUSTEE To open an account as a retirement trust or plan
RETIREMENT INVESTMENTS based on an existing corporate or institutional plan.
(Vanguard is not the These accounts are established by the custodian or
custodian or trustee) trustee of the existing plan.
- --------------------------------------------------------------------------------
FOR AN ORGANIZATION To open an account as a corporation, partnership, or
other entity. These accounts may require a corporate
resolution or other documents to name the individuals
authorized to act. $3,000 minimum initial investment.
- --------------------------------------------------------------------------------

RETIREMENT

These accounts must be established with a Vanguard adoption agreement--not a
Vanguard account registration form--and may require additional documentation. To
request the appropriate adoption agreement and forms or to receive answers to
your questions about investing for retirement, call Investor Information.

- --------------------------------------------------------------------------------
FOR AN INDIVIDUAL To open a retirement account in the name of an
RETIREMENT ACCOUNT individual. IRAs can also be established through
(IRA) direct rollovers from an employer's plan such as a
(Vanguard Fiduciary Trust 401(k), or through an asset transfer from another
Company is the custodian) financial institution such as a bank or mutual fund
company. $1,000 minimum initial investment.
- --------------------------------------------------------------------------------
FOR A SIMPLIFIED EMPLOYEE To open a retirement account in the name of an
PENSION PLAN ACCOUNT employee. SEPs allow employers to make deductible
(SEP-IRA) contributions directly to IRAs established for their
(Vanguard Fiduciary Trust employees. A SEP can be established by self-employed
Company is the custodian) individuals, small businesses, partnerships, or
corporations.
- --------------------------------------------------------------------------------
FOR A QUALIFIED RETIREMENT To open a retirement account that allows small
PROGRAM ACCOUNT business owners (and their employees) or
(Vanguard Fiduciary Trust self-employed individuals to make tax-deductible
Company can be the retirement contributions into HR-10 (Keogh),
custodian) Profit-Sharing, or Money Purchase Pension plans.
- --------------------------------------------------------------------------------
FOR A 403(B)(7) PLAN To open a retirement account that allows employees of
ACCOUNT tax-exempt institutions (for example, schools or
(Vanguard Fiduciary Trust hospitals) to make tax-deductible retirement
Company is the custodian) contributions.
- --------------------------------------------------------------------------------

DISTRIBUTION OPTIONS

You can receive distributions of dividends and/or capital gains in a number of
ways:

- --------------------------------------------------------------------------------
REINVESTMENT Dividends and capital gains are reinvested in
additional shares of the Portfolio.
- --------------------------------------------------------------------------------
DIVIDENDS IN CASH Dividends are paid by check and mailed to your
account's address of record, and capital gains are
reinvested in additional shares of the Portfolio.
- --------------------------------------------------------------------------------

13
<PAGE> 19
INVESTOR INFORMATION 1-800-662-7447 CLIENT SERVICES 1-800-662-2739
TELE-ACCOUNT 1-800-662-6273
- --------------------------------------------------------------------------------

DISTRIBUTION OPTIONS (CONTINUED)

- --------------------------------------------------------------------------------
DIVIDENDS AND Both dividends and capital gains are paid by check
CAPITAL GAINS IN CASH and mailed to your account's address of record.
- --------------------------------------------------------------------------------

To electronically transfer cash dividends and/or capital gains to your bank,
savings and loan, or credit union account, or to another Vanguard Fund account,
see Vanguard Dividend Express under "Services and Account Features."

BUYING SHARES

The price you pay for your shares is the Portfolio's next-determined net asset
value after Vanguard receives your request, provided we receive your request
before 4:00 p.m. Eastern time (the close of trading on the New York Stock
Exchange). The Portfolio is offered on a no-load basis, meaning that you do not
pay sales commissions or 12b-1 marketing fees.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
OPEN A ADD TO AN
NEW ACCOUNT EXISTING ACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MINIMUM INVESTMENT $3,000 (regular account); $1,000 (retirement and $100 by mail or exchange; $1,000 by wire.
custodial accounts).
- ------------------------------------------------------------------------------------------------------------------------------------
BY MAIL Complete and sign the application form. Mail your check with an Invest-By-Mail form
[GRAPHIC] detached from your confirmation statement
FIRST-CLASS mail to: to the address listed on the form.
Vanguard Financial Center
P.O. Box 2600 Make your check payable to: Make your check payable to:
Valley Forge, PA 19482 The Vanguard Group--934. The Vanguard Group--934.

EXPRESS or REGISTERED mail to: All purchases must be made in U.S. dollars, and All purchases must be made in U.S. dollars, and
Vanguard Financial Center checks must be drawn on U.S. banks. checks must be drawn on U.S. banks.
455 Devon Park Drive
Wayne, PA 19087
- ------------------------------------------------------------------------------------------------------------------------------------
BY TELEPHONE Call Vanguard Tele-Account* 24 hours a day--or Call Vanguard Tele-Account* 24 hours a day--or
[GRAPHIC] Client Services during business hours--to Client Services during business hours--to
1-800-662-6273 exchange from another Vanguard Fund account with exchange from another Vanguard Fund account with
Vanguard Tele-Account the same registration (name, address, and the same registration (name, address, and
taxpayer I.D. number). taxpayer I.D. number).
1-800-662-2739
Client Services Use Vanguard Fund Express (see "Services and
Account Features") to transfer assets from your
bank account. Call Client Services before your
first use to verify that this option is in
place.

*You must obtain a Personal Identification Number through Tele-Account at least seven days before
you request your first exchange.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

IMPORTANT NOTE: Once a telephone transaction has been approved by you and a
confirmation number assigned, it cannot be revoked. We reserve the right to
refuse any purchase by exchange.

14
<PAGE> 20
INVESTOR INFORMATION 1-800-662-7447 CLIENT SERVICES 1-800-662-2739
TELE-ACCOUNT 1-800-662-6273
- --------------------------------------------------------------------------------

BUYING SHARES (CONTINUED)

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
OPEN A ADD TO AN
NEW ACCOUNT EXISTING ACCOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BY WIRE Call Client Services to arrange your wire Call Client Services to arrange your wire
transaction. transaction.
Wire to:
CoreStates Bank, N.A.
ABA 031000011 Wire transactions are not available for Wire transactions are not available for
CoreStates No 01019897 retirement accounts. retirement accounts.
[Temporary Account Number]
Vanguard Selected Value Portfolio
[Account Registration]
[Attn Vanguard]
- ------------------------------------------------------------------------------------------------------------------------------------
AUTOMATICALLY Vanguard offers a variety of ways that you
-- can add to your account automatically. See
"Services and Account Features."
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Shares purchased by check or Vanguard Fund Express can be redeemed at any time.
However, while your redemption request will be processed as soon as it is
received, your redemption proceeds will not be available until payment for your
purchase is collected, which may take up to ten days.

It is important that you call Vanguard before you invest a large dollar amount
by wire or check. Investment advisers must consider the interests of all
Portfolio shareholders and so reserve the right to delay or refuse any purchase
that may disrupt the Portfolio's operation or performance.

REDEEMING SHARES

IMPORTANT TAX NOTE: Any sale or exchange of shares in a non-retirement account
could result in a taxable gain or a loss.

The ability to redeem (that is, sell or exchange) Portfolio shares by telephone
is automatically established for your account unless you tell us in writing that
you do not want this option.

To protect your account from unauthorized or fraudulent telephone
instructions, Vanguard follows specific security procedures. When we receive a
call requesting an account transaction, we require the caller to provide:

- Portfolio name.
- 10-digit account number.
- Name and address exactly as registered on that account.
- Social Security or Employer Identification number as registered on
that account.

If you call to sell shares, the sale proceeds will be made payable to
you, as the registered shareholder, and mailed to your account's address of
record.

If we follow reasonable security procedures, neither the Portfolio nor
Vanguard will be responsible for the authenticity of transaction instructions
received by telephone. We believe that these procedures are reasonable and that,
if we follow them, you bear the risk of any losses resulting from unauthorized
or fraudulent telephone transactions on your account. However, if we do not
follow these or other reasonable procedures, Vanguard may be liable for any
losses resulting from unauthorized or fraudulent transactions.

15
<PAGE> 21
INVESTOR INFORMATION 1-800-662-7447 CLIENT SERVICES 1-800-662-2739
TELE-ACCOUNT 1-800-662-6273
- --------------------------------------------------------------------------------

REDEEMING SHARES (CONTINUED)

HOW TO SELL SHARES

You may withdraw any part of your account, at any time, by selling shares (at
least $1,000 in shares must remain in your account). The Portfolio will deduct a
$10 annual fee if your non-retirement account balance falls below $2,500 or if
your UGMA/UTMA account balance falls below $500. The fee is waived if your total
Vanguard Fund account assets are $50,000 or more.

Sale proceeds are normally mailed within two business days after
Vanguard receives your request. The sale price of your shares will be the
Portfolio's next-determined net asset value after Vanguard receives all required
documents in good order.

Good order means that the request includes:
- Portfolio name and account number.
- Amount of the transaction (in dollars or shares).
- Signatures of all owners exactly as registered on the account.
- Signature guarantees (if required).
- Any supporting legal documentation that may be required.
- Any certificates you are holding for the account.

Sales or exchange requests received after the close of trading on the
New York Stock Exchange (generally 4:00 p.m. Eastern time) are processed at the
next business day's net asset value.

Some written requests require a signature guarantee from a bank or broker or
other acceptable institution. A notary public cannot provide a signature
guarantee.

HOW TO EXCHANGE SHARES

An exchange is the selling of shares of one Vanguard Fund to purchase shares of
another.

Although every effort will be made to maintain the exchange privilege,
Vanguard reserves the right to revise or terminate the exchange privilege, limit
the amount of an exchange, or reject any exchange, at any time, without notice.

Because excessive exchanges can potentially disrupt the management of
the Portfolio and increase transaction costs, Vanguard has established a policy
of limiting exchange activity to TWO SUBSTANTIVE EXCHANGE REDEMPTIONS (at least
30 days apart) from the Portfolio during any 12-month period. "Substantive"
means either a dollar amount large enough to have a negative impact on the
Portfolio or a series of movements between Vanguard Funds.

Before you exchange into a new Vanguard Fund, please read its
prospectus. For a copy and for answers to questions you might have, please call
Investor Information.

SELLING OR EXCHANGING SHARES
- --------------------------------------------------------------------------------
BY TELEPHONE

[GRAPHIC]

1-800-662-6273
Vanguard Tele-Account

1-800-662-2739
Client Services

ACCOUNT TYPE
- --------------------------------------------------------------------------------
ALL TYPES EXCEPT RETIREMENT:

Call Vanguard Tele-Account* 24 hours a day--or Client Services during business
hours--to request a sale or exchange of shares. You can exchange shares from
this Portfolio to open an account in another Vanguard Fund or to add to an
existing Vanguard Fund account with an identical registration.

RETIREMENT:

You can exchange--but not sell--shares by calling Tele-Account or Client
Services.

*You must obtain a Personal Identification Number through Tele-Account at least
seven days before you request your first redemption.

16
<PAGE> 22
INVESTOR INFORMATION 1-800-662-7447 CLIENT SERVICES 1-800-662-2739
TELE-ACCOUNT 1-800-662-6273
- --------------------------------------------------------------------------------

REDEEMING SHARES (CONTINUED)

SELLING OR EXCHANGING SHARES ACCOUNT TYPE
- --------------------------------------------------------------------------------

BY MAIL ALL TYPES EXCEPT RETIREMENT:

[GRAPHIC] Send a letter of instruction signed by
all registered account holders. Include
FIRST-CLASS mail to: the Portfolio name and account number and
Vanguard Financial Center (if you are selling) a dollar amount or
Vanguard Selected Value Portfolio number of shares OR (if you are
P.O. Box 1120 exchanging) the name of the Fund you want
Valley Forge, PA 19482 to exchange into and a dollar amount or
number of shares
EXPRESS OR REGISTERED mail to:
Vanguard Financial Center RETIREMENT:
Vanguard Selected Value Portfolio
455 Devon Park Drive Call Client Services (for IRAs) or
Wayne, PA 19087 Individual Retirement Services (for
SEP-IRAs and Keogh, Profit-Sharing, and
Money Purchase Pension plans:
1-800-662-2003) for information on how to
request a distribution. Depending on your
account registration type, additional
documentation may be required.

- --------------------------------------------------------------------------------

AUTOMATICALLY ALL TYPES EXCEPT RETIREMENT:

Vanguard offers several ways to sell or
exchange shares automatically (see
"Services and Account Features"). Call
Investor Information for the appropriate
booklet and application if you did not
elect a feature when you opened your
account.

- --------------------------------------------------------------------------------

It is important that you call Vanguard before you redeem a large dollar amount.
In protecting the interests of all Portfolio shareholders, Vanguard may not be
able to deliver your redemption proceeds immediately if the amount is considered
to be disruptive to the Portfolio's operation or performance. Vanguard reserves
the right to take up to seven days to deliver your redemption proceeds.

A NOTE ON UNUSUAL CIRCUMSTANCES

Vanguard reserves the right to revise or terminate the telephone redemption
privilege at any time, without notice. In addition, Vanguard can stop selling
shares or postpone payment at times when the New York Stock Exchange is closed
or under any emergency circumstances as determined by the United States
Securities and Exchange Commission.

If you experience difficulty making a telephone redemption during periods
of drastic economic or market change, you can send us your request by regular or
express mail. Follow the instructions on selling or exchanging shares by mail in
the "Redeeming Shares" section.

FUND AND ACCOUNT UPDATES

STATEMENTS AND REPORTS

We will send you a variety of statements to help you monitor your account
activity and to help you complete your tax returns. You will also receive annual
and semi-annual financial reports on the Portfolio's operation and performance.

CONFIRMATION STATEMENT

Sent each time you purchase, exchange, or redeem shares; confirms the date and
the amount of the transaction.

<PAGE> 23
INVESTOR INFORMATION 1-800-662-7447 CLIENT SERVICES 1-800-662-2739
TELE-ACCOUNT 1-800-662-6273
- --------------------------------------------------------------------------------

FUND AND ACCOUNT UPDATES (CONTINUED)

PORTFOLIO SUMMARY Mailed quarterly; shows the market value of your
account as of the close of the statement period, as
well as distributions, purchases, exchanges, and
redemptions for the current calendar year.

FUND FINANCIAL REPORTS Mailed in June and December for this Portfolio.

TAX STATEMENTS Generally mailed in January; report previous year's
dividend and capital gains distributions, proceeds
from the sale of shares, and distributions from
IRAs or other retirement accounts.

AVERAGE COST STATEMENT Issued quarterly for taxable accounts (accompanies
your Portfolio Summary); shows the average cost of
[GRAPIC] shares that you redeemed during the previous
quarter, using the average cost single category
method.

AUTOMATED TELEPHONE ACCESS

VANGUARD TELE-ACCOUNT Toll-free access to total return, share price,
1-800-662-6273 price change, and yield quotations through any
Any time, seven days TouchTone telephone. Also provides your account
a week, from anywhere balance (in dollars and shares), last transaction,
in the continental redemptions by check during the last three months,
United States and Canada and the latest dividend or capital gains
distribution. Permits exchanges and sales of
[GRAPIC] Portfolio shares.

COMPUTER ACCESS

VANGUARD ONLINE Information via your personal computer on Fund
KEYWORD: vanguard share price, yield, and total return; offered
through America Online (AOL). To establish an AOL
account, call 1-800-238-6336.

VANGUARD ON THE An education-oriented website offering news and
WORLD WIDE WEB information about Vanguard Funds and services, as
ADDRESS: well as interactive, easy-to-use investment
http://www.vanguard.com planning tools.

Shares of the Portfolio may only be sold in those states in which they are
registered. The Portfolio's shares are currently registered for sale in all 50
states, and the Portfolio intends to maintain such registration.

18
<PAGE> 24
PROSPECTUS POSTSCRIPT

This prospectus is designed to provide you with pertinent information about
Vanguard Selected Value Portfolio, including its investment objective, risks,
strategy, and expenses, as well as services available to you as a shareholder.
It is important that you understand these facts so that you can decide
whether an investment in this Portfolio is right for you. The following
questions offer a quick review of some of the subjects covered by this
prospectus.

In Reading The Prospectus, Did You Learn...

/ / The Portfolio's objective? (page 3)

/ / The Portfolio's investment strategies? (pages 4-6)

/ / Who should invest in the Portfolio? (page 3)

/ / The risks associated with the Portfolio? (pages 3-6)

/ / Whether the Portfolio is Federally insured?
(inside front cover)

/ / The Portfolio's estimated expenses? (page 2)

/ / The background of the Portfolio's investment managers?
(page 9)

/ / How to open an account? (page 14)

/ / How to sell or exchange shares? (pages 15-17)

/ / How often you'll receive statements and financial reports?
(pages 17-18)

Plain Talk About

KEEPING YOUR
PROSPECTUS

Reading this prospectus will help you to decide whether Vanguard Selected Value
Portfolio is suitable for your investment goals. If you decide to invest, don't
throw the prospectus out: you will no doubt need it for future reference.

<PAGE> 25
GLOSSARY OF INVESTMENT TERMS

CAPITAL GAINS DISTRIBUTION
Payment to mutual fund shareholders of gains realized during the year on
securities that the fund has sold at a profit, minus any realized losses.

CASH RESERVES
Cash deposits as well as short-term bank deposits, money market instruments and
U.S. Treasury bills.

COMMON STOCK
A security representing ownership rights in a corporation. A stockholder is
entitled to share in the company's profits, some of which may be paid out as
dividends.

DIVERSIFICATION

Spreading your investments among many issuers (this is, organizations that
sell securities).

DIVIDEND INCOME
Payment to shareholders of income from interest or dividends generated by a
fund's investments.

DOLLAR-COST AVERAGING
Investing equal amounts of money at regular intervals on an ongoing basis. This
technique ensures that an investor buys fewer shares when prices are high and
more shares when prices are low.

EXPENSE RATIO

The percentage of a fund's average net assets used to pay its expenses. The
expense ratio takes into account management fees, administrative fees, and any
12b-1 marketing fees.

FIXED-INCOME SECURITIES
Investments, such as bonds, that have a fixed payment schedule. While the level
of income offered by these securities is predetermined, their prices may
fluctuate.

GROWTH STOCK FUND

A mutual fund that emphasizes stocks of companies seeking growth in market
value, rather than dividend income. Such stocks typically sell at relatively
high prices in relation to earnings, book value, and dividends.

INVESTMENT ADVISER

An organization that makes the day-to-day decisions regarding the Portfolio's
investments.

MUTUAL FUND
An investment company that pools the money of many people and invests it in a
variety of securities in an effort to achieve a specific objective over time.

NET ASSET VALUE (NAV)
The market value of a mutual fund's total assets, minus liabilities, divided by
the number of shares outstanding. The value of a single share is called its
share value or share price.

PRICE/EARNINGS (P/E) RATIO
The current share price of a stock, divided by its per-share earnings (profits)
from the past year. A stock selling for $20, with earnings of $2 per share, has
a price/earnings ratio of 10.

PRINCIPAL
The amount of your own money you put into an investment.

SECURITIES
Stocks, bonds, and other investment vehicles.

TOTAL RETURN
A percentage change, over a specified time period, in a mutual fund's net asset
value, with the ending net asset value adjusted to account for the reinvestment
of all distributions of dividends and capital gains.

VALUE STOCK FUND
A mutual fund that invests in companies whose stocks have relatively low prices
in relation to earnings, book value, and dividends.

VOLATILITY
The fluctuations in value of a mutual fund or other security. The greater a
fund's volatility, the wider the fluctuations between its high and low prices.

YIELD

Current income (interest or dividends) earned by an investment, expressed as a
percentage of the investment's price.

<PAGE> 26
[This page intentionally left blank.]
<PAGE> 27
[THE VANGUARD GROUP LOGO]

HMS Vanguard was the flagship of Lord Nelson at the Battle of the Nile in 1798.
Vanguard was chosen as the name of The Vanguard Group because of the
significance of its traditional meaning: "the advance guard" or "leadership of a
new trend."

THE VANGUARD GROUP OF INVESTMENT COMPANIES
VANGUARD FINANCIAL CENTER
P.O. Box 2600
Valley Forge, PA 19482

INVESTOR INFORMATION DEPARTMENT
1-800-662-7447 (SHIP)
TEXT TELEPHONE:
1-800-952-3335
For Information on our Funds, Fund Services, and Retirement Accounts; Requests
for Literature

CLIENT SERVICES DEPARTMENT
1-800-662-2739 (CREW)
TEXT TELEPHONE:
1-800-662-2739
For Information on Your Account, Account Transactions, Account Statements

VANGUARD BROKERAGE
SERVICES
1-800-992-8327
For Information on Trading Stocks, Bonds, and Options at Reduced Commissions

VANGUARD TELE-ACCOUNT(R)
1-800-662-6273 (ON-BOARD)
For 24-Hour Automated Access to Price and Yield, Information on Your Account,
Certain Transactions

ELECTRONIC ACCESS TO
VANGUARD
To Reach the Vanguard Mutual Fund Education and Information Center
On Vanguard Online(SM) (on America Online(R))
Keyword: vanguard
To Send E-Mail to Vanguard
[email protected]
On the World Wide Web
http://www.vanguard.com

P934N
<PAGE> 28

PART B

VANGUARD WHITEHALL FUNDS, INC.

STATEMENT OF ADDITIONAL INFORMATION

FEBRUARY 15, 1996

This Statement is not a prospectus but should be read in conjunction with
the Fund's current Prospectus (dated February 15, 1996). To obtain the
Prospectus please call the Investor Information Department:

1-800-662-7447

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objectives and Policies........................................................ 1
Investment Policies....................................................................... 1
Investment Limitations.................................................................... 5
Management of the Fund.................................................................... 6
Investment Advisory Services.............................................................. 9
Securities Transactions................................................................... 11
Purchase of Shares........................................................................ 12
Redemption of Shares...................................................................... 12
Comparative Indexes....................................................................... 13
</TABLE>

INVESTMENT OBJECTIVES AND POLICIES

The following policies supplement the Fund's Investment objectives and
policies set forth in the Prospectus.

PORTFOLIO TURNOVER While the rate of portfolio turnover is not a limiting
factor when management deems changes appropriate, it is anticipated that the
Portfolio's annual portfolio turnover rate will not normally exceed 30%. A
portfolio turnover rate of 33% would occur if one-third of the Portfolio's
securities, exclusive of U.S. Government securities and other securities whose
maturities at the time of acquisition are one year or less, are replaced in the
period of one year. Turnover rates may vary greatly from year to year as well as
within a particular year and may also be affected by cash requirements for
redemptions of each Portfolio's shares and by requirements which enable the Fund
to receive certain favorable tax treatments. The portfolio turnover rates will,
of course, depend in large part on the level of purchases and redemptions of
shares of each Portfolio. Higher portfolio turnover can result in corresponding
increases in brokerage costs to the Portfolios of the Fund and their
shareholders.

INVESTMENT POLICIES

FUTURES CONTRACTS Each Portfolio may enter into futures contracts,
options, and options on futures contracts for several reasons: to maintain cash
reserves while remaining fully invested, to facilitate trading, to reduce
transaction costs, or to seek higher investment returns when a futures contract
is priced more attractively than the underlying equity security or index.
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified future
time and at a specified price. Futures contracts which are standardized as to
maturity date and underlying financial instrument are traded on national futures
exchanges. Futures exchanges and trading are regulated under the Commodity
Exchange Act by the Commodity Futures Trading Commission ("CFTC"), a U.S.
Government Agency.

Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract

1
<PAGE> 29

which has previously been "sold," or "selling" a contract previously purchased)
in an identical contract to terminate the position. Brokerage commissions are
incurred when a futures contract is bought or sold.

Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. The Fund's margin deposits will be placed in a
segregated account maintained by the Fund's custodian bank. A margin deposit is
intended to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified delivery
date. Minimal initial margin requirements are established by the futures
exchange and may be changed. Brokers may establish deposit requirements which
are higher than the exchange minimums. Futures contracts are customarily
purchased and sold on margin which may range upward from less than 5% of the
value of the contract being traded.

After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent that
the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Fund
expects to earn interest income on its margin deposits.

Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade, and use
futures contracts with the expectation of realizing profits from fluctuations in
the prices of underlying securities. A Portfolio will not use futures and
options contracts for speculative purposes or as leveraged investments that
magnify the gains or losses of an investment.

Although techniques other than the sale and purchase of futures contracts
could be used to control a Portfolio's exposure to market fluctuations, the use
of futures contracts may be a more effective means of hedging this exposure.
While a Portfolio will incur commission expenses in both opening and closing out
futures positions, these costs are lower than transaction costs incurred in the
purchase and sale of the underlying securities.

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS A Portfolio will not enter
into futures contract transactions to the extent that, immediately thereafter,
the sum of its initial margin deposits on open contracts exceeds 5% of the
market value of its total assets. In addition, a Portfolio will not enter into
futures contracts to the extent that its outstanding obligations to purchase
securities under these contracts would exceed 20% of its total assets.

RISK FACTORS IN FUTURES TRANSACTIONS Positions in futures contracts may be
closed out only on an Exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, a Portfolio would continue to be required to make daily cash payments
to maintain its required margin. In such situations, if the Portfolio has
insufficient cash, it may have to sell portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition, a
Portfolio may be required to make delivery of the instruments underlying futures
contracts it holds. The inability to close options and futures positions also
could have an adverse impact on the ability to effectively hedge.

The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed

2
<PAGE> 30

out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of the Fund are engaged in only for hedging purposes, the Adviser
does not believe that the Portfolios are subject to the risks of loss frequently
associated with futures transactions. A Portfolio would presumably have
sustained comparable losses if, instead of the futures contract, it had invested
in the underlying financial instrument and sold it after the decline. Futures
and options are derivative instruments, in that their value is derived from the
value of another security.

Utilization of futures transactions by a Portfolio does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged. It is also
possible that a Portfolio could both lose money on futures contracts and also
experience a decline in value of its portfolio securities. There is also the
risk of loss by a Portfolio of margin deposits in the event of bankruptcy of a
broker with whom the Portfolio has an open position in a futures contract or
related option. Additionally, investments in futures contracts and options
involve the risk that the investment advisers will incorrectly predict stock
market and interest rate trends.

Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of future positions and subjecting some futures
traders to substantial losses.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS Except for transactions the
Fund has identified as hedging transactions, each Portfolio is required for
Federal income tax purposes to recognize as income for each taxable year its net
unrealized gains and losses on certain futures contracts as of the end of the
year as well as those actually realized during the year. In most cases, any gain
or loss recognized with respect to a futures contract is considered to be 60%
long-term capital gain or loss and 40% short-term capital gain or loss, without
regard to the holding period of the contract. Furthermore, sales of futures
contracts which are intended to hedge against a change in the value of
securities held by a Portfolio may affect the holding period of such securities
and, consequently, the nature of the gain or loss on such securities upon
disposition.

In order for a Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, gains from the sale of
securities or foreign currencies or other income derived with respect to the
Fund's business of investing in securities. In addition, gains realized on the
sale or other disposition of securities held for less than three months must be
limited to less than 30% of the Portfolio's annual gross income. It is
anticipated that any net gain realized from the closing out of futures contracts
will be considered gain from the sale of securities and therefore be qualifying
income for purposes of the 90% requirement. In order to avoid realizing
excessive gains on securities held less than three months, the Portfolio may be
required to defer the closing out of futures contracts beyond the time when it
would otherwise be advantageous to do so. It is anticipated that unrealized
gains on futures contracts, which have been open for less than three months as
of the end of the Portfolio's fiscal year and which are recognized for tax
purposes, will not be considered gains on sales of securities held less than
three months for the purpose of the 30% test.

A Portfolio will distribute to shareholders annually any net capital gains
which have been recognized for Federal income tax purposes (including unrealized
gains at the end of the Fund's fiscal year) on futures transactions. Such
distributions will be combined with distributions of capital gains realized on
the Portfolio's other investments and shareholders will be advised on the nature
of the transactions.

REPURCHASE AGREEMENTS Each Portfolio may invest in repurchase agreements
with commercial banks, brokers or dealers either for defensive purposes due to
market conditions or to generate income from its excess cash balances. A
repurchase agreement is an agreement under which the Fund acquires a money
market instrument (generally a security issued by the U.S Government or an
agency thereof, a banker's acceptance or

3
<PAGE> 31

a certificate of deposit) from a commercial bank, broker or dealer, subject to
resale to the seller at an agreed upon price and date (normally, the next
business day). A repurchase agreement may be considered a loan collateralized by
securities. The resale price reflects an agreed upon interest rate effective for
the period the instrument is held by the Portfolio and is unrelated to the
interest rate on the underlying instrument. In these transactions, the
securities acquired by the Portfolio (including accrued interest earned thereon)
must have a total value in excess of the value of the repurchase agreement and
are held by the Fund's Custodian Bank until repurchased. In addition, the Fund's
Board of Directors will monitor each Portfolio's repurchase agreement
transactions generally and will establish guidelines and standards for review by
the investment adviser of the creditworthiness of any bank, broker or dealer
party to a repurchase agreement with any Portfolio of the Fund. No more than an
aggregate of 15% of a Portfolio's assets, at the time of investment, will be
invested in repurchase agreements having maturities longer than seven days and
securities subject to legal or contractual restrictions on resale, or for which
there are no readily available market quotations.

The use of repurchase agreements involves certain risks. For example, if
the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Portfolio may incur a loss upon disposition of the security. If the other party
to the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by the Portfolio not within the
control of the Portfolio and therefore the realization by the Portfolio on such
collateral may be automatically stayed. Finally, it is possible that the
Portfolio may not be able to substantiate its interest in the underlying
security and may be deemed an unsecured creditor of the other party to the
agreement. While the Fund's management acknowledges these risks, it is expected
that they can be controlled through careful monitoring procedures.

LENDING OF SECURITIES Each Portfolio may lend its securities on a
short-term basis (less than nine months) to qualified institutional investors
who need to borrow securities in order to complete certain transactions, such as
covering short sales, avoiding failures to deliver securities or completing
arbitrage operations. By lending its securities, the Portfolio will be
attempting to increase its net investment income through the receipt of interest
on the loan. Any gain or loss in the market price of the securities loaned that
might occur during the term of the loan would be for the account of the
Portfolio. Each Portfolio may lend its portfolio securities to qualified
brokers, dealers, banks or other financial institutions, so long as the terms,
the structure and the aggregate amount of such loans are not inconsistent with
the Investment Company Act of 1940, or the Rules and Regulations or
interpretations of the Securities and Exchange Commission (the "Commission")
thereunder, which currently require that (a) the borrower pledge and maintain
with the Fund collateral consisting of cash, an irrevocable letter of credit or
securities issued or guaranteed by the United States Government having a value
at all times not less than 100% of the value of the securities loaned, (b) the
borrower add to such collateral whenever the price of the securities loaned
rises (i.e., the borrower "marks to the market" on a daily basis), (c) the loan
be made subject to termination by the Portfolio at any time and (d) the
Portfolio receives reasonable interest on the loan which may include the
Portfolio's investing any cash collateral in interest bearing short-term
investments, any distribution on the loaned securities and any increase in their
market value. A Portfolio will not be required to pay any service, placement or
other fee in connection with such loans, and will retain voting rights to the
loaned securities. A Portfolio will not lend its portfolio securities, if as a
result, the aggregate value of such loans exceeds 33 1/3% of the value of the
Portfolio's net assets. Loan arrangements made by a Portfolio will comply with
all other applicable regulatory requirements, including the rules of the New
York Stock Exchange, which rules presently require the borrower, after notice,
to redeliver the securities within the normal settlement time of five business
days. All relevant facts and circumstances, including the credit-worthiness of
the broker, dealer or institution, will be considered in making decisions with
respect to the lending of securities, subject to review by the Fund's Board of
Directors.

At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the investment company's Directors (Trustees). In addition, voting
rights may pass with the loaned securities, but if a material event will occur
affecting an investment on loan, the loan must be called and the securities
voted.

4
<PAGE> 32

INVESTMENT IN SHORT-TERM FIXED INCOME SECURITIES

Although it normally seeks to remain substantially invested in equity
securities, the Fund may invest for temporary purposes in certain short-term
fixed income securities. Such securities may be used to invest uncommitted cash
balances, to maintain liquidity to meet shareholder redemptions, or to take a
temporarily defensive position against potential stock market declines. These
securities include: obligations of the United States Government and its agencies
or instrumentalities; commercial paper, bank certificates of deposit, and
bankers' acceptances; and repurchase agreements collateralized by these
securities.

INVESTMENT LIMITATIONS

The following policies supplement the Fund's investment limitations set
forth in the Prospectus. It is a fundamental policy of each Portfolio not to
engage in any of the following activities or business practices. These
restrictions may not be changed with respect to a particular Portfolio without
the approval of a majority of the outstanding shares (as defined in the
Investment Company Act of 1940) of that Portfolio. A Portfolio may not:

1) Issue senior securities;

2) Borrow money, except from banks (or through reverse repurchase
agreements), for temporary or emergency (not leveraging) purposes,
including the meeting of redemption requests which might otherwise
require the untimely disposition of securities, in an amount not in
excess of 15% of the value of the net assets of the Portfolio
(including the amount borrowed and the value of any outstanding reverse
repurchase agreements) at the time the borrowing is made. Whenever
borrowings exceed 5% of the value of the net assets of the Portfolio,
the Portfolio will not make any additional investments;

3) With respect to 75% of the value of its total assets, purchase the
securities of any issuer (except obligations of the United States
government and its instrumentalities) if as a result the Portfolio
would hold more than 10% of the outstanding voting securities of the
issuer, or more than 5% of the value of the Portfolio's total assets
would be invested in the securities of such issuer;

4) Engage in the business of underwriting securities issued by others,
except to the extent that the Portfolio may technically be deemed to be
an underwriter under the Securities Act of 1933, as amended, in
disposing of portfolio securities;

5) Purchase or otherwise acquire any security if, as a result, more than
15% of its net assets would be invested in securities that are illiquid
(including the Fund's investment in The Vanguard Group, Inc., as
described on page 7);

6) Make loans except (i) by purchasing bonds, debentures or similar
obligations (including repurchase agreements, subject to the limitation
described in (5) above) which are either publicly distributed or
customarily purchased by institutional investors, and (ii) by lending
its securities to banks, brokers, dealers and other financial
institutions so long as such loans are not inconsistent with the
Investment Company Act or the Rules and Regulations or interpretations
of the Commission thereunder and the aggregate value of all securities
loaned does not exceed 33 1/3% of the market value of the Portfolio's
total assets;

7) Pledge, mortgage, or hypothecate its assets, except to secure
borrowings permitted by limitation (2) above;

8) Buy any securities or other property on margin (except for such
short-term credits as are necessary for the clearance of transactions),
or, engage in short sales (unless by virtue of its ownership of other
securities it has a right to obtain at no added cost securities
equivalent in kind and amount to the securities sold) except as set
forth below in (12);

5
<PAGE> 33

9) Purchase or sell puts or calls, or combinations thereof except as
provided for in the prospectus; provided however, that a Portfolio may
enter into futures contracts, options transactions or forward foreign
currency exchange transactions except as set forth below in (12);

10) Purchase or sell real estate or real estate limited partnerships
(although it may purchase securities secured by real estate interests
or interests therein, or issued by companies or investment trusts which
invest in real estate or interests therein);

11) The Fund will not invest in securities of other investment companies,
except as may be acquired as a part of a merger, consolidation or
acquisition of assets approved by the Fund's shareholders or otherwise
to the extent permitted by Section 12 of the Investment Company Act of
1940. The Fund will invest only in investment companies which have
investment objectives and investment policies consistent with those of
the Fund;

12) Purchase or sell commodities or commodity contracts; provided, however,
that a Portfolio may enter into forward foreign currency exchange
transactions and that each Portfolio may invest in futures contracts
and options to the extent that not more than 5% of the Portfolio's
assets are required as deposit to secure obligations under futures
contracts, within these limitations, each portfolio may purchase put
options as provided for in the prospectus. Additionally each Portfolio
will invest no more than 20% of its assets in swap agreements;

13) Invest in companies for the purpose of exercising control of
management; and

14) Invest more than 25% of its assets in any single industry.

Notwithstanding these limitations, the Fund may own all or any portion of
the securities of, make loans to, or contribute to the costs or other financial
requirements of, any company which will be wholly owned by the Fund and one or
more other investment companies and is primarily engaged in the business of
providing at cost services, such as management, administrative, distribution or
other related services to the Fund and other investment companies. (See
"Management of the Fund").

In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the fundamental or
non-fundamental operating restrictions described above. Should the Fund
determine that any such commitment is no longer in the best interests of the
Fund and its shareholders it will revoke the commitment by terminating sales of
its shares in the state(s) involved.

The above-mentioned investment limitations are considered at the time
investment securities are purchased.

MANAGEMENT OF THE FUND

THE VANGUARD GROUP The Fund is a member of The Vanguard Group of
Investment Companies which consists of more than 30 investment companies.
Through their jointly-owned subsidiary, The Vanguard Group, Inc. ("Vanguard"),
the Vanguard Funds obtain at cost virtually all of their corporate management,
administrative and distribution services. Vanguard also provides investment
advisory services on an at-cost basis to certain of the Vanguard Funds.

Vanguard employs a supporting staff of management personnel needed to
provide the requisite services to the Funds and also furnishes the Funds with
necessary office space, furnishings and equipment. Each Fund pays its share of
Vanguard's net expenses which are allocated among the Funds under procedures
approved by the Directors (Trustees) of each Fund. In addition, each Fund bears
its own direct expenses such as legal, auditing and custodian fees.

The Officers of the Fund and the Vanguard Funds are also Officers and
employees of Vanguard. No Officer or employee is permitted to own any securities
of any external adviser for the Vanguard Funds.

The Vanguard Group adheres to a Code of Ethics established pursuant to Rule
17j-l under the Investment Company Act of 1940. The Code is designed to prevent
unlawful practices in connection with the purchase or

6
<PAGE> 34

sale of securities by persons associated with Vanguard. Under Vanguard's Code of
Ethics certain officers and employees of Vanguard who are considered access
persons are permitted to engage in personal securities transactions. However,
such transactions are subject to procedures, restrictions and guidelines
substantially similar to those recommended by the mutual fund industry and
approved by the U.S. Securities and Exchange Commission.

The Vanguard Group was established and operates under a Funds' Service
Agreement which was approved by the shareholders of each of the Funds. The
amounts which each of the Funds have invested are adjusted from time to time in
order to maintain the proportionate relationship between each Fund's relative
net assets and its contribution to Vanguard's capital. The Fund's Service
Agreement provides as follows: (a) each Vanguard Fund may invest up to .40% of
its current assets in Vanguard, and (b) there is no other limitation on the
amount that each Vanguard Fund may contribute to Vanguard's capitalization. The
amount contributed to Vanguard by the Fund's Portfolios included the Service
Economy and Technology Portfolios which are no longer in existence.

The Officers of the Fund manage its day-to-day operations and are
responsible to the Fund's Board of Directors. The Directors set broad policies
for each Fund and choose its Officers. The following is a list of the Directors
and Officers of the Funds and a statement of their present positions and
principal occupations during the past five years. The mailing address of the
Directors and Officers of the Fund is Post Office Box 876, Valley Forge, PA
19482.

JOHN C. BOGLE, Chairman and Director*

Chairman and Director of The Vanguard Group, Inc. and of each of the
investment companies in The Vanguard Group; Director of The Mead
Corporation and General Accident Insurance.

JOHN J. BRENNAN, President, Chief Executive Officer and Director*

President, Chief Executive Officer and Director of The Vanguard Group, Inc.
and of each of the investment companies in The Vanguard Group.

ROBERT E. CAWTHORN, Director
Chairman of Rhone-Poulenc Rorer, Inc.; Director of Sun Company, Inc.

BARBARA BARNES HAUPTFUHRER, Director
Director of The Great Atlantic and Pacific Tea Company, ALCO Standard
Corp., Raytheon Company, Knight-Ridder, Inc., Massachusetts Mutual Life
Insurance Co. and Trustee Emerita of Wellesley College.

BRUCE K. MACLAURY, Director
President, The Brookings Institution; Director of American Express Bank,
Ltd., The St. Paul Companies, Inc. and Scott Paper Co.

BURTON G. MALKIEL, Director
Chemical Bank Chairman's Professor of Economics, Princeton University;
Director of Prudential Insurance Co. of America, Amdahl Corporation, Baker
Fentress & Co., The Jeffrey Co. and Southern New England Communications
Company.

ALFRED M. RANKIN, JR., Director

Chairman, President, and Chief Executive Officer of NACCO Industries, Inc.;
Director of The BFGoodrich Company, The Standard Products Company and The
Reliance Electric Company.

JOHN C. SAWHILL, Director
President and Chief Executive Officer, The Nature Conservancy; formerly,
Director and Senior Partner, McKinsey & Co.; and President, New York
University; Director of Pacific Gas and Electric Company and NACCO
Industries.

JAMES O. WELCH, JR., Director
Retired Chairman of Nabisco Brands, Inc., retired Vice Chairman and Director
of RJR Nabisco; Director of TECO Energy, Inc.

J. LAWRENCE WILSON, Director
Chairman and Chief Executive Officer of Rohm & Haas Company; Director of
Cummins Energy Company, and Trustee of Vanderbilt University and the Culver
Educational Foundation.

RAYMOND J. KLAPINSKY, Secretary*
Senior Vice President and Secretary of The Vanguard Group, Inc.; Secretary
of each of the investment companies in The Vanguard Group.

RICHARD F. HYLAND, Treasurer*
Treasurer of The Vanguard Group, Inc. and of each of the investment
companies in The Vanguard Group.

KAREN E. WEST, Controller*
Vice President of The Vanguard Group, Inc.; Controller of each of the
investment companies in The Vanguard Group.
- ---------------

*Officers of the Fund are "interested persons" as defined in the Investment
Company Act of 1940.

7
<PAGE> 35

MANAGEMENT Corporate management and administrative services include: (1)
executive staff; (2) accounting and financial; (3) legal and regulatory; (4)
shareholder account maintenance; (5) monitoring and control of custodian
relationships; (6) shareholder reporting; and (7) review and evaluation of
advisory and other services provided to the Vanguard Funds by third parties.

DISTRIBUTION Vanguard also provides all distribution and marketing
services for the Vanguard Funds. The principal distribution expenses are for
advertising, promotional materials and marketing personnel. Distribution
services may also include organizing and offering to the public, from time to
time, one or more new investment companies which will become members of the
Group. The Directors and Officers of Vanguard determine the amount to be spent
annually on distribution activities, the manner and amount to be spent on each
Fund, and whether to organize new investment companies.

One half of the distribution expenses of a marketing and promotional nature
are allocated among the Vanguard Funds based upon their relative net assets. The
remaining one half of these expenses is allocated among the Vanguard Funds based
upon each Fund's sales for the preceding 24 months relative to the total sales
of the Funds as a Group. Provided, however, that no Fund's aggregate quarterly
rate of contribution for distribution expenses of a marketing and promotional
nature shall exceed 125% of the average distribution expense rate for the Group,
and that no Fund shall incur annual distribution expenses in excess of 20/100 of
1% of its average month-end net assets.

INVESTMENT ADVISORY SERVICES An experienced investment management staff
employed directly by Vanguard also provides investment advisory services to the
Fund, Vanguard Money Market Reserves, Vanguard Institutional Money Market
Portfolio, Vanguard Municipal Bond Fund, several Portfolios of Vanguard Fixed
Income Securities Fund, Vanguard California Tax-Free Fund, Vanguard Florida
Insured Tax-Free Fund, Vanguard New Jersey Tax-Free Fund, Vanguard New York
Insured Tax-Free Fund, Vanguard Ohio Tax-Free Fund, Vanguard Pennsylvania
Tax-Free Fund, Vanguard Admiral Funds, Vanguard Bond Index Fund, Vanguard
Balanced Index Fund, Vanguard Index Trust, Vanguard International Equity Index
Fund, Vanguard Tax-Managed Fund, Vanguard Institutional Index Fund, several
Portfolios of Vanguard Variable Insurance Fund, a portion of Vanguard/Windsor
II, a portion of Vanguard/Morgan Growth Fund as well as several indexed separate
accounts. The compensation and other expenses of this staff are paid by the
Portfolios and Funds utilizing these services.

REMUNERATION OF DIRECTORS AND OFFICERS The Fund will pay each Director who
is not also an Officer, an annual fee plus travel and other expenses incurred in
attending Board meetings. Directors who are also Officers receive no
remuneration for their services as Directors. The Fund's Officers and employees
are paid by Vanguard which, in turn, is reimbursed by the Fund, and each other
Fund in the Group, for its proportionate share of Officers' and employees'
salaries and retirement benefits.

Under its retirement plan, Vanguard contributes annually an amount equal to
10% of each Officer's annual compensation plus 5.7% of that part of an eligible
Officer's compensation during the year, if any, that exceeds the Social Security
Taxable Wage Base then in effect. Under its Thrift Plan, all employees of
Vanguard are permitted to make pre-tax basic contributions in a maximum amount
equal to 4% of total compensation. Vanguard matches the basic contributions on a
100% basis.

DIRECTORS' RETIREMENT FEES A Retirement Plan for Directors has been
implemented to provide a fee
to retired Directors equal to $1,000 per year of service on the Board, up to 15
years of service. This fee
will remain in place subsequent to the Director's retirement for a period of 10
years or until a retired
Director's death.

INVESTMENT ADVISORY SERVICES

INVESTMENT ADVISORY AGREEMENT WITH BARROW, HANLEY, MEWHINNEY &
STRAUSS. The Vanguard Selected Value Portfolio is managed by Barrow, Hanley,
Mewhinney & Strauss ("BHM&S"), 200 Crescent Court, Dallas, TX under the terms of
an agreement dated November , 1995. BHM&S was founded in 1979 and provides
asset management services to companies, institutions, and individuals. As of
December 31, 1994, BHM&S had over $16.3 billion in assets under management.

8
<PAGE> 36

The investment philosophy of BHM&S is to use fundamental research to
identify undervalued stocks. Jim Clure and John Harloe have been designated as
portfolio managers for the assets of Vanguard Selected Value Portfolio. They
both have over 10 years experience.

For the services to be rendered by BHM&S, the Fund shall pay to BHM&S at
the end of each quarter a base advisory fee adjusted by an incentive/penalty
performance adjustment reflecting the investment performance of the Portfolio
relative to the return of the Russell Midcap Index. The Russell Midcap Index is
prepared by Frank Russell Company (which is unaffiliated with the Fund or any of
the Fund's affiliates) and is composed of the 800 smallest stocks (by market
capitalization) in the Russell 1000 Index. The fees shall be calculated
according to the following rules:

a) Total Quarterly Fee Payable. The total quarterly fee payable by
the Fund to BHM&S under this advisory agreement shall be the base
advisory fee for the quarter plus the performance adjustment
(which may be negative).

b) Base Advisory Fee for the Quarter. The base advisory fee for the
quarter will be calculated by applying the following quarterly
percentage rates to the average of month-end assets of the
Portfolio for the quarter:

<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE QUARTERLY RATE
--------------------------- ------ --------------
<S> <C> <C>
First $100 million 0.40% 0.1000%
Next $200 million 0.35% 0.0875%
Next $300 million 0.25% 0.0625%
Next $400 million 0.20% 0.0500%
Over $1 billion 0.15% 0.0375%
</TABLE>

c) Performance Adjustment. The performance adjustment will be
calculated as follows:

i) the performance adjustment for the quarters ending April 30,
1996, July 31, 1996 and October 31, 1996 will be $0.

ii) beginning with the quarter ending January 31, 1997 and
thereafter, the performance adjustment will be calculated for the
relevant performance period. The performance period will be the 36
months preceding the quarter-end or the months that have elapsed
between January 31, 1996 and the end of the quarter for which the
fee is being computed, whichever is shorter. A base fee for the
performance period will be calculated based on the average of month
end assets during the performance period multiplied by the quarterly
rates used in calculating the base advisory fee for the quarter. An
incentive/penalty adjustment reflecting the investment performance
of the Portfolio relative to the return of the Russell Midcap Index
will be applied to the base fee for the performance period. The
following table sets forth the calculation of the performance
adjustment:

<TABLE>
<CAPTION>
CUMULATIVE 36-MONTH PERFORMANCE
VS. THE RUSSELL MIDCAP INDEX PERFORMANCE ADJUSTMENT
------------------------------- ----------------------------------------
<S> <C>
Less than -12% -0.50 X Base Fee for Performance Period
Between -12% and -6% -0.25 X Base Fee for Performance Period
Between -6% and +6% 0 X Base Fee for Performance Period
Between +6% and +12% 0.25 X Base Fee for Performance Period
More than +12% 0.50 X Base Fee for Performance Period
</TABLE>

Until the quarter ending January 31, 1999, the performance
adjustment for BHM&S will be calculated according to the following
transition rules:

(ii-a) November 1, 1996 through January 31, 1999. Beginning with
the quarter ending January 31, 1997, and until the quarter ending
January 31, 1999, the Performance adjustment will be computed based
upon a comparison of the investment performance of the Portfolio
and that of the Russell Midcap Index over the number of months that
have elapsed

9
<PAGE> 37

between January 31, 1996 and the end of the quarter for which the
fee is computed. The number of percentage points by which the
investment performance of the Portfolio must exceed the investment
record of the Russell Midcap Index shall increase proportionately
from four and two, respectively, for the twelve months ending
January 31, 1997, to twelve and six, for the thirty-six months
ending January 31, 1999.

(ii-b) On and After January 31, 1999. For the quarter ending
January 31, 1999 and thereafter, the period used to calculate the
incentive/penalty adjustment shall be the 36 months preceding the
end of the quarter for which the fee is being computed and the
number of percentage points used shall be twelve and six.

CALCULATING RELATIVE INVESTMENT PERFORMANCE

The investment performance of the Portfolio for such period, expressed as a
percentage of the net asset value per share of the Portfolio at the beginning of
such period, shall be the sum of: (i) the change in the net asset value per
share of the Portfolio during such period; (ii) the value of the cash
distributions per share of the Portfolio accumulated to the end of such period;
and (iii) the value of capital gains taxes per share paid or payable by the
Portfolio on undistributed realized long-term capital gains accumulated to the
end of such period.

The investment record of the Russell Midcap Index will be calculated
monthly by (i) multiplying the total return for the month (change in market
price plus dividends) of each stock included in the Russell Midcap Index by its
weighting in the Russell Midcap Index at the beginning of the month, and (ii)
adding the values discussed in (i). For any period, therefore, the investment
record of the Russell Midcap Index will be the compounded monthly returns of the
Russell Midcap Index.

RELATED INFORMATION CONCERNING BHM&S. BHM&S, 200 Crescent Ct., Dallas,
Texas, is an independent, owner-managed investment management firm founded in
1979 which provides investment advisory services to individuals, employee
benefit plans, investment companies and other institutions. As of December 31,
1994, BHM&S provided investment advisory services to clients having assets with
an approximate value of $13.7 billion.

The agreement will continue until January 31, 1998 and will be renewable
thereafter, for successive one-year periods, only if each renewal is
specifically approved by a vote of the Fund's Board of Directors, including the
affirmative votes of a majority of the Directors who are not parties to the
agreement or "interested persons" (as defined in the Investment Company Act of
1940) of any such party cast in person at a meeting called for the purpose of
considering such approval. In addition, the question of continuance of the
agreement may be presented to the shareholders of the Fund; in such event
continuance shall be effected only if approved by the affirmative vote of a
majority of the outstanding voting securities of the Fund. If the holders of any
Portfolio fail to approve the agreement, BHM&S may continue to serve as
investment adviser to each Portfolio which approved the agreement, and to any
Portfolio which did not approve the agreement until new arrangements have been
made. The agreement is automatically terminated if assigned, and may be
terminated by any Portfolio without penalty, at any time, (1) either by vote of
the Board of Directors or by vote of the outstanding voting securities of the
Portfolio on sixty (60) days' written notice to BHM&S, or (2) by BHM&S upon
ninety (90) days' written notice to the Fund.

SECURITIES TRANSACTIONS

The investment advisory agreements with BHM&S authorizes the investment
adviser (with the approval of the Fund's Board of Directors) to select the
brokers or dealers that will execute the purchases and sales of securities for
the Fund and directs each investment adviser to use its best efforts to obtain
the best available price and most favorable execution with respect to all
transactions for the Fund. The investment adviser has undertaken to execute each
investment transaction at a price and commission which provides the most
favorable total cost or proceeds reasonably obtainable under the circumstances.

10
<PAGE> 38

In placing portfolio transactions, the Fund's investment adviser will use
its best judgment to choose the broker most capable of providing the brokerage
services necessary to obtain best available price and most favorable execution.
The full range and quality of brokerage services available will be considered in
making these determinations. In those instances where it is reasonably
determined that more than one broker can offer the brokerage services needed to
obtain the best available price and most favorable execution, consideration may
be given to those brokers which supply investment research and statistical
information, and provide other services in addition to execution services to the
Fund and/or the investment adviser. The investment adviser considers the
investment services it receives useful in the performance of its obligations
under the agreement but is unable to determine the amount by which such services
may reduce its expenses.

The investment advisory agreement also incorporates the concepts of Section
28(e) of the Securities Exchange Act of 1934 by providing that, subject to the
approval of the Fund's Board of Directors, the investment adviser may cause the
Fund to pay a broker-dealer which furnishes brokerage and research services a
higher commission than that which might be charged by another broker-dealer for
effecting the same transaction; provided that such commission is deemed
reasonable in terms of either that particular transaction or the overall
responsibilities of the investment adviser to the Fund and the other Funds in
the Group.

Currently, it is the Fund's policy that the investment adviser may at times
pay higher commissions in recognition of brokerage services felt necessary for
the achievement of better execution of certain securities transactions that
otherwise might not be available. An investment adviser will only pay such
higher commissions if it believes this to be in the best interest of the Fund.
Some brokers or dealers who may receive such higher commissions in recognition
of brokerage services related to execution of securities transactions are also
providers of research information to the investment adviser and/or the Fund.
However, the investment adviser has informed the Fund that it will not pay
higher commission rates specifically for the purpose of obtaining research
services.

Since the Fund does not market its shares through intermediary brokers or
dealers, it is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made through such
firms. However, the Fund may place portfolio orders with qualified
broker-dealers who recommend the sale of shares of the Fund and may, when a
number of brokers and dealers can provide comparable best price and execution on
a particular transaction, consider the sale of Fund shares by a broker or dealer
in selecting among qualified broker-dealers.

Some securities considered for investment by one Portfolio may also be
appropriate for the other Portfolios and the other Funds and/or clients served
by the investment advisers. If purchase or sale of securities consistent with
the investment policies of a Portfolio, the other Portfolios and/or one or more
of these other Funds or clients are considered at or about the same time,
transactions in such securities will be allocated among the Portfolios and the
several Funds and clients in a manner deemed equitable by the respective
investment adviser. Although there will be no specified formula for allocating
such transactions, the allocation methods used, and the results of such
allocations, will be subject to periodic review by the Fund's Board of
Directors.

PURCHASE OF SHARES

The Fund reserves the right in its sole discretion (i) to suspend the
offering of its shares, (ii) to reject purchase orders when in the judgment of
management such rejection is in the best interest of the Fund or any Portfolio,
and (iii) to reduce or waive the minimum for initial and subsequent investments
as well as redemption fees for certain fiduciary accounts such as employee
benefit plans or under circumstances where certain economies can be achieved in
sales of the Fund's shares.

REDEMPTION OF SHARES

The Fund may suspend redemption privileges or postpone the date of payment
(i) during any period that the New York Stock Exchange is closed, or trading on
the Exchange is restricted as determined by the

11
<PAGE> 39

Securities and Exchange Commission (the "Commission"), (ii) during any period
when an emergency exists as defined by the rules of the Commission as a result
of which it is not reasonably practicable for the Fund to dispose of securities
owned by it, or fairly to determine the value of its assets, and (iii) for such
other periods as the Commission may permit.

The Fund has made an election with the Commission to pay in cash all
redemptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% or the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid in whole or in part, in investment securities or in cash, as the Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make a
practice detrimental to the best interests of the Fund. If redemptions are paid
in investment securities, such securities will be valued as set forth in the
Prospectus under "The Share Price of Each Portfolio" and a redeeming shareholder
would normally incur brokerage expenses if he converted these securities to
cash.

COMPARATIVE INDEXES

Vanguard may use reprinted material discussing The Vanguard Group, Inc. or
any of the member funds of The Vanguard Group of Investment Companies.

Each of the investment company members of The Vanguard Group, including
Vanguard Horizon Fund, Inc., may, from time to time, use one or more of the
following unmanaged indices for comparative performance purposes.

STANDARD AND POOR'S 500 COMPOSITE STOCK PRICE INDEX -- is a well diversified
list of 500 companies representing the U.S. Stock Market.

WILSHIRE 5000 EQUITY INDEXES -- consists of approximately 6,000 common equity
securities, covering all stocks in the U.S. for which daily pricing is
available.

WILSHIRE 4500 EQUITY INDEX -- consists of all stocks in the Wilshire 5000 except
for the 500 stocks in the Standard and Poor's 500 Index.

MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX -- is an arithmetic, market
value-weighted average of the performance of over 900 securities listed on the
stock exchanges of countries in Europe, Australia and the Far East.

MORGAN STANLEY CAPITAL INTERNATIONAL ALL COUNTRY INDEX -- is an arithmetic,
market value-weighted average of the performance of over 2,427 securities listed
on the stock exchanges of countries included in the EAFE Index, United States,
Canada, and Emerging Markets.

CAPITAL OPPORTUNITIES FUND STOCK INDEX -- the Index is composed of the various
common stocks that are held in the largest aggressive growth stock mutual funds,
using year-end net assets, monitored by Morningstar, Inc.

GLOBAL BALANCED INDEX -- a fixed weighted index of global stocks, bonds and U.S.
cash reserves, the component parts of which are derived from the adjusted
capitalization weighted averages of individual currency adjusted local country
indices.

MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX -- an arithmetic, market
value-weighted average of the performance of over 1,460 securities listed on the
stock exchanges of 23 countries.

SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX -- a market capitalization-weighted
index consisting of government bond markets of 14 countries.

GOLDMAN SACHS 100 CONVERTIBLE BOND INDEX -- currently includes 67 bonds and 33
preferreds. The original list of names was generated by screening for
convertible issues of 100 million or greater in market capitalization. The index
is priced monthly.

12
<PAGE> 40

SALOMON BROTHERS GNMA INDEX -- includes pools of mortgages originated by private
lenders and guaranteed by the mortgage pools of the Government National Mortgage
Association.

SALOMON BROTHERS HIGH-GRADE CORPORATE BOND INDEX -- consists of publicly issued,
non-convertible corporate bonds rated AA or AAA. It is a value-weighted, total
return index, including approximately 800 issues with maturities of 12 years or
greater.

LEHMAN LONG-TERM TREASURY BOND -- is composed of all bonds covered by the
Shearson Lehman Hutton Treasury Bond Index with maturities of 10 years or
greater.

MERRILL LYNCH CORPORATE & GOVERNMENT BOND -- consists of over 4,500 U.S.
Treasury, Agency and investment grade corporate bonds.

LEHMAN CORPORATE (BAA) BOND INDEX -- all publicly offered fixed-rate,
nonconvertible domestic corporate bonds rated Baa by Moody's, with a maturity
longer than 1 year and with more than $25 million outstanding. This index
includes over 1,000 issues.

BOND BUYER MUNICIPAL INDEX (20 YEAR) BOND -- is a yield index on current coupon
high-grade general obligation municipal bonds.

STANDARD & POOR'S PREFERRED INDEX -- is a yield index based upon the average
yield for four high-grade, non-callable preferred stock issues.

NASDAQ INDUSTRIAL INDEX -- is composed of more than 3,000 industrial issues. It
is a value-weighted index calculated on price change only and does not include
income.

COMPOSITE INDEX -- 70% Standard & Poor's 500 Index and 30% NASDAQ Industrial
Index.

COMPOSITE INDEX -- 35% Standard & Poor's 500 Index and 65% Salomon Brothers High
Grade Bond Index.

COMPOSITE INDEX -- 65% Standard & Poor's 500 Index and 35% Salomon Brothers High
Grade Bond Index.

RUSSELL 2000 SMALL COMPANY STOCK INDEX -- consists of the smallest 2,000 stocks
within the Russell 3000; a widely-used benchmark for small capitalization common
stocks.

LEHMAN BROTHERS AGGREGATE BOND INDEX -- is a market weighted index that contains
individually priced U.S. Treasury, agency, corporate, and mortgage pass-through
securities corporate rated BBB- or better. The Index has a market value of over
$4 trillion.

LEHMAN BROTHERS MUTUAL FUND SHORT (1-5) GOVERNMENT/CORPORATE INDEX -- is a
market weighted index that contains individually priced U.S. Treasury, agency,
and corporate investment grade bonds rated BBB- or better with maturities
between 1 and 5 years. The index has a market value of over $1.3 trillion.

LEHMAN BROTHERS MUTUAL FUND INTERMEDIATE (5-10) GOVERNMENT/CORPORATE INDEX -- is
a market weighted index that contains individually priced U.S. Treasury, agency,
and corporate securities rated BBB- or better with maturities between 5 and 10
years. The index has a market value of over $600 billion.

LEHMAN BROTHERS MUTUAL FUND LONG (10+) GOVERNMENT/CORPORATE INDEX -- is a market
weighted index that contains individually priced U.S. Treasury, agency, and
corporate securities rated BBB- or better with maturities greater than 10 years.
The index has a market value of over $900 billion.

LIPPER BALANCED FUND AVERAGE -- An industry benchmark of average balanced funds
with similar investment objectives and policies, as measured by Lipper
Analytical Services, Inc.

LIPPER NON-GOVERNMENT MONEY MARKET FUND AVERAGE -- An industry benchmark of
average non-government money market funds with similar investment objectives and
policies, as measured by Lipper Analytical Services, Inc.

LIPPER GOVERNMENT MONEY MARKET FUND AVERAGE -- An industry benchmark of average
government money market funds with similar investment objectives and policies,
as measured by Lipper Analytical Services, Inc.

13
<PAGE> 41

LIPPER SMALL COMPANY GROWTH FUND AVERAGE -- the average performance of small
company growth funds as defined by Lipper Analytical Services, Inc. Lipper
defines a small company growth fund as a fund that by prospectus or portfolio
practice, limits its investments to companies on the basis of the size of the
company. From time to time, Vanguard may advertise using the average performance
and/or the average expense ratio of the small company growth funds. (This fund
category was first established in 1982. For years prior to 1982, the results of
the Lipper Small Company Growth category were estimated using the returns of the
Funds that constituted the Group at its inception.)

RUSSELL 3000 INDEX -- consists of approximately the 3,000 largest stocks of U.S.
domiciled companies commonly traded on the New York and American Stock Exchanges
or the NASDAQ over-the-counter market, accounting for over 90% of the market
value of publicly traded Stocks in the U.S.

RUSSELL 2000(R) VALUE INDEX -- composed of the 2,000 smallest securities in the
Russell 3000 Index, representing approximately 7% of the Russell 3000 total
market capitalization.

RUSSELL MIDCAP(TM) INDEX -- composed of all medium and medium/small companies in
the Russell 1000 Index.

Advertisements which refer to the use of the fund as a potential investment
for Individual Retirement Accounts may quote a total return based upon
compounding of dividends on which it is presumed no Federal income tax applies.

In assessing such comparisons of yields, an investor should keep in mind
that the composition of the investments in the reported averages is not
identical to the Fund's Portfolio and that the items included in the
calculations of such averages may not be identical to the formula used by the
Fund to calculate its yield. In addition there can be no assurance that the Fund
will continue its performance as compared to such other averages.

14
<PAGE> 42

PART C
VANGUARD WHITEHALL FUNDS, INC.
OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS

Statement of Assets and Liabilities*

Report of Independent Accountants*

(B) EXHIBITS

1. Articles of Incorporation*

2. By-Laws of Registrant**
3. Not Applicable
4. Not Applicable

5. Investment Advisory Agreement*

6. Not Applicable
7. Reference is made to the section entitled "Management of the Fund" in
the Registrant's Statement of Additional Information
9. Form of Vanguard Service Agreement**
10. Opinion of Counsel*
11. Consent of Independent Accountants*
12. Financial Statements*
13. Not Applicable
14. Not Applicable
15. Not Applicable
16. Not Applicable
- ---------------
* Filed herewith.
** Previously filed.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Registrant is not controlled by or under common control with any person.
The officers of the Registrant, the investment companies in The Vanguard Group
of Investment Companies and The Vanguard Group, Inc. are identical. Reference is
made to the caption "Management of the Fund" in the Prospectus constituting Part
A and in the Statement of Additional Information constituting Part B of this
Registration Statement.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

None.

ITEM 27. INDEMNIFICATION

Reference is made to Article IX of Registrant's Articles of Incorporation.

Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to trustees, directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a trustee, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such

<PAGE> 43

indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Reference is made to the caption "Investment Advisers" in the prospectus
constituting Part "A" of this Registration Statement and "Investment Advisory
Services" in Part "B" of this Registration Statement.

ITEM 29. PRINCIPAL UNDERWRITERS

(a) None

(b) Not Applicable

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

The books, accounts and other documents required by Section 31(a) under the
Investment Company Act and the rules promulgated thereunder will be maintained
in the physical possession of Registrant; Registrant's Transfer Agent, The
Vanguard Group, Inc. c/o The Vanguard Financial Center, Valley Forge,
Pennsylvania 19482; and the Registrant's Custodians.

ITEM 31. MANAGEMENT SERVICES

Other than the Amended and Restated Funds' Service Agreement with The
Vanguard Group, Inc. which is filed herewith as Exhibit 9 and described in Part
B hereof under "Management of the Fund"; the Registrant is not a party of any
management-related service contract.

ITEM 32. UNDERTAKINGS

Registrant also undertakes to hold a First Annual Meeting of Shareholders
by the end of the Registrant's first sixteen months of operation for the purpose
of electing directors, approving the Investment Advisory and Service Agreements
and appointing auditors. Thereafter, annual meetings will not be held except as
required by the Investment Company Act of 1940 ("1940 Act") or other applicable
law. Registrant undertakes to comply with the provisions of Section 16(c) of the
1940 Act in regard to shareholders' rights to call a meeting of shareholders for
the purpose of voting on the removal of Directors and to assist in shareholder
communications in such matters, to the extent required by law.

Registrant hereby undertakes to provide an Annual Report to Shareholders or
prospective investors, free of charge, upon request.

Registrant undertakes to file a post-effective amendment containing
financial statements, which need not be audited, within 4-6 months from
effectiveness.
<PAGE> 44

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Valley Forge and the Commonwealth of Pennsylvania, on
the 13th day of February 1996.

VANGUARD WHITEHALL FUNDS, INC.

BY: (Raymond J. Klapinsky)

John C. Bogle*, Chairman

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated:

BY: (Raymond J. Klapinsky)

John C. Bogle*, Chairman of the Board and Director

February 13, 1996

BY: (Raymond J. Klapinsky)

John J. Brennan*, President, Chief Executive Officer and Director

February 13, 1996

BY: (Raymond J. Klapinsky)

Robert C. Cawthorn*, Director

February 13, 1996

BY: (Raymond J. Klapinsky)

Barbara B. Hauptfuhrer*, Director

February 13, 1996

BY: (Raymond J. Klapinsky)

Burton G. Malkiel*, Director

February 13, 1996

BY: (Raymond J. Klapinsky)

Bruce K. MacLaury, Jr.*, Director

February 13, 1996

BY: (Raymond J. Klapinsky)

Alfred M. Rankin, Jr.*, Director

February 13, 1996

BY: (Raymond J. Klapinsky)

John C. Sawhill*, Director

February 13, 1996

BY: (Raymond J. Klapinsky)

James O. Welch, Jr.*, Director

February 13, 1996

BY: (Raymond J. Klapinsky)

J. Lawrence Wilson*, Director

February 13, 1996

BY: (Raymond J. Klapinsky)

Richard F. Hyland*, Treasurer and Principal
Financial Officer and Accounting Officer
February 13, 1996

*By Power of Attorney. See 1933 Act File No. 2-14336, January 23, 1990.
Incorporated by Reference.

<PAGE> 45

VANGUARD WHITEHALL FUNDS, INC.
INDEX TO EXHIBITS

<TABLE>
<S> <C>
Articles of Incorporation.......................................................... EX-99.B1
Investment Advisory Agreement...................................................... EX-99.B5
Opinion of Counsel................................................................. EX-99.B10
Consent of Independent Accountants................................................. EX-99.B11
Financial Statements............................................................... EX-99.B12
</TABLE>

<PAGE> 1

EX-99.B1

ARTICLES OF INCORPORATION
OF
VANGUARD WHITEHALL FUNDS, INC.
VANGUARD SELECTED VALUE PORTFOLIO

FIRST: The undersigned, Curtis R. Hilliard, whose post office address is
100 Vanguard Boulevard, Malvern, Pennsylvania 19355 and being at least eighteen
years of age, does hereby cause to be filed these Articles of Incorporation for
the purpose of forming a Corporation under the General Corporation Law of the
State of Maryland.

SECOND: The name of the Corporation is Vanguard Whitehall Funds, Inc.

THIRD: The purpose for which the Corporation is formed is to operate as
an investment company and to exercise all of the powers and to do any and all of
the things as fully and to the same extent as any other Corporation incorporated
under the laws of the State of Maryland, now or hereinafter in force.

FOURTH: The post office address of the principal office of the Corporation
in the State of Maryland is:

c/o Mr. James E. Baker, Esquire
CSC
Lawyers Incorporating Service Company
11 East Chase Street
Suite 9E
Baltimore, MD 21202

The name and post office address of the initial resident agent
of the Corporation is:

c/o Mr. James E. Baker, Esquire
CSC
Lawyers Incorporating Service
11 East Chase Street
Baltimore, MD 21202

FIFTH: The total number of shares of stock which the corporation shall
have authority to issue is One Billion (1,000,000,000) shares of stock, with a
par value of one-tenth of one cent ($.001) per share, to be known and designated
as Common Stock, such shares of Common Stock having an aggregate par value of
One Million Dollars ($1,000,000).

Subject to the provisions of these Articles of Incorporation, the Board of
Directors shall have the power to issue shares of Common Stock of the
Corporation from time to time, at prices not less than the net asset value or
par value thereof, whichever is greater, for such consideration as may be fixed
from time to time pursuant to the direction of the Board of Directors.

Pursuant to Section 2-105 of the Maryland General Corporation Law, the
Board of Directors of the Corporation shall have the power to designate one or
more series of shares of Common Stock and sub-series (classes) thereof, and to
classify or reclassify any unissued shares with respect to such series or
sub-series thereof, and such series and sub-series (subject to any applicable
rule, regulation or order of the Securities and Exchange Commission or other
applicable law or regulation) shall have such preference, conversion or other
rights, voting powers, restrictions, limitations as to dividends,
qualifications, terms and conditions of redemption and other characteristics as
the Board may determine, unless inconsistent with this Article FIFTH.
<PAGE> 2

Subject to such aforesaid power, the Board of Directors has initially
designated one series of shares of Common Stock of the Corporation. The name of
the series and the number of shares of Common Stock initially classified and
allocated to it is as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
INITIALLY
CLASSIFIED
NAME OF SERIES AND ALLOCATED
----------------------------------------------------- -------------------
<S> <C>
Vanguard Selected Value Portfolio.................... 250,000,000
</TABLE>

At any time when there are no shares outstanding or subscribed for a
particular series previously established and designated herein by the Board of
Directors, the Series may be liquidated by similar means. Each share of a series
shall have equal rights with each other share of that series with respect to the
assets of the Corporation pertaining to that series. The dividends payable to
the holders of any series (subject to any applicable rule, regulation or order
of the Securities and Exchange Commission or any other applicable law or
regulation) shall be determined by the Board and need not be individually
declared, but may be declared and paid in accordance with a formula adopted by
the Board. Except as otherwise provided herein, all references in these Articles
of Incorporation to Common Stock or series of stock shall apply without
discrimination to the shares of each series of stock.

The holder of each share of stock of the Corporation shall be entitled to
one vote for each full share, and a fractional vote for each fractional share of
stock, irrespective of the series then standing in his or her name in the books
of the Corporation. On any matter submitted to a vote of shareholders, all
shares of the Corporation then issued and outstanding and entitled to vote,
irrespective of the series or subseries, shall be voted in the aggregate and not
by series or subseries except (1) when otherwise expressly provided by the
Maryland General Corporation Law, or (2) when required by the Investment Company
Act of 1940, as amended, shares shall be voted by individual series or
subseries; and (3) when the matter does not affect any interest of a particular
series or subseries, then only shareholders of affected series or subseries
shall be entitled to vote thereon. Holders of shares of stock of the Corporation
shall not be entitled to cumulative voting in the election of Directors or on
any other matter.

Notwithstanding any provision of the Maryland General Corporation Law
requiring more than a majority of the votes of all series or subseries, or any
series or subseries entitled to vote on a matter, including but not limited to
amending the Articles of Incorporation, the Corporation may take or authorize
corporate action upon the favorable vote of a majority of the shares of stock of
all series or subseries, or the series or subseries entitled to vote thereon as
provided in the preceding paragraph.

Each series of stock of the Corporation shall have the following powers,
preferences and participating, voting, or other special rights and the
qualifications, restrictions, and limitations thereof shall be as follows:

1. All consideration received by the Corporation for the issue or sale of
stock of each series, together with all income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale, exchange or liquidation
thereof, and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be shall irrevocably belong to the series
of shares of stock with respect to which such assets, payments or funds were
received by the Corporation for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of the Corporation.
Such assets, income, earnings, profits, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation thereof and any assets
derived from any reinvestment of such proceeds, in whatever form the same may
be, are herein referred to as "assets belonging to" such series.

2. The Board of Directors may from time to time declare and pay dividends
of distributions, in stock or in cash, on any or all series of stock; provided,
such dividends or distributions on shares of any series of stock shall be paid
only out of earnings, surplus, or other lawfully available assets belonging to
such series.

3. The Board of Directors shall have the power in its discretion to
distribute in any fiscal year as dividends, including dividends designated in
whole or in part as capital gain distributions, amounts suffi
<PAGE> 3

cient, in the opinion of the Board of Directors, to enable the Corporation to
qualify as a "regulated investment company" under the Internal Revenue Code of
1954, as amended, or any successor or comparable statute thereto, and
regulations promulgated thereunder (collectively, the "IRC"), and to avoid
liability for the Corporation for Federal income tax in respect of that year and
to make other appropriate adjustments in connection therewith. In furtherance,
and not in limitation of the foregoing, to the extent deemed necessary or
appropriate by the Board of Directors to comply with the provisions of the IRC,
in the event that a series of shares has a net capital loss for a fiscal year,
and to the extent that the net capital loss offsets net capital gains from
another series, the amounts to be deemed available for distribution to the
series with the net capital gain shall be reduced by the amount of offset. The
shareholders of the series with the net capital gain shall be entitled to a full
distribution of the net income to the extent earned and to recognition in the
net asset value of such series of the amount of the realized net capital loss of
a series exceeds the net capital gain from another series, the excess loss shall
not reduce the net investment income available for distribution to the series
with the loss, but shall be carried forward.

4. In the event of the liquidation or dissolution of the Corporation,
shareholders of each series shall be entitled to receive, as a series, out of
the assets of the Corporation available for distribution to shareholders, but
other than general assets belonging to such series, and the assets so
distributable to the shareholders of any series shall be distributed among such
shareholders in proportion to the number of shares held by them and recorded on
the books of the Corporation. In the event that there are any general assets not
belonging to any particular series of stock and available for distribution, such
distribution shall be made to the holders of stock of all series in proportion
to the net asset value of the respective series determined as hereinafter
provided.

5. The assets belonging to any series of stock shall be charged with the
liabilities in respect to such series, and shall also be charged with its share
of the general liabilities of the Corporation, in proportion to the net asset
value of the respective series determined as hereinafter provided. The
determination of the Board of Directors shall be conclusive as to the amount of
liabilities, including accrued expenses and reserves, as to the allocation of
the same as to a given series, and as to whether the same or general assets of
the Corporation are allocable to one or more series.

The Board of Directors may provide for a holder of any series of stock of
the Corporation, who surrenders his certificate in good form for transfer to the
Corporation or, if the shares in question are not represented by certificates,
who delivers to the Corporation a written request in good order signed by the
shareholder, to convert the shares in question on such basis as the Board may
provide, into shares of stock of any other series of the Corporation.

The Board of Directors shall have power to fix an initial offering price
for the shares of any class which shall yield to the Corporation not less than
the par value thereof, at which price the shares of the Common Stock of the
Corporation shall be offered for sale, and to determine from time to time
thereafter the offering price which shall yield to the Corporation not less than
the par value thereof from the sales of shares of its Common Stock provided,
however, that no shares of Common Stock of the Corporation shall be issued or
sold for a consideration which shall yield to the Corporation less than the net
asset value of such class determined as hereinafter provided, as of the business
day on which such shares were sold, or at times set by the Board of Directors,
except in the case of a dividend properly declared and payable.

The net asset value per share of a series of the Corporation's Common Stock
shall be determined in accordance with the Investment Company Act of 1940, as
amended, and with generally accepted accounting principles, by adding the market
or appraised value of all securities, cash and other assets of the Corporation
pertaining to that series, subtracting the liabilities determined by the Board
of Directors to be applicable to that series, allocating any general assets and
general liabilities to that series, and dividing the net result by the number of
shares of that series outstanding. Securities and other investments and assets
will be valued at the current market value, and in the absence of a readily
available market value, will be valued at fair value as determined in good faith
by the Board of Directors.

The holders of the shares of Common Stock or other securities of the
Corporation shall have no pre-emptive rights to subscribe to new or additional
shares of its Common Stock or other securities.
<PAGE> 4

SIXTH: The number of Directors of the Corporation shall be such number
as may from time to time be fixed by the By-Laws of the Corporation or pursuant
to authorization contained in such By-Laws; provided, notwithstanding anything
herein to the contrary, the Board of Directors shall initially consist of eight
Directors until such time as the number of Directors is fixed as stated above.
The names of the Directors who shall act as such until successors are duly
chosen and qualify are: John C. Bogle, John J. Brennan, Robert E. Cawthorn,
Barbara B. Hauptfuhrer, Bruce K. MacLaury. Burton G. Malkiel, Alfred M. Rankin,
Jr., John C. Sawhill, James O. Welch, Jr. and J. Lawrence Wilson.

SEVENTH: The following provisions are inserted for the management of the
business and for the conduct of the affairs of the Corporation:

1. The Board shall have the power to fix an initial offering price for the
shares of any series which shall yield to the Corporation not less than the par
value thereof, at which price the shares of the Common Stock of the Corporation
shall be offered for sale, and to determine from time to time thereafter the
offering price which shall yield to the Corporation not less than the par value
thereof from sales of the shares of its Common Stock; provided, however, that no
shares of the Common Stock of the Corporation shall be issued or sold for a
consideration which shall yield to the Corporation less than the net asset value
of such series determined as hereinafter provided, as of the business day on
which such shares are sold, or at such other times set by the Board of
Directors, except in the case of a dividend properly declared and payable.

The net asset value of the property and assets of any series of the
Corporation shall be determined at such times as the Board of Directors may
direct, by deducting from the total appraised value of all of the property and
assets of the Corporation, determined in the manner hereinafter provided, all
debts, obligations and liabilities of the Corporation (including, but without
limitation of the generality of any of the foregoing, any or all debts,
obligations, liabilities or claims of any and every kind and nature, whether
fixed, accrued, or unmatured, and any reserves or charges, determined in
accordance with generally accepted accounting principles, for any or all
thereof, whether for taxes, including estimated taxes or unrealized book
profits, expenses, contingencies or otherwise).

In determining the total appraised value of all the property and assets of
the Corporation or belonging to any series thereof:

(a) Securities owned shall be valued at market value or, in the
absence of readily available market quotations, at fair value as determined
in good faith by or as directed by the Board of Directors in accordance
with applicable statutes and regulations.

(b) Dividends declared but not yet received, or rights, in respect of
securities which are quoted ex-dividend or ex-rights, shall be included in
the value of such securities as determined by or pursuant to the direction
of the Board of Directors on the day the particular securities are first
quoted ex-dividend or ex-rights, and on each succeeding day until the said
dividends or rights are received and become part of the assets of the
Corporation.

(c) The value of any other assets of the Corporation (and any of the
assets mentioned in paragraphs (a) or (b), in the discretion of the Board
of Directors in the event of a national financial emergency, as hereinafter
defined) shall be determined in such manner as may be approved from time to
time by or pursuant to the direction of the Board of Directors.

The net asset value of each share of the Common Stock of the Corporation
shall be determined by dividing the total market value of the property and
assets of the relevant series of the Corporation by the total number of shares
of its Common Stock then issued and outstanding for such series, including any
shares sold by the Corporation up to and including the date as of which such net
asset value is to be determined whether or not certificates therefor have
actually been issued. In case the net asset value of each share so determined
shall include a fraction of one cent, such net asset value of each shares shall
be adjusted to the nearest full cent.

For the purpose of these Articles of Incorporation, a "national financial
emergency" is defined as the whole or any part of any period (i) during which
the New York Stock Exchange is closed other than customary weekend and holiday
closings, (ii) during which trading on the New York Stock Exchange is
restricted,
<PAGE> 5

(iii) during which an emergency exists as a result of which disposal by the
Corporation of securities owned by such series is not reasonably practicable or
it is not reasonably practicable for the Corporation fairly to determine the
value of the net assets of such series, or (iv) during any other period when the
Securities and Exchange Commission (or any succeeding governmental authority)
may for the protection of security holders of the Corporation by order permit
suspension of the right of redemption or postponement of the date of payment on
redemption; provided that applicable rules and regulations of the Securities and
Exchange Commission (or any succeeding governmental authority) shall govern as
to whether the conditions prescribed in (ii), (iii), or (iv) exist. The Board of
Directors may, in its discretion, declare the suspension described in (iv) above
at an end, and such other suspension relating to a natural financial emergency
shall terminate as the case may be on the first business day on which said Stock
Exchange shall have opened or the period specified in (ii) or (iii) shall have
expired as to which in the absence of an official ruling by said Commission or
succeeding authority, the determination of the Board of Directors shall be
conclusive.

2. To the extent permitted by law, and except in the case of a national
financial emergency, the Corporation shall redeem shares of its Common Stock
from its stockholders upon request of the holder thereof received by the
Corporation or its designated agent during business hours of any business day,
provided that such request must be accompanied by surrender of outstanding
certificate or certificates for such shares in form for transfer, together with
such proof of the authenticity of signatures as may reasonably be required on
such shares (or, on such request in the event no certificate is outstanding) by,
or pursuant to the direction of the Board of Directors of the Corporation, and
accompanied by proper stock transfer stamps. Shares redeemed upon any such
request shall be purchased by the Corporation at the net asset value of such
shares determined in the manner provided in Paragraph (1) of this Article
Seventh, as of the close of business on the business day during which such
request was received in good order by the Corporation.

Payments for shares of its Common Stock so redeemed by the Corporation
shall be made from assets of the applicable series in cash, except payment for
such shares may, at the option of the Board of Directors, or such officer or
officers as they may duly authorize for the purpose in their complete
discretion, be made from the assets of that series in kind or partially in cash
and partially in kind. In case of any payment in kind the Board of Directors, or
their delegate, shall have absolute discretion as to what security or securities
of such series shall be distributed in kind and the amount of the same; and the
securities shall be valued for purposes of distribution at the value at which
they were appraised in computing the current net asset value of the series of
the Fund's shares, provided that any stockholder who cannot legally acquire
securities so distributed in kind by reason of the prohibitions of the
Investment Company Act of 1940 shall receive cash.

Payment for shares of its Common stock so redeemed by the Corporation shall
be made by the Corporation as provided above within seven days after the date
which such shares are deposited; provided, however, that if payment shall be
made by delivery of assets of the Corporation, as provided above, any securities
to be delivered as part of such payment shall be delivered as promptly as any
necessary transfers of such securities on the books of the several Corporations
whose securities are to be delivered may be made, but not necessarily within
such seven day period.

The right of any holder of shares of the Common Stock of the Corporation to
receive dividends thereon and all other rights of such stockholder with respect
to the shares so redeemed by the Corporation shall cease and determine from and
after the time as of which the purchase price of such shares shall be fixed, as
provided above except the right of such stockholder to receive payment for such
shares as provided for herein.

3. The Board of Directors, may from time to time, without the vote or
consent of stockholders, establish uniform standards with respect to the minimum
net asset value of a stockholder account or minimum net asset value of a
stockholder account or minimum investment which may be made by a stockholder.
The Board of Directors may authorize the closing of those stockholder accounts
not meeting the specified minimum standards of net asset value by redeeming all
of the shares in such accounts, provided there is mailed to each affected
stockholder account, at least thirty (30) days prior to the planned redemption
date, a notice setting forth the minimum account size requirement and the date
on which the account will be closed if the minimum size requirement is not met
prior to said closing date.
<PAGE> 6

EIGHTH: The Corporation expressly reserves the right to amend, alter,
change or repeal any provision contained in these Articles of Incorporation, and
all rights, contract and otherwise, conferred herein upon the stockholders are
granted subject to such reservation.

NINTH: (a) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law, no
director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for damages. This limitation on liability
applies to events occurring at the time a person serves as a director or officer
of the Corporation whether or not such person is a director or officer at the
time of any proceeding in which liability is asserted.

(b) The Corporation shall indemnify and advance expenses of its currently
acting and its former directors to the fullest extent that indemnification of
directors is permitted by the Maryland General Corporation Law. The Corporation
shall indemnify and advance expenses to its officers to the same extent as its
directors and to such further extent as is consistent with law. The Board of
Directors may by By-Law, resolution or agreement make further provisions for
indemnification of directors, officers, employees and agents to the fullest
extent permitted by the Maryland General Corporation Law.

(c) No provision of this Article shall be effective to protect or purport
to protect any director or officer of the Corporation against any liability to
the Corporation or its security holders to which he would otherwise be subject
by reason or willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.

(d) References to the Maryland General Corporation Law in this Article are
to the law as from time to time amended. No further amendment to the Articles of
Incorporation of the Corporation shall affect any right of any person under this
Article based on any event, omission or proceeding prior to such amendment.

TENTH: In furtherance, and not in limitation, of the powers conferred by
the laws of the State of Maryland, the Board of Directors is expressly
authorized to make, alter or repeal the By-Laws of the Corporation, except where
such power is reserved by the By-Laws to the stockholders, and except as
otherwise required by the Investment Company Act of 1940.

IN WITNESS WHEREOF, the undersigned incorporator of Vanguard Whitehall
Funds, Inc. who executed the foregoing Articles of Incorporation hereby
acknowledged the same to be his act and further acknowledge that, to the best of
his knowledge the matters and facts set forth therein are true in all material
respects under the penalties of perjury.

Dated this 20th day of November, 1995.

--------------------------------------
Curtis R. Hilliard

<PAGE> 1
EXHIBIT 99.B5

INVESTMENT ADVISORY AGREEMENT

Agreement, made as of this 31st day of January, 1996, among VANGUARD
WHITEHALL FUNDS, INC., a Maryland corporation (the "Fund"), and BARROW, HANLEY,
MEWHINNEY & STRAUSS, INC, a Texas corporation ("BHM&S").

WHEREAS, the Fund is an open-end, diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"); and

WHEREAS, the Fund desires to retain BHM&S to render to the Fund
investment advisory services to the Fund's Vanguard Selected Value Portfolio,
and BHM&S is willing to render such services;

NOW THEREFORE, this Agreement

WITNESSETH:

that in consideration of the premises and mutual promises hereinafter set
forth, the parties hereto agree as follows:

1. Appointment of BHM&S. The Fund hereby employs BHM&S as
investment adviser to the Fund's Vanguard Selected Value Portfolio (the
"Portfolio"), on the terms and conditions set forth herein. BHM&S accepts such
employment and agrees to render the services herein set forth, for the
compensation herein provided.

2. Duties of BHM&S. The Fund employs BHM&S to manage the
investment and reinvestment of the Portfolio's assets, to continuously review,
supervise and administer the investment program for the Portfolio, to determine
in its discretion the securities to be purchased or sold, subject to the
investment objectives, policies and limitations of the Fund, and the portion of
such assets to be held uninvested, to provide the Fund with records concerning
the activities of BHM&S which the Fund is required to maintain, and to render
regular reports to the Fund's officers and Board of Directors concerning the
discharge of the foregoing responsibilities. BHM&S shall discharge the
foregoing responsibilities subject to the control of the officers and the Board
of Directors of the Fund, and in compliance with the objectives, policies and
limitations set forth in the Fund's prospectus, statement of additional
information, and applicable laws and regulations. BHM&S agrees to provide, at
its own expense, the office space, furnishings and equipment and the personnel
required by it to perform the services on the terms and for the compensation
provided herein.

3. Securities Transactions. BHM&S is authorized to select the
brokers or dealers that will execute the purchases and sales of securities for
the Portfolio, and is directed to use its best efforts to obtain the best
available price and most favorable execution, except as prescribed herein.
Subject to policies established by the Board of Directors of the Fund from time
to time and delivered to BHM&S, BHM&S may also be

1
<PAGE> 2

authorized to effect individual securities transactions at commission rates in
excess of the minimum commission rates available, if BHM&S determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage or research services provided by such broker or dealer, viewed in
terms of either that particular transaction or overall responsibilities of
BHM&S with respect to the Fund. The execution of such transactions shall not
be deemed to represent an unlawful act or breach of any duty created by this
Agreement or otherwise. BHM&S will promptly communicate to the officers and
Directors of the Fund such information relating to portfolio transactions as
they may reasonably request.

4. Compensation of BHM&S. For the services to be rendered by
BHM&S as provided in this Agreement, the Fund shall pay to BHM&S at the end of
each quarter a base advisory fee adjusted by an incentive/penalty performance
adjustment reflecting the investment performance of the Portfolio relative to
the return of the Russell Midcap Index. The Russell Midcap Index is prepared by
Frank Russell Company (which is unaffiliated with the Fund or any of the Fund's
affiliates) and is composed of the 800 smallest stocks (by market
capitalization) in the Russell 1000 Index. The fees shall be calculated
according to the following rules:

a) Total Quarterly Fee Payable. The total quarterly fee payable by the Fund to
BHM&S under this advisory agreement shall be the base advisory fee for the
quarter plus the performance adjustment (which may be negative).

b) Base Advisory Fee for the Quarter. The base advisory fee for the quarter
will be calculated by applying the following quarterly percentage rates to the
average of month-end assets of the Portfolio for the quarter:

<TABLE>
<CAPTION>
Net Assets Annual Rate Quarterly Rate
---------- ----------- --------------
<S> <C> <C>
First $100 million 0.40% 0.1000%
Next $200 million 0.35% 0.0875%
Next $300 million 0.25% 0.0625%
Next $400 million 0.20% 0.0500%
Over $1 billion 0.15% 0.0375%
</TABLE>

c) Performance Adjustment. The performance adjustment will be calculated as
follows:

i) prior to March 1, 1997, the performance adjustment will be $0.

ii) beginning with the quarter ending April 30, 1997 and
thereafter, the performance adjustment will be calculated for the relevant
performance period. The performance period will be the 36 months preceding
the quarter-end or the months that have elapsed between March 1, 1996 and
the end of the quarter for which the fee is being computed, whichever is
shorter. A base fee for the performance period will be calculated based on
the average of month end assets during the performance period multiplied by
the quarterly rates used in calculating the base advisory fee for the
quarter.

2
<PAGE> 3

An incentive/penalty adjustment reflecting the investment performance of the
Portfolio relative to the return of the Russell Midcap Index will be applied
to the base fee for the performance period. The following table sets forth
the calculation of the performance adjustment:

<TABLE>
<CAPTION>
Cumulative 36-month Performance
vs. the Russell Midcap Index Performance Adjustment
---------------------------- ----------------------
<S> <C>
Less than -12% -0.50 x Base Fee for Performance Period
Between -12% and -6% -0.25 x Base Fee for Performance Period
Between -6% and +6% 0 x Base Fee for Performance Period
Between +6% and +12% 0.25 x Base Fee for Performance Period
More than +12% 0.50 x Base Fee for Performance Period
</TABLE>

Up to and including the quarter ending April 30, 1999, the performance
adjustment for BHM&S will be calculated according to the following
transition rules:

(ii-a) March 1, 1997 through April 30, 1999. Beginning with
the quarter ending April 30, 1997, and until the quarter ending April
30, 1999, the Performance adjustment will be computed based upon a
comparison of the investment performance of the Portfolio and that of
the Russell Midcap Index over the number of months that have elapsed
between March 1, 1996 and the end of the quarter for which the fee is
computed. The number of percentage points by which the investment
performance of the Portfolio must exceed the investment record of the
Russell Midcap Index shall increase proportionately from 4.67% and
2.33%, respectively, for the fourteen months ending April 30, 1997, to
12% and 6%, for the thirty-six months ending April 30, 1999.

(ii-b) After April 30, 1999. For the quarter ending July 31,
1999 and thereafter, the period used to calculate the
incentive/penalty adjustment shall be the 36 months preceding the end
of the quarter for which the fee is being computed and the number of
percentage points used shall be twelve and six.

Upon request, the Fund will provide BHM&S access to the documents
substantiating the calculation of the performance adjustment. An
example illustrating the methodology for calculating the total fee,
base plus performance adjustment, is attached hereto as Appendix A.

Calculating Relative Investment Performance

The investment performance of the Portfolio for such period, expressed
as a percentage of the net asset value per share of the Portfolio at the
beginning of such period, shall be the sum of: (i) the change in the net asset
value per share of the Portfolio during such period; (ii) the value of the cash
distributions per share of the Portfolio reinvested to the end of such period;
and (iii) the value of capital gains taxes per share paid or payable by

3
<PAGE> 4

the Portfolio on undistributed realized long-term capital gains accumulated to
the end of such period. For any period, therefore, the investment record of
the Portfolio will be the compounded daily returns of the Portfolio.

In the event of termination of this Agreement, the fee provided in
this Section shall be computed on the basis of the period ending on the last
business day on which this Agreement is in effect subject to a pro rata
adjustment based on the number of days elapsed in the current fiscal quarter as
a percentage of the total number of days in such quarter.

5. Reports. The Fund and BHM&S agree to furnish to each
other current prospectuses, statements of additional information, proxy
statements, reports to shareholders, Fund's Articles of Incorporation,
certified copies of its financial statements, and such other information with
regard to its affairs as each may reasonably request. BHM&S agrees to provide
the Fund with its current Form ADV and other reports or information the Fund
may request.

6. Status of BHM&S. The services of BHM&S to the Fund
are not to be deemed exclusive, and BHM&S shall be free to render similar
services to others so long as its services to the Fund are not impaired
thereby. BHM&S shall be deemed to be an independent contractor and shall,
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.

7. Liability of BHM&S. Except for negligence or malfeasance, or
violation of applicable law, BHM&S shall not be liable to the Fund or its
shareholders with respect to any liabilities arising from its services rendered
hereunder. Further, no provision of this Agreement shall be deemed to protect
BHM&S against any liability to the Fund or its shareholders to which it might
otherwise be subject by reasons of any willful malfeasance, bad faith or gross
negligence in the performance of its duties or the reckless disregard of its
obligations under this Agreement. Federal and state securities laws impose
liabilities under certain circumstances on persons who act in good faith, and
therefore nothing herein shall in any way constitute a waiver or limitation on
any rights which the Fund may have under any such laws.

8. Duration and Termination. This Agreement shall become
effective on January 31, 1996, and shall continue in effect until January 30,
1998. The Agreement shall continue after January 30, 1998, only so long as
such continuance is approved at least annually by votes of the Fund's Board of
Directors, including the votes of a majority of the

4
<PAGE> 5

Directors 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 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
shall be effected only if approved by the affirmative vote of a majority of the
outstanding voting securities of the Fund.

Provided, however, that (i) this Agreement may at any time be
terminated without payment of any penalty either by vote of the Board of
Directors of the Fund or by vote of a majority of the outstanding voting
securities of the Fund, on sixty days' written notice to BHM&S, (ii) this
Agreement shall automatically terminate in the event of its assignment, and
(iii) this Agreement may be terminated by BHM&S on ninety days' written notice
to the Fund. Any notice under this Agreement shall be given in writing,
addressed and delivered, or mailed postpaid, to the other party at any office
of such party.

As used in this Section 8, the terms "assignment", "interested
persons", and a "vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in Section 2(a)(4), Section 2(a)(19) and
Section 2(a)(42) of the 1940 Act.

9. Severability. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of this 31st day of January, 1996.

ATTEST: Vanguard Whitehall Funds, Inc.

By
- ------------------------ -----------------------------------
Secretary President

ATTEST: Barrow, Hanley, Mewhinney & Strauss, Inc.

By
- ------------------------- ----------------------------------

5
<PAGE> 6
APPENDIX A - FEE CALCULATION EXAMPLE

Example of fee under full imposition of the incentive factor.

<TABLE>
<CAPTION>
Cumulative 36-Month
Performance Relative to Incentive/Penalty
Base Fee for the Quarter Benchmark Performance Adustment
- ------------------------ ----------------------- ---------------------
<S> <C> <C> <C>
Assets Annualized Rate
- ------ --------------- Less than -12% -0.50 x Base Fee *
First $100 million 0.40% Between -12% and -6% -0.25 x Base Fee *
Next $200 million 0.35% Between -6% and +6% 0.00 x Base Fee *
Next $300 million 0.25% Between +6% and +12% 0.25 x Base Fee *
Next $400 million 0.20% More than 12% 0.50 x Base Fee *
Over $1 billion 0.15%
</TABLE>

Assets start the beginning of Year 1 at $100 million and grow by 10% per year.
For all periods prior to Year 1, assets are assumed to be constant at $100
million.
Assets and fees in thousands of dollars.

<TABLE>
<CAPTION>
Average Assets ($000) Performance Adjustment ($000) TOTAL FEE ($000)
------------------------- Base Fee ----------------------------- -----------------------
Current Qtr 36-Months for Quarter ($000) MAX Adjust MIN Adjust MAX Adjust MIN Adjust
----------- -------- ------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
First Quarter 101,202 100,130 101.1 50.1 -50.1 151.1 51.0
Second Quarter 103,643 100,459 103.2 50.2 -50.2 153.4 53.0
Third Quarter 106,142 100,991 105.4 50.4 -50.4 155.8 54.9
Fourth Quarter 108,702 101,731 107.6 50.8 -50.8 158.4 56.9
-----------------------
TOTAL YEAR 1 $618.7 $215.8
-----------------------

First Quarter 111,323 102,685 109.9 51.2 -51.2 161.1 58.7
Second Quarter 114,007 103,857 112.3 51.7 -51.7 163.9 60.6
Third Quarter 116,756 105,253 114.7 52.3 -52.3 167.0 62.4
Fourth Quarter 119,572 106,879 117.1 53.0 -53.0 170.1 64.1
-----------------------
TOTAL YEAR 2 $662.1 $245.8
-----------------------

First Quarter 122,455 108,739 119.6 53.8 -53.8 173.5 65.8
Second Quarter 125,408 110,839 122.2 54.7 -54.7 177.0 67.5
Third Quarter 128,432 113,186 124.9 55.8 -55.8 180.6 69.1
Fourth Quarter 131,529 115,784 127.6 56.9 -56.9 184.5 70.7
-----------------------
TOTAL YEAR 3 $715.6 $273.1
-----------------------

</TABLE>

* For purposes of calculating the Incentive/Penalty Performance Adjustment, the
Base Fee represents the annual rate(s) used in calculating
the base advisory fee for the quarter multiplied by the
average assets for the applicable performance period.

<PAGE> 1

EX-99.B10

Vanguard Whitehall Funds, Inc.
P.O. Box 2600
Valley Forge, PA 19482

Gentlemen:

Vanguard Whitehall Funds, Inc. (the "Fund") was organized under the laws of
the State of Maryland on November 27, 1995. I am acting as counsel to the Fund
in connection with the Fund's initial registration as an open-end management
investment company under the Investment Company Act of 1940 ("1940 Act"), as
amended. It is in my capacity as counsel to the Fund that I am furnishing you
this opinion.

I have examined the Fund's: (1) Articles of Incorporation; (2) By-Laws;
(3) minutes of the meetings of the Board of Directors; (4) Notification of
Registration on Form N-8A under the 1940 Act; (5) Registration Statement on Form
N-1A under the Securities Act of 1933 ("1933" Act) and 1940 Act and all
amendments thereto; (6) registration statements, application and other documents
filed with various state securities authorities; and (7) all other relevant
documents and records, as well as the procedures and requirements relative to
the issuance and sale of the Fund's shares.

Based upon the foregoing information and my examination, it is my opinion
that:

1. The Fund is a valid and existing corporation of the State of Maryland
authorized to issue one billion shares of common stock interest, $.001 par
value. The Board of Directors has the power to designate one or more classes
(Portfolios) of shares of common stock and to classify and reclassify any
unissued shares with respect to such Portfolios. Currently, the Fund is offering
one Portfolio.

2. The Fund has filed a Registration Statement with the U.S. Securities and
Exchange Commission on Form N-1A to register as an open-end management company
under the 1940 Act and to register an indefinite number of its securities under
the 1933 Act.

3. The Fund has filed registration statements, applications and/or other
documents required to register its securities under various State securities
laws.

4. The Fund will be authorized to offer and sell its shares when all
necessary Federal and State regulatory authorizations, which are prerequisite to
the issuance of the Fund's shares, have been obtained, subject to the Fund's
continuing to maintain the effectiveness of the requisite Registration Statement
under the 1933 Act and certain of the State securities laws.

5. Such shares, when issued for consideration deemed by the Board of
Directors to be consistent with the Fund's Articles of Incorporation, will be
legally authorized, fully paid and non-assessable.

6. The holders of the Fund's shares will have all the rights provided with
respect to such holdings by the Articles of Incorporation and the laws of the
State of Maryland.

I hereby consent to use of this opinion as an Exhibit to the Fund's
Registration Statement on Form N-1A filed under the 1933 and 1940 Acts, and to
the applications and registration statements, and amendments thereto, filed in
accordance with the securities laws of the states in which shares of the Fund
are offered. I further consent to reference in the Prospectus of the Fund to the
fact that this opinion concerning the legality of the issue has been rendered by
me.

Very truly yours,

BY: (Raymond J. Klapinsky)

Senior Vice President and

General Counsel

<PAGE> 1

EX-99.B11

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in the Statement of Additional Information
constituting part of this amended Registration Statement on Form N-1A of our
report dated February 8, 1996, relating to the financial statement of the
Vanguard Selected Value Portfolio of Vanguard Whitehall Funds, Inc., which
appears in such Statement of Additional Information.

PRICE WATERHOUSE LLP

Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103

February 12, 1996

<PAGE> 1

EX-99.B12

VANGUARD WHITEHALL FUNDS, INC.

VANGUARD SELECTED VALUE

STATEMENT OF ASSETS AND LIABILITIES

JANUARY 24, 1996

<TABLE>
<S> <C>
ASSETS
Cash................................................................................ $ 100,000
Liabilities........................................................................... None
Net Assets............................................................................ $ 100,000
Net Asset Value and Offering Price Per Share: One Billion Shares of common stock
authorized with $.001 par value, 10,000 shares issued and outstanding............... $ 10.00
</TABLE>

The Vanguard Whitehall Funds, Inc. (the "Fund") is an open-end, diversified
management investment company registered under the Investment Company Act of
1940, as amended (the "Act"). The Fund was organized as a Maryland Corporation
on November 27, 1995. The Fund had no operations other than the sale of shares
of common stock of the Fund, at an aggregate cost of $100,000, to an officer of
the Fund's Investment Adviser, representing the initial capital of the Fund.
Costs incurred in connection with the organization and registration of the Fund
have been borne by The Vanguard Group, Inc. ("Vanguard"), a jointly-owned
subsidiary of The Vanguard Group of Investment Companies.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholder and Board of Directors
Vanguard Whitehall Funds, Inc.

In our opinion, the accompanying statement of assets and liabilities
presents fairly, in all material respects, the financial position of the
Vanguard Selected Value Portfolio of Vanguard Whitehall Funds, Inc. (the "Fund")
at January 24, 1996, in conformity with generally accepted accounting
principles. This financial statement is the responsibility of the Fund's
management; our responsibility is to express an opinion on this financial
statement based on our audit. We conducted our audit of this financial statement
in accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statement, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for the opinion expressed above.

PRICE WATERHOUSE LLP

Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103

February 12, 1996