VANGUARD WORLD FUND INC, N-30D, 2000-10-27

VANGUARD WORLD FUND INC
N-30D, 2000-10-27

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VANGUARD CALVERT SOCIAL INDEX(TM)FUND

ANNUAL

[PHOTO OF SHIP]

August 31, 2000

[THE VANGUARD GROUP LOGO]

<PAGE>

OUR REPORTS TO
THE OWNERS

At Vanguard, we regard our investors not as mere customers but as owners of the
enterprise. For that's exactly what a mutual fund shareholder is--part owner of
an investment company.

In our reports to you on how the company is doing, we have tried to convey
information without hyperbole and in the context of broad market trends and
relevant benchmarks.

We've introduced several changes to this year's annual report to make it even
more useful. Among the changes:
* Larger type and redesigned graphics to make the reports easier to read.
* An at-a-glance summary of key points about fund performance and the
financial markets.
* A table--included for many funds--in which the investment adviser
highlights significant changes in holdings.
* Comparisons of fund performance and characteristics against both a broad
market index and a "best fit" benchmark.

We hope you'll find that these changes make the reports even more accessible and
informative.

SUMMARY

* The Calvert Social Index Fund returned 11.1% between May 31 and August 31.
* The Calvert Social Index(TM)comprises socially screened large- and mid-
capitalization U.S. stocks.
* Because the fund is more heavily concentrated in a couple of key sectors, it
is likely to experience wider price fluctuations than market-weighted
portfolios.

CONTENTS

1 Letter from the Chairman
5 Fund Profile
6 Glossary of Investment Terms
7 Performance Summary
8 Financial Statements
19 Report of Independent Accountants

<PAGE>

LETTER
from the Chairman

Fellow Shareholders,

This is the first of my semiannual letters to the investors in vanguard calvert
social index fund. Welcome aboard! We introduced the fund on May 8, 2000, and
conducted a subscription period until the end of that month. On May 31, your
fund started to pursue its objective--to provide investment results that
correspond to returns for the Calvert Social Index.

2000 TOTAL RETURNS Period Ended
August 31*
----------------------------------------------
Vanguard Calvert Social Index Fund 11.1%
Average Large-Cap Growth Fund** 15.5
Calvert Social Index 10.5
Wilshire 5000 Index 9.7
----------------------------------------------
*Total returns are since the fund's inception
on May 31, 2000.
**Derived from data provided by Lipper Inc.

I am pleased to report that the fund has thus far met its objective. During the
three months ended August 31, the fund's total return of 11.1% was in line
with--indeed, a bit ahead of--the result for its target index. (The fund's net
asset value increased from $10.03 per share on May 31 to $11.14 per share on
August 31.) The fund did not distribute any dividends during the period, nor did
it distribute any capital gains realized from the sale of securities. The fund
is expected to make distributions of income and net realized capital gains once
each year in December.

The table above compares the fund's return with the performance of three
relevant benchmarks. As you can see, your fund enjoyed a good beginning,
outpacing two of its benchmarks. However, nothing of consequence can be inferred
from the results of such a brief period. Much of the remainder of this report
will provide an overview of the Calvert Social Index and Vanguard Calvert Social
Index Fund. The fund's performance will be described only briefly and "for the
record."

WHAT IS THE CALVERT SOCIAL INDEX?

It is a list of stocks that have passed a number of screens developed by the
Calvert Group of Bethesda, Maryland, which has worked with such screens since
1982. These screens are applied to approximately 1,000 of the largest publicly
traded, U.S.-based companies. Companies that are excluded from the index may
have significant involvement, in Calvert's opinion, with tobacco, alcohol,
gambling, weapons manufacturing, nuclear power, or unfair labor practices, among
other things. The firm also evaluates corporate efforts to protect the
environment, treat employees fairly, provide safe workplaces, sell

1
<PAGE>

safe products, protect human rights in foreign countries, and protect the
rights of indigenous peoples.

The number of stocks in the index--461 as of August 31--will change from time to
time, as Calvert monitors the largest companies on an ongoing basis. Stocks may
be dropped or added for three reasons. First, the results of the screens could
change. (For example, a previously excluded company may improve its
environmental compliance record sufficiently to warrant inclusion in the index.)
Second, mergers may prompt index changes. Third, shifting market capitalizations
could move companies into or out of consideration.(A stock that declines for an
extended period may be removed from the index if its market capitalization
becomes too small.) While the first two issues could prompt index changes
throughout the year, fluctuations in the market value of stocks will typically
lead to revisions just once a year. In fact, the first such revisions were made
shortly after the end of our fiscal period. Some 200 stocks joined the index and
about two dozen others were removed, bringing the total number of stocks to 640
as of this writing. Despite this expansion, the sector weightings of the
index--and thus our fund--did not change significantly.

--------------------------------------------------------------------------------
Calvert Group looks at the 1,000 largest U.S.-based companies and eliminates
those that do not pass its screens for social responsibility.
--------------------------------------------------------------------------------

It's important to note that Vanguard exercises no control over the composition
of the Calvert Social Index. A complete list of the stocks in the fund as of
August 31 begins on page 8 of this report. For a regularly updated list of
stocks in the index, you can visit the Calvert Group's website at
www.calvert.com.

THE STRATEGY AND RISKS OF YOUR FUND

Vanguard Calvert Social Index Fund holds all the stocks listed in the Calvert
Social Index. Because the fund's mandate is to track the performance of the
index as closely as possible, the fund's investment adviser, Vanguard's
Quantitative Equity Group, makes no attempt to discern which stocks in the index
may perform better than the average. Instead, the adviser buys and sells shares
so as to replicate the weighting of each company in the index.

--------------------------------------------------------------------------------
The fund may be less diversified--and more volatile--than the average
diversified stock mutual fund.
--------------------------------------------------------------------------------

Our passive investment approach, combined with the index's exclusion of a large
number of widely held stocks, make the fund significantly different from--and
potentially more volatile than--the broad stock market or the average
diversified stock mutual fund. As of August 31, for example, the fund had 41% of
its assets in technology companies and a stake of nearly 21% in financial
services firms. In contrast, the weightings of

2
<PAGE>

both sectors in the Wilshire 5000 Total Market Index were only three-fourths
that large. The fund was underweighted in energy, automotive, and utility
companies, among others, compared with the Wilshire 5000.

The growth-oriented Calvert Social Index Fund excludes the stocks
of some large "old economy" companies, which tend to offer relatively high
dividends. For this reason, it is not surprising that the fund had a yield of
just 0.7% at the end of the fiscal period. The relative dearth of
income-producing stocks may make the fund somewhat riskier than the average
stock fund, which is of the growth-and-income variety. That's because the income
from dividend payments on stocks is far more predictable than returns from
capital appreciation, upon which your fund relies.

I hope it is clear to shareholders new to Vanguard that we believe in candor.
Our Calvert Social Index Fund entails significant risk of price fluctuations
over any short-term period. That said, we believe that the fund will serve well
the interests of socially concerned investors who seek growth of capital over
the long term.

PERFORMANCE OVERVIEW IN BRIEF

The three-month period ended August 31 was remarkably fruitful for U.S. stock
investors. Amid signs that the record-setting U.S. economic expansion was
finally slowing, the Wilshire 5000 Index gained 9.7%--nearly as much in a single
quarter as stocks have historically provided in a full year. Mid- and small-cap
stocks led the way, jumping 20.9%, as measured by the Wilshire 4500 Completion
Index. Large-cap stocks lagged, returning 7.1% (Standard & Poor's 500 Index). In
contrast, returns from developed international stock markets were flat. The U.S.
bond market rallied smartly as interest rates fell from May 31 to August 31, but
bonds could not keep pace with equities.

--------------------------------------------------------------------------------
Our effort to track the Calvert Social Index will be aided by our low costs.
--------------------------------------------------------------------------------

As noted, Vanguard Calvert Social Index Fund had a three-month total return of
11.1%. While our twice-a-year reports naturally involve some examination of
short-term performance, we will evaluate the success of the fund over many
years. We think that's appropriate, given the stock market's wide short-term
swings and the fact that most individuals invest for long-term goals.

Our effort to track the Calvert Social Index as closely as possible will be
aided by our low costs. The fund is expected to have an expense ratio (annual
operating expenses as a percentage of average net assets) of 0.25%, or $2.50 per
$1,000 in assets. That's less than one-fifth the 1.41% ($14.10 per $1,000)
charged by our average mutual fund peer. Because the managerial and
administrative fund costs of all mutual funds are deducted directly from the
income that shareholders would otherwise receive, our funds enjoy a head start
versus funds that charge higher expenses.

3
<PAGE>

Our significant cost advantage is due in large part to our unique corporate
structure: The Vanguard Group is owned by the Vanguard funds, which, in turn,
are owned by the funds' shareholders. The typical mutual fund is run by a
management company that seeks to maximize its profits. In contrast, the Vanguard
funds operate on an at-cost basis, thereby returning any potential profits to
the fund shareholder, not a management company.

IN SUMMARY

Vanguard Calvert Social Index Fund set sail under the financial equivalent of
clear blue skies and a strong tailwind. The sailing will not always be so
smooth, of course. Stocks will fall now and again--sometimes sharply. At such
times, it will help to be an informed investor, one who knows that markets are
ever cyclical and whose focus is on meeting long-term goals, not on quarterly
gains or losses.

Finally, I'd like to thank you for placing your trust in Vanguard. I look
forward to reporting to you six months hence.

Sincerely,

September 20, 2000

[PHOTO OF JOHN J. BRENNAN]
JOHN J. BRENNAN
Chairman and
Chief Executive Officer

4
<PAGE>

FUND PROFILE As of August 31, 2000
for Calvert Social Index Fund

This Profile provides a snapshot of the fund's characteristics, compared where
appropriate to its unmanaged target index and a broader market index. Key terms
are defined on page 6.

--------------------------------------------------------------------------------
PORTFOLIO CHARACTERISTICS
Calvert Social Target Wilshire
Index Fund Index* 5000
--------------------------------------------------------------------------------
Number of Stocks 462 461 6,848
Median Market Cap $72.7B $72.7B $48.6B
Price/Earnings Ratio 36.4x 36.4x 33.0x
Price/Book Ratio 7.1x 7.1x 4.9x
Yield 0.7% 0.7% 1.0%
Return on Equity 26.7% 26.7% 23.1%
Earnings Growth Rate 22.6% 22.6% 17.5%
Foreign Holdings 0.0% 0.0% 0.0%
Turnover Rate 3% -- --
Expense Ratio 0.25%** -- --
Cash Investments 1.3% -- --
--------------------------------------------------------------------------------
**Annualized.
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
SECTOR DIVERSIFICATION
(% of common stocks)
Calvert Social Target Wilshire
Index Fund Index* 5000
--------------------------------------------------------------------------------
Auto & Transportation 0.7% 0.7% 1.7%
Consumer Discretionary 11.6 11.6 12.3
Consumer Staples 2.3 2.3 4.4
Financial Services 20.6 20.6 15.5
Health Care 12.8 12.8 10.9
Integrated Oils 0.0 0.0 2.7
Other Energy 0.9 0.9 2.7
Materials & Processing 0.4 0.4 2.4
Producer Durables 2.8 2.8 3.5
Technology 41.0 41.0 31.1
Utilities 6.6 6.6 8.0
Other 0.3 0.3 4.8
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
TEN LARGEST HOLDINGS
(% of total net assets)

Intel Corp.
(computer hardware) 5.3%
Cisco Systems, Inc.
(computer networks) 5.0
Microsoft Corp.
(software) 3.8
Pfizer, Inc.
(pharmaceuticals) 3.5
Oracle Corp.
(software) 2.7
American International Group, Inc.
(insurance) 2.7
International Business Machines Corp.
(computer technology) 2.5
EMC Corp.
(computer technology) 2.2
Sun Microsystems, Inc.
(computer technology) 2.1
Merck & Co., Inc.
(pharmaceuticals) 2.1
--------------------------------------------------------------------------------
Top Ten 31.9%
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
INVESTMENT FOCUS

[GRID APPEARS HERE]

MARKET CAP LARGE
STYLE GROWTH
--------------------------------------------------------------------------------

*Calvert Social Index.
[PHOTO OF COMPUTER]
Visit our website
www.vanguard.com
for regularly updated
fund information.

5
<PAGE>

GLOSSARY
of Investment Terms

CASH INVESTMENTS. The percentage of a fund's net assets invested in "cash
equivalents"--highly liquid, short-term, interest-bearing securities. This
figure does not include cash invested in futures contracts to simulate stock
investment.
--------------------------------------------------------------------------------
EARNINGS GROWTH RATE. The average annual rate of growth in earnings over the
past five years for the stocks now in a fund.
--------------------------------------------------------------------------------
EXPENSE RATIO. The percentage of a fund's average net assets used to pay its
annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
--------------------------------------------------------------------------------
FOREIGN HOLDINGS. The percentage of a fund's equity assets represented by stocks
or American Depositary Receipts of companies based outside the United States.
--------------------------------------------------------------------------------
MEDIAN MARKET CAP. An indicator of the size of companies in which a fund
invests; the midpoint of market capitalization (market price x shares
outstanding) of a fund's stocks, weighted by the proportion of the fund's assets
invested in each stock. Stocks representing half of the fund's assets have
market capitalizations above the median, and the rest are below it.
--------------------------------------------------------------------------------
PRICE/BOOK RATIO. The share price of a stock divided by its net worth, or book
value, per share. For a fund, the weighted average price/book ratio of the
stocks it holds.
--------------------------------------------------------------------------------
PRICE/EARNINGS RATIO. The ratio of a stock's current price to its per-share
earnings over the past year. For a fund, the weighted average P/E of the stocks
it holds. P/E is an indicator of market expectations about corporate prospects;
the higher the P/E, the greater the expectations for a company's future growth.
--------------------------------------------------------------------------------
RETURN ON EQUITY. The annual average rate of return generated by a company
during the past five years for each dollar of shareholder's equity (net income
divided by shareholder's equity). For a fund, the weighted average return on
equity for the companies whose stocks it holds.
--------------------------------------------------------------------------------
TURNOVER RATE. An indication of trading activity during the past year. Funds
with high turnover rates incur higher transaction costs and are more likely to
distribute capital gains (which are taxable to investors).
--------------------------------------------------------------------------------
YIELD. A snapshot of a fund's income from interest and dividends. The yield,
expressed as a percentage of the fund's net asset value, is based on income
earned over the past 30 days and is annualized, or projected forward for the
coming year. The index yield is based on the current annualized rate of
dividends paid on stocks in the index.
--------------------------------------------------------------------------------
6
<PAGE>

PERFORMANCE SUMMARY
for Calvert Social Index Fund

--------------------------------------------------------------------------------
TOTAL INVESTMENT RETURNS (%) May 31, 2000-August 31, 2000

[CHART]

CALVERT SOCIAL INDEX FUND 11.1%
CALVERT SOCIAL INDEX 10.5%
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
CUMULATIVE PERFORMANCE May 31, 2000-August 31, 2000

[CHART]
Initial Investment of $10,000.

Total Returns
Period Ended August 31, 2000 Final Value
----------------------------- of a $10,000
Since Inception Investment
--------------------------------------------------------------------------------
Calvert Social Index Fund* 11.07% $11,107
Average Large-Cap Growth Fund** 15.47 11,547
Calvert Social Index 10.55 11,055
Wilshire 5000 Index 9.68 10,968
--------------------------------------------------------------------------------
*Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000. **Derived from data provided by Lipper Inc.
--------------------------------------------------------------------------------

TOTAL RETURN Period Ended June 30, 2000*

[CHART]

Since Inception
Inception ------------------------------
Date Capital Income Total
--------------------------------------------------------------------------------
Calvert Social Index Fund 5/31/2000 5.78% 0.00% 5.78%
--------------------------------------------------------------------------------
*SEC rules require that we provide this average annual total return information
through the latest calendar quarter.
--------------------------------------------------------------------------------
7
<PAGE>

FINANCIAL STATEMENTS
August 31, 2000

STATEMENT OF NET ASSETS

This Statement provides a detailed list of the fund's holdings, including each
security's market value on the last day of the reporting period. Securities are
grouped and subtotaled by asset type (common stocks, bonds, etc.) and by
industry sector. Other assets are added to, and liabilities are subtracted from,
the value of Total Investments to calculate the fund's Net Assets. Finally, Net
Assets are divided by the outstanding shares of the fund to arrive at its share
price, or Net Asset Value (NAV) Per Share.

At the end of the Statement of Net Assets, you will find a table displaying the
composition of the fund's net assets. Because all income and any realized gains
must be distributed to shareholders each year, the bulk of net assets consists
of Paid in Capital (money invested by shareholders). The amounts shown for
Undistributed Net Investment Income and Accumulated Net Realized Gains usually
approximate the sums the fund had available to distribute to shareholders as
income dividends or capital gains as of the statement date, but may differ
because certain investments or transactions may be treated differently for
financial statement and tax purposes. Any Accumulated Net Realized Losses, and
any cumulative excess of distributions over net income or net realized gains,
will appear as negative balances. Unrealized Appreciation (Depreciation) is the
difference between the market value of the fund's investments and their cost,
and reflects the gains (losses) that would be realized if the fund were to sell
all of its investments at their statement-date values.

--------------------------------------------------------------------
MARKET
VALUE*
CALVERT SOCIAL INDEX FUND SHARES (000)
--------------------------------------------------------------------
COMMON STOCKS (98.7%)
--------------------------------------------------------------------
AUTO & TRANSPORTATION (0.7%)
Harley-Davidson, Inc. 1,607 $ 80
*FedEx Corp. 1,602 65
Southwest Airlines Co. 2,579 58
Norfolk Southern Corp. 1,912 31
Genuine Parts Co. 838 17
PACCAR, Inc. 405 17
UAL Corp. 272 13
CNF Transportation, Inc. 165 4
Federal-Mogul Corp. 299 3
Kansas City Southern
Industries, Inc. 174 2
-----------------
290
-----------------
CONSUMER DISCRETIONARY (11.4%)
*America Online, Inc. 11,771 690
Home Depot, Inc. 11,898 572
Time Warner, Inc. 5,978 511
*Yahoo!, Inc. 2,709 329
Gillette Co. 5,444 163
*Exodus Communications, Inc. 2,158 148
*EchoStar Communications Corp. 2,213 108
Target Corp. 4,480 104
The Gap, Inc. 4,345 97
*Kohl's Corp. 1,739 97
Lowe's Cos., Inc. 2,015 90
*eBay Inc. 1,348 84
Omnicom Group Inc. 939 78
*Costco Wholesale Corp. 2,198 76
*Amazon.com, Inc. 1,659 69
The McGraw-Hill Cos., Inc. 1,064 66
*Best Buy Co., Inc. 1,075 66
*CMGI Inc 1,250 56
Estee Lauder Cos. Class A 1,220 50
Avon Products, Inc. 1,226 48
*Univision Communications Inc. 1,074 47
*Electronic Arts Inc. 386 42
*Lycos, Inc. 547 39
Newell Rubbermaid, Inc. 1,480 38
Washington Post Co. Class B 74 38
New York Times Co. Class A 929 36
*Staples, Inc. 2,332 36
*Starbucks Corp. 947 35
Dollar General Corp. 1,645 34
*USA Networks, Inc. 1,386 33
*Convergys Corp. 806 32
*CDW Computer Centers, Inc. 416 31
*Robert Half International, Inc. 942 30
*Bed Bath & Beyond, Inc. 1,378 24
Harcourt General, Inc. 398 24
*DoubleClick Inc. 559 23
E.W. Scripps Co. Class A 405 21
*Lamar Advertising Co. Class A 418 19
*Dollar Tree Stores, Inc. 475 19
J.C. Penney Co., Inc. 1,250 18
Black & Decker Corp. 417 17

8
<PAGE>

--------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
--------------------------------------------------------------------

*Catalina Marketing Corp. 375 $ 16
Maytag Corp. 414 16
Whirlpool Corp. 400 15
R.R. Donnelley & Sons Co. 566 15
Family Dollar Stores, Inc. 831 15
Manpower Inc. 402 15
*CNET Networks, Inc. 414 14
*Hispanic Broadcasting Corp. 538 14
*BJ's Wholesale Club, Inc. 399 14
*Tech Data Corp. 270 14
Viad Corp. 427 13
*Apollo Group, Inc. Class A 301 12
*PRIMEDIA Inc. 695 12
Nordstrom, Inc. 681 12
Liz Claiborne, Inc. 280 12
The Stanley Works 420 11
A.H. Belo Corp. Class A 559 11
*Office Depot, Inc. 1,443 11
Darden Restaurants Inc. 572 10
Fastenal Co. 151 10
*Williams Sonoma, Inc. 276 10
Snap-On Inc. 279 9
The McClatchy Co. Class A 261 9
*Hearst-Argyle Television Inc. 425 9
*Brinker International, Inc. 288 9
*Valassis Communications, Inc. 276 8
Galileo International, Inc. 422 8
Houghton Mifflin Co. 142 7
Meredith Corp. 269 7
Media General, Inc. Class A 136 7
*ACNielson Corp. 278 7
*Earthlink, Inc. 557 6
John Wiley & Sons Class A 282 6
Tribune Co. 176 6
American Greetings Corp. Class A 287 5
*Pixar, Inc. 163 5
Ziff-Davis Inc. 440 5
*Barnes & Noble, Inc. 293 5
Claire's Stores, Inc. 265 5
Ross Stores, Inc. 319 5
Blyth, Inc. 165 4
Ethan Allen Interiors, Inc. 155 4
Callaway Golf Co. 302 4
*Borders Group, Inc. 304 4
IKON Office Solutions, Inc. 601 3
*Modis Professional Services Inc. 229 2
*Sylvan Learning Systems, Inc. 69 1
*OfficeMax, Inc. 169 1
-----------------
4,561
-----------------
CONSUMER STAPLES (2.3%)
Walgreen Co. 5,154 169
Colgate-Palmolive Co. 2,984 152
Bestfoods 1,475 104
CVS Corp. 2,027 75
Sysco Corp. 1,744 74
H.J. Heinz Co. 1,877 72
General Mills, Inc. 1,605 52
Wrigley, (Wm.) Jr. Co. 654 48
Kellogg Co. 2,046 47
The Quaker Oats Co. 679 46
Hershey Foods Corp. 686 29
SuperValu Inc. 588 9
McCormick & Co., Inc. 293 9
Tootsie Roll Industries, Inc. 144 6
Dial Corp. 542 6
Longs Drug Stores, Inc. 153 3
Great Atlantic & Pacific Tea Co., Inc. 52 1
-----------------
902
-----------------

FINANCIAL SERVICES (20.3%)
American International Group, Inc. 11,926 1,063
Bank of America Corp. 8,897 477
American Express Co. 6,907 408
The Chase Manhattan Corp. 6,315 353
Fannie Mae 5,281 284
Charles Schwab Corp. 7,122 272
Bank One Corp. 5,843 206
FleetBoston Financial Corp. 4,732 202
The Bank of New York Co., Inc. 3,791 199
Automatic Data Processing, Inc. 3,248 194
Marsh & McLennan Cos., Inc. 1,459 173
Freddie Mac 3,638 153
MBNA Corp. 4,179 148
First Union Corp. 5,029 146
Firstar Corp. 5,016 120
AXA Financial, Inc. 2,306 119
Mellon Financial Corp. 2,592 117
State Street Corp. 915 108
Fifth Third Bancorp 2,324 107
Washington Mutual, Inc. 2,977 104
First Data Corp. 2,164 103
Northern Trust Corp. 1,200 101
American General Corp. 1,333 97
PNC Financial Services Group 1,596 94
Providian Financial Corp. 791 91
CIGNA Corp. 919 89
U.S. Bancorp 3,816 83
SunTrust Banks, Inc. 1,613 80
Paychex, Inc. 1,799 80
The Hartford Financial Services
Group Inc. 1,198 80
AFLAC, Inc. 1,458 79
The Chubb Corp. 937 72
National City Corp. 3,217 67
Capital One Financial Corp. 1,065 64
Wachovia Corp. 1,073 61
*Stilwell Financial, Inc. 1,198 58
PaineWebber Group, Inc. 792 57
Lincoln National Corp. 1,063 57

9
<PAGE>
--------------------------------------------------------------------
MARKET
VALUE*
CALVERT SOCIAL INDEX FUND SHARES (000)
--------------------------------------------------------------------

St. Paul Cos., Inc. 1,206 $ 57
BB&T Corp. 2,068 56
Franklin Resources Corp. 1,335 51
Aon Corp. 1,345 50
Comerica, Inc. 810 46
KeyCorp 2,302 46
Golden West Financial Corp. 817 39
*DST Systems, Inc. 385 36
Jefferson-Pilot Corp. 541 36
AmSouth Bancorp 1,926 35
MBIA, Inc. 534 35
Dow Jones & Co., Inc. 521 33
USA Education Inc. 814 32
MGIC Investment Corp. 542 32
Cincinnati Financial Corp. 818 32
*Concord EFS, Inc. 977 31
*Fiserv, Inc. 565 31
M & T Bank Corp. 61 30
Progressive Corp. of Ohio 398 30
North Fork Bancorp, Inc. 1,637 29
Reliastar Financial Corp. 519 28
Synovus Financial Corp. 1,377 27
Dun & Bradstreet Corp. 816 27
UnumProvident Corp. 1,223 27
A.G. Edwards & Sons, Inc. 520 27
Marshall & Ilsley Corp. 543 26
AMBAC Financial Group Inc. 394 25
T. Rowe Price 561 25
*SunGard Data Systems, Inc. 673 24
SouthTrust Corp. 826 23
Summit Bancorp 834 23
*E*TRADE Group, Inc. 1,289 23
Regions Financial Corp. 1,001 22
Transatlantic Holdings, Inc. 247 22
Union Planters Corp. 690 21
Huntington Bancshares Inc. 1,163 20
Old Kent Financial Corp. 677 20
Zions Bancorp 415 19
H & R Block, Inc. 532 19
Torchmark Corp. 677 19
National Community Bancorp 878 17
Allmerica Financial Corp. 273 17
SEI Corp. 272 17
Comdisco, Inc. 705 17
*Knight Trading Group, Inc. 550 17
The PMI Group Inc. 260 16
SAFECO Corp. 575 15
Legg Mason Inc. 282 15
*CheckFree Corp. 271 14
Federated Investors, Inc. 616 14
Green Point Financial Corp. 545 14
TCF Financial Corp. 412 14
*AmeriTrade Holding Corp. 735 14
First Security Corp. 863 13
*Affiliated Computer Services, Inc.
Class A 262 12
Dime Bancorp, Inc. 653 12
Banknorth Group, Inc. 693 11
First Virginia Banks, Inc. 267 11
Everest Re Group, Ltd. 263 11
Golden State Bancorp Inc. 570 11
City National Corp. 267 10
Commerce Bancshares, Inc. 284 10
FirstMerit Corp. 421 10
Mercantile Bankshares Corp. 293 10
*BISYS Group, Inc. 137 10
Astoria Financial Corp. 273 10
Hibernia Corp. Class A 716 9
Unitrin, Inc. 296 9
Erie Indemnity Co. Class A 291 9
Waddell & Reed Financial, Inc. 260 9
Compass Bancshares Inc. 453 8
American National Insurance Co. 136 8
Protective Life Corp. 287 8
Reinsurance Group of America, Inc. 267 8
Sovereign Bancorp, Inc. 902 8
Associated Banc-Corp. 295 7
Valley National Bancorp 283 7
Wilmington Trust Corp. 144 7
Leucadia National Corp. 276 7
Deluxe Corp. 302 7
21st Century Insurance Group 414 7
*United Rentals, Inc. 297 6
Peoples Bank Bridgeport 286 6
Centura Banks, Inc. 153 6
Old National Bancorp 173 5
Trustmark Corp. 296 5
Keystone Financial, Inc. 166 4
Pacific Century Financial Corp. 307 4
National Data Corp. 144 4
*Nova Corp. 299 4
United Asset Management Corp. 179 4
Colonial BancGroup, Inc. 351 3
FINOVA Group, Inc. 82 1
-----------------
8,112
-----------------
HEALTH CARE (12.6%)
Pfizer, Inc. 32,210 1,393
Merck & Co., Inc. 12,046 842
Johnson & Johnson 7,173 659
*Amgen, Inc. 5,275 400
Medtronic, Inc. 6,107 313
Schering-Plough Corp. 7,579 304
Cardinal Health, Inc. 1,479 121
*Guidant Corp. 1,614 109
*MedImmune Inc. 1,055 89
*Biogen, Inc. 802 56

10
<PAGE>

--------------------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
--------------------------------------------------------------------------------

*Chiron Corp. 944 $ 51
*Forest Laboratories, Inc. 514 50
Stryker Corp. 1,061 48
*Sepracor Inc. 389 43
*ALZA Corp. 537 41
Becton, Dickinson & Co. 1,339 40
*Watson Pharmaceuticals, Inc. 629 39
*Boston Scientific Corp. 2,058 39
McKesson HBOC, Inc. 1,479 37
*Wellpoint Health Networks Inc.
Class A 386 33
*Genzyme Corp. 413 31
IMS Health, Inc. 1,514 29
*Gilead Sciences, Inc. 259 28
*IVAX Corp. 813 28
Biomet, Inc. 778 26
*Health Management Associates
Class A 1,224 20
Mylan Laboratories, Inc. 674 18
*Express Scripts 252 18
*St. Jude Medical, Inc. 413 16
*ICOS Corp. 259 15
*HEALTHSOUTH Corp. 1,820 11
*Foundation Health Systems
Class A 569 10
*Universal Health Services Class B 141 10
*Sybron International Corp. 440 10
*Oxford Health Plan 310 9
DENTSPLY International Inc. 271 9
*VISIX Inc. 287 8
*Quintiles Transnational Corp. 455 6
Bergen Brunswig Corp. Class A 681 6
Omnicare, Inc. 423 6
*Lincare Holdings, Inc. 173 4
*Covance, Inc. 79 1
-----------------
5,026
-----------------
OTHER ENERGY (0.9%)
*AES Corp. 2,156 137
Anadarko Petroleum Corp. 1,272 84
El Paso Energy Corp. 1,207 70
Columbia Energy Group 409 29
EOG Resources, Inc. 660 25
*Smith International, Inc. 266 21
-----------------
366
-----------------
MATERIALS & PROCESSING (0.4%)
Masco Corp. 2,297 45
Praxair, Inc. 814 36
Avery Dennison Corp. 552 30
*Sealed Air Corp. 412 21
Consolidated Papers 422 17
Sigma-Aldrich Corp. 436 13
*Catellus Development Corp. 544 10
Harsco Corp. 154 4
-----------------
176
-----------------
PRODUCER DURABLES (2.8%)
*Applied Materials, Inc. 4,179 361
*KLA-Tencor Corp. 947 62
*Teradyne, Inc. 930 60
Xerox Corp. 3,394 55
*Waters Corp. 668 53
Dover Corp. 1,074 52
Pitney Bowes, Inc. 1,357 50
*Lexmark International, Inc. 672 46
Danaher Corp. 792 45
Deere & Co. 1,215 40
*RF Micro Devices, Inc. 814 36
*Novellus Systems, Inc 558 34
*American Tower Corp. Class A 794 29
Molex, Inc. 532 28
*American Power Conversion Corp. 859 21
Parker Hannifin Corp. 551 19
Molex, Inc. Class A 432 17
W.W. Grainger, Inc. 426 12
*Andrew Corp. 408 12
Herman Miller, Inc. 306 10
Pentair, Inc. 257 8
Diebold, Inc. 295 8
HON Industries, Inc. 281 8
Hubbell Inc. Class B 273 7
Briggs & Stratton Corp. 131 6
Cummins Engine Co., Inc. 156 6
Clayton Homes Inc. 588 6
York International Corp. 152 4
-----------------
1,095
-----------------
TECHNOLOGY (40.5%)
Communications Technology (9.7%)
*Cisco Systems, Inc. 28,908 1,984
Lucent Technologies, Inc. 13,490 564
*JDS Uniphase Corp. 3,345 416
*QUALCOMM, Inc. 2,853 171
*CIENA Corp. 688 153
*ADC Telecommunications, Inc. 2,816 115
*Tellabs, Inc. 1,641 92
*Metromedia Fiber Network, Inc. 2,234 89
*Inktomi Corp. 646 84
Scientific-Atlanta, Inc. 713 56
*RealNetworks, Inc. 606 30
*Cabletron Systems, Inc. 745 28
*3Com Corp. 1,261 21
*NCR Corp. 430 17
*Network Associates, Inc. 487 13
*PSINet, Inc. 675 12
*CSG Systems International, Inc. 170 8
*CommScope, Inc. 168 4

COMPUTER SERVICES SOFTWARE & SYSTEMS (10.0%)
*Microsoft Corp. 22,005 1,536
*Oracle Corp. 11,897 1,082

11
<PAGE>

--------------------------------------------------------------------
MARKET
VALUE*
CALVERT SOCIAL INDEX FUND SHARES (000)
--------------------------------------------------------------------

*Veritas Software Corp. 1,723 $ 208
*Siebel Systems, Inc. 849 168
*VeriSign, Inc. 845 168
*i2 Technologies, Inc. 807 137
Computer Associates
International, Inc. 2,492 79
*Amdocs Ltd. 1,076 77
Adobe Systems, Inc. 561 73
*Rational Software Corp. 419 54
*Intuit, Inc. 866 52
*QLogic Corp. 399 45
*BroadVision, Inc. 1,020 35
*PeopleSoft, Inc. 1,061 34
*Sapient Corp. 554 29
*BMC Software, Inc. 1,029 28
*Cadence Design Systems, Inc. 1,028 22
*Novell, Inc. 1,343 16
*Compuware Corp. 1,385 15
*Ceridian Corp. 595 14
*Citrix Systems, Inc. 641 14
*Symantec Corp. 278 14
*Parametric Technology Corp. 970 13
Sabre Holdings Corp. 474 13
*J.D. Edwards & Co. 446 11
*Macromedia, Inc. 166 11
*Acxiom Corp. 317 8
Autodesk, Inc. 183 5
*Electronics for Imaging, Inc. 175 5
*Keane, Inc. 296 5
*New Era of Networks, Inc. 145 5
Reynolds & Reynolds Class A 303 5
*Gartner Group, Inc. Class A 320 4
*Legato Systems, Inc. 314 4
*American Management
Systems, Inc. 55 1

COMPUTER TECHNOLOGY (11.4%)
International Business
Machines Corp. 7,626 1,007
*EMC Corp. 8,770 859
*Sun Microsystems, Inc. 6,735 855
Hewlett-Packard Co. 4,248 513
*Dell Computer Corp. 10,852 473
Compaq Computer Corp. 7,188 245
*Network Appliance, Inc. 1,310 153
*Palm, Inc. 2,373 104
Electronic Data Systems Corp. 2,034 101
*Gateway, Inc. 1,426 97
*Apple Computer, Inc. 1,336 81
*Synopsys, Inc. 295 11
*Ingram Micro, Inc. 594 9
*Adaptec, Inc. 340 8
*Quantum Corp.?DLT &
Storage Systems 616 8
*Storage Technology Corp. 435 7
*Iomega Corp. 1,063 4
*Silicon Graphics, Inc. 700 3
*Quantum Corp.?Hard Disk Drive 114 1

ELECTRONICS (0.3%)
*Sanmina Corp. 780 92
AVX Corp. 734 22

ELECTRONICS--SEMICONDUCTORS/COMPONENTS (8.6%)
Intel Corp. 28,292 2,118
*Broadcom Corp. 980 245
*Micron Technology, Inc. 2,185 179
*PMC Sierra Inc. 683 161
*Xilinx, Inc. 1,432 127
*Maxim Integrated Products, Inc. 1,274 112
*Altera Corp. 1,636 106
Linear Technology Corp. 1,319 95
*Vitesse Semiconductor Corp. 812 72
*Advanced Micro Devices, Inc. 1,298 49
*Jabil Circuit, Inc. 734 47
*LSI Logic Corp. 1,300 47
*Atmel Corp. 1,792 36
*Rambus Inc. 428 35
*Arrow Electronics, Inc. 429 16
Avnet, Inc. 159 10

ELECTRONICS--TECHNOLOGY (0.3%)
*Solectron Corp. 2,498 113
Symbol Technologies, Inc. 579 24

SCIENTIFIC EQUIPMENT & SUPPLIES (0.2%)
PE Corp.?PE Biosystems Group 879 86
-----------------
16,178
-----------------
UTILITIES (6.5%)
SBC Communications Inc. 17,591 734
*Qwest Communications
International Inc. 8,407 434
BellSouth Corp. 9,733 363
*NEXTEL Communications, Inc. 3,628 201
*Comcast Corp.?Special Class A 4,512 168
*Cox Communications, Inc. Class A 2,968 106
ALLTEL Corp. 1,622 82
*NTL Inc. 1,363 60
*NEXTLINK Communications, Inc. 1,458 51
*Cablevision Systems Corp.
Class B 675 45
*McLeodUSA, Inc. Class A 2,752 44
Telephone & Data Systems, Inc. 274 32
*BroadWing Inc. 1,091 31
*Allegiance Telecom, Inc. 544 27
KeySpan Corp. 680 23
*Citizens Communications Co. 1,252 20
Kinder Morgan, Inc. 551 20

12
<PAGE>

--------------------------------------------------------------------
MARKET
VALUE*
SHARES (000)
--------------------------------------------------------------------

CenturyTel, Inc. 688 $ 20
*Western Wireless Corp. Class A 394 20
*Adelphia Communications Corp.
Class A 567 19
LG&E Energy Corp. 675 17
*Winstar Communications, Inc. 411 11
Puget Sound Energy Inc. 414 10
MCN Energy Group Inc. 415 10
NICOR, Inc. 263 10
OGE Energy Corp. 405 9
Questar Corp. 411 9
*Centennial Communications Corp.
Class A 427 7
Global TeleSystems, Inc. 842 7
*RCN Corp. 303 7
IDACORP, Inc. 151 6
*Intermedia Communications Inc. 169 4
*Teligent, Inc. 51 1
-----------------
2,608
-----------------
OTHER (0.3%)
Illinois Tool Works, Inc. 1,604 90
Lancaster Colony Corp. 153 4
National Service Industries, Inc. 155 3
-----------------
97
-----------------
--------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $37,367) 39,411
--------------------------------------------------------------------
FACE
AMOUNT
(000)
--------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (7.4%)
--------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP.
6.42%, 10/26/2000 $ 100 99
REPURCHASE AGREEMENT
Collateralized by U.S. Government
Obligations in a Pooled Cash Account
6.60%, 9/1/2000 2,855 2,855
--------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $2,954) 2,954
--------------------------------------------------------------------
TOTAL INVESTMENTS (106.1%)
(COST $40,321) 42,365
--------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-6.1%)
--------------------------------------------------------------------
Other Assets--Note B 496
Payables for Investment Securities Purchased (2,884)
Other Liabilities (28)
-----------------
(2,416)
-----------------
--------------------------------------------------------------------
NET ASSETS (100%) $39,949
====================================================================
*See Note A in Notes to Financial Statements.
*Non-income-producing security.

--------------------------------------------------------------------
AMOUNT
(000)
--------------------------------------------------------------------
AT AUGUST 31, 2000, NET ASSETS CONSISTED OF:
--------------------------------------------------------------------
Paid in Capital $ 37,800
Undistributed Net Investment Income 59
Accumulated Net Realized Gains 46
Unrealized Appreciation--Note E 2,044
--------------------------------------------------------------------
NET ASSETS $39,949
====================================================================

Investor Shares--Net Assets
Applicable to 3,585,605 outstanding $.001
par value shares of beneficial interest
(unlimited authorization) $39,949
--------------------------------------------------------------------
NET ASSET VALUE PER SHARE--
INVESTOR SHARES $11.14
====================================================================

13
<PAGE>

STATEMENT OF OPERATIONS

------------------------------------------------------------------------------
CALVERT SOCIAL INDEX FUND
MAY 8* TO
AUGUST 31, 2000
(000)
------------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 53
Interest 21
------------------------------------------------------------------------------
Total Income 74
------------------------------------------------------------------------------
EXPENSES
The Vanguard Group--Note B
Management and Administrative 8
Custodian Fees 7
------------------------------------------------------------------------------
Total Expenses 15
------------------------------------------------------------------------------
NET INVESTMENT INCOME 59
------------------------------------------------------------------------------
REALIZED NET GAIN
Investment Securities Sold 35
Futures Contracts 11
------------------------------------------------------------------------------
REALIZED NET GAIN 46
------------------------------------------------------------------------------
UNREALIZED APPRECIATION OF INVESTMENT SECURITIES 2,044
------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,149
==============================================================================
*Commencement of operations.

14
<PAGE>

STATEMENT OF CHANGES IN NET ASSETS

This Statement shows how the fund's total net assets changed during the
reporting period. The Operations section summarizes information detailed in the
Statement of Operations. The fund has not yet made any Distributions to
shareholders. The Capital Share Transactions section shows the amount
shareholders invested in the fund, as well as the amounts redeemed. The
corresponding numbers of Shares Issued and Redeemed are shown at the end of the
Statement.

------------------------------------------------------------------------------
CALVERT SOCIAL INDEX FUND
MAY 8* TO
AUGUST 31, 2000
(000)
------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 59
Realized Net Gain 46
Unrealized Appreciation 2,044

Net Increase in Net Assets Resulting from Operations 2,149
------------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income --
Realized Capital Gain --
------------------------------------------------------------------------------
Total Distributions --
------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS1
Issued 38,499
Issued in Lieu of Cash Distributions --
Redeemed (699)
------------------------------------------------------------------------------
Net Increase from Capital Share Transactions 37,800
------------------------------------------------------------------------------
Total Increase 39,949
------------------------------------------------------------------------------
NET ASSETS
Beginning of Period --
------------------------------------------------------------------------------
End of Period $39,949
==============================================================================
1Shares Issued (Redeemed)
Issued 3,651
Issued in Lieu of Cash Distributions --
Redeemed (65)
------------------------------------------------------------------------------
Net Increase in Shares Outstanding 3,586
==============================================================================
*Commencement of operations.

15
<PAGE>

FINANCIAL HIGHLIGHTS

This table summarizes the fund's investment results and distributions to
shareholders on a per-share basis. It also presents the fund's Total Return and
shows net investment income and expenses as percentages of average net assets.
These data will help you assess: the variability of the fund's net income and
total returns from year to year; the relative contributions of net income and
capital gains to the fund's total return; how much it costs to operate the fund;
and the extent to which the fund tends to distribute capital gains. The table
also shows the Portfolio Turnover Rate, a measure of trading activity. A
turnover rate of 100% means that the average security is held in the fund for
one year.

------------------------------------------------------------------------------
CALVERT SOCIAL INDEX FUND
MAY 8* TO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD AUGUST 31, 2000
------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $10.00
------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .02
Net Realized and Unrealized Gain (Loss) on Investments 1.12
------------------------------------------------------------------------------
Total from Investment Operations 1.14
------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income --
Distributions from Realized Capital Gains --
------------------------------------------------------------------------------
Total Distributions --
------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $11.14
==============================================================================
Total Return** 11.07%
==============================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (Millions) $40
Ratio of Total Expenses to Average Net Assets 0.25%+
Ratio of Net Investment Income to Average Net Assets 0.98%+
Portfolio Turnover Rate 3%
================================================================================
*Subscription period for the fund was May 8, 2000, to May 31, 2000, during
which time all assets were held in money market instruments.
Performance measurement begins May 31, 2000.
**Total return figures do not reflect the $10 annual account maintenance fee
applied on balances under $10,000.
+Annualized.

16
<PAGE>

NOTES TO FINANCIAL STATEMENTS

Vanguard Calvert Social Index Fund is registered under the Investment Company
Act of 1940 as an open-end investment company, or mutual fund.

A. The following significant accounting policies conform to generally accepted
accounting principles for U.S. mutual funds. The fund consistently follows such
policies in preparing its financial statements.

1. SECURITY VALUATION: Equity securities are valued at the latest quoted
sales prices as of the close of trading on the New York Stock Exchange
(generally 4:00 p.m. Eastern time) on the valuation date; such securities not
traded on the valuation date are valued at the mean of the latest quoted bid and
asked prices. Prices are taken from the primary market in which each security
trades. Temporary cash investments acquired over 60 days to maturity are valued
using the latest bid prices or using valuations based on a matrix system (which
considers such factors as security prices, yields, maturities, and ratings),
both as furnished by independent pricing services. Other temporary cash
investments are valued at amortized cost, which approximates market value.
Securities for which market quotations are not readily available are valued by
methods deemed by the board of trustees to represent fair value.

2. FEDERAL INCOME TAXES: The fund intends to qualify as a regulated
investment company and distribute all of its taxable income. Accordingly, no
provision for federal income taxes is required in the financial statements.

3. REPURCHASE AGREEMENTS: The fund, along with other members of The
Vanguard Group, transfers uninvested cash balances to a pooled cash account,
which is invested in repurchase agreements secured by U.S. government
securities. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal; however, in the event of default or bankruptcy by the other party
to the agreement, retention of the collateral may be subject to legal
proceedings.

4. FUTURES CONTRACTS: The fund uses S&P 500 Index futures contracts to a
limited extent, with the objective of maintaining full exposure to the stock
market while maintaining liquidity. The fund may purchase or sell futures
contracts to achieve a desired level of investment, whether to accommodate
portfolio turnover or cash flows from capital share transactions. The primary
risks associated with the use of futures contracts are imperfect correlation
between changes in market values of stock held by the fund and the prices of
futures contracts, and the possibility of an illiquid market. Futures contracts
are valued at their quoted daily settlement prices. The aggregate principal
amounts of the contracts are not recorded in the financial statements.
Fluctuations in the value of the contracts are recorded in the Statement of Net
Assets as an asset (liability) and in the Statement of Operations as unrealized
appreciation (depreciation) until the contracts are closed, when they are
recorded as realized futures gains (losses).

5. DISTRIBUTIONS: Distributions to shareholders are recorded on the
ex-dividend date. Distributions are determined on a tax basis and may differ
from net investment income and realized capital gains for financial reporting
purposes.

6. OTHER: Dividend income is recorded on the ex-dividend date. Security
transactions are accounted for on the date securities are bought or sold. Costs
used to determine realized gains (losses) on the sale of investment securities
are those of the specific securities sold.

B. The Vanguard Group furnishes at cost investment advisory, corporate
management, administrative, marketing, and distribution services. The costs of
such services are allocated to the fund under methods approved by the board of
trustees. The fund has committed to provide up to 0.40% of its net assets in
capital contributions to Vanguard. At August 31, 2000, the fund had contributed
capital of $5,000 to Vanguard (included in Other Assets), representing 0.01% of
the

17
<PAGE>
Notes to Financial Statements (continued)

fund's net assets and 0.01% of Vanguard's capitalization. The fund's trustees
and officers are also directors and officers of Vanguard.

C. The fund offers two classes of shares, the Investor Shares and the
Institutional Shares. Institutional shares are designed primarily for
institutional investors that meet certain administrative and servicing criteria
and have a minimum investment of $10 million. Investor Shares are offered to all
other investors. The fund has not issued any Institutional Shares through August
31, 2000.

D. During the period ended August 31, 2000, the fund purchased $37,820,000 of
investment securities and sold $487,000 of investment securities other than
temporary cash investments.

E. At August 31, 2000, net unrealized appreciation of investment securities for
financial reporting and federal income tax purposes was $2,044,000, consisting
of unrealized gains of $3,075,000 on securities that had risen in value since
their purchase and $1,031,000 in unrealized losses on securities that had fallen
in value since their purchase.

18
<PAGE>

REPORT
of Independent Accountants

To the Shareholders and Trustees of Vanguard Calvert Social Index Fund

In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Vanguard Calvert Social Index Fund (the "Fund") at August 31, 2000, and the
results of its operations, the changes in its net assets and the financial
highlights for the period May 8, 2000 (commencement of operations) through
August 31, 2000, in conformity with accounting principles generally accepted in
the United States of America. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these financial statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit, which included confirmation of securities at August 31,
2000 by correspondence with the custodian, provides a reasonable basis for our
opinion.

PricewaterhouseCoopers LLP

Philadelphia, Pennsylvania

September 29, 2000

--------------------------------------------------------------------------------
SPECIAL 2000 TAX INFORMATION (UNAUDITED) FOR
VANGUARD CALVERT SOCIAL INDEX FUND
This information for the fiscal year ended August 31, 2000, is included pursuant
to provisions of the Internal Revenue Code.
For corporate shareholders, 53.0% of investment income (dividend income
plus short-term gains, if any) qualifies for the dividends-received deduction.

19
<PAGE>

THE VANGUARD(R)
Family of Funds

STOCK FUNDS

500 Index Fund
Calvert Social Index(TM) Fund
Capital Opportunity Fund
Convertible Securities Fund
Developed Markets Index Fund
Emerging Markets Stock Index Fund
Energy Fund Equity Income Fund
European Stock Index Fund
Explorer(TM)Fund
Extended Market Index Fund
Global Equity Fund
Gold and Precious Metals Fund
Growth and Income Fund
Growth Equity Fund
Growth Index Fund
Health Care Fund
Institutional Developed Markets Index Fund
Institutional Index Fund
International Growth Fund
International Value Fund
Mid-Cap Index Fund
Morgan(TM)Growth Fund
Pacific Stock Index Fund
PRIMECAP Fund
REIT Index Fund
Selected Value Fund
Small-Cap Growth Index Fund
Small-Cap Index Fund
Small-Cap Value Index Fund
Strategic Equity Fund
Tax-Managed Capital Appreciation Fund
Tax-Managed Growth and Income Fund
Tax-Managed International Fund
Tax-Managed Small-Cap Fund
Total International Stock Index Fund
Total Stock Market Index Fund
U.S. Growth Fund
U.S. Value Fund
Utilities Income Fund
Value Index Fund
Windsor(TM) Fund
Windsor(TM) II Fund

BALANCED FUNDS

Asset Allocation Fund
Balanced Index Fund
Global Asset Allocation Fund
LifeStrategy(R)Conservative Growth Fund
LifeStrategy(R)Growth Fund
LifeStrategy(R)Income Fund
LifeStrategy(R)Moderate
Growth Fund STAR(TM) Fund
Tax-Managed Balanced Fund
Wellesley(R)Income Fund
Wellington(TM)Fund

BOND FUNDS

Admiral(TM)Intermediate-Term
Treasury Fund
Admiral(TM)Long-Term
Treasury Fund
Admiral(TM)Short-Term
Treasury Fund
GNMA Fund
High-Yield Corporate Fund
High-Yield Tax-Exempt Fund
Inflation-Protected Securities Fund
Insured Long-Term Tax-Exempt Fund
Intermediate-Term Bond Index Fund
Intermediate-Term Corporate Fund
Intermediate-Term Tax-Exempt Fund
Intermediate-Term Treasury Fund
Limited-Term Tax-Exempt Fund
Long-Term Bond Index Fund
Long-Term Corporate Fund
Long-Term Tax-Exempt Fund
Long-Term Treasury Fund
Preferred Stock Fund
Short-Term Bond Index Fund
Short-Term Corporate Fund
Short-Term Federal Fund
Short-Term Tax-Exempt Fund
Short-Term Treasury Fund
State Tax-Exempt Bond Funds
(California, Florida,
Massachusetts, New Jersey,
New York, Ohio, Pennsylvania)
Total Bond Market Index Fund

MONEY MARKET FUNDS

Admiral(TM) Treasury Money Market Fund
Federal Money Market Fund
Prime Money Market Fund
State Tax-Exempt Money Market Funds
(California, New Jersey,
New York, Ohio, Pennsylvania)
Tax-Exempt Money Market Fund
Treasury Money Market Fund

VARIABLE ANNUITY PLAN

Balanced Portfolio
Diversified Value Portfolio
Equity Income Portfolio
Equity Index Portfolio
Growth Portfolio
High-Grade Bond Portfolio
High Yield Bond Portfolio
International Portfolio
Mid-Cap Index Portfolio
Money Market Portfolio
REIT Index Portfolio
Short-Term Corporate Portfolio
Small Company Growth Portfolio

For information about Vanguard funds and our variable annuity plan, including
charges and expenses, obtain a prospectus from The Vanguard Group, P.O. Box
2600, Valley Forge, PA 19482-2600. Read it carefully before you invest or send
money.

20
<PAGE>

THE PEOPLE
Who Govern Your Fund

The trustees of your mutual fund are there to see that the fund is operated and
managed in your best interests since, as a shareholder, you are part owner of
the fund. Your fund trustees also serve on the board of directors of The
Vanguard Group, which is owned by the funds and exists solely to provide
services to them on an at-cost basis.
Six of Vanguard's seven board members are independent, meaning that they
have no affiliation with Vanguard or the funds they oversee, apart from the
sizable personal investments they have made as private individuals. They bring
distinguished backgrounds in business, academia, and public service to their
task of working with Vanguard officers to establish the policies and oversee the
activities of the funds.
Among board members' responsibilities are selecting investment advisers for
the funds; monitoring fund operations, performance, and costs; reviewing
contracts; nominating and selecting new trustees/ directors; and electing
Vanguard officers.
The list below provides a brief description of each trustee's professional
affiliations. Noted in parentheses is the year in which the trustee joined the
Vanguard board.
--------------------------------------------------------------------------------
TRUSTEES

JOHN J. BRENNAN (1987) Chairman of the Board, Chief Executive Officer, and
Director/Trustee of The Vanguard Group, Inc., and each of the investment
companies in The Vanguard Group.

JOANN HEFFERNAN HEISEN (1998) Vice President, Chief Information Officer, and a
member of the Executive Committee of Johnson & Johnson; Director of Johnson &
Johnson*Merck Consumer Pharmaceuticals Co., The Medical Center at Princeton, and
Women's Research and Education Institute.

BRUCE K. MACLAURy (1990) President Emeritus of The Brookings Institution;
Director of American Express Bank Ltd., The St. Paul Companies, Inc., and
National Steel Corp.

BURTON G. MALKIEL (1977) Chemical Bank Chairman's Professor of Economics,
Princeton University; Director of Prudential Insurance Co. of America, Banco
Bilbao Argentaria, Gestion, BKF Capital, The Jeffrey Co., NeuVis, Inc., and
Select Sector SPDR Trust.

ALFRED M. RANKIN, JR. (1993) Chairman, President, Chief Executive Officer, and
Director of NACCO Industries, Inc.; Director of The BFGoodrich Co.

JAMES O. WELCH, JR. (1971) Retired Chairman of Nabisco Brands, Inc. (Food
Products); retired Vice Chairman and Director of RJR Nabisco (Food and Tobacco
Products); Director of TECO Energy, Inc., and Kmart Corp.

J.LAWRENCE WILSON (1985) Retired Chairman and Chief Executive Officer of Rohm &
Haas Co.; Director of AmeriSource Health Corporation, Cummins Engine Co., and
The Mead Corp.; Trustee of Vanderbilt University.
--------------------------------------------------------------------------------
OTHER FUND OFFICERS

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

THOMAS J. HIGGINS, Treasurer; Principal of The Vanguard Group, Inc.; Treasurer
of each of the investment companies in The Vanguard Group.
--------------------------------------------------------------------------------
VANGUARD MANAGING DIRECTORS

R. GREGORY BARTON, Legal Department.
ROBERT A. DISTEFANO, Information Technology.
JAMES H. GATELY, Direct Investor Services.
KATHLEEN C. GUBANICH, Human Resources.
IAN A. MACKINNON, Fixed Income Group.
F. WILLIAM MCNABB, III, Institutional Investor Group.
MICHAEL S. MILLER, Planning and Development.
RALPH K. PACKARD, Chief Financial Officer.
GEORGE U. SAUTER, Quantitative Equity Group.
--------------------------------------------------------------------------------
JOHN C. BOGLE
Founder, Chairman, and Chief Executive, 1974-1996.
<PAGE>

[SHIP GRAPHIC]
[THE VANGUARD GROUP LOGO]

Post Office Box 2600
Valley Forge, Pennsylvania, 19482-2600

ABOUT OUR COVER

Our cover art evokes both Vanguard's rich past and the course we've set for the
future--our determination to provide superior investment performance and
top-notch service. The image is based on two works: a painting titled The First
Journey of 'Victory,' by the English artist W.L. Wyllie (1851?1931), and a
sculpture of a compass rose on Vanguard's campus near Valley Forge,
Pennsylvania. All comparative mutual fund data are from Lipper Inc. or
Morningstar, Inc., unless otherwise noted.

Standard & Poor's(R), S&P(R), S&P 500(R), Standard & Poor's 500, 500, S&P MidCap
400, and S&P SmallCap 600 are trademarks of The McGraw-Hill Companies, Inc.

Calvert Group and Calvert Social Index are trademarks of Calvert Group, Ltd.,
and have been licensed for use by The Vanguard Group, Inc. Vanguard Calvert
Social Index Fund is not sponsored, endorsed, sold, or promoted by Calvert
Group, Ltd., and Calvert Group, Ltd., makes no representation regarding the
advisability of investing in the fund.

All other index names may contain trademarks and are the exclusive property of
their respective owners.

WORLD WIDE WEB
www.vanguard.com

FUND INFORMATION
1-800-662-7447

INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739

INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036

This report is intended for the fund's shareholders. It may not be distributed
to prospective investors unless it is preceded or accompanied by the current
fund prospectus.

Q2130 102000
<PAGE>
VANGUARD U.S. GROWTH FUND

ANNUAL

[PHOTO OF SHIP]

AUGUST 31, 2000

[THE VANGUARD GROUP LOGO]
<PAGE>

OUR REPORTS TO
THE OWNERS

At Vanguard, we regard our investors not as mere customers but as owners of the
enterprise. For that's exactly what a mutual fund shareholder is--part owner of
an investment company.

In our reports to you on how the company is doing, we have tried to convey
information without hyperbole and in the context of broad market trends and
relevant benchmarks.

We've introduced several changes to this year's annual report to make it
even more useful. Among the changes:

* Larger type and redesigned graphics to make the reports easier to read.

* An at-a-glance summary of key points about fund performance and the
financial markets.

* A table--included for many funds--in which the investment adviser
highlights significant changes in holdings.

* Comparisons of fund performance and characteristics against both a broad
market index and a "best fit" benchmark.

We hope you'll find that these changes make the reports even more
accessible and informative.

SUMMARY

* Vanguard U.S. Growth Fund earned 33.3% during the 12 months ended August 31,
2000, marking the sixth consecutive fiscal year in which the fund recorded a
double-digit return.

* Technology stocks now play an enormous role in the fund, accounting for more
than half of its assets.

* In the U.S. stock market, growth stocks dominated their value counterparts.

CONTENTS

1 Letter from the Chairman
6 Notice to Shareholders
7 Report from the Adviser
9 Fund Profile
10 Glossary of Investment Terms
11 Performance Summary
12 Report on After-Tax Returns
13 Financial Statements
20 Report of Independent Accountants

<PAGE>

LETTER

from the Chairman

Fellow Shareholders,

VANGUARD U.S. GROWTH FUND earned an excellent return of 33.3% during its 2000
fiscal year, benefiting from an impressive, albeit extremely uneven, rise in
technology shares.

The adjacent table presents the fund's 12-month total return, as well as
the return of the average large-capitalization growth fund. We also present the
returns of several unmanaged market indexes: the Russell 1000 Growth Index, the
benchmark we consider the "best fit" for the U.S. Growth Fund, and the Wilshire
5000 Total Market Index, which is a proxy for the entire U.S. stock market. For
your information, we also present the return of the Standard & Poor's 500 Index,
a widely watched stock market measure that is dominated by large companies.

2000 TOTAL RETURNS Fiscal Year Ended
August 31
------------------------------------------
Vanguard U.S. Growth Fund 33.3%
Average Large-Cap Growth Fund* 39.5
Russell 1000 Growth Index 33.5
Wilshire 5000 Index 20.4
S&P 500 Index 16.3
------------------------------------------
*Derived from data provided by Lipper Inc.

As you can see, your fund's performance surpassed that of the broad stock
market but lagged that of its average peer. The fund's total return (capital
change plus reinvested dividends) is based on an increase in net asset value
from $38.92 per share on August 31, 1999, to $49.26 per share on August 31,
2000, and is adjusted for a dividend of $0.21 per share paid from net investment
income and a distribution of $2.02 per share paid from net realized capital
gains.

For investors who own Vanguard U.S. Growth Fund in taxable accounts,
please see page 12 for a comparison of the fund's pre-tax and after-tax returns.

------------------------------------------------------------------------------
MARKET BAROMETER AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 2000

ONE THREE FIVE
YEAR YEARS YEARS
-------------------------------------------------------------------------------
S&P 500 Index (Large caps) 16.3% 20.7% 24.0%
Russell 2000 Index (Small caps) 27.1 9.6 13.5
Wilshire 5000 Index (Entire market) 20.4 19.7 22.5
MSCI EAFE Index (International) 9.8 11.5 10.4
-------------------------------------------------------------------------------
Lehman Aggregate Bond Index (Entire market) 7.6% 6.2% 6.5%
Lehman 10 Year Municipal Bond Index 7.2 5.4 6.0
Salomon Smith Barney 3-Month
U.S. Treasury Bill Index 5.5 5.1 5.2
===============================================================================
Consumer Price Index 3.4% 2.4% 2.5%
-------------------------------------------------------------------------------

1
<PAGE>

FINANCIAL MARKETS IN REVIEW

Investors had plenty of economic and market factors on their minds during the 12
months ended August 31. The fiscal year started off with a bang as economic
growth barreled ahead, inflation appeared well under control, technology stocks
soared, and the Y2K transition went off without a hitch.

--------------------------------------------------------------------------------
Investors became concerned about interest rates, oil prices, and tech stocks.
--------------------------------------------------------------------------------

But it wasn't long before investors turned their attention toward the dark
side of economic expansion and high stock market valuations. As the period
progressed, investors became increasingly concerned that inflation would be an
inevitable by-product of the economy's growth, that the Federal Reserve Board's
series of interest rate hikes would continue, that oil prices would keep rising,
and that tech companies were bound to run out of steam. These concerns took hold
in March and resulted in a sharp slide in stock prices, particularly those in
the tech arena.

Despite the volatility, the fiscal year was generally a good one for stocks
and bonds. The table at the bottom of page 1 presents the returns of a variety
of stock and bond market measures, including the Morgan Stanley Capital
International Europe, Australasia, Far East (EAFE) Index. It also contains
readings on the Consumer Price Index, the widely watched gauge of inflation. The
Wilshire 5000 Index booked nearly its entire gain during the first seven months
of the fiscal year, then bounced around, going essentially nowhere on balance
during the remaining five months. The index advanced 20.1% from September
through March, but just 0.3% for the final five months of the period, despite
closing out the 12 months with a spectacular August.

GROWTH BEATS VALUE--AGAIN

In short, growth-oriented shares--those with above-average prices in relation to
such measures as earnings and book value--led the way during the 12 months, and
small-cap stocks outpaced large-caps. Though value stocks took their turn in the
market lead for most of the second half of the period, the strength of growth
stocks during the last several months of calendar year 1999 helped establish a
lead that value stocks could not overcome. For the period, the growth stocks in
the S&P 500 Index returned 22%, while the index's value stocks returned about
9%. The story was similar among small-cap stocks. The growth component of the
Russell 2000 Index returned 39% for the 12 months, nearly triple the 14% return
of the index's value stocks.

--------------------------------------------------------------------------------
Growth-oriented shares led the way and small-caps outpaced large-caps.
--------------------------------------------------------------------------------

The tech-heavy Nasdaq Composite Index returned 55% for the fiscal year,
though its excellent result masked tremendous volatility, both on the upside and
downside. After a terrific start, the index plunged in the

2
<PAGE>

spring, drifted lower in early summer, and then bounced back impressively in
August.

Among market sectors within the S&P 500 Index, which accounts for about
three-fourths of the market capitalization of the U.S. stock market, technology,
producer durables, and "other energy" (drillers and equipment makers) each
posted returns in excess of 40%. At the same time, other major
sectors--materials & processing, consumer staples, utilities, and autos--earned
negative returns for the 12 months.

The advance in the U.S. stock market came despite a steady rise in
short-term interest rates. During the 2000 fiscal year, the yield of 90-day U.S.
Treasury bills increased 1.34 percentage points, in line with the
1.25-percentage-point increase in the federal funds rate--a hike engineered by
the Federal Reserve Board to help cool off the surging economy. At the longer
end of the bond spectrum, however, yields declined during the 12 months and
prices rose, resulting in solid returns for bonds.

FISCAL 2000 PERFORMANCE OVERVIEW

Vanguard U.S. Growth Fund's performance during its 2000 fiscal year marked the
sixth consecutive year in which the fund notched a double-digit return. And it
was the third time in the past four fiscal years that the fund earned a return
above 30%. It should go without saying that this streak will not continue
indefinitely.

--------------------------------------------------------------------------------
These days, growth investing means tech investing.
--------------------------------------------------------------------------------

Of course, these days growth investing, in large measure, means tech
investing. And any fund that emphasizes growth-oriented investments will be
heavily influenced by the performance of its technology stocks. Our fund's tech
stocks, which accounted for an average of about 39% of assets during the 12
months, earned a spectacular return of about 66%. But just as our strong
absolute performance can largely be attributed to the outperformance of the
technology sector, so too can our shortfall to the average large-cap growth
mutual fund, which returned 39.5%. Generally, our average peer held a bigger
stake in tech companies, an advantage that was especially helpful early in the
12-month period, when tech stocks soared. Though our tech position grew
significantly throughout the fiscal year--our tech stake stood at about 54% of
net assets on August 31--we still suffered relative to our peers from having
underweighted the sector during the final three months of 1999.

The fund's health care stocks--including Pfizer, its fourth-largest
holding--also performed well during the 12 months, returning nearly 19%. And the
producer durables group, which includes several technology-related companies,
registered a remarkable return of 116%, though the sector accounts for only
about 5% of the U.S. Growth Fund's assets.

3
<PAGE>

On the negative side, our selections in the utilities, consumer staples,
and consumer discretionary sectors were disappointing.

THE RISKS OF CONCENTRATION

The fund's ten largest holdings, which total about 42% of its net assets, are
dominated by tech companies, including Cisco Systems, Intel, Sun Microsystems,
and Juniper Networks. The list also includes America Online, which is not
technically classified as a technology company, but has a distinct high-tech
flavor.

Make no mistake about it, the U.S. Growth Fund's emphasis on tech stocks,
while not unusual for a growth fund, exposes investors to considerable risk.
That's not to say that the sector or the fund is poised for a fall--we don't
claim an ability to forecast the market. Rather, it's a cautionary note about
the risks of investing heavily in a particular market segment. Though the U.S.
Growth Fund's investment adviser, Lincoln Capital Management Company, is
confident about the long-term prospects of the technology sector, investors in
the fund should be fully prepared for a bumpy ride that could include extended
periods of poor performance.

LONG-TERM PERFORMANCE OVERVIEW

Of course, a fund's 12-month performance tells only part of the story. A useful
evaluation of any mutual fund requires a review of long-term performance. The
adjacent table presents the average annual returns of the U.S. Growth Fund and
its comparative benchmarks for the past ten years. It also presents the results
of hypothetical $10,000 investments made a decade ago in the fund, its average
competitor, and the unmanaged indexes that we use to measure the fund's
performance.

-------------------------------------------------------------------------
TOTAL RETURNS Ten Years Ended
August 31, 2000

Average Final Value of
Annual a $10,000
Return Initial Investment
-------------------------------------------------------------------------
Vanguard U.S. Growth Fund 21.1% $67,615
Average Large-Cap Growth Fund 21.6 70,765
Russell 1000 Growth Index 22.0 72,884
Wilshire 5000 Index 19.2 57,857
S&P 500 Index 19.5 59,339
-------------------------------------------------------------------------

Our advantage over the broad stock market, as measured by the Wilshire 5000
Index, amounted to nearly $10,000 over the decade. That was an impressive
margin, but our record versus more growth-oriented measures was a bit below par.

Our goal is to provide long-term returns that exceed those of our competitive
measures. We are aided toward this objective by keeping our costs as low as
possible. Our fund has an expense ratio (annual expenses as a percentage

4
<PAGE>

of average net assets) of 0.38%, just a fraction of the 1.41% charged by our
average peer. Because fund operating and administrative costs are deducted
directly from the returns investors receive, our significant cost advantage
provides us with a head start versus funds that charge higher expenses.

While we expect our relative long-term performance to improve, we harbor no
such expectations about our absolute returns. Given that the very long-term
return from stocks has averaged about 12% a year, returns in excess of 20% over
a ten-year period are more than investors should have expected, and are
certainly higher than should be relied upon for the future. A prudent investor
structures a long-term investment program on the assumption that future returns
will be far lower than those of the recent past. This means that outsized
returns are not viewed as a necessity for meeting your investment goals, but as
a welcome bonus should they occur.

IN SUMMARY

During the past 12 months, technology stocks demonstrated both the terrific
rewards and the ever-present risks of the financial markets. Though the good
times may increase the temptation to simply follow the market's leader, the bad
times provide powerful reminders that such temptation is best ignored. Balance,
we believe, is an investing virtue.

Growth stocks in general, and technology stocks in particular, certainly
have their place in an investment program, provided that the program also
includes short-term investments, bond funds, and stock funds that invest in
equities of various sizes and styles. For its part, Vanguard U.S. Growth Fund
will continue to provide investors with a low-cost, actively managed way to gain
exposure to large growth stocks.

Sincerely,

September 18, 2000

[PHOTO OF JOHN J. BRENNAN]
JOHN J. BRENNAN
Chairman and
Chief Executive Officer

5
<PAGE>

NOTICE OF CHANGES TO THE INVESTMENT ADVISORY AGREEMENT

The board of trustees of Vanguard U.S. Growth Fund and the fund's adviser,
Lincoln Capital Management Company, have agreed to change the fund's investment
advisory agreement. The revised agreement includes a performance adjustment to
the basic fee paid to Lincoln Capital Management, based on the fund's
performance relative to the Russell 1000 Growth Index.

Currently, the fund pays Lincoln Capital Management a basic fee at the end
of each fiscal quarter. The fee is calculated by applying a quarterly rate to
the fund's average month-end assets for the quarter. For the year ended August
31, 2000, the advisory fee paid to Lincoln represented an effective annual rate
of 0.11% of the fund's average net assets.

Effective September 1, 2000, the basic fee will be adjusted up or down by
applying a formula based on the fund's performance in comparison to that of the
index. The fee will be increased (or decreased) by up to 15% of the basic fee if
the fund's cumulative total return for the 36 months preceding the end of the
quarter is at least nine percentage points above (or below) the cumulative total
return of the index for the same period.

Vanguard proposed this change in the belief that it is in the best interest
of the fund and its shareholders. The fund's trustees carefully considered,
among other factors, (1) the nature and quality of the services that Lincoln
Capital has rendered; (2) the fund's investment objective and policies; and (3)
the qualifications of Lincoln Capital and its personnel. Based upon its review
of these factors, the fund's trustees, including all those who are not
"interested persons" of the fund or of Lincoln Capital, unanimously approved the
new advisory contract.

RELATED INFORMATION CONCERNING LINCOLN CAPITAL MANAGEMENT

Lincoln Capital Management is an investment advisory firm founded in 1967. As of
August 31, 2000, Lincoln managed approximately $69 billion in assets. It
provides services to a limited number of clients, most of which are
institutional clients such as pension funds. The individuals responsible to the
board for the implementation of Lincoln's strategy in Vanguard U.S. Growth Fund
are:

J. PARKER HALL, Chairman and Managing Director of Lincoln; has worked in
investment management since 1957; with Lincoln since 1971; Fund Manager since
1987; B.A., Swarthmore College; M.B.A., Harvard Business School.

DAVID M. FOWLER, President and Managing Director of Lincoln; has worked in
investment management since 1972; with Lincoln since 1984; Fund Manager since
1987; B.S., Loyola University; M.B.A., Northwestern University.

JOHN S. COLE, Executive Vice President and Managing Director of Lincoln; has
worked in investment management since 1992; Executive Vice President and Chief
Equity Officer of Boatman's Trust Company from 1992 until joining Lincoln in
1997; Fund Manager since 1999; B.S., Bentley College; M.B.A., University of
Notre Dame.

6
<PAGE>

REPORT
from the Adviser LINCOLN CAPITAL MANAGEMENT COMPANY

VANGUARD U.S. GROWTH FUND'S robust return of 33.3% during its 2000 fiscal year
was excellent on an absolute basis but fell short of the returns of its average
mutual fund competitor. The fund's fiscal 2000 performance was aided by our
solid results--on both an absolute basis and relative to our competitive
measures--in the last six months of the period.

--------------------------------------------------------------------------------
INVESTMENT PHILOSOPHY

The adviser believes that superior long-term investment results can be achieved
by emphasizing investments in growth companies that are leaders in their
industries and that have a strong market presence.
--------------------------------------------------------------------------------

OUR SUCCESSES

The technology sector represents a large proportion of the holdings of Vanguard
U.S. Growth Fund--about 54% on August 31, up from about 30% a year ago--so the
performance of tech stocks makes a big difference in the performance of your
fund. Happily, our tech stocks returned 66% during the 12 months ended August
31, compared with 62% for the tech stocks in the Russell 1000 Growth Index,
which is made up of the most growth-oriented of the 1,000 largest U.S. stocks.
Our selections among health care stocks were also excellent. The fund's health
care companies gained nearly 19% during the 12 months, about 5 percentage points
more than the return of the health care stocks in the Russell 1000 Growth Index.

Tech winners included Juniper Networks, EMC, Nokia, and Cisco Systems. We
also gained some relative ground in health care with our positions in
Warner-Lambert (which was acquired by Pfizer) and Eli Lilly (despite its recent
decline).

OUR SHORTFALLS

While our stock selections were good overall, some of our gains were offset by
our sector weightings. Specifically, our weighting in technology was a bit light
in the first half of the fiscal year, when many tech stocks soared. Our stake in
the consumer sector, which turned in a relatively weak performance during the 12
months, was heavier than that of the index, even though we reduced our
commitment to this area continually throughout the year.

THE FUND'S POSITION

Technology stocks dominate both the growth landscape and the holdings of
Vanguard U.S. Growth Fund. Our current tech-related stake of about 61% is

7
<PAGE>

a tiny bit larger than that of the Russell 1000 Growth Index. Within the tech
sector, we are overweighted in companies heavily involved in computer networking
and storage, areas that can be considered Internet infrastructure. Notable by
their absence are some of the PC era's biggest winners--Microsoft, Dell
Computer, and Compaq.

Relative to our benchmark index, we are also overweighted in the finance
industry and cyclical growth companies, and we are underweighted in health care,
retail, and media issues.

Vanguard U.S. Growth Fund has become "growthier" over the past year. This
increases the potential for superior returns but also imparts more variability,
as investor attitudes ebb and flow. Over longer periods--several years or
more--very strong earnings progress should more than offset periodic concerns
about valuations and individual company fundamentals.

John Cole, Portfolio Manager
David Fowler, Portfolio Manager
Parker Hall, Portfolio Manager

September 13, 2000

-------------------------------------------------------------------------------
PORTFOLIO CHANGES Fiscal Year Ended August 31, 2000

ADDITIONS Comments
--------------------------------------------------------------------------------
Sun Microsystems* Leading provider of servers to Internet
companies.
-------------------------------------------------------------------------------
Juniper Networks* Substantial market share in routers.
-------------------------------------------------------------------------------
Pfizer Purchased Warner-Lambert.
-------------------------------------------------------------------------------
America Online Superior cash-flow growth.
--------------------------------------------------------------------------------

REDUCTIONS
--------------------------------------------------------------------------------
Microsoft** Earnings shortfall; judicial
disappointment.
-------------------------------------------------------------------------------
Lucent Technologies** Earnings slowing.
-------------------------------------------------------------------------------
Procter & Gamble** Earnings slowing.
-------------------------------------------------------------------------------
Dell Computer** Possible slowing in PC sales.
-------------------------------------------------------------------------------
*New holding in portfolio.
**Eliminated from portfolio.

See page 13
for a complete
listing of the
fund's holdings.

8
<PAGE>

FUND PROFILE As of August 31, 2000
for U.S. Growth Fund

This Profile provides a snapshot of the fund's characteristics, compared where
appropriate to both an unmanaged index that we consider a "best fit" for the
fund and a broad market index. Key terms are defined on page 10.

PORTFOLIO CHARACTERISTICS
WILSHIRE
U.S. GROWTH BEST FIT* 5000
-------------------------------------------------------------------
Number of Stocks 65 534 6,848
Median Market Cap $96.1B $112.9B $48.6B
Price/Earnings Ratio 90.3x 67.3x 33.0x
Price/Book Ratio 12.7x 13.3x 4.9x
Yield 0.0% 0.3% 1.0%
Return on Equity 26.4% 27.8% 23.1%
Earnings Growth Rate 21.2% 23.9% 17.5%
Foreign Holdings 2.2% 0.0% 0.0%
Turnover Rate 76% -- --
Expense Ratio 0.38% -- --
Cash Investments 0.7% -- --
-------------------------------------------------------------------

-------------------------------------------------------------------
VOLATILITY MEASURES
WILSHIRE
U.S. GROWTH BEST FIT* 5000
-------------------------------------------------------------------
R-Squared 0.88 0.58 1.00
Beta 1.02 1.39 1.00
-------------------------------------------------------------------

-------------------------------------------------------------------
SECTOR DIVERSIFICATION
(% of common stocks)

WILSHIRE
U.S. GROWTH BEST FIT* 5000
-------------------------------------------------------------------
Auto & Transportation 0.0% 0.3% 1.7%
Consumer Discretionary 9.7 11.4 12.3
Consumer Staples 3.5 2.7 4.4
Financial Services 5.0 2.7 15.5
Health Care 12.2 14.1 10.9
Integrated Oils 0.0 0.0 2.7
Other Energy 0.0 1.8 2.7
Materials & Processing 0.5 0.1 2.4
Producer Durables 4.1 2.6 3.5
Technology 54.0 54.4 31.1
Utilities 3.4 2.8 8.0
Other 7.6 7.1 4.8
-------------------------------------------------------------------

-------------------------------------------------------------------
TEN LARGEST HOLDINGS
(% of total net assets)

Cisco Systems, Inc. 6.7%
(computer networks)
General Electric Co. 5.1
(conglomerate)
Intel Corp. 4.6
(computer hardware)
Pfizer, Inc. 4.5
(pharmaceuticals)
Sun Microsystems, Inc. 4.3
(computer technology)
Juniper Networks, Inc. 3.9
(telecommunications)
EMC Corp. 3.8
(computer technology)
Oracle Corp. 3.5
(software)
America Online, Inc. 3.0
(information services)
Nortel Networks Corp. 3.0
(telecommunications)
-------------------------------------------------------------------
Top Ten 42.4%
-------------------------------------------------------------------

-------------------------------------------------------------------
INVESTMENT FOCUS

[GRID APPEARS HERE]

MARKET LARGE
STYLE GROWTH
-------------------------------------------------------------------

9
<PAGE>

GLOSSARY
of Investment Terms

BETA. A measure of the magnitude of a fund's past share-price fluctuations in
relation to the ups and downs of the overall market (or appropriate market
index). The market (or index) is assigned a beta of 1.00, so a fund with a beta
of 1.20 would have seen its share price rise or fall by 12% when the overall
market rose or fell by 10%.
--------------------------------------------------------------------------------
CASH INVESTMENTS. The percentage of a fund's net assets invested in "cash
equivalents"--highly liquid, short-term, interest-bearing securities. This
figure does not include cash invested in futures contracts to simulate stock
investment.
--------------------------------------------------------------------------------
EARNINGS GROWTH RATE. The average annual rate of growth in earnings over the
past five years for the stocks now in a fund.
--------------------------------------------------------------------------------
EXPENSE RATIO. The percentage of a fund's average net assets used to pay its
annual administrative and advisory expenses. These expenses directly reduce
returns to investors.
-------------------------------------------------------------------------------
FOREIGN HOLDINGS. The percentage of a fund's equity assets represented by stocks
or American Depositary Receipts of companies based outside the United States.
--------------------------------------------------------------------------------
MEDIAN MARKET CAP. An indicator of the size of companies in which a fund
invests; the midpoint of market capitalization (market price x shares
outstanding) of a fund's stocks, weighted by the proportion of the fund's assets
invested in each stock. Stocks representing half of the fund's assets have
market capitalizations above the median, and the rest are below it.
--------------------------------------------------------------------------------
PRICE/BOOK RATIO. The share price of a stock divided by its net worth, or book
value, per share. For a fund, the weighted average price/book ratio of the
stocks it holds.
--------------------------------------------------------------------------------
PRICE/EARNINGS RATIO. The ratio of a stock's current price to its per-share
earnings over the past year. For a fund, the weighted average P/E of the stocks
it holds. P/E is an indicator of market expectations about corporate prospects;
the higher the P/E, the greater the expectations for a company's future growth.
--------------------------------------------------------------------------------
R-SQUARED. A measure of how much of a fund's past returns can be explained by
the returns from the overall market (or its benchmark index). If a fund's total
return were precisely synchronized with the overall market's return, its
R-squared would be 1.00. If a fund's returns bore no relationship to the
market's returns, its R-squared would be 0.
--------------------------------------------------------------------------------
RETURN ON EQUITY. The annual average rate of return generated by a company
during the past five years for each dollar of shareholder's equity (net income
divided by shareholder's equity). For a fund, the weighted average return on
equity for the companies whose stocks it holds.
--------------------------------------------------------------------------------
TURNOVER RATE. An indication of trading activity during the past year. Funds
with high turnover rates incur higher transaction costs and are more likely to
distribute capital gains (which are taxable to investors).
--------------------------------------------------------------------------------
YIELD. A snapshot of a fund's income from interest and dividends. The yield,
expressed as a percentage of the fund's net asset value, is based on income
earned over the past 30 days and is annualized, or projected forward for the
coming year. The index yield is based on the current annualized rate of
dividends paid on stocks in the index.
--------------------------------------------------------------------------------

10
<PAGE>

PERFORMANCE SUMMARY
for U.S. Growth Fund

All of the data on this page represent past performance, which cannot be used to
predict future returns that may be achieved by the fund. Note, too, that both
share price and return can fluctuate widely. An investor's shares, when
redeemed, could be worth more or less than their original cost.
---------------------------------------------------------------------
TOTAL INVESTMENT RETURNS (%) AUGUST 31, 1990-AUGUST 31, 2000

[CHART]
U.S. GROWTH FUND RUSSELL 1000 GROWTH INDEX

1991 34.3 33.5
1992 8.8 7.7
1993 1.7 8.0
1994 7.0 6.5
1995 22.8 24.6
1996 25.3 18.4
1997 32.5 39.4
1998 14.0 8.3
1999 37.4 48.3
2000 33.3 33.5
---------------------------------------------------------------------
See Financial Highlights table on page 17 for dividend and capital
gains information for the past five years.
---------------------------------------------------------------------

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

CUMULATIVE PERFORMANCE AUGUST 31, 1990-AUGUST 31, 2000

AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED AUGUST 31, 2000 FINAL VALUE
----------------------------- OF A $10,000
1 YEAR 5 YEARS 10 YEARS INVESTMENT
------------------------------------------------------------------------------
U.S. Growth Fund 33.29% 28.22% 21.06% $67,615
Average Large-Cap Growth Fund* 39.48 27.80 21.61 70,765
Russell 1000 Growth Index 33.46 28.73 21.97 72,884
Wilshire 5000 Index 20.39 22.52 19.19 57,857
S&P 500 Index 16.32 24.04 19.49 59,339
------------------------------------------------------------------------------
*Derived from data provided by Lipper Inc.
------------------------------------------------------------------------------

------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS PERIODS ENDED JUNE 30, 2000*

10 YEARS
INCEPTION ----------------------------
DATE 1 YEAR 5 YEARS CAPITAL INCOME TOTAL
------------------------------------------------------------------------------
U.S. Growth Fund 1/6/1959 20.50% 26.83% 17.57% 1.32% 18.89%
------------------------------------------------------------------------------
*SEC rules require that we provide this average annual total return
information through the latest calendar quarter.

11
<PAGE>

A REPORT
on Your Fund's After-Tax Returns

This table presents pre-tax and after-tax returns for your fund and an
appropriate peer group of mutual funds. The after-tax returns represent the
fund's past results only and should not be used to predict future tax
efficiency.

If you own the fund in a tax-deferred account such as an individual retirement
account or a 401(k), this information does not apply to you. Such accounts are
not subject to current taxes. Income taxes can have a considerable impact on a
fund's return--an important consideration for investors who own mutual funds in
taxable accounts. While the pre-tax return is most often used to tally a fund's
performance, the fund's after-tax return, which accounts for taxes on
distributions of capital gains and income dividends, is an important measure of
the return that many investors actually received.

PRE-TAX AND AFTER-TAX PERIODS ENDED AUGUST 31, 2000
AVERAGE ANNUAL TOTAL RETURNS

ONE YEAR FIVE YEARS TEN YEARS
--------------------------------------------------------
PRE-TAX AFTER-TAX PRE-TAX AFTER-TAX PRE-TAX AFTER-TAX
--------------------------------------------------------------------------------
Vanguard U.S. Growth Fund 33.3% 31.8% 28.2% 26.3% 21.1% 19.8%
Average Large Growth Fund* 38.8 36.2 24.9 22.0 20.1 17.5
--------------------------------------------------------------------------------
*Based on data from Morningstar, Inc. Elsewhere in this report, returns for
comparable funds are derived from data provided by Lipper Inc., which may differ
somewhat.

The after-tax return calculations use the top federal income tax rates in
effect at the time of each distribution. The tax burden would be less, and the
after-tax return higher, for those in lower tax brackets. We must stress that
because many interrelated factors affect how tax-friendly a fund may be, it's
very difficult to predict tax efficiency. A fund's tax efficiency can be
influenced by its turnover rate, the types of securities it holds, the
accounting practices it uses, and the net cash flow it receives.

Finally, it's important to understand that our calculation does not reflect
the tax effect of your own investment activities. Specifically, you may incur
additional capital gains taxes--thereby lowering your after-tax return--if you
decide to sell all or some of your shares.

--------------------------------------------------------------------------------
A NOTE ABOUT OUR CALCULATIONS: Pre-tax total returns assume that all
distributions received (income dividends, short-term capital gains, and
long-term capital gains) are reinvested in new shares, while our after-tax
returns assume that distributions are reduced by any taxes owed on them before
reinvestment. When calculating the taxes due, we used the highest individual
federal income tax rates at the time of the distributions. Those rates are
currently 39.6% for dividends and short-term capital gains and 20% for long-term
capital gains. State and local income taxes were not considered. The competitive
group returns provided by Morningstar are calculated in a manner consistent with
that used for Vanguard funds.

[PHOTO OF COMPUTER]
You can use Vanguard's online after-tax
return calculator at
www.vanguard.com/?aftertax
to customize the calculation
of your after-tax return.

12
<PAGE>

FINANCIAL STATEMENTS
August 31, 2000

STATEMENT OF NET ASSETS

At the end of the Statement of Net Assets, you will find a table displaying
the composition of the fund's net assets on both a dollar and per-share basis.
Because all income and any realized gains must be distributed to shareholders
each year, the bulk of net assets consists of Paid in Capital (money invested by
shareholders). The amounts shown for Undistributed Net Investment Income and
Accumulated Net Realized Gains usually approximate the sums the fund had
available to distribute to shareholders as income dividends or capital gains as
of the statement date, but may differ because certain investments or
transactions may be treated differently for financial statement and tax
purposes. Any Accumulated Net Realized Losses, and any cumulative excess of
distributions over net income or net realized gains, will appear as negative
balances. Unrealized Appreciation (Depreciation) is the difference between the
market value of the fund's investments and their cost, and reflects the gains
(losses) that would be realized if the fund were to sell all of its investments
at their statement-date values.

------------------------------------------------------------------------------
MARKET
VALUE*
U.S. GROWTH FUND SHARES (000)
------------------------------------------------------------------------------
COMMON STOCKS (99.0%)
------------------------------------------------------------------------------
CONSUMER DISCRETIONARY (9.6%)
*America Online, Inc. 11,600,000 680,050
Home Depot, Inc. 5,800,000 278,762
*Amazon.com, Inc. 5,700,000 236,550
*Clear Channel
Communications, Inc. 2,700,000 195,412
*Yahoo!, Inc. 1,500,000 182,250
*AT&T Corp.-Liberty Media
Class A 8,200,000 175,275
The Gap, Inc. 5,500,000 123,406
The Walt Disney Co. 2,800,000 109,025
*Infinity Broadcasting Corp. 2,500,000 94,688
*Bed Bath & Beyond, Inc. 4,400,000 77,275
-----------------
2,152,693
-----------------
CONSUMER STAPLES (3.5%)
CVS Corp. 8,900,000 330,413
PepsiCo, Inc. 7,000,000 298,375
The Coca-Cola Co. 1,700,000 89,463
Walgreen Co. 1,600,000 52,600
-----------------
770,851
-----------------
FINANCIAL SERVICES (4.9%)
Charles Schwab Corp. 9,500,000 362,781
American Express Co. 4,600,000 271,975
Capital One Financial Corp. 4,200,000 253,313
State Street Corp. 1,800,000 211,950
-----------------
1,100,019
-----------------
HEALTH CARE (12.1%)
Pfizer, Inc. 23,200,000 1,003,400
American Home
Products Corp. 7,300,000 395,569
Eli Lilly & Co. 5,300,000 386,900
Pharmacia Corp. 4,700,000 275,244
Johnson & Johnson 2,500,000 229,844
*Genentech, Inc. 800,000 152,400
*Forest Laboratories, Inc. 1,100,000 107,663
*Amgen, Inc. 1,100,000 83,394
*Serono SA 2,200,000 62,975
-----------------
2,697,389
-----------------
MATERIALS & PROCESSING (0.5%)
*Sealed Air Corp. 2,000,000 102,625
-----------------
PRODUCER DURABLES (4.0%)
*Applied Materials, Inc. 7,700,000 664,606
Nokia Corp. ADR 5,200,000 233,675
-----------------
898,281
-----------------
TECHNOLOGY (53.5%)
COMMUNICATIONS TECHNOLOGY (21.1%)
*Cisco Systems, Inc. 21,700,000 1,489,162
*Juniper Networks, Inc. 4,100,000 876,375
Nortel Networks Corp. 8,300,000 676,969
Corning, Inc. 1,500,000 491,906
*Brocade Communications
Systems, Inc. 1,400,000 316,137

13
<PAGE>

------------------------------------------------------------------------------
MARKET
VALUE*
U.S. GROWTH FUND SHARES (000)
------------------------------------------------------------------------------
*Inktomi Corp. 2,000,000 260,750
*CIENA Corp. 1,100,000 243,856
*Redback Networks Inc. 1,600,000 239,000
*JDS Uniphase Corp. 800,000 99,587

COMPUTER SERVICES SOFTWARE & SYSTEMS (8.7%)
*Oracle Corp. 8,600,000 782,062
*Veritas Software Corp. 4,400,000 530,475
*BEA Systems, Inc. 4,200,000 285,862
*i2 Technologies, Inc. 900,000 152,269
*Ariba, Inc. 900,000 141,637
*BroadVision, Inc. 1,500,000 51,750

COMPUTER TECHNOLOGY (11.0%)
*Sun Microsystems, Inc. 7,500,000 952,031
*EMC Corp. 8,700,000 852,600
*Network Appliance, Inc. 3,200,000 374,400
*Palm, Inc. 5,900,000 259,600
*Corvis Corp. 235,500 24,448

ELECTRONICS--SEMICONDUCTORS/COMPONENTS (10.9%)
Intel Corp. 13,600,000 1,018,300
Texas Instruments, Inc. 9,600,000 642,600
*Xilinx, Inc. 4,800,000 426,600
*Broadcom Corp. 1,000,000 250,000
*SDL, Inc. 250,000 99,328

ELECTRONICS--TECHNOLOGY (1.1%)
*Solectron Corp. 5,500,000 249,219

SCIENTIFIC EQUIPMENT & SUPPLIES (0.7%)
PE Corp.?PE Biosystems Group 1,600,000 157,400
-----------------
11,944,323
-----------------
UTILITIES (3.3%)
*Comcast Corp. Special Class A 7,100,000 264,475
*Sprint PCS 4,100,000 205,769
Vodafone Group PLC ADR 4,500,000 184,219
*VoiceStream Wireless Corp. 800,000 90,050
------------------
744,513
-----------------
OTHER (7.6%)
General Electric Co. 19,300,000 1,132,669
Tyco International Ltd. 7,200,000 410,400
Illinois Tool Works, Inc. 2,600,000 145,763
-----------------
1,688,832
-----------------
------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(COST $14,515,239) 22,099,526
------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCK (0.3%)
Sealed Air Corp. $2.00 Cvt. Pfd.
(Cost $54,110) 1,400,000 70,088
------------------------------------------------------------------------------

------------------------------------------------------------------------------
TEMPORARY CASH INVESTMENTS (2.4%)
------------------------------------------------------------------------------
REPURCHASE AGREEMENTS
Collateralized by U.S. Government
Obligations in a Pooled
Cash Account
6.60%, 9/1/2000 $ 333,456 $ 333,456
6.63%, 9/1/2000--Note G 198,521 198,521
------------------------------------------------------------------------------
TOTAL TEMPORARY CASH INVESTMENTS
(COST $531,977) 531,977
------------------------------------------------------------------------------
TOTAL INVESTMENTS (101.7%)
(Cost $15,101,326) 22,701,591
------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (?1.7%)
------------------------------------------------------------------------------
Other Assets--Note C 102,145
Liabilities--Note G (472,827)
-----------------
(370,682)
------------------------------------------------------------------------------
NET ASSETS (100%)
------------------------------------------------------------------------------
Applicable to 453,292,212 outstanding
$.001 par value shares of beneficial
interest (unlimited authorization) $22,330,909
==============================================================================

NET ASSET VALUE PER SHARE $49.26
==============================================================================
*See Note A in Notes to Financial Statements.
*Non-income-producing security.
ADR--American Depositary Receipt.

------------------------------------------------------------------------------
AT AUGUST 31, 2000, NET ASSETS CONSISTED OF:
------------------------------------------------------------------------------
AMOUNT PER
(000) SHARE
------------------------------------------------------------------------------
Paid in Capital--Note E $ 11,985,809 $ 26.44
Undistributed Net
Investment Income--Note E 8,225 .02
Accumulated Net Realized Gains--
Note E 2,736,610 6.04
Unrealized Appreciation--Note F 7,600,265 16.76
------------------------------------------------------------------------------
NET ASSETS $ 22,330,909 $ 49.26
==============================================================================

14
<PAGE>

STATEMENT OF OPERATIONS

---------------------------------------------------------------------------
U.S. GROWTH FUND
YEAR ENDED AUGUST 31, 2000
(000)
---------------------------------------------------------------------------
INVESTMENT INCOME
INCOME
Dividends $ 89,561
Interest 22,995
Security Lending 297
---------------------------------------------------------------------------
Total Income 112,853
---------------------------------------------------------------------------
EXPENSES
Investment Advisory Fees--Note B 20,280
The Vanguard Group--Note C
Management and Administrative 48,413
Marketing and Distribution 2,733
Custodian Fees 27
Auditing Fees 13
Shareholders' Reports 398
Trustees' Fees and Expenses 25
---------------------------------------------------------------------------
Total Expenses 71,889
Expenses Paid Indirectly--Note D (3,961)
---------------------------------------------------------------------------
Net Expenses 67,928
---------------------------------------------------------------------------
NET INVESTMENT INCOME 44,925
---------------------------------------------------------------------------
REALIZED NET GAIN ON INVESTMENT SECURITIES SOLD 3,116,570
---------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION)
OF INVESTMENT SECURITIES 2,293,584
---------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,455,079
===========================================================================

15
<PAGE>

STATEMENT OF CHANGES IN NET ASSETS

This Statement shows how the fund's total net assets changed during the two most
recent reporting periods. The Operations section summarizes information detailed
in the Statement of Operations. The amounts shown as Distributions to
shareholders from the fund's net income and capital gains may not match the
amounts shown in the Operations section, because distributions are determined on
a tax basis and may be made in a period different from the one in which the
income was earned or the gains were realized on the financial statements. The
Capital Share Transactions section shows the amount shareholders invested in the
fund, either by purchasing shares or by reinvesting distributions, as well as
the amounts redeemed. The corresponding numbers of Shares Issued and Redeemed
are shown at the end of the Statement.

-----------------------------------------------------------------------------
U.S. GROWTH FUND
YEAR ENDED AUGUST 31,
----------------------------
2000 1999
(000) (000)
-----------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net Investment Income $ 44,925 $ 82,729
Realized Net Gain 3,116,570 802,298
Change in Unrealized Appreciation (Depreciation) 2,293,584 2,867,213
-----------------------------------------------------------------------------
Net Increase in Net Assets Resulting
from Operations 5,455,079 3,752,240
-----------------------------------------------------------------------------
DISTRIBUTIONS
Net Investment Income (87,492) (63,675)
Realized Capital Gain (841,606) (774,154)
-----------------------------------------------------------------------------
Total Distributions (929,098) (837,829)
-----------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS1
Issued 5,114,365 5,653,573
Issued in Lieu of Cash Distributions 899,196 811,835
Redeemed (4,215,800) (2,959,346)
-----------------------------------------------------------------------------
Net Increase from Capital Share Transactions 1,797,761 3,506,062
-----------------------------------------------------------------------------
Total Increase 6,323,742 6,420,473
-----------------------------------------------------------------------------
NET ASSETS
Beginning of Year 16,007,167 9,586,694
-----------------------------------------------------------------------------
End of Year $22,330,909 $16,007,167
=============================================================================

1Shares Issued (Redeemed)
Issued 118,692 151,298
Issued in Lieu of Cash Distributions 21,409 23,255
Redeemed (98,060) (79,056)
-----------------------------------------------------------------------------
Net Increase in Shares Outstanding 42,041 95,497
=============================================================================

16
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
------------------------------------------------------------------------------------------------
U.S. GROWTH FUND
YEAR ENDED AUGUST 31,
------------------------------------
<S> <C> <C> <C> <C> <C>
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $38.92 $30.36 $27.74 $22.62 $18.83
------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .10 .21 .21 .27 .26
Net Realized and Unrealized Gain (Loss) on Investments 12.47 10.85 3.57 6.73 4.39
------------------------------------------------------------------------------------------------
Total from Investment Operations 12.57 11.06 3.78 7.00 4.65
------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.21) (.19) (.27) (.26) (.29)
Distributions from Realized Capital Gains (2.02) (2.31) (.89) (1.62) (.57)
------------------------------------------------------------------------------------------------
Total Distributions (2.23) (2.50) (1.16) (1.88) (.86)
------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $49.26 $38.92 $30.36 $27.74 $22.62
================================================================================================

TOTAL RETURN 33.29% 37.38% 14.01% 32.50% 25.28%
================================================================================================

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $22,331 $16,007 $9,587 $7,445 $4,544
Ratio of Total Expenses to Average Net Assets 0.38% 0.39% 0.41% 0.42% 0.43%
Ratio of Net Investment Income to Average Net Assets 0.24% 0.59% 0.69% 1.13% 1.32%
Portfolio Turnover Rate 76% 49% 48% 35% 44%
</TABLE>

17
<PAGE>

NOTES TO FINANCIAL STATEMENTS

Vanguard U.S. Growth Fund is registered under the Investment Company Act of 1940
as a diversified open-end investment company, or mutual fund.

1. Security Valuation: Equity securities are valued at the latest quoted
sales prices as of the close of trading on the New York Stock Exchange
(generally 4:00 p.m. Eastern time) on the valuation date; such securities not
traded on the valuation date are valued at the mean of the latest quoted bid and
asked prices. Prices are taken from the primary market in which each security
trades. Temporary cash investments are valued at cost, which approximates market
value. Securities for which market quotations are not readily available are
valued by methods deemed by the board of trustees to represent fair value.

2. Federal Income Taxes: The fund intends to continue to qualify as a
regulated investment company and distribute all of its taxable income.
Accordingly, no provision for federal income taxes is required in the financial
statements.

3. Repurchase Agreements: The fund, along with other members of The
Vanguard Group, transfers uninvested cash balances to a pooled cash account,
which is invested in repurchase agreements secured by U.S. government
securities. Securities pledged as collateral for repurchase agreements are held
by a custodian bank until the agreements mature. Each agreement requires that
the market value of the collateral be sufficient to cover payments of interest
and principal; however, in the event of default or bankruptcy by the other party
to the agreement, retention of the collateral may be subject to legal
proceedings.

4. Distributions: Distributions to shareholders are recorded on the
ex-dividend date. Distributions are determined on a tax basis and may differ
from net investment income and realized capital gains for financial reporting
purposes.

5. Other: Dividend income is recorded on the ex-dividend date. Security
transactions are accounted for on the date securities are bought or sold. Costs
used to determine realized gains (losses) on the sale of investment securities
are those of the specific securities sold.

B. Lincoln Capital Management Company provides investment advisory services to
the fund for a fee calculated at an annual percentage rate of average net
assets. For the year ended August 31, 2000, the advisory fee represented an
effective annual rate of 0.11% of the fund's average net assets.

C. The Vanguard Group furnishes at cost corporate management, administrative,
marketing, and distribution services. The costs of such services are allocated
to the fund under methods approved by the board of trustees. The fund has
committed to provide up to 0.40% of its net assets in capital contributions to
Vanguard. At August 31, 2000, the fund had contributed capital of $3,858,000 to
Vanguard (included in Other Assets), representing 0.02% of the fund's net assets
and 3.9% of Vanguard's capitalization. The fund's trustees and officers are also
directors and officers of Vanguard.

D. The fund has asked its investment adviser to direct certain security trades,
subject to obtaining the best price and execution, to brokers who have agreed to
rebate to the fund part of the commissions generated. Such rebates are used
solely to reduce the fund's management and administrative expenses. The fund's
custodian bank has also agreed to reduce its fees when the fund maintains cash
on deposit in the non-interest-bearing custody account. For the year ended
August 31, 2000, directed brokerage and custodian fee offset arrangements
reduced expenses by $3,952,000 and $9,000, respectively. The total expense
reduction represented an effective annual rate of 0.02% of the fund's average
net assets.

18
<PAGE>

E. During the year ended August 31, 2000, the fund purchased $15,012,807,000 of
investment securities and sold $14,080,625,000 of investment securities other
than temporary cash investments.

During the year ended August 31, 2000, the fund realized $127,948,000 of
net capital gains resulting from in-kind redemptions--in which shareholders
exchanged fund shares for securities held by the fund rather than for cash.
Because such gains are not taxable to the fund, and are not distributed to
shareholders, they have been reclassified from accumulated net realized gains to
paid in capital.

The fund used a tax accounting practice to treat a portion of the price of
capital shares redeemed during the year as distributions from net investment
income and realized capital gains. Accordingly, the fund has reclassified
$3,521,000 from undistributed net investment income, and $212,892,000 from
accumulated net realized gains, to paid in capital.

F. At August 31, 2000, net unrealized appreciation of investment securities for
financial reporting and federal income tax purposes was $7,600,265,000,
consisting of unrealized gains of $7,831,732,000 on securities that had risen in
value since their purchase and $231,467,000 in unrealized losses on securities
that had fallen in value since their purchase.

G. The market value of securities on loan to broker/dealers at August 31, 2000,
was $190,094,000, for which the fund held cash collateral of $198,521,000. The
fund invests cash collateral received in repurchase agreements, and records a
liability for the return of the collateral, during the period the securities are
on loan.

19
<PAGE>

REPORT
of Independent Accountants

To the Shareholders and Trustees of Vanguard U.S. Growth Fund

In our opinion, the accompanying statement of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Vanguard U.S. Growth Fund (the "Fund") at August 31, 2000, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the five years in the period then ended, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States of America, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at August 31, 2000 by correspondence with the custodian, provide a
reasonable basis for our opinion.

PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania

September 29, 2000

--------------------------------------------------------------------------------
SPECIAL 2000 TAX INFORMATION (UNAUDITED) FOR
VANGUARD U.S. GROWTH FUND

This information for the fiscal year ended August 31, 2000, is included pursuant
to provisions of the Internal Revenue Code.

The fund distributed $1,054,499,000 as capital gain dividends (from net
long-term capital gains) to shareholders during the fiscal year, all of which is
designated as a 20% rate gain distribution.

For corporate shareholders, 100% of investment income (dividend income plus
short-term gains, if any) qualifies for the dividends-received deduction.

20
<PAGE>

THE PEOPLE
Who Govern Your Fund

Six of Vanguard's seven board members are independent, meaning that they
have no affiliation with Vanguard or the funds they oversee, apart from the
sizable personal investments they have made as private individuals. They bring
distinguished backgrounds in business, academia, and public service to their
task of working with Vanguard officers to establish the policies and oversee the
activities of the funds.

Among board members' responsibilities are selecting investment advisers for
the funds; monitoring fund operations, performance, and costs; reviewing
contracts; nominating and selecting new trustees/ directors; and electing
Vanguard officers.

The list below provides a brief description of each trustee's professional
affiliations. Noted in parentheses is the year in which the trustee joined the
Vanguard board.

--------------------------------------------------------------------------------
TRUSTEES

JOHN J. BRENNAN (1987) Chairman of the Board, Chief Executive Officer, and
Director/Trustee of The Vanguard Group, Inc., and each of the investment
companies in The Vanguard Group.

BRUCE K. MACLAURY (1990) President Emeritus of The Brookings Institution;
Director of American Express Bank Ltd., The St. Paul Companies, Inc., and
National Steel Corp.

ALFRED M. RANKIN, JR. (1993) Chairman, President, Chief Executive Officer, and
Director of NACCO Industries, Inc.; Director of The BFGoodrich Co.

J. LAWRENCE WILSON (1985) Retired Chairman and Chief Executive Officer of Rohm &
Haas Co.; Director of AmeriSource Health Corporation, Cummins Engine Co., and
The Mead Corp.; Trustee of Vanderbilt University.
--------------------------------------------------------------------------------
OTHER FUND OFFICERS

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

R. GREGORY BARTON, Legal Department.

ROBERT A. DISTEFANO, Information Technology.

JAMES H. GATELY, Direct Investor Services.

KATHLEEN C. GUBANICH, Human Resources.

IAN A. MACKINNON, Fixed Income Group.

F. WILLIAM MCNABB, III, Institutional Investor Group.

MICHAEL S. MILLER, Planning and Development.

RALPH K. PACKARD, Chief Financial Officer.

GEORGE U. SAUTER, Quantitative Equity Group.
--------------------------------------------------------------------------------
John C. Bogle
Founder, Chairman, and Chief Executive, 1974-1996.
<PAGE>

[SHIP GRAPHIC]
[THE VANGUARD GROUP LOGO]

Post Office Box 2600
Valley Forge, Pennsylvania, 19482-2600

ABOUT OUR COVER

All comparative mutual fund data are from Lipper Inc. or Morningstar, Inc.,
unless otherwise noted.

Standard & Poor's(R), S&P(R), S&P 500(R), Standard & Poor's 500, 500, S&P
MidCap400, and S&P SmallCap 600 are trademarks of The McGraw-Hill Companies,
Inc. All other index names may contain trademarks and are the exclusive property
of their respective owners.

WORLD WIDE WEB
www.vanguard.com

FUND INFORMATION
1-800-662-7447

INDIVIDUAL ACCOUNT SERVICES
1-800-662-2739

INSTITUTIONAL INVESTOR SERVICES
1-800-523-1036

This report is intended for the fund's shareholders. It may not be distributed
to prospective investors unless it is preceded or accompanied by the current
fund prospectus.

Q230 102000
<PAGE>
VANGUARD (R) INTERNATIONAL GROWTH FUND