VANGUARD/WELLINGTON FUND INC, 485BPOS, 1999-03-10

VANGUARD/WELLINGTON FUND INC
485BPOS, 1999-03-10

Previous: WEIS MARKETS INC, 10-K, 1999-03-10

Next: WESTMORELAND COAL CO, SC 13E4, 1999-03-10

<PAGE> 1

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

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT (NO. 2-11444) UNDER
THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. [X]

POST-EFFECTIVE AMENDMENT NO. 81 [X]

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940

AMENDMENT NO. 81 [X]

VANGUARD WELLINGTON FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)

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

REGISTRANT'S TELEPHONE NUMBER (610) 669-1000

R. GREGORY BARTON, ESQUIRE
P.O. BOX 876
VALLEY FORGE, PA 19482

IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE:

on March 19, 1999, pursuant to paragraph (b) of Rule 485.

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

WE HAVE ELECTED TO REGISTER AN INDEFINITE NUMBER OF SHARES PURSUANT TO
REGULATION 24f-2 UNDER THE INVESTMENT COMPANY ACT OF 1940. WE FILED OUR RULE
24f-2 NOTICE FOR THE PERIOD ENDED NOVEMBER 30, 1998 ON FEBRUARY 27, 1999.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
VANGUARD WELLINGTON FUND

Prospectus
March 19, 1999

A Balanced Mutual Fund

CONTENTS

<TABLE>
<S> <C>
1 FUND PROFILE
3 ADDITIONAL INFORMATION
3 A WORD ABOUT RISK
3 WHO SHOULD INVEST
4 PRIMARY INVESTMENT STRATEGIES
8 THE FUND AND VANGUARD
8 INVESTMENT ADVISER
9 YEAR 2000 CHALLENGE
10 DIVIDENDS, CAPITAL GAINS, AND TAXES
11 SHARE PRICE
12 FINANCIAL HIGHLIGHTS
13 INVESTING WITH VANGUARD
13 SERVICES AND ACCOUNT FEATURES
14 TYPES OF ACCOUNTS
14 BUYING SHARES
16 REDEEMING SHARES
19 TRANSFERRING REGISTRATION
19 FUND AND ACCOUNT UPDATES
GLOSSARY (inside back cover)
</TABLE>

- --------------------------------------------------------------------------------
WHY READING THIS PROSPECTUS IS IMPORTANT

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

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE> 3
1

FUND PROFILE

The following profile summarizes key features of Vanguard Wellington Fund.

INVESTMENT OBJECTIVE

The Fund is a balanced fund that seeks to conserve capital and to provide
moderate long-term growth in capital and income.

INVESTMENT STRATEGIES

The Fund invests 60% to 70% of its assets in dividend-paying stocks of
established, large and medium-size companies. In choosing these companies, the
adviser seeks those that appear to be undervalued but to have improving
prospects. These stocks are commonly referred to as value stocks. The remaining
30% to 40% of assets are invested primarily in high-quality, long-term corporate
bonds, with some exposure to U.S. Treasury, government agency, and
mortgage-backed bonds.

PRIMARY RISKS

THE FUND'S TOTAL RETURN, LIKE THE PRICES OF STOCKS AND BONDS, WILL FLUCTUATE
WITHIN A WIDE RANGE, SO AN INVESTOR COULD LOSE MONEY OVER SHORT OR EVEN LONG
PERIODS. The Fund is also subject to:

- - Investment style risk, which is the chance that returns from large- and
mid-capitalization value stocks will trail returns from other asset classes
or the overall stock market. Each type of stock tends to go through cycles of
doing better -- or worse -- than the stock market in general. These periods
have, in the past, lasted for as long as several years.

- - Interest rate risk, which is the chance that bond prices overall will decline
over short or even long periods due to rising interest rates. Interest rate
risk should be modest for shorter-term bonds and high for longer-term bonds.

- - Credit risk, which is the chance that a bond issuer will fail to pay interest
and principal in a timely manner, reducing the Fund's return. Credit risk
should be low for the Fund.

- - Manager risk, which is the chance that poor security selection will cause the
Fund to underperform other funds with similar investment objectives.

PERFORMANCE/RISK INFORMATION

The bar chart and table below provide an indication of the risk of investing in
the Fund. The bar chart shows the Fund's performance in each calendar year over
a ten-year period. The table shows how the Fund's average annual returns for
one, five, and ten calendar years compare with those of both the S&P 500 Index,
a broad stock market benchmark, and a composite stock/bond index weighted 65% in
the S&P 500 Index and 35% in a broad bond market index. Keep in mind that the
Fund's past performance does not indicate how it will perform in the future.

- ------------------------------------------------------------------------------
ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------------------

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

During the period shown in the bar chart, the highest return for a calendar
quarter was 12.19% (quarter ended June 30, 1997) and the lowest return for a
quarter was -9.48% (quarter ended September 30, 1990).

<PAGE> 4
2

<TABLE>
<CAPTION>
-------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR YEARS ENDED DECEMBER 31, 1998
-------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
-------------------------------------------------------------------
<S> <C> <C> <C>
Vanguard Wellington Fund 12.06% 16.24% 14.28%
Composite Index* 22.65 18.69 16.35
S&P 500 Index 28.58 24.06 19.21
-------------------------------------------------------------------
</TABLE>

* Weighted 65% in the S&P 500 Index, 35% in the Lehman Brothers Long Corporate
AA or Better Bond Index.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
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 the fund's buying and selling of securities. These costs
can erode a substantial portion of the gross income or capital appreciation a
fund achieves. Even seemingly small differences in expenses can, over time, have
a dramatic effect 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 Wellington Fund's expense ratio in fiscal year 1998 was
0.31%, or $3.10 per $1,000 of average net assets. The average balanced mutual
fund had expenses in 1998 of 1.31%, or $13.10 per $1,000 of average net assets,
according to Lipper, Inc., which reports on the mutual fund industry.

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

FEES AND EXPENSES

The following table describes the fees and expenses you would pay if you buy and
hold shares of the Fund. The expenses shown under Annual Fund Operating Expenses
are based upon those incurred in the fiscal year ended November 30, 1998.

<TABLE>
<S> <C>
SHAREHOLDER FEES (fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases: None
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fees: None
Exchange Fees: None

ANNUAL FUND OPERATING EXPENSES (expenses deducted from the Fund's assets)
Management Expenses: 0.28%
12b-1 Distribution Fees: None
Other Expenses: 0.03%
TOTAL ANNUAL FUND OPERATING EXPENSES: 0.31%
</TABLE>

The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. It illustrates the
hypothetical expenses that you would incur over various periods if you invest
$10,000 in the Fund. This example assumes that the Fund provides a return of 5%
a year and that operating expenses remain the same. The results apply whether or
not you redeem your investment at the end of each period.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
$32 $100 $174 $393
- --------------------------------------------------------------------------------
</TABLE>

THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE. ACTUAL FUTURE EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.
<PAGE> 5
3

- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION

DIVIDENDS AND CAPITAL GAINS

Dividends are distributed in March, June, September, and December; capital
gains, if any, are distributed in December

INVESTMENT ADVISER
Wellington Management Company, LLP, Boston, Mass., since inception

INCEPTION DATE
July 1, 1929

NET ASSETS AS OF NOVEMBER 30, 1998
$25.8 billion

SUITABLE FOR IRAs
Yes

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

NEWSPAPER ABBREVIATION
Welltn

VANGUARD FUND NUMBER
021

CUSIP NUMBER
921935102

TICKER SYMBOL
VWELX
- --------------------------------------------------------------------------------

================================================================================
A WORD ABOUT RISK

This prospectus describes the risks you would face as an investor in Vanguard
Wellington Fund. 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. As you consider an investment in Vanguard Wellington Fund, you
should also take into account your personal tolerance for the daily fluctuations
of the stock and bond markets.

Look for this [FLAG] symbol throughout the prospectus. It is used to mark
detailed information about each type of risk that you would confront as a
shareholder of the Fund.
================================================================================

WHO SHOULD INVEST

The Fund may be a suitable investment for you if:

- - You want a simple way to invest in a relatively fixed percentage of stocks
and bonds.

- - You are seeking moderate growth of your capital over the long term -- at
least five years -- but you want to hold down risk by investing in
established companies and high-quality bonds.

- - You are seeking moderate current income.

- --------------------------------------------------------------------------------
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 Fund discourages short-term trading by, among other things,
limiting the number of exchanges it permits.
- --------------------------------------------------------------------------------

THE VANGUARD FUNDS DO NOT PERMIT MARKET-TIMING. DO NOT INVEST IN THIS FUND IF
YOU ARE A MARKET-TIMER.
<PAGE> 6
4

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
BALANCED FUNDS

Balanced funds are generally "middle-of-the-road" investments that seek to
provide some combination of growth, income, and conservation of capital by
investing in a mix of stocks, bonds, and/or money market instruments. Because
the prices of stocks and bonds often move in different directions, balanced
funds are able to use rewards from one type of investment to help offset the
risks from another.
- --------------------------------------------------------------------------------

The Fund has adopted the following policies, among others, to discourage
short-term trading:

- - The Fund 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 Fund. 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 and out of the
Fund (see "Redeeming Shares" in the INVESTING WITH VANGUARD section).

- - The Fund reserves the right to stop offering shares at any time.

PRIMARY INVESTMENT STRATEGIES

This section explains the strategies that the investment adviser uses in pursuit
of the Fund's objective of conservation of capital and moderate long-term growth
of capital and income. It also explains how the adviser implements these
strategies. In addition, this section discusses several important risks --
market risk, interest rate risk, manager risk, investment style risk, and credit
risk -- faced by investors in the Fund. The Board of Trustees oversees the
management of the Fund, and may change the investment strategies in the interest
of shareholders.

MARKET EXPOSURE

STOCKS

Roughly two-thirds of the Fund's assets are invested in common stocks. At times,
the Fund may also invest in securities that are convertible to common stocks.

[FLAG] THE FUND IS SUBJECT TO STOCK MARKET RISK, WHICH IS THE POSSIBILITY THAT
STOCK PRICES OVERALL WILL DECLINE OVER SHORT OR EVEN LONG PERIODS.
STOCK MARKETS TEND TO MOVE IN CYCLES, WITH PERIODS OF RISING PRICES AND
PERIODS OF FALLING PRICES.

To illustrate the volatility of stock prices, the following table shows the
best, worst, and average total returns 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 market activity. (Total returns consist of dividend
income plus change in market price.) 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, that the gap between best and
worst tends to narrow over the long term.

- --------------------------------------------------------------------------------
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.
Generally, Vanguard defines large-capitalization (large-cap) funds as those
holding stocks of companies whose outstanding shares have a market value
exceeding $10 billion. Mid-cap funds hold stocks of companies with a market
value between $1 billion and $10 billion. Small-cap funds typically hold stocks
of companies with a market value of less than $1 billion.

- --------------------------------------------------------------------------------
<PAGE> 7
5

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
U.S. STOCK MARKET RETURNS (1926 - 1998)
- ---------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS 20 YEARS
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Best 54.2% 24.1% 19.9% 17.7%
Worst -43.1 -12.4 -0.8 3.1
Average 13.1 10.7 11.0 11.0
- ---------------------------------------------------------------------------
</TABLE>

The table covers all of the 1-, 5-, 10-, and 20-year periods from 1926
through 1998. You can see, for example, that while the average return on stocks
for all of the 5-year periods was 10.7%, returns for individual 5-year periods
ranged from a -12.4% average (from 1928 through 1932) to 24.1% (from 1994
through 1998). These average returns reflect past performance on common stocks;
you should not regard them as an indication of future returns from either the
stock market as a whole or this Fund in particular.

Finally, because Vanguard Wellington Fund's holdings are not identical to the
S&P 500 Index or any other market index, the performance of the Fund will not
mirror the returns of any particular index.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
BONDS AND INTEREST RATES

As a rule, when interest rates rise, bond prices fall. The opposite is also
true: Bond prices go up when interest rates fall. Why do bond prices and
interest rates move in opposite directions? Let's assume that you hold a bond
offering a 5% yield. A year later, interest rates are on the rise and bonds are
offered with a 6% yield. With higher-yielding bonds available, you would have
trouble selling your 5% bond for the price you paid: you would have to lower
your asking price. On the other hand, if interest rates were falling and 4%
bonds were being offered, you should be able to sell your 5% bond for more than
you paid.

PLAIN TALK ABOUT
BOND MATURITIES

A bond is issued with a specific maturity date -- the date when the bond issuer,
or seller, must pay back the bond's initial value (known as its "face value").
Bond maturities generally range from less than one year (short-term) to 30 years
(long-term). The longer a bond's maturity, the more risk you, as a bond
investor, face as interest rates rise -- but also the more interest you could
receive. Long-term bonds are more suitable for investors willing to take greater
risks of price fluctuations to get higher interest income; short-term bond
investors should be willing to accept lower yields in return for less
fluctuation in the value of their investment.
- --------------------------------------------------------------------------------

BONDS

Approximately one-third of the Fund's assets are invested in bonds.

[FLAG] THE FUND IS SUBJECT TO INTEREST RATE RISK, WHICH IS THE POSSIBILITY
THAT BOND PRICES OVERALL WILL DECLINE OVER SHORT OR EVEN LONG PERIODS
DUE TO RISING INTEREST RATES. INTEREST RATE RISK SHOULD BE MODEST FOR
SHORTER-TERM BONDS AND HIGHER FOR LONGER-TERM BONDS.

Although bonds are often thought to be less risky than stocks, there have
been periods when bond prices have fallen significantly due to rising interest
rates. For instance, prices of long-term bonds fell by almost 48% between
December 1976 and September 1981.

To illustrate the relationship between bond prices and interest rates, the
following table shows the impact of a 2% change (both up and down) in interest
rates on three bonds of different maturities, each with a face value of $1,000.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
HOW INTEREST RATE CHANGES AFFECT BOND PRICES*
- ------------------------------------------------------------------------------------
VALUE OF A $1,000 BOND VALUE OF A $1,000 BOND
AFTER A 2% INCREASE AFTER A 2% DECREASE
TYPE OF BOND (MATURITY) IN INTEREST RATES IN INTEREST RATES
- ------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term (2.5 years) $ 956 $1,046
Intermediate-Term (10 years) 870 1,156
Long-Term (20 years) 816 1,251
- ------------------------------------------------------------------------------------
</TABLE>

* Assuming a 7% yield.

These figures are for illustrative purposes only and should not be regarded
as an indication of future returns from the bond market as a whole or the Fund
in particular.

Finally, because stock and bond prices often move in different directions,
the Fund's bond holdings help to dampen -- but not eliminate -- some of the
stock market volatility experienced by the Fund. Likewise, changes in interest
rates may not have as dramatic an effect on the Fund as they would on a fund
made up entirely of bonds.
<PAGE> 8
6

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
CREDIT QUALITY

A bond's credit quality depends on the issuer's ability to pay interest on the
bond and, ultimately, to repay the debt. The lower the rating by one of the
independent bond-rating agencies (for example, Moody's or Standard & Poor's),
the greater the chance (in the rating agency's opinion) that the bond issuer
will default, or fail to meet its payment obligations. All things being equal,
the lower a bond's credit rating, the higher its yield should be to compensate
investors for assuming additional risk. Bonds rated in one of the four highest
ratings categories are considered "investment grade."
- --------------------------------------------------------------------------------

SECURITY SELECTION

Wellington Management Company, LLP (WMC), adviser to the Fund, invests
approximately 60% to 70% of the Fund's assets in dividend-paying common stocks
and the remaining 30% to 40% of assets in high-quality, U.S. investment grade
bonds. While the mix of stocks and bonds varies from time to time depending on
the adviser's view of economic and market conditions, the stock portion can be
expected to represent at least 60% of the Fund's holdings.

The Fund is run by WMC according to traditional methods of active investment
management. Securities are bought and sold based on WMC's judgments about
companies and their financial prospects, and about bond issuers and the general
level of interest rates. To achieve the Fund's objectives of conservation of
capital and moderate growth in capital and income, the adviser follows specific
strategies for stock and bond selection.

The Fund is generally managed without regard to tax ramifications.

[FLAG] THE FUND IS SUBJECT TO MANAGER RISK, WHICH IS THE POSSIBILITY THAT WMC
MAY DO A POOR JOB OF SELECTING STOCKS AND BONDS.

STOCKS

WMC uses extensive research to find what it considers to be undervalued stocks
of established, large- and medium-size companies. WMC considers a stock to be
undervalued if company earnings, or potential earnings, are not fully reflected
in the stock's share price. In other words, the current market prices of these
large- and mid-cap stocks may be less than what the adviser thinks they should
be worth.

The adviser's goal is to identify and purchase these securities before their
value is recognized by other investors. The adviser emphasizes stocks that, on
average, provide a higher level of dividend income than stocks in the overall
market generally provide. By adhering to this stock selection strategy and by
investing in a wide variety of companies and industries, the adviser expects to
moderate overall risk.

[FLAG] THE FUND IS SUBJECT TO INVESTMENT STYLE RISK, WHICH IS THE POSSIBILITY
THAT RETURNS FROM LARGE- AND MID-CAPITALIZATION VALUE STOCKS WILL TRAIL
RETURNS FROM OTHER ASSET CLASSES OR THE OVERALL STOCK MARKET. AS A
GROUP, VALUE STOCKS TEND TO GO THROUGH CYCLES OF DOING BETTER -- OR
WORSE -- THAN COMMON STOCKS IN GENERAL. THESE PERIODS HAVE, IN THE
PAST, LASTED FOR AS LONG AS SEVERAL YEARS.

As of November 30, 1998, the fund had invested 14.45% of net assets in its
top ten stock holdings.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
TYPES OF BONDS

Bonds are issued (sold) by many sources: corporations issue corporate bonds; the
federal government issues U.S. Treasury bonds; agencies of the federal
government issue agency bonds; and mortgage holders issue "mortgage-backed"
bonds such as those of the Government National Mortgage Association (GNMA). Each
issuer is responsible for paying back the bond's initial value as well as
periodic interest payments.
- --------------------------------------------------------------------------------

BONDS

WMC selects high-quality bonds that it believes will generate a high
and sustainable level of income. These bonds may include intermediate- and
long-term corporate bonds, U.S. Treasury, government agency, and mortgage-backed
and asset-backed bonds. The average maturity of the
<PAGE> 9
7

bond holdings exceeds 15 years. To generate a relatively stable stream of
interest income, the adviser does not generally make large adjustments in the
average maturity of the Fund's bond holdings in anticipation of changes in
interest rates.

A breakdown of the Fund's bond holdings (which amounted to 35% of the Fund's
net assets) as of November 30, 1998, follows:

<TABLE>
<CAPTION>
---------------------------------------------------------------------
PERCENTAGE OF
TYPE OF BOND FUND'S BOND HOLDINGS
---------------------------------------------------------------------
<S> <C>
Corporate 67.2%
U.S. Treasury and government agency 20.7
Foreign issuers 11.3
Other 0.8
---------------------------------------------------------------------
</TABLE>

[FLAG] THE FUND IS SUBJECT, TO A LIMITED EXTENT, TO CREDIT RISK, WHICH IS THE
POSSIBILITY THAT A BOND ISSUER WILL FAIL TO REPAY INTEREST AND
PRINCIPAL IN A TIMELY MANNER.

WMC purchases bonds that are primarily investment-grade quality -- that is,
bonds that are rated at least Baa by Moody's Investors Service, Inc., or BBB by
Standard & Poor's Corporation. The average dollar-weighted quality of bonds held
by the Fund, as of November 30, 1998, was Aa3, according to Moody's.

Timely payment of principal and interest on U.S. Treasury bonds is always
guaranteed by the full faith and credit of the U.S. government; many (but not
all) agency bonds have the same guarantee. However, these guarantees do not
protect against fluctuations in the bonds' prices. In other words, while
Treasury and agency bonds enjoy the highest credit ratings, their prices -- like
the prices of other bonds -- will fluctuate with changes in interest
rates.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
TURNOVER RATE

Before investing in a mutual fund, you should review its turnover rate. This
gives an indication of how transaction costs could affect 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 turnover rates may be more likely
to generate capital gains that must be distributed to shareholders as income
subject to taxes. The average turnover rate for all balanced funds is
approximately 98%, according to Morningstar, Inc.

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

TURNOVER RATE

Although the Fund generally seeks to invest for the long term, it retains
the right to sell securities regardless of how long the securities have been
held. It is not expected that the Fund's turnover rate will exceed 50% in the
future. (A turnover rate of 100% would occur, for example, if the Fund sold and
replaced securities valued at 100% of its net assets within a one-year period.)

OTHER INVESTMENT POLICIES AND RISKS

Besides investing in stocks of large- and medium-size companies and high-quality
intermediate- and long-term bonds, the Fund may follow a number of other
investment policies to achieve its objective.

Although the Fund typically does not make significant investments in
securities of companies based outside the United States, it reserves the right
to invest up to 20% of its assets in foreign stocks traded in U.S. or foreign
markets. To the extent that it owns foreign stocks, the Fund is subject to (1)
country risk, which is the possibility that political events (such as a war),
financial problems (such as government default), or natural disasters (such as
an earthquake) will weaken a country's economy and cause investments in that
country to lose money; and (2) currency risk, which is the possibility that
Americans investing abroad could lose money because of a rise in the value of
the U.S. dollar versus foreign currencies. The Fund will also invest to a
limited extent in U.S. dollar-denominated foreign bonds which are also subject
to country risk.

The Fund may also invest, to a limited extent, in stock and bond (interest
rate) futures and options contracts, which are traditional types of derivatives.
The Fund may also invest modestly in less-risky classes of collateralized
mortgage obligations (CMOs).
<PAGE> 10
8

- --------------------------------------------------------------------------------
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 types of derivatives. If used for speculation or
as leveraged investments, derivatives can carry considerable risks.
- --------------------------------------------------------------------------------

Losses (or gains) involving futures 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 fund. This Fund will not use
futures for speculative purposes or as leveraged investments that magnify the
gains or losses of an investment. The value of all futures and options contracts
in which the Fund acquires an interest cannot exceed 20% of total assets.

The reasons for which the Fund invests in futures and options are:

- - To keep cash on hand to meet shareholder redemptions or other needs while
simulating full investment in stocks and bonds.

- - To reduce the Fund's transaction costs or add value when these instruments
are favorably priced.

The Fund may, from time to time, take temporary defensive measures -- such as
holding cash reserves without limit -- that are inconsistent with the Fund's
primary investment strategies, in response to adverse market, economic,
political, or other conditions. In taking such measures, the Fund may not
achieve its investment objective.

THE FUND AND VANGUARD

The Fund is a member of The Vanguard Group, a family of more than 35 investment
companies with more than 100 distinct investment portfolios holding assets worth
more than $440 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 distribution fees, each fund pays its
allocated share of The Vanguard Group's marketing costs.

INVESTMENT ADVISER

The Fund employs Wellington Management Company, LLP (WMC), 75 State Street,
Boston, MA 02109, as its investment adviser. WMC manages the Fund subject to the
control of the Trustees and officers of the Fund.

WMC's advisory fee is paid quarterly. This fee is based on certain annual
percentage rates applied to the Fund's average month-end assets for each
quarter.

In addition, WMC's advisory fee is increased or decreased, based on the
cumulative investment performance of the fund over a trailing 36-month period as
compared with the cumulative total return of the Composite Index over

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
VANGUARD'S UNIQUE CORPORATE STRUCTURE

The Vanguard Group is truly a MUTUAL mutual fund company. It is owned jointly by
the funds it oversees and thus indirectly by the shareholders in those funds.
Most other mutual funds are operated by for-profit management companies that may
be owned by one person, by a group of individuals, or by investors who own the
management company's stock. By contrast, Vanguard provides its services on an
"at-cost" basis, and the funds' expense ratios reflect only these costs. No
separate management company reaps profits or absorbs losses from operating the
funds.
- --------------------------------------------------------------------------------
<PAGE> 11
9

the same period. This Index is a market benchmark that is made up of the S&P 500
Index (65% of the Composite Index) and the Lehman Brothers Long Corporate AA or
Better Bond Index (35% of the Composite Index). Under the fee schedule, the base
fee may be increased or decreased by up to 30%.

For the year ended November 30, 1998, the net fee paid to WMC was $7,055,000,
after a decrease of $2,102,000 based on performance. This fee represented an
effective annual rate of 0.03% of the Fund's average net assets.

The Fund has authorized WMC to choose brokers or dealers to handle the
purchase and sale of securities for the Fund, and to get the best available
price and most favorable execution from these brokers with respect to all
transactions.

In the interest of obtaining better execution of a transaction, WMC may
choose brokers who charge higher commissions. If more than one broker can obtain
the best available price and favorable execution of a transaction, then WMC is
authorized to choose a broker who, in addition to executing the transaction,
will provide research services to WMC or the Fund. Also, the Fund may direct WMC
to use a particular broker for certain transactions in exchange for commission
rebates or research services provided to the Fund.

The Board of Trustees may, without prior approval from shareholders, change
the terms of the advisory agreement or hire a new investment adviser, either as
a replacement for WMC or as an additional adviser. However, any such change will
be communicated to shareholders in writing.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
THE FUND'S ADVISER

Wellington Management Company, LLP (WMC) is an investment advisory firm founded
in 1928. As of November 30, 1998, WMC managed more than $205 billion in stock
and bond portfolios, including 14 Vanguard funds. The managers responsible for
overseeing Vanguard Wellington Fund are:

ERNST H. VON METZSCH, CFA, Senior Vice President and partner of WMC; has
worked in investment management since 1970; has worked with WMC since 1973; has
managed portfolio investments since 1984; M.Sc., The University of Leiden, The
Netherlands; Ph.D., Harvard University.

PAUL D. KAPLAN, Senior Vice President and partner of WMC; has worked in
investment management since 1974; with WMC since 1978; has managed the bond
portion of the Fund since 1994; B.S., Dickinson College; M.S., The Sloan School
of Management, Massachusetts Institute of Technology.

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

YEAR 2000 CHALLENGE

The common practice in computer programming of using just two digits
to identify a year has resulted in the Year 2000 challenge throughout the
information technology industry. If unchanged, many computer applications and
systems could misinterpret dates occurring after December 31, 1999, leading to
errors or failure. Such failure could adversely affect a fund's operations,
including pricing, securities trading, and the servicing of shareholder
accounts.

The Vanguard Group is dedicated to providing uninterrupted, high-quality
performance from our computer systems before, during, and after 2000. In July
1998, we completed the renovation and initial testing of our internal systems.
Vanguard is diligently working with external partners, suppliers, and vendors,
including fund managers and other service providers, to assure that the systems
with which we interact remain operational at all times.

In addition to taking every reasonable step to secure our internal systems
and external relationships, Vanguard is further developing contingency plans
intended to assure that unexpected systems failures will not adversely affect
the Fund's operations. Vanguard intends to monitor these processes through the
rollover of 1999 into 2000 and to quickly implement alternate solutions if
necessary.

However, despite Vanguard's efforts and contingency plans, noncompliant
computer systems could have a material adverse effect on the Fund's business,
operations, or financial condition. Additionally, the Fund's performance could
be hurt if a computer-system failure at a company or governmental unit affects
the price of securities the Fund owns.
<PAGE> 12
10

- --------------------------------------------------------------------------------
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 an income dividend or a capital gains distribution. Income
dividends come from both the dividends that the fund earns from its holdings and
the interest it receives from its money market and bond investments. Capital
gains are realized whenever the fund sells securities for higher prices than it
paid for them. These capital gains are either short-term or long-term depending
on whether the fund held the securities for less than or more than one year.

PLAIN TALK ABOUT
"BUYING A DIVIDEND"

Unless you are investing through a tax-deferred 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 doing so can cost you money in taxes. 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 still have only $5,000 (250 shares x $19 = $4,750 in share value, plus 250
shares x $1 = $250 in distributions), but you owe tax on the $250 distribution
you received -- even if you reinvest it in more shares. To avoid "buying a
dividend," check a fund's distribution schedule before you invest.
- --------------------------------------------------------------------------------

DIVIDENDS, CAPITAL GAINS, AND TAXES

The Fund distributes to shareholders virtually all of its net income (interest
and dividends less expenses) as well as any capital gains realized from the sale
of its holdings. Income distributions generally occur in March, June, September,
and December; capital gains distributions generally occur in December. You can
receive distributions of income or capital gains in cash, or you can have them
automatically invested in more shares of the Fund. In either case, these
distributions are taxable to you. It is important to note that distributions of
dividends and capital gains that are declared in December -- if paid to you by
the end of January -- are taxed as if they had been paid to you in December.

Vanguard will send you a statement each year showing the tax status of all
your distributions. If you have chosen to receive dividend and/or capital gains
distributions in cash, and the postal or other delivery service is unable to
deliver checks to your address of record, we will change the distribution option
so that all dividends and other distributions are automatically invested in
additional shares. We will not pay interest on uncashed distribution checks.

- - The dividends and short-term capital gains that you receive are considered
ordinary income for tax purposes.

- - Any distributions of net long-term capital gains by the Fund are taxable to
you as long-term capital gains, no matter how long you've owned shares in the
Fund.

- - Although the Fund 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 its ordinary investment activities. Consequently, distributions may vary
considerably from year to year.

- - If you sell or exchange shares, any gain or loss you have is a taxable event.
This 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 Fund shares, may be subject to state and local
income taxes as well.

The tax information in this prospectus is provided as general information and
will not apply to you if you are investing through a tax-deferred account such
as an IRA or a qualified employee benefit plan. (Non-U.S. investors may be
subject to U.S. withholding and estate tax.) You should consult your tax adviser
about the tax consequences of an investment in the Fund.

IMPORTANT NOTE: By law, the Fund must withhold 31% of your taxable
distributions and any redemption proceeds if you do not provide your correct
taxpayer identification number, or certify that it is correct, or if the IRS
instructs the Fund to do so.

<PAGE> 13
11

SHARE PRICE

The Fund's share price, called its net asset value, or NAV, is calculated each
business day after the close of trading on the New York Stock Exchange (the NAV
is not calculated on holidays or other days the Exchange is closed). Net asset
value per share is computed by adding up the total value of the Fund's
investments and other assets, subtracting any of its liabilities (debts), and
then dividing by the number of Fund shares outstanding:

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

Knowing the daily net asset value is useful to you as a shareholder because
it indicates the current value of your investment. The Fund's NAV, multiplied by
the number of shares you own, gives you the dollar amount you would have
received had you sold all of your shares back to the Fund that day.

A NOTE ON PRICING: The Fund's investments will be priced at their market
value when market quotations are readily available. When these quotations are
not readily available, investments will be priced at their fair value,
calculated according to procedures adopted by the Fund's Board of Trustees.

The Fund's share price can be found daily in the mutual fund listings of most
major newspapers under the heading "Vanguard Funds." Different newspapers use
different abbreviations of the Fund's name, but the most common is WELLTN.
<PAGE> 14
12

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
HOW TO READ THE FINANCIAL HIGHLIGHTS TABLE

The Fund began fiscal 1998 with a net asset value (price) of $31.05 per share.
During the year, the Fund earned $1.13 per share from investment income
(interest and dividends) and $2.86 per share from investments that had
appreciated in value or that were sold for higher prices than the Fund paid for
them.

Shareholders received $2.75 per share in the form of dividend and capital
gains distributions. A portion of each year's distributions may come from the
prior year's income or capital gains.

The earnings ($3.99 per share) minus the distributions ($2.75 per share)
resulted in a share price of $32.29 at the end of the year. This was an increase
of $1.24 per share (from $31.05 at the beginning of the year to $32.29 at the
end of the year). For a shareholder who reinvested the distributions in the
purchase of more shares, the total return from the Fund was 13.84% for the year.

As of November 30, 1998, the Fund had $25.8 billion in net assets. For the
year, its expense ratio was 0.31% ($3.10 per $1,000 of net assets); and its net
investment income amounted to 3.68% of its average net assets. It sold and
replaced securities valued at 29% of its net assets.

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

FINANCIAL HIGHLIGHTS

The following financial highlights table is intended to help you understand the
Fund's financial performance for the past five years, and certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost each year on
an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been derived from the financial statements
audited by PricewaterhouseCoopers LLP, independent accountants, whose report --
along with the Fund's financial statements -- is included in the Fund's most
recent annual report to shareholders. You may have the annual report sent to you
without charge by contacting Vanguard.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
VANGUARD WELLINGTON FUND
YEAR ENDED NOVEMBER 30,
------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 31.05 $ 28.34 $ 24.57 $ 19.33 $ 20.78
- -------------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income 1.13 1.11 1.02 .96 .88
Net Realized and Unrealized Gain (Loss)
on Investments 2.86 3.77 4.00 5.19 (1.03)
------------------------------------------------------------------------------
Total from Investment Operations 3.99 4.88 5.02 6.15 (.15)
------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (1.18) (1.06) (.97) (.88) (.92)
Distributions from Realized Capital Gains (1.57) (1.11) (.28) (.03) (.38)
------------------------------------------------------------------------------
Total Distributions (2.75) (2.17) (1.25) (.91) (1.30)
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 32.29 $ 31.05 $ 28.34 $ 24.57 $ 19.33
==============================================================================================================================

TOTAL RETURN 13.84% 18.60% 21.26% 32.70% -0.82%
==============================================================================================================================

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $ 25,829 $ 21,340 $ 16,505 $ 12,333 $ 8,638
Ratio of Total Expenses to
Average Net Assets 0.31% 0.29% 0.31% 0.33% 0.35%
Ratio of Net Investment Income to
Average Net Assets 3.68% 3.97% 4.08% 4.37% 4.35%
Turnover Rate 29% 27% 30% 24% 32%
==============================================================================================================================
</TABLE>

From time to time, the Vanguard funds advertise yield and total return
figures. Yield is a measure of past dividend income. Total return includes both
past dividend income (assuming that it has been reinvested) plus realized and
unrealized capital appreciation (or depreciation). Neither yield nor total
return should be used to predict the future performance of a fund.

"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc.
<PAGE> 15
13

- --------------------------------------------------------------------------------
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. Booklets providing detailed information are available on the services
marked with a [BOOK]. Please call us to request copies.
- --------------------------------------------------------------------------------

SERVICES AND ACCOUNT FEATURES

Vanguard offers many services that make it convenient to buy, sell, or exchange
shares, or to obtain fund or account information.
- --------------------------------------------------------------------------------
TELEPHONE REDEMPTIONS (SALES AND EXCHANGES)

Automatically set up for this Fund unless you notify us otherwise.
- --------------------------------------------------------------------------------
VANGUARD DIRECT DEPOSIT SERVICE(TM)[BOOK]

Automatic method for depositing your paycheck or U.S. government payment
(including Social Security and government pension checks) into your account.
- --------------------------------------------------------------------------------
VANGUARD AUTOMATIC EXCHANGE SERVICE(TM)[BOOK]

Automatic method for moving a fixed amount of money from one Vanguard fund
account to another.
- --------------------------------------------------------------------------------
VANGUARD FUND EXPRESS(R)[BOOK]

Electronic method for buying or selling shares. You can transfer 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 EXPRESS(TM)[BOOK]

Electronic method for transferring dividend and/or capital gains distributions
directly from your Vanguard fund account to your bank, savings and loan, or
credit union account.
- --------------------------------------------------------------------------------
VANGUARD TELE-ACCOUNT(R) 1-800-662-6273 (ON-BOARD)[BOOK]

Toll-free 24-hour access to Vanguard fund and account information -- as well as
some transactions -- by using any touch-tone phone. Tele-Account provides total
return, share price, price change, and yield quotations for all Vanguard funds;
gives your account balances and history (e.g., last transaction, latest dividend
distribution); and allows you to sell or exchange fund shares.
- --------------------------------------------------------------------------------
ACCESS VANGUARD(TM) www.vanguard.com [COMPUTER]

You can use your personal computer to perform certain transactions for most
Vanguard funds by accessing our website. To establish this service, you must
register through the website. We will then send to you, by mail, an account
access password that allows you to process the following financial and
administrative transactions online:

- - Open a new account.*

- - Buy, sell, or exchange shares of most funds.

- - Change your name/address.

- - Add/change fund options (including dividend options, Vanguard Fund Express,
bank instructions, checkwriting, and Vanguard Automatic Exchange Service).

*Only current Vanguard shareholders can open a new account online, by exchanging
shares from other existing Vanguard accounts.
- --------------------------------------------------------------------------------
INVESTOR INFORMATION DEPARTMENT: 1-800-662-7447 (SHIP)
TEXT TELEPHONE: 1-800-952-3335

Call Vanguard for information on our funds, fund services, and retirement
accounts, and to request literature.
- --------------------------------------------------------------------------------
CLIENT SERVICES DEPARTMENT: 1-800-662-2739 (CREW) TEXT TELEPHONE: 1-800-662-2738

Call Vanguard for information on your account, account transactions, and account
statements.
- --------------------------------------------------------------------------------
SERVICES FOR CLIENTS OF VANGUARD'S INSTITUTIONAL DIVISION: 1-888-809-8102

Vanguard's Institutional Division offers a variety of specialized services for
large institutional investors, including the ability to effect account
transactions through private electronic networks and third-party recordkeepers.
- --------------------------------------------------------------------------------
<PAGE> 16
14

TYPES OF ACCOUNTS

Individuals and institutions can establish a variety of accounts with Vanguard.
- --------------------------------------------------------------------------------
FOR ONE OR MORE PEOPLE

Open an account in the name of one (individual) or more (joint tenants) people.
- --------------------------------------------------------------------------------
FOR HOLDING PERSONAL TRUST ASSETS [BOOK]

Invest assets held in an existing personal trust.
- --------------------------------------------------------------------------------
FOR INDIVIDUAL RETIREMENT ACCOUNTS [BOOK]

Open a traditional IRA account or a Roth IRA account. Eligibility and other
requirements are established by federal law and Vanguard custodial account
agreements. For more information, please call 1-800-662-7447 (SHIP).
- --------------------------------------------------------------------------------
FOR AN ORGANIZATION [BOOK]

Open an account as a corporation, partnership, endowment, foundation, or other
entity.
- --------------------------------------------------------------------------------
FOR THIRD-PARTY TRUSTEE RETIREMENT INVESTMENTS

Open an account as a retirement trust or plan based on an existing corporate or
institutional plan. These accounts are established by the trustee of the
existing plan.
- --------------------------------------------------------------------------------
VANGUARD PROTOTYPE PLANS

Open a variety of retirement accounts using Vanguard prototype plans for
individuals, sole proprietorships, and small businesses. For more information,
please call 1-800-662-2003.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
A NOTE ON INVESTING WITH VANGUARD THROUGH OTHER FIRMS

You may purchase or sell Fund shares through a financial intermediary such as a
bank, broker, or investment adviser. If you invest with Vanguard through an
intermediary, please read that firm's program materials carefully to learn of
any special rules that may apply. For example, special terms may apply to
additional service features, fees, or other policies. Consult your intermediary
to determine when your order will be priced.

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

BUYING SHARES

You buy your shares at the Fund's next-determined net asset value after Vanguard
receives your request. As long as your request is received before the close of
trading on the New York Stock Exchange, generally 4 p.m. Eastern time, you will
buy your shares at that day's net asset value.
- --------------------------------------------------------------------------------
MINIMUM INVESTMENT TO . . .
open a new account

$3,000 (regular account); $1,000 (traditional IRAs and Roth IRAs).

add to an existing account
$100 by mail or exchange; $1,000 by wire.
- --------------------------------------------------------------------------------
A NOTE ON LOW BALANCES

The Fund reserves the right to close any nonretirement account whose balance
falls below the minimum initial investment. The Fund will deduct a $10 annual
fee in June if your nonretirement account balance falls below $2,500. The fee is
waived if your total Vanguard account assets are $50,000 or more.
- --------------------------------------------------------------------------------
By Mail to . . .[ENVELOPE]

open a new account
Complete and sign the application form and enclose your check.

add to an existing account
Mail your check with an Invest-By-Mail form detached from your confirmation
statement to the address listed on the form.
<PAGE> 17
15

Make your check payable to: The Vanguard Group - 21
All purchases must be made in U.S. dollars, and checks must be drawn on U.S.
banks.

First-class mail to: Express or Registered mail to:
The Vanguard Group The Vanguard Group
P.O. Box 2600 455 Devon Park Drive
Valley Forge, PA 19482-2600 Wayne, PA 19087-1815

For clients of Vanguard's Institutional Division . . .

First-class mail to: Express or Registered mail to:
The Vanguard Group The Vanguard Group
P.O. Box 2900 455 Devon Park Drive
Valley Forge, PA 19482-2900 Wayne, PA 19087-1815

- --------------------------------------------------------------------------------
IMPORTANT NOTE: To prevent check fraud, Vanguard will not accept checks made
payable to third parties.
- --------------------------------------------------------------------------------
BY TELEPHONE TO . . . [Phone]

open a new account

add to an existing account

Call Vanguard Tele-Account* 24 hours a day -- or Client Services during business
hours -- to exchange from another Vanguard fund account with the same
registration (name, address, taxpayer identification number, and account type).
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.

Vanguard Tele-Account Client Services
1-800-662-6273 1-800-662-2739

*You must obtain a Personal Identification Number through Tele-Account at least
seven days before you request your first exchange.
- --------------------------------------------------------------------------------
IMPORTANT NOTE: Once you've requested a telephone transaction and a confirmation
number has been assigned, the transaction cannot be revoked. We reserve the
right to refuse any purchase request.
- --------------------------------------------------------------------------------
BY WIRE TO OPEN A NEW ACCOUNT OR ADD TO AN EXISTING ACCOUNT [WIRE]

Call Client Services to arrange your wire transaction. Wire transactions are not
available for retirement accounts, except for asset transfers and direct
rollovers.

Wire to:
FRB ABA 021001088
Marine Midland Bank, New York

For credit to:
Account: 000112046
Vanguard Incoming Wire Account

In favor of:
Vanguard Wellington Fund - 21
[Account number, or temporary number for a new account]
[Registered account owner/s]
[Registered address]
- --------------------------------------------------------------------------------
<PAGE> 18
16

BUYING SHARES (continued)

You can redeem (that is, sell or exchange) shares purchased by check or
Vanguard Fund Express at any time. However, while your redemption request will
be processed at the next-determined net asset value after it is received, your
redemption proceeds will not be available until payment for your purchase is
collected, which may take up to ten calendar days.

- --------------------------------------------------------------------------------
A NOTE ON LARGE PURCHASES

It is important that you call Vanguard before you invest a large dollar amount.
We must consider the interests of all Fund shareholders and so reserve the right
to refuse any purchase that will disrupt the Fund's operation or performance.
- --------------------------------------------------------------------------------

REDEEMING SHARES

This section describes how you can redeem -- that is, sell or exchange -- the
Fund's shares.

When Selling Shares:

- - Vanguard sends the redemption proceeds to you or a designated third party.*

- - You can sell all or part of your Fund shares at any time.

* May require a signature guarantee; see footnote on page 18.

When Exchanging Shares:

- - The redemption proceeds are used to purchase shares of a different Vanguard
fund.

- - You must meet the receiving fund's minimum investment requirements.

- - Vanguard reserves the right to revise or terminate the exchange privilege,
limit the amount of an exchange, or reject an exchange at any time, without
notice.

In both cases, your transaction will be based on the Fund's next-determined
share price, subject to any special rules discussed in this prospectus. For
exchanges, the purchase side of the transaction will be based on the receiving
fund's next-determined share price, again subject to any special rules discussed
in this prospectus.

- --------------------------------------------------------------------------------
NOTE: Once a redemption is processed and a confirmation number given, the
transaction CANNOT be canceled.
- --------------------------------------------------------------------------------

HOW TO REQUEST A REDEMPTION

You can request a redemption from your Fund account in any one of three ways:
online, by telephone, or by mail.

- --------------------------------------------------------------------------------
ONLINE REQUESTS [COMPUTER]

ACCESS VANGUARD at www.vanguard.com

You can use your personal computer to sell or exchange shares of most Vanguard
funds by accessing our website. To establish this service, you must register
through the website. We will then send you, by mail, an account access password
that will enable you to sell or exchange shares online (as well as perform other
transactions).

NOTE: The Vanguard funds whose shares you cannot exchange online or by
telephone are VANGUARD U.S. STOCK INDEX FUNDS, VANGUARD BALANCED INDEX FUND,
VANGUARD INTERNATIONAL STOCK INDEX FUNDS, VANGUARD REIT INDEX FUND, VANGUARD
TOTAL INTERNATIONAL STOCK INDEX FUND, and VANGUARD GROWTH AND INCOME FUND. These
funds do, however, permit online and telephone exchanges within IRAs and other
retirement accounts. If you sell shares of these funds online, you will receive
a redemption check at your address of record.
- --------------------------------------------------------------------------------
TELEPHONE REQUESTS [PHONE]

All Account Types Except Retirement:

Call Vanguard Tele-Account 24 hours a day -- or Client Services during business
hours -- to sell or exchange shares. You can exchange shares from this Fund to
open an account in another Vanguard fund or to add to an existing Vanguard fund
account with an identical registration.
<PAGE> 19
17

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

Vanguard Tele-Account Client Services
1-800-662-6273 1-800-662-2739
- --------------------------------------------------------------------------------
SPECIAL INFORMATION: We will automatically establish the telephone redemption
option for your account, unless you instruct us otherwise in writing. While
telephone redemption is easy and convenient, this account feature involves a
risk of loss from unauthorized or fraudulent transactions. Vanguard will take
reasonable precautions to protect your account from fraud. You should do the
same by keeping your account information private and immediately reviewing any
account statements that we send to you. Make sure to contact Vanguard
immediately about any transaction you believe to be unauthorized.
- --------------------------------------------------------------------------------
We reserve the right to refuse a telephone redemption if the caller is unable to
provide:

[CHECK MARK] The ten-digit account number.

[CHECK MARK] The name and address exactly as registered on the account.

[CHECK MARK] The primary Social Security or employer identification
number as registered on the account.

[CHECK MARK] The Personal Identification Number, if applicable.

Please note that Vanguard will not be responsible for any account losses due
to telephone fraud, so long as we have taken reasonable steps to verify the
caller's identity. If you wish to remove the telephone redemption feature from
your account, please notify us in writing.
- --------------------------------------------------------------------------------
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 U.S. 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 this section.

- --------------------------------------------------------------------------------
MAIL REQUESTS [ENVELOPE]

All Account Types Except Retirement:
Send a letter of instruction signed by all registered account holders. Include
the fund name and account number and (if you are selling) a dollar amount or
number of shares OR (if you are exchanging) the name of the fund you want to
exchange into and a dollar amount or number of shares. To exchange into an
account with a different registration (including a different name, address,
taxpayer identification number, or account type), you must provide Vanguard with
written instructions that include the guaranteed signatures of all current
owners of the fund from which you wish to redeem.

Vanguard Retirement Accounts:

For information on how to request distributions from:

- - Traditional IRAs and Roth IRAs -- call Client Services.

- - SEP - IRAs, SIMPLE IRAs, 403(b)(7) custodial accounts, and Profit-Sharing and
Money Purchase Pension (Keogh) Plans -- call Individual Retirement Plans at
1-800-662-2003.

Depending on your account registration type, additional documentation may be
required.

First-class mail to: Express or Registered mail to:
The Vanguard Group The Vanguard Group
P.O. Box 1120 455 Devon Park Drive
Valley Forge, PA 19482-1120 Wayne, PA 19087-1815
<PAGE> 20
18

REDEEMING SHARES (continued)

For clients of Vanguard's Institutional Division ...

First-class mail to: Express or Registered mail to:
The Vanguard Group The Vanguard Group
P.O. Box 2900 455 Devon Park Drive
Valley Forge, PA 19482-2900 Wayne, PA 19087-1815
- --------------------------------------------------------------------------------
A NOTE ON LARGE REDEMPTIONS

It is important that you call Vanguard before you redeem a large dollar amount.
We must consider the interests of all fund shareholders and so reserve the right
to delay delivery of your redemption proceeds -- up to seven days -- if the
amount will disrupt the Fund's operation or performance.

If you redeem more than $250,000 worth of Fund shares within any 90-day
period, the Fund reserves the right to pay part or all of the redemption
proceeds above $250,000 in kind, i.e., in securities, rather than in cash. If
payment is made in kind, you may incur brokerage commissions if you elect to
sell the securities for cash.
- --------------------------------------------------------------------------------

OPTIONS FOR REDEMPTION PROCEEDS

You may receive your redemption proceeds in one of two ways: check or exchange
to another Vanguard fund.
- --------------------------------------------------------------------------------
CHECK REDEMPTIONS

Normally, Vanguard will mail your check within two business days of a
redemption.
- --------------------------------------------------------------------------------
EXCHANGE REDEMPTIONS

As described above, an exchange involves using the proceeds of your redemption
to purchase shares of another Vanguard fund.
- --------------------------------------------------------------------------------

FOR OUR MUTUAL PROTECTION

For your best interests and ours, Vanguard applies these additional requirements
to redemptions:

REQUEST IN "GOOD ORDER"

All redemption requests must be received by Vanguard in "good order." This means
that your request must include:

[CHECK MARK] The Fund name and account number.

[CHECK MARK] The amount of the transaction (in dollars or shares).

[CHECK MARK] Signatures of all owners exactly as registered on the
account (for mail requests).

[CHECK MARK] Signature guarantees (if required).*

[CHECK MARK] Any supporting legal documentation that may be required.

[CHECK MARK] Any outstanding certificates representing shares to be redeemed.

*For instance, a signature guarantee must be provided by all registered account
shareholders when redemption proceeds are to be sent to a different person or
address. A signature guarantee can be obtained from most banks, credit unions,
and licensed brokers.

TRANSACTIONS ARE PROCESSED AT THE NEXT-DETERMINED SHARE PRICE AFTER VANGUARD HAS
RECEIVED ALL REQUIRED INFORMATION.
- --------------------------------------------------------------------------------
LIMITS ON ACCOUNT ACTIVITY

Because excessive account transactions can disrupt management of the Fund and
increase the Fund's costs for all shareholders, Vanguard limits account activity
as follows:

- - You may make no more than TWO SUBSTANTIVE "ROUND TRIPS" THROUGH THE FUND
during any 12-month period.

- - Your round trips through the Fund must be at least 30 days apart.

- - The Fund may refuse a share purchase at any time, for any reason.

- - Vanguard may revoke an investor's telephone exchange privilege at any time,
for any reason.

A "round trip" is a redemption from the Fund followed by a purchase back into
the Fund. Also, "round trip" covers transactions accomplished by any combination
of methods, including transactions conducted by check, wire, or exchange to/from
another Vanguard fund. "Substantive" means a dollar amount that Vanguard
determines, in its sole discretion, could adversely affect the management of the
Fund.

<PAGE> 21
19

- --------------------------------------------------------------------------------
RETURN YOUR SHARE CERTIFICATES

Any portion of your account represented by share certificates cannot be redeemed
until you return the certificates to Vanguard. Certificates must be returned
(unsigned), along with a letter requesting the sale or exchange you wish to
process, via certified mail to:

The Vanguard Group
455 Devon Park Drive
Wayne, PA 19087-1815
- --------------------------------------------------------------------------------
ALL TRADES FINAL

Vanguard will not cancel any transaction request (including any purchase or
redemption) that we believe to be authentic once the request has been received
and a confirmation number assigned.
- --------------------------------------------------------------------------------

TRANSFERRING REGISTRATION

You can transfer the registration of your Fund shares to another owner by
completing a transfer form and sending it to Vanguard.

First-class mail to: Express or Registered mail to:
The Vanguard Group The Vanguard Group
P.O. Box 2600 455 Devon Park Drive
Valley Forge, PA 19482-2600 Wayne, PA 19087-1815

For clients of Vanguard's Institutional Division . . .

FUND AND ACCOUNT UPDATES

STATEMENTS AND REPORTS

We will send you account and tax statements to help you keep track of your Fund
account throughout the year as well as when you are preparing your income tax
returns.

In addition, you will receive financial reports about the Fund twice a year.
These comprehensive reports include an assessment of the Fund's performance (and
a comparison to its industry benchmark), an overview of the markets, a report
from the advisers, and the Fund's financial statements which include a listing
of the Fund's holdings.

To keep the Fund's costs as low as possible (so that you and other
shareholders can keep more of the Fund's investment earnings), Vanguard attempts
to eliminate duplicate mailings to the same address. When we find that two or
more Fund shareholders have the same last name and address, we send just one
Fund report to that address -- instead of mailing separate reports to each
shareholder. If you want us to send separate reports, however, you may notify
our Investor Information Department at 1-800-662-7447.
- --------------------------------------------------------------------------------
CONFIRMATION STATEMENT

Sent each time you buy, sell, or exchange shares; confirms the trade date and
the amount of your transaction.
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY [BOOK GRAPHIC]

Mailed quarterly for most accounts; shows the market value of your account at
the close of the statement period, as well as distributions, purchases, sales,
and exchanges for the current calendar year.
- --------------------------------------------------------------------------------
<PAGE> 22
20

FUND AND ACCOUNT UPDATES (continued)

- --------------------------------------------------------------------------------
FUND FINANCIAL REPORTS

Mailed in January and July for this Fund.
- --------------------------------------------------------------------------------
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 REVIEW STATEMENT [BOOK GRAPHIC]

Issued quarterly for most taxable accounts (accompanies your Portfolio Summary);
shows the average cost of shares that you redeemed during the calendar year,
using the average cost single category method.
- --------------------------------------------------------------------------------

<PAGE> 23
21

GLOSSARY OF INVESTMENT TERMS

BALANCED FUND

A mutual fund that seeks to provide some combination of income, capital growth,
and conservation of capital by investing in stocks, bonds, and/or money market
instruments.

BOND

A debt security (IOU) issued by a corporation, government, or government agency
in exchange for the money you lend it. In most instances, the issuer agrees to
pay back the loan by a specific date and to make regular interest payments until
that date.

CAPITAL GAINS DISTRIBUTION

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

CASH RESERVES

Cash deposits, short-term bank deposits, and money market instruments, which
include U.S. Treasury bills, bank certificates of deposit (CDs), repurchase
agreements, commercial paper, and banker's acceptances.

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.

CREDIT QUALITY

A measure of a bond issuer's ability to pay interest and principal in a timely
manner.

DIVIDEND INCOME

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

EXPENSE RATIO

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

FACE VALUE

The amount to be paid at maturity of a bond; the par value or principal.

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.

FUND DIVERSIFICATION

Holding a variety of securities so that a fund's return is not badly hurt by the
poor performance of a single security, industry, or country.

GROWTH STOCK FUND

A mutual fund that emphasizes stocks of companies believed to have above-average
prospects for growth. Reflecting market expectations for superior growth, the
prices of growth stocks often are relatively high in comparison to revenue,
earnings, book value, and dividends.

INVESTMENT GRADE

A bond whose credit quality by independent bond-rating agencies is considered to
be sufficient to ensure timely payment of principal and interest under current
economic circumstances.

MATURITY

The date when a bond issuer agrees to repay the bond's principal, or face value,
to the bond's buyer.

PRINCIPAL

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

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 emphasizes stocks of companies whose growth prospects are
generally regarded as subpar by the market. Reflecting these market
expectations, the prices of value stocks typically are below-average in
comparison with such factors as revenue, 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

Income (interest or dividends) earned by an investment, expressed as a
percentage of the investment's price.
<PAGE> 24
[SHIP GRAPHIC]
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, PA 19482-2600

FOR MORE INFORMATION

If you'd like more information about Vanguard Wellington Fund, the following
documents are available free upon request:

ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS

Additional information about the Fund's investments is available in the Fund's
annual and semiannual reports to shareholders. In these reports, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during the most recent fiscal year.

STATEMENT OF ADDITIONAL INFORMATION (SAI)

The SAI provides more detailed information about the Fund.

The current annual and semiannual reports and the SAI are incorporated by
reference into (and are thus legally a part of) this prospectus.

To receive a free copy of the latest annual or semiannual report or the SAI, or
to request additional information about the Fund or other Vanguard funds, please
contact us as follows:

THE VANGUARD GROUP
INVESTOR INFORMATION DEPARTMENT
P.O. BOX 2600
VALLEY FORGE, PA 19482-2600

TELEPHONE:
1-800-662-7447 (SHIP)

TEXT TELEPHONE:
1-800-952-3335

WORLD WIDE WEB:
www.vanguard.com

If you are a current Fund shareholder and would like information about your
account, account transactions, and/or account statements, please call:

CLIENT SERVICES DEPARTMENT
TELEPHONE:
1-800-662-2739 (CREW)

TEXT TELEPHONE:
1-800-662-2738

INFORMATION PROVIDED BY THE SECURITIES AND EXCHANGE COMMISSION (SEC)

You can review and copy information about the Fund (including the SAI) at the
SEC's Public Reference Room in Washington, D.C. To find out more about this
public service, call the SEC at 1-800-SEC-0330. Reports and other information
about the Fund are also available on the SEC's website (www.sec.gov), or you can
receive copies of this information, for a fee, by writing the Public Reference
Section, Securities and Exchange Commission, Washington, DC 20549-6009.

Fund's Investment Company Act file number: 811-121

P021N - 03/19/1999

<PAGE> 25
VANGUARD WELLINGTON FUND
Participant Prospectus
March 19, 1999

A Balanced Mutual Fund

CONTENTS

1 FUND PROFILE

3 ADDITIONAL INFORMATION

3 A WORD ABOUT RISK

3 WHO SHOULD INVEST

4 PRIMARY INVESTMENT STRATEGIES

8 THE FUND AND VANGUARD

8 INVESTMENT ADVISER

9 YEAR 2000 CHALLENGE

10 DIVIDENDS, CAPITAL GAINS, AND TAXES

10 SHARE PRICE

11 FINANCIAL HIGHLIGHTS

12 INVESTING WITH VANGUARD

12 ACCESSING FUND INFORMATION BY COMPUTER

GLOSSARY (inside back cover)

WHY READING THIS PROSPECTUS IS IMPORTANT

IMPORTANT NOTE

This prospectus is intended for participants in employer-sponsored retirement or
savings plans. Another version--for investors who would like to open a personal
investment account--can be obtained by calling Vanguard at 1-800-662-7447.

FUND PROFILE

The following profile summarizes key features of Vanguard Wellington Fund.

INVESTMENT OBJECTIVE

The Fund is a balanced fund that seeks to conserve capital and to provide
moderate long-term growth in capital and income.

INVESTMENT STRATEGIES

PRIMARY RISKS

THE FUND'S TOTAL RETURN, LIKE THE PRICES OF STOCKS AND BONDS, WILL FLUCTUATE
WITHIN A WIDE RANGE, SO AN INVESTOR COULD LOSE MONEY OVER SHORT OR EVEN LONG
PERIODS. The Fund is also subject to:

- - Investment style risk, which is the chance that returns from large- and
mid-capitalization value stocks will trail returns from other asset classes
or the overall stock market. Each type of stock tends to go through cycles
of doing better--or worse--than the stock market in general. These periods
have, in the past, lasted for as long as several years.

- - Interest rate risk, which is the chance that bond prices overall will
decline over short or even long periods due to rising interest rates.
Interest rate risk should be modest for shorter-term bonds and high for
longer-term bonds.

- - Credit risk, which is the chance that a bond issuer will fail to pay
interest and principal in a timely manner, reducing the Fund's return.
Credit risk should be low for the Fund.

- - Manager risk, which is the chance that poor security selection will cause
the Fund to underperform other funds with similar investment objectives.

PERFORMANCE/RISK INFORMATION

- --------------------------------------------------------------------------------
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------

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

<PAGE> 27
2

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR YEARS ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Vanguard Wellington Fund 12.06% 16.24% 14.28%

Composite Index* 22.65 18.69 16.35

S&P 500 Index 28.58 24.06 19.21
- --------------------------------------------------------------------------------
</TABLE>

*Weighted 65% in the S&P 500 Index, 35% in the Lehman Brothers Long Corporate AA
or Better Bond Index.
- --------------------------------------------------------------------------------

PLAIN TALK ABOUT
THE COSTS OF INVESTING

PLAIN TALK ABOUT
FUND EXPENSES

FEES AND EXPENSES

SHAREHOLDER FEES (fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases: None
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fees: None
Exchange Fees: None

ANNUAL FUND OPERATING EXPENSES (expenses deducted from the Fund's assets)
Management Expenses: 0.28%
12b-1 Distribution Fees: None
Other Expenses: 0.03%
TOTAL ANNUAL FUND OPERATING EXPENSES: 0.31%

The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. It illustrates the
hypothetical expenses that you would incur over various periods if you invest
$10,000 in the Fund. This example assumes that the Fund provides a return of 5%
a year, and that operating expenses remain the same. The results apply whether
or not you redeem your investment at the end of each period.

- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$32 $100 $174 $393
- --------------------------------------------------------------------------------

THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE. ACTUAL FUTURE EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.
<PAGE> 28
3

ADDITIONAL INFORMATION

DIVIDENDS AND CAPITAL GAINS
Dividends are distributed in March, June, September, and December; capital
gains, if any, are distributed in December

INVESTMENT ADVISER
Wellington Management Company, LLP, Boston, Mass., since inception

INCEPTION DATE
July 1, 1929

NET ASSETS AS OF NOVEMBER 30, 1998
$25.8 billion

NEWSPAPER ABBREVIATION
Welltn

VANGUARD FUND NUMBER
021

CUSIP NUMBER
921935102

TICKER SYMBOL
VWELX

A WORD ABOUT RISK

Look for this [FLAG] symbol throughout the prospectus. It is used to mark
detailed information about each type of risk that you would confront as a
shareholder of the Fund.

WHO SHOULD INVEST

The Fund may be a suitable investment for you if:

- - You want a simple way to invest in a relatively fixed percentage of stocks
and bonds.

- - You are seeking moderate growth of your capital over the long term--at least
five years--but you want to hold down risk by investing in established
companies and high-quality bonds.

- - You are seeking moderate current income.

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 Fund discourages short-term trading by, among other things,
limiting the number of exchanges it permits.

The Vanguard funds do not permit market-timing. Do not invest in this Fund if
you are a market-timer.
<PAGE> 29
4

PLAIN TALK ABOUT
BALANCED FUNDS

The Fund has adopted the following policies, among others, to discourage
short-term trading:

- - The Fund 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 Fund. 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 and out of the
Fund (see "Exchanges" in the INVESTING WITH VANGUARD section).

- - The Fund reserves the right to stop offering shares at any time.

PRIMARY INVESTMENT STRATEGIES

This section explains the strategies that the investment adviser uses in pursuit
of the Fund's objective of conservation of capital and moderate long-term growth
of capital and income. It also explains how the adviser implements these
strategies. In addition, this section discusses several important risks--market
risk, interest rate risk, manager risk, investment style risk, and credit
risk--faced by investors in the Fund. The Board of Trustees oversees the
management of the Fund and may change the investment strategies in the interest
of shareholders.

MARKET EXPOSURE
STOCKS

Roughly two-thirds of the Fund's assets are invested in common stocks. At times,
the Fund may also invest in securities that are convertible to common stocks.

[FLAG]THE FUND IS SUBJECT TO STOCK MARKET RISK, WHICH IS THE POSSIBILITY THAT
STOCK PRICES OVERALL WILL DECLINE OVER SHORT OR EVEN LONG PERIODS. STOCK
MARKETS TEND TO MOVE IN CYCLES, WITH PERIODS OF RISING PRICES AND PERIODS
OF FALLING PRICES.

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.
Generally, Vanguard defines large-capitalization (large-cap) funds as those
holding stocks of companies whose outstanding shares have a market value
exceeding $10 billion. Mid-cap funds hold stocks of companies with a market
value between $1 billion and $10 billion. Small-cap funds typically hold stocks
of companies with a market value of less than $1 billion.

<PAGE> 30
5

- --------------------------------------------------------------------------------
U.S. STOCK MARKET RETURNS (1926-1998)
- --------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS 20 YEARS
- --------------------------------------------------------------------------------
Best 54.2% 24.1% 19.9% 17.7%

Worst -43.1 -12.4 -0.8 3.1

Average 13.1 10.7 11.0 11.0
- --------------------------------------------------------------------------------

Finally, because Vanguard Wellington Fund's holdings are not identical to the
S&P 500 Index or any other market index, the performance of the Fund will not
mirror the returns of any particular index.

BONDS

Approximately one-third of the Fund's assets are invested in bonds.

[FLAG]THE FUND IS SUBJECT TO INTEREST RATE RISK, WHICH IS THE POSSIBILITY THAT
BOND PRICES OVERALL WILL DECLINE OVER SHORT OR EVEN LONG PERIODS DUE TO
RISING INTEREST RATES. INTEREST RATE RISK SHOULD BE MODEST FOR
SHORTER-TERM BONDS AND HIGHER FOR LONGER-TERM BONDS.

- --------------------------------------------------------------------------------
HOW INTEREST RATE CHANGES AFFECT BOND PRICES*
- --------------------------------------------------------------------------------
VALUE OF A $1,000 BOND VALUE OF A $1,000 BOND
AFTER A 2% INCREASE AFTER A 2% DECREASE
TYPE OF BONDS (MATURITY) IN INTEREST RATES IN INTEREST RATES
- --------------------------------------------------------------------------------
Short-Term (2.5 years) $956 $1,046

Intermediate-Term (10 years) 870 1,156

Long-Term (20 years) 816 1,251
- --------------------------------------------------------------------------------
*Assuming a 7% yield.
- --------------------------------------------------------------------------------

These figures are for illustrative purposes only and should not be regarded
as an indication of future returns from the bond market as a whole or the Fund
in particular.

Finally, because stock and bond prices often move in different directions,
the Fund's bond holdings help to dampen--but not eliminate--some of the stock
market volatility experienced by the Fund. Likewise, changes in interest rates
may not have as dramatic an effect on the Fund as they would on a fund made up
entirely of bonds.

PLAIN TALK ABOUT
BONDS AND INTEREST RATES

PLAIN TALK ABOUT
BOND MATURITIES

A bond is issued with a specific maturity date--the date when the bond issuer,
or seller, must pay back the bond's initial value (known as its "face value").
Bond maturities generally range from less than one year (short-term) to 30 years
(long-term). The longer a bond's maturity, the more risk you, as a bond
investor, face as interest rates rise--but also the more interest you could
receive. Long-term bonds are more suitable for investors willing to take greater
risks of price fluctuations to get higher interest income; short-term bond
investors should be willing to accept lower yields in return for less
fluctuation in the value of their investment.
<PAGE> 31
6

PLAIN TALK ABOUT
CREDIT QUALITY

SECURITY SELECTION

The Fund is generally managed without regard to tax ramifications.

[FLAG] THE FUND IS SUBJECT TO MANAGER RISK, WHICH IS THE POSSIBILITY THAT WMC
MAY DO A POOR JOB OF SELECTING STOCKS AND BONDS.

STOCKS

PLAIN TALK ABOUT
TYPES OF BONDS

[FLAG] THE FUND IS SUBJECT TO INVESTMENT STYLE RISK, WHICH IS THE POSSIBILITY
THAT RETURNS FROM LARGE- AND MID-CAPITALIZATION VALUE STOCKS WILL TRAIL
RETURNS FROM OTHER ASSET CLASSES OR THE OVERALL STOCK MARKET. AS A
GROUP, VALUE STOCKS TEND TO GO THROUGH CYCLES OF DOING BETTER--OR
WORSE--THAN COMMON STOCKS IN GENERAL. THESE PERIODS HAVE, IN THE PAST,
LASTED FOR AS LONG AS SEVERAL YEARS.

As of November 30, 1998, the fund had invested 14.45% of net assets in its
top ten stock holdings.

BONDS

WMC selects high-quality bonds that it believes will generate a high and
sustainable level of income. These bonds may include intermediate- and long-term
corporate bonds, U.S. Treasury, government agency, and mortgage-backed and
asset-backed bonds. The average maturity of the bond
<PAGE> 32
7

holdings exceeds 15 years. To generate a relatively stable stream of interest
income, the adviser does not generally make large adjustments in the average
maturity of the Fund's bond holdings in anticipation of changes in interest
rates.

A breakdown of the Fund's bond holdings (which amounted to 35% of the Fund's
net assets) as of November 30, 1998, follows:

PERCENTAGE OF
TYPE OF BOND FUND'S BOND HOLDINGS
- --------------------------------------------------------------------------------
Corporate 67.2%
U.S. Treasury and government agency 20.7
Foreign issuers 11.3
Other 0.8
- --------------------------------------------------------------------------------

[FLAG] THE FUND IS SUBJECT, TO A LIMITED EXTENT, TO CREDIT RISK, WHICH IS THE
POSSIBILITY THAT A BOND ISSUER WILL FAIL TO REPAY INTEREST AND PRINCIPAL
IN A TIMELY MANNER.

WMC purchases bonds that are primarily investment-grade quality--that is,
bonds that are rated at least Baa by Moody's Investors Service, Inc., or BBB by
Standard & Poor's Corporation. The average dollar-weighted quality of bonds held
by the Fund, as of November 30, 1998, was Aa3, according to Moody's.

Timely payment of principal and interest on U.S. Treasury bonds is always
guaranteed by the full faith and credit of the U.S. government; many (but not
all) agency bonds have the same guarantee. However, these guarantees do not
protect against fluctuations in the bonds' prices. In other words, while
Treasury and agency bonds enjoy the highest credit ratings, their prices--like
the prices of other bonds--will fluctuate with changes in interest rates.

TURNOVER RATE

OTHER INVESTMENT POLICIES AND RISKS

Besides investing in stocks of large- and medium-size companies and high-quality
intermediate- and long-term bonds, the Fund may follow a number of other
investment policies to achieve its objective.

Although the Fund typically does not make significant investments in the
securities of companies based outside the United States, it reserves the right
to invest up to 20% of its assets in foreign stocks traded in U.S. or foreign
markets. To the extent that it owns foreign stocks, the Fund is subject to (1)
country risk, which is the possibility that political events (such as a war),
financial problems (such as government default), or natural disasters (such as
an earthquake) will weaken a country's economy and cause investments in that
country to lose money; and (2) currency risk, which is the possibility that
Americans investing abroad could lose money because of a rise in the value of
the U.S. dollar versus foreign currencies. The Fund will also invest to a
limited extent in U.S. dollar-denominated foreign bonds which are also subject
to country risk.

PLAIN TALK ABOUT
TURNOVER RATE

<PAGE> 33
8

PLAIN TALK ABOUT
DERIVATIVES

Losses (or gains) involving futures 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 fund. This Fund will not use
futures for speculative purposes or as leveraged investments that magnify the
gains or losses of an investment. The value of all futures and options contracts
in which the Fund acquires an interest cannot exceed 20% of total assets.

The reasons for which the Fund invests in futures and options are:

- - To keep cash on hand to meet shareholder redemptions or other needs while
simulating full investment in stocks and bonds.

- - To reduce the Fund's transaction costs or add value when these instruments
are favorably priced.

The Fund may, from time to time, take temporary defensive measures--such as
holding cash reserves without limit--that are inconsistent with the Fund's
primary investment strategies, in response to adverse market, economic,
political, or other conditions. In taking such measures, the Fund may not
achieve its investment objective.

THE FUND AND VANGUARD

INVESTMENT ADVISER

WMC's advisory fee is paid quarterly. This fee is based on certain annual
percentage rates applied to the Fund's average month-end assets for each
quarter.

PLAIN TALK ABOUT
VANGUARD'S UNIQUE CORPORATE STRUCTURE

<PAGE> 34
9

In the interest of obtaining better execution of a transaction, WMC
may choose brokers who charge higher commissions. If more than one broker can
obtain the best available price and favorable execution of a transaction, then
WMC is authorized to choose a broker who, in addition to executing the
transaction, will provide research services to WMC or the Fund. Also, the Fund
may direct WMC to use a particular broker for certain transactions in exchange
for commission rebates or research services provided to the Fund.

PLAIN TALK ABOUT
THE FUND'S ADVISER

YEAR 2000 CHALLENGE

PLAIN TALK ABOUT
DISTRIBUTIONS

DIVIDENDS, CAPITAL GAINS, AND TAXES

Dividend and capital gains distributions of Fund shares that are held as an
investment option in an employer-sponsored retirement or savings plan will be
reinvested in additional Fund shares and accumulate on a tax-deferred basis. You
will not owe taxes on these distributions until you begin withdrawals. You
should consult your plan administrator, your plan's Summary Plan Description, or
your own tax adviser about the tax consequences of an investment in the Fund and
of any plan withdrawals.

SHARE PRICE

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

FINANCIAL HIGHLIGHTS

The following financial highlights table is intended to help you understand the
Fund's financial performance for the past five years, and certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost each year on
an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been derived from the financial statements
audited by PricewaterhouseCoopers LLP, independent accountants, whose
report--along with the Fund's financial statements--is included in the Fund's
most recent annual report to shareholders. You may have the annual report sent
to you without charge by contacting Vanguard.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
VANGUARD WELLINGTON FUND
YEAR ENDED NOVEMBER 30,
---------------------------------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 31.05 $ 28.34 $ 24.57 $ 19.33 $ 20.78
- --------------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income 1.13 1.11 1.02 .96 .88
Net Realized and Unrealized Gain (Loss)
on Investments 2.86 3.77 4.00 5.19 (1.03)
---------------------------------------------------------------------------
Total from Investment Operations 3.99 4.88 5.02 6.15 (.15)
---------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (1.18) (1.06) (.97) (.88) (.92)
Distributions from Realized Capital Gains (1.57) (1.11) (.28) (.03) (.38)
---------------------------------------------------------------------------
Total Distributions (2.75) (2.17) (1.25) (.91) (1.30)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $ 32.29 $ 31.05 $ 28.34 $ 24.57 $ 19.33
==========================================================================================================================

TOTAL RETURN 13.84% 18.60% 21.26% 32.70% -0.82%
==========================================================================================================================

"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc.

PLAIN TALK ABOUT
HOW TO READ THE FINANCIAL HIGHLIGHTS TABLE

Shareholders received $2.75 per share in the form of dividend and capital
gains distributions. A portion of each year's distributions may come from the
prior year's income or capital gains.

<PAGE> 37
12

INVESTING WITH VANGUARD

The Fund is an investment option in your retirement or savings plan. Your plan
administrator or your employee benefits office can provide you with detailed
information on how to participate in your plan and how to elect the Fund as an
investment option.

- - If you have any questions about the Fund or Vanguard, including the Fund's
investment objective, strategies, or risks, contact Vanguard's Participant
Services Center, toll-free, at 1-800-523-1188.

- - If you have questions about your account, contact your plan administrator or
the organization that provides recordkeeping services for your plan.

INVESTMENT OPTIONS AND ALLOCATIONS

Your plan's specific provisions may allow you to change your investment
selections, the amount of your contributions, or how your contributions are
allocated among the investment choices available to you. Contact your plan
administrator or employee benefits office for more details.

TRANSACTIONS

Contributions, exchanges, or redemptions of the Fund's shares are processed as
soon as they have been received by Vanguard in good order. Good order means that
your request includes complete information on your contribution, exchange, or
redemption, and that Vanguard has received the appropriate assets.

EXCHANGES

The exchange privilege (your ability to redeem shares from one fund to purchase
shares of another fund) may be available to you through your plan. Although we
make every effort to maintain the exchange privilege, Vanguard reserves the
right to revise or terminate this 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 Fund and increase its transaction
costs, Vanguard limits participant exchange activity to no more than FOUR
SUBSTANTIVE "ROUND TRIPS" THROUGH THE FUND (at least 90 days apart) during any
12-month period. A "round trip" is a redemption from the Fund followed by a
purchase back into the Fund. "Substantive" means a dollar amount that Vanguard
determines, in its sole discretion, could adversely affect the management of the
Fund.

Before making an exchange to or from another fund available in your plan,
consider the following:

- - Certain investment options, particularly funds made up of company stock or
investment contracts, may be subject to unique restrictions.

- - Make sure to read that fund's prospectus. Contact Participant Services,
toll-free, at 1-800-523-1188 for a copy.

- - Vanguard can accept exchanges only as permitted by your plan. Contact your
plan administrator for details on the exchange policies that apply to your
plan.

ACCESSING FUND INFORMATION BY COMPUTER

- --------------------------------------------------------------------------------
VANGUARD ON THE WORLD WIDE WEB www.vanguard.com
Use your personal computer to visit Vanguard's education-oriented website, which
provides timely news and information about Vanguard funds and services; an
online "university" that offers a variety of mutual fund classes; and
easy-to-use, interactive tools to help you create your own investment and
retirement strategies.
- --------------------------------------------------------------------------------
<PAGE> 38

GLOSSARY OF INVESTMENT TERMS

BALANCED FUND
A mutual fund that seeks to provide some combination of income, capital growth,
and conservation of capital by investing in stocks, bonds, and/or money market
instruments.

BOND
A debt security (IOU) issued by a corporation, government, or government agency
in exchange for the money you lend it. In most instances, the issuer agrees to
pay back the loan by a specific date and to make regular interest payments until
that date.

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

CASH RESERVES
Cash deposits, short-term bank deposits, and money market instruments, which
include U.S. Treasury bills, bank certificates of deposit (CDs), repurchase
agreements, commercial paper, and banker's acceptances.

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.

CREDIT QUALITY

A measure of a bond issuer's ability to pay interest and principal in a timely
manner.

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

EXPENSE RATIO
The percentage of a fund's average net assets used to pay its expenses. The
expense ratio includes management fees, administrative fees, and any 12b-1
distribution fees.

FACE VALUE
The amount to be paid at maturity of a bond; the par value or principal.

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.

FUND DIVERSIFICATION
Holding a variety of securities so that a fund's return is not badly hurt by the
poor performance of a single security, industry, or country.

GROWTH STOCK FUND
A mutual fund that emphasizes stocks of companies believed to have above-average
prospects for growth. Reflecting market expectations for superior growth, the
prices of growth stocks often are relatively high in comparison to revenue,
earnings, book value, and dividends.

INVESTMENT GRADE
A bond whose credit quality by independent bond-rating agencies is considered to
be sufficient to ensure timely payment of principal and interest under current
economic circumstances.

MATURITY
The date when a bond issuer agrees to repay the bond's principal, or face value,
to the bond's buyer.

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

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 emphasizes stocks of companies whose growth prospects are
generally regarded as subpar by the market. Reflecting these market
expectations, the prices of value stocks typically are below-average in
comparison with such factors as revenue, 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
Income (interest or dividends) earned by an investment, expressed as a
percentage of the investment's price.

<PAGE> 39

[SHIP GRAPHIC]

[THE VANGUARD GROUP LOGO]

Institutional Division
Post Office Box 2900
Valley Forge, PA 19482-2900

FOR MORE INFORMATION
If you'd like more information about Vanguard Wellington Fund, the following
documents are available free upon request:

ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS
Additional information about the Fund's investments is available in the Fund's
annual and semiannual reports to shareholders. In these reports, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during the most recent fiscal year.

STATEMENT OF ADDITIONAL INFORMATION (SAI)
The SAI provides more detailed information about the Fund.

The current annual and semiannual reports and the SAI are incorporated by
reference into (and are thus legally a part of) this prospectus.

To receive a free copy of the latest annual or semiannual report or the SAI, or
to request additional information about the Fund or other Vanguard funds, please
contact us as follows:

THE VANGUARD GROUP
PARTICIPANT SERVICES CENTER
P.O. BOX 2900
VALLEY FORGE, PA 19482-2900

TELEPHONE:
1-800-523-1188

TEXT TELEPHONE:
1-800-523-8004

WORLD WIDE WEB:
www.vanguard.com

INFORMATION PROVIDED BY THE SECURITIES AND EXCHANGE COMMISSION (SEC)

Fund's Investment Company Act
file number: 811-121

Vanguard Marketing Corporation, Distributor.

I021N-03/19/1999
<PAGE> 40

PART B

VANGUARD WELLINGTON FUND (THE "TRUST")

STATEMENT OF ADDITIONAL INFORMATION

MARCH 19, 1999

This Statement is not a prospectus but should be read in conjunction with
the Trust's current Prospectus (dated March 19, 1999). To obtain the Prospectus
or an additional Annual Report to Shareholders which contains the Fund's
Financial Statements as hereby incorporated by reference, please call the
Investor Information Department:

1-800-662-7447 (SHIP)

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Description of the Trust.................................... B-1
Investment Policies......................................... B-2
Yield and Total Return...................................... B-8
Purchase of Shares.......................................... B-9
Redemption of Shares........................................ B-9
Share Price................................................. B-9
Fundamental Investment Limitations.......................... B-10
Management of the Trust..................................... B-12
Investment Advisory Services................................ B-15
Portfolio Transactions...................................... B-17
Financial Statements........................................ B-17
Performance Measures........................................ B-17
</TABLE>

DESCRIPTION OF THE TRUST

ORGANIZATION

The Trust was organized as a Delaware Corporation in 1928, before becoming
a Maryland corporation in 1973, and then reorganized as a Delaware business
trust in May, 1998. Prior to its reorganization as a Delaware business trust,
the Trust was known as Vanguard/Wellington Fund, Inc. The Trust is registered
with the United States Securities and Exchange Commission under the Investment
Company Act of 1940 (the "1940 Act") as an open-end, diversified management
investment company. It currently offers the following fund and class of shares:
Vanguard Wellington Fund (the "Fund").

The Trust has the ability to offer additional funds or classes of shares.
There is no limit on the number of full and fractional shares that the Trust may
issue for a single fund or class of shares.

SERVICE PROVIDERS

CUSTODIAN. The Chase Manhattan Bank, N.A., 4 Chase MetroTech Center,
Brooklyn, New York 11245, serves as the Fund's custodian. The custodian is
responsible for maintaining the Fund's assets and keeping all necessary accounts
and records.

INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, 30 South 17th Street,
Philadelphia, Pennsylvania 19103, serves as the Fund's independent accountants.
The accountants audit the Fund's financial statements and provide other related
services.

TRANSFER AND DIVIDEND-PAYING AGENT. The Fund's transfer agent and
dividend-paying agent is The Vanguard Group, Inc., 100 Vanguard Boulevard,
Malvern, Pennsylvania 19355.

CHARACTERISTICS OF THE TRUST'S SHARES

RESTRICTIONS ON HOLDING OR DISPOSING OF SHARES. There are no restrictions
on the right of shareholders to retain or dispose of the Trust's shares, other
than the possible future termination of the Trust or any of its funds.

B-1
<PAGE> 41

The Trust or any of its funds may be terminated by reorganization into another
mutual fund or by liquidation and distribution of the assets of the affected
fund. Unless terminated by reorganization or liquidation, the Trust and its
fund(s) will continue indefinitely.

SHAREHOLDER LIABILITY. The Trust is organized under Delaware law, which
provides that shareholders of a business trust are entitled to the same
limitations of personal liability as shareholders of a corporation organized
under Delaware law. Effectively, this means that a shareholder of the Trust will
not be personally liable for payment of the Trust's debts except by reason of
his or her own conduct or acts. In addition, a shareholder could incur a
financial loss on account of a Trust obligation only if the Trust itself had no
remaining assets with which to meet such obligation. We believe that the
possibility of such a situation arising is extremely remote.

DIVIDEND RIGHTS. The shareholders of a fund are entitled to receive any
dividends or other distributions declared for such fund. No shares have priority
or preference over any other shares of the same fund with respect to
distributions. Distributions will be made from the assets of a fund, and will be
paid ratably to all shareholders of the fund (or class) according to the number
of shares of such fund (or class) held by shareholders on the record date. The
amount of income dividends per share may vary between separate share classes of
the same fund based upon differences in the way that expenses are allocated
between share classes pursuant to a multiple class plan.

VOTING RIGHTS. Shareholders are entitled to vote on a matter if: (i) a
shareholder vote is required under the 1940 Act; (ii) the matter concerns an
amendment to the Declaration of Trust that would adversely affect to a material
degree the rights and preferences of the shares of any class or fund; or (iii)
the Trustees determine that it is necessary or desirable to obtain a shareholder
vote. The 1940 Act requires a shareholder vote under various circumstances,
including to elect or remove Trustees upon the written request of shareholders
representing 10% or more of the Trust's net assets, and to change any
fundamental policy of the Trust. Shareholders of the Trust receive one vote for
each dollar of net asset value owned on the record date, and a fractional vote
for each fractional dollar of net asset value owned on the record date. However,
only the shares of the fund affected by a particular matter are entitled to vote
on that matter. Voting rights are non-cumulative and cannot be modified without
a majority vote.

LIQUIDATION RIGHTS. In the event of liquidation, shareholders will be
entitled to receive a pro rata share of the net assets of applicable funds of
the Trust.

PREEMPTIVE RIGHTS. There are no preemptive rights associated with shares
of the Fund.

CONVERSION RIGHTS. There are no conversion rights associated with shares
of the Trust.

REDEMPTION PROVISIONS. The Trust's redemption provisions are described in
its current prospectus and elsewhere in this Statement of Additional
Information.

SINKING FUND PROVISIONS. The Trust has no sinking fund provisions.

CALLS OR ASSESSMENT. The Trust's shares, when issued, are fully paid and
non-assessable.

TAX STATUS OF THE TRUST

The Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code. This special tax status means that
the Fund will not be liable for federal tax on income and capital gains
distributed to shareholders. In order to preserve its tax status, the Fund must
comply with certain requirements. If it fails to meet these requirements in any
taxable year, it will be subject to tax on its taxable income at corporate
rates, and all distributions from earnings and profits, including any
distributions of net tax-exempt income and net long-term capital gains, will be
taxable to shareholders as ordinary income. In addition, the Fund could be
required to recognize unrealized gains, pay substantial taxes and interest, and
make substantial distributions before regaining its tax status as a regulated
investment company.

INVESTMENT POLICIES

The following policies supplement the Trust's investment policies as set
forth in the Prospectus.

B-2
<PAGE> 42

REPURCHASE AGREEMENTS. The Fund 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
fixed-income security (generally a security issued by the U.S. Government or an
agency thereof, a banker's acceptance or 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 Fund and is unrelated to the interest rate on the underlying instrument. In
these transactions, the securities acquired by the Fund (including accrued
interest earned thereon) must have a total value in excess of the value of the
repurchase agreement and are held by a Custodian Bank until repurchased. In
addition, the Trust's Board of Trustees will monitor the Fund'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 the Fund.

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
Fund 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 Fund not within the control
of the Fund and therefore the realization by the Fund on such collateral may be
automatically stayed. Finally, it is possible that the Fund 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 Trust's
management acknowledges these risks, it is expected that they can be controlled
through careful monitoring procedures.

LENDING OF SECURITIES. The Fund may lend its portfolio securities to
qualified institutional investors (typically brokers, dealers, banks or other
financial institutions) 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 portfolio
securities, the Fund attempts to increase its 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 Fund. The terms and the structure and the aggregate amount of such loans
must be consistent with the Investment Company Act of 1940, and the Rules and
Regulations or interpretations of the Securities and Exchange Commission (the
"Commission") thereunder. These provisions limit the amount of securities a fund
may lend to 33 1/3% of the Fund's total assets, and require that (a) the
borrower pledge and maintain with the Fund collateral consisting of cash, a
letter of credit issued by a domestic U.S. bank, 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 Fund at any time, and (d) the Fund receive reasonable
interest on the loan (which may include the Fund's investing any cash collateral
in interest bearing short-term investments), any distribution on the loaned
securities and any increase in their market value. Loan arrangements made by the
Fund will comply with all other applicable regulatory requirements, including
the rules of the New York Stock Exchange, whose rules presently require the
borrower, after notice, to redeliver the securities within the normal settlement
time of three business days. All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review by
the Trust's Board of Trustees.

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 trustees. In addition, voting rights 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.

VANGUARD INTERFUND LENDING PROGRAM. The SEC has issued an exemptive order
permitting the Fund to participate in Vanguard's interfund lending program. This
program allows the Vanguard funds to borrow money from and loan money to each
other for temporary or emergency purposes. The program is subject to a number of
conditions, including the requirement that no fund may borrow or lend money
through the program unless it
B-3
<PAGE> 43

receives a more favorable interest rate than is available from a typical bank
for a comparable transaction. In addition, a fund may participate in the program
only if and to the extent that such participation is consistent with the fund's
investment objective and other investment policies. The Boards of Trustees of
the Vanguard funds are responsible for ensuring that the interfund lending
program operates in compliance with all conditions of the SEC's exemptive order.

ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities. Illiquid securities are securities that may not be sold or
disposed of in the ordinary course of business within seven business days at
approximately the value at which they are being carried on the Fund's books.

The Fund may invest in restricted, privately placed securities that, under
SEC rules, may be sold only to qualified institutional buyers. Because these
securities can be resold only to qualified institutional buyers, they may be
considered illiquid securities -- meaning that they could be difficult for the
Fund to convert to cash if needed.

If a substantial market develops for a restricted security held by the
Fund, it will be treated as a liquid security, in accordance with procedures and
guidelines approved by the Trust's Board of Trustees. This generally includes
securities that are unregistered that can be sold to qualified institutional
buyers in accordance with Rule 144A under the 1933 Act. While the Fund's
investment adviser determines the liquidity of restricted securities on a daily
basis, the Board oversees and retains ultimate responsibility for the adviser's
decisions. Several factors the Board considers in monitoring these decisions
include the valuation of a security, the availability of qualified institutional
buyers, and the availability of information about the security's issuer.

MORTGAGE-BACKED SECURITIES. The Fund may invest in mortgage-backed
securities. Mortgage-backed securities are instruments that entitle the holder
to a share of all interest and principal payments from mortgages underlying the
security. The mortgages backing these securities include conventional
thirty-year fixed rate mortgages, graduated payment mortgages and adjustable
rate mortgages. During periods of declining interest rates, prepayment of
mortgages underlying mortgage-backed securities may be expected to accelerate.
Prepayment of mortgages which underlie securities purchased at a premium often
results in capital losses, while prepayment of mortgages purchased at a discount
often results in capital gains. Because of these unpredictable prepayment
characteristics, it is often not possible to predict accurately the average life
or realized yield of a particular issue.

COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). CMOs are debt obligations or
multi-class pass-through certificates issued by agencies or instrumentalities of
the U.S. Government, or by private originators or investors in mortgage loans.
In a CMO, series of bonds or certificates are usually issued in multiple
classes, with principal and interest allocated to each class in a variety of
ways. Each class of a CMO or "tranche" is issued with a specific fixed or
floating coupon rate and has a stated maturity or final distribution date. The
Fund will invest modestly in those CMO classes which feature a high degree of
cash flow predictability and moderate vulnerability to prepayment risk, and that
carry high-quality investment grade credit ratings.

FOREIGN INVESTMENTS. Vanguard Wellington Fund may invest up to 20% of its
assets in equity securities of foreign companies. The Fund may also invest
without limits in fixed income securities issued by foreign governments and
companies; however, these securities must be valued, or denominated, in U.S.
dollars and meet the Fund's credit quality standards. Investors should recognize
that investing in foreign companies involves certain special considerations
which are not typically associated with investing in U.S. companies.

Country Risk. As foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards and practices comparable
to those applicable to domestic companies, there may be less publicly available
information about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, with respect to certain foreign
countries, there is the possibility of expropriation or confiscatory taxation,
political or social instability, or diplomatic developments which could affect
U.S. investments in those countries.

B-4
<PAGE> 44

Although the Fund will endeavor to achieve most favorable execution costs
in its portfolio transactions, fixed commissions on many foreign stock exchanges
are generally higher than negotiated commissions on U.S. exchanges. In addition,
it is expected that the expenses for custodial arrangements of the Fund's
foreign securities will be somewhat greater than the expenses for the custodial
arrangements for handling U.S. securities of equal value.

Certain foreign governments levy withholding taxes against dividend and
interest income. Although in some countries a portion of these taxes is
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income the Fund receives from its foreign investments.

Currency Risk. Since the stocks of foreign companies are frequently
denominated in foreign currencies, and since the Fund may temporarily hold
uninvested reserves in bank deposits in foreign currencies, the Fund will be
affected favorably or unfavorably by changes in currency rates and in exchange
control regulations, and may incur costs in connection with conversions between
various currencies.

FEDERAL TAX TREATMENT OF NON-U.S. TRANSACTIONS. Special rules govern the
Federal income tax treatment of certain transactions denominated in foreign
currency or determined by reference to the value of one or more foreign
currencies. The types of transactions covered by the special rules include the
following; (i) the acquisition of, or becoming the obligor under, a bond or
other debt instrument (including, to the extent provided in treasury
regulations, preferred stock); (ii) the accrual of certain trade receivables and
payables; and (iii) the entering into or acquisition of any forward contract,
futures contract, option or similar financial instrument if such instrument is
not marked to market. The disposition of a currency other than the U.S. dollar
by a U.S. taxpayer is also treated as a transaction subject to the special
currency rules. However, foreign currency-related regulated futures contracts
and nonequity options are generally not subject to the special currency rules if
they are or would be treated as sold for their fair market value at year-end
under the marking-to-market rules applicable to other futures contracts, unless
an election is made to have such currency rules apply. With respect to
transactions covered by the special rules, foreign currency gain or loss is
calculated separately from any gain or loss on the underlying transaction and is
normally taxable as ordinary gain or loss. A taxpayer may elect to treat as
capital gain or loss foreign currency gain or loss arising from certain
identified forward contracts, futures contracts and options that are capital
assets in the hands of the taxpayer and which are not part of a straddle. The
Treasury Department issued regulations under which certain transactions subject
to the special currency rules that are part of a "section 988 hedging
transaction" (as defined in the Internal Revenue Code of 1986, as amended, and
the Treasury regulations) will be integrated and treated as a single transaction
or otherwise treated consistently for purposes of the Code. Any gain or loss
attributable to the foreign currency component of a transaction engaged in by a
fund which is not subject to the special currency rules (such as foreign equity
investments other than certain preferred stocks) will be treated as capital gain
or loss and will not be segregated from the gain or loss on the underlying
transaction.

FUTURES CONTRACTS. The Fund may enter into futures contracts, options, and
options on futures contracts for the purpose of simulating full investment and
reducing transactions costs. 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. Assets committed to futures
contracts will be segregated to the extent required by law.

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 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. 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
B-5
<PAGE> 45

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 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 market 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. The Fund intends to use futures contracts only
for bona fide hedging purposes.

Regulations of CFTC applicable to the Fund require that all of its futures
transactions constitute bona fide hedging transactions except to the extent that
the aggregate initial margins and premiums required to establish any non-hedging
positions do not exceed five percent of the value of the Fund's portfolio. The
Fund will only sell futures contracts to protect securities it owns against
price declines or purchase contracts to protect against an increase in the price
of securities it intends to purchase. As evidence of this hedging interest, the
Fund expects that approximately 75% of its futures contract purchases will be
"completed," that is, equivalent amounts of related securities will have been
purchased or are being purchased by the Fund upon sale of open futures
contracts.

Although techniques other than the sale and purchase of futures contracts
could be used to control the Fund's exposure to market fluctuations, the use of
futures contracts may be a more effective means of hedging this exposure. While
the Fund 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. The Fund 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 the Fund's total assets. In addition, the Fund will not enter into
futures contracts to the extent that its outstanding obligations to purchase
securities under these contracts would exceed 20% of the Fund's 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, the Fund would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if the Fund 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, the Fund 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 Fund will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.

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
B-6
<PAGE> 46

in a loss equal to 150% of the original margin deposit if the contract were
closed 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 Fund is subject to the risks of loss frequently
associated with futures transactions. The Fund 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.

Utilization of futures transactions by the Fund 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 the Fund could both lose money on futures contacts and also
experience a decline in value of its portfolio securities. There is also the
risk of loss by the Fund of margin deposits in the event of bankruptcy of a
broker with whom the Fund has an open position in a futures contract or related
option.

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 futures positions and subjecting some futures
traders to substantial losses.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS. The Fund 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 the Fund may affect the holding period of such securities
and, consequently, the nature of the gain or loss on such securities upon
disposition. The Fund may be required to defer the recognition of losses on
futures contracts to the extent of any unrecognized gains on related positions
held by the Fund.

In order for the Fund 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 of foreign currencies or other income derived with respect to the
Fund's business of investing in securities. It is anticipated that any net gain
realized from the closing out of futures contracts will be considered qualifying
income for purposes of the 90% requirement.

The Fund 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 Fund's other investments and shareholders will be advised on the nature of
the transactions.

TEMPORARY INVESTMENTS. The Fund may take temporary defensive measures that
are inconsistent with the Fund's normal fundamental or non-fundamental
investment policies and strategies in response to adverse market, economic,
political or other conditions. Such measures could include investments in (a)
highly liquid short-term fixed income securities issued by or on behalf of
municipal or corporate issuers, obligations of the U.S. Government and its
agencies, commercial paper, and bank certificates of deposit; (b) shares of
other investment companies which have investment objectives consistent with
those of the Fund; (c) repurchase agreements involving any such securities; and
(d) other money market instruments. There is no limit on the extent to which the
Fund may take temporary defensive measures. In taking such measures, the Fund
may fail to achieve its investment objective.

B-7
<PAGE> 47

YIELD AND TOTAL RETURN

SEC YIELD

The yield of the Fund for the 30-day period ended November 30, 1998 was
3.47%. Yields are calculated daily and premiums and discounts on asset-backed
accounts are not amortized.

Yield is the net annualized yield based on a specified 30-day (or one
month) period assuming semiannual compounding of income. Yield is calculated by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula:

YIELD = 2[((a-b)/cd + 1)(6)-1]

<TABLE>
<S> <C> <C>
Where:
a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
</TABLE>

AVERAGE ANNUAL TOTAL RETURN

The average annual total return of the Fund for the one-, five-, and
ten-year periods ending November 30, 1998 was 13.84%, 16.59%, and 14.40%,
respectively. Total return is computed by finding the average compounded rates
of return over the one-, five-, and ten-year periods set forth above that would
equate an initial amount invested at the beginning of the periods to the ending
redeemable value of the investment.

Average annual total return is the average annual compounded rate of return
for the periods of one year, five years, ten years, or the life of the Fund, all
ended on the last day of a recent month. Average annual total return quotations
will reflect changes in the price of the Fund's shares and assume that all
dividends and capital gains distributions during the respective periods were
reinvested in Fund shares. Average annual total return is calculated by finding
the average annual compounded rates of return of a hypothetical investment over
such periods according to the following formula (average annual total return is
then expressed as a percentage):

T = (ERV/P)(1/n)-1

<TABLE>
<S> <C> <C>
Where:
T = average annual total return
P = a hypothetical initial investment of $1,000
n = number of years
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made
at the beginning of the applicable period
</TABLE>

CUMULATIVE TOTAL RETURN

Cumulative total return is the cumulative rate of return on a hypothetical
initial investment of $1,000 for a specified period. Cumulative total return
quotations reflect changes in the price of the Fund's shares and assume that all
dividends and capital gains distributions during the period were reinvested in
Fund shares. Cumulative total return is calculated by finding the cumulative
rates of a return of a hypothetical investment over such periods, according to
the following formula (cumulative total return is then expressed as a
percentage):

C = (ERV/P)-1

<TABLE>
<S> <C> <C>
Where:
C = cumulative total return
P = a hypothetical initial investment of $1,000
ERV = ending redeemable value: ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 investment made
at the beginning of the applicable period
</TABLE>

B-8
<PAGE> 48

PURCHASE OF SHARES

The Trust 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 Trust, and (iii) to
reduce or waive the minimum investment for or any other restrictions on initial
and subsequent investments for certain fiduciary accounts, such as employee
benefit plans, or under circumstances where certain economies can be achieved in
sales of the Trust's shares.

The Fund has authorized Charles Schwab & Co., Inc. ("Schwab") to accept on
its behalf purchase and redemption orders under certain terms and conditions.
Schwab is also authorized to designate other intermediaries to accept purchase
and redemption orders on the Fund's behalf subject to those terms and
conditions. Under this arrangement, the Fund will be deemed to have received a
purchase or redemption order when Schwab or, if applicable, Schwab's authorized
designee, accepts the order in accordance with the Fund's instructions. Customer
orders that are properly transmitted to the Fund by Schwab, or if applicable,
Schwab's authorized designee, will be priced as follows:

Orders received by Schwab before 3 p.m. Eastern time on any business day,
will be sent to Vanguard that day and your share price will be based on the
Fund's net asset value calculated at the close of trading that day. Orders
received by Schwab after 3 p.m. Eastern time, will be sent to Vanguard on the
following business day and your share price will be based on the Fund's net
asset value calculated at the close of trading that day.

REDEMPTION OF SHARES

The Trust 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 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.

SHARE PRICE

The Fund's share price, or "net asset value" per share, is calculated by
dividing the total assets of the Fund, less all liabilities, by the total number
of shares outstanding. The net asset value is determined as of the close of the
New York Stock Exchange (generally 4:00 p.m. Eastern time) on each day that the
Exchange is open for trading.

Portfolio securities for which market quotations are readily available
(including those securities listed on national securities exchanges, as well as
those quoted on the NASDAQ Stock Market) will be valued at the last quoted sales
price on the day the valuation is made. Such securities which are not traded on
the valuation date are valued at the mean of the bid and ask prices. Price
information on exchange-listed securities is taken from the exchange where the
security is primarily traded. Securities may be valued on the basis of prices
provided by a pricing service when such prices are believed to reflect the fair
market value of such securities.

Short-term instruments (those with remaining maturities of 60 days or less)
may be valued at cost, plus or minus any amortized discount or premium, which
approximates market value.

Bonds and other fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities. The prices provided by a pricing
service may be determined without regard to bid or last sale prices of each
security, but take into account institutional-size transactions in similar
groups of securities as well as any developments related to specific securities.

Foreign securities are valued at the last quoted sales price, according to
the broadest and most representative market, available at the time the Fund is
valued. If events which materially affect the value of the Fund's investments
occur after the close of the securities markets on which such securities are
primarily traded, those investments may be valued by such methods as the Board
of Trustees deems in good faith to reflect fair value.

B-9
<PAGE> 49

In determining the Fund's net asset value per share, all assets and
liabilities initially expressed in foreign currencies will be converted into
U.S. dollars using the officially quoted daily exchange rates used by Morgan
Stanley Capital International in calculating various benchmarking indices. This
officially quoted exchange rate may be determined prior to or after the close of
a particular securities market. If such quotations are not available, the rate
of exchange will be determined in accordance with policies established in good
faith by the Board of Trustees.

Other assets and securities for which no quotations are readily available
or which are restricted as to sale (or resale) are valued by such methods as the
Board of Trustees deems in good faith to reflect fair value.

The share price for the Fund can be found daily in the mutual fund listings
of most major newspapers under the heading of "Vanguard Funds".

FUNDAMENTAL INVESTMENT LIMITATIONS

The Fund is subject to the following fundamental investment limitations,
which cannot be changed in any material way without the approval of the holders
of a majority of the Fund's shares. For these purposes, a "majority" of the
Fund's shares means shares representing the lesser of: (i) 67% or more of the
votes cast to approve a change, so long as shares representing more than 50% of
the Fund's net asset value are present or represented by proxy; or (ii) more
than 50% of the Fund's net asset value.

BORROWING. The Fund may not borrow money, except for temporary or
emergency purposes in an amount not exceeding 15% of the Fund's net assets. The
Fund may borrow money through banks or Vanguard's interfund lending program
only, and must comply with all applicable regulatory conditions. The Fund may
not make any additional investments whenever its outstanding borrowings exceed
5% of its net assets.

COMMODITIES. The Fund may not invest in commodities, except that it may
invest in bond and stock futures contracts, bond and stock options, and options
on bond and stock futures contracts. No more than 5% of the Fund's total assets
may be used as initial margin deposit for futures contracts, and no more than
20% of the Fund's total assets may be invested in futures contracts or options
at any time.

DIVERSIFICATION. With respect to 75% of its total assets, the Fund may
not: (i) purchase more than 10% of the outstanding voting securities of any one
issuer; or (ii) purchase securities of any issuer if, as a result, more than 5%
of the Fund's total assets would be invested in that issuer's securities. This
limitation does not apply to obligations of the United States Government, its
agencies, or instrumentalities.

ILLIQUID SECURITIES. The Fund may not acquire any security if, as a
result, more than 15% of its net assets would be invested in securities that are
illiquid.

INDUSTRY CONCENTRATION. The Fund may not invest more than 25% of its total
assets in any one industry.

INVESTING FOR CONTROL. The Fund may not invest in a company for purposes
of controlling its management.

INVESTMENT COMPANIES. The Fund may not invest in any other investment
company, except through a merger, consolidation or acquisition of assets, or to
the extent permitted by Section 12 of the 1940 Act. Investment companies whose
shares the Fund acquires pursuant to Section 12 must have investment objectives
and investment policies consistent with those of the Fund.

LOANS. The Fund may not lend money to any person except by purchasing
fixed income securities that are publicly distributed or customarily purchased
by institutional investors, by entering into repurchase agreements, by lending
its portfolio securities, or through Vanguard's interfund lending program.

MARGIN. The Fund may not purchase securities on margin or sell securities
short, except as permitted by the Fund's investment policies relating to
commodities.

PLEDGING ASSETS. The Fund may not pledge, mortgage or hypothecate more
than 15% of its net assets.

REAL ESTATE. The Fund may not invest directly in real estate, although it
may invest in securities of companies that deal in real estate and bonds secured
by real estate.

B-10
<PAGE> 50

SENIOR SECURITIES. The Fund may not issue senior securities, except in
compliance with the 1940 Act.

UNDERWRITING. The Fund may not engage in the business of underwriting
securities issued by other persons. The Fund will not be considered an
underwriter when disposing of its investment securities.

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

None of these limitations prevents the Fund from participating in The
Vanguard Group, Inc. ("Vanguard"). Because the Trust is a member of The Vanguard
Group of Investment Companies, the Fund may own securities issued by Vanguard,
make loans to Vanguard, and contribute to Vanguard's costs or other financial
requirement. See "Management of the Trust" for more information.

B-11
<PAGE> 51

MANAGEMENT OF THE TRUST

TRUSTEES AND OFFICERS

The Officers of the Trust manage its day-to-day operations and are responsible
to the Trust's Board of Trustees. The Trustees set broad policies for the Trust
and choose its Officers. The following is a list of the Trustees and Officers of
the Trust and a statement of their present positions and principal occupations
during the past five years. As a group, the Trust's Trustees and Officers own
less than 1% of the outstanding shares of the Trust. Each Trustee also serves as
a Director of The Vanguard Group, Inc., and as a Trustee of each of the 36
investment companies administered by Vanguard (35 in the case of Mr. Malkiel and
28 in the case of Mr. MacLaury). The mailing address of the Trustees and
Officers of the Trust is Post Office Box 876, Valley Forge, Pennsylvania 19482.

JOHN C. BOGLE, (DOB: 5/8/1929) Senior Chairman and Trustee*

Senior Chairman and Director of The Vanguard Group, Inc., and Trustee of each of
the investment companies in The Vanguard Group; Director of The Mead Corp.
(Paper Products), General Accident Insurance, and Chris-Craft Industries, Inc.
(Broadcasting & Plastics Manufacturer).

JOHN J. BRENNAN, (DOB: 7/29/1954) Chairman, Chief Executive Officer & Trustee*

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

JOANN HEFFERNAN HEISEN, (DOB: 1/25/1950) Trustee

Vice President, Chief Information Officer, and member of the Executive Committee
of Johnson and Johnson (Pharmaceuticals/Consumer Products), Director of Johnson
& Johnson*MERCK Consumer Pharmaceuticals Co., Women First HealthCare, Inc.
(Research and Education Institution), Recording for the Blind and Dyslexic, The
Medical Center at Princeton, and Women's Research and Education Institute.

BRUCE K. MACLAURY, (DOB: 5/7/1931) Trustee

President Emeritus of The Brookings Institution (Independent Non-Partisan
Research Organization); Director of American Express Bank, Ltd., The St. Paul
Companies, Inc. (Insurance and Financial Services), and National Steel Corp.

BURTON G. MALKIEL, (DOB: 8/28/1932) Trustee

Chemical Bank Chairman's Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Banco Bilbao Gestinova, Baker Fentress &
Co. (Investment Management), The Jeffrey Co. (Holding Company), and Southern New
England Telecommunications Co.

ALFRED M. RANKIN, JR., (DOB: 10/8/1941) Trustee

Chairman, President, Chief Executive Officer, and Director of NACCO Industries
(Machinery/Coal/Appliances); Director of The BFGoodrich Co. (Aircraft
Systems/Manufacturing/Chemicals), and The Standard Products Co. (Rubber Products
Company).

JOHN C. SAWHILL, (DOB: 6/12/1936) Trustee

President and Chief Executive Officer of The Nature Conservancy (Non-Profit
Conservation Group); Director of Pacific Gas and Electric Co., Procter & Gamble
Co., NACCO Industries (Machinery/Coal/Appliances), and Newfield Exploration Co.
(Energy); formerly, Director and Senior Partner of McKinsey & Co., and President
of New York University.

JAMES O. WELCH, JR., (DOB: 5/13/1931) Trustee

Retired Chairman of Nabisco Brands, Inc. (Food Products); retired Vice Chairman
and Director of RJR Nabisco (Food and Tobacco Products); Director of TECO
Energy, Inc., and Kmart Corp.

B-12
<PAGE> 52

J. LAWRENCE WILSON, (DOB: 3/2/1936) Trustee

Chairman and Chief Executive Officer of Rohm & Haas Co. (Chemicals); Director of
Cummins Engine Co. (Diesel Engine Company), and The Mead Corp. (Paper Products);
and Trustee of Vanderbilt University.

RAYMOND J. KLAPINSKY, (DOB: 12/7/1938) Secretary*

Managing Director of The Vanguard Group, Inc.; Secretary of The Vanguard Group,
Inc. and of each of the investment companies in The Vanguard Group.

THOMAS J. HIGGINS, (DOB: 5/21/1957) Treasurer*

Principal of The Vanguard Group, Inc.; Treasurer of each of the investment
companies in The Vanguard Group.

ROBERT D. SNOWDEN, (DOB: 9/4/1961) Controller*

Principal of The Vanguard Group, Inc.; Controller of each of the investment
companies in The Vanguard Group.
- --------------------------------------------------------------------------------
*Officers of the Trust are "interested persons" as defined in the Investment
Company Act of 1940.

THE VANGUARD GROUP

The Trust is a member of The Vanguard Group of Investment Companies, which
consists of more than 35 investment companies (the "Trusts"). Through their
jointly-owned subsidiary, The Vanguard Group, Inc. ("Vanguard"), the Trust and
the other Trusts in The Vanguard Group 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 several of the
Vanguard Trusts.

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

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

Vanguard adheres to a Code of Ethics established pursuant to Rule 17j-1
under the Investment Company Act of 1940. The Code is designed to prevent
unlawful practices in connection with the purchase or 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 and guidelines similar to, and in many
cases more restrictive than, those recommended by a blue ribbon panel of mutual
fund industry executives.

Vanguard was established and operates under an Amended and Restated Funds'
Service Agreement which was approved by the shareholders of each of the Trusts.
The amounts which each of the Trusts has invested are adjusted from time to time
in order to maintain the proportionate relationship between each Trust's
relative net assets and its contribution to Vanguard's capital. At November 30,
1998, the Trust had contributed capital of $4,656,000 to Vanguard, representing
0.02% of the Fund's net assets and 6.6% of Vanguard's capitalization. The
Amended and Restated Funds' Service Agreement provides as follows: (a) each
Vanguard Trust may be called upon to invest up to .40% of its current assets in
Vanguard, and (b) there is no other limitation on the dollar amount that each
Vanguard Trust may contribute to Vanguard's capitalization.

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 Trusts by third parties. During the
fiscal years ended November 30, 1996, 1997, and 1998, the Trust's share of
Vanguard's actual net costs of operation relating to management and
administrative services (including transfer agency) totaled approximately
$32,343,000, $40,886,000, and $60,543,000, respectively.

B-13
<PAGE> 53

DISTRIBUTION. Vanguard Marketing Corporation, a wholly-owned subsidiary of
The Vanguard Group, Inc., provides all distribution and marketing activities for
the Trusts in the Group. 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
Vanguard Group. The Trustees and Officers of Vanguard determine the amount to be
spent annually on distribution activities, the manner and amount to be spent on
each Trust, and whether to organize new investment companies.

One half of the distribution expenses of a marketing and promotional nature
is allocated among the Trusts based upon their relative net assets. The
remaining one half of these expenses is allocated among the Trusts based upon
each Trust's sales for the preceding 24 months relative to the total sales of
the Trusts as a Group, provided, however, that no Trust'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
Vanguard Group, and that no Trust shall incur annual distribution expenses in
excess of .20 of 1% of its average month end net assets. During the fiscal years
ended November 30, 1996, 1997, and 1998, the Trust incurred approximately
$2,818,000, $3,933,000, and $5,216,000, respectively, of The Vanguard Group's
distribution and marketing expenses.

INVESTMENT ADVISORY SERVICES. Vanguard also provides investment advisory
services to several Vanguard Trusts. These services are provided on an at-cost
basis from a money management staff employed directly by Vanguard. The
compensation and other expenses of this staff are paid by the Trusts utilizing
these services.

TRUSTEE COMPENSATION

The individuals in the following table serve as Trustees of all Vanguard
Trusts, and each Trust pays a proportionate share of the Trustees' compensation.
The Trusts employ their officers on a shared basis, as well. However, officers
are compensated by The Vanguard Group, Inc., not the Trusts.

INDEPENDENT TRUSTEES. The Trusts compensate their independent
Trustees -- that is, the ones who are not also officers of the Trust -- in three
ways:

- The independent Trustees receive an annual fee for their service to the
Trusts, which is subject to reduction based on absences from scheduled
Board meetings.

- The independent Trustees are reimbursed for the travel and other expenses
that they incur in attending Board meetings.

- Upon retirement, the independent Trustees receive an aggregate annual fee
of $1,000 for each year served on the Board, up to fifteen years of
service. This annual fee is paid for ten years following retirement, or
until each Trustee's death.

"INTERESTED" TRUSTEES. The Trusts' interested Trustees -- Messrs. Bogle
and Brennan -- receive no compensation for their service in that capacity.
However, they are paid in their role as officers of The Vanguard Group, Inc.

COMPENSATION TABLE. The following table provides compensation details for
each of the Trustees. For the Trust, we list the amounts paid as compensation
and accrued as retirement benefits by the Trust for each Trustee. In addition,
the table shows the total amount of benefits that we expect each Trustee to
receive from all Vanguard

B-14
<PAGE> 54

Trusts upon retirement, and the total amount of compensation paid to each
Trustee by all Vanguard Trusts. All information shown is for the fiscal year
ended November 30, 1998.

VANGUARD WELLINGTON FUND
COMPENSATION TABLE

<TABLE>
<CAPTION>
TOTAL
PENSION OR RETIREMENT COMPENSATION
AGGREGATE BENEFITS ACCRUED AS ESTIMATED FROM ALL
COMPENSATION PART OF TRUST ANNUAL BENEFITS VANGUARD TRUSTS
NAMES OF TRUSTEES FROM TRUST EXPENSES UPON RETIREMENT PAID TO TRUSTEES(1)
----------------- ------------ --------------------- --------------- -------------------
<S> <C> <C> <C> <C>
John C. Bogle None None None None
John J. Brennan None None None None
Barbara Barnes
Hauptfuhrer(2) $5,195 $703 $15,000 $75,000
JoAnn Heffernan Heisen $2,165 $305 $15,000 $31,250
Robert E. Cawthorn(2) $2,598 $470 $ 6,000 $37,500
Bruce K. MacLaury $5,438 $525 $12,000 $70,000
Burton G. Malkiel $5,231 $505 $15,000 $75,000
Alfred M. Rankin, Jr. $5,195 $370 $15,000 $75,000
John C. Sawhill $5,195 $468 $15,000 $75,000
James O. Welch, Jr. $5,195 $540 $15,000 $75,000
J. Lawrence Wilson $5,195 $390 $15,000 $75,000
</TABLE>

(1)The amounts reported in this column reflect the total compensation paid to
each Trustee for their service as Trustee of 36 Vanguard Trusts (35 in the
case of Mr. Malkiel; 28 in the case of Mr. MacLaury).
(2)Mr. Cawthorn and Mrs. Hauptfuhrer have retired from the Trust's Board,
effective May 31, 1998 and December 31, 1998, respectively.

INVESTMENT ADVISORY SERVICES

The Trust employs Wellington Management Company, LLP (WMC) under an
investment advisory agreement to manage the investment and reinvestment of the
assets of the Trust and to continuously review, supervise and administer the
Trust's investment program. WMC discharges its responsibilities subject to the
control of the Officers and Trustees of the Trust.

The Trust pays WMC a Basic Fee at the end of each fiscal quarter,
calculated by applying a quarterly rate, based on the following annual
percentage rates, to the Fund's average month-end net assets for the quarter:

<TABLE>
<CAPTION>
NET ASSETS RATE
---------- ----
<S> <C>
First $1 billion................................ .100%
Next $2 billion................................. .050%
Next $7 billion................................. .040%
Over $10 billion................................ .030%
</TABLE>

During the fiscal years ended November 30, 1996, 1997, and 1998, the Fund
incurred the following advisory fees:

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- -----------
<S> <C> <C> <C>
Basic Fee................................................ $6,042,000 $7,447,000 $ 9,157,000
Increase (Decrease) for Performance Adjustment........... 79,000 (244,000) (2,102,000)
---------- ---------- -----------
Total.................................................. $6,121,000 $7,203,000 $ 7,055,000
========== ========== ===========
</TABLE>

The basic advisory fee may be increased or decreased by applying an
adjustment formula based on the investment performance of the Fund relative to
the investment record of the "Composite Index," 65% of which

B-15
<PAGE> 55

shall be comprised of the Standard & Poor's Composite Stock Price Index, and 35%
of which shall be comprised of the Lehman Brothers Long Corporate AA or Better
Bond Index.

<TABLE>
<CAPTION>
CUMULATIVE 36-MONTH PERFORMANCE PERFORMANCE FEE
VERSUS THE COMPOSITE INDEX ADJUSTMENT
------------------------------- ---------------
<S> <C>
Less than -6% points........................................ -0.30 X Basic Fee*
Between -3% points and -6% points........................... -0.15 X Basic Fee
Between -3% points and 3% points............................ 0 X Basic Fee
Between 3% points and 6% points............................. 0.15 X Basic Fee
More than 6% points......................................... 0.30 X Basic Fee
</TABLE>

* For purposes of this calculation, the Basic Fee is calculated by
applying the quarterly rate based on the Annual Basic Fee Rate using
average assets over the same 36-month period over which the
performance is measured.

The new incentive penalty fee will not be fully operable until the quarter
ending February 28, 1999. Until that date, a "blended" fee rate consisting of
varying percentages of (i) the performance adjustment based on the schedule set
forth above (the "new rate"(1)), and (ii) the performance adjustment based on
the schedule set forth in the previous investment advisory agreement(2) (the
"previous rate") applies as follows:

1. QUARTER ENDING NOVEMBER 30, 1997. 58.4% of the incentive/penalty
fee was calculated according to the new rate and 41.6% of the
incentive/penalty fee was calculated according to the previous rate.

2. QUARTER ENDING FEBRUARY 28, 1998. 67% of the incentive/penalty fee
was calculated according to the new rate and 33% of the incentive/penalty
fee was calculated according to the previous rate.

3. QUARTER ENDING MAY 31, 1998. 75% of the incentive/penalty fee was
calculated according to the new rate and 25% of the incentive/penalty fee
was calculated according to the previous rate.

4. QUARTER ENDING AUGUST 31, 1998. 83.4% of the incentive/penalty fee
was calculated according to the new rate and 16.6% of the incentive/penalty
fee was calculated according to the previous rate.

5. QUARTER ENDING NOVEMBER 30, 1998. 91.7% of the incentive/penalty
fee was calculated according to the new rate and 8.3% of the
incentive/penalty fee was calculated according to the previous rate.

6. QUARTER ENDING FEBRUARY 28, 1999. New rate fully operable.

The present agreement is renewable for successive one-year periods, only if
each renewal is specifically approved by a vote of the Trust's Board of
Trustees, including the affirmative votes of a majority of the Trustees who are
not parties to the contract 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. The agreement is
automatically terminated if assigned, and may be terminated without penalty at
any time: (1) by vote of the Board of Trustees of the Trust on 60 days' written
notice to WMC, or (2) by WMC upon 90 days' written notice to the Trust. Any such
change will be communicated to shareholders in writing.

DESCRIPTION OF WMC. WMC is a Massachusetts limited liability partnership
of which the following persons are managing partners: Robert W. Doran, Duncan M.
McFarland, and John R. Ryan.

- ---------------
(1) The benchmark used for the new rate calculation will consist of linking the
return of the "new" benchmark (Lehman Long-Term Corporate AA or Better Bond
Index) to the return of the "previous" benchmark (Salomon Brothers
High-Grade Corporate Bond Index) in the same varying percentages that are
listed in note (2).

(2) The previous incentive/penalty fee structure provided that the Basic Fee be
increased or decreased by an amount equal to .02% per annum (.005% per
quarter) of the average month-end assets of the Trust if the Trust's
investment performance for the thirty-six months preceding the end of the
quarter is six percentage points or more above or below, respectively, the
investment record of a "Combined Index" which included the Salomon Brothers
High-Grade Corporate Bond Index for the debt portion of the Combined Index.
B-16
<PAGE> 56

PORTFOLIO TRANSACTIONS

The investment advisory agreement authorizes WMC (with the approval of the
Trust's Board of Trustees) to select the brokers or dealers that will execute
the purchases and sales of portfolio securities for the Fund and directs WMC to
use its best efforts to obtain the best available price and most favorable
execution with respect to all transactions for the Fund. WMC 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.

In placing portfolio transactions, WMC 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 WMC. WMC 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 Trust's Board of Trustees, WMC 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 WMC to the Fund and the other Funds in the Group.

Currently, it is the Fund's policy that WMC 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. WMC 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 WMC and/or the Fund. However, WMC has informed the Fund that it
generally will not pay higher commission rates specifically for the purpose of
obtaining research services.

During the fiscal years ended November 30, 1996, 1997, and 1998 the Fund
paid $5,563,124, $6,369,711, and $9,332,327 in brokerage commissions,
respectively.

Some securities considered for investment by the Fund may also be
appropriate for other Funds and/or clients served by WMC. If purchase or sale of
securities consistent with the investment policies of the Fund and one or more
of these other funds or clients served by WMC is considered at or about the same
time, transactions in such securities will be allocated among the several funds
and clients in a manner deemed equitable by WMC.

FINANCIAL STATEMENTS

The Fund's Financial Statements for the year ended November 30, 1998,
including the financial highlights for each of the five years in the period
ended November 30, 1998, appearing in the Vanguard Wellington Fund 1998 Annual
Report to Shareholders, and the report thereon of PricewaterhouseCoopers LLP,
independent accountants, also appearing therein, are incorporated by reference
in this Statement of Additional Information. For a more complete discussion of
the performance, please see the Fund's Annual Report to Shareholders, which may
be obtained without charge.

PERFORMANCE MEASURES

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

B-17
<PAGE> 57

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

STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX -- includes stocks selected by
Standard & Poor's Index Committee to include leading companies in leading
industries and to reflect the U.S. stock market.

STANDARD & POOR'S MIDCAP 400 INDEX -- is composed of 400 medium sized domestic
stocks.

STANDARD & POOR'S SMALLCAP 600/BARRA VALUE INDEX -- contains stocks of the S&P
SmallCap 600 Index which have a lower than average price-to-book ratio.

STANDARD & POOR'S SMALLCAP 600/BARRA GROWTH INDEX -- contains stocks of the S&P
SmallCap 600 Index which have a higher than average price-to-book ratio.

RUSSELL 1000 VALUE INDEX -- consists of the stocks in the Russell 1000 Index
(comprising the 1,000 largest U.S.-based companies measured by total market
capitalization) with the lowest price-to-book ratios, comprising 50% of the
market capitalization of the Russell 1000.

WILSHIRE 5000 EQUITY INDEX -- consists of more than 7,000 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.

RUSSELL 3000 STOCK INDEX -- a diversified portfolio of approximately 3,000
common stocks accounting for over 90% of the market value of publicly-traded
stocks in the U.S.

RUSSELL 2000 STOCK INDEX -- a subset of approximately 2,000 of the smallest
stocks contained in the Russell 3000; a widely-used benchmark for small
capitalization common stocks.

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, Asia, and the Far East.

GOLDMAN SACHS 100 CONVERTIBLE BOND INDEX -- currently includes 71 bonds and 29
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.

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,
nonconvertible 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 INDEX -- 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 INDEX -- 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.

LEHMAN BROTHERS LONG-TERM CORPORATE BOND INDEX -- is a subset of the Lehman
Corporate Bond Index covering all corporate, publicly issued, fixed-rate,
nonconvertible U.S. debt issues rated at least Baa, with at least $50 million
principal outstanding and maturity greater than 10 years.

BOND BUYER MUNICIPAL BOND INDEX -- is a yield index on current coupon high-grade
general obligation municipal bonds.
B-18
<PAGE> 58

STANDARD & POOR'S PREFERRED INDEX -- is a yield index based upon the average
yield of 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 -- 65% Standard & Poor's 500 Index and 35% Lehman Long-Term
Corporate AA or Better Bond Index.

COMPOSITE INDEX -- 65% Lehman Long-Term Corporate AA or Better Bond Index and a
35% weighting in a blended equity composite (75% Standard & Poor's/BARRA Value
Index, 12.5% Standard & Poor's Utilities Index and 12.5% Standard & Poor's
Telephone Index).

LEHMAN LONG-TERM CORPORATE AA OR BETTER BOND INDEX -- consists of all publicly
issued, fixed rate, nonconvertible investment grade, dollar-denominated,
SEC-registered corporate debt rated AA or AAA.

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 $1.6 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 $700 billion.

LEHMAN BROTHERS 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 SMALL COMPANY GROWTH FUND AVERAGE -- the average performance of small
company growth funds as defined by Lipper, 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.)

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

LIPPER GENERAL EQUITY FUND AVERAGE -- an industry benchmark of average general
equity funds with similar investment objectives and policies, as measured by
Lipper, Inc.

LIPPER FIXED INCOME FUND AVERAGE -- an industry benchmark of average fixed
income funds with similar investment objectives and policies, as measured by
Lipper, Inc.

B-19
<PAGE> 59

PART C
VANGUARD WELLINGTON FUND
OTHER INFORMATION

ITEM 23. EXHIBITS

<TABLE>
<S> <C>
Exhibit Description
- ------- -----------
(a)................. Declaration of Trust*
(b)................. By-Laws*
(c)................. Reference is made to Articles III and V of the Registrant's
Declaration of Trust
(d)................. Investment Advisory Contract*
(e)................. Not Applicable
(f)................. Reference is made to the section entitled "Management of the
Trust" in the Registrant's Statement of Additional
Information
(g)................. Custodian Agreement*
(h)................. Amended and Restated Funds' Service Agreement*
(i)................. Legal Opinion*
(j)................. Consent of Independent Accountants+
(k)................. Not Applicable
(l)................. Not Applicable
(m)................. Not Applicable
(n)................. Financial Data Schedule+
(o)................. Not Applicable
</TABLE>

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

*Filed Previously

+Filed Herewith

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
Registrant is not controlled by or under common control with any person.

ITEM 25. INDEMNIFICATION
The Registrant's organizational documents contain provisions indemnifying
Trustees and Officers against liability incurred in their official capacity.
Article VII, Section 2 of the Declaration of Trust provides that the Registrant
may indemnify and hold harmless each and every Trustee and Officer from and
against any and all claims, demands, costs, losses, expenses, and damages
whatsoever arising out of or related to the performance of his or her duties as
a Trustee or Officer. However, this provision does not cover any liability to
which a Trustee or Officer would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office. Article VI of the By-Laws
generally provides that the Registrant shall indemnify its Trustees and Officers
from any liability arising out of their past or present service in that
capacity. Among other things, this provision excludes any liability arising by
reason of willful misfeasance, bad faith, gross negligence, or the reckless
disregard of the duties involved in the conduct of the Trustee's or Officer's
office with the Registrant.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER
Wellington Management Company is a Massachusetts limited liability
partnership of which the following persons are managing partners: Robert W.
Doran, Duncan M. McFarland and John R. Ryan.
<PAGE> 60

Wellington Management Company, LLP ("Wellington Management") is an
investment adviser registered under the Investment Advisers Act of 1940, as
amended (the "Advisers Act"). The list required by this Item 26 of officers and
partners of Wellington Management, together with any information as to any
business profession, vocation or employment of a substantial nature engaged in
by such officers and partners during the past two years, is incorporated herein
by reference from Schedules B and D of Form ADV filed by Wellington Management
pursuant to the Advisers Act (SEC File No. 801-15908).

ITEM 27. PRINCIPAL UNDERWRITERS
(a) Not Applicable
(b) Not Applicable
(c) Not Applicable

ITEM 28. 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., Valley Forge, Pennsylvania 19482; and the Registrant's
Custodian, The Chase Manhattan Bank, N.A., 4 Chase MetroTech Center, Brooklyn,
New York 11245.

ITEM 29. MANAGEMENT SERVICES
Other than as set forth under the description of The Vanguard Group in Part
B of this Registration Statement, the Registrant is not a party to any
management-related service contract.

ITEM 30. UNDERTAKINGS
Not Applicable
<PAGE> 61

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant hereby certifies that it meets
all the requirements for effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and 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 10th day of March, 1999.

VANGUARD WELLINGTON FUND

BY: (Heidi Stam) John J. Brennan*, Chairman of the Board, Chief Executive
Officer

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

BY: (Heidi Stam)
John C. Bogle*, Senior Chairman of the Board and Trustee

March 10, 1999

BY: (Heidi Stam)
John J. Brennan*, Chairman of the Board, Chief Executive Officer, and
Trustee

March 10, 1999

BY: (Heidi Stam)
JoAnn Heffernan Heisen*, Trustee

March 10, 1999

BY: (Heidi Stam)
Bruce K. MacLaury*, Trustee

March 10, 1999

BY: (Heidi Stam)
Burton G. Malkiel*, Trustee

March 10, 1999

BY: (Heidi Stam)
Alfred M. Rankin, Jr.*, Trustee

March 10, 1999

BY: (Heidi Stam)
John C. Sawhill*, Trustee

March 10, 1999

BY: (Heidi Stam)
James O. Welch, Jr.*, Trustee

March 10, 1999

BY: (Heidi Stam)
J. Lawrence Wilson*, Trustee

March 10, 1999

BY: (Heidi Stam)
Thomas J. Higgins*, Treasurer and Principal
Financial Officer and Accounting Officer

March 10, 1999

*By Power of Attorney. See 1933 Act File Number 33-4424, filed on January 25,
1999. Incorporated by Reference.

<PAGE> 62

VANGUARD WELLINGTON FUND

EXHIBIT INDEX

<TABLE>
<S> <C>
Consent of Independent Accountants.......................... EX-99.BJ
Financial Data Schedule..................................... EX-99.BN
</TABLE>

<PAGE> 1

EX-99.BJ

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 81 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated January 6, 1999, relating to the financial
statements and financial highlights appearing in the November 30, 1998 Annual
Report to Shareholders of Vanguard Wellington Fund, which are also incorporated
by reference into the Registration Statement. We also consent to the references
to us under the headings "Financial Highlights" in the Prospectus and "Financial
Statements" and "Service Providers -- Independent Accountants" in the Statement
of Additional Information.

PricewaterhouseCoopers LLP
Philadelphia, PA

March 4, 1999

<PAGE> 1
[ARTICLE] 6
[CIK] 0000105563
[NAME] VANGUARD WELLINGTON FUND
[CURRENCY] US
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] NOV-30-1998
[PERIOD-START] DEC-01-1997
[PERIOD-END] NOV-30-1998
[EXCHANGE-RATE] 1
[INVESTMENTS-AT-COST] 19961076
[INVESTMENTS-AT-VALUE] 26110728
[RECEIVABLES] 378811
[ASSETS-OTHER] 4656
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 26494195
[PAYABLE-FOR-SECURITIES] 114663
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 550311
[TOTAL-LIABILITIES] 664974
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 17434893
[SHARES-COMMON-STOCK] 799892
[SHARES-COMMON-PRIOR] 687314
[ACCUMULATED-NII-CURRENT] 294945
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] 1949731
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 6149652
[NET-ASSETS] 25829221
[DIVIDEND-INCOME] 352161
[INTEREST-INCOME] 593408
[OTHER-INCOME] 1591
[EXPENSES-NET] 72470
[NET-INVESTMENT-INCOME] 874690
[REALIZED-GAINS-CURRENT] 1953295
[APPREC-INCREASE-CURRENT] 214437
[NET-CHANGE-FROM-OPS] 3042422
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 871468
[DISTRIBUTIONS-OF-GAINS] 1082884
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 157319
[NUMBER-OF-SHARES-REDEEMED] 107318
[SHARES-REINVESTED] 62577
[NET-CHANGE-IN-ASSETS] 4488939
[ACCUMULATED-NII-PRIOR] 291723
[ACCUMULATED-GAINS-PRIOR] 1079320
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 7055
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 74625
[AVERAGE-NET-ASSETS] 23775407
[PER-SHARE-NAV-BEGIN] 31.05
[PER-SHARE-NII] 1.13
[PER-SHARE-GAIN-APPREC] 2.86
[PER-SHARE-DIVIDEND] 1.18
[PER-SHARE-DISTRIBUTIONS] 1.57
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 32.29
[EXPENSE-RATIO] 0.31
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>