VANGUARD WORLD FUND INC, 497, 1996-06-27

VANGUARD WORLD FUND INC
497, 1996-06-27

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT (NO. 2-17620) UNDER
THE SECURITIES ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. / /
POST-EFFECTIVE AMENDMENT NO. 70 /X/
AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
AMENDMENT NO. 70 /X/

VANGUARD WORLD FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ARTICLES OF INCORPORATION)

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

REGISTRANT'S TELEPHONE NUMBER (610) 669-1000

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

IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE
on April 29, 1996 pursuant to paragraph (a) of Rule 485.

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

THE REGISTRANT HAS REGISTERED AN INDEFINITE NUMBER OF SECURITIES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24f-2 OF THE INVESTMENT COMPANY ACT OF
1940. REGISTRANT FILED ITS RULE 24f-2 NOTICE FOR ITS FISCAL YEAR ENDED AUGUST
31, 1995, WITH THE COMMISSION ON OCTOBER 26, 1995.

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<PAGE> 2

VANGUARD WORLD FUND, INC.

CROSS REFERENCE SHEET

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

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

U.S. GROWTH

PORTFOLIO

Institutional Prospectus
June 28, 1996

[GRAPHIC]

This prospectus contains

financial data for the Portfolio through the fiscal year ended August 31, 1995.

[THE VANGUARD GROUP LOGO]
<PAGE> 4
VANGUARD U.S. GROWTH PORTFOLIO A GROWTH STOCK MUTUAL FUND

<TABLE>
<CAPTION>
CONTENTS

<S> <C>
Portfolio Expenses 2

Financial Highlights 3

A Word About Risk 4

The Portfolio's Objective 4

Who Should Invest 4

Investment Strategies 5

Investment Policies 7

Investment Limitations 8

Investment Performance 8

Share Price 9

Dividends, Capital Gains, and Taxes 9

The Portfolio and Vanguard 10

Investment Adviser 10

General Information 11

Investing
with Vanguard

- - For Plan Participants 12

- - For Other

Institutional Investors 12

Accessing Fund Informationby Computer 13

Prospectus Postscript 14

Glossary Inside Back Cover

</TABLE>

INVESTMENT OBJECTIVE AND POLICIES

Vanguard U.S. Growth Portfolio (the "Portfolio") is a diversified mutual fund, a
part of Vanguard World Fund, Inc. (the "Fund"), an open-end investment
management company.

The Portfolio seeks to provide long-term capital growth by investing in
equity securities of high-quality, seasoned U.S. companies with records of
exceptional growth. The Portfolio emphasizes companies with strong positions in
their markets, reasonable financial strength, and low sensitivity to changing
economic conditions.

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

FEES AND EXPENSES

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

IMPORTANT NOTE

This prospectus is intended for institutional clients and for participants in
employer-sponsored retirement or savings plans.

Another version of this prospectus--for individual investors who would like
to open a personal investment account in this Portfolio--can be obtained by
calling Vanguard, toll-free, at 1-800-662-7447.

ADDITIONAL INFORMATION ABOUT THE PORTFOLIO

A Statement of Additional Information containing more information about the
Portfolio is, by reference, part of this prospectus and may be obtained without
charge by writing to or calling Vanguard (see back cover).

WHY READING THIS PROSPECTUS IS IMPORTANT

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

These securities have not been approved or disapproved by the Securities and
Exchange Commission or any state securities commission, nor has the Securities
and Exchange Commission or any state commission passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
<PAGE> 5
PORTFOLIO PROFILE VANGUARD U.S. GROWTH PORTFOLIO

WHO SHOULD INVEST (page 4)

- - Investors seeking a growth stock mutual fund as part of a balanced and
diversified investment program.

- - Investors seeking growth of their capital over the long term--at least five
years.

WHO SHOULD NOT INVEST

- - Investors unwilling to accept significant fluctuations in share price.

- - Investors seeking dividend income.

RISKS OF THE PORTFOLIO (pages 4-7)

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

DIVIDENDS AND CAPITAL GAINS (page 9)

Paid annually in December (automatically reinvested in participant accounts).

INVESTMENT ADVISER (PAGE 10)

Lincoln Capital Management Company,
Chicago, IL.

INCEPTION DATE: January 6, 1959

NET ASSETS AS OF 8/31/95: $2.98 billion

PORTFOLIO'S EXPENSE RATIO FOR THE
YEAR ENDED 8/31/95: 0.47%

NEWSPAPER ABBREVIATION: USGro

VANGUARD FUND NUMBER: 023

AVERAGE ANNUAL TOTAL RETURN--
PERIODS ENDED AUGUST 31, 1995

1 YEAR 5 YEARS 10 YEARS
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<S> <C> <C> <C>
U.S. Growth Portfolio +22.8% +14.3% +12.9%
S&P 500 Index +21.4 +15.1 +15.1

</TABLE>
QUARTERLY RETURNS (%) 1986-1995

[BAR GRAPH]

In evaluating past performance, remember that it is not indicative of future
performance and that returns from stocks before adjusting for inflation were
relatively high during the periods shown. Performance figures include the
reinvestment of any dividends and capital gains distributions. The returns shown
are net of expenses, but they do not reflect income taxes an investor would have
incurred. Note, too, that both the return and principal value of an investment
will fluctuate so that investors' shares, when redeemed, may be worth more or
less than their original cost.

1
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Plain Talk About

THE COSTS OF INVESTING

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

Plain Talk About

FUND EXPENSES

All mutual funds have operating expenses. These expenses, which are deducted
from a fund's gross income, are expressed as a percentage of the net assets of
the fund. Vanguard U.S. Growth Portfolio's expense ratio in fiscal year 1995 was
0.47%, or $4.70 per $1,000 of average net assets. The average growth equity
mutual fund had expenses in 1995 of 1.36%, or $13.60 per $1,000 of average net
assets, according to Lipper Analytical Services, Inc., which reports on the
mutual fund industry.

PORTFOLIO EXPENSES

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

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

SHAREHOLDER TRANSACTION EXPENSES

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

The next table illustrates the operating expenses that you would incur as a
shareholder of the Portfolio. These expenses are deducted from the Portfolio's
income before it is paid to you. Expenses include investment advisory fees as
well as the costs of maintaining accounts, administering the Portfolio,
providing shareholder services, and other activities. The expenses shown in the
table are for the fiscal year ended August 31, 1995.

ANNUAL PORTFOLIO OPERATING EXPENSES

<TABLE>

<S> <C> <C>
Management and Administrative Expenses: 0.25%
Investment Advisory Expenses: 0.19%
12b-1 Marketing Fees: None
Other Expenses

Marketing and Distribution Costs: 0.02%
Miscellaneous Expenses (e.g., Taxes, Auditing): 0.01%

----
Total Other Expenses: 0.03%

----
TOTAL OPERATING EXPENSES (EXPENSE RATIO): 0.47%

====
</TABLE>

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

- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
<C> <C> <C> <C>

$5 $15 $26 $59
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</TABLE>

This example should not be considered a representation of actual expenses or
performance from the past or for the future, which may be higher or lower than
those shown.

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FINANCIAL HIGHLIGHTS

The following financial highlights table shows the results for a share
outstanding for each of the last ten years ended August 31, 1995. The financial
highlights were audited by Price Waterhouse LLP, independent accountants. You
should read this information in conjunction with the Portfolio's financial
statements and accompanying notes, which appear, along with the audit report
from Price Waterhouse, in the Portfolio's most recent Annual Report to
shareholders. The Annual Report is incorporated by reference in the Statement of
Additional Information and in this prospectus, and contains a more complete
discussion of the Portfolio's performance. You may have the Report sent to you
without charge by writing to or calling Vanguard (see back cover).

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Year Ended August 31,

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1995 1994 1993 1992 1991 1990 1989 1988 1987 1986*
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<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $15.52 $14.71 $14.71 $13.69 $10.38 $10.01 $ 7.17 $12.74 $13.21 $ 9.94

INVESTMENT OPERATIONS

Net Investment Income .25 .20 .21 .19 .20 .14 .11 .10 .30 .24
Net Realized and
Unrealized Gain (Loss)

on Investments 3.24 .82 .05 1.02 3.30 .36 2.79 (2.10) 1.45 3.03

TOTAL FROM INVESTMENT

OPERATIONS 3.49 1.02 .26 1.21 3.50 .50 2.90 (2.00) 1.75 3.27
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net

Investment Income (.18) (.21) (.18) (.19) (.19) (.13) (.06) (.31) (.28) --
Distributions from
Realized Capital Gains -- -- (.08) . -- . -- . -- . -- (3.26) (1.94) --

TOTAL DISTRIBUTIONS (.18) (.21) (.26) (.19) (.19) (.13) (.06) (3.57) (2.22) --
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NET ASSET VALUE,

END OF PERIOD $18.83 $15.52 $14.71 $14.71 $13.69 $10.38 $10.01 $ 7.17 $12.74 $13.21
======================================================================================================================
TOTAL RETURN 22.75% 6.98% 1.69% 8.83% 34.28% 5.03% 40.72% (21.62)% 17.81% 32.90%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (Millions) $2,989 $1,963 $1,954 $1,441 $ 747 $ 339 $ 184 $ 130 $ 184 $ 188
Ratio of Expenses to
Average Net Assets .47%** .52% .49% .49% .56% .74% .95% .88% .65% .80%+
Ratio of Net Investment
Income to Average
Net Assets 1.59% 1.30% 1.50% 1.52% 1.82% 1.77% 1.44% 1.23% 2.41% 2.27%+
Portfolio Turnover Rate 32% 47% 37% 24% 30% 49% 48% 38% 142%. 77%
</TABLE>

* Partial period: October 1, 1985, to August 31, 1986.
** Beginning in fiscal year 1995, this figure does not include expense

reductions from directed brokerage arrangements. The Ratio of Net Expenses
to Average Net Assets was 0.44%.

+ Annualized.

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

Plain Talk About

HOW TO READ THE FINANCIAL HIGHLIGHTS TABLE

The Portfolio began fiscal 1995 with a net asset value (price) of $15.52 per
share. During the year, the Portfolio earned $0.25 per share from investment
income (interest and dividends) and $3.24 per share from investments that had
appreciated in value or that were sold for higher prices than the Portfolio paid
for them. Of those total earnings of $3.49 per share, $0.18 per share was
returned to shareholders in the form of dividend distributions. The earnings
($3.49 per share) less distributions ($0.18 per share) resulted in a share price
of $18.83 at the end of the year, an increase of $3.31 per share (from $15.52 at
the beginning of the period to $18.83 at the end of the period). Assuming that
the shareholder had reinvested the distribution in the purchase of more shares,
total return from the Portfolio was 22.75% for the year.

As of August 31, 1995, the Portfolio had $2.98 billion in net assets; an
expense ratio of 0.47% ($4.70 per $1,000 of net assets); and net investment
income amounting to 1.59% of its average net assets. It sold and replaced
securities valued at 32% of its total net assets.

3
<PAGE> 8
Plain Talk About

GROWTH FUNDS AND
VALUE FUNDS

Growth investing and value investing are two styles employed by stock fund
managers. Growth funds generally focus on companies that, due to their strong
earnings and revenue potential, offer above-average prospects for capital
growth, with less emphasis on dividend income. Value funds generally emphasize
companies that, considering their assets and earnings history, are attractively
priced; these companies often pay regular dividend income to shareholders.
Growth and value stocks have, in the past, produced similar long-term returns,
though each has periods when it outperforms the other. In general, growth funds
appeal to investors who will accept more volatility in hope of a greater
increase in share price, while value funds are appropriate for investors who
want some dividend income and the potential for capital gains but are less
tolerant of share-price fluctuations.

Plain Talk About

INVESTING FOR THE LONG TERM

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

A WORD ABOUT RISK

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

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

THE PORTFOLIO'S OBJECTIVE

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

BECAUSE OF THE SEVERAL TYPES OF RISK DESCRIBED ON THE FOLLOWING
[Flag Graphic] PAGES, YOUR INVESTMENT IN THE PORTFOLIO, AS WITH ANY INVESTMENT
IN COMMON STOCKS, COULD LOSE MONEY.

WHO SHOULD INVEST

The Portfolio may be a suitable investment for you if:

- - You wish to add a growth stock fund to your existing holdings, which could
include other stock--as well as bond and money market--investments.

- - You are seeking growth of capital over the long term--at least five years.
- - You characterize your investment temperament as "relatively aggressive."

- - You are seeking a fund that emphasizes good-quality companies with
established records of growth.

- - You are not looking for income.

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

- - The Portfolio reserves the right to reject any purchase request--including
exchanges from other Vanguard Funds--that it regards as disruptive to the
efficient management of the Portfolio. This could be because of the timing of
the investment or because

4
<PAGE> 9
of a history of excessive trading by the investor. If you own shares of the
Portfolio as an investment option in an employer-sponsored retirement or
savings plan, your plan dictates the rules governing exchanges. Contact your
plan administrator for details.

- - There is a limit on the number of times you can exchange into or out of the
Portfolio.

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

INVESTMENT STRATEGIES

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

MARKET EXPOSURE

The Portfolio invests chiefly in large-capitalization common stocks that offer
favorable prospects for capital growth but that produce little current income.
At times, the Portfolio may also invest in securities that are convertible into
common stocks.

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

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

- --------------------------------------------------------------------------------
U.S. Stock Market Returns (1926-1995)

1 Year 5 Years 10 Years 20 Years
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Best +53.9% +23.9% +20.1% +16.9%
Worst -43.3 -12.5 -0.9 +3.1

Average +12.5 +10.3 +10.7 +10.7

- --------------------------------------------------------------------------------
</TABLE>

Plain Talk About

COSTS AND MARKET TIMING

Some investors try to profit from "market timing"--switching money into
investments when they expect prices to rise, and taking money out when they
expect the market to fall. As money is shifted in and out, a fund incurs
expenses for buying and selling securities. These costs are borne by all fund
shareholders, including the long-term investors who do not generate the costs.
Therefore, the Portfolio tries to discourage short-term trading by closely
monitoring daily transactions.

Plain Talk About

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

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

5
<PAGE> 10
Plain Talk About

PORTFOLIO DIVERSIFICATION

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

The table covers all of the 1-, 5-, 10-, and 20-year periods from 1926
through 1995. For example, while the average return on stocks for all of the
5-year periods was +10.3%, returns for these five-year periods ranged from a
- -12.5% average (from 1928 through 1932), to +23.9% (from 1951 through 1955).
These average returns reflect past performance on common stocks and should not
be regarded as an indication of future returns from either the stock market as a
whole or this Portfolio in particular.

Finally, because the U.S. Growth Portfolio does not hold the same securities
held in the Standard & Poor's 500 Index or any other market index, the
performance of the Portfolio will not mirror the returns of any particular
index.

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

SECURITY SELECTION

Lincoln Capital Management Company (Lincoln), adviser to the Portfolio, selects
common stocks of seasoned U.S. companies that have past records of growth and,
in Lincoln's opinion, above-average prospects for continued growth. Such
companies tend to have strong positions in their markets, reasonable financial
strength, and relatively low sensitivity to changing economic conditions.
Lincoln seeks to identify stocks that sell at attractive prices in relation to
their growth potential. The top ten holdings (which amounted to 40% of the
Portfolio's total net assets) as of August 31, 1995, follow.

1. Wal-Mart Stores, Inc.

2. General Electric Co.

3. Philip Morris Cos., Inc.

4. The Coca-Cola Co.

5. Intel Corp.

6. Johnson & Johnson

7. AT&T Corp.

8. PepsiCo, Inc.

9. Automatic Data Processing Inc.

10. Procter & Gamble Co.

Keep in mind that, because the makeup of the Portfolio changes daily, this
listing is only a "snapshot" at one point in time. Note, too, that the
Portfolio's relatively low level of diversification means that there is a
greater chance that the poor performance of a single stock held could hurt the
Portfolio.

The Portfolio is run by Lincoln according to traditional methods of active
investment management, which means securities are

6
<PAGE> 11
bought and sold according to Lincoln's judgments about companies and their
financial prospects, and about the stock market and the economy in general.

THE PORTFOLIO IS SUBJECT TO MANAGER RISK, WHICH IS THE
[Flag Graphic] POSSIBILITY THAT LINCOLN MAY DO A POOR JOB OF SELECTING STOCKS.

PORTFOLIO TURNOVER

Although the Portfolio generally seeks to invest for the long term, it retains
the right to sell securities regardless of how long they have been held. The
Portfolio's average turnover rate for the past ten years has been about 50%. (A
turnover rate of 100% would occur, for example, if the Portfolio sold and
replaced securities valued at 100% of its total net assets within a one-year
period.)

INVESTMENT POLICIES

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

ALTHOUGH IT HAS NOT DONE SO IN THE PAST, THE PORTFOLIO RESERVES
[Flag Graphic] THE RIGHT TO INVEST, TO A LIMITED EXTENT, IN STOCK FUTURES AND
OPTIONS CONTRACTS,

WHICH ARE TRADITIONAL TYPES OF DERIVATIVES.

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

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

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

- - To make it easier to trade.

- - To reduce costs by buying futures instead of actual stocks when futures are
cheaper.

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

Plain Talk About

PORTFOLIO TURNOVER

Before investing in a mutual fund, you should review its portfolio turnover rate
for an indication of the potential effect of transaction costs on the fund's
future returns. In general, the greater the volume of buying and selling by the
fund, the greater the impact that brokerage commissions and other transaction
costs will have on its return. The average turnover rate for actively managed
funds investing in common stocks is 75%.

Plain Talk About

DERIVATIVES

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

7
<PAGE> 12
Plain Talk About

PAST PERFORMANCE

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

INVESTMENT LIMITATIONS

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

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

- - Invest more than 25% of its assets in any one industry.
- - Borrow money, except for the purpose of meeting shareholder requests to

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

- - Invest more than 5% in the securities of any one company.
- - Buy more than 10% of the outstanding voting securities of any company.

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

INVESTMENT PERFORMANCE

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

Average Annual Total Returns

For Periods Ended 8/31/95

[BAR GRAPH]

The results shown above represent the Portfolio's "average annual total
return" performance, which assumes that any distributions of capital gains and
dividends were reinvested for the indicated periods. Also included is
comparative information on the unmanaged Standard & Poor's 500 Index. The chart
does not make any allowance for Federal, state, or local income taxes that
shareholders must pay on a current basis.

In weighing these performance figures, note that the Portfolio has been in
operation since January 6, 1959, and managed by Lincoln Capital Management since
August 31, 1987.

8
<PAGE> 13
Plain Talk About

DISTRIBUTIONS

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

SHARE PRICE

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

TOTAL ASSETS - LIABILITIES

NET ASSET VALUE = ------------------------------
NUMBER OF SHARES OUTSTANDING

Daily net asset value, or NAV, is useful to you as a shareholder because the
NAV, multiplied by the number of Portfolio shares you own, gives you the dollar
amount you would have received had you sold all of your shares back to the
Portfolio that day.

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

DIVIDENDS, CAPITAL GAINS, AND TAXES

Each December, the Portfolio distributes to shareholders virtually all of its
income from interest and dividends, as well as any capital gains realized from
the sale of securities.

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

If your Vanguard U.S. Growth Portfolio investment is not part of an
employer-sponsored plan, you can receive distributions of income or capital
gains in cash, or you may have them automatically reinvested in more shares of
the Portfolio. Both dividend and capital gains distributions--whether received
in cash or reinvested in additional shares--are subject to Federal (and possibly
state and local) income taxes, no matter how long you have held the shares in
the Portfolio. You should consult your own tax adviser about other tax
consequences of an investment in the Portfolio.

THE PORTFOLIO AND VANGUARD

The Fund is a member of The Vanguard Group, a family of more than 30 investment
companies with more than 90 distinct invest-

9
<PAGE> 14
ment portfolios and total net assets of more than $200 billion. All of the
Vanguard Funds share in the expenses associated with business operations, such
as personnel, office space, equipment, and advertising.

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

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

Plain Talk About

VANGUARD`S UNIQUE CORPORATE STRUCTURE

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

Plain Talk About

THE PORTFOLIO`S ADVISER

Lincoln Capital Management Company, an investment advisory firm founded in 1967,
currently manages about $33 billion in assets. It provides investment counseling
services to a limited number of clients, most of which are institutional clients
such as pension funds. The managers responsible for overseeing the
implementation of Lincoln's strategy for Vanguard U.S. Growth Portfolio are:

J. PARKER HALL III, President of Lincoln; 39 years investment experience, 25
years with Lincoln; B.A. from Swarthmore College, M.B.A. from Harvard Business

School.

DAVID M. FOWLER, Vice President of Lincoln; 24 years investment experience,
12 years with Lincoln; B.S. from Loyola University, M.B.A. from Northwestern
University.

Both have served in this capacity since Lincoln became the Portfolio's
adviser in August 1987.

INVESTMENT ADVISER

The Portfolio employs Lincoln Capital Management Company, 200 South Wacker
Drive, Chicago, IL 60606, as its investment adviser. Lincoln manages the
Portfolio subject to the control of the Officers and Directors of the Fund.

Lincoln is paid an advisory fee based on average month-end net assets of the
Portfolio and a sliding percentage scale:

<TABLE>

<S> <C> <C>
ASSETS MANAGED FEE
----------------- ----
First $25 million 0.40%
Next $125 million 0.35
Next $350 million 0.25
Next $500 million 0.20
Next $1.5 billion 0.15
Assets over $2.5 billion 0.10
</TABLE>

For the year ended August 31, 1995, the investment advisory fee paid to
Lincoln was $4.52 million.

The fee agreement with Lincoln does not provide for either an incentive bonus
or penalty based on performance. The agreement authorizes Lincoln to choose
brokers or dealers to handle the purchase and sale of the Portfolio's
securities, and directs Lincoln to get the best available price and most
favorable execution from these brokers with respect to all transactions.

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

GENERAL INFORMATION

The U.S. Growth Portfolio is one of two Portfolios of Vanguard World Fund, Inc.
The other Portfolio is the International Growth Portfolio. Vanguard World Fund
was originally formed as a corporation in 1959 and is now organized under the
laws of the State

10
<PAGE> 15
of Maryland. The Portfolios are combined under one corporation for
administrative purposes, but in virtually all respects operate like separate
corporations.

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

11
<PAGE> 16
INVESTING WITH VANGUARD

FOR PLAN PARTICIPANTS

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

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

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

INVESTMENT OPTIONS AND ALLOCATIONS

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

TRANSACTIONS

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

EXCHANGES

The exchange privilege (your ability to redeem shares from one fund to purchase
shares of another fund) may be available to you through your plan. However,
because excessive exchanges can potentially disrupt the management of the
Portfolio and increase its transaction costs, Vanguard reserves the right to
refuse any exchange request. In addition, certain investment options,
particularly funds made up of company stock or investment contracts, may be
subject to unique restrictions. Contact your plan administrator for details on
the exchange policies that apply to your plan.

Before making an exchange, you should consider the following:

- - Before you exchange to another Vanguard Fund available in your plan, you
should read that Fund's prospectus. Contact Participant Services, toll-free,
at 1-800-523-1188 for a copy.

- - Vanguard can accept exchanges only as permitted by your plan. Your plan
administrator can explain how frequently exchanges are allowed.

FOR OTHER INSTITUTIONAL INVESTORS

If you have questions about Vanguard U.S. Growth Portfolio, including how to
establish an account, call Vanguard, toll-free, at 1-800-523-1036.
If you have questions about an existing account, contact your Vanguard
account administrator.

12
<PAGE> 17
INVESTING WITH VANGUARD (continued)

TRANSACTIONS

Purchases, exchanges, or redemptions of the Portfolio's shares are processed as
soon as they have been received by Vanguard in good order. Good order means that
your request includes complete information on your purchase, exchange, or
redemption, and that Vanguard has received the appropriate assets. The price of
shares bought, exchanged, or sold will be the Portfolio's next-determined net
asset value after Vanguard has processed your request, provided your request has
been received before 4:00 p.m. Eastern time.

Vanguard must consider the interests of all Portfolio shareholders and so
reserves the right to . . .

- - Delay or reject any purchase or exchange request that may disrupt the
Portfolio's operation or performance.

- - Revise or terminate the exchange privilege or limit the amount of an exchange,
at any time, without notice.

- - Take up to seven days to deliver your redemption proceeds.

- - Pay redemption proceeds -- in whole or in part -- through a distribution in
kind of readily marketable securities.

ACCESSING FUND INFORMATION BY COMPUTER

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

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

SHARES OF THE PORTFOLIO MAY ONLY BE SOLD IN THOSE STATES IN WHICH THEY ARE
REGISTERED. THE PORTFOLIO'S SHARES ARE CURRENTLY REGISTERED FOR SALE IN ALL 50
STATES, AND THE PORTFOLIO INTENDS TO MAINTAIN SUCH REGISTRATION.

13
<PAGE> 18
Plain Talk About

KEEPING YOUR PROSPECTUS

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

PROSPECTUS POSTSCRIPT

This prospectus is designed to provide you with pertinent information about
Vanguard U.S. Growth Portfolio, including its investment objective, risks,
strategies, and expenses.

It is important that you understand these facts so that you can decide
whether an investment in this Portfolio is right for your needs. The following
questions offer a quick review of some of the subjects covered by this
prospectus.

In Reading The Prospectus, Did You Learn . . .

- The Portfolio's objective? (page 4)

- The Portfolio's investment strategies? (page 5)

- Who should invest in the Portfolio? (page 4)

- The risks associated with the Portfolio? (pages 4 - 7)

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

- The Portfolio's expenses? (page 2)

- The background of the Portfolio's investment managers?
(page 10)

14
<PAGE> 19
GLOSSARY OF INVESTMENT TERMS

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

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

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

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

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

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

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

GROWTH STOCK FUND
A mutual fund that emphasizes stocks of companies whose strong earnings and
revenue potential indicate above-average prospects for capital growth, with less
emphasis on dividend income.

INVESTMENT ADVISER
An organization that makes the day-to-day decisions regarding a portfolio's
investments.

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

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

PORTFOLIO DIVERSIFICATION
Holding a variety of securities so that a portfolio's return is not hurt by the
poor performance of a single security or industry.

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

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

SECURITIES
Stocks, bonds, and other investment vehicles.

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

VALUE STOCK FUND
A mutual fund that focuses on the stocks of companies that, considering their
earnings and dividends, are attractively priced; these companies often pay
regular dividend income to shareholders.

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

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

3
<PAGE> 20
<TABLE>
<CAPTION>
<S> <C> <C>

[THE VANGUARD GROUP LOGO]
Institutional Division
Post Office Box 2900
Valley Forge, PA 19482

FOR PARTICIPANTS IN FOR OTHER INSTITUTIONAL ELECTRONIC ACCESS TO THE VANGUARD MUTUAL FUND EDUCATION AND INFORMATION
EMPLOYER-SPONSORED PLANS INVESTORS CENTER
1-800-523-1036
PARTICIPANT SERVICES For information on Vanguard On America Online(R)
DEPARTMENT Funds and services Keyword: vanguard
1-800-523-1188
TEXT TELEPHONE On the World Wide Web
1-800-523-8004 http://www.vanguard.com
For information on the
Vanguard Funds in your plan,
Monday through Friday
8:30 a.m. to 7:00 p.m., To send e-mail to Vanguard
Eastern time [email protected]

</TABLE>
<PAGE> 21
VANGUARD
INTERNATIONAL GROWTH
PORTFOLIO

Institutional Prospectus
June 28, 1996

This prospectus contains financial data for the Portfolio through the fiscal
year ended August 31, 1995.

[LOGO] A member of THE VANGUARD GROUP

<PAGE> 22
VANGUARD INTERNATIONAL GROWTH PORTFOLIO An International Stock Mutual Fund

CONTENTS

Portfolio Expenses 2

Financial Highlights 3

A Word About Risk 4

The Portfolio's
Objective 4

Who Should Invest 4

Investment Strategies 5

Investment Policies 7

Investment Limitations 8

Investment
Performance 9

Share Price 9

Dividends, Capital
Gains, and Taxes 10

The Portfolio and
Vanguard 11

Investment Adviser 11

General Information 12

Investing
with Vanguard

- -For Plan Participants 13

- -For Other
Institutional Investors 13

Accessing Fund Information
by Computer 14

Prospectus Postscript 15

Glossary Inside Back Cover

INVESTMENT OBJECTIVE AND POLICIES

Vanguard International Growth Portfolio (the "Portfolio") is a diversified
mutual fund, a part of Vanguard World Fund, Inc. (the "Fund"), an open-end
investment management company.

The International Growth Portfolio seeks to provide long-term capital growth
by investing in equity securities of seasoned companies located outside the
United States. The Portfolio invests in up to 30 foreign stock markets,
emphasizing companies with above-average growth potential.

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

FEES AND EXPENSES

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

IMPORTANT NOTE

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

ADDITIONAL INFORMATION ABOUT THE PORTFOLIO

A Statement of Additional Information containing more information about the
Portfolio is, by reference, part of this prospectus and may be obtained without
charge by contacting Vanguard (see back cover).

WHY READING THIS PROSPECTUS IS IMPORTANT

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<PAGE> 23
PORTFOLIO PROFILE Vanguard International Growth Portfolio

WHO SHOULD INVEST (page 4)

- - Investors seeking investment opportunities outside the United States.

- - Investors seeking growth of their capital over the long term -- at least five
years.

- - Investors willing to accept the additional risks associated with
international investing.

- - Investors wishing to add an international component to an investment mix that
already includes U.S. stock, bond, and money market mutual funds.

WHO SHOULD NOT INVEST

- - Investors unwilling to accept significant fluctuations in share price.

- - Investors seeking dividend income.

RISKS OF THE PORTFOLIO (pages 4 - 8)

This Portfolio's total return will fluctuate within a wide range, so an investor
could lose money over short or even extended periods. In addition to the risks
of U.S. stock funds (market risk, etc.), the Portfolio is subject to the risks
associated with foreign investing. Among these are country risk (the chance that
a country's economy will be hurt by political or financial problems or natural
disasters) and currency risk (the chance that Americans investing abroad could
lose money because of a rise in the value of the U.S. dollar versus foreign
currencies).

DIVIDENDS AND CAPITAL GAINS (page 10)
Paid annually in December (automatically reinvested in participant accounts).

INVESTMENT ADVISER (page 11)
Schroder Capital Management International, Inc., London, England.

INCEPTION DATE: September 30, 1981

NET ASSETS AS OF 8/31/95: $3.35 billion

PORTFOLIO'S EXPENSE RATIO FOR THE
YEAR ENDED 8/31/95: 0.59%

NEWSPAPER ABBREVIATION: INTLGR

VANGUARD FUND NUMBER: 081

AVERAGE ANNUAL TOTAL RETURN --
PERIODS ENDED AUGUST 31, 1995

<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS

<S> <C> <C> <C>
INTERNATIONAL
GROWTH PORTFOLIO +3.8% +7.8% +16.3%

MSCI EAFE INDEX +0.8 +7.3 +15.7
</TABLE>

QUARTERLY RETURNS (%) 1986 - 1995

[GRAPH]

In evaluating past performance, remember that it is not indicative of future
performance. Performance figures include the reinvestment of any dividends and
capital gains distributions. The returns shown are net of expenses, but they do
not reflect income taxes an investor would have incurred. Note, too, that both
the return and principal value of an investment will fluctuate so that
investors' shares, when redeemed, may be worth more or less than their original
cost.

1
<PAGE> 24
PLAIN TALK ABOUT
THE COSTS OF INVESTING

PLAIN TALK ABOUT
FUND EXPENSES

All mutual funds have operating expenses. These expenses, which are deducted
from a fund's gross income, are expressed as a percentage of the net assets of
the fund. Vanguard International Growth Portfolio's expense ratio in fiscal year
1995 was 0.59%, or $5.90 per $1,000 of average net assets. The average actively
managed international equity mutual fund had expenses in 1995 of 1.58%, or
$15.80 per $1,000 of average net assets, according to Lipper Analytical
Services, Inc., which reports on the mutual fund industry.

PORTFOLIO EXPENSES

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

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

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

ANNUAL PORTFOLIO OPERATING EXPENSES
Management and Administrative Expenses: 0.32%
Investment Advisory Expenses: 0.16%
12b-1 Marketing Fees: None
Other Expenses
Marketing and Distribution Costs: 0.02%
Miscellaneous Expenses (e.g., Taxes, Auditing): 0.09%
-----
Total Other Expenses: 0.11%
-----
TOTAL OPERATING EXPENSES (EXPENSE RATIO): 0.59%
-----
-----

<TABLE>
<CAPTION>
-----------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------------
<S> <C> <C> <C> <C>
$6 $19 $33 $74
-----------------------------------------------
</TABLE>

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

2
<PAGE> 25

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
---------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 14.36 $ 12.02 $ 10.15 $ 10.31 $ 11.81 $ 11.61
INVESTMENT OPERATIONS
Net Investment Income .20 .14 .12 .20 .18 .32
Net Realized and
Unrealized Gain (Loss)
on Investments .32 2.31 1.96 (.05) (.80) .31
- -------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS .52 2.45 2.08 .15 (.62) .63
- -------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income (.18) (.11) (.21) (.19) (.20) (.15)
Distributions from
Realized Capital Gains -- -- -- (.12) (.68) (.28)
- -------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.18) (.11) (.21) (.31) (.88) (.43)
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $ 14.70 $ 14.36 $ 12.02 $ 10.15 $ 10.31 $ 11.81
===================================================================================================================
TOTAL RETURN 3.76% 20.44% 21.06% 1.49% (5.11)% 5.25%
===================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
Period (Millions) $ 3,354 $ 2,989 $ 1,477 $ 919 $ 846 $ 796
Ratio of Expenses to
Average Net Assets .59%** .46% .59% .58% .67% .68%
Ratio of Net Investment
Income to Average
Net Assets 1.53% 1.37% 1.27% 2.04% 1.80% 3.01%
Portfolio Turnover Rate 31% 28% 51% 58% 49% 45%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
---------------------------------------------------
1989 1988 1987 1986*
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $ 10.45 $ 14.21 $ 11.67 $ 6.19
INVESTMENT OPERATIONS
Net Investment Income .13 .16 .12 .07
Net Realized and
Unrealized Gain (Loss)
on Investments 2.26 (1.36) 3.29 5.41
- -------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 2.39 (1.20) 3.41 5.48
- -------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income (.16) (.13) (.07) --
Distributions from
Realized Capital Gains (1.07) (2.43) (.80) --
- -------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (1.23) (2.56) (.87) --
- -------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $ 11.61 $ 10.45 $ 14.21 $ 11.67
===============================================================================
Total Return 24.49% (9.92)% 32.01% 88.53%
===============================================================================
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
Period (Millions) $ 550 $ 454 $ 607 $ 451
Ratio of Expenses to
Average Net Assets .64% .67% .66% .78%+
Ratio of Net Investment
Income to Average
Net Assets 1.27% 1.39% 1.00% 1.10%+
Portfolio Turnover Rate 50% 71% 77% 39%
- -------------------------------------------------------------------------------
</TABLE>
*Partial period: October 1, 1985, to August 31, 1986.
**Beginning in fiscal year 1995, this figure does not include expense reductions
from directed brokerage arrangements. The Ratio of Net Expenses to Average Net
Assets was .58%.
+Annualized.

PLAIN TALK ABOUT
HOW TO READ THE FINANCIAL HIGHLIGHTS TABLE

The Portfolio began fiscal 1995 with a net asset value (price) of $14.36 per
share. During the year, the Portfolio earned $0.20 per share from investment
income (interest and dividends) and $0.32 per share from investments that had
appreciated in value or that were sold for higher prices than the Portfolio paid
for them. Of those total earnings of $0.52 per share, $0.18 per share was
returned to shareholders in the form of dividend distributions. The earnings
($0.52 per share) less distributions ($0.18 per share) resulted in a share price
of $14.70 at the end of the year, an increase of $0.34 per share (from $14.36 at
the beginning of the period to $14.70 at the end of the period). Assuming that
the shareholder had reinvested the distribution in the purchase of more shares,
total return from the Portfolio was 3.76% for the year.

As of August 31, 1995, the Portfolio had $3.35 billion in net assets; an
expense ratio of 0.59% ($5.90 per $1,000 of net assets); and net investment
income amounting to 1.53% of its average net assets. It sold and replaced
securities valued at 31% of its total net assets.

<PAGE> 26
PLAIN TALK ABOUT
GROWTH FUNDS AND
VALUE FUNDS

PLAIN TALK ABOUT
INVESTING FOR THE LONG TERM

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

A WORD ABOUT RISK

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

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

THE PORTFOLIO'S OBJECTIVE

The Portfolio seeks to provide long-term growth of capital. This objective is
fundamental, which means that it cannot be changed unless a majority of
shareholders vote to do so.

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

WHO SHOULD INVEST

The Portfolio may be a suitable investment for you if:

- - You wish to add an international stock fund to your existing holdings, which
could include U.S. stock, bond and money market investments.

- - You are willing to accept the additional risks (country risk, currency risk,
etc.) associated with international investments.

- - You are seeking growth of capital over the long term -- at least five years.

- - You characterize your investment temperament as "relatively aggressive."

- - You are not looking for income.

- - The Portfolio reserves the right to reject any purchase request -- including
exchanges from other Vanguard Funds -- that it regards as disruptive to the
efficient management of the Portfolio. This

4
<PAGE> 27

could be because of the timing of the investment or because of a history of
excessive trading by the investor. If you own shares of the Portfolio as an
investment option in an employer-sponsored retirement or savings plan, your
plan dictates the rules governing exchanges.Contact your plan administrator
for details.

- - There is a limit on the number of times you can exchange into or out of the
Portfolio.

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

INVESTMENT STRATEGIES

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

MARKET EXPOSURE

The Portfolio invests in stocks of non-U.S. companies. About two-thirds of the
Portfolio's assets are invested in small and medium-size companies, the
remaining third in large companies.

[FLAG]THE PORTFOLIO IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY THAT
STOCK PRICES OVERALL WILL DECLINE OVER SHORT OR EVEN EXTENDED PERIODS.
STOCK MARKETS TEND TO MOVE IN CYCLES, WITH PERIODS OF RISING STOCK PRICES
AND PERIODS OF FALLING STOCK PRICES. IN ADDITION, INVESTMENTS IN FOREIGN
STOCK MARKETS CAN BE AS RISKY, IF NOT MORE RISKY, THAN U.S. STOCK
INVESTMENTS.

To illustrate the volatility of international stock prices, the following
table shows the best, worst, and average total returns (dividend income plus
change in market value) for foreign stock markets over various periods as
measured by the Morgan Stanley Capital International Europe, Australia, and Far
East (EAFE) Index, a widely used barometer of international stock market
activity. Note that the returns shown do not include the costs of buying and
selling stocks or other expenses that a real-world investment portfolio would
incur.

<TABLE>
<CAPTION>
- --------------------------------------------------------------------
INTERNATIONAL STOCK MARKET RETURNS (1969-1995)
- --------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS 20 YEARS
- --------------------------------------------------------------------
<S> <C> <C> <C> <C>
Best +69.9% +36.5% +22.8% +16.3%
Worst - 23.2 +1.5 +7.0 +12.0

Average +15.3 +14.2 +16.2 +14.9
</TABLE>

PLAIN TALK ABOUT
COSTS AND MARKET TIMING

Some investors try to profit from "market timing" -- switching money into
investments when they expect prices to rise, and taking money out when they
expect the market to fall. As money is shifted in and out, a fund incurs
expenses for buying and selling securities. These costs are borne by all fund
shareholders, including the long-term investors who do not generate the costs.
Therefore, the Portfolio tries to discourage short-term trading by closely
monitoring daily transactions.
<PAGE> 28
PLAIN TALK ABOUT
THE RISKS OF
INTERNATIONAL INVESTING

Because foreign stock markets operate differently from the U.S. market,
Americans investing abroad will encounter risks not typically associated with
U.S. companies. For instance, foreign countries are not subject to the same
accounting, auditing, and financial reporting standards and practices as U.S.
companies, and may not be as liquid as similar U.S. companies. In addition,
foreign stock exchanges, brokers, and companies generally have less government
supervision and regulation than in the U.S. These factors -- as well as possible
country risk and currency risk (which are described in detail in this
prospectus) -- could negatively impact the returns that Americans receive from a
foreign investment. For more information about foreign investment risk, see the
Statement of Additional Information.

Note, also, how the gap between best and worst tends to narrow over the long
term.

The table covers all of the 1-, 5-, 10-, and 20-year periods from 1969
through 1995. Keep in mind that this was a particularly favorable period for
foreign markets. For instance, over 10-year periods, foreign stocks provided an
average return of +16.2%, compared to +13.1% for U.S. stocks (as measured by the
Standard & Poor's 500 Composite Stock Price Index) during the same time frame.
These average returns reflect past performance and should not be regarded as an
indication of future returns from either foreign markets as a whole or this
Portfolio in particular.

Keep in mind, too, that while the Portfolio invests mainly in small and
medium-size companies, classifications of companies as large, medium, and small
vary from country to country. For instance, a large company in one country may
be considered a small company in another.

Finally, because the International Growth Portfolio does not hold the same
securities held in the EAFE Index or any other market index, the performance of
the Portfolio will not mirror the returns of any particular index.

[FLAG] THE PORTFOLIO IS SUBJECT TO OBJECTIVE RISK, WHICH IS THE POSSIBILITY
THAT RETURNS FROM INTERNATIONAL STOCKS WILL TRAIL RETURNS FROM THE
U.S. STOCK MARKETS. THE PRICES OF INTERNATIONAL STOCKS AND THE PRICES
OF U.S. STOCKS HAVE OFTEN MOVED IN OPPOSITE DIRECTIONS. THESE PERIODS
HAVE, IN THE PAST, LASTED FOR AS LONG AS SEVERAL YEARS.

SECURITY SELECTION

Schroder Capital Management International, Inc. (Schroder Capital), adviser to
the Portfolio, believes that the two most important factors in managing the
investments of an international stock fund are country selection and stock
selection. Schroder Capital evaluates up to 30 financial markets -- including
Japan, the United Kingdom, the Netherlands, Germany, France, Switzerland,
Sweden, Australia, Hong Kong, Singapore, Malaysia, and Italy -- and identifies
those countries with, in the adviser's opinion, the most favorable business
climates.

[FLAG] THE PORTFOLIO IS SUBJECT TO COUNTRY RISK, WHICH IS THE POSSIBILITY
THAT POLITICAL EVENTS (A WAR, NATIONAL ELECTIONS), FINANCIAL PROBLEMS
(RISING INFLATION, GOVERNMENT DEFAULT), OR NATURAL DISASTERS (AN
EARTHQUAKE, A FLOOD) WILL WEAKEN A COUNTRY'S ECONOMY AND CAUSE
INVESTMENTS IN THAT COUNTRY TO LOSE MONEY.

Once an attractive market has been identified, Schroder Capital analyzes and
ranks the companies in that country that, Schroder believes, offer the potential
for above-average earnings growth. Schroder Capital considers on-site
evaluations a vital part of the security selection process, visiting more than
1,000 companies in 20

6
<PAGE> 29

countries each year. The companies chosen by Schroder Capital reflect a wide
variety of countries and industries.

The top ten holdings (which amounted to 21% of the Portfolio's total net
assets) as of August 31, 1995, follow.

<TABLE>
<CAPTION>
COMPANY COUNTRY
<S> <C>
1. Heineken NV Netherlands
2. Ito-Yokado Co. Japan
3. Philips Electronics NV (non-voting) Netherlands
4. Murata Manufacturing Co. Ltd. Japan
5. Societe National Elf Aquitaine France
6. Veba AG Germany
7. BBC Brown Boveri AG A (bearer) Switzerland
8. Internationale Nederlanden Groep Netherlands
9. Hitachi Ltd. Japan
10. Matsushita Electric Industrial Co., Ltd. Japan
</TABLE>

Keep in mind that, because the makeup of the Portfolio changes daily, this
listing is only a "snapshot" at one point in time.

The Portfolio is run by Schroder Capital according to traditional methods of
active investment management, which means securities are bought and sold
according to Schroder Capital's judgments about companies and their financial
prospects, and about foreign stock markets and economies in general.

[FLAG] THE PORTFOLIO IS SUBJECT TO MANAGER RISK, WHICH IS THE POSSIBILITY
THAT SCHRODER CAPITAL MAY DO A POOR JOB OF EVALUATING FOREIGN MARKETS
AND SELECTING STOCKS.

PORTFOLIO TURNOVER

Although the Portfolio generally seeks to invest for the long term, it retains
the right to sell securities regardless of how long they have been held. The
Portfolio's average turnover rate for the past ten years has been about 63%. (A
turnover rate of 100% would occur, for example, if the Portfolio sold and
replaced securities valued at 100% of its total net assets within a one-year
period.)

INVESTMENT POLICIES

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

The Portfolio may enter into forward foreign currency contracts, which help
protect the Portfolio's securities against unfavorable short-term changes in
exchange rates. A forward foreign currency contract is an agreement to buy or
sell a country's currency at a specific price usually 30, 60, or 90 days in the
future. In other words, the contract guarantees an exchange rate on a given
date. Managers of international stock funds use these contracts to guard against
sudden, unfavorable changes in U.S. dollar/foreign currency exchange rates.

PLAIN TALK ABOUT
PORTFOLIO DIVERSIFICATION

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

PLAIN TALK ABOUT
PORTFOLIO TURNOVER

7
<PAGE> 30
PLAIN TALK ABOUT
DERIVATIVES

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

PLAIN TALK ABOUT
CASH RESERVES

With mutual funds, holding cash reserves -- or "cash" -- does not mean literally
that the fund holds a stack of currency. Rather, cash reserves refer to
short-term, interest-bearing securities that can easily and quickly be converted
to cash. (Most mutual funds hold at least a small percentage of assets in cash
to accommodate shareholder redemptions.) While some equity funds strive to keep
cash levels at a minimum and to always remain fully invested in stocks, other
equity funds allow investment advisers to hold up to 20% or more of a fund's
assets in cash reserves.

The contracts will not prevent the fund's securities from falling in value
during foreign market downswings. Schroder Capital will use these contracts to
eliminate some of the uncertainty of foreign exchange rates -- but will not
speculate on changes in the market.

[FLAG] THE PORTFOLIO IS SUBJECT TO CURRENCY RISK, WHICH IS THE POSSIBILITY
THAT A "STRONGER" U.S. DOLLAR WILL REDUCE RETURNS FOR AMERICANS
INVESTING OVERSEAS. GENERALLY, WHEN THE DOLLAR RISES IN VALUE AGAINST
A FOREIGN CURRENCY, YOUR INVESTMENT IN THAT COUNTRY LOSES VALUE
BECAUSE ITS CURRENCY IS WORTH FEWER U.S. DOLLARS. ON THE OTHER HAND,
A "WEAKER" DOLLAR GENERALLY LEADS TO HIGHER RETURNS FOR AMERICANS
HOLDING FOREIGN INVESTMENTS.

The Portfolio may also invest in derivatives.

[FLAG] ALTHOUGH IT HAS NOT DONE SO IN THE PAST, THE PORTFOLIO RESERVES THE
RIGHT TO INVEST, TO A LIMITED EXTENT, IN STOCK FUTURES AND OPTIONS
CONTRACTS, WHICH ARE TRADITIONAL TYPES OF DERIVATIVES.

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

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

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

- - To make it easier to trade.

- - To reduce costs by buying futures instead of actual stocks when futures are
cheaper.

INVESTMENT LIMITATIONS

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

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

8
<PAGE> 31
- - Invest more than 25% of its assets in any one industry.

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

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

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

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

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

INVESTMENT PERFORMANCE

Vanguard International Growth Portfolio invests in foreign stocks, so its
performance is tied to the performance of many stock markets outside the United
States. Historically, stock market performance, both foreign and domestic, has
been characterized by sharp up-and-down swings in the short term and by more
stable growth over the long term.

Average Annual Total Returns
For Periods Ended 8/31/95
[AVERAGE ANNUAL TOTAL RETURNS GRAPH]

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
INTERNATIONAL GROWTH PORTFOLIO 0.8% 14.8% 7.8% 16.3%
MSCI EAFE INDEX 3.8% 12.5% 7.3% 15.7%
</TABLE>

The results shown above represent the Portfolio's "average annual total return"
performance, which assumes that any distributions of capital gains and dividends
were reinvested for the indicated periods. Also included is comparative
information on the unmanaged Morgan Stanley Capital International Europe,
Australia, and Far East (EAFE) Index. The chart does not make any allowance for
Federal, state, or local income taxes that shareholders must pay on a current
basis.

SHARE PRICE

The Portfolio's share price, called its net asset value, is calculated each
business day after the close of regular trading (generally 4:00 p.m. Eastern
time) of the New York Stock Exchange. Net

PLAIN TALK ABOUT
PAST PERFORMANCE

9
<PAGE> 32
PLAIN TALK ABOUT
DISTRIBUTIONS

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

asset value per share is computed by adding up the total value of the
Portfolio's investments and other assets, subtracting any of its liabilities, or
debts, and then dividing by the number of Portfolio shares outstanding:

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

To help determine its daily share price, the Portfolio calculates the value
of its foreign securities in U.S. dollars. The Portfolio uses the daily exchange
rate employed by Morgan Stanley Capital International in the calculation of its
own indexes. If Morgan Stanley's exchange rate is not available, the Portfolio
uses a rate according to policies set by the Portfolio's Board of Directors.

DIVIDENDS, CAPITAL GAINS, AND TAXES

Each December, the Portfolio distributes to shareholders virtually all of its
income from interest and dividends, as well as any capital gains realized from
the sale of securities.

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

If your Vanguard International Growth Portfolio investment is not part of an
employer-sponsored plan, you can receive distributions of income or capital
gains in cash, or you may have them automatically reinvested in more shares of
the Portfolio. Both dividend and capital gains distributions -- whether received
in cash or reinvested in additional shares -- are subject to Federal (and
possibly state and local) income taxes, no matter how long you have held the
shares in the Portfolio. You should consult your own tax adviser about other tax
consequences of an investment in the Portfolio.

10
<PAGE> 33
THE PORTFOLIO AND VANGUARD

The Fund is a member of The Vanguard Group, a family of more than 30 investment
companies with more than 90 distinct investment portfolios and total net assets
of more than $200 billion. All of the Vanguard Funds share in the expenses
associated with business operations, such as personnel, office space, equipment,
and advertising.

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

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

INVESTMENT ADVISER

The Portfolio employs Schroder Capital Management International, Inc., 33 Gutter
Lane, London, England EC2V 8AS, as its investment adviser. Schroder Capital
manages the Portfolio subject to the control of the Officers and Directors of
the Fund.

Schroder Capital's base advisory fee is calculated using the Portfolio's
average net assets during the most recent fiscal quarter:

<TABLE>
<CAPTION>
----------------------------------------
ASSETS MANAGED FEE
----------------------------------------
<S> <C>
First $50 million 0.350%
Next $950 million 0.175
Assets over $1 billion 0.125
----------------------------------------
</TABLE>

In addition, Schroder Capital's advisory fee is increased or decreased, based
on the cumulative total return performance of the Portfolio as compared to the
cumulative total return performance of the MSCI EAFE Index over the past 36
months.

For the Portfolio's first $1 billion in assets:

<TABLE>
<CAPTION>
--------------------------------------------------
DIFFERENCE BETWEEN PORTFOLIO PERFORMANCE FEE
AND MSCI EAFE INDEX ADJUSTMENT
--------------------------------------------------
<S> <C>
-12% and below -0.0750%
Between -6% and -12% -0.0375
Between -6% and +6% 0
Between +6% and +12% +0.0375
+12% and above +0.0750
--------------------------------------------------
</TABLE>

PLAIN TALK ABOUT
VANGUARD'S UNIQUE
CORPORATE STRUCTURE

PLAIN TALK ABOUT
THE PORTFOLIO'S ADVISER

Schroder Capital Management International, Inc., is part of a worldwide group of
banks and financial services companies known as The Schroder Group. The Group
manages more than $100 billion in assets. The manager responsible for overseeing
Schroder Capital's strategy for Vanguard International Growth Portfolio is:

RICHARD FOULKES, Executive Vice President of Schroder Capital; 28 years with
Schroder Capital; educated at the Sorbonne, France; M.A., Cambridge University,
England.

He has served in this capacity since the Portfolio's inception in 1981.

11
<PAGE> 34
For the portion of the Portfolio's assets over $1 billion:

<TABLE>
<CAPTION>
--------------------------------------------------
DIFFERENCE BETWEEN PORTFOLIO PERFORMANCE FEE
AND MSCI EAFFE INDEX ADJUSTMENT
--------------------------------------------------
<S> <C>
-12% and below -0.050%
Between -6% and -12% -0.025
Between -6% and +6% 0
Between +6% and +12% +0.025
+12% and above +0.050
--------------------------------------------------
</TABLE>

For the year ended August 31, 1995, the investment advisory fee paid to
Schroder Capital was $4.89 million, which included a base fee of $4.37 million
and, because the Portfolio's cumulative total return performance bettered that
of the MSCI EAFE Index over the past 36 months, an additional $518,000.

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

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

GENERAL INFORMATION

The International Growth Portfolio is one of two Portfolios of Vanguard World
Fund, Inc. The other Portfolio is the U.S. Growth Portfolio. Vanguard World Fund
was originally formed as a corporation in 1959 and is now organized under the
laws of the State of Maryland. The Portfolios are combined under one corporation
for administrative purposes, but in virtually all respects operate like separate
corporations.

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

12
<PAGE> 35
INVESTING WITH VANGUARD

FOR PLAN PARTICIPANTS

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

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

INVESTMENT OPTIONS AND ALLOCATIONS

TRANSACTIONS

EXCHANGES

Before making an exchange, you should consider the following:

- - Before you exchange to another Vanguard Fund available in your plan, you
should read that Fund's prospectus. Contact Participant Services, toll-free,
at 1-800-523-1188 for a copy.

- - Vanguard can accept exchanges only as permitted by your plan. Your plan
administrator can explain how frequently exchanges are allowed.

FOR OTHER INSTITUTIONAL INVESTORS

If you have questions about Vanguard International Growth Portfolio, including
how to establish an account, call Vanguard, toll-free, at 1-800-523-1036.

If you have questions about an existing account, contact your Vanguard
account administrator.

13
<PAGE> 36
INVESTING WITH VANGUARD (CONTINUED)

TRANSACTIONS

Vanguard must consider the interests of all Portfolio shareholders and so
reserves the right to . . .

- - Delay or reject any purchase or exchange request that may disrupt the
Portfolio's operation or performance.

- - Revise or terminate the exchange privilege or limit the amount of an
exchange, at any time, without notice.

- - Take up to seven days to deliver your redemption proceeds.

- - Pay redemption proceeds -- in whole or in part -- through a distribution in
kind of readily marketable securities.

ACCESSING FUND INFORMATION BY COMPUTER

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

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

14
<PAGE> 37
PROSPECTUS POSTSCRIPT

This prospectus is designed to provide you with pertinent information about
Vanguard International Growth Portfolio, including its investment objective,
risks, strategy, and expenses.

It is important that you understand these facts so that you can decide
whether an investment in this Portfolio is right for you. The following
questions offer a quick review of some of the subjects covered by this
prospectus.

IN READING THE PROSPECTUS, DID YOU LEARN . . .

- The Portfolio's objective? (page 4)

- The Portfolio's investment strategies? (page 5)

- Who should invest in the Portfolio? (page 4)

- The risks associated with the Portfolio? (pages 4 - 8)

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

- The Portfolio's expenses? (page 2)

- The background of the Portfolio's investment manager? (page 11)

PLAIN TALK ABOUT
KEEPING YOUR PROSPECTUS

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

15
<PAGE> 38
GLOSSARY OF INVESTMENT TERMS

CAPITAL GAINS DISTRIBUTION

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

CASH RESERVES

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

COMMON STOCK

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

COUNTRY RISK

The possibility that events such as political or financial troubles or natural
disasters will weaken a country's economy.

CURRENCY RISK

The possibility that an American's foreign investment will lose money because of
unfavorable exchange rates.

DIVIDEND INCOME

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

EXPENSE RATIO

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

FIXED-INCOME SECURITIES

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

INTERNATIONAL STOCK FUND

A mutual fund that invests in the stocks of companies located outside the United
States.

INVESTMENT ADVISER

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

MUTUAL FUND

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

NET ASSET VALUE (NAV)

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

PORTFOLIO DIVERSIFICATION

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

PRICE/EARNINGS (P/E) RATIO

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

PRINCIPAL

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

SECURITIES

Stocks, bonds, and other investment vehicles.

TOTAL RETURN

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

VOLATILITY

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

YIELD

Current income (interest or dividends) earned by an investment, expressed as a
percentage of the investment's price.
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THE VANGUARD GROUP
Institutional Division
Post Office Box 2900
Valley Forge, PA 19482

FOR PARTICIPANTS IN EMPLOYER-SPONSORED PLANS

PARTICIPANT SERVICES DEPARTMENT
1-800-523-1188

TEXT TELEPHONE:
1-800-523-8004

For information on the Vanguard Funds in your plan, Monday through Friday
8:30 a.m. to 7:00 p.m., Eastern time

FOR OTHER INSTITUTIONAL INVESTORS
1-800-523-1036

For information on Vanguard Funds and services

ELECTRONIC ACCESS TO THE VANGUARD MUTUAL FUND EDUCATION AND INFORMATION CENTER

On America Online(R)
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On the World Wide Web
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