<PAGE> 1
FUND PROFILE
FOR
VANGUARD
WINDSOR II
July 31, 1995
[VANGUARD GROUP LOGO]
<PAGE> 2
1 OBJECTIVE
As a growth and income stock fund, Vanguard/Windsor II seeks to achieve
long-term growth of capital and income by investing primarily 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.
2 INVESTMENT STRATEGIES
The Fund emphasizes value stocks, typically those with below-average
price-earnings ratios (i.e., a measure of a company's stock price relative to
its profits) and above-average dividend yields. In addition to investing
primarily in equity securities, the Fund may also invest to a limited degree in
short-term fixed-income securities, futures contracts, and options.
3 RISKS
This Fund's total return can be expected to fluctuate within a wide range.
Investors in the Fund are exposed to a HIGH degree of principal risk as stock
prices may decline over short or extended periods.
The past history of the stock market gives some indication of the level of
risk. From 1926 to 1994, the Standard & Poor's 500 Index provided an annualized
total return of some +10%, but provided a negative return--averaging -12.3%--in
20 out of 69 years. The range of annual returns from 1926 to 1994 was -43% to
+54%.
Due to its emphasis on value stocks, the Fund's return will be quite different
at times from broad measures of the stock market.
4 APPROPRIATENESS
This Fund may be appropriate for investors . . .
- - Seeking capital growth and income, and planning to invest for at least
five years.
- - Who desire equity investments that tend to provide reasonable current
income from dividends.
- - Willing to accept share-price volatility, but potentially somewhat less
than that of growth stock funds.
This Fund is inappropriate for investors . . .
- - Unable to tolerate fluctuating share price.
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5 FEES AND EXPENSES
The following table illustrates all expenses and fees that you would incur as a
shareholder of the Fund. The expenses shown below are for the 1994 fiscal year.
<TABLE>
<S> <C> <C>
Sales Load Imposed on Purchases . . . . . . None
Sales Load Imposed on Reinvested
Dividends . . . . . . . . . . . . . . None
Redemption Fees . . . . . . . . . . . . . . None
Exchange Fees . . . . . . . . . . . . . . None
ANNUAL FUND OPERATING EXPENSES
---------------------------------------------------------------------------
Management and Administration . . . . . . . 0.22%
Investment Advisory Fees . . . . . . . . . 0.14
12b-1 Fees . . . . . . . . . . . . . . None
Other Expenses
Distribution Costs . . . . . . . . . . 0.02
Miscellaneous Expenses . . . . . . . . 0.01
----
Total Other Expenses . . . . . . . . . . . 0.03
----
Total Operating Expenses . . . . . . . . . 0.39%
----
</TABLE>
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>
$4 $13 $22 $49
</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.
<PAGE> 4
6 PAST PERFORMANCE
PERFORMANCE
ANNUAL RETURNS (%) 1986-1994
<TABLE>
<CAPTION>
'86 '87 '88 '89 '90 '91 '92 '93 '94
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Windsor II 21.4 -2.1 24.7 27.8 -10.0 28.7 12.0 13.6 -1.2
S&P 500 Index 18.6 5.2 16.5 31.6 - 3.1 30.4 7.6 10.1 1.3
</TABLE>
PERFORMANCE SUMMARY
(PERIODS ENDED JUNE 30, 1995)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
WINDSOR II S&P 500
<S> <C> <C>
1 Year +19.73% +26.03%
5 Years +12.28% +12.07%
Since Inception* +13.63% +14.62%
</TABLE>
*Since Fund's inception, June 24, 1985.
Note: In evaluating past performance, it is important to consider that nominal
returns from stocks were close to their highest levels in history during the
past ten years. Past performance is not indicative of future performance.
Performance figures include the reinvestment of all dividends and any capital
gains distributions. All returns are net of expenses. The performance data
quoted represent past performance. The investment return and principal value of
an investment will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
<PAGE> 5
7 INVESTMENT ADVISER
The Fund employs a "multi-manager" approach using four investment advisers to
manage its assets. As of June 30, 1995, the Fund's assets were managed by the
four advisers in the following proportions:
<TABLE>
<CAPTION>
% OF
ADVISER FUND'S ASSETS
-------------------------------------------------------------
<S> <C>
Barrow, Hanley, Mewhinney
& Strauss, Inc. 73.5%
Equinox Capital Management, Inc. 9.6
Tukman Capital Management, Inc. 9.8
Vanguard Core Management Group 7.1
</TABLE>
8 PURCHASES
You may purchase shares by mail, wire, or exchange from another Vanguard Fund.
The minimum initial investment is $3,000 ($500 for IRAs). There are no sales
commissions or 12b-1 fees.
9 REDEMPTIONS
You may redeem shares by sending a letter or calling Vanguard. (Please note:
The Fund's share price is expected to fluctuate and, at redemption, may be
higher or lower than at the time of initial purchase, resulting in a gain or
loss.)
10 DISTRIBUTIONS
The Fund expects to pay dividends from ordinary income semi-annually. Capital
gains distributions, if any, will be paid annually. Dividend and capital gains
distributions may be automatically reinvested or received in cash.
11 OTHER SERVICES
- - Vanguard Fund Express(R)--electronic transfers between your bank account
and the Fund.
- - Vanguard Tele-Account(R)--around-the-clock access to Vanguard Fund
information, account balances, and some transactions by calling
1-800-662-6273 (ON-BOARD).
- - Investor Information--toll-free access to Vanguard Associates by calling
1-800-662-7447 (SHIP).
<PAGE> 6
[FIGURE 2]
This Fund Profile contains key
information about the Fund. More details
appear in the Fund's accompanying prospectus.
0795-20S (C) 1995 Vanguard Marketing Corporation, Distributor FP73
