<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF VANGUARD WINDSOR FUND APPEARS HERE]
A Series of Vanguard/Windsor Funds
and A Member of The Vanguard Group
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROSPECTUS--FEBRUARY 28, 1995; REVISED JUNE 6, 1995
- --------------------------------------------------------------------------------
NEW ACCOUNT INFORMATION: INVESTOR INFORMATION DEPARTMENT--1-800-662-7447 (SHIP)
- --------------------------------------------------------------------------------
SHAREHOLDER ACCOUNT SERVICES: CLIENT SERVICES DEPARTMENT--1-800-662-2739 (CREW)
- --------------------------------------------------------------------------------
INVESTMENT Vanguard/Windsor Fund (the "Fund"), formerly Windsor Fund, is
OBJECTIVE AND an open-end diversified investment company that seeks to pro-
POLICIES vide long-term growth of capital and income by investing pri-
marily in common stocks. The Fund's secondary objective is to
provide current income. There can be no assurance that the
Fund will achieve these objectives. Shares of the Fund are
neither insured nor guaranteed by any agency of the U.S. Gov-
ernment, including the FDIC.
Vanguard/Windsor Fund is an independent series of
Vanguard/Windsor Funds, Inc. (the "Company"), formerly The
Windsor Funds, Inc. The Company is currently offering shares
of two series. This Prospectus relates to the
Vanguard/Windsor Fund series only.
- --------------------------------------------------------------------------------
OPENING AN Currently, shares of the Fund are not being offered or sold
ACCOUNT to new investors. Current shareholders of the Fund may make
additional investments of up to $25,000 during calendar year
1995. See "Opening an Account and Purchasing Shares" for ad-
ditional information.
The Fund is offered on a no-load basis (i.e., there are no
sales commissions or 12b-1 fees). However, the Fund incurs
expenses for investment advisory, management, administrative,
and distribution services.
- --------------------------------------------------------------------------------
ABOUT THIS This Prospectus is designed to set forth concisely the
PROSPECTUS information you should know about the Fund before you invest.
It should be retained for future reference. A "Statement of
Additional Information" containing additional information
about the Fund has been filed with the Securities and
Exchange Commission. This Statement is dated February 28,
1995; Revised June 6, 1995, and has been incorporated by
reference into this Prospectus. A copy may be obtained
without charge by writing to the Fund or by calling the
Investor Information Department.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
Fund Expenses........ 2
Financial Highlights. 2
Yield and Total
Return ............. 3
FUND INFORMATION
Investment
Objectives.......... 4
Investment Policies.. 4
Investment Risks..... 4
Who Should Invest.... 5
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Implementation of
Policies............. 6
Investment
Limitations.......... 8
Management of the
Fund................. 8
Investment Adviser.... 9
Performance Record.... 11
Dividends, Capital
Gains and Taxes...... 11
The Share Price of the
Fund ................ 13
General Information... 13
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
SHAREHOLDER GUIDE
Opening an Account and
Purchasing Shares.... 15
When Your Account Will
Be Credited.......... 17
Selling Your Shares... 18
Exchanging Your
Shares............... 20
Important Information
About Telephone
Transactions......... 21
Transferring
Registration......... 22
Other Vanguard
Services............. 22
</TABLE>
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-
FENSE.
- --------------------------------------------------------------------------------
<PAGE>
The following table illustrates ALL expenses and fees that
FUND EXPENSES you would incur as a shareholder of the Fund. The expenses
and fees set forth in the table are for the 1994 fiscal year.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
---------------------------------------------------------------
<S> <C> <C>
Sales Load Imposed on Purchases......................... None
Sales Load Imposed on Reinvested Dividends.............. None
Redemption Fees......................................... None
Exchange Fees........................................... None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------
<S> <C> <C>
Management & Administrative Expenses.................... 0.18%
Investment Advisory Fees................................ 0.24
12b-1 Fees.............................................. None
Other Expenses
Distribution Costs................................ 0.02%
Miscellaneous Expenses............................ 0.01
----
Total Other Expenses.................................... 0.03
----
TOTAL OPERATING EXPENSES........................... 0.45%
====
</TABLE>
The purpose of this table is to assist you in understanding
the various costs and expenses that you would bear directly
or indirectly as an investor in the Fund.
The following example illustrates the expenses that you would
incur on a $1,000 investment over various periods, assuming
(1) a 5% annual rate of return and (2) redemption at the end
of each period. As noted in the table above, the Fund charges
no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$5 $14 $25 $57
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY
BE HIGHER OR LOWER THAN THOSE SHOWN.
- --------------------------------------------------------------------------------
FINANCIAL The following financial highlights for a share outstanding
HIGHLIGHTS throughout each period, insofar as they relate to each of the
five years in the period ended October 31, 1994, have been
audited by Price Waterhouse LLP, independent accountants,
whose report thereon was unqualified. This information should
be read in conjunction with the Fund's financial statements
and notes thereto which are incorporated by reference in the
Statement of Additional Information and this Prospectus, and
which appear, along with the report of Price Waterhouse LLP,
in the Fund's 1994 Annual Report to Shareholders. For a more
complete discussion of the Fund's performance, please see the
Fund's 1994 Annual Report to Shareholders, which may be ob-
tained without charge by writing to the Fund or by calling
our Investor Information Department at 1-800-662-7447.
2
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR...... $14.95 $12.37 $12.79 $ 9.72 $15.17 $14.13 $14.22 $13.85 $13.39 $12.12
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income.. .44 .37 .49 .58 .74 .71 .66 .78 .85 .79
Net Realized and
Unrealized Gain (Loss)
on Investments........ .42 2.98 .50 3.55 (4.59) 1.51 2.33 (.11) 3.05 2.01
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS........... .86 3.35 .99 4.13 (3.85) 2.22 2.99 .67 3.90 2.80
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net In-
vestment
Income................ (.37) (.39) (.57) (.74) (.75) (.63) (.87) (.30) (.85) (.79)
Distributions from
Realized
Capital Gains......... (.89) (.38) (.84) (.32) (.85) (.55) (2.21) -- (2.59) (.74)
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS... (1.26) (.77) (1.41) (1.06) (1.60) (1.18) (3.08) (.30) (3.44) (1.53)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR................... $14.55 $14.95 $12.37 $12.79 $ 9.72 $15.17 $14.13 $14.22 $13.85 $13.39
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
TOTAL RETURN............ 6.35% 28.29% 9.30% 44.69% (27.93)% 17.05% 27.01% 4.62% 29.31% 23.30%
- ------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year
(Millions)............. $11,406 $10,537 $8,250 $7,859 $5,841 $8,313 $5,920 $4,848 $4,862 $3,813
Ratio of Expenses to Av-
erage Net
Assets................. .45% .40% .26% .30% .37% .41% .46% .43% .52% .53%
Ratio of Net Investment
Income to
Average Net Assets..... 3.11% 2.68% 3.89% 4.84% 5.82% 5.07% 5.08% 4.86% 5.28% 6.19%
Portfolio Turnover Rate. 34% 25% 32% 36% 21% 34% 24% 46% 51% 23%
</TABLE>
- --------------------------------------------------------------------------------
From time to time the Fund may advertise its yield and total
YIELD AND return. Both yield and total return figures are based on his-
TOTAL RETURN torical earnings and are not intended to indicate future per-
formance. The "total return" of the Fund refers to the aver-
age annual compounded rates of return over one- , five- and
ten-year periods or for the life of the Fund (as stated in
the advertisement) that would equate an initial amount in-
vested at the beginning of a stated period to the ending re-
deemable value of the investment, assuming the reinvestment
of all dividend and capital gains distributions.
In accordance with industry guidelines set forth by the U.S.
Securities and Exchange Commission, the "30-day yield" of the
Fund is calculated daily by dividing the net investment in-
come per share earned during a 30-day period by the net asset
value per share on the last day of the period. Net investment
income includes interest and dividend income earned on the
Fund's securities and is net of all expenses and all recur-
ring and nonrecurring charges that have been applied to all
shareholder accounts. The yield calculation assumes that the
net investment income earned over 30 days is compounded
monthly for six months and then annualized. Methods used to
calculate advertised yields are standardized for all stock
and bond mutual funds. However, these methods differ from the
accounting methods used by the Fund to maintain its books and
records, and so the advertised 30-day yield may not fully re-
flect the income paid to your own account or the yield re-
ported in the Fund's reports to shareholders.
- --------------------------------------------------------------------------------
3
<PAGE>
The objective of the Fund is to provide long-term growth of
INVESTMENT capital and income. The Fund's secondary objective is to pro-
OBJECTIVES vide current income. There can be no assurance that the Fund
will achieve these objectives.
THE FUND SEEKS
TO PROVIDE These investment objectives are fundamental and so cannot be
LONG-TERM changed without the approval of a majority of the Fund's
GROWTH OF shareholders.
CAPITAL AND
INCOME
- --------------------------------------------------------------------------------
INVESTMENT The Fund invests primarily in common stocks, which are se-
POLICIES lected principally on the basis of fundamental investment
value. Crucial to the valuation process is the relationship
THE FUND of a company's underlying earning power and dividend payout
INVESTS to the market price of its stock. The Fund's holdings usually
PRIMARILY IN are characterized by relatively low price-earnings ratios and
COMMON STOCKS meaningful income yields. At the time of purchase, many of
the Fund's securities are considered to be undervalued or
overlooked by the market. The Fund is managed without regard
to tax ramifications.
Although the Fund invests primarily in common stocks, it may
invest in money market instruments, fixed-income securities,
convertible securities and other equity securities, such as
preferred stock. The Fund reserves the right to hold money
market instruments and fixed-income securities in whatever
proportion the adviser deems appropriate for temporary defen-
sive purposes. The Fund may also invest in stock futures con-
tracts and options. See "Implementation of Policies" for a
description of these investment practices of the Fund.
The investment policies of the Fund are not fundamental and
so may be changed by the Board of Directors without share-
holder approval.
- --------------------------------------------------------------------------------
INVESTMENT As a mutual fund investing primarily in common stocks, the
RISKS Fund is subject to MARKET RISK--i.e., the possibility that
common stock prices will decline over short or even extended
THE FUND IS periods. The U.S. stock market has tended to be cyclical,
SUBJECT TO with periods when common stock prices generally rise and pe-
MARKET RISK riods when prices generally decline.
To illustrate the volatility of stock prices, the following
table sets forth the extremes for stock market returns as
well as the average return for the period from 1926 to 1994,
as measured by the Standard & Poor's 500 Composite Stock
Price Index.
AVERAGE ANNUAL U.S. STOCK MARKET RETURNS (1926-1994)
OVER VARIOUS TIME HORIZONS
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS 20 YEARS
------ ------- -------- --------
<S> <C> <C> <C> <C>
Best +53.9 +23.9 +20.1 +16.9
Worst -43.3 -12.5 - 0.9 - 3.1
Average +12.2 +10.2 +10.7 +10.7
</TABLE>
4
<PAGE>
As shown, common stocks have provided annual total returns
(capital appreciation plus dividend income) averaging +10.7%
for all 10-year periods from 1926 to 1994. While this average
return can be used as a guide for setting reasonable expecta-
tions for future stock market returns, it may not be useful
for forecasting future returns in any particular period, as
stock returns are quite volatile from year to year.
This table of U.S. stock market returns should not be viewed
as a representation of future returns for the Fund or the
U.S. stock market. The illustrated returns represent histori-
cal investment performance, which may be a poor guide to fu-
ture returns. Also, stock market indexes such as the S&P 500
are based on unmanaged portfolios of securities before trans-
action costs and other expenses. Such costs will reduce the
relative investment performance of the Fund and other "real
world" portfolios. Finally, the Fund is likely to differ in
portfolio composition from broad stock market averages, and
so the Fund's performance should not be expected to mirror
the returns provided by a specific index.
THE FUND IS The investment adviser manages the Fund according to the tra-
ALSO SUBJECT ditional methods of "active" investment management, which in-
TO MANAGER volve the buying and selling of securities based upon econom-
RISK ic, financial and market analysis and investment judgement.
MANAGER RISK refers to the possibility that the Fund's in-
vestment adviser may fail to execute the Fund's investment
strategy effectively. As a result, the Fund may fail to
achieve its stated objective.
- --------------------------------------------------------------------------------
The Fund is intended for investors who are seeking growth of
WHO SHOULD capital and income. Although the Fund's secondary objective
INVEST is to provide current income, investors should not consider
the Fund a substitute for fixed-income investments. The Fund
LONG-TERM is intended to be a long-term investment vehicle and is not
INVESTORS designed to provide investors with a means of speculating on
SEEKING GROWTH short-term market movements. Investors who engage in exces-
OF CAPITAL AND sive account activity generate additional costs which are
INCOME borne by all of the Fund's shareholders. In order to minimize
such costs, the Fund has adopted the following policies. The
Fund reserves the right to reject any purchase request (in-
cluding exchange purchases from other Vanguard portfolios)
that is reasonably deemed to be disruptive to efficient port-
folio management, either because of the timing of the invest-
ment or previous excessive trading by the investor. Addition-
ally, the Fund has adopted exchange privilege limitations as
described in the section "Exchange Privilege Limitations."
Finally, the Fund reserves the right to suspend the offering
of its shares.
No assurance can be given that the Fund will attain its ob-
jectives or that shareholders will be protected from the risk
of loss that is inherent in equity investing. Investors may
wish to reduce the potential risk of investing in the Fund by
purchasing shares on a regular, periodic basis (dollar-cost
averaging) rather than making an investment in one lump sum.
Investors should not consider the Fund a complete investment
program. Most investors should maintain diversified holdings
of securities with different risk
5
<PAGE>
characteristics--including common stocks, bonds and money
market instruments. Investors may also wish to complement an
investment in the Fund with other types of common stock in-
vestments.
- --------------------------------------------------------------------------------
In addition to investing primarily in equity securities, the
IMPLEMENTATION Fund follows a number of additional investment practices to
OF POLICIES achieve its objectives.
THE FUND MAY Although it normally seeks to remain substantially fully in-
INVEST IN vested in equity securities, the Fund may invest in certain
SHORT-TERM short-term fixed income securities. Such securities may be
FIXED INCOME used temporarily to invest uncommitted cash balances, to
SECURITIES maintain liquidity to meet shareholder redemptions, or to
take a temporarily defensive position against a potential
stock market decline. No more than 35% of the Fund's assets
will be committed to short-term fixed income securities for
purposes other than taking a temporary defensive position.
These securities include: obligations of the United States
government and its agencies or instrumentalities; commercial
paper, bank certificates of deposit, and bankers' accept-
ances; and repurchase agreements collateralized by these se-
curities. In addition, the Fund may, on occasion, invest a
small portion of its assets in bonds with ratings below in-
vestment grade when selected issues are believed to offer
prospective returns competitive with equity securities.
A repurchase agreement is a means of investing monies for a
short period. In a repurchase agreement, a seller--a U.S.
commercial bank or recognized U.S. securities dealer--sells
securities to the Fund and agrees to repurchase the securi-
ties at the Fund's cost plus interest within a specified pe-
riod (normally one day). In these transactions, the securi-
ties purchased by the Fund will have a total value equal to
or in excess of the value of the repurchase agreement, and
will be held by the Fund's Custodian Bank until repurchased.
THE FUND MAY The Fund may hold securities of foreign issuers, but all such
INVEST IN securities must be denominated in U.S. dollars. Securities of
SECURITIES OF foreign issuers may trade in U.S. or foreign securities mar-
FOREIGN kets. Securities of foreign issuers may involve investment
ISSUERS risks that are different from those of domestic issuers. Such
risks include the effect of foreign economic policies and
conditions, future political and economic developments, and
the possible imposition of exchange controls or other foreign
governmental restrictions on foreign debt issuers. There may
also be less publicly available information about a foreign
issuer than a domestic issuer of securities. Foreign issuers
are generally not subject to the uniform accounting, auditing
and financial reporting standards that apply to domestic is-
suers. Also, foreign debt markets may be characterized by
lower liquidity, greater price volatility, and higher trans-
actions costs. Additionally, it may be difficult to obtain or
enforce a legal judgment in a foreign court.
THE FUND MAY The Fund may utilize stock futures contracts and options to a
USE FUTURES limited extent. Specifically, the Fund may enter into futures
CONTRACTS AND contracts provided that not more than 5% of its assets are
OPTIONS required as a futures contract deposit. In addition, the Fund
may enter into futures contracts and options transactions
only to the
6
<PAGE>
extent that obligations under such contracts or transactions
represent not more than 20% of the Fund's assets.
Futures and options transactions may be used for several rea-
sons: to maintain cash reserves while simulating full invest-
ment, to facilitate trading, to reduce transaction costs, or
to seek higher investment returns when a futures contract is
priced more attractively than the underlying equity security
or index. While futures contracts and options can be used as
leveraged investments, the Fund may not use futures or op-
tions transactions to leverage its net assets.
For example, in order to remain fully invested in stocks
while maintaining liquidity to meet potential shareholder re-
demptions, the Fund may invest a portion of its assets in a
stock futures contract. Because futures contracts only re-
quire a small initial margin deposit, the Fund would then be
able to maintain a cash reserve for potential redemptions,
while at the same time remaining fully invested. Also, be-
cause the transaction costs of futures and options may be
lower than the costs of investing in stocks directly, it is
expected that the use of futures contracts and options may
reduce the Fund's total transaction costs.
FUTURES The primary risks associated with the use of futures con-
CONTRACTS AND tracts and options are: (i) imperfect correlation between the
OPTIONS POSE change in market value of the stocks held by the Fund and the
CERTAIN RISKS prices of futures contracts and options; and (ii) possible
lack of a liquid secondary market for a futures contract and
the resulting inability to close a futures position prior to
its maturity date. The risk of imperfect correlation will be
minimized by investing only in those contracts whose behavior
is expected to resemble that of the Fund's underlying securi-
ties. The risk that the Fund will be unable to close out a
futures position will be minimized by entering into such
transactions on a national exchange with an active and liquid
secondary market.
The risk of loss in trading futures contracts in some strate-
gies 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 (or gain) to the investor. When investing in
futures contracts, the Fund will segregate cash or cash
equivalents in the amount of the underlying obligation.
THE FUND MAY The Fund may lend its investment securities to qualified in-
LEND ITS stitutional investors for either short-term or long-term pur-
SECURITIES poses of realizing additional income. Loans of securities by
the Fund will be collateralized by cash, letters of credit,
or securities issued or guaranteed by the U.S. Government or
its agencies. The collateral will equal at least 100% of the
current market value of the loaned securities.
BORROWING The Fund may borrow money, subject to the restrictions de-
scribed below in Investment Limitations, for temporary or
emergency purposes, including the meeting of redemption re-
quests which might otherwise require the untimely disposition
of securities.
7
<PAGE>
PORTFOLIO Although it generally seeks to invest for the long term, the
TURNOVER IS Fund retains the right to sell securities irrespective of how
NOT EXPECTED long they have been held. It is anticipated that the annual
TO EXCEED 100% portfolio turnover of the Fund will not exceed 100%. A turn-
over rate of 100% would occur, for example, if all of the se-
curities of the Fund were replaced within one year.
- --------------------------------------------------------------------------------
INVESTMENT The Fund has adopted certain limitations on its investment
LIMITATIONS practices. Specifically, the Fund will not:
THE FUND HAS (a) with respect to 75% of the value of its total
ADOPTED assets, purchase the securities of any issuer
CERTAIN (except obligations of the United States govern-
FUNDAMENTAL ment and its instrumentalities) if as a result
LIMITATIONS the Fund would hold more than 10% of the out-
standing voting securities of the issuer, or
more than 5% of the value of the total assets of
the Fund would be invested in the securities of
such issuer;
(b) invest more than 25% of its assets in any one
industry; and
(c) borrow money, except that the Fund may borrow
from banks (or through reverse repurchase agree-
ments), for temporary or emergency (not
leveraging) purposes, including the meeting of
redemption requests which might otherwise re-
quire the untimely disposition of securities, in
an amount not exceeding 10% of the value of the
net assets of the Fund (including the amount
borrowed and the value of any outstanding re-
verse repurchase agreements) at the time the
borrowing is made. Whenever borrowings exceed 5%
of the value of the net assets of the Fund, the
Fund will not make any additional investments.
These investment limitations are considered at the time in-
vestment securities are purchased. The investment limitations
described here and in the Statement of Additional information
may be changed only with the approval of a majority of the
Fund's shareholders.
- --------------------------------------------------------------------------------
MANAGEMENT OF The Fund is a member of The Vanguard Group of Investment Com-
THE FUND panies, a family of more than 30 investment companies with
more than 80 distinct investment portfolios and total assets
VANGUARD in excess of $130 billion. Through their jointly-owned sub-
ADMINISTERS sidiary, The Vanguard Group, Inc. ("Vanguard"), the Fund and
AND the other funds in the Group obtain at cost virtually all of
DISTRIBUTES their corporate management, administrative and distribution
THE FUND services. Vanguard also provides investment advisory services
on an at-cost basis to certain Vanguard funds. As a result of
Vanguard's unique corporate structure, the Vanguard funds
have costs substantially lower than those of most competing
mutual funds. In 1994, the average expense ratio (annual
costs including advisory fees divided by total net assets)
for the Vanguard funds amounted to approximately .30% com-
pared to an average of 1.05% for the mutual fund industry
(data provided by Lipper Analytical Services).
The Officers of the Fund manage its day-to-day operations and
are responsible to the Fund's Board of Directors. The Direc-
tors set broad policies for the Fund
8
<PAGE>
and choose its Officers. A list of the Directors and Officers
of the Fund and a statement of their present positions and
principal occupations during the past five years can be found
in the Statement of Additional Information.
Vanguard employs a supporting staff of management and admin-
istrative personnel needed to provide the requisite services
to the funds and also furnishes the funds with necessary of-
fice space, furnishings and equipment. Each fund pays its
share of Vanguard's total expenses, which are allocated among
the funds under methods approved by the Board of Directors
(Trustees) of each fund. In addition, each fund bears its own
direct expenses, such as legal, auditing and custodian fees.
Vanguard provides distribution and marketing services to the
funds. The funds are available on a no-load basis (i.e.,
there are no sales commissions or 12b-1 fees). However, each
fund bears its share of the Group's distribution costs.
- --------------------------------------------------------------------------------
INVESTMENT The Fund has entered into an investment advisory agreement
ADVISER with Wellington Management Company ("WMC"), 75 State Street,
Boston, MA 02109, under which WMC manages the investment and
WELLINGTON reinvestment of Vanguard/Windsor Fund's assets and continu-
MANAGEMENT ously reviews, supervises and administers the Fund's invest-
COMPANY SERVES ment program. WMC discharges its responsibilities subject to
AS ADVISER TO the control of the Officers and Directors of the Fund.
THE FUND
WMC is a professional investment counseling firm which glob-
ally provides investment services to investment companies,
institutions, and individuals. Among the clients of WMC are
more than 10 investment companies of The Vanguard Group. As
of December 31, 1994, WMC held discretionary management au-
thority with respect to more than $80 billion of assets. WMC
and its predecessor organizations have provided investment
advisory services to investment companies since 1931 and to
investment counseling clients since 1960.
John B. Neff, Managing Partner of WMC, serves as portfolio
manager of the Fund, a position he has held since June of
1964. In managing the Fund's investments, Mr. Neff is as-
sisted by Charles T. Freeman, Senior Vice President of WMC
and assistant portfolio manager of the Fund, who joined WMC
in 1969. Messrs. Neff and Freeman are supported by research
and other investment services provided by the professional
staff of WMC.
Effective at year-end 1995, Mr. Neff will retire and Mr.
Freeman will assume the position of portfolio manager of the
Fund. Mr. Neff will remain as an adviser to WMC, and will
continue to work with the firm's investment professionals,
including the portfolio managers of all Vanguard funds for
which WMC serves as adviser.
9
<PAGE>
WMC earns a basic advisory fee, calculated by applying the
following annual percentage rates to the average month-end
net assets of the Fund:
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
---------- ------
<S> <C>
First $200 million .350%
Next $250 million .275%
Next $300 million .200%
Assets in excess of $750 million .150%
</TABLE>
The basic fee paid to the Adviser may be increased or de-
creased by applying an adjustment based on the Fund's invest-
ment performance. Such formula provides for an increase or
decrease of the basic fee in an amount equal to .10% per an-
num (.025% per quarter) of the average month-end net assets
of the Fund if the Fund's investment performance for the
thirty-six months preceding the end of the quarter is twelve
percentage points or more above or below, respectively, the
investment record of the Standard & Poor's Daily Stock Price
Index of 500 Common Stocks (the "S&P Index") for the same pe-
riod; or by an amount equal to .05% per annum (.0125% per
quarter) if the Fund's investment performance for such thir-
ty-six months is six or more but less than twelve percentage
points above or below, respectively, the investment record of
the S&P Index for the same period.
During the fiscal year ended October 31, 1994, the total ad-
visory fees paid by the Fund to WMC represented an effective
annual rate of .16% of the Fund's average net assets before
an increase of .08% based upon the investment performance.
The investment advisory agreement authorizes WMC to select
brokers or dealers to execute purchases and sales of the
Fund's portfolio securities, and directs the adviser to use
its best efforts to obtain the best available price and most
favorable execution with respect to all transactions. The
full range and quality of brokerage services available are
considered in making these determinations.
The Fund has authorized WMC to pay higher commissions in rec-
ognition of brokerage services felt necessary for the
achievement of better execution, provided the adviser be-
lieves this to be in the best interest of the Fund. Although
the Fund does not market its shares through intermediary bro-
kers or dealers, the Fund may place orders with qualified
broker-dealers who recommend the Fund to clients if the Offi-
cers of the Fund believe that the quality of the transaction
and the commission are comparable to what they would be with
other qualified brokerage firms.
The Fund's Board of Directors may, without the approval of
shareholders, provide for: (a) the employment of a new in-
vestment adviser pursuant to the terms of a new advisory
agreement, either as a replacement for an existing adviser or
as an additional adviser; (b) a change in the terms of an ad-
visory agreement; and (c) the continued employment of an ex-
isting adviser on the same advisory
10
<PAGE>
contract terms where a contract has been assigned because of
a change in control of the adviser. Any such change will only
be made upon not less than 30 days' prior written notice to
shareholders of the Fund, which shall include substantially
the information concerning the adviser that would have nor-
mally been included in a proxy statement.
- --------------------------------------------------------------------------------
PERFORMANCE The table on table 11 provides investment results for the
RECORD Fund for several periods throughout the Fund's lifetime. The
results shown represent the Fund's "total return" investment
performance, which assumes the reinvestment of all capital
gains and income dividends for the indicated periods. Also
included is comparative information with respect to the un-
managed Standard & Poor's 500 Composite Stock Price Index, a
widely used barometer of stock market activity, and the Con-
sumer Price Index, a statistical measure of changes in the
prices of goods and services. The table does not make any al-
lowance for federal, state or local income taxes which share-
holders must pay on a current basis.
The results shown should not be considered a representation
of the total return from an investment made in the Fund to-
day. This information is provided to help investors better
understand the Fund and may not provide a basis for compari-
son with other investments or mutual funds which use a dif-
ferent method to calculate performance.
AVERAGE ANNUAL RETURN FOR VANGUARD/WINDSOR FUND
<TABLE>
<CAPTION>
PERCENTAGE INCREASE
------------------------------------------------
FISCAL PERIODS VANGUARD/WINDSOR S&P 500 CONSUMER
ENDED 10/31/94 FUND INDEX PRICE INDEX
-------------- ---------------- ------- -----------
<S> <C> <C> <C>
3 Years +14.2% + 9.5% +2.9%
5 Years + 9.2 +10.1 +3.6
10 Years +14.5 +14.8 +3.6
20 Years +18.3 +14.3 +5.5
Lifetime* +12.8 +10.4 +4.7
</TABLE>
*October 23, 1958, to October 31, 1994. Data for the
Consumer Price Index begins October 31, 1958.
- --------------------------------------------------------------------------------
DIVIDENDS, The Fund expects to pay dividends from ordinary income semi-
CAPITAL GAINS annually. Capital gains distributions, if any, will be made
AND TAXES annually.
THE FUND PAYS In addition, in order to satisfy certain distribution re-
SEMI- ANNUAL quirements of the Tax Reform Act of 1986, the Fund may de-
DIVIDENDS AND clare special year-end dividend and capital gains distribu-
ANY CAPITAL tions during December. Such distributions, if received by
GAINS ANNUALLY shareholders by January 31, are deemed to have been paid by
the Fund and received by shareholders on December 31 of the
prior year.
Dividend and capital gains distributions may be automatically
reinvested or received in cash. See "Choosing a Distribution
Option" for a description of these distributions methods.
11
<PAGE>
The Fund intends to continue to qualify for taxation as a
"regulated investment company" under the Internal Revenue
Code so that it will not be subject to federal tax to the ex-
tent its income is distributed to shareholders. Dividends
paid by the Fund from net investment income, whether received
in cash or reinvested in additional shares, will be taxable
to shareholders as ordinary income. For corporate investors,
dividends from net investment income will generally qualify
in part for the corporate dividends received deduction. How-
ever, the portion of the dividends so qualified depends on
the aggregate taxable qualifying dividend income received by
the Fund from domestic (U.S.) sources.
Distributions paid by the Fund from long-term capital gains,
whether received in cash or reinvested in additional shares,
are taxable as long-term capital gains, regardless of the
length of time you have owned shares in the Fund. Capital
gains distributions are made when the Fund realizes net capi-
tal gains on sales of portfolio securities during the year.
The Fund does not seek to realize any particular amount of
capital gains during a year; rather, realized gains are a by-
product of portfolio management activities. Consequently,
capital gains distributions may be expected to vary consider-
ably from year to year; there will be no capital gains dis-
tributions in years when the Fund realizes net capital loss-
es.
Note that if you accept capital gains distributions in cash
instead of reinvesting them in additional shares, you are in
effect reducing the capital at work for you in the Fund. Al-
so, keep in mind that if you purchase shares in the Fund
shortly before the record date for a dividend or capital
gains distribution, a portion of your investment will be re-
turned to you as a taxable distribution, regardless of
whether you are reinvesting your distributions or receiving
them in cash.
The Fund will notify you annually as to the tax status of
dividend and capital gains distributions paid by the Fund.
A CAPITAL GAIN A sale of shares of the Fund is a taxable event and may re-
OR LOSS MAY BE sult in a capital gain or loss. A capital gain or loss may be
REALIZED UPON realized from an ordinary redemption of shares or an exchange
EXCHANGE OR of shares between two mutual funds (or two portfolios of a
REDEMPTION mutual fund).
Dividend distributions, capital gains distributions, and cap-
ital gains or losses from redemptions and exchanges may be
subject to state and local taxes.
The Fund is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to share-
holders who have not complied with IRS taxpayer identifica-
tion regulations. You may avoid this withholding requirement
by certifying on your Account Registration Form your proper
Social Security or Employer Identification number and certi-
fying that you are not subject to backup withholding.
The Fund has obtained a Certificate of Authority to do busi-
ness as a foreign corporation in Pennsylvania and does busi-
ness and maintains an office in that
12
<PAGE>
state. In the opinion of counsel, the shares of the Fund are
exempt from Pennsylvania personal property taxes.
The tax discussion set forth above is included for general
information only. Prospective investors should consult their
own tax advisers concerning the tax consequences of an in-
vestment in the Fund. The Fund is managed without regard to
tax ramifications.
- --------------------------------------------------------------------------------
THE SHARE The Fund's share price or "net asset value" per share is de-
PRICE OF THE termined by dividing the total market value of the Fund's in-
FUND vestments and other assets, less any liabilities, by the num-
ber of outstanding shares of the Fund. Net asset value per
share is calculated at the close of regular trading on the
New York Stock Exchange on each day the Exchange is open for
business.
Portfolio securities that are listed on a securities exchange
are valued at the latest quoted sales prices as of 4:00 p.m.
on the valuation date. Price information on listed securities
is taken from the exchange where the security is primarily
traded. Securities which are listed on an exchange and which
are not traded on the valuation date are valued at the mean
of the latest quoted bid and asked prices. Unlisted securi-
ties for which market quotations are readily available are
valued at the latest quoted bid price. Temporary cash invest-
ments are valued at amortized cost, which approximates market
value. Other assets and securities for which no quotations
are readily available are valued at fair value as determined
in good faith by the Directors. 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 Fund's share price can be found daily in the mutual fund
listings of most major newspapers under the heading of The
Vanguard Group.
- --------------------------------------------------------------------------------
The Company is a Maryland corporation. The Articles of Incor-
GENERAL poration permit the Directors to issue 1,600,000,000 shares
INFORMATION of common stock, with a one cent par value. The Board of Di-
rectors has the power to designate one or more classes ("se-
ries") of shares of common stock and to classify and reclas-
sify any unissued shares with respect to such series. Cur-
rently the Company is offering shares of two series.
The shares of each series of the Company are fully paid and
non-assessable; have no preference as to conversion, ex-
change, dividends, retirement or other features; and have no
pre-emptive rights. Such shares have non-cumulative voting
rights, meaning that the holders of more than 50% of the
shares voting for the election of Directors can elect 100% of
the Directors if they so choose.
Annual meetings of shareholders will not be held except as
required by the Investment Company Act of 1940 and other ap-
plicable law. An annual meeting will be held to vote on the
removal of a Director or Directors of the Company if re-
quested in writing by the holders of not less than 10% of the
outstanding shares of the Company.
13
<PAGE>
All securities and cash are held by State Street Bank and
Trust Company. Boston, MA. The Vanguard Group, Inc., Valley
Forge, Pa, serves as the Fund's Transfer and Dividend Dis-
bursing Agent. Price Waterhouse LLP, serves as independent
accountants for the Fund and will audit its financial state-
ments annually. The Fund is not involved in any litigation.
- --------------------------------------------------------------------------------
14
<PAGE>
SHAREHOLDER GUIDE
OPENING AN Currently, shares of the Fund are not being offered or sold
ACCOUNT AND to new investors. Current shareholders of the Fund may make
PURCHASING additional investments, but the aggregate amount of such in-
SHARES vestments made during the calendar year may not exceed
$25,000.
Regular annual contributions to existing Vanguard/Windsor
Fund retirement accounts are being accepted. For IRAs, you
may make annual contributions up to the applicable tax law
limit ($2,000), as well as asset transfers and rollovers, but
the total of such purchases may not exceed $25,000. For other
retirement plans, total purchases generally may not exceed
$25,000. However, annual contributions to retirement plans
sponsored by Vanguard may be higher if permitted under the
tax laws.
Because of the risks associated with common stock invest-
ments, the Fund is intended to be a long-term investment ve-
hicle and is not designed to provide investors with a means
of speculating on short-term stock market movements. Conse-
quently the Fund reserves the right to reject any specific
purchase (or exchange purchase) request. The Fund also re-
serves the right to suspend the offering of shares for a pe-
riod of time.
The Fund's shares are purchased at the next-determined net
asset value after your investment has been received. The Fund
is offered on a no-load basis (i.e., there are no sales com-
missions or 12b-1 fees).
ADDITIONAL Subsequent investments by current shareholders may be made
INVESTMENTS only by mail ($100 minimum), wire ($1,000 minimum), exchange
from another Vanguard Fund account, or Vanguard Fund Express.
--------------------------------------------------------------
PURCHASING BY Additional investments should include the Invest-by-Mail re-
MAIL mittance form attached to your Fund confirmation statement.
Please make your check payable to The Vanguard Group-22,
write your account number on your check and, using the return
envelope provided, mail to the address indicated on the In-
vest-by-Mail form. Do not send registered or express mail to
the post office box address.
If you do not have a business reply envelope, mail your re-
quest to VANGUARD FINANCIAL CENTER, VANGUARD/WINDSOR FUND,
P.O. BOX 2600, VALLEY FORGE, PA 19482. For express or regis-
tered mail, send your request to Vanguard Financial Center,
Vanguard/Windsor Fund, 455 Devon Park Drive, Wayne, PA 19087.
--------------------------------------------------------------
PURCHASING BY CORESTATES BANK, N.A.
WIRE Money ABA 031000011
should be CORESTATES NO. 0101 9897
wired to: ATTN VANGUARD
VANGUARD/WINDSOR FUND
BEFORE WIRING ACCOUNT NUMBER
Please contact ACCOUNT REGISTRATION
Client Services
(1-800-662-2739)
15
<PAGE>
To assure proper receipt, please be sure your bank includes
the Fund name, the account number Vanguard has assigned to
you and the eight-digit CoreStates number. NOTE: Federal
Funds wire purchase orders will be accepted only when the
Fund and Custodian Bank are open for business.
--------------------------------------------------------------
PURCHASING BY Current shareholders may purchase additional shares of the
EXCHANGE (from Fund by exchange from an existing Vanguard account. (As ex-
a Vanguard plained on page 5, however, the Fund reserves the right to
account) refuse any exchange purchase request.) Please call our Client
Services Department at 1-800-662-2739.
--------------------------------------------------------------
PURCHASING BY The Fund Express Special Purchase option lets you move money
FUND EXPRESS from your bank account to your Vanguard account at your re-
quest. Or, if you choose the Automatic Investment option,
Special money will be moved from your bank account to your Vanguard
Purchase and account on the schedule (monthly, bimonthly [every other
Automatic month], quarterly or yearly) you select. To establish these
Investment Fund Express options, please call 1-800-662-7447 for a Fund
Express application. We will send you a confirmation of your
Fund Express service: please wait three weeks before using
the service.
- --------------------------------------------------------------------------------
CHOOSING A You must select one of three distribution options:
DISTRIBUTION
OPTION
1. AUTOMATIC REINVESTMENT OPTION--Both dividends and
capital gains distributions will be reinvested in
additional Fund shares. This option will be se-
lected for you automatically unless you specify
one of the other options.
2. CASH DIVIDEND OPTION--Your dividends will be paid
in cash and your capital gains will be reinvested
in additional Fund shares.
3. ALL CASH OPTION--Both dividend and capital gains
distributions will be paid in cash.
You may change your option by calling our Client Services De-
partment (1-800-662-2739).
In addition, an option to invest your cash dividends and/or
capital gains distributions in another Vanguard Fund account
is available. Please call our Client Services Department
(1-800-662-2739) for information. You may also elect Vanguard
Dividend Express which allows you to transfer your cash divi-
dends and/or capital gains distributions automatically to
your bank account. Please see "Other Vanguard Services" for
more information.
- --------------------------------------------------------------------------------
TAX CAUTION Under federal tax laws, the Fund is required to distribute
net capital gains and dividend income to Fund shareholders.
INVESTORS These distributions are made to all shareholders who own Fund
SHOULD ASK shares as of the distribution's record date, regardless of
ABOUT THE how long the shares have been owned. Purchasing shares just
TIMING OF prior to the record date could have a significant impact on
CAPITAL GAINS your tax liability for the year. For example, if you purchase
AND DIVIDEND shares immediately prior to the record date of a sizable cap-
DISTRIBUTIONS ital gain or income dividend distribution, you will be as-
BEFORE sessed taxes
INVESTING
16
<PAGE>
on the amount of the capital gain and/or dividend distribu-
tion later paid even though you owned the Fund shares for
just a short period of time. (Taxes are due on the distribu-
tions even if the dividend or gain is reinvested in addi-
tional Fund shares.) While the total value of your investment
will be the same after the distribution--the amount of the
distribution will offset the drop in the net asset value of
the shares--you should be aware of the tax implications the
timing of your purchase may have.
Prospective investors should, therefore, inquire about poten-
tial distributions before investing. The Fund's annual capi-
tal gains distribution normally occurs in December, while in-
come dividends are generally paid semi-annually in June and
December. For additional information on distributions and
taxes, see the section titled "Dividends, Capital Gains, and
Taxes."
- --------------------------------------------------------------------------------
IMPORTANT The easiest way to establish optional Vanguard services on
ACCOUNT your account is to select the options you desire when you
INFORMATION complete your Account Registration Form. IF YOU WISH TO ADD
SHAREHOLDER OPTIONS LATER, YOU MAY NEED TO PROVIDE VANGUARD
ESTABLISHING WITH ADDITIONAL INFORMATION AND A SIGNATURE GUARANTEE. PLEASE
OPTIONAL CALL OUR CLIENT SERVICES DEPARTMENT (1-800-662-2739) FOR FUR-
SERVICES THER ASSISTANCE.
SIGNATURE For our mutual protection, we may require a signature guaran-
GUARANTEES tee on certain written transaction requests. A signature
guarantee verifies the authenticity of your signature and may
be obtained from banks, brokers and any other guarantors that
Vanguard deems acceptable. A SIGNATURE GUARANTEE CANNOT BE
PROVIDED BY A NOTARY PUBLIC.
CERTIFICATES Share certificates will be issued upon request. If a certifi-
cate is lost, you may incur an expense to replace it.
BROKER/DEALER If you purchase shares in Vanguard funds through a registered
PURCHASES broker-dealer or investment adviser, the broker-dealer or ad-
viser may charge a service fee.
CANCELLING The Fund will not cancel any trade (e.g., purchase, exchange
TRADES or redemption) believed to be authentic, received in writing
or by telephone, once the trade request has been received.
ELECTRONIC If you would prefer to receive a prospectus for the Fund or
PROSPECTUS any of the Vanguard Funds in an electronic format, please
DELIVERY call 1-800-231-7870 for additional information. If you elect
to do so, you may also receive a paper copy of the prospec-
tus, by calling 1-800-662-7447.
- --------------------------------------------------------------------------------
WHEN YOUR Your trade date is the date on which your account is credit-
ACCOUNT WILL ed. If your purchase is made by check, Federal Funds wire or
BE CREDITED exchange, and is received by the regular close of the New
York Stock Exchange (generally 4:00 p.m. Eastern time), your
trade date is the date of receipt. If your purchase is re-
ceived after the close of the Exchange, your trade date is
the next business day. Your shares are purchased at the net
asset value determined on your trade date.
17
<PAGE>
In order to prevent lengthy processing delays caused by the
clearing of foreign checks, Vanguard will only accept a for-
eign check which has been drawn in U.S. dollars and has been
issued by a foreign bank with a U.S. correspondent bank. The
name of the U.S. correspondent bank must be printed on the
face of the foreign check.
- --------------------------------------------------------------------------------
SELLING YOUR You may withdraw any portion of the funds in your account by
SHARES redeeming shares at any time. You may initiate a request by
writing or by telephoning. Your redemption proceeds are nor-
mally mailed within two business days after the receipt of
the request in Good Order.
--------------------------------------------------------------
SELLING BY Requests should be mailed to VANGUARD FINANCIAL CENTER,
MAIL VANGUARD/WINDSOR FUND, P.O. BOX 1120, VALLEY FORGE, PA 19482.
(For express or registered mail, send your request to Van-
guard Financial Center, Vanguard/Windsor Fund, 455 Devon Park
Drive, Wayne, PA 19087.)
The redemption price of shares will be the Fund's net asset
value next determined after Vanguard has received all re-
quired documents in Good Order.
--------------------------------------------------------------
DEFINITION OF GOOD ORDER means that the request includes the following:
GOOD ORDER
1. The account number and Fund name.
2. The amount of the transaction (specified in dollars or
shares).
3. Signatures of all owners EXACTLY as they are registered on
the account.
4. Any required signature guarantees.
5. Other supporting legal documentation that might be re-
quired, in the case of estates, corporations, trusts, and
certain other accounts.
6. Any certificates that you hold for the account.
IF YOU HAVE ANY QUESTIONS ABOUT THIS DEFINITION AS IT PER-
TAINS TO YOUR REQUEST, PLEASE CALL OUR CLIENT SERVICES DE-
PARTMENT AT 1-800-662-2739.
--------------------------------------------------------------
SELLING BY To sell shares by telephone, you or your pre-authorized rep-
TELEPHONE resentative may call our Client Services Department at 1-800-
662-2739. The proceeds will be sent to you by mail. Please
see also "Important Information About Telephone
Transactions."
--------------------------------------------------------------
SELLING BY If you select the Fund Express Automatic Withdrawal option,
FUND EXPRESS money will be automatically moved from your Vanguard Fund ac-
count to your bank account according to the schedule you have
Automatic selected. The Special Redemption option lets you move money
Withdrawal & from your Vanguard account to your bank account on your re-
Special quest. To establish Fund Express, call our Investor Informa-
Redemption tion Department at 1-800-662-7447 for a Fund Express
application.
--------------------------------------------------------------
SELLING BY You may sell shares of the Fund by making an exchange into
EXCHANGE another Vanguard Fund account. Please see "Exchanging Your
Shares" for details.
--------------------------------------------------------------
18
<PAGE>
IMPORTANT Shares purchased by check or Fund Express may be redeemed at
REDEMPTION any time. However, your redemption proceeds will not be paid
INFORMATION until payment for the purchase is collected, which may take
up to ten calendar days.
--------------------------------------------------------------
If you choose to close your Vanguard/Windsor account through
DELIVERY OF a redemption, you will not be able to open another account at
REDEMPTION a later date, since Windsor Fund is currently closed to new
PROCEEDS investors. But, if you choose to close your account through
an exchange to another Vanguard portfolio, your account can
be reopened for UP TO ONE YEAR.
Redemption requests received by telephone prior to the regu-
lar close of the New York Stock Exchange (generally 4:00 p.m.
Eastern time) are processed on the day of receipt and the re-
demption proceeds are normally sent on the following business
day.
Redemption requests received by telephone after the close of
the Exchange are processed on the business day following re-
ceipt and the proceeds are normally sent on the second busi-
ness day following receipt.
Redemption proceeds must be sent to you within seven days of
receipt of your request in Good Order.
If you experience difficulty in making a telephone redemption
during periods of drastic economic or market changes, your
redemption request may be made by regular or express mail. It
will be implemented at the net asset value next determined
after your request has been received by Vanguard in Good Or-
der. The Fund reserves the right to revise or terminate the
telephone redemption privilege at any time.
The Fund may suspend the redemption right or postpone payment
at times when the New York Stock Exchange is closed or under
any emergency circumstances as determined by the United
States Securities and Exchange Commission.
If the Board of Directors determines that it would be detri-
mental to the best interests of the Fund's remaining share-
holders to make payment in cash, the Fund may pay redemption
proceeds in whole or in part by a distribution in kind of
readily marketable securities.
--------------------------------------------------------------
VANGUARD'S If you make a redemption from a qualifying account, Vanguard
AVERAGE COST will send you an Average Cost Statement which provides you
STATEMENT with the tax basis of the shares you redeemed. Please see
"Other Vanguard Services" for additional information.
--------------------------------------------------------------
MINIMUM Due to the relatively high cost of maintaining smaller ac-
ACCOUNT counts, the Fund reserves the right to redeem shares in any
BALANCE account that is below the minimum initial investment amount.
REQUIREMENT If at any time your total investment does not have a value of
at least $3,000, you may be notified that your account is be-
low the Fund's minimum account balance requirement. You would
then be allowed 60 days to make an additional investment be-
fore the account is liquidated. Pro-
19
<PAGE>
ceeds would be promptly paid to the registered shareholder.
(This minimum does not apply to IRAs, certain other retire-
ment accounts, and Uniform Gifts/Transfers to Minors Act ac-
counts.)
The Fund's minimum account balance requirement will not apply
if your account falls below $3,000 solely as a result of de-
clining markets (i.e., a decline in a Fund's net asset val-
ue).
- --------------------------------------------------------------------------------
EXCHANGING Should your investment goals change, you may ex-
YOUR SHARES change your shares of Vanguard/Windsor Fund for
those of other available Vanguard Funds.
EXCHANGING BY When exchanging shares by telephone, please have ready the
TELEPHONE Fund name, account number, Social Security number or Employer
Identification number listed on the account, and the exact
Call Client name and address in which the account is registered. Only the
Services (1- registered shareholder, or his or her pre-authorized repre-
800-662-2739) sentative, may complete such an exchange. Requests for tele-
phone exchanges received prior to the close of trading on the
New York Stock Exchange (generally 4:00 p.m. Eastern time)
are processed at the close of business that same day. Re-
quests received after 4:00 p.m. are processed the next busi-
ness day. TELEPHONE EXCHANGES ARE NOT ACCEPTED INTO OR FROM
VANGUARD BALANCED INDEX, VANGUARD INDEX TRUST, VANGUARD IN-
TERNATIONAL EQUITY INDEX FUND, AND VANGUARD QUANTITATIVE
PORTFOLIOS. If you experience difficulty in making a tele-
phone exchange, your exchange request may be made by regular
or express mail, and it will be implemented at the closing
net asset value on the date received by Vanguard provided the
request is received in Good Order.
Please see "Important Information About Telephone Transac-
tions" for additional important details.
--------------------------------------------------------------
EXCHANGING BY Please be sure to include on your exchange request the name
MAIL and account number of your current Fund, and the name of the
Fund you wish to exchange into, the amount you wish to ex-
change, and the signatures of all registered account holders.
Send your request to VANGUARD FINANCIAL CENTER,
VANGUARD/WINDSOR FUND, P.O. BOX 1120, VALLEY FORGE, PA 19482.
(For express or registered mail, send your request to Van-
guard Financial Center, Vanguard/Windsor Fund, 455 Devon Park
Drive, Wayne, PA 19087.)
--------------------------------------------------------------
IMPORTANT Before you make an exchange, you should consider the follow-
EXCHANGE ing:
INFORMATION
. Please read the Fund's prospectus before making an
exchange. For a copy and for answers to any ques-
tions you may have, call our Investor Information
Department (1-800-662-7447).
. An exchange is treated as a redemption and a pur-
chase; therefore, you could realize a taxable gain
or loss on the transaction.
. Exchanges are accepted only if the registrations
and the Taxpayer Identification numbers of the two
accounts are identical.
20
<PAGE>
. New accounts are not currently accepted in the
Fund or Vanguard/PRIMECAP Fund.
. The shares to be exchanged must be on deposit and
not held in certificate form.
. The redemption price of shares redeemed by ex-
change is the net asset value next determined af-
ter Vanguard has received any required documents
in Good Order.
. When opening a new account by exchange, you must
meet the minimum investment requirement of the new
Fund. You cannot open a new account in the Fund by
exchange.
Every effort will be made to maintain the exchange privilege.
However, the Fund reserves the right to revise or terminate
its provisions, or to limit the amount of or reject any ex-
change, as deemed necessary, at any time.
- --------------------------------------------------------------------------------
EXCHANGE The Fund's exchange privilege is not intended to afford
PRIVILEGE shareholders a way to speculate on short-term movements in
LIMITATIONS the market. Accordingly, in order to prevent excessive use of
the exchange privilege that may potentially disrupt the man-
agement of the Fund and increase transaction costs, the Fund
has established a policy of limiting excessive exchange ac-
tivity.
Exchange activity generally will not be deemed excessive if
limited to TWO SUBSTANTIVE EXCHANGE REDEMPTIONS (AT LEAST 30
DAYS APART) from the Fund during any twelve month period.
Notwithstanding these limitations, the Fund reserves the
right to reject any purchase request (including exchange pur-
chases from other Vanguard portfolios) that is reasonably
deemed to be disruptive to efficient portfolio management.
- --------------------------------------------------------------------------------
IMPORTANT The ability to initiate redemptions (except wire redemptions)
INFORMATION and exchanges by telephone is automatically established on
ABOUT your account unless you request in writing that telephone
TELEPHONE transactions on your account not be permitted.
TRANSACTIONS
To protect your account from losses resulting from unautho-
rized or fraudulent telephone instructions, Vanguard adheres
to the following security procedures:
1. SECURITY CHECK. To request a transaction by telephone, the
caller must know (i) the name of the Portfolio; (ii) the 10-
digit account number; (iii) the exact name and address used
in the registration; and (iv) the Social Security or Employer
Identification number listed on the account.
2. PAYMENT POLICY. The proceeds of any telephone redemption
by mail will be made payable to the registered shareowners
and mailed to the address of record, only.
Neither the Fund nor Vanguard will be responsible for the au-
thenticity of transaction instructions received by telephone,
provided that reasonable security procedures have been fol-
lowed. Vanguard believes that the security procedures de-
scribed above are reasonable, and that if such procedures are
followed, you
21
<PAGE>
will bear the risk of any losses resulting from unauthorized
or fraudulent telephone transactions on your account.
- --------------------------------------------------------------------------------
You may transfer the registration of any of your Fund shares
TRANSFERRING to another person, provided that the amount of each transfer
REGISTRATION equals at least $3,000 for non-retirement and $2,000 for
IRAs, by completing a transfer form and sending it to: VAN-
GUARD FINANCIAL CENTER, P.O. BOX 1110, VALLEY FORGE, PA
19482. The request must be in Good Order. Before mailing your
request, please call our Client Services Department (1-800-
662-2739) for full instructions.
- --------------------------------------------------------------------------------
STATEMENTS AND Vanguard will send you a confirmation statement each time you
REPORTS initiate a transaction in your account, except for
checkwriting redemptions from Vanguard money market accounts.
You will also receive a comprehensive account statement at
the end of each calendar quarter. The fourth-quarter state-
ment will be a year-end statement, listing all transaction
activity for the entire calendar year.
Vanguard's Average Cost Statement provides you with the aver-
age cost of shares redeemed from your account, using the av-
erage cost single category method. This service is available
for most taxable accounts opened since January 1, 1986. In
general, investors who redeemed shares from a qualifying Van-
guard account may expect to receive their Average Cost State-
ment in February of the following year. Please call our Cli-
ent Services Department (1-800- 662-2739) for information.
Financial reports on the Fund will be mailed to you semi-an-
nually, according to the Fund's fiscal year-end.
- --------------------------------------------------------------------------------
OTHER VANGUARD For more information about any of these services,
SERVICES please call our Investor Information Department at
1-800-662-7447.
VANGUARD With Vanguard's Direct Deposit Service, most U.S. Government
DIRECT DEPOSIT checks (including Social Security and military pension
SERVICE checks) and private payroll checks may be automatically de-
posited into your Vanguard Fund account. Separate brochures
and forms are available for direct deposit of U.S. Government
and private payroll checks.
VANGUARD Vanguard's Automatic Exchange Service allows you to move
AUTOMATIC money automatically among your Vanguard fund accounts. For
EXCHANGE instance, the service can be used to "dollar cost average"
SERVICE from a money market portfolio into a stock or bond fund, or
to contribute to an IRA or other retirement plan. Please con-
tact our Client Services Department at 1-800-662-2739 for ad-
ditional information.
VANGUARD FUND Vanguard's Fund Express allows you to transfer money between
EXPRESS your Fund account and your account at a bank, savings and
loan association, or a credit union that is a member of the
Automated Clearing House (ACH) system. You may elect this
service on the Account Registration Form or call our Investor
Information Department (1-800-662-7447) for a Fund Express
application.
22
<PAGE>
The minimum amount that can be transferred by telephone is
$100. However, if you have established one of the automatic
options, the minimum amount is $50. The maximum amount that
can be transferred using any of the options is $100,000.
Special rules govern how your Fund Express purchases or re-
demptions are credited to your account. In addition, some
services of Fund Express cannot be used with specific Van-
guard funds. For more information, please refer to the Van-
guard Fund Express brochure.
VANGUARD Vanguard's Dividend Express allows you to transfer your divi-
DIVIDEND dends and/or capital gains distributions automatically from
EXPRESS your Fund account, one business day after the Fund's payable
date, to your account at a bank, savings and loan associa-
tion, or a credit union that is a member of the Automated
Clearing House (ACH) system. You may elect this service on
the Account Registration Form, or call our Investor Informa-
tion Department (1-800-662-7447) for a Vanguard Dividend Ex-
press application.
VANGUARD TELE- Vanguard's Tele-Account is a convenient, automated service
ACCOUNT that provides share price, price change and yield quotations
on Vanguard Funds through any TouchToneTM telephone. This
service also lets you obtain information about your account
balance, your last transaction, and your most recent dividend
or capital gains payment. To contact Vanguard's Tele-Account
service, dial 1-800-ON-BOARD (1-800-662-6273). A brochure of-
fering detailed operating instructions is available from our
Investor Information Department (1-800-662-7447).
- --------------------------------------------------------------------------------
23
<PAGE>
[LOGO OF VANGUARD WINDSOR FUND APPEARS HERE]
- ---------------
THE VANGUARD GROUP
OF INVESTMENT
COMPANIES
Vanguard Financial Center
P.O. Box 2600
Valley Forge, PA 19482
INVESTOR INFORMATION
DEPARTMENT:
1-800-662-7447 (SHIP)
CLIENT SERVICES
DEPARTMENT:
1-800-662-2739 (CREW)
TELE-ACCOUNT FOR
24-HOUR ACCESS:
1-800-662-6273 (ON-BOARD)
TELECOMMUNICATION SERVICE FOR THE HEARING-IMPAIRED:
1-800-662-2738
TRANSFER AGENT:
The Vanguard Group, Inc.
Vanguard Financial Center
Valley Forge, PA 19482
[LOGO OF VANGUARD WINDSOR FUND APPEARS HERE]
P R O S P E C T U S
FEBRUARY 28, 1995;
REVISED JUNE 6, 1995
[LOGO OF THE VANGUARD GROUP APPEARS HERE]
P022
<PAGE>
================================================================================
[LOGO OF
VANGUARD
WINDSOR
FUND A Series of Vanguard/Windsor Funds
APPEARS HERE] and A Member of The Vanguard Group
================================================================================
PROSPECTUS--FEBRUARY 28, 1995; REVISED JUNE 6, 1995
- --------------------------------------------------------------------------------
FUND INFORMATION: INSTITUTIONAL PARTICIPANT SERVICES--1-800-523-1188
- --------------------------------------------------------------------------------
INVESTMENT Vanguard/Windsor Fund (the "Fund"), formerly Windsor Fund, is
OBJECTIVES an open-end diversified investment company that seeks to pro-
AND POLICIES vide long-term growth of capital and income by investing pri-
marily in common stocks. The Fund's secondary objective is to
provide current income. There can be no assurance that the
Fund will achieve these objectives. Shares of the Fund are
neither insured nor guaranteed by any agency of the U.S. Gov-
ernment, including the FDIC.
Vanguard/Windsor Fund is an independent series of
Vanguard/Windsor Funds, Inc. (the "Company"), formerly The
Windsor Funds, Inc. The Company is currently offering shares
of two series. This Prospectus relates to the
Vanguard/Windsor Fund series only.
- --------------------------------------------------------------------------------
IMPORTANT This Prospectus is intended exclusively for participants in
NOTE employer-sponsored retirement or savings plans, such as tax-
qualified pension and profit-sharing plans and 401(k) thrift
plans, as well as 403(b)(7) custodial accounts for non-profit
educational and charitable organizations.
- --------------------------------------------------------------------------------
OPENING AN The Fund is an investment option under a retirement or sav-
ACCOUNT ings program sponsored by your employer. The administrator of
your retirement plan 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 op-
tion.
If you have any questions about the Fund, please contact Par-
ticipant Services at 1-800-523-1188. If you have any ques-
tions about your plan account, contact your plan administra-
tor or the organization that provides recordkeeping services
for your plan.
- --------------------------------------------------------------------------------
ABOUT THIS This Prospectus is designed to set forth concisely the infor-
PROSPECTUS mation you should know about the Fund before you invest. It
should be retained for future reference. A "Statement of Ad-
ditional Information" containing additional information about
the Fund has been filed with the Securities and Exchange Com-
mission. This Statement is dated February 28, 1995; Revised
June 6, 1995 and has been incorporated by reference into this
Prospectus. A copy may be obtained without charge by writing
to the Fund or by calling Participant Services.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page Page Page
<S> <C> <C> <C>
Fund Expenses................. 2 Who Should Invest............. 5 Dividends, Capital
Financial Highlights.......... 2 Implementation of Policies.... 6 Gains and Taxes............. 11
Yield and Total Return........ 3 Investment Limitations........ 8 The Share Price of the Fund.. 12
Investment Objectives......... 4 Management of the Fund........ 8 General Information.......... 12
Investment Policies........... 4 Investment Adviser............ 9 SERVICE GUIDE
Investment Risks.............. 4 Performance Record............ 11 Participating in Your Plan... 13
</TABLE>
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-
FENSE.
- --------------------------------------------------------------------------------
<PAGE>
FUND EXPENSES The following table illustrates all expenses and fees that a
shareholder of the Fund would incur. The expenses and fees
set forth in the table are for the 1994 fiscal year.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
---------------------------------------------------------------
<S> <C>
Sales Load Imposed on Purchases......................... None
Sales Load Imposed on Reinvested Dividends.............. None
Redemption Fees......................................... None
Exchange Fees........................................... None
<CAPTION>
ANNUAL/FUND OPERATING EXPENSES
---------------------------------------------------------------
<S> <C> <C>
Management & Administrative Expenses.................... 0.18%
Investment Advisory Fees................................ 0.24
12b-1 Fees.............................................. None
Other Expenses
Distribution Costs................................ 0.02%
Miscellaneous Expenses............................ 0.01
----
Total Other Expenses.................................... 0.03
----
TOTAL OPERATING EXPENSES.............................. 0.45%
====
</TABLE>
The purpose of this table is to assist you in understanding
the various costs and expenses that an investor would bear
directly or indirectly as a shareholder in the Fund.
The following example illustrates the expenses that a share-
holder would incur on a $1,000 investment over various peri-
ods, assuming (1) a 5% annual rate of return and (2) redemp-
tion at the end of each period. As noted in the table above,
the Fund charges no redemption fees of any kind.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C>
$5 $14 $25 $57
</TABLE>
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY
BE HIGHER OR LOWER THAN THOSE SHOWN.
- --------------------------------------------------------------------------------
FINANCIAL The following financial highlights for a share outstanding
HIGHLIGHTS throughout each year, insofar as they relate to each of the
five years in the period ended October 31, 1994, have been
audited by Price Waterhouse LLP, independent accountants,
whose report thereon was unqualified. This information should
be read in conjunction with the Fund's financial statements
and notes thereto which are incorporated by reference in the
Statement of Additional Information and this Prospectus, and
which appear, along with the report of Price Waterhouse LLP,
in the Fund's 1994 Annual Report to Shareholders. For a more
complete discussion of the Fund's performance, please see the
Fund's 1994 Annual Report to Shareholders, which may be ob-
tained without charge by writing to the Fund or by calling
Participant Services at 1-800-523-1188.
2
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988 1987 1986 1985
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR...... $14.95 $12.37 $12.79 $9.72 $15.17 $14.13 $14.22 $13.85 $13.39 $12.12
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
INVESTMENT OPERATIONS
Net Investment Income.. .44 .37 .49 .58 .74 .71 .66 .78 .85 .79
Net Realized and
Unrealized Gain (Loss)
on Investments........ .42 2.98 .50 3.55 (4.59) 1.51 2.33 (.11) 3.05 2.01
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT
OPERATIONS........... .86 3.35 .99 4.13 (3.85) 2.22 2.99 .67 3.90 2.80
- ------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income..... (.37) (.39) (.57) (.74) (.75) (.63) (.87) (.30) (.85) (.79)
Distributions from
Realized Capital
Gains................. (.89) (.38) (.84) (.32) (.85) (.55) (2.21) -- (2.59) (.74)
------- ------- ------ ------ ------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS... (1.26) (.77) (1.41) (1.06) (1.60) (1.18) (3.08) (.30) (3.44) (1.53)
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
YEAR................... $14.55 $14.95 $12.37 $12.79 $ 9.72 $15.17 $14.13 $14.22 $13.85 $13.39
============================================================================================================
TOTAL RETURN............ 6.35% 28.29% 9.30% 44.69% (27.93)% 17.05% 27.01% 4.62% 29.31% 23.30%
============================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year
(Millions)............. $11,406 $10,537 $8,250 $7,859 $5,841 $8,313 $5,920 $4,848 $4,862 $3,813
Ratio of Expenses to
Average Net Assets..... .45% .40% .26% .30% .37% .41% .46% .43% .52% .53%
Ratio of Net Investment
Income to Average Net
Assets................. 3.11% 2.68% 3.89% 4.84% 5.82% 5.07% 5.08% 4.86% 5.28% 6.19%
Portfolio Turnover Rate. 34% 25% 32% 36% 21% 34% 24% 46% 51% 23%
</TABLE>
- --------------------------------------------------------------------------------
YIELD AND From time to time the Fund may advertise its yield and total
TOTAL RETURN return. Both yield and total return figures are based on his-
torical earnings and are not intended to indicate future per-
formance. The "total return" of the Fund refers to the aver-
age annual compounded rates of return over one-, five-and
ten-year periods or for the life of the Fund (as stated in
the advertisement) that would equate an initial amount in-
vested at the beginning of a stated period to the ending re-
deemable value of the investment, assuming the reinvestment
of all dividend and capital gains distributions.
In accordance with industry guidelines set forth by the U.S.
Securities and Exchange Commission, the "30-day yield" of the
Fund is calculated daily by dividing the net investment in-
come per share earned during a 30-day period by the net asset
value per share on the last day of the period. Net investment
income includes interest and dividend income earned on the
Fund's securities and is net of all expenses and all recur-
ring and nonrecurring charges that have been applied to all
shareholder accounts. The yield calculation assumes that the
net investment income earned over thirty days is compounded
monthly for six months and then annualized. Methods used to
calculate advertised yields are standardized for all stock
and bond mutual funds. However, these methods differ from the
accounting methods used by the Fund to maintain its books and
records, and so the advertised 30-day yield may not fully re-
flect the income paid to your own account or the yield re-
ported in the Fund's reports to shareholders.
- --------------------------------------------------------------------------------
3
<PAGE>
INVESTMENT The objective of the Fund is to provide long-term growth of
OBJECTIVES capital and income. The Fund's secondary objective is to pro-
vide current income. There can be no assurance that the Fund
THE FUND SEEKS will achieve these objectives.
TO PROVIDE
LONG-TERM These investment objectives are fundamental and so cannot be
GROWTH OF changed without the approval of a majority of the Fund's
CAPITAL AND shareholders.
INCOME
- --------------------------------------------------------------------------------
INVESTMENT The Fund invests primarily in common stocks, which are se-
POLICIES lected principally on the basis of fundamental investment
value. Crucial to the valuation process is the relationship
THE FUND of a company's underlying earning power and dividend payout
INVESTS to the market price of its stock. The Fund's holdings usually
PRIMARILY IN are characterized by relatively low price-earnings ratios and
COMMON STOCKS meaningful income yields. At the time of purchase, many of
the Fund's securities are considered to be undervalued or
overlooked by the market. The Fund is managed without regard
to tax ramifications.
Although the Fund invests primarily in common stocks, it may
invest in money market instruments, fixed-income securities,
convertible securities and other equity securities, such as
preferred stock. The Fund reserves the right to hold money
market instruments and fixed-income securities in whatever
proportion the adviser deems appropriate for temporary defen-
sive purposes. The Fund may also invest in stock futures con-
tracts and options. See "Implementation of Policies" for a
description of these investment practices of the Fund.
The investment policies of the Fund are not fundamental and
so may be changed by the Board of Directors without share-
holder approval.
- --------------------------------------------------------------------------------
INVESTMENT As a mutual fund investing primarily in common stocks, the
RISKS Fund is subject to MARKET RISK--i.e., the possibility that
common stock prices will decline over short or even extended
THE FUND IS periods. The U.S. stock market has tended to be cyclical,
SUBJECT TO with periods when common stock prices generally rise and pe-
MARKET RISK riods when prices generally decline.
To illustrate the volatility of stock prices, the following
table sets forth the extremes for stock market returns as
well as the average return for the period from 1926 to 1994,
as measured by the Standard & Poor's 500 Composite Stock
Price Index.
AVERAGE ANNUAL U.S. STOCK MARKET RETURNS (1926-1994) OVER
VARIOUS TIME HORIZONS
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS 20 YEARS
------ ------- -------- --------
<S> <C> <C> <C> <C>
Best +53.9% +23.9% +20.1% +16.9%
Worst -43.3 -12.5 - 0.9 + 3.1
Average +12.2 +10.2 +10.7 +10.7
</TABLE>
4
<PAGE>
As shown, common stocks have provided annual total returns
(capital appreciation plus dividend income), averaging +10.7%
for all 10-year periods from 1926 to 1994. While this average
return can be used as a guide for setting reasonable expecta-
tions for future stock market returns, it may not be useful
for forecasting future returns in any particular period, as
stock returns are quite volatile from year to year.
This table of U.S. stock market returns should not be viewed
as a representation of future returns for the Fund or the
U.S. stock market. The illustrated returns represent histori-
cal investment performance, which may be a poor guide to fu-
ture returns. Also, stock market indexes such as the S&P 500
are based on unmanaged portfolios of securities before trans-
action costs and other expenses. Such costs will reduce the
relative investment performance of the Fund and other "real
world" portfolios. Finally, the Fund is likely to differ in
portfolio composition from broad stock market averages, and
so the Fund's performance should not be expected to mirror
the returns provided by a specific index.
THE FUND IS The investment adviser manages the Fund according to the tra-
ALSO SUBJECT ditional methods of "active" investment management, which in-
TO MANAGER volve the buying and selling of securities based upon econom-
RISK ic, financial and market analysis and investment judgement.
MANAGER RISK refers to the possibility that the Fund's in-
vestment adviser may fail to execute the Fund's investment
strategy effectively. As a result, the Fund may fail to
achieve its stated objective.
- --------------------------------------------------------------------------------
WHO SHOULD The Fund is intended for investors who are seeking growth of
INVEST capital and income. Although the Fund's secondary objective
is to provide current income, investors should not consider
LONG-TERM the Fund a substitute for fixed-income investments. The Fund
INVESTORS is intended to be a long-term investment vehicle and is not
SEEKING GROWTH designed to provide investors with a means of speculating on
OF CAPITAL AND short-term market movements. Investors who engage in exces-
INCOME sive account activity generate additional costs which are
borne by all of the Fund's shareholders. In order to minimize
such costs the Fund has adopted certain policies. The Fund
reserves the right to reject any purchase request (including
exchange purchases from other Vanguard portfolios) that is
reasonably deemed to be disruptive to efficient portfolio
management, either because of the timing of the investment or
previous excessive trading by the investor. Additionally, the
Fund reserves the right to suspend the offering of its
shares.
No assurance can be given that the Fund will attain its ob-
jectives or that shareholders will be protected from the risk
of loss that is inherent in equity investing. Investors may
wish to reduce the potential risk of investing in the Fund by
purchasing shares on a regular, periodic basis (dollar-cost-
averaging) rather than making an investment in one lump sum.
Investors should not consider the Fund a complete investment
program. Most investors should maintain diversified holdings
of securities with different risk characteristics--including
common stocks, bonds and money market instru-
5
<PAGE>
ments. Investors may also wish to complement an investment in
the Fund with other types of common stock investments.
- --------------------------------------------------------------------------------
IMPLEMENTATION In addition to investing primarily in equity securities, the
OF POLICIES Fund follows a number of additional investment practices to
achieve its objectives.
THE FUND MAY Although it normally seeks to remain substantially fully in-
INVEST IN vested in equity securities, the Fund may invest in certain
SHORT-TERM short-term fixed income securities. Such securities may be
FIXED INCOME used temporarily to invest uncommitted cash balances, to
SECURITIES maintain liquidity to meet shareholder redemptions, or to
take a temporarily defensive position against a potential
stock market decline. No more than 35% of the Fund's assets
will be committed to short-term fixed income securities for
purposes other than taking a temporary defensive position.
These securities include: obligations of the United States
government and its agencies or instrumentalities; commercial
paper, bank certificates of deposit, and bankers' accept-
ances; and repurchase agreements collateralized by these se-
curities. In addition, the Fund may, on occasion, invest a
small portion of its assets in bonds with ratings below in-
vestment grade when selected issues are believed to offer
prospective returns competitive with equity securities.
A repurchase agreement is a means of investing monies for a
short period. In a repurchase agreement, a seller--a U.S.
commercial bank or recognized U.S. securities dealer--sells
securities to the Fund and agrees to repurchase the securi-
ties at the Fund's cost plus interest within a specified pe-
riod (normally one day). In these transactions, the securi-
ties purchased by the Fund will have a total value equal to
or in excess of the value of the repurchase agreement, and
will be held by the Fund's Custodian Bank until repurchased.
THE FUND MAY The Fund may hold securities of foreign issuers, but all such
INVEST IN securities must be denominated in U.S. dollars. Securities of
SECURITIES OF foreign issuers may trade in U.S. or foreign securities mar-
FOREIGN kets. Securities of foreign issuers may involve investment
ISSUERS risks that are different from those of domestic issuers. Such
risks include the effect of foreign economic policies and
conditions, future political and economic developments, and
the possible imposition of exchange controls or other foreign
governmental restrictions on foreign debt issuers. There may
also be less publicly available information about a foreign
issuer than a domestic issuer of securities. Foreign issuers
are generally not subject to the uniform accounting, auditing
and financial reporting standards that apply to domestic is-
suers. Also, foreign debt markets may be characterized by
lower liquidity, greater price volatility, and higher trans-
actions costs. Additionally, it may be difficult to obtain or
enforce a legal judgment in a foreign court.
THE FUND MAY The Fund may utilize stock futures contracts and options to a
USE FUTURES limited extent. Specifically, the Fund may enter into futures
CONTRACTS AND contracts provided that not more than 5% of its assets are
OPTIONS required as a futures contract deposit. In addition, the Fund
may enter into futures contracts and options transactions
only to the
6
<PAGE>
extent that obligations under such contracts or transactions
represent not more than 20% of the Fund's assets.
Futures and options transactions may be used for several rea-
sons: to maintain cash reserves while simulating full invest-
ment, to facilitate trading, to reduce transaction costs, or
to seek higher investment returns when a futures contract is
priced more attractively than the underlying equity security
or index. While futures contracts and options can be used as
leveraged investments, the Fund may not use futures or op-
tions transactions to leverage its net assets.
For example, in order to remain fully invested in stocks
while maintaining liquidity to meet potential shareholder re-
demptions, the Fund may invest a portion of its assets in a
stock futures contract. Because futures contracts only re-
quire a small initial margin deposit, the Fund would than be
able to maintain a cash reserve for potential redemptions,
while at the same time remaining fully invested. Also, be-
cause the transaction costs of futures and options may be
lower than the costs of investing in stocks directly, it is
expected that the use of futures contracts and options may
reduce the Fund's total transaction costs.
FUTURES The primary risks associated with the use of futures con-
CONTRACTS AND tracts and options are: (i) imperfect correlation between the
OPTIONS POSE change in market value of the stocks held by the Fund and the
CERTAIN RISKS prices of futures contracts and options; and (ii) possible
lack of a liquid secondary market for a futures contract and
the resulting inability to close a futures position prior to
its maturity date. The risk of imperfect correlation will be
minimized by investing only in those contracts whose behavior
is expected to resemble that of the Fund's underlying securi-
ties. The risk that the Fund will be unable to close out a
futures position will be minimized by entering into such
transactions on a national exchange with an active and liquid
secondary market.
The risk of loss in trading futures contracts in some strate-
gies 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 (or gain) to the investor. When investing in
futures contracts, the Fund will segregate cash or cash
equivalents in the amount of the underlying obligation.
THE FUND MAY The Fund may lend its investment securities to qualified in-
LEND ITS stitutional investors for either short-term or long-term pur-
SECURITIES poses of realizing additional income. Loans of securities by
the Fund will be collateralized by cash, letters of credit,
or securities issued or guaranteed by the U.S. Government or
its agencies. The collateral will equal at least 100% of the
current market value of the loaned securities.
BORROWING The Fund may borrow money, subject to the restrictions de-
scribed below in Investment Limitations, for temporary or
emergency purposes, including the meeting of redemption re-
quests which might otherwise require the untimely disposition
of securities.
7
<PAGE>
PORTFOLIO Although it generally seeks to invest for the long term, the
TURNOVER IS Fund retains the right to sell securities irrespective of how
NOT EXPECTED long they have been held. It is anticipated that the annual
TO EXCEED 100% portfolio turnover of the Fund will not exceed 100%. A turn-
over rate of 100% would occur, for example, if all of the se-
curities of the Fund were replaced within one year.
- --------------------------------------------------------------------------------
INVESTMENT The Fund has adopted certain limitations on its investment
LIMITATIONS practices. Specifically, the Fund will not:
THE FUND HAS (a) with respect to 75% of the value of its total assets,
ADOPTED purchase the securities of any issuer (except obligations
CERTAIN of the United States government and its instrumentali-
FUNDAMENTAL ties) if as a result the Fund would hold more than 10% of
LIMITATIONS the outstanding voting securities of the issuer, or more
than 5% of the value of the total assets of the Fund
would be invested in the securities of such issuer;
(b) invest more than 25% of its assets in any one industry;
and
(c) borrow money, except that the Fund may borrow from banks
(or through reverse repurchase agreements), for temporary
or emergency (not leveraging) purposes, including the
meeting of redemption requests which might otherwise re-
quire the untimely disposition of securities, in an
amount not exceeding 10% of the value of the net assets
of the Fund (including the amount borrowed and the value
of any outstanding reverse repurchase agreements) at the
time the borrowing is made. Whenever borrowings exceed 5%
of the value of the net assets of the Fund, the Fund will
not make any additional investments.
These investment limitations are considered at the time in-
vestment securities are purchased. The investment limitations
described here and in the Statement of Additional Information
may be changed only with the approval of a majority of the
Fund's shareholders.
- --------------------------------------------------------------------------------
MANAGEMENT OF The Fund is a member of The Vanguard Group of Investment Com-
THE FUND panies, a family of more than 30 investment companies with
more than 80 distinct investment portfolios and total assets
VANGUARD in excess of $130 billion. Through their jointly-owned sub-
ADMINISTERS sidiary, The Vanguard Group, Inc. ("Vanguard"), the Fund and
AND the other funds in the Group obtain at cost virtually all of
DISTRIBUTES their corporate management, administrative and distribution
THE FUND services. Vanguard also provides investment advisory services
on an at-cost basis to certain Vanguard funds. As a result of
Vanguard's unique corporate structure, the Vanguard funds
have costs substantially lower than those of most competing
mutual funds. In 1994, the average expense ratio (annual
costs including advisory fees divided by total net assets)
for the Vanguard funds amounted to approximately .30% com-
pared to an average of 1.05% for the mutual fund industry
(data provided by Lipper Analytical Services).
The Officers of the Fund manage its day-to-day operations and
are responsible to the Fund's Board of Directors. The Direc-
tors set broad policies for the Fund
8
<PAGE>
and choose its Officers. A list of the Directors and Officers
of the Fund and a statement of their present positions and
principal occupations during the past five years can be found
in the Statement of Additional Information.
Vanguard employs a supporting staff of management and admin-
istrative personnel needed to provide the requisite services
to the funds and also furnishes the funds with necessary of-
fice space, furnishings and equipment. Each fund pays its
share of Vanguard's total expenses, which are allocated among
the funds under methods approved by the Board of Directors
(Trustees) of each fund. In addition, each fund bears its own
direct expenses, such as legal, auditing and custodian fees.
Vanguard provides distribution and marketing services to the
funds. The funds are available on a no-load basis (i.e.,
there are no sales commissions or 12b-1 fees). However, each
fund bears its share of the Group's distribution costs.
- --------------------------------------------------------------------------------
INVESTMENT The Fund has entered into an investment advisory agreement
ADVISER with Wellington Management Company ("WMC"), 75 State Street,
Boston, MA 02109, under which WMC manages the investment and
WELLINGTON reinvestment of Vanguard/Windsor Fund's assets and continu-
MANAGEMENT ously reviews, supervises and administers the Fund's invest-
COMPANY SERVES ment program. WMC discharges its responsibilities subject to
AS ADVISER TO the control of the Officers and Directors of the Fund.
THE FUND
WMC is a professional investment counseling firm which glob-
ally provides investment services to investment companies,
institutions, and individuals. Among the clients of WMC are
more than 10 investment companies of The Vanguard Group. As
of December 31, 1994 WMC held discretionary management au-
thority with respect to more than $80 billion of assets. WMC
and its predecessor organizations have provided investment
advisory services to investment companies since 1931 and to
investment counseling clients since 1960.
John B. Neff, Managing Partner of WMC, serves as portfolio
manager of the Fund, a position he has held since June of
1964. In managing the Fund's investments, Mr. Neff is as-
sisted by Charles T. Freeman, Senior Vice President of WMC
and assistant portfolio manager of the Fund, who joined WMC
in 1969. Messrs. Neff and Freeman are supported by research
and other investment services provided by the professional
staff of WMC.
Effective at year-end 1995, Mr. Neff will retire and Mr.
Freeman will assume the position of portfolio manager of the
Fund. Mr. Neff will remain as an adviser to WMC, and will
continue to work with the firm's investment professionals,
including the portfolio managers of all Vanguard funds for
which WMC serves as adviser.
WMC earns a basic advisory fee, calculated by applying the
following annual percentage rates to the average month-end
net assets of the Fund:
9
<PAGE>
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
---------- ------
<S> <C>
First $200 million .350%
Next $250 million .275%
Next $300 million .200%
Assets in excess of $750 million .150%
</TABLE>
The basic fee paid to the Adviser may be increased or de-
creased by applying an adjustment based on the Fund's invest-
ment performance. Such formula provides for an increase or
decrease of the basic fee in an amount equal to .10% per an-
num (.025% per quarter) of the average month-end net assets
of the Fund if the Fund's investment performance for the
thirty-six months preceding the end of the quarter is twelve
percentage points or more above or below, respectively, the
investment record of the Standard & Poor's Daily Stock Price
Index of 500 Common Stocks (the "S&P Index") for the same pe-
riod; or by an amount equal to .05% per annum (.0125% per
quarter) if the Fund's investment performance for such thir-
ty-six months is six or more but less than twelve percentage
points above or below, respectively, the investment record of
the S&P Index for the same period.
During the fiscal year ended October 31, 1994, the total ad-
visory fees paid by the Fund to WMC represented an effective
annual rate of .16% of the Fund's average net assets before
an increase of .08% based upon investment performance.
The investment advisory agreement authorized WMC to select
brokers or dealers to execute purchases and sales of the
Fund's portfolio securities, and directs the adviser to use
its best efforts to obtain the best available price and most
favorable execution with respect to all transactions. The
full range and quality of brokerage services available are
considered in making these determinations.
The Fund has authorized WMC to pay higher commissions in rec-
ognition of brokerage services felt necessary for the
achievement of better execution, provided the adviser be-
lieves this to be in the best interest of the Fund. Although
the Fund does not market its shares through intermediary bro-
kers or dealers, the Fund may place orders with qualified
broker-dealers who recommend the Fund to clients if the Offi-
cers of the Fund believe that the quality of the transaction
and the commission are comparable to what they would be with
other qualified brokerage firms.
The Fund's Board of Directors may, without the approval of
shareholders, provide for: (a) the employment of a new in-
vestment adviser pursuant to the terms of a new advisory
agreement, either as a replacement for an existing adviser or
as an additional adviser; (b) a change in the terms of an ad-
visory agreement; and (c) the continued employment of an ex-
isting adviser on the same advisory contract terms where a
contract has been assigned because of a change in control of
the adviser. Any such change will only be made upon not less
than 30 days' prior written notice to shareholders of the
Fund, which shall include substantially the information con-
cerning the adviser that would have normally been included in
a proxy statement.
- --------------------------------------------------------------------------------
10
<PAGE>
PERFORMANCE The table on page 11 provides investment results for the Fund
RECORD for several periods throughout the Fund's lifetime. The re-
sults shown represent the Fund's "total return" investment
performance, which assumes the reinvestment of all capital
gains and income dividends for the indicated periods. Also
included is comparative information with respect to the un-
managed Standard & Poor's 500 Composite Stock Price Index, a
widely used barometer of stock market activity, and the Con-
sumer Price Index, a statistical measure of changes in the
prices of goods and services. The table does not make any al-
lowance for federal, state, or local income taxes which
shareholders must pay on a current basis.
The results shown should not be considered a representation
of the total return from an investment made in the Fund to-
day. This information is provided to help investors better
understand the Fund and may not provide a basis for compari-
son with other investments or mutual funds which use a dif-
ferent method to calculate performance.
AVERAGE ANNUAL RETURN FOR VANGUARD/WINDSOR FUND
<TABLE>
<CAPTION>
PERCENTAGE INCREASE
------------------------------------------------
FISCAL PERIODS VANGUARD/WINDSOR S&P 500 CONSUMER
ENDED 10/31/94 FUND INDEX PRICE INDEX
-------------- ---------------- ------- -----------
<S> <C> <C> <C>
3 Years +14.2% + 9.5% +2.9%
5 Years + 9.2 +10.1 +3.6
10 Years +14.5 +14.8 +3.6
20 Years +18.3 +14.3 +5.5
Lifetime* +12.8 +10.4 +4.7
</TABLE>
*October 23, 1958 to October 31, 1994. Data for the Consumer
Price Index begins October 31, 1958.
- --------------------------------------------------------------------------------
DIVIDENDS, The Fund expects to pay dividends from ordinary income semi-
CAPITAL GAINS annually. Capital gains distributions, if any, will be made
AND TAXES annually. All dividend and capital gains distributions are
automatically reinvested in additional shares of the Fund. In
THE FUND PAYS order to satisfy certain distribution requirements of the
SEMI-ANNUAL IRS, the Fund may also declare special year-end distributions
DIVIDENDS AND during December. The Fund intends to continue to qualify for
ANY CAPITAL taxation as a "regulated investment company" under the Inter-
GAINS ANNUALLY nal Revenue Code so that it will not be subject to federal
income tax to the extent that its income is distributed to
its shareholders.
If you utilize the Fund as an investment option in an employ-
er-sponsored retirement or savings plan, dividend and capital
gains distributions from the Fund generally will not be sub-
ject to current taxation, but will accumulate on a tax-de-
ferred basis. In general, employer-sponsored retirement and
savings plans are governed by a complex set of tax rules. You
should consult your plan administrator, the plan's "Summary
Plan Description," or a professional tax adviser regarding
the tax consequences of your participation in the plan and of
any plan contributions or withdrawals.
- --------------------------------------------------------------------------------
11
<PAGE>
THE SHARE The Fund's share price or "net asset value" per share is de-
PRICE OF THE termined by dividing the total market value of the Fund's in-
FUND vestments and other assets, less any liabilities, by the num-
ber of outstanding shares of the Fund. Net asset value per
share is calculated at the close of regular trading on the
New York Stock Exchange on each day the Exchange is open for
business.
Portfolio securities that are listed on a securities exchange
are valued at the latest quoted sales prices as of 4:00 p.m.
on the valuation date. Price information on listed securities
is taken from the exchange where the security is primarily
traded. Securities which are listed on an exchange and which
are not traded on the valuation date are valued at the mean
of the latest quoted bid and asked prices. Unlisted securi-
ties for which market quotations are readily available are
valued at the latest quoted bid price. Temporary cash invest-
ments are valued at amortized cost, which approximates market
value. Other assets and securities for which no quotations
are readily available are valued at fair value as determined
in good faith by the Directors. 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 Fund's share price can be found daily in the mutual fund
listings of most major newspapers under the heading of The
Vanguard Group.
- --------------------------------------------------------------------------------
GENERAL The Company is a Maryland corporation. The Articles of Incor-
INFORMATION poration permit the Directors to issue 1,600,000,000 shares
of common stock, with a one cent par value. The Board of Di-
rectors has the power to designate one or more classes ("se-
ries") of shares of common stock and to classify and reclas-
sify any unissued shares with respect to such series. Cur-
rently the Company is offering shares of two series.
The shares of each series of the Company are fully paid and
non-assessable; have no preference as to conversion, ex-
change, dividends, retirement or other features; and have no
pre-emptive rights. Such shares have non-cumulative voting
rights, meaning that the holders of more than 50% of the
shares voting for the election of Directors can elect 100% of
the Directors if they so choose.
Annual meetings of shareholders will not be held except as
required by the Investment Company Act of 1940 and other ap-
plicable law. An annual meeting will be held to vote on the
removal of a Director or Directors of the Company if re-
quested in writing by the holders of not less than 10% of the
outstanding shares of the Company.
All securities and cash are held by State Street Bank and
Trust Company, Boston, MA. The Vanguard Group, Inc., Valley
Forge, PA. serves as the Fund's Transfer and Dividend Dis-
bursing Agent. Price Waterhouse LLP, serves as independent
accountants for the Fund and will audit its financial state-
ments annually. The Fund is not involved in any litigation.
- --------------------------------------------------------------------------------
12
<PAGE>
SERVICE GUIDE
PARTICIPATING The Fund is available as an investment option in your retire-
IN YOUR PLAN ment or savings plan. The administrator of your plan or your
employee benefits office can provide you with detailed infor-
mation 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, including the
Fund's investment objective, policies, risk characteristics
or historical performance, please contact Participant Serv-
ices at 1-800-523-1188.
If you have questions about your account, contact your plan
administrator or the organization which provides recordkeep-
ing services for your plan.
--------------------------------------------------------------
INVESTMENT You may be permitted to elect different investment options,
OPTIONS AND alter the amounts contributed to your plan, or change how
ALLOCATIONS contributions are allocated among your investment options in
accordance with your plan's specific provisions. See your
plan administrator or employee benefits office for more de-
tails.
--------------------------------------------------------------
TRANSACTIONS Contributions, exchanges or distributions of the Fund's
INFUND SHARES shares are effective when received in "good order" by Van-
guard. "Good order" means that complete information on the
purchase, exchange, or redemption and the appropriate monies
have been received by Vanguard.
--------------------------------------------------------------
MAKING Your plan may allow you to exchange monies from one invest-
EXCHANGES ment option to another. Check with your plan administrator
for details on the rules governing exchanges in your plan.
Certain investment options, particularly company stock or
guaranteed investment contracts (GICs), may be subject to
unique restrictions.
Before making an exchange, you should consider the following:
. If you are making an exchange to another Vanguard Fund op-
tion, please read the Fund's prospectus. Contact Partici-
pant Services at 1-800-523-1188 for a copy.
. Exchanges are accepted by Vanguard only as permitted by
your plan. Your plan administrator can explain how fre-
quently exchanges are allowed.
. As explained on page 5, the Fund reserves the right to ref-
use any exchange purchase request.
- --------------------------------------------------------------------------------
13
<PAGE>
[LOGO OF VANGUARD WINDSOR FUND APPEARS HERE]
- ---------------
THE VANGUARD GROUP
OF INVESTMENT
COMPANIES
Vanguard Financial Center
P.O. Box 2900
Valley Forge, PA 19482
INSTITUTIONAL PARTICIPANT SERVICES DEPARTMENT:
1-800-523-1188
TRANSFER AGENT:
The Vanguard Group, Inc.
Vanguard Financial Center
Valley Forge, PA 19482
[LOGO OF VANGUARD WINDSOR FUND APPEARS HERE]
I N S T I T U T I O N A L
P R O S P E C T U S
FEBRUARY 28, 1995;
REVISED JUNE 6, 1995
[LOGO OF THE VANGUARD GROUP APPEARS HERE]
IO22
