VANGUARD MORGAN GROWTH FUND INC, 485BPOS, 1998-04-21

VANGUARD MORGAN GROWTH FUND INC
485BPOS, 1998-04-21

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT
(NO. 2-29601) UNDER
THE SECURITIES ACT OF 1933

Pre-Effective Amendment No. Post Effective
Amendment No. 51
and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940

Amendment No. 53

VANGUARD/MORGAN GROWTH FUND, INC.
(Exact Name of Registrant as Specified in Charter))

P.O. Box 2600, Malvern, PA 19355-0741
(Address of Principal Executive Office)

Registrant's Telephone Number (610) 669-1000

Raymond J. Klapinsky, Esquire
P.O. Box 876
Valley Forge, PA 19482

It is proposed that this filing become effective:
It is hereby requested that this amendment become effective on April 30, 1998,
pursuant to paragraph (b) of Rule 485.

Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.

We have elected to register an indefinite number of shares pursuant to
Regulation 24f-2 under the Investment Company Act of 1940. We filed our Rule
24f-2 Notice for the period ended December 31, 1997 on March 30, 1998.
================================================================================

<PAGE>

<TABLE>
<CAPTION>
VANGUARD/MORGAN INCOME FUND, INC.
CROSS REFERENCE SHEET

FORM N-1A
ITEM NUMBER LOCATION IN PROSPECTUS
Item 1. Cover Page....................................................Cover Page

Item 2. Synopsis......................................................Highlights; Fund Expenses

Item 3. Condensed Financial Information...............................Financial Highlights
Item 4. General Description of Registrant.............................Investment Strategies; Investment
Limitations; Investment Policies;
General Information
Item 5. Management of the Fund Management of the Fund; The Fund and
Vanguard; Investment Adviser

Item 5A. Management's Discussion of Fund Performance...................Herein incorporated by reference to
Registrant's Annual Report to
Shareholders dated December 31, 1997
filed with the Securities & Exchange
Commission's EDGAR system on February
18, 1998

Item 6. Capital Stock and Other Securities............................Investing with Vanguard; Buying
Shares; Redeeming Shares; Share Price
of the Dividends, Capital Gains, and
Taxes; General Information
Item 7. Purchase of Securities Being Offered Cover Page; Investing in Vanguard;
Buying Shares
Item 8. Redemption or Repurchase Redeeming Your Shares
Item 9. Pending Legal Proceedings Not Applicable

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

Item 22. Calculations of Performance Data Yield and Total Return

Item 23. Financial Statements Financial Statements
</TABLE>
<PAGE>

VANGUARD/
MORGAN GROWTH
FUND
Prospectus
April 30, 1998

This prospectus contains financial data for the Fund through the fiscal year
ended December 31, 1997.

[VANGUARD LOGO]
<PAGE>

VANGUARD/MORGAN GROWTH FUND A Growth Stock Mutual Fund

CONTENTS
Fund Profile 1
Fund Expenses 2
Financial Highlights 3
A Word About Risk 4
The Fund's Objective 4
Who Should Invest 4
Investment Strategy 5
Investment Policies 7
Investment Limitations 9
Investment Performance 9
Share Price 10
Dividends, Capital Gains, and Taxes 10
The Fund and Vanguard 11
Investment Advisers 11
General Information 13
Investing with Vanguard 14
Services and Account Features 14
Types of Accounts 15
Distribution Options 16
Buying Shares 17
Redeeming Shares 18
Transferring Registration 21
Fund and Account Updates 21
Prospectus Postscript 23
Investment Primer 24
Glossary Inside Back Cover

INVESTMENT OBJECTIVE AND POLICIES

Vanguard/Morgan Growth Fund, Inc. (the "Fund") is an open-end diversified
investment company, or mutual fund.

The Fund seeks to provide long-term capital growth by investing mainly in the
stocks of large, established companies that have strong sales and earnings
records or have performed well during certain market cycles. The Fund also
invests in stocks of smaller companies that offer good expansion prospects.

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

FEES AND EXPENSES

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

ADDITIONAL INFORMATION ABOUT THE FUND

A Statement of Additional Information (dated April 30, 1998) containing more
information about the Fund is, by reference, part of this prospectus and may be
obtained without charge by writing to Vanguard, calling our Investor Information
Department at 1-800-662-7447, or visiting the Securities and Exchange
Commission's website (www.sec.gov).

WHY READING THIS PROSPECTUS IS IMPORTANT

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

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

FUND PROFILE Vanguard/Morgan Growth Fund

WHO SHOULD INVEST (page 4)

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

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

WHO SHOULD NOT INVEST

o Investors unwilling to accept significant fluctuations in share price.

o Investors seeking current dividend income.

RISKS OF THE FUND (pages 4-8)

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

DIVIDENDS AND CAPITAL GAINS (page 10)

Paid annually in December.

INVESTMENT ADVISERS (page 11)

The Fund employs a multiadviser approach:

o Wellington Management Company, LLP, Boston, Mass.

o Franklin Portfolio Associates LLC, Boston, Mass.

o Vanguard Core Management Group, Valley Forge, Pa.

INCEPTION DATE: December 31, 1968

NET ASSETS AS OF 12/31/1997: $2.80 billion

FUND'S EXPENSE RATIO FOR THE YEAR ENDED 12/31/1997: 0.48%

LOADS, 12B-1 MARKETING FEES: None

SUITABLE FOR IRAS: Yes

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

NEWSPAPER ABBREVIATION: Morg

VANGUARD FUND NUMBER: 026

CUSIP NUMBER: 921928107

QUOTRON SYMBOL: VMRGX.Q

ACCOUNT FEATURES (page 14)

o Telephone Redemption

o Vanguard Direct Deposit Service(TM)

o Vanguard Automatic Exchange Servicesm

o Vanguard Fund Express(R)

o Vanguard Dividend Express(SM)

AVERAGE ANNUAL TOTAL RETURNS--YEARS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
<S> <C> <C> <C>

1 YEAR 5 YEARS 10 YEARS
--------------------------
Vanguard/Morgan Growth Fund 30.8% 18.3% 17.1%
S&P 500 Index 33.4 20.3 18.1
</TABLE>

QUARTERLY RETURNS (%) 1988-1997 (intended to show volatility of returns)

[GRAPH]

IN EVALUATING PAST PERFORMANCE, REMEMBER THAT IT IS NOT INDICATIVE OF FUTURE
PERFORMANCE AND THAT RETURNS FROM STOCKS BEFORE ADJUSTING FOR INFLATION WERE
RELATIVELY HIGH DURING THE PERIODS SHOWN. PERFORMANCE FIGURES INCLUDE THE
REINVESTMENT OF ANY DIVIDEND AND CAPITAL GAINS DISTRIBUTIONS. THE RETURNS SHOWN
ARE NET OF EXPENSES, BUT THEY DO NOT REFLECT INCOME TAXES AN INVESTOR WOULD HAVE
INCURRED. NOTE, TOO, THAT BOTH THE RETURN AND PRINCIPAL VALUE OF AN INVESTMENT
WILL FLUCTUATE SO THAT INVESTORS' SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR
LESS THAN THEIR ORIGINAL COST.

1
<PAGE>

FUND EXPENSES

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

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

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

The next table illustrates the operating expenses that you would incur as a
shareholder of the Fund. These expenses are deducted from the Fund's income
before it is paid to you. Expenses include investment advisory fees as well as
the costs of maintaining accounts, administering the Fund, providing shareholder
services, and other activities. The expenses shown in the table are based upon
those incurred in the fiscal year ended December 31, 1997.

PLAIN TALK ABOUT

THE COSTS OF INVESTING

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

ANNUAL FUND OPERATING EXPENSES
<S> <C> <C>

Management and Administrative Expenses: 0.28%
Investment Advisory Expenses: 0.16%
12b-1 Marketing Fees: None
Other Expenses
Marketing and Distribution Costs: 0.02%
Miscellaneous Expenses (e.g., Taxes, Auditing): 0.02%
----
Total Other Expenses: 0.04%
----
TOTAL OPERATING EXPENSES (EXPENSE RATIO): 0.48%
====
</TABLE>

The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds, by illustrating
the hypothetical expenses that you would incur on a $1,000 investment over
various periods. The example assumes that (1) the Fund provides a return of 5% a
year and (2) you redeem your investment at the end of each period.

-----------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------
$5 $15 $27 $60
-----------------------------------

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

PLAIN TALK ABOUT

FUND EXPENSES

All mutual funds have operating expenses. These expenses,
which are deducted from a fund's gross income, are expressed
as a percentage of the net assets of the fund.
Vanguard/Morgan Growth Fund's expense ratio in fiscal year
1997 was 0.48%, or $4.80 per $1,000 of average net assets.
The average growth equity mutual fund had expenses in 1997
of 1.53%, or $15.30 per $1,000 of average net assets,
according to Lipper Analytical Services, which reports on
the mutual fund industry.

2
<PAGE>

FINANCIAL HIGHLIGHTS

The following financial highlights table shows the results for a share
outstanding of the Fund for each of the fiscal years in the decade ended
December 31, 1997. The financial statements that include these financial
highlights were audited by Price Waterhouse llp, independent accountants. You
should read this information in conjunction with the Fund's financial statements
and accompanying notes, which appear, along with the audit report from Price
Waterhouse, in the Fund's most recent annual report to shareholders. The annual
report is incorporated by reference in the Statement of Additional Information
and in this prospectus, and contains a more complete discussion of the Fund's
performance. You may have the report sent to you without charge by writing to
Vanguard or by calling our Investor Information Department.

<TABLE>

YEAR ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $15.63 $14.09 $11.36 $12.01 $12.65 $12.20 $10.40 $11.72 $10.27 $ 9.39
--------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .160 .14 .15 .14 .18 .18 .29 .32 .28 .25
Net Realized and Unrealized
Gain (Loss) on Investments 4.435 3.07 3.89 (.34) .71 .97 2.66 (.50) 2.04 1.85
--------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS 4.595 3.21 4.04 (.20) .89 1.15 2.95 (.18) 2.32 2.10
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.160) (.14) (.15) (.14) (.18) (.18) (.29) (.34) (.28) (.24)
Distributions from Realized Capital Gains (2.525) (1.53) (1.16) (.31) (1.35) (.52) (.86) (.80) (.59) (.98)
TOTAL DISTRIBUTIONS (2.685) (1.67) (1.31) (.45) (1.53) (.70) (1.15) (1.14) (.87) (1.22)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $17.54 $15.63 $14.09 $11.36 $12.01 $12.65 $12.20 $10.40 $11.72 $10.27
====================================================================================================================================
TOTAL RETURN 30.81% 23.30% 35.98% -1.67% 7.32% 9.54% 29.33% -1.51% 22.66% 22.34%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $2,795 $2,054 $1,471 $1,075 $1,135 $1,116 $957 $697 $733 $622
Ratio of Total Expenses
to Average Net Assets 0.48% 0.51% 0.49%* 0.50% 0.49% 0.48% 0.46% 0.55% 0.51% 0.55%
Ratio of Net Investment Income
to Average Net Assets 0.93% 0.97% 1.10% 1.15% 1.36% 1.51% 2.36% 2.77% 2.38% 2.20%
Portfolio Turnover Rate 76% 73% 76% 84% 72% 64% 52% 73% 27% 32%
Average Commission Rate Paid $.0430 $.0362 N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------

*Beginning in fiscal year 1995, this figure does not include expense reductions from directed brokerage arrangements. The Ratio of
Net Expenses to Average Net Assets was 0.48%.
</TABLE>

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

PLAIN TALK ABOUT

HOW TO READ THE FINANCIAL HIGHLIGHTS TABLE

The Fund began fiscal 1997 with a net asset value (price) of
$15.63 per share. During the year, the Fund earned $0.160
per share from investment income (interest and dividends)
and $4.435 per share from investments that had appreciated
in value or that were sold for higher prices than the Fund
paid for them. Of those total earnings of $4.595 per share,
$2.685 was returned to shareholders in the form of
distributions ($0.160 in dividends, $2.525 in capital
gains). The earnings ($4.595 per share) less distributions
($2.685 per share) resulted in a share price of $17.54 at
the end of the year, an increase of $1.91 per share (from
$15.63 at the beginning of the year to $17.54 at the end of
the year). Assuming that the shareholder had reinvested the
distributions in the purchase of more shares, total return
from the Fund was 30.81% for the year.

As of December 31, 1997, the Fund had $2.795 billion in
net assets; an expense ratio of 0.48% ($4.80 per $1,000 of
net assets); and net investment income amounting to 0.93% of
its average net assets. It sold and replaced securities
valued at 76% of its total net assets.

<PAGE>

A WORD ABOUT RISK

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

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

PLAIN TALK ABOUT

GROWTH FUNDS
AND VALUE FUNDS

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

THE FUND'S OBJECTIVE

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

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

WHO SHOULD INVEST

The Fund may be a suitable investment for you if:

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

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

o You are seeking a fund that invests in growth companies representing a
wide variety of industries.

o You are not looking for current income.

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

PLAIN TALK ABOUT

INVESTING FOR THE LONG TERM

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

4
<PAGE>
o There is a limit on the number of times you can exchange into or out of
the Fund (see "Redeeming Shares" in the INVESTING WITH VANGUARD section).

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

INVESTMENT STRATEGY

This section explains how the investment advisers pursue the Fund's objective of
long-term capital growth. It also explains several important risks--market risk,
objective risk, manager risk, and country risk--faced by investors in the Fund.
Unlike the Fund's investment objective, the advisers' investment strategy is not
fundamental and can be changed by the Fund's Board of Directors without
shareholder approval. However, before making any important change in its
policies, the Fund will give shareholders 30 days' notice, in writing.

PLAIN TALK ABOUT

COSTS AND MARKET-TIMING

Some investors try to profit from "market-timing"--switching
money into investments when they expect prices to rise, and
taking money out when they expect the market to fall. As
money is shifted in and out, a fund incurs expenses for
buying and selling securities. These costs are borne by all
fund shareholders, including the long-term investors who do
not generate the costs. Therefore, the Fund discourages
short-term trading by, among other things, limiting the
number of exchanges it permits.

MARKET EXPOSURE

The Fund is a growth fund that invests mainly in large-capitalization common
stocks. The Fund also includes stocks of smaller companies that--even though
they may not have a long history of growth--one of the Fund's advisers finds
attractive. All stocks are chosen for their above-average earnings growth
potential. At times, the Fund may also invest in securities that are convertible
into common stocks.

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

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

U.S. STOCK MARKET RETURNS (1926-1997)
- ------------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR 5 YEARS 10 YEARS 20 YEARS
- ------------------------------------------------------
Best 53.9% 23.9% 20.1% 16.9%
Worst -43.3 -12.5 -0.9 3.1
Average 13.0 10.5 10.9 10.9
- ------------------------------------------------------
</TABLE>

PLAIN TALK ABOUT

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

Stocks of publicly traded companies--and mutual funds that
hold these stocks--can be classified by the companies'
market value, or capitalization. Vanguard defines
large-capitalization, or large-cap, funds as those holding
stocks of companies with a median total market value
exceeding $7.5 billion. Mid-cap funds hold stocks of
companies with a median market value between $1 billion and
$7.5 billion. Small-cap funds hold stocks of companies with
a median market value of less than $1 billion.

<PAGE>

The table covers all of the 1-, 5-, 10-, and 20-year periods from 1926
through 1997. For example, while the average return on stocks for all of the
5-year periods was 10.5%, returns for these 5-year periods ranged from a -12.5%
average (from 1928 through 1932) to 23.9% (from 1950 through 1954). These
average returns reflect past performance and should not be regarded as an
indication of future returns from either the stock market as a whole or the Fund
in particular.

Finally, because Vanguard/Morgan Growth Fund does not hold the same
securities held in the S&P 500 Index or any other market index, the performance
of the Fund will not mirror the returns of any particular index.

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

PLAIN TALK ABOUT

PORTFOLIO DIVERSIFICATION

In general, the more diversified a fund's portfolio of
stocks, the less likely that a specific stock's poor
performance will hurt the fund. One measure of a fund's
diversification is the percentage of total net assets
represented by its ten largest holdings. The average U.S.
equity mutual fund has about 31% of its assets invested in
its ten largest holdings, while some less-diversified mutual
funds have more than 50% of their assets invested in the
stocks of just ten companies.

SECURITY SELECTION

Vanguard/Morgan Growth Fund has three investment advisers, each of whom
independently chooses and maintains a portfolio of common stocks for the Fund.

The three investment advisers employ active investment management methods,
which means securities are bought and sold according to the advisers' judgments
about companies and their financial prospects, and about the stock markets and
the economy in general.

Each adviser is responsible for investing a relatively fixed percentage of
the Fund's assets. Before the Fund makes a significant change in an adviser's
percentage, shareholders will receive 30 days' notice, in writing.

Wellington Management Company, llp (WMC), which is currently responsible for
about 38% of the Fund's assets, uses traditional methods of stock
selection--company research and analysis--to identify companies that it feels
have above-average growth prospects, particularly those in industries undergoing
change.

The other two advisers, Franklin Portfolio Associates LLC (Associates) and
Vanguard Core Management Group, employ a "quantitative" investment approach. In
other words, they use computer techniques to track--and, if possible,
outperform--a specific market standard. For Vanguard/Morgan Growth Fund, this
market standard is the Growth Fund Stock Index, which is made up of the stocks
held by the nation's 50 largest growth funds. Associates currently manages about
43% and the Core Management Group is currently responsible for about 14% of the
Fund's assets.

<PAGE>

The balance of Vanguard/Morgan Growth Fund's assets (about 5%) is held in
cash reserves, also managed by Vanguard. Vanguard may invest the Fund's cash
reserves in stock futures. This strategy is intended to keep the Fund more fully
invested in common stocks while retaining cash on hand to meet liquidity needs.
See page 8 for more details on the Fund's policy on futures.

The Fund's top ten holdings (which amounted to about 15% of the Fund's total
net assets) as of December 31, 1997, follow.

1. Home Depot, Inc.
2. Airtouch Communications, Inc.
3. Travelers Group Inc.
4. Compaq Computer Corp.
5. Fannie Mae
6. Ford Motor Co.
7. Tele-Communications Class A
8. Ace, Ltd.
9. BankAmerica Corp.
10. HEALTHSOUTH Corp.

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

[FLAG] THE FUND IS SUBJECT TO MANAGER RISK, WHICH IS THE POSSIBILITY THAT ONE
OR MORE OF THE FUND'S INVESTMENT ADVISERS MAY DO A POOR JOB OF
SELECTING STOCKS.

PLAIN TALK ABOUT

PORTFOLIO TURNOVER

Before investing in a mutual fund, you should review its
portfolio turnover rate for an indication of the potential
effect of transaction costs on the fund's future returns. In
general, the greater the volume of buying and selling by the
fund, the greater the impact that brokerage commissions and
other transaction costs will have on its return. Also, funds
with high portfolio turnover rates may be more likely than
low-turnover funds to generate capital gains that must be
distributed to shareholders as taxable income. The average
turnover rate for all domestic stock funds is approximately
80%.

PORTFOLIO TURNOVER

Although the Fund generally seeks to invest for the long term, it retains the
right to sell securities regardless of how long they have been held. The Fund's
average turnover rate for the past ten years has been about 60%. (A turnover
rate of 100% would occur, for example, if the Fund sold and replaced securities
valued at 100% of its total net assets within a one-year period.)

INVESTMENT POLICIES

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

The Fund may invest up to 20% of its assets in securities of companies based
outside the United States. These securities may be traded in U.S. or foreign
markets.

[FLAG] THE FUND IS SUBJECT TO FOREIGN MARKET RISK, COUNTRY RISK, AND CURRENCY
RISK.

PLAIN TALK ABOUT

THE RISKS OF
INTERNATIONAL INVESTING

Because foreign stock markets operate differently from the
U.S. market, Americans investing abroad will encounter risks
not typically associated with U.S. companies. For instance,
foreign companies are not subject to the same accounting,
auditing, and financial reporting standards and practices as
U.S. companies; and their stock may not be as liquid as the
stock of similar U.S. companies. In addition, foreign stock
exchanges, brokers, and companies generally have less
government supervision and regulation than their
counterparts in the United States. These factors, among
others, could negatively impact the returns Americans
receive from a foreign investment. For more information, see
the Statement of Additional Information.

<PAGE>

Because of its investments in foreign securities, the Fund is subject to
foreign market risk. Investments in foreign stock markets can be as volatile, if
not more volatile, than investments in U.S. stock markets. Over the years, the
prices of foreign stocks and the prices of U.S. stocks have often moved in
opposite directions. However, a portfolio that invests in both U.S. and foreign
stocks may benefit from diversification and have less volatility than a
portfolio made up strictly of foreign stocks.

In addition, the Fund is subject to country and currency risk. Country risk
is the possibility that political events (such as a war), financial problems
(such as government default), or natural disasters (such as an earthquake) will
weaken a country's economy and cause investments in that country to lose money.
Currency risk is the possibility that a "stronger" U.S. dollar will reduce
returns for Americans investing overseas. Generally, when the dollar rises in
value against a foreign currency, your investment in that country loses value
because its currency is worth fewer U.S. dollars. On the other hand, a "weaker"
U.S. dollar generally leads to higher returns for Americans holding foreign
investments.

The Fund may invest up to 15% of its assets in restricted securities with
limited marketability or other illiquid securities.

The Fund may also invest in derivatives.

[FLAG] THE FUND MAY INVEST, TO A LIMITED EXTENT, IN STOCK FUTURES AND OPTIONS
CONTRACTS, WHICH ARE TRADITIONAL TYPES OF DERIVATIVES.

PLAIN TALK ABOUT

DERIVATIVES

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

Losses (or gains) involving futures can sometimes be substantial--in part
because a relatively small price movement in a futures contract may result in an
immediate and substantial loss (or gain) for a portfolio. This Fund will not use
futures and options for speculative purposes or as leveraged investments that
magnify the gains or losses of an investment. Rather, the Fund will keep
separate cash reserves or other liquid portfolio securities in the amount of the
obligation underlying the futures or options contract. Only a limited percentage
of the Fund's assets--5%--may be applied toward the deposits required on futures
contracts, and the value of all futures contracts in which the Fund acquires an
interest cannot exceed 20% of the Fund's total assets.

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

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

o To reduce the Fund's transaction costs by buying futures instead of actual
stocks.

o To add value to the Fund by buying futures instead of actual stocks when
futures are cheaper.

The Fund will usually hold only a small percentage of its assets in cash
reserves, although if the investment advisers believe that market conditions
warrant a temporary defensive measure, the Fund may hold cash reserves without
limit. Cash reserves refer to short-term interest-bearing securities that can
easily and quickly be converted to cash, such as those described in the
prospectus glossary.

<PAGE>

INVESTMENT LIMITATIONS

The Fund has adopted limitations on some of its investment policies. Some of
these limitations are that the Fund will not:

o Invest more than 25% of its assets in any one industry.

o Borrow money, except for temporary or emergency purposes in an amount not
exceeding 10% of its net assets. Whenever the Fund's outstanding borrowing
is more than 5% of its assets, it will stop making investments.

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

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

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

A complete list of the Fund's investment limitations can be found in the
Statement of Additional Information. These limitations are fundamental and may
be changed only by approval of a majority of the Fund's shareholders.

PLAIN TALK ABOUT

PAST PERFORMANCE

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

INVESTMENT PERFORMANCE

Vanguard/Morgan Growth Fund invests primarily in common stocks, so its
performance is closely correlated to the performance of the overall stock
market. Historically, performance of the stock markets, both foreign and
domestic, has been characterized by sharp up-and-down swings in the short term
and by more stable growth over the long term.

AVERAGE ANNUAL TOTAL RETURNS
FOR YEARS ENDED DECEMBER 31, 1997

[GRAPH]

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

In weighing these performance figures, note that the Fund has been in
operation since December 31, 1968, and that until April 24, 1990, Wellington
Management Company, llp was the Fund's only investment adviser (Franklin
Portfolio Associates LLC was added as an adviser in 1990 and Vanguard Core
Management Group was added in 1993; Husic Capital Management also served as an
adviser to the Fund from 1993 to early 1998).

<PAGE>

SHARE PRICE

The Fund's share price, called its net asset value, or NAV, is calculated each
business day after the close of trading on the New York Stock Exchange,
generally 4 p.m. Eastern time. The net asset value per share is calculated by
adding up the total assets of the Fund, subtracting all of its liabilities, or
debts, and then dividing by the total number of Fund shares outstanding:

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

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

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

PLAIN TALK ABOUT

DISTRIBUTIONS

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

DIVIDENDS, CAPITAL GAINS, AND TAXES

Each December, the Fund distributes to shareholders virtually all of its income
from interest and dividends, as well as any capital gains realized from the sale
of securities. In addition, the Fund may occasionally be required to make
supplemental dividend or capital gains distributions at some other time during
the year. You can choose to receive your distributions of income and capital
gains (or of income alone) in cash, or you can have them automatically invested
in more shares of the Fund. In either case, these distributions are taxable to
you. It is important to note that distributions of dividends and capital gains
that are declared in December--if paid to you by the end of January--are taxed
as if they had been paid to you in December. Vanguard will send you a statement
each year showing the tax status of all your distributions.

PLAIN TALK ABOUT

"BUYING A DIVIDEND"

Unless you are investing in a tax-deferred retirement
account (such as an IRA), it is not to your advantage to buy
shares of a fund shortly before it makes a distribution,
because part of your investment will come back to you as a
taxable distribution. This is known as "buying a dividend."
For example: on December 15, you invest $5,000, buying 250
shares for $20 each. If the fund pays a distribution of $1
per share on December 16, its share price would drop to $19
(not counting market change). You would still have only
$5,000 (250 shares x $19 = $4,750 in share value, plus 250
shares x $1 = $250 in distributions), but you would owe tax
on the $250 distribution you received, even if you had
reinvested it in more shares. To avoid "buying a dividend,"
check a fund's distribution schedule before you invest.

<PAGE>

o The dividends and short-term capital gains that you receive are taxable to
you as ordinary dividend income. Any distributions of net long-term
capital gains by the Fund are taxable to you as long-term capital gains,
no matter how long you've owned shares in the Fund. Long-term capital
gains may be taxed at different rates depending on how long the Fund held
the securities. Although the Fund does not seek to realize any particular
amount of capital gains during a year, such gains are realized from time
to time as by-products of the ordinary investment activities of the Fund.
Consequently, distributions may vary considerably from year to year.

o If you sell or exchange shares of the Fund, any gain or loss you have is a
taxable event, which means that you may have a capital gain to report as
income, or a capital loss to report as a deduction, when you complete your
federal income tax return.

o Distributions of dividends or capital gains, and capital gains or losses
from your sale or exchange of Fund shares, may be subject to state and
local income taxes as well.

The tax information in this prospectus is provided as general information and
will not apply to you if you are investing in a tax-deferred account such as an
IRA. You should consult your tax adviser about the tax consequences of an
investment in the Fund.

THE FUND AND VANGUARD

Vanguard/Morgan Growth Fund is a member of The Vanguard Group, a family of more
than 30 investment companies with more than 95 distinct investment portfolios
and total net assets of more than $360 billion. All of the Vanguard funds share
in the expenses associated with business operations, such as personnel, office
space, equipment, and advertising.

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

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

PLAIN TALK ABOUT

VANGUARD'S UNIQUE CORPORATE STRUCTURE

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

INVESTMENT ADVISERS

The Fund has three investment advisers. Each manages its portion of the Fund's
assets subject to the control of the Directors and officers of the Fund.

Wellington Management Company, llp (WMC), 75 State Street, Boston, MA 02109,
is an investment advisory firm founded in 1928. The firm currently manages more
than $175 billion in stock and bond portfolios, including 14 Vanguard funds. As
of December 31, 1997, WMC managed 38% of Vanguard/Morgan Growth Fund's assets.

WMC's advisory fee is based on average month-end net assets managed:

---------------------------------
AVERAGE ASSETS MANAGED FEE
---------------------------------
First $500 million 0.175%
Next $500 million 0.100
Assets over $1 billion 0.075
---------------------------------

<PAGE>

WMC's advisory fee may be adjusted based on its 36-month cumulative total
return performance as compared to that of the Growth Fund Stock Index. Under the
fee schedule, WMC's basic fee may be increased or decreased by as much as 50%.

Franklin Portfolio Associates LLC (Associates), Two International Place,
Boston, MA 02110, is a professional advisory firm founded in 1982. Associates is
a wholly owned, indirect subsidiary of Mellon Bank, and has no affiliation with
the Franklin/Templeton group of Funds or Franklin Resources, Inc. Associates
currently manages approximately $13.5 billion in assets. As of December 31,
1997, Associates managed 38% of Vanguard/Morgan Growth Fund's assets.

Associates' advisory fee is paid quarterly, based on average month-end net
assets managed during the quarter:

--------------------------------
AVERAGE ASSETS MANAGED FEE
--------------------------------
First $100 million 0.25%
Next $200 million 0.20
Next $200 million 0.15
Assets over $500 million 0.10
--------------------------------

PLAIN TALK ABOUT

THE FUND'S ADVISERS

Since 1994, the manager responsible for WMC's portion of
Vanguard/Morgan Growth Fund has been ROBERT D. RANDS, CFA,
Senior Vice President of WMC; has worked in investment
management since 1966; with WMC since 1978; B.A., Yale
University; M.B.A., University of Pennsylvania.

Since 1990, the manager responsible for Associates'
portion of the Fund has been JOHN J. NAGORNIAK, CFA,
President of Associates; has worked in investment management
since 1970; with Associates since 1982; B.A., Princeton
University; M.S., The Sloan School of Management,
Massachusetts Institute of Technology.

Since 1993, the manager responsible for Vanguard Core
Management Group's portion of the Fund has been GEORGE U.
SAUTER, Managing Director of Vanguard; has worked in
investment management since 1985; primary responsibility for
Vanguard Core Management Group since 1987; A.B., Dartmouth
College; M.B.A., University of Chicago.

Associates' advisory fee may be adjusted based on its total return
performance as compared to that of the Growth Fund Stock Index. Under the fee
schedule, Associates' basic fee may be increased or decreased by as much as
0.10% of the value of the Fund's average net assets for the last 36 months.

Vanguard Core Management Group, P.O. Box 2600, Valley Forge, PA 19482, was
responsible for 9% of Vanguard/Morgan Growth Fund's assets as of December 31,
1997. The Group provides investment advisory services to several Vanguard funds,
managing more than $97 billion in total assets as of year-end 1997. Vanguard
Core Management Group provides advisory services to the Fund on an at-cost
basis.

Husic Capital Management was responsible for 10% of Vanguard/Morgan Growth
Fund's assets as of December 31, 1997. Effective February 2, 1998, Associates
and Vanguard Core Management Group assumed responsibility for Fund assets
previously managed by Husic.

Any Fund assets held in cash (which, as of December 31, 1997, equaled 5% of
the Fund's assets) are managed, at no cost to the Fund, by The Vanguard Group.

For the year ended December 31, 1997, the aggregate investment advisory fee
represented an effective annual basic rate of 0.15% of average net assets of the
Fund before an increase of 0.01% based on performance.

<PAGE>

At times, an adviser may choose brokers who charge higher commissions in the
interest of obtaining better execution of a transaction. If more than one broker
can obtain the best available price and favorable execution of a transaction,
then the adviser is authorized to choose a broker who, in addition to executing
the transaction, will provide research services to the adviser or the Fund.
However, the adviser will not pay higher commissions specifically for the
purpose of obtaining research services. The Fund may direct the adviser to use a
particular broker for certain transactions in exchange for commission rebates or
research services to the Fund.

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

GENERAL INFORMATION

Vanguard/Morgan Growth Fund, Inc., is organized under the laws of the state of
Maryland. Shareholders of the Fund have rights and privileges similar to those
enjoyed by other corporate shareholders. For example, shareholders will not be
responsible for any liabilities of the corporation. If any matters are to be
voted on by shareholders (such as a change in a fundamental investment objective
or the election of Directors), each share outstanding at that point would be
entitled to one vote. Annual meetings will not be held by the Fund except as
required by the Investment Company Act of 1940. A meeting will be scheduled to
vote on the removal of a Director if the holders of at least 10% of the Fund's
shares request a meeting in writing.

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

<PAGE>

INVESTING WITH VANGUARD

Are you looking for the most convenient way to open or add money to a Vanguard
account? Obtain instant access to fund information? Establish an account for a
minor child or for your retirement savings?

Vanguard can help. Our goal is to make it easy and pleasant for you to do
business with us.

The following sections of the prospectus briefly explain the many services we
offer you as a Vanguard/Morgan Growth Fund shareholder. Booklets providing
detailed information are available on the services marked with a [BOOK]. Please
call us to request copies.

SERVICES AND ACCOUNT FEATURES

Vanguard offers many services that make it convenient to buy, sell, or exchange
shares.

TELEPHONE REDEMPTIONS Automatically set up for this Fund
(SALES AND EXCHANGES) unless you notify us otherwise.

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

VANGUARD AUTOMATIC EXCHANGE Automatic method for moving a fixed
SERVICE(SM) amount of money from one Vanguard Fund
[BOOK} account to another.*

VANGUARD FUND EXPRESS(R) Electronic method for buying or selling
[BOOK] shares. You can transfer money between
your Vanguard fund account and an
account at your bank, savings and loan,
or credit union on a systematic
schedule or whenever you wish.*

VANGUARD DIVIDEND EXPRESS(SM) Electronic method for transferring
{BOOK} dividend and/or capital gains
distributions directly from your
Vanguard fund account to your bank,
savings and loan, or credit union
account.

VANGUARD BROKERAGE SERVICES (VBS) A cost-effective way to trade stocks,
[BOOK] bonds, and options on major exchanges,
Nasdaq, and other domestic over-the-
counter markets at reduced rates, and
to buy and sell shares of non-Vanguard
mutual funds. Call VBS (1-800-992-8327)
for additional information and the
appropriate forms.

*Can be used to "dollar-cost average" [BOOK] or to contribute to an IRA or other
retirement plan.

<PAGE>

TYPES OF ACCOUNTS

INDIVIDUAL OR OTHER ENTITY

Vanguard's account registration form can be used to establish a variety of
nonretirement accounts.

FOR ONE OR MORE PEOPLE To open an account in the name of one
(individual) or more (joint tenants)
people. $3,000 minimum initial
investment.

FOR A MINOR CHILD To open an account as an UGMA/UTMA
[BOOK] (Uniform Gifts/Transfers to Minors Act).
Age of majority and other requirements
are set by state law. $1,000 minimmum
initial investment.

FOR A MINOR CHILD To open an account as an Education IRA.
(Vanguard Fiduciary Trust Eligibility and other requirements are
Company is the custodian.) established by federal tax law and the
[BOOK] Vanguard Education IRA. (Note: You
should establish this type of account
with a Vanguard adoption agreement--not
an account registration form.) Please
call Investor Information to request
the appropriate brochure and forms.
$500 minimum initial investment.

FOR HOLDING TRUST ASSETS To invest assets held in an existing
[BOOK] trust. $3,000 minimum initial
investment.

FOR THIRD-PARTY TRUSTEE To open an account as a retirement trust
RETIREMENT INVESTMENTS or plan based on an existing corporate
(Vanguard is not the custodian or institutional plan. These accounts
or trustee.) are established by the custodian or
1-800-662-2003 trustee of the existing plan. $1,000
Individual Retirement Plans minimum initial investment.

FOR AN ORGANIZATION To open an account as a corporation,
partnership, or other entity. These
accounts may require a corporate
resolution or other documents to name
the individuals authorized to act.
$3,000 minimum initial investment.

RETIREMENT

You establish these accounts with a Vanguard adoption agreement--not a Vanguard
account registration form. To request the appropriate adoption agreement and
forms, or to ask questions about investing for retirement, call Investor
Information.

FOR A TRADITIONAL INDIVIDUAL To open a retirement account in the name
RETIREMENT ACCOUNT (TRADITIONAL IRA) of an individual. Traditional IRAs can
(Vanguard Fiduciary Trust be established with a contribution, a
Company is the custodian.) direct rollover from an employer's plan
plan such as a 401(k), or an asset
transfer or rollover from another
financial institution, such as a bank
or mutual fund company. $1,000 minimum
initial investment.

FOR A ROTH INDIVIDUAL To open an after-tax retirement savings
RETIREMENT ACCOUNT (ROTH IRA) account in the name of an individual.
(Vanguard Fiduciary Trust Roth IRAs can be established with an
Company is the custodian.) after-tax contribution, an asset
transfer or rollover from another
financial institution such as a bank or
mutual fund company, or a conversion of
an existing IRA. Eligibility and other
requirements are established by federal
tax law. $1,000 minimum initial
investment.

<PAGE>

TYPES OF ACCOUNTS (continued)

FOR A SIMPLIFIED EMPLOYEE To open a retirement account in the name
PENSION PLAN ACCOUNT (SEP-IRA) of an employee. SEPs allow employers to
(Vanguard Fiduciary Trust make deductible contributions directly
Company is the custodian.) to IRAs established by their employees,
1-800-662-2003 SEPs can be established by people who
Individual Retirement Plans are self-employed, small-business
owners, partnerships, or corporations.

FOR A SAVINGS INCENTIVE MATCH To open a retirement account in the name
PLAN FOR EMPLOYEES ACCOUNT of an employee. Created as part of the
(SIMPLE IRA) Small Business Job Protection Act of
(Vanguard Fiduciary Trust 1996, SIMPLEs replace SAR-SEPs. SIMPLEs
Company is the custodian.) are exclusively for employers that had
1-800-662-2003 100 or fewer employees in the most
Individual Retirement Plans recent calendar year and that do not
maintain another employer-sponsored
retirement plan. SIMPLEs can be
established by people who are self-
employed, small-business owners,
partnerships, or corporations. Salary
reduction contributions may be made by
the employee, with matching or
nonmatching contributions from the
employer.

FOR A QUALIFIED RETIREMENT To open a retirement account that allows
PROGRAM ACCOUNT small-business owners or people who are
(Vanguard Fiduciary Trust self-employed to make tax-deductible
Company can be the custodian.) retirement contributions for themselves
1-800-662-2003 and their employees into Profit-Sharing
Individual Retirement Plans and Money Purchase Pension (Keogh)
plans.

FOR A 403(B)(7) CUSTODIAL ACCOUNT To open a retirement account that allows
(Vanguard Fiduciary Trust employees of tax-exempt institutions
Company is the custodian.) (for example, schools or hospitals) to
1-800-662-2003 make pretax retirement contributions.
Individual Retirement Plans

DISTRIBUTION OPTIONS

You can receive distributions of dividends and/or capital gains in a number of
ways:

REINVESTMENT Dividends and capital gains are
automatically reinvested in additional
shares of the Fund unless you request
a different distribution method.

DIVIDENDS IN CASH Dividends are paid by check and mailed
to your account's address of record,
and capital gains are reinvested in
additional shares of the Fund.

CAPITAL GAINS IN CASH Capital gains distributions are paid by
check and mailed to your account's
address of record, and dividends are
reinvested in additional shares of the
Fund.

DIVIDENDS AND CAPITAL GAINS Both dividends and capital gains
IN CASH distributions are paid by check and
mailed to your account's address of
record.

To electronically transfer cash dividends and/or capital gains to your bank,
savings and loan, or credit union account, see Vanguard Dividend Express under
"Services and Account Features." To transfer cash dividends and/or capital gains
to another Vanguard fund, call Client Services.

<PAGE>

DISTRIBUTION OPTIONS (continued)

If you have elected to receive dividend and/or capital gains distributions in
cash, but the Postal Service is unable to make delivery to your address of
record, your distribution option will be changed to reinvestment. No interest
will accrue on amounts represented by uncashed distribution checks.

BUYING SHARES

You buy your shares at the Fund's next-determined net asset value after Vanguard
receives your request, provided we receive your request before the close of
trading on the New York Stock Exchange (the "Exchange"), generally 4 p.m.
Eastern time. The Fund is offered on a no-load basis, meaning that you do not
pay sales commissions or 12b-1 marketing fees.

OPEN A NEW ACCOUNT ADD TO AN EXISTING ACCOUNT

MINIMUM INVESTMENT $3,000 (regular account); $100 by mail or exhange;
$1,000 (Traditional IRAs, $1,000 by wire.
Roth IRAs, and custodial
accounts for minors); $500
(Education IRAs).

BY MAIL Complete and sign the Mail your check with an
[ENVELOPE] application form. Invest-By-Mail form
detached from your
FIRST-CLASS mail to: confirmation statement to
The Vanguard Group the address listed on the
P.O. Box 2600 form.
Valley Forge, PA
19482-2600 Make your check payable Make your check payable
to: The Vanguard Group-26 to: The Vanguard Group-26

EXPRESS or REGISTERED All purchases must be All purchases must be made
mail to: made in U.S. dollars, and in U.S. dollars, and
The Vanguard Group checks must be drawn on checks must be drawn on
455 Devon Park Drive U.S. banks. U.S. banks.
Wayne, PA 19087-1815

IMPORTANT NOTE: To prevent check fraud, Vanguard will not accept checks made
payable to third parties.

BY TELEPHONE Call Vanguard Tele-Account* Call Vanguard Tele-Account*
[TELEPHONE] 24 hours a day--or Client 24 hours a day--or Client
1-800-662-6273 Services during business Services during business
Vanguard hours--to exchange from hours--to exchange from
Tele-Account(R) another Vanguard fund another Vanguard fund
account with the same account with the same
1-800-662-2739 registration (name, registration (name,
Client Services address,taxpayer I.D., address, taxpayer I.D.,
and account type). and account type).

Use Vanguard Fund Express
(see "Services and Account
Features") to transfer
assets from your bank
account. Call Client
Services before your first
use to verify that this
option is in place.

*You must obtain a Personal Identification Number through
Tele-Account at least seven days before you request your
first exchange.

IMPORTANT NOTE: Once a telephone transaction has been approved by you and a
confirmation number assigned, it cannot be revoked. We reserve the right to
refuse any purchase.

<PAGE>

BUYING SHARES (continued)

OPEN A NEW ACCOUNT ADD TO AN EXISTING ACCOUNT

BY WIRE Call Client Services Call Client Services to
[WIRE] to arrange your wire arrange your wire
transaction. transaction.
Wire to:
CoreStates Bank, N.A. Wire transactions are Wire transactions are not
ABA 031000011 available for retire- available for retirement
CoreStates No. 0101 9897 ment accounts, except accounts, except for asset
[Temporary Account Number] for asset transfers transfers and direct
Vanguard/Morgan Growth Fund and direct rollovers. rollovers.
[Account Registration]
Attention: Vanguard

AUTOMATICALLY -- Vanguard offers a variety
[CIRCLE OF ARROWS] of ways that you can add to
your account automatically.
See "Services and Account
Features."

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

IMPORTANT NOTE: If you buy Fund shares through a registered broker/dealer or
investment adviser, the broker/dealer or adviser may charge you a service fee.

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

REDEEMING SHARES

IMPORTANT TAX NOTE: Any sale or exchange of shares in a nonretirement account
could result in a taxable gain or a loss.

The ability to redeem (that is, sell or exchange) Fund shares by telephone is
automatically established for your nonretirement account unless you tell us in
writing that you do not want this option.

To protect your account from unauthorized or fraudulent telephone
instructions, Vanguard follows specific security procedures. When we receive a
call requesting an account transaction, we require the caller to provide:

[CHECK] Fund name.
[CHECK] 10-digit account number.
[CHECK] Name and address exactly as registered on that account.
[CHECK] Social Security or employer identification number as registered on
that account.

If you call to sell shares, the sale proceeds will be made payable to you, as
the registered shareholder, and mailed to your account's address of record.

If we follow reasonable security procedures, neither the Fund nor Vanguard
will be responsible for the authenticity of transaction instructions received by
telephone. We believe that these procedures are reasonable and that, if we
follow them, you bear the risk of any losses resulting from unauthorized or
fraudulent telephone transactions on your account.

<PAGE>

REDEEMING SHARES (continued)

HOW TO SELL SHARES

You may withdraw any part of your account, at any time, by selling shares. Sale
proceeds are normally mailed within two business days after Vanguard receives
your request. The sale price of your shares will be the Fund's next-determined
net asset value after Vanguard receives all required documents in good order.

Good order means that the request includes:

[CHECK] Fund name and account number.
[CHECK] Amount of the transaction (in dollars or shares).
[CHECK] Signatures of all owners exactly as registered on the account.
[CHECK] Signature guarantees (if required).
[CHECK] Any supporting legal documentation that may be required.
[CHECK] Any certificates you are holding for the account.

Sales or exchange requests received after the close of trading on the
Exchange are processed at the next business day's net asset value. No interest
will accrue on amounts represented by uncashed redemption checks. The Fund will
not cancel any trade (e.g., purchase, redemption, or exchange) believed to be
authentic, once the trade request has been received in writing or by telephone.

The Fund reserves the right to close any nonretirement or UGMA/UTMA account
whose balance falls below the minimum initial investment. The Fund will deduct a
$10 annual fee in either June or December if your nonretirement account balance
falls below $2,500 or if your UGMA/UTMA account balance falls below $500. The
fee is waived if your total Vanguard account assets are $50,000 or more.

Some written requests require a signature guarantee from a bank, broker, or
other acceptable financial institution. A notary public cannot provide a
signature guarantee.

HOW TO EXCHANGE SHARES

An exchange is the selling of shares of one Vanguard fund to purchase shares of
another.

Although we make every effort to maintain the exchange privilege, Vanguard
reserves the right to revise or terminate the exchange privilege, limit the
amount of an exchange, or reject any exchange, at any time, without notice.

Because excessive exchanges can potentially disrupt the management of the
Fund and increase transaction costs, Vanguard limits exchange activity to TWO
SUBSTANTIVE EXCHANGE REDEMPTIONS (at least 30 days apart) from the Fund during
any 12-month period. "Substantive" means either a dollar amount or a series of
movements between Vanguard funds that Vanguard determines, in its sole
discretion, could have an adverse impact on the management of the Fund.

Before you exchange into a new Vanguard fund, be sure to read its prospectus.
For a copy and for answers to questions you might have, call Investor
Information.

<PAGE>

REDEEMING SHARES (continued)

SELLING OR EXCHANGING SHARES ACCOUNT TYPE

BY TELEPHONE ALL TYPES EXCEPT RETIREMENT:
[TELEPHONE] Call Vanguard Tele-Account* 24 hours a
1-800-662-6273 day--or Client Services during business
Vanguard Tele-Account hours--to sell or exchange shares. You can
1-800-662-2739 exchange shares from this Fund to open an
Client Services open an account in another Vanguard fund or
to add to an existing Vanguard fund account
with an identical registration.

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

*You must obtain a Personal Identification
Number through Tele-Account at least seven
days before you request your first
redemption.

BY MAIL ALL TYPES EXCEPT RETIREMENT:
[ENVELOPE] Send a letter of instruction signed by all
registered account holders. Include the fund
FIRST-CLASS mail to: name and account number and (if you are
The Vanguard Group selling) a dollar amount or number of shares
Vanguard/Morgan Growth Fund OR (if you are exchanging) the name of the
P.O. Box 1120 fund you want to exchange into and a dollar
Valley Forge, PA 19482-1120 amount or number of shares. To exchange into
EXPRESS or REGISTERED mail to: an account with a different registration
The Vanguard Group (including a different name, address, or
Vanguard/Morgan Growth Fund taxpayer identification number), you must
455 Devon Park Drive provide Vanguard with written instructions
Wayne, PA 19087-1815 that include the guaranteed signatures of
all current account owners.

RETIREMENT:
For information on how to request
distributions from:
o Traditional IRAs, Roth IRAs, Education
IRAs--call Client Services.

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

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

EXCHANGING SHARES ONLINE You may use your personal computer to
[COMPUTER] exchange shares of most Vanguard funds by
accessing our website (www.vanguard.com). To
establish this service for your account, you
must first register through the website. We
will then send to you, by mail, an account
access password that will enable you to make
online exchanges.

The Vanguard funds that you cannot purchase
or sell through online exchange are VANGUARD
INDEX TRUST, VANGUARD BALANCED INDEX FUND,
VANGUARD INTERNATIONAL EQUITY INDEX FUND,
VANGUARD REIT INDEX PORTFOLIO, VANGUARD
TOTAL INTERNATIONAL PORTFOLIO, and VANGUARD
GROWTH AND INCOME PORTFOLIO (formerly known
as Vanguard Quantitative Portfolios). These
funds do permit online exchanges within IRAs
and other retirement accounts.

AUTOMATICALLY ALL TYPES EXCEPT RETIREMENT:
[CIRCLE OF ARROWS] Vanguard offers several ways to sell or
exchange shares automatically (see "Services
and Account Features"). Call Investor
Information for the appropriate booklet and
application if you did not elect this
feature when you opened your account.

<PAGE>

REDEEMING SHARES (continued)

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

A NOTE ON UNUSUAL CIRCUMSTANCES

Vanguard reserves the right to revise or terminate the telephone redemption
privilege at any time, without notice. In addition, Vanguard can stop selling
shares or postpone payment at times when the New York Stock Exchange is closed
or under any emergency circumstances as determined by the U.S. Securities and
Exchange Commission. If you experience difficulty making a telephone redemption
during periods of drastic economic or market change, you can send us your
request by regular or express mail. Follow the instructions on selling or
exchanging shares by mail in the "Redeeming Shares" section.

TRANSFERRING REGISTRATION

HOW TO TRANSFER SHARES

You may transfer the registration of your Fund shares to another owner by
completing a transfer form and sending it to: The Vanguard Group, Attention:
Transfer Department, P.O. Box 1110, Valley Forge, PA 19482-1110.

FUND AND ACCOUNT UPDATES

STATEMENTS AND REPORTS

We will send you clear, concise account and tax statements to help you keep
track of your Vanguard/Morgan Growth Fund account throughout the year as well as
when you are preparing your income tax returns.

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

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

CONFIRMATION STATEMENT Sent each time you buy, sell, or exchange
shares; confirms the trade date and the
amount of your transaction.

PORTFOLIO SUMMARY Mailed quarterly; shows the market value of
[BOOK] your account at the close of the statement
period, as well as distributions, purchases,
sales, and exchanges for the current calendar
year.

FUND FINANCIAL REPORTS Mailed in February and August for this Fund.

<PAGE>

FUND AND ACCOUNT UPDATES (continued)

TAX STATEMENTS Generally mailed in January; report previous
year's dividend distributions, proceeds from
the sale of shares, and distributions from
IRAs or other retirement accounts.

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

AUTOMATED TELEPHONE ACCESS

VANGUARD TELE-ACCOUNT Toll-free access to Vanguard fund and account
1-800-662-6273 information--as well as some transactions--
Any time, seven days a week, through any touch-tone telephone. Tele-
from anywhere in the continental Account provides total return, share price,
United States. price change, and yield quotations for all
Vanguard funds; gives your account balances
and history (e.g., last transaction, latest
dividend distribution); and allows you to
sell or exchange fund shares.

Vanguard Online(R) Use your personal computer to learn more
www.vanguard.com about Vanguard's funds and services; keep in
touch with your Vanguard accounts; map out a
long-term investment strategy; initiate
certain transactions; and ask questions, make
suggestions, and send messages to Vanguard.

Our education-oriented website provides
timely news and information about Vanguard's
funds and services; an online "university"
that offers a variety of mutual fund classes;
and easy-to-use, interactive tools to help
you create your own investment and retirement
strategies.

<PAGE>

PROSPECTUS POSTSCRIPT

This prospectus is designed to provide you with pertinent information about
Vanguard/Morgan Growth Fund, including its investment objective, risks,
strategy, and expenses, as well as services available to you as a shareholder.

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

IN READING THE PROSPECTUS, DID YOU LEARN:

o The Fund's objective? (page 4)

o The Fund's investment strategy? (page 5)

o Who should invest in the Fund? (page 4)

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

o Whether the Fund is federally insured? (inside front cover)

o The Fund's expenses? (page 2)

o The background of the Fund's investment managers? (pages 11-12)

o How to open an account? (pages 17-18)

o How to sell or exchange shares? (pages 18-21)

o How often you'll receive statements and financial reports? (page 21)

PLAIN TALK ABOUT

KEEPING YOUR PROSPECTUS

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

23
<PAGE>

AN INVESTMENT PRIMER

Whether you are investing for the short or long term, keep these three points in
mind:

1. INVEST IN ALL THREE OF THE MAJOR ASSET CLASSES.

Most people use a combination of . . .

o Stocks, which are considered the "riskiest" of the three asset classes.
Day to day, or even year to year, stocks tend to have wide price swings.
Despite this potential for significant price fluctuation, however, stocks
have historically offered higher returns than the other major asset
classes over longer periods.

o Bonds, which are chiefly influenced by changes in interest rates. When
interest rates climb, bond prices drop; when interest rates fall, bond
prices rise.

o Cash reserves, which offer more share-price (or capital) stability than
stocks or bonds--but also generate lower returns. Some examples are
Treasury bills and money market funds.

2. REMEMBER THAT SAFETY HAS A PRICE.

Many people want a "no-risk" investment. Remember, though, that the more safety
you seek, the less potential reward you can expect--and the less you can expect
in returns after inflation. Inflation affects not only the price you pay for
goods and services; it also eats away at your investment returns over time. What
is left is known as your "real" return--the actual return you receive after you
factor in inflation (see the chart at left).

3. CHANCES ARE GOOD THAT YOU CAN AFFORD TO TAKE MORE RISK.

As the chart shows, inflation cuts into the returns of all three asset classes.
However, stocks and bonds have had an easier time of outpacing inflation over
time--which means that, to beat inflation, you may need to invest more
aggressively.

Don't be put off by potential downswings in the value of your investment,
especially if you are investing for long periods. Time acts as a shock absorber,
letting you ride out the short-term bumps that investments often provide. The
longer you hold an investment, the more likely it is that you will earn a
positive return.

PLAIN TALK ABOUT

INFLATION AND YOUR INVESTMENTS

No matter how you invest your money, inflation--the rising
cost of living--is a constant threat to your investment
returns. The chart below shows how stocks, bonds, and cash
reserves have fared against inflation over time.

INFLATION'S EFFECT ON
INVESTMENT RETURNS
(1926-1997)

[CHART]

SOURCE: [COPYRIGHT] STOCKS, BONDS, BILLS, AND INFLATION 1998 YEARBOOK(TM),
IBBOTSON ASSOCIATES, CHICAGO (ANNUALLY UPDATES WORK BY ROGER G. IBBOTSON AND REX
A. SINQUEFIELD). USED WITH PERMISSION. ALL RIGHTS RESERVED.

<PAGE>

GLOSSARY OF INVESTMENT TERMS

CAPITAL GAINS DISTRIBUTION

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

CASH RESERVES

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

COMMON STOCK

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

COUNTRY RISK

The possibility that events such as changes in regulation, political or
financial troubles, or natural disasters will adversely affect the market value
of securities issued by companies or governments in that country.

DIVIDEND INCOME

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

EXPENSE RATIO

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

FIXED-INCOME SECURITIES

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

GROWTH STOCK FUND

A mutual fund that emphasizes stocks of companies whose strong earnings and
revenue potential indicate above-average prospects for capital growth.

INVESTMENT ADVISER

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

MUTUAL FUND

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

NET ASSET VALUE (NAV)

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

PORTFOLIO DIVERSIFICATION

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

PRICE/EARNINGS (P/E) RATIO

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

PRINCIPAL

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

TOTAL RETURN

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

VALUE STOCK FUND

A mutual fund that focuses on stocks of companies that, considering their
earnings and dividends, are attractively priced.

VOLATILITY

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

YIELD

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

<PAGE>

[VANGUARD SHIP LOGO]

Post Office Box 2600
Valley Forge, PA 19482

INVESTOR INFORMATION DEPARTMENT
1-800-662-7447 (SHIP)
Text Telephone:
1-800-952-3335
For information on our funds, fund services, and retirement accounts;
requests for literature

CLIENT SERVICES DEPARTMENT
1-800-662-2739 (CREW)
TEXT TELEPHONE:
1-800-662-2738
For information on your account, account transactions, and account statements

VANGUARD BROKERAGE SERVICES
1-800-992-8327
For information on trading stocks, bonds, and options at reduced commissions

VANGUARD TELE-ACCOUNT(R)
1-800-662-6273 (ON-BOARD)
For 24-hour automated access to price and yield, information on your account,
and certain transactions

ELECTRONIC ACCESS TO THE VANGUARD MUTUAL FUND EDUCATION AND INFORMATION CENTER
World Wide Web
www.vanguard.com

E-mail
[email protected]

[COPYRIGHT] 1998 Vanguard Marketing Corporation, Distributor

P026N

Vanguard/
Morgan Growth
Fund
Institutional Prospectus
April 30, 1998

This prospectus contains financial data for the Fund through the
fiscal year ended December 31, 1997.

[VANGUARD LOGO]
<PAGE>

Vanguard/Morgan Growth Fund

A Growth Stock Mutual Fund

CONTENTS

Fund Profile 1
Fund Expenses 2
Financial Highlights 3
A Word About Risk 4
The Fund's Objective 4
Who Should Invest 4
Investment Strategy 5
Investment Policies 7
Investment Limitations 9
Investment Performance 9
Share Price 10
Dividends, Capital
Gains, and Taxes 10
The Fund and Vanguard 11
Investment Advisers 11
General Information 13
Investing with Vanguard
O For Plan Participants 14
O For Other
Institutional Investors 14
Accessing Fund Information
by Computer 15
Prospectus Postscript 16
Glossary Inside Back Cover

INVESTMENT OBJECTIVE AND POLICIES

Vanguard/Morgan Growth Fund, Inc. (the "Fund") is an open-end diversified
investment company, or mutual fund.

FEES AND EXPENSES

IMPORTANT NOTE

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

ADDITIONAL INFORMATION ABOUT THE FUND

A Statement of Additional Information (dated April 30, 1998) containing more
information about the Fund is, by reference, part of this prospectus and may be
obtained without charge by contacting Vanguard (see back cover) or visiting the
Securities and Exchange Commission's website (www.sec.gov).

WHY READING THIS PROSPECTUS IS IMPORTANT

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

<PAGE>

FUND PROFILE Vanguard/Morgan Growth Fund

WHO SHOULD INVEST (page 4)

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

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

WHO SHOULD NOT INVEST

o Investors unwilling to accept significant fluctuations in share price.

o Investors seeking current dividend income.

RISKS OF THE FUND (pages 4-8)

DIVIDENDS AND CAPITAL GAINS (page 10)

Paid annually in December. In participant accounts, all distributions are
automatically reinvested.

INVESTMENT ADVISERS (page 11)

The Fund employs a multiadviser approach:

o Wellington Management Company, LLP, Boston, Mass.

o Franklin Portfolio Associates LLC, Boston, Mass.

o Vanguard Core Management Group, Valley Forge, Pa.

INCEPTION DATE: December 31, 1968

NET ASSETS AS OF 12/31/1997: $2.80 billion

FUND'S EXPENSE RATIO FOR THE YEAR ENDED 12/31/1997: 0.48%

NEWSPAPER ABBREVIATION: Morg

VANGUARD FUND NUMBER: 026

CUSIP NUMBER: 921928107

QUOTRON SYMBOL: VMRGX.Q

AVERAGE ANNUAL TOTAL RETURNS--YEARS ENDED DECEMBER 31, 1997
<TABLE>

1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Vanguard/Morgan Growth Fund 30.8% 18.3% 17.1%
S&P 500 Index 33.4 20.3 18.1
</TABLE>

QUARTERLY RETURNS (%) 1988-1997 (intended to show volatility of returns)

[GRAPH]

1
<PAGE>
FUND EXPENSES

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

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

SHAREHOLDER TRANSACTION EXPENSES

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

PLAIN TALK ABOUT

THE COSTS OF INVESTING

ANNUAL FUND OPERATING EXPENSES
<TABLE>

<CAPTION>
<S> <C> <C> <C>
-----------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$5 $15 $27 $60
-----------------------------------
</TABLE>

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

PLAIN TALK ABOUT

FUND EXPENSES

2
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>

- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
--------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $15.63 $14.09 $11.36 $12.01 $12.65 $12.20 $10.40 $11.72 $10.27 $ 9.39
- ---------------------------------- --------------------------------------------------------------------------------------
Investment Operations
Net Investment Income .160 .14 .15 .14 .18 .18 .29 .32 .28 .25
Net Realized and Unrealized
Gain (Loss) on Investments 4.435 3.07 3.89 (.34) .71 .97 2.66 (.50) 2.04 1.85
-------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT
OPERATIONS 4.595 3.21 4.04 (.20) .89 1.15 2.95 (.18) 2.32 2.10
- ------------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income (.160) (.14) (.15) (.14) (.18) (.18) (.29) (.34) (.28) (.24)
Distributions from Realized Capital Gains (2.525) (1.53) (1.16) (.31) (1.35) (.52) (.86) (.80) (.59) (.98)
--------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (2.685) (1.67) (1.31) (.45) (1.53) (.70) (1.15) (1.14) (.87) (1.22)
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $17.54 $15.63 $14.09 $11.36 $12.01 $12.65 $12.20 $10.40 $11.72 $10.27
====================================================================================================================================
TOTAL RETURN 30.81% 23.30% 35.98% -1.67% 7.32% 9.54% 29.33% -1.51% 22.66% 22.34%
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Millions) $2,795 $2,054 $1,471 $1,075 $1,135 $1,116 $957 $697 $733 $622
Ratio of Total Expenses
to Average Net Assets 0.48% 0.51% 0.49%* 0.50% 0.49% 0.48% 0.46% 0.55% 0.51% 0.55%
Ratio of Net Investment Income
to Average Net Assets 0.93% 0.97% 1.10% 1.15% 1.36% 1.51% 2.36% 2.77% 2.38% 2.20%
Portfolio Turnover Rate 76% 73% 76% 84% 72% 64% 52% 73% 27% 32%
Average Commission Rate Paid $.0430 $.0362 N/A N/A N/A N/A N/A N/A N/A N/A
- ------------------------------------------------------------------------------------------------------------------------------------
*Beginning in fiscal year 1995, this figure does not include expense reductions from directed brokerage arrangements. The Ratio of
Net Expenses to Average Net Assets was 0.48%.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

PLAIN TALK ABOUT

HOW TO READ THE FINANCIAL HIGHLIGHTS TABLE

3
<PAGE>

A WORD ABOUT RISK

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

PLAIN TALK ABOUT

GROWTH FUNDS
AND VALUE FUNDS

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

THE FUND'S OBJECTIVE

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

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

WHO SHOULD INVEST

The Fund may be a suitable investment for you if:

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

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

o You are seeking a fund that invests in growth companies representing a
wide variety of industries.

o You are not looking for current income.

o The Fund reserves the right to reject any purchase request--including
exchanges from other Vanguard funds--that it regards as disruptive to the
efficient management of the Fund. This could be because of the timing of
the investment or because of a history of excessive trading by the
investor. If you own shares of the Fund as an investment or savings plan,
your plan dictates the rules governing exchanges. Contact your plan
administrator for details.

PLAIN TALK ABOUT

INVESTING FOR THE LONG TERM

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

4
<PAGE>

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

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

PLAIN TALK ABOUT

COSTS AND MARKET-TIMING

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

INVESTMENT STRATEGY

MARKET EXPOSURE

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

U.S. STOCK MARKET RETURNS (1926-1997)
- -------------------------------------------------
<S> <C> <C> <C> <C>
1 YEAR 5 YEARS 10 YEARS 20 YEARS
- -------------------------------------------------
Best 53.9% 23.9% 20.1% 16.9%
Worst -43.3 -12.5 -0.9 3.1
Average 13.0 10.5 10.9 10.9
- -------------------------------------------------
</TABLE>

PLAIN TALK ABOUT

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

5
<PAGE>

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

SECURITY SELECTION

Vanguard/Morgan Growth Fund has three investment advisers, each of whom
independently chooses and maintains a portfolio of common stocks for the Fund.

PLAIN TALK ABOUT

PORTFOLIO DIVERSIFICATION

6
<PAGE>

The Fund's top ten holdings (which amounted to about 15% of the Fund's total
net assets) as of December 31, 1997, follow.

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

[FLAG] THE FUND IS SUBJECT TO MANAGER RISK, WHICH IS THE POSSIBILITY THAT ONE
OR MORE OF THE FUND'S INVESTMENT ADVISERS MAY DO A POOR JOB OF SELECTING
STOCKS.

PORTFOLIO TURNOVER

PLAIN TALK ABOUT

PORTFOLIO TURNOVER

Before investing in a mutual fund, you should review its
portfolio turnover rate for an indication of the potential
effect of transaction costs on the fund's future returns. In
general, the greater the volume of buying and selling by the
fund, the greater the impact that brokerage commissions and
other transaction costs will have on its return. The average
turnover rate for all domestic stock funds is approximately
80%.

INVESTMENT POLICIES

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

The Fund may invest up to 20% of its assets in securities of companies based
outside the United States. These securities may be traded in U.S. or foreign
markets.

[FLAG] THE FUND IS SUBJECT TO FOREIGN MARKET RISK, COUNTRY RISK, AND CURRENCY
RISK.

PLAIN TALK ABOUT

THE RISKS OF
INTERNATIONAL INVESTING

7
<PAGE>

The Fund may invest up to 15% of its assets in restricted securities with
limited marketability or other illiquid securities.

The Fund may also invest in derivatives.

[FLAG] THE FUND MAY INVEST, TO A LIMITED EXTENT, IN STOCK FUTURES AND OPTIONS
CONTRACTS, WHICH ARE TRADITIONAL TYPES OF DERIVATIVES.

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

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

o To reduce the Fund's transaction costs by buying futures instead of actual
stocks.

o To add value to the Fund by buying futures instead of actual stocks when
futures are cheaper.

PLAIN TALK ABOUT

DERIVATIVES

8
<PAGE>

INVESTMENT LIMITATIONS

The Fund has adopted limitations on some of its investment policies. Some of
these limitations are that the Fund will not:

o Invest more than 25% of its assets in any one industry.

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

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

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

INVESTMENT PERFORMANCE

PLAIN TALK ABOUT

PAST PERFORMANCE

AVERAGE ANNUAL TOTAL RETURNS
FOR YEARS ENDED DECEMBER 31, 1997

[GRAPH]

9
<PAGE>

SHARE PRICE

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

DIVIDENDS, CAPITAL GAINS, AND TAXES

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

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

PLAIN TALK ABOUT

DISTRIBUTIONS

10
<PAGE>

THE FUND AND VANGUARD

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

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

INVESTMENT ADVISERS

The Fund has three investment advisers. Each manages its portion of the Fund's
assets subject to the control of the Directors and officers of the Fund.

Wellington Management Company, llp (WMC), 75 State Street, Boston, MA 02109,
is an investment advisory firm founded in 1928. The firm currently manages more
than $175 billion in stock andbond portfolios, including 14 Vanguard funds. As
of December 31, 1997, WMC managed 38% of Vanguard/Morgan Growth Fund's assets.

WMC's advisory fee is based on average month-end net assets managed:
<TABLE>
<CAPTION>
<S> <C>
---------------------------------
AVERAGE ASSETS MANAGED FEE
---------------------------------
First $500 million 0.175%
Next $500 million 0.100
Assets over $1 billion 0.075
---------------------------------
</TABLE>

PLAIN TALK ABOUT

VANGUARD'S UNIQUE CORPORATE STRUCTURE

11
<PAGE>

Associates' advisory fee is paid quarterly, based on average month-end net
assets managed during the quarter:
<TABLE>
<CAPTION>
<S> <C>
--------------------------------
AVERAGE ASSETS MANAGED FEE
--------------------------------
First $100 million 0.25%
Next $200 million 0.20
Next $200 million 0.15
Assets over $500 million 0.10
--------------------------------
</TABLE>

Any Fund assets held in cash (which, as of December 31, 1997, equaled 5% of
the Fund's assets) are managed, at no cost to the Fund, by The Vanguard Group.

PLAIN TALK ABOUT

THE FUND'S ADVISERS

12
<PAGE>

GENERAL INFORMATION

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

13
<PAGE>

INVESTING WITH VANGUARD

FOR PLAN PARTICIPANTS

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

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

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

INVESTMENT OPTIONS AND ALLOCATIONS

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

TRANSACTIONS

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

EXCHANGES

The exchange privilege (your ability to redeem shares from one fund to purchase
shares of another fund) may be available to you through your plan. Although we
make every effort to maintain the exchange privilege, Vanguard reserves the
right to revise or terminate the exchange privilege, limit the amount of an
exchange, or reject any exchange, at any time, without notice. Because excessive
exchanges can potentially disrupt the management of the fund and increase its
transaction costs, Vanguard limits exchange activity to TWO SUBSTANTIVE EXCHANGE
REDEMPTIONS (at least 30 days apart) from the Fund during any 12-month period.
"Substantive" means either a dollar amount or a series of movements between
Vanguard funds that Vanguard determines, in its sole discretion, could have an
adverse impact on the management of the Fund. In addition, certain investment
options, particularly funds made up of company stock or investment contracts,
may be subject to unique restrictions. Contact your plan administrator for
details on the exchange policies that apply to your plan.

Before making an exchange, you should consider the following:

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

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

FOR OTHER INSTITUTIONAL INVESTORS

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

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

14
<PAGE>

INVESTING WITH VANGUARD (continued)

TRANSACTIONS

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

Vanguard must consider the interests of all Fund shareholders and so reserves
the right to:

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

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

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

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

ACCESSING FUND INFORMATION BY COMPUTER

VANGUARD ONLINE(R)
www.vanguard.com

Use your personal computer to learn more about Vanguard's funds and services;
keep in touch with your Vanguard accounts; map out a long-term investment
strategy; initiate certain transactions; and ask questions, make suggestions,
and send messages to Vanguard.

Our education-oriented website provides timely news and information about
Vanguard's funds and services; an online "university" that offers a variety of
mutual fund classes; and easy-to-use, interactive tools to help you create your
own investment and retirement strategies.

15
<PAGE>

PROSPECTUS POSTSCRIPT

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

IN READING THE PROSPECTUS, DID YOU LEARN:

o The Fund's objective? (page 4)

o The Fund's investment strategy? (page 5)

o Who should invest in the Fund? (page 4)

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

o Whether the Fund is federally insured? (inside front cover)

o The Fund's expenses? (page 2)

o The background of the Fund's investment managers? (pages 11-12)

PLAIN TALK ABOUT

KEEPING YOUR PROSPECTUS

16
<PAGE>

GLOSSARY OF INVESTMENT TERMS

CAPITAL GAINS DISTRIBUTION

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

CASH RESERVES

COMMON STOCK

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

COUNTRY RISK

DIVIDEND INCOME

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

EXPENSE RATIO

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

FIXED-INCOME SECURITIES

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

GROWTH STOCK FUND

A mutual fund that emphasizes stocks of companies whose strong earnings and
revenue potential indicate above-average prospects for capital growth.

INVESTMENT ADVISER

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

MUTUAL FUND

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

NET ASSET VALUE (NAV)

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

PORTFOLIO DIVERSIFICATION

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

PRICE/EARNINGS (P/E) RATIO

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

PRINCIPAL

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

TOTAL RETURN

VALUE STOCK FUND

A mutual fund that focuses on stocks of companies that, considering their
earnings and dividends, are attractively priced.

VOLATILITY

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

YIELD

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

<PAGE>

[VANGUARD SHIP LOGO]

Institutional Division
Post Office Box 2900
Valley Forge, PA 19482

FOR PARTICIPANTS IN EMPLOYER-SPONSORED PLANS

PARTICIPANT SERVICES CENTER 1-800-523-1188 TEXT TELEPHONE: 1-800-523-8004 For
information on the Vanguard funds in your plan, Monday through Friday, 8:30 a.m.
to 9 p.m., Eastern time

FOR OTHER INSTITUTIONAL INVESTORS
1-800-523-1036
For information on Vanguard funds and services

ELECTRONIC ACCESS TO THE VANGUARD MUTUAL FUND EDUCATION AND INFORMATION CENTER
World Wide Web
www.vanguard.com

E-mail
[email protected]

[COPYRIGHT] 1998 Vanguard Marketing Corporation, Distributor

I026N
<PAGE>

PART B

VANGUARD/MORGAN GROWTH FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

April 30, 1998

This Statement is not a prospectus but should be read in conjunction with the
Fund's current Prospectus (dated April 30, 1998). To obtain the Prospectus
please call the Investor Information Department:

1-800-662-7447

TABLE OF CONTENTS

PAGE

Investment Objective and Policies........................................ B-1
Investment Limitations................................................... B-5
Purchase of Shares....................................................... B-6
Redemption of Shares..................................................... B-6
Management of the Fund................................................... B-7
Investment Advisory Services............................................. B-10
Portfolio Transactions................................................... B-15
Yield and Total Return................................................... B-16
Performance Measures..................................................... B-16
Financial Statements..................................................... B-19

INVESTMENT OBJECTIVE AND POLICIES

Portfolio Turnover. While the rate of portfolio turnover is not a limiting
factor when management deems changes appropriate, it is anticipated that the
Fund's annual portfolio turnover rate will not normally exceed 100%. A rate of
turnover of 100% could occur, for example, if the Fund sold and replaced
securities valued at 100% of its total net assets. The Fund's portfolio turnover
rate for each of its last ten fiscal years is set forth under "Financial
Highlights," in the Fund's Prospectus.

Repurchase Agreements. The Fund may invest in repurchase agreements with
commercial banks, brokers or dealers either for defensive purposes due to market
conditions or to generate income from its excess cash balances. A repurchase
agreement is an agreement under which the Fund acquires a money market
instrument (generally a security issued by the U.S. Government or an agency
thereof, a banker's acceptance or a certificate of deposit) from a commercial
bank, broker or dealer, subject to resale to the seller at an agreed upon price
and date (normally, the next business day). A repurchase agreement may be
considered a loan collateralized by securities. The resale price reflects an
agreed upon interest rate effective for the period the instrument is held by the
Fund and is unrelated to the interest rate on the underlying instrument. In
these transactions, the securities acquired by the Fund (including accrued
interest earned thereon) must have a total value in excess of the value of the
repurchase agreement and are held by a custodian bank until repurchased. In
addition, the Fund's Board of Directors will monitor the Fund's repurchase
agreement transactions generally and will establish guidelines and standards for
review by the investment adviser of the creditworthiness of any bank, broker or
dealer party to a repurchase agreement with the Fund. No more than an aggregate
of 15% of the Fund's assets, at the time of investment, will be invested in
repurchase agreements having maturities longer than seven days and securities
subject to legal or contractual restrictions on resale for which there are no
readily available market quotations. From time to time, the Fund's Board of
Directors may determine that certain restricted securities known as Rule 144A
securities are liquid and not subject to the 15% limitation described above. See
"Illiquid Securities" on page B-3.

B-1
<PAGE>

The use of repurchase agreements involves certain risks. For example, if the
other party to the agreement defaults on its obligation to repurchase the
underlying instrument at a time when the value of the security has declined, the
Fund may incur a loss upon disposition of the security. If the other party to
the agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by the Fund not within the control
of the Fund and therefore the realization by the Fund on such collateral may be
automatically stayed. Finally, it is possible that the Fund may not be able to
substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement. While the Fund's
management acknowledges these risks, it is expected that they can be controlled
through careful monitoring procedures.

Lending of Securities. The Fund may lend its securities on a short-term or
long-term basis to qualified institutional investors who need to borrow
securities in order to complete certain transactions, such as covering short
sales, avoiding failures to deliver securities or completing arbitrage
operations. By lending its portfolio securities, the Fund attempts to increase
its net investment income through the receipt of interest on the loan. Any gain
or loss in the market price of the securities loaned that might occur during the
term of the loan would be for the account of the Fund. The Fund may lend its
portfolio securities to qualified brokers, dealers, banks or other financial
institutions, so long as the terms, the structure and the aggregate amount of
such loans are not inconsistent with the Investment Company Act of 1940, or the
Rules and Regulations or interpretations of the Securities and Exchange
Commission (the "Commission") thereunder, which currently require that (a) the
borrower pledge and maintain with the Fund collateral consisting of cash, an
irrevocable letter of credit issued by a domestic U.S. bank, or securities
issued or guaranteed by the U.S. Government having a value at all times not less
than 100% of the value of the securities loaned, (b) the borrower add to such
collateral whenever the price of the securities loaned rises (i.e. the borrower
"marks to the market" on a daily basis), (c) the loan be made subject to
termination by the Fund at any time and (d) the Fund receive reasonable interest
on the loan (which may include the Fund's investing any cash collateral in
interest bearing short-term investments), any distribution on the loaned
securities and any increase in their market value. Loan arrangements made by the
Fund will comply with all other applicable regulatory requirements, including
the rules of the New York Stock Exchange, which rules presently require the
borrower, after notice, to redeliver the securities within the normal settlement
time of three business days. All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review by
the Fund's Board of Directors.

At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the investment company's directors. In addition, voting rights pass
with the loaned securities, but if a material event will occur affecting an
investment on loan, the loan must be called and the securities voted.

Foreign Investments. As indicated in the Prospectus, the Fund may invest up
to 20% of its assets in foreign securities and may engage in currency
transactions with respect to these investments. Investors should recognize that
investing in foreign companies involves certain special considerations which are
not typically associated with investing in U.S. companies.

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

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

B-2
<PAGE>

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

Currency Risk. Since the stocks of foreign companies are frequently
denominated in foreign currencies, and since the Fund may temporarily hold
uninvested reserves in bank deposits in foreign currencies, the Fund will be
affected favorably or unfavorably by changes in currency rates and in exchange
control regulations, and may incur costs in connection with conversions between
various currencies. The investment policies of the Fund permit it to enter into
forward foreign currency exchange contracts in order to hedge holdings and
commitments against changes in the level of future currency rates. Such
contracts involve an obligation to purchase or sell a specific currency at a
future date at a price set at the time of the contract.

Illiquid Securities. Illiquid securities are securities that may not be sold
or disposed of in the ordinary course of business within seven business days at
approximately the value at which they are being carried on a Fund's books. An
illiquid security includes repurchase agreements which have a maturity of longer
than seven days, securities which are illiquid by virtue of the absence of a
readily available market, and demand instruments with a demand notice exceeding
seven days. Illiquid securities may include securities that are not registered
under the Securities Act of 1933 (the "1933 Act"); however, unregistered
securities that can be sold to "qualified institutional buyers" in accordance
with Rule 144A under the 1933 Act will not be considered illiquid so long as it
is determined by the Fund's advisor that an adequate trading market exists for
the security.

Futures Contracts. The Fund may enter into futures contracts, options, and
options on futures contracts for the purpose of remaining fully invested and
reducing transactions costs. Futures contracts provide for the future sale by
one party and purchase by another party of a specified amount of a specific
security at a specified future time and at a specified price. Futures contracts
which are standardized as to maturity date and underlying financial instrument
are traded on national futures exchanges. Futures exchanges and trading are
regulated under the Commodity Exchange Act by the Commodity Futures Trading
Commission ("CFTC"), a U.S. Government agency. Assets committed to futures
contracts will be segregated at the Fund's custodian bank to the extent required
by law.

Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold," or "selling" a contract previously
purchased) in an identical contract to terminate the position. Brokerage
commissions are incurred when a futures contract is bought or sold.

Futures traders are required to make a good faith margin deposit in cash or
government securities with a broker or custodian to initiate and maintain open
positions in futures contracts. A margin deposit is intended to assure
completion of the contract (delivery or acceptance of the underlying security)
if it is not terminated prior to the specified delivery date. Minimal initial
margin requirements are established by the futures exchange and may be changed.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on margin which
may range upward from less than 5% of the value of the contract being traded.

After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent that
the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Fund
expects to earn interest income on its margin deposits.

Traders in futures contracts may be broadly classified as either "hedgers" or
"speculators." Hedgers use the futures markets primarily to offset unfavorable
changes in the value of securities otherwise held for investment purposes or
expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from fluctuations in the
prices of underlying securities. The Fund intends to use futures contracts only
for bona fide hedging purposes.

B-3
<PAGE>

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

Although techniques other than the sale and purchase of futures contracts
could be used to control the Fund's exposure to market fluctuations, the use of
futures contracts may be a more effective means of hedging this exposure. While
the Fund will incur commission expenses in both opening and closing out futures
positions, these costs are lower than transaction costs incurred in the purchase
and sale of the underlying securities.

Restrictions on the Use of Futures Contracts. The Fund will not enter into
futures contract transactions to the extent that, immediately thereafter, the
sum of its initial margin deposits on open contracts exceeds 5% of the market
value of the Fund's total assets. In addition, the Fund will not enter into
futures contracts to the extent that its outstanding obligations to purchase
securities under these contracts would exceed 20% of the Fund's total assets.

Risk Factors in Futures Transactions. Positions in futures contracts may be
closed out only on an Exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market will
exist for any particular futures contract at any specific time. Thus, it may not
be possible to close a futures position. In the event of adverse price
movements, the Fund would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if the Fund has insufficient
cash, it may have to sell portfolio securities to meet daily margin requirements
at a time when it may be disadvantageous to do so. In addition, the Fund may be
required to make delivery of the instruments underlying futures contracts it
holds. The inability to close options and futures positions also could have an
adverse impact on the ability to effectively hedge.

The Fund will minimize the risk that it will be unable to close out a futures
contract by only entering into futures which are traded on national futures
exchanges and for which there appears to be a liquid secondary market. The
principal stock index futures exchanges in the United States are the Board of
Trade of the City of Chicago and the Chicago Mercantile Exchange.

The risk of loss in trading futures contracts in some strategies can be
substantial, due to the low margin deposits required. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. The Fund is not subject to
extreme losses from futures because 100% of the contract obligation is held
separately in cash or other liquid portfolio securities. The Fund would
presumably have sustained comparable losses if, instead of the futures contract,
it had invested in the underlying financial instrument and sold it after the
decline.

Utilization of futures transactions by the Fund does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged. It is also
possible that the Fund could both lose money on futures contracts and also
experience a decline in value of its portfolio securities. There is also the
risk of loss by the Fund of margin deposits in the event of bankruptcy of a
broker with whom the Fund has an open position in a futures contract or related
option. Additionally, investments in futures contracts and options involve the
risk that the investment advisers will incorrectly predict stock market and
interest rate trends.

B-4
<PAGE>

Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses, because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of future positions and subjecting some futures
traders to substantial losses.

Federal Tax Treatment of Futures Contracts. The Fund is required for federal
income tax purposes to recognize as income for each taxable year its net
unrealized gains and losses on certain futures contracts as of the end of the
year as well as those actually realized during the year. In most cases, any gain
or loss recognized with respect to a futures contract is considered to be 60%
long-term capital gain or loss and 40% short-term capital gain or loss, without
regard to the holding period of the contract. Furthermore, sales of futures
contracts which are intended to hedge against a change in the value of
securities held by the Fund may affect the holding period of such securities
and, consequently, the nature of the gain or loss on such securities upon
disposition. A Fund may be required to defer the recognition of losses on
futures contracts to the extent of any unrecognized gains on related positions
held by the Fund.

In order for the Fund to continue to qualify for federal income tax treatment
as a regulated investment company, at least 90% of its gross income for a
taxable year must be derived from qualifying income; i.e., dividends, interest,
income derived from loans of securities, gains from the sale of securities or of
foreign currencies or other income derived with respect to the Fund's business
of investing in securities. It is anticipated that any net gain realized from
the closing out of futures contracts will be considered gain from the sale of
securities and therefore be qualifying income for purposes of the 90%
requirement.

The Fund will distribute to shareholders annually any net capital gains which
have been recognized for federal income tax purposes (including unrealized gains
at the end of the Fund's fiscal year) on futures transactions. Such
distributions will be combined with distributions of capital gains realized on
the Fund's other investments and shareholders will be advised on the nature of
the distributions.

INVESTMENT LIMITATIONS

The following restrictions and fundamental policies cannot be changed without
approval of the holders of a majority of the outstanding shares of the Fund (as
defined in the Investment Company Act of 1940). The Fund may not under any
circumstances:

1) Borrow money, except from banks (or through reverse repurchase
agreements), for temporary or emergency (not leveraging) purposes, and
then in an amount not exceeding 10% of the value of the Fund's net
assets (including the amount borrowed and the value of any outstanding
reverse repurchase agreements) at the time the borrowing is made.
Whenever borrowings exceed 5% of the value of the Fund's net assets, the
Fund will not make any additional investments;

2) With respect to 75% of the value of its total assets, purchase the
securities of any issuer (except obligations of the United States
government and its instrumentalities) if as a result the Fund would hold
more than 10% of the outstanding voting securities of the issuer, or
more than 5% of the value of the Fund's total assets would be invested
in the securities of such issuer;

3) Invest for the purpose of exercising control of management of any
company;

4) Invest in securities of other investment companies, except as may be
acquired as a part of a merger, consolidation or acquisition of assets
approved by the Fund's shareholders or otherwise to the extent permitted
by Section 12 of the Investment Company Act of 1940. The Fund will
invest only in investment companies which have investment objectives and
investment policies consistent with those of the Fund;

5) Engage in the business of underwriting securities issued by others,
except to the extent that the Fund may technically be deemed to be an
underwriter under the Securities Act of 1933, as amended, in disposing
of portfolio securities;

6) Purchase or otherwise acquire any security if, as a result, more than
15% of its net assets would be invested in securities that are illiquid
(including the Fund's investment in The Vanguard Group, Inc., as
described on page B-9);

B-5
<PAGE>

7) Invest in commodities (except that the Fund may invest in stock futures
contracts and options to the extent that not more than 5% of the Fund's
assets are required as deposit to secure obligations under futures
contracts and not more than 20% of the Fund's assets are invested in
futures and options at any time) or real estate although the Fund may
purchase and sell securities of companies which deal in real estate, or
interests therein;

8) Purchase securities on margin or sell any securities short (except as
specified in 7 above);

9) Invest more than 5% of the assets of the Fund, at the time of
investment, in the securities of any issuers which have (with
predecessors) a record of less than three years' continuous operation;

10) Lend money to any person except (i) by purchasing bonds, debentures or
similar obligations (including repurchase agreements) which are either
publicly distributed or customarily purchased by institutional
investors, and (ii) by lending its portfolio securities as provided
under "Lending of Securities";

11) Pledge, mortgage, or hypothecate any of its assets to an extent greater
than 5% of its total assets; and

12) Invest more than 25% of the value of its total assets in any one
industry.

These investment limitations are considered at the time investment securities
are purchased.

Notwithstanding these limitations, the Fund may own all or any portion of the
securities of, or make loans to, or contribute to the costs or other financial
requirements of any company which will be wholly owned by the Fund and one or
more other investment companies and is primarily engaged in the business of
providing, at-cost, management, administrative, distribution or related services
to the Fund and other investment companies. See "Management of the Fund."

PURCHASE OF SHARES

The Fund reserves the right in its sole discretion (i) to suspend the
offerings of its shares, (ii) to reject purchase orders when in the judgment of
management such rejection is in the best interest of the Fund, and (iii) to
reduce or waive the minimum investment for or any other restrictions on initial
and subsequent investments for certain fiduciary accounts or under circumstances
where certain economies can be achieved in sales of the Fund's shares.

REDEMPTION OF SHARES

The Fund may suspend redemption privileges or postpone the date of payment
(i) during any period that the New York Stock Exchange is closed, or trading on
the Exchange is restricted as determined by the Securities and Exchange
Commission (the "Commission"), (ii) during any period when an emergency exists
as defined by the rules of the Commission as a result of which it is not
reasonably practicable for the Fund to dispose of securities owned by it, or
fairly to determine the value of its assets, and (iii) for such other periods as
the Commission may permit.

The Fund has made an election with the Commission to pay in cash all
redemptions requested by any shareholder of record limited in amount during any
90-day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid in whole or in part, in investment securities or in cash, as the Directors
may deem advisable; however, payment will be made wholly in cash unless the
Directors believe that economic or market conditions exist which would make such
a practice detrimental to the best interests of the Fund. If redemptions are
paid in investment securities, such securities will be valued as set forth in
the Prospectus under "The Fund's Share Price" and a redeeming shareholder would
normally incur brokerage expenses if he converted these securities to cash.

No charge is made by the Fund for redemptions. Any redemption may be more or
less than the shareholder's cost depending on the market value of the securities
held by the Fund.
B-6
<PAGE>

MANAGEMENT OF THE FUND

Officers and Directors

The Fund's Officers, under the supervision of the Board of Directors, manage
the day-to-day operations of the Fund. The Directors set broad policies for the
Fund and choose its Officers. A list of the Directors and Officers of the Fund
and a brief statement of their present positions and principal occupations
during the past 5 years is set forth below. The mailing address of the Directors
and Officers of the Fund is Post Office Box 876, Valley Forge, PA 19487.

JOHN C. BOGLE, (DOB: 5/8/1929)

Senior Chairman and Director* Senior Chairman and Director of The Vanguard
Group, Inc., and each of the investment companies in The Vanguard Group;
Director of The Mead Corporation, General Accident Insurance, and Chris-Craft
Industries, Inc.

JOHN J. BRENNAN, (DOB: 7/29/1954)

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

ROBERT E. CAWTHORN, (DOB: 9/28/1935) Director

Chairman Emeritus and Director of Rhone-Poulenc Rorer, Inc.; Managing
Director of Global Health Care Partners/DLJ Merchant Banking Partners;
Director of Sun Company, Inc., and Westinghouse Electric Corporation.

BARBARA BARNES HAUPTFUHRER, (DOB: 10/11/1928) Director

Director of The Great Atlantic and Pacific Tea Company, IKON Office
Solutions, Inc., Raytheon Company, Knight-Ridder, Inc., Massachusetts Mutual
Life Insurance Co., and Ladies Professional Golf Association; and Trustee
Emerita of Wellesley College.

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

President Emeritus of The Brookings Institution: Director of American Express
Bank, Ltd., The St. Paul Companies, Inc., and National Steel Corporation.

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

Chemical Bank Chairman's Professor of Economics, Princeton University;
Director of Prudential Insurance Co. of America, Amdahl Corporation, Baker
Fentress & Co., The Jeffrey Co., and Southern New England Telecommuni-cations
Company.

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

Chairman, President, Chief Executive Officer, and Director of NACCO
Industries, Inc.; Director of The BFGoodrich Company, and The Standard
Products Company.

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

President and Chief Executive Officer of The Nature Conservancy; formerly,
Director and Senior Partner of McKinsey & Co., and President of New York
University; Director of Pacific Gas and Electric Company, Procter & Gamble
Company, and NACCO Industries.

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

Retired Chairman of Nabisco Brands, Inc.; retired Vice Chairman and Director
of RJR Nabisco; Director of TECO Energy, Inc., and Kmart Corporation.

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

Chairman and Chief Executive Officer of Rohm & Haas Company; Director of
Cummins Engine Company, and The Mead Corporation; and Trustee of Vanderbilt
University.

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

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

RICHARD F. HYLAND, (DOB: 3/22/1937) Treasurer*

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

KAREN E. WEST, (DOB: 9/13/1946) Controller*

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

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

*Officers of the Fund are "interested persons" as defined in the Investment
Company Act of 1940.

B-7
<PAGE>

THE VANGUARD GROUP

Vanguard/Morgan Growth Fund, Inc. is a member of The Vanguard Group of
Investment Companies.

Through their jointly-owned subsidiary, The Vanguard Group, Inc.
("Vanguard"), the Fund and the other Funds in the Group obtain at cost virtually
all of their corporate management, administrative and distribution services.
Vanguard also provides investment advisory services on an at-cost basis to
certain Vanguard Funds.

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

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

The Vanguard Group adheres to a Code of Ethics established pursuant to Rule
17j-1 under the Investment Company Act of 1940. The Code is designed to prevent
unlawful practices in connection with the purchase or sale of securities by
persons associated with Vanguard. Under Vanguard's Code of Ethics, certain
Officers and employees of Vanguard who are considered access persons are
permitted to engage in personal securities transactions. However, such
transactions are subject to procedures and guidelines substantially similar to
those recommended by the mutual fund industry and approved by the U.S.
Securities and Exchange Commission.

The Vanguard Group was established and operates under a Funds' Service
Agreement which was approved by the shareholders of each of the Funds. The
amounts which each of the Funds has invested are adjusted from time to time in
order to maintain the proportionate relationship between each Fund's relative
net assets and its contribution to Vanguard's capital. At December 31, 1997, the
Fund had contributed capital of $182,000 to Vanguard, representing .9% of
Vanguard's capitalization. The Fund's Service Agreement provides as follows: (a)
each Vanguard Fund may invest up to .40% of its current assets in Vanguard, and
(b) there is no other limitation on the amount that each Vanguard Fund may
contribute to Vanguard's capitalization.

Management Corporate management and administrative services include: (1)
executive staff; (2) accounting and financial; (3) legal and regulatory; (4)
shareholder account maintenance; (5) monitoring and control of custodian
relationships; (6) shareholder reporting; and (7) review and evaluation of
advisory and other services provided to the Funds by third parties. During the
fiscal year ended December 31, 1997, the Fund's share of Vanguard's actual net
costs of operation relating to management and administrative services (including
transfer agency) totaled approximately $6,897,000.

Distribution Vanguard provides all distribution and marketing activities for
the Funds in the Group. Vanguard Marketing Corporation, a wholly-owned
subsidiary of The Vanguard Group, Inc., acts as Sales Agent for the shares of
the Funds in connection with any sales made directly to investors in the states
of Florida, Missouri, New York, Ohio, Texas and such other states as it may be
required.

The principal distribution expenses are for advertising, promotional
materials and marketing personnel. Distribution services may also include
organizing and offering to the public, from time to time, one or more new
investment companies which will become members of the Group. The directors and
officers of Vanguard determine the amount to be spent annually on distribution
activities, the manner and amount to be spent on each Fund, and whether to
organize new investment companies.

One half of the distribution expenses of a marketing and promotional nature
is allocated among the Funds based upon relative net assets. The remaining one
half of those expenses is allocated among the Funds based upon each Fund's sales
for the preceding 24 months relative to the total sales of the Funds as a Group,
provided, however, that no Fund's aggregate quarterly rate of contribution for
distribution expenses of a marketing and promotional nature shall exceed 125% of
average distribution expense rate for the Group, and that no Fund shall incur
annual distribution expenses in excess of 20/100 of 1% of its average month-end
net assets. During the fiscal year ended December 31, 1997, the Fund paid
approximately $465,000 of the Group's distribution and marketing expenses.

B-8
<PAGE>

Investment Advisory Services. Vanguard also provides the Fund, Vanguard Money
Market Reserves, Vanguard Treasury Fund, Vanguard Municipal Bond Fund, several
Portfolios of Vanguard Fixed Income Securities Fund, Vanguard California
Tax-Free Fund, Vanguard Florida Insured Tax-Free Fund, Vanguard New Jersey
Tax-Free Fund, Vanguard New York Tax-Free Fund, Vanguard Ohio Tax-Free Fund,
Vanguard Pennsylvania Tax-Free Fund, Vanguard Admiral Funds, Vanguard
Institutional Index Fund, Vanguard Bond Index Fund, Vanguard Balanced Index
Fund, Vanguard Index Trust, Vanguard International Equity Index Fund, Vanguard
Tax-Managed Fund, the Aggressive Growth Portfolio of Vanguard Horizon Fund, the
REIT Index Portfolio of Vanguard Specialized Portfolios, the Total International
Portfolio of Vanguard STAR Fund, several Portfolios of Vanguard Variable
Insurance Fund, a portion of Vanguard/Windsor II, Vanguard Explorer Fund, and
Vanguard Equity Income Fund, as well as several indexed separate accounts with
investment advisory services. These services are provided on an at-cost basis
from a money management staff employed directly by Vanguard. The compensation
and other expenses of this staff are paid by the Funds utilizing these services.

Director/Trustee Compensation

The individuals appearing in the table below serve as Directors/Trustees of
all Vanguard Funds, and each Fund pays a proportionate share of the
Directors'/Trustees' compensation. The Funds employ their officers on a shared
basis, as well. However, officers are compensated by The Vanguard Group, Inc.,
not the Funds.

Independent Director/Trustees. The Funds compensate their independent
Directors/Trustees--that is, the ones who are not also officers of the Fund--in
three ways:

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

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

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

Interested Directors/Trustees. The Funds' interested Directors/
Trustees--Messrs. Bogle and Brennan--receive no compensation for their service
in that capacity. However, they are paid in their role as officers of The
Vanguard Group, Inc.

B-9
<PAGE>

Compensation Table. The following table provides compensation details for each
of the Directors. For the Fund, we list the amounts paid as compensation and
accrued as retirement benefits by the Fund for each Director. In addition, the
table shows the total amount of benefits that we expect each Director/Trustee to
receive from all Vanguard Funds upon retirement, and the total amount of
compensation paid to each director/Trustee by all Vanguard Funds. All
information shown is for the fiscal year ended December 31, 1997:

VANGUARD/MORGAN GROWTH FUND
COMPENSATION TABLE

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Aggregate Pension or Retirement Estimated Total Compensation
Compensation Benefits Accrued As Annual Benefits From All Vanguard Funds
Names of Directors From Fund Part of Fund Expenses Upon Retirement Paid to Directors(2)
------------------- --------------- ---------------------- ---------------- -----------------------
John C. Bogle(1) None None None None
John J. Brennan(1) None None None None
Barbara Barnes
Hauptfuhrer $716 $ 103 $15,000 $70,000
Robert E. Cawthorn $716 $ 86 $13,000 $70,000
Bruce K. MacLaury $762 $ 100 $12,000 $65,000
Burton G. Malkiel $720 $ 69 $15,000 $70,000
Alfred M. Rankin, Jr. $716 $ 54 $15,000 $70,000
John C. Sawhill $716 $ 65 $15,000 $70,000
James O. Welch, Jr. $716 $ 79 $15,000 $70,000
J. Lawrence Wilson $716 $ 57 $15,000 $70,000

(1)As "Interested Directors," Messrs. Bogle and Brennan receive no compensation for their service as
Directors.
(2)The amounts reported in this column reflect the total compensation paid to each Director for his or her
service as Director or Trustee of 35 Vanguard Funds (34 in the case of Mr. Malkiel; 28 in the case of Mr. MacLaury).
</TABLE>

INVESTMENT ADVISORY SERVICES

The Fund currently uses three separate investment advisers, each of whom
manages the investment and reinvestment of a portion of the Fund's assets. Prior
to April 24, 1990, Wellington Management Company served as the Fund's sole
investment adviser.

Wellington Management Company, LLP The Fund employs Wellington Management
Company, LLP ("WMC") under an investment advisory agreement dated as of April 1,
1996, to manage the investment and reinvestment of a portion of the Fund's
assets, and to continuously review, supervise and administer the Fund's
investment program. WMC discharges its responsibilities subject to the control
of the officers and Directors of the Fund.

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

Net Assets Rate
First $500 million............................................ 0.175%
Next $500 million............................................. 0.100%
Over $1 billion............................................... 0.075%

The Basic Fee may be increased or decreased by applying an incentive/penalty
fee based on the investment performance of the assets of the Fund managed by WMC
relative to the investment record of The Growth Fund Stock Index (the "Index"),
which is described on page B-16.

B-10
<PAGE>

The following table sets forth the incentive/penalty fee rates payable by the
Fund to WMC under the investment advisory agreement:
<TABLE>
<CAPTION>
<S> <C>

Cumulative 36-Month
Performance versus the Performance Fee
Growth Fund Stock Index Adjustment*
----------------------- -----------------
Less than -12% ............................ -0.50 x Basic Fee
Between -12% and -6% ............................ -0.25 x Basic Fee
Between -6% and 6% ............................ 0.00 x Basic Fee
Between 6% and 12% ............................ +0.25 x Basic Fee
More than 12% ............................ +0.50 x Basic Fee
</TABLE>

- ------------
*For purposes of this calculation, the basic fee is calculated by applying the
quarterly rate against average assets over the 36-month period.

This incentive/penalty fee will not be fully operable until the quarter
ending March 31, 1999. Until that date, a "blended" fee rate consisting of
varying percentages of (i) the performance adjustment based on the schedule set
forth above (the "new rate"), and (ii) the performance adjustment based on the
schedule set forth in the Fund's previous investment advisory agreement with the
Adviser(1) (the "previous rate") shall be used as follows:

1. Quarter Ending June 30, 1996. The incentive/penalty fee was calculated as
the sum of 8.3% (e.g., one of 12 quarters) of the fee payable under the new rate
plus 91.7% (e.g., 11 of 12 quarters) of the fee payable under the previous rate.

2. Quarter Ending September 30, 1996. The incentive/penalty fee was
calculated as the sum of 16.6% of the fee payable under the new rate plus 83.4%
of the fee payable under the previous rate.

3. Quarter Ending December 31, 1996. The incentive/penalty fee was calculated
as the sum of 25% of the fee payable under the new rate plus 75% of the fee
payable under the previous rate.

4. Quarter Ending March 31, 1997. The incentive/penalty fee was calculated as
the sum of 33% of the fee payable under the new rate plus 67% of the fee payable
under the previous rate.

5. Quarter Ending June 30, 1997. The incentive/penalty fee was calculated as
the sum of 41.6% of the fee payable under the new rate plus 58.4% of the fee
payable under the previous rate.

6. Quarter Ending September 30, 1997. The incentive/penalty fee was
calculated as the sum of 50% of the fee payable under the new rate plus 50% of
the fee payable under the previous rate.

7. Quarter Ending December 31, 1997. The incentive/penalty fee was calculated
as the sum of 58.4% of the fee payable under the new rate plus 41.6% of the fee
payable under the previous rate.

8. Quarter Ending March 31, 1998. The incentive/penalty fee was calculated as
the sum of 67% of the fee payable under the new rate plus 33% of the fee payable
under the previous rate.

9. Quarter Ending June 30, 1998. The incentive/penalty fee shall be
calculated as the sum of 75% of the fee payable under the new rate and 25% of
the fee payable under the previous rate.

10. Quarter Ending September 30, 1998. The incentive/penalty fee shall be
calculated as the sum of 83.4% of the fee payable under the new rate plus 16.6%
of the fee payable under the previous rate.

B-11
<PAGE>

11. Quarter Ending December 31, 1998. The incentive/penalty fee shall be
calculated as the sum of 91.7% of the fee payable under the new rate plus 8.3%
of the fee payable under the previous rate.

12. Quarter Ending March 31, 1999. New rate will be fully operable.

- ---------------
(1) The previous incentive/penalty fee structure provided that the Basic Fee be
increased or decreased by an amount equal to .0375% per annum (.009375 of 1% per
quarter) of the average month-end assets if the Fund's investment performance
for the 36 months preceding the end of the quarter was between 6 and 12
percentage points above or below, respectively, the investment record of the
Growth Fund Stock Index and .075% per annum (0.1875 of 1% per) of the average
month-end assets of the Fund if the Fund's investment performance for the 36
months preceding the end of the quarter was twelve percentage points or more
above or below, respectively, the investment record of the Growth Fund Stock
Index.

For the purpose of determining the fee adjustment for investment performance,
as described above, the net assets of the WMC Portfolio shall be averaged over
the same period as the investment performance of the WMC Portfolio and the
investment record of the Growth Fund Stock Index are computed. The investment
performance of the WMC Portfolio for such period, expressed as a percentage of
the WMC Portfolio's net asset value per share at the beginning of such period,
shall be the sum of: (i) the change in the WMC Portfolio's net asset value per
share during such period; (ii) the value of the WMC Portfolio's cash
distributions per share having an ex-dividend date occurring within such period;
and (iii) the per share amount of capital gains taxes paid or accrued during
such period by the WMC Portfolio for undistributed realized long-term capital
gains.

The investment record of the Growth Fund Stock Index for any period,
expressed as a percentage of the Growth Fund Stock Index level at the beginning
of such period, shall be the sum of (i) the change in the level of the Growth
Fund Stock Index during such period and (ii) the value, computed consistently
with the Growth Fund Stock Index, of cash distributions having an ex-dividend
date occurring within such period made by companies whose securities comprise
the Growth Fund Stock Index. The foregoing notwithstanding, any computation of
the investment performance of the WMC Portfolio and the investment record of the
Growth Fund Stock Index shall be in accordance with any then applicable rules of
the Securities and Exchange Commission.

In April 1972, the Securities and Exchange Commission ("SEC") issued Release
No. 7113 under the Investment Company Act of 1940 to call attention of directors
and investment advisers to certain factors which must be considered in
connection with investment company incentive fee arrangements. One of these
factors is to "avoid basing significant fee adjustments upon random or
insignificant differences" between the investment performance of a fund and that
of the particular index with which it is being compared. The Release provides
that "preliminary studies (of the SEC staff) indicate that as a 'rule of thumb'
the performance difference should be at least +/-10 percentage points" annually
before the maximum performance adjustment may be made. However, the Release also
states that "because of the preliminary nature of these studies, the Commission
is not recommending, at this time, that any particular performance difference
exist before the maximum fee adjustment may be made." The Release concludes that
the directors of a fund "should satisfy themselves that the maximum performance
adjustment will be made only for performance differences that can reasonably be
considered significant." The Board of Directors of the Fund has fully considered
the SEC Release and believes that the performance adjustments as included in the
agreement are entirely appropriate although not within the +/-10 percentage
points per year range suggested in the Release. Under the Fund's investment
advisory agreement, the maximum performance adjustment is made at a difference
of +/-12 percentage points from the performance of the index over a thirty-six
month period, which would effectively be the equivalent of approximately +/-4
percentage points difference per year. The Fund's investment advisory agreement
provides for no performance adjustment at a difference of less than +/-6
percentage points from the performance of the index over a thirty-six month
period, which would be the equivalent of approximately +/-2 percentage points
per year.

Duration and Termination. The current agreement with WMC continues in effect
until March 31, 1999, and is renewable thereafter for successive one-year
periods only so long as such renewal is approved at least annually by a vote of
the Fund's Board of Directors, including the affirmative votes of a majority of
the Directors who are not parties to the contract or "interested persons" (as
defined in the Investment Company Act of 1940) of any such party, cast in person
at a meeting called for the purpose of considering such approval. In addition,
the question of continuance of the agreement may be presented to the
shareholders of the Fund; in such event, continuance shall be effected only if
approved by the affirmative vote of a majority of the outstanding voting
securities of the Fund. The agreement is automatically terminated if assigned,
and may be terminated without penalty at any time (1) either by vote of the
Board of Directors of the Fund or by vote of a majority of the outstanding
voting securities of the Fund on sixty (60) days' written notice to WMC, or (2)
by WMC upon ninety (90) days' written notice to the Fund.

B-12
<PAGE>

Related Information Concerning Wellington Management Company LLP ("WMC"), 75
State Street, Boston, MA 02109, is a professional investment counseling firm
which provides investment services to investment companies, other institutions
and individuals. Among the clients of WMC are more than 10 of the investment
companies of The Vanguard Group. WMC and its predecessor organizations have
provided investment advisory services to investment companies since 1928 and to
investment counseling clients since 1960. WMC is a Massachusetts limited
liability partnership of which the following persons are managing partners:
Messrs. Robert W. Doran, Duncan M. McFarland and John R. Ryan.

During the last three fiscal years, the Fund paid the following advisory fees
to WMC:

1995 1996 1997
---------- ---------- ----------

Basic Fee................................................... $ 892,794 $1,084,780 $1,292,417
Increase (Decrease) for Performance Adjustment.............. (321,731) 51,915 (63,493)
---------- ---------- ----------

Total..................................... $ 571,063 $1,136,695 $1,228,924
========= ========== ==========
</TABLE>

Franklin Portfolio Associates LLC The Fund employs Franklin Portfolio
Associates LLC ("Associates") under an investment advisory agreement dated as of
April 1, 1996 to manage the investment and reinvestment of a portion of the
Fund's assets. Associates discharges its responsibilities subject to the control
of the Officers and Directors of the Fund.

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

Net Assets Rate
First $100 million................................. 0.25%
Next $200 million.................................. 0.20%
Next $200 million.................................. 0.15%
Over $500 million.................................. 0.10%
</TABLE>

The Basic Fee may be increased or decreased by applying an incentive/penalty
fee based on the investment performance of the assets of the Fund managed by
Associates relative to the investment record of the Index. Such
incentive/penalty fee provides for an increase or decrease in Associates' basic
fee in an amount equal to .10% per annum (.025% per quarter) of the average
month-end net assets of the portion of the Fund managed by Associates if the
investment performance of that portion of the Fund for the thirty-six months
preceding the end of the quarter is six percentage points or more above or
below, respectively, the investment record of the Index for the same period.

The following table sets forth the incentive/penalty fee rates payable by the
Fund to Associates under the investment advisory agreement:
<TABLE>
<CAPTION>
<S> <C>

Cumulative 36-Month Annual Incentive (+)/
Performance Penalty (-) Fee
vs. The Index Rate
- --------------------------------------------------------------------------------
+6% or more above............................... +.10%
Between +6% and -6%............................. --0--
- -6% or more below............................... -.10%
</TABLE>

B-13
<PAGE>

The investment performance of the Associates Portfolio, the "Associates
Portfolio unit value" and the "investment record of the Index" will be
calculated in the same manner as set forth under the discussion of the WMC
Agreement on page B-12.

For the purposes of determining the incentive/penalty fee, the net assets of
the Associates Portfolio will be averaged over the same period as the investment
performance of the Associates Portfolio and the investment record of the Index
are computed.

The formula used to determine the performance adjustments differs from the
view taken by the staff of the Securities and Exchange Commission. For a more
detailed discussion, see page B-12. The Board of Directors of the Fund believes
that the performance adjustments, as included in the proposed agreement with
Associates, are appropriate although less than the +10 percentage points per
year range suggested in SEC Release No. 7113. Under the proposed agreement, the
maximum performance adjustment is made at a difference of approximately +2
percentage points per year.

The current agreement with Associates is dated April 1, 1996 and continues in
effect March 31, 1999, and is renewable for successive one year periods
thereafter only so long as such renewal is approved at least annually by a vote
of the Fund's Board of Directors, including the affirmative votes of a majority
of the Directors who are not parties to the contract or "interested persons" (as
defined in the Investment Company Act of 1940) of any such party, cast in person
at a meeting called for the purpose of considering such approval. In addition,
the question of continuance of the agreement may be presented to the
shareholders of the Fund; in such event, continuance shall be effected only if
approved by the affirmative vote of a majority of the outstanding voting
securities of the Fund. The agreement may be terminated without penalty at any
time (1) either by vote of the Board of Directors of the Fund or by vote of a
majority of the outstanding voting securities of the Fund on 60 days' written
notice to Associates, or (2) by Associates upon 90 days' written notice to the
Fund.

During the last three fiscal years, the Fund paid Associates the following
advisory fees:

<TABLE>
<CAPTION>
<S> <C> <C> <C>
1995 1996 1997
-------- -------- --------

Basic Fee.............................. $848,530 $987,145 $1,310,220
Increase (Decrease) for Performance
Adjustment.......................... 74,545 115,797 571,862
------ ------- -------

Total.................................. $923,075 $400,942 1,882,082
======== ======== =========
</TABLE>

Related Information Concerning Franklin Portfolio Associates LLC
("Associates"), Two International Place, Boston, MA 02110. Associates is a
Massachusetts limited liability company, which is an indirect, wholly-owned
subsidiary of MBC Investments Corporation, which is itself a wholly owned
subsidiary of Mellon Bank Corporation. Associates is managed by a Board of
Trustees consisting of Messrs. John J. Nagorniak, Chairman, Donald A. McMullen,
Jr. and G. Christian Lantzsch.

Associates is a professional investment counseling firm which specializes in
the management of common stock portfolios through the use of quantitative
investment models. As of December 31, 1997, Associates provided investment
advisory services with respect to approximately $13.5 billion of client assets,
including approximately $2.1 billion for Vanguard Growth and Income Portfolio,
Inc., another mutual fund member of The Vanguard Group. During the year ended
December 31, 1997, Vanguard Growth and Income Portfolio, Inc. paid Associates an
annual advisory fee equal to 0.13% of its average net assets before a decrease
of 0.01% based on performance.

B-14
<PAGE>

Vanguard's Core Management Group. Vanguard's Core Management Group provides
investment advisory services on an at-cost basis with respect to 9% of
Vanguard/Morgan Growth Fund's assets. The Core Management Group employes a
quantitative investment approach that uses computer techniques to track--and, if
possible, outperform--a specific market standard. For Morgan Growth Fund, this
market standard is the Growth Fund Stock Index, which is made up of the stocks
held by the nation's 50 largest growth funds.

Advisory Changes. The Fund's Board of Directors may, without the approval of
shareholders, provide for:

A. The employment of a new investment adviser pursuant to the terms of a new
advisory agreement, either as a replacement for an existing adviser or as
an additional adviser.

B. A change in the terms of an advisory agreement.

C. The continued employment of an existing adviser on the same advisory
contract terms where a contract has been assigned because of a change in
control of the adviser.

Any such change will only be made upon not less than 30 days' prior written
notice to shareholders, which shall include the information concerning the
adviser that would have normally been included in a proxy statement.

PORTFOLIO TRANSACTIONS

The investment advisory agreements authorize the Advisers (with the approval
of the Fund's Board of Directors) to select the brokers or dealers that will
execute the purchases and sales of portfolio securities for the Fund and directs
the Advisers to use their best efforts to obtain the best available price and
most favorable execution as to all transactions for the Fund. The Advisers have
undertaken to execute each investment transaction at a price and commission
which provides the most favorable total cost or proceeds reasonably obtainable
under the circumstances. During the fiscal years ended December 31, 1995, 1996
and 1997 the Fund paid $1,492,129, $2,130,785, and $3,104,030 respectively, in
brokerage commissions.

In placing portfolio transactions, the Advisers will use their best judgment
to choose the broker most capable of providing the brokerage services necessary
to obtain best available price and most favorable execution. The full range and
quality of brokerage services available will be considered in making these
determinations. In those instances where it is reasonably determined that more
than one broker can offer the brokerage services needed to obtain the best
available price and most favorable execution, consideration may be given to
those brokers which supply investment research and statistical information and
provide other services in addition to execution services to the Fund and/or the
Advisers. The Advisers consider such information useful in the performance of
their obligations under the agreement but are unable to determine the amount by
which such services may reduce its expenses.

The investment advisory agreements also incorporate the concepts of Section
28(e) of the Securities Exchange Act of 1934 by providing that, subject to the
approval of the Fund's Board of Directors, the Advisers may cause the Fund to
pay a broker-dealer which furnishes brokerage and research services a higher
commission than that which might be charged by another broker-dealer for
effecting the same transaction; provided that such commission is deemed
reasonable in terms of either that particular transaction or the overall
responsibilities of the Advisers to the Fund and the other Funds in the Group.

Currently, it is the Fund's policy that the Advisers may at times pay higher
commissions in recognition of brokerage services felt necessary for the
achievement of better execution of certain securities transactions that
otherwise might not be available. The Advisers will only pay such higher
commissions if they believe this to be in the best interest of the Fund. Some
brokers or dealers who may receive such higher commissions in recognition of
brokerage services related to execution of securities transactions are also
providers of research information to the Advisers and/or the Fund. However, the
Advisers have informed the Fund that they will not pay higher commission rates
specifically for the purpose of obtaining research services.

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

B-15
<PAGE>

YIELD AND TOTAL RETURN

The yield of the Fund for the 30-day period ended December 31, 1997 was
1.02%.

The average annual total return of the Fund for the one-, five- and ten-year
periods ending December 31, 1997 was 30.8%, 18.28% and 17.10%, respectively.
Total return is computed by finding the average compounded rates of return over
the one-, five- and ten-year periods set forth above that would equate an
initial amount invested at the beginning of the periods to the ending redeemable
value of the investment.

PERFORMANCE MEASURES

There are a number of different ways to measure the performance of a mutual
fund. One of the these methods is to calculate the current yield of a fund or
portfolio. This is done by dividing the total amount of dividends per share paid
by a fund during the past twelve months by a current offering price (including
the sales charge, if any). Under certain circumstances, such as when there has
been a fundamental change in investment or dividend policies, it might be
appropriate to annualize the dividends paid over the period such policies were
in effect, rather than using the dividends paid during the past twelve months.
An alternate method is to calculate a compound yield. This is derived by
computing the total compounded dividends paid by a fund during the past twelve
months on the assumption that all dividends were reinvested in additional shares
(and giving no effect to capital gains distributions or taxes) and dividing this
by a current offering price. Another method is to calculate the total return by
dividing the change in value of an investment in shares over a period of time
(generally ten years or more), assuming the reinvestment of all dividends and
capital gains distributions, by the original net asset value of the shares.
Regardless of the method used, past performance is not necessarily indicative of
future results, but is an indication of the return to shareholders only for the
limited historical period used.

From time to time, advertisements, reports and promotional literature
regarding the Fund may compare its yield or total return (as calculated above)
to yields or returns reported by other investments and to various indices and
averages to assist an investor's calculation of how an investment in the Fund
might satisfy his investment objectives.

COMPARATIVE INDEXES

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

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

Growth Fund Stock Index--The Index is composed of the various common stocks that
are held in the 50 largest growth stock mutual funds, using year-end net assets,
monitored by Morningstar, Inc. Under an agreement with the Fund, Morningstar,
Inc. develops the composition of the Index and its total return each quarter.
Neither The Vanguard Group, Inc., WMC, nor Franklin are affiliated with
Morningstar in any way.

Standard and Poor's 500 Composite Stock Price Index--is a well diversified list
of 500 companies representing the U.S. Stock Market.

Standard & Poor's MidCap 400 Index--is composed of 400 medium sized domestic
stocks.

Standard & Poor's SmallCap 600/BARRA Value Index--contains stocks of the S&P
SmallCap 600 Index which have a lower than average price-to-book ratio.

Standard & Poor's SmallCap 600/BARRA Growth Index--contains stocks of the S&P
SmallCap 600 Index which have a higher than average price-to-book ratio.

B-16
<PAGE>

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

Wilshire 5000 Equity Index--consists of more than 7,000 common equity
securities, covering all stocks in the U.S. for which daily pricing is
available.

Wilshire 4500 Equity Index--consists of all stocks in the Wilshire 5000 except
for the 500 stocks in the Standard and Poor's 500 Index.

Morgan Stanley Capital International EAFE Index--is an arithmetic, market
value-weighted average of the performance of over 900 securities listed on the
stock exchanges of countries in Europe, Australia, Asia, and the Far East.

Goldman Sachs 100 Convertible Bond Index--currently includes 71 bonds and 29
preferreds. The original list of names was generated by screening for
convertible issues of $100 million or greater in market capitalization. The
index is priced monthly.

Salomon Brothers GNMA Index--includes pools of mortgages originated by private
lenders and guaranteed by the mortgage pools of the Government National Mortgage
Association.

Salomon Brothers High-Grade Corporate Bond Index--consists of publicly issued,
non-convertible corporate bonds rated Aa or Aaa. It is a value-weighted, total
return index, including approximately 800 issues with maturities of 12 years or
greater.

Lehman Long-Term Treasury Bond Index--is composed of all bonds covered by the
Shearson Lehman Hutton Treasury Bond Index with maturities of 10 years or
greater.

Merrill Lynch Corporate & Government Bond Index--consists of over 4,500 U.S.
Treasury, agency and investment grade corporate bonds.

Lehman Corporate (Baa) Bond Index--all publicly offered fixed-rate,
nonconvertible domestic corporate bonds rated Baa by Moody's, with a maturity
longer than 1 year and with more than $25 million outstanding. This index
includes over 1,000 issues.

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

Bond Buyer Municipal Bond Index--is a yield index on current coupon high-grade
general obligation municipal bonds.

Standard & Poor's Preferred Index--is a yield index based upon the average yield
for four high-grade, non-callable preferred stock issues.

NASDAQ Industrial Index--is composed of more than 3,000 industrial issues. It is
a value-weighted index calculated on price change only and does not include
income.

Composite Index--70% Standard & Poor's 500 Index and 30% NASDAQ Industrial
Index.

Composite Index--65% Standard & Poor's 500 Index and 35% Lehman Long-Term
Corporate AA or Better Bond Index.

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

B-17
<PAGE>

Lehman Long-Term Corporate AA or Better Bond Index--consists of all publicly
issued, fixed rate, nonconvertible investment grade, dollar-denominated,
SEC-registered corporate debt rated AA or AAA.

Russell 3000 Index--consists of approximately the 3,000 largest stocks of U.S.
domiciled companies commonly traded on the New York and American Stock Exchanges
or the NASDAQ over-the-counter market, accounting for over 90% of the market
value of publicly traded stocks in the U.S.

Russell 2000 Stock Index--consists of the smallest 2,000 stocks within the
Russell 3000; a widely-used benchmark for small capitalization common stocks.

Russell 2000(R) Value Index--Contains stocks from the Russell 2000 Index with a
less-than-average growth orientation.

Lipper Balanced Fund Average--an industry benchmark of average balanced funds
with similar investment objectives and policies, as measured by Lipper
Analytical Services, Inc.

Lipper Non-Government Money Market Fund Average--an industry benchmark of
average non-government money market funds with similar investment objectives and
policies, as measured by Lipper Analytical Services, Inc.

Lipper Government Money Market Fund Average--an industry benchmark of average
government money market funds with similar investment objectives and policies,
as measured by Lipper Analytical Services, Inc.

Lipper SmallCap Fund Average--the average performance of small company growth
funds as defined by Lipper Analytical Services, Inc. Lipper defines a small
company growth fund as a fund that by prospectus or portfolio practice, limits
its investments to companies on the basis of the size of the company. From time
to time, Vanguard may advertise using the average performance and/or the average
expense ratio of the small company growth funds. (This fund category was first
established in 1982. For years prior to 1982, the results of the Lipper Small
Company Growth category were estimated using the returns of the Funds that
constituted the Group at its inception.)

Lehman Brothers Aggregate Bond Index--is a market weighted index that contains
individually priced U.S. Treasury, agency, corporate, and mortgage pass-through
securities corporate rated BBB- or better. The Index has a market value of over
$4 trillion.

Lehman Brothers Mutual Fund Short (1-5) Government/Corporate Index--is a market
weighted index that contains individually priced U.S. Treasury, agency, and
corporate investment grade bonds rated BBB- or better with maturities between 1
and 5 years. The index has a market value of over $1.6 trillion.

Lehman Brothers Mutual Fund Intermediate (5-10) Government/Corporate Index--is a
market weighted index that contains individually priced U.S. Treasury, agency,
and corporate securities rated BBB- or better with maturities between 5 and 10
years. The index has a market value of over $700 billion.

Lehman Brothers Long (10+) Government/Corporate Index--is a market weighted
index that contains individually priced U.S. Treasury, agency and corporate
securities rated BBB- or better with maturities greater than 10 years. The index
has a market value of over $900 billion.

Lipper General Equity Fund Average--an industry benchmark of average general
equity funds with similar investment objectives and policies, as measured by
Lipper Analytical Services, Inc.

Lipper Fixed Income Fund Average--an industry benchmark of average fixed income
funds with similar investment objectives and policies, as measured by Lipper
Analytical Services, Inc.

Aggressive Growth Fund Stock Index--The Index is composed of the various common
stocks that are held in the 50 largest aggressive growth stock mutual funds,
using year-end net assets, monitored by Morningstar, Inc.

B-18
<PAGE>

Advertisements which refer to the use of the Fund as a potential investment
for Individual Retirement Accounts may quote a total return based upon
compounding of dividends on which it is presumed no federal income tax applies.

In assessing such comparisons of yields, an investor should keep in mind that
the composition of the investments in the reported averages is not identical to
the Fund's portfolio and that the items included in the calculations of such
averages may not be identical to the formula used by the Fund to calculate its
yield. In addition there can be no assurance that the Fund will continue its
performance as compared to such other averages.

FINANCIAL STATEMENTS

The Fund's financial statements as of and for the year ended December 31,
1997, appearing in the Vanguard/Morgan Growth Fund 1997 Annual Report to
Shareholders, and the report thereon of Price Waterhouse LLP, independent
accountants, also appearing therein, are incorporated by reference in this
Statement of Additional Information. The Fund's 1997 Annual Report to
Shareholders is enclosed with this Statement of Additional Information.

B-19
<PAGE>

PART C
VANGUARD/MORGAN GROWTH FUND, INC.
(Formerly W.L. Morgan Growth Fund, Inc.)
OTHER INFORMATION

Item 24. Financial Statements and Exhibits
(a) Financial Statements

The Registrant's financial statements for the year ended December 31, 1997,
including Price Waterhouse LLP's report thereon, are incorporated by reference,
in the Statement of Additional Information, from the Registrant's 1997 Annual
Report which has been filed with the Commission. The financial statements
included in the Annual Report are:

1. Statement of Net Assets as of December 31, 1997.

2. Statement of Operations for the year ended December 31, 1997.

3. Statement of Changes in Net Assets for the years ended December 31, 1996
and 1997.

4. Financial Highlights for each of the five years in the period ended
December 31, 1997.

5. Notes to Financial Statements.

6. Report of Independent Accountants.

(b) Exhibits
Exhibit Number Description
1...................Articles of Incorporation**
2...................By-Laws of Registrant**
3...................Not Applicable
4...................Not Applicable
5...................Not Applicable
6...................Not Applicable
7...................Reference is made to the section entitled
"Management of the Fund" in the Registrant's
Statement of Additional Information
8...................Form of Custody Agreement**
9...................Form of Vanguard Service Agreement**
10...................Opinion of Counsel**
11...................Consent of Independent Accountants*
12...................Financial Statements--reference is made to (a) above
13...................Not Applicable
14...................Not Applicable
15...................Not Applicable
16...................Schedule for Computation of Performance Quotations*
27...................Financial Data Schedule*

------------
*Filed herewith
**Previously filed

Item 25. Persons Controlled by or under Common Control with Registrant

Registrant is not controlled by or under common control with any person. The
Officers of the Registrant, the investment companies in The Vanguard Group of
Investment Companies and The Vanguard Group, Inc. are identical. Reference is
made to the caption "Management of the Fund" in the Prospectus constituting Part
A and "Management of the Fund" in the Statement of Additional Information
constituting Part B of this Registration Statement.

Item 26. Number of Holders of Securities

On December 31, 1997 there were 130,190 shareholders.

C-1
<PAGE>

Item 27. Indemnification

Reference is made to Article XI of Registrant's Articles of Incorporation.

Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to Directors, Officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Director, Officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Director, Officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

Item 28. Business and Other Connections of Investment Adviser

Wellington Management Company, LLP, ("WMC") 75 State Street, Boston,
Massachusetts, 02109, is a Massachusetts limited liability partnership, of which
the following persons are managing partners: Robert W. Doran, Duncan M.
McFarland and John R. Ryan. No partner has any other affiliation with the
Registrant.

WMC is an investment adviser registered under the Investment Advisers Act of
1940, as amended (the "Advisers Act"). The list required by this Item 28 of
officers and partners of WMC, together with any information as to any business
profession, vocation or employment of a substantial nature engaged in by such
officers and partners during the past two years, is incorporated herein by
reference to Schedules A and D of Form ADV filed by WMC pursuant to the Advisers
Act (SEC File No. 801-159089).

Franklin Portfolio Associates LLC ("Associates"), Two International Place,
Boston, MA 02110, is a Massachusetts limited liability company, which is an
indirect, wholly-owned subsidiary of MBC Investments Corporation, which is
itself a wholly-owned subsidiary of Mellon Bank Corporation. No officer has any
other affiliation with the Registrant.

Associates is an investment adviser registered under the Investment Advisers
Act of 1940, as amended (the "Advisers Act"). The list required by this Item 28
of officers and partners of Associates, together with any information as to any
business profession, vocation or employment of a substantial nature engaged in
by such officers and partners during the past two years, is incorporated herein
by reference to Schedules A and D of Form ADV filed by Associates pursuant to
the Advisers Act (SEC File No. 801- ).

Item 29. Principal Underwriters

(a) None

(b) Not Applicable

Item 30. Location of Accounts and Records

The books, accounts and other documents required by Section 31(a) under the
Investment Company Act and the rules promulgated thereunder will be maintained
in the physical possession of Registrant; Registrant's Transfer Agent, The
Vanguard Group, Inc. c/o The Vanguard Financial Center, Valley Forge,
Pennsylvania 19482; and the Registrant's Custodian, State Street Bank and Trust
Company, 225 Franklin Street, Boston, Massachusetts 02105.

Item 31. Management Services

Other than the Amended and Restated Funds' Service Agreement which was
previously filed as Exhibit 9(c) and described in Part B hereof under
"Management of the Fund" the Registrant is not a party to any management-related
service contract.

Item 32. Undertakings

Registrant hereby undertakes to provide an Annual Report to Shareholders or
prospective investors, free of charge, upon request.

C-2
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant hereby certifies that it meets the
requirements for effectiveness pursuant to Paragraph (b) of Rule 485 and has
duly caused this Post-Effective Amendment to this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the Town
of Valley Forge and the Commonwealth of Pennsylvania, on the 20th day of April,
1998.

Vanguard/Morgan Growth Fund, Inc.

BY: (Raymond J. Klapinsky)
John C. Bogle*, Senior Chairman of the Board and Director
April 20, 1998

BY: (Raymond J. Klapinsky)
John J. Brennan*, Chairman, Director and Chief Executive Officer
April 20, 1998

BY: (Raymond J. Klapinsky)
Robert E. Cawthorn*, Director
April 20, 1998

BY: (Raymond J. Klapinsky)
Barbara B. Hauptfuhrer*, Director
April 20, 1998

BY: (Raymond J. Klapinsky)
Bruce K. MacLaury*, Director
April 20, 1998

BY: (Raymond J. Klapinsky)
Burton G. Malkiel*, Director
April 20, 1998

BY: (Raymond J. Klapinsky)
Alfred M. Rankin, Jr.*, Director
April 20, 1998

BY: (Raymond J. Klapinsky)
John C. Sawhill*, Director
April 20, 1998

BY: (Raymond J. Klapinsky)
James O. Welch, Jr.*, Director
April 20, 1998

BY: (Raymond J. Klapinsky)
J. Lawrence Wilson*, Director
April 20, 1998

BY: (Raymond J. Klapinsky)
Richard F. Hyland*, Treasurer and Principal
Financial Officer and Accounting Officer
April 20, 1998

*By Power of Attorney. See File Number 2-14336, January 23, 1990. Incorporated
by Reference.

C-3

<PAGE>

INDEX TO EXHIBITS

CONSENT OF INDEPENDENT ACCOUNTANTS EX-99.B11
SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS EX-99.B16
FINANCIAL DATA SCHEDULE EX-27

EX-99.B11

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 51 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 6, 1998 relating to the financial
statements and financial highlights appearing in the December 31, 1997 Annual
Report to Shareholders of Vanguard/Morgan Growth Fund, which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the heading "Financial Highlights" in the
Prospectuses and under the heading "Financial Statements" in the Statement of
Additional Information.

PRICE WATERHOUSE LLP
Philadelphia, PA
April 15, 1998

EX-99.B16

SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
VANGUARD/MORGAN GROWTH FUND, INC.

1. Average Annual Total Return (As of December 31, 1997)
P (1 + T)n = ERV

Where: P = a hypothetical initial payment of $1,000
T = average annual total return
N = number of years
ERV = ending redeemable value at the end of the period

EXAMPLE:

One Year
P = $1,000
T = 30.81%
N = 1 yr.
ERV = $1,308.10

Five Year
P = $1,000
T = 18.28%
N = 5 yrs.
ERV = $2,314.65

Ten Year
P = $1,000
T = 17.10%
N = 10 yrs.
ERV = $4,846.62

2. YIELD (30 Days Ended December 31, 1997)

a - b
Yield = 2[( --------- +1)(6) - 1]
c x d

Where: a = dividends and interest paid during the period
b = expense dollars during the period (net of
reimbursements)
c = the average daily number of shares outstanding during
the period
d = the maximum offering price per share on the last day of
the period

Example a = $3,131,166.34
b = $793,173.90
c = 157,480,632.35
d = $17.54
Yield = 1.02%

WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 6
<CIK> 0000068139
<NAME> VANGUARD/MORGAN GROWTH FUND, INC.
<MULTIPLIER> 1,000
<CURRENCY> US

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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</TABLE>