VANGUARD/PRIMECAP FUND INC, 485BPOS, 2000-03-17

VANGUARD/PRIMECAP FUND INC
485BPOS, 2000-03-17

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT (NO. 2-92948) UNDER THE SECURITIES ACT OF 1933

PRE-EFFECTIVE AMENDMENT NO.

POST-EFFECTIVE AMENDMENT NO. 19

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 21

VANGUARD PRIMECAP FUND
(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)

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

REGISTRANT'S TELEPHONE NUMBER (610) 669-1000

R. GREGORY BARTON, ESQUIRE
P.O. BOX 876
VALLEY FORGE, PA 19482

IT IS PROPOSED THAT THIS AMENDMENT BECOME EFFECTIVE:
ON APRIL 7, 2000, PURSUANT TO PARAGRAPH (B) OF RULE 485 OF THE SECURITIES ACT OF
1933.

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

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VANGUARD(R)
PRIMECAP FUND

Prospectus
April 7, 2000

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This prospectus contains
financial data for the
Fund through the
fiscal year ended
December 31, 1999.

[A MEMBER OF
THE VANGUARD GROUP LOGO]

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VANGUARD PRIMECAP FUND
Prospectus

April 7, 2000

A Growth Stock Mutual Fund

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CONTENTS
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1 FUND PROFILE 11 FINANCIAL HIGHLIGHTS

3 ADDITIONAL INFORMATION 13 INVESTING WITH VANGUARD

3 A WORD ABOUT RISK 13 Services and Account Features

3 WHO SHOULD INVEST 14 Types of Accounts

5 PRIMARY INVESTMENT STRATEGIES 15 Buying Shares

7 THE FUND AND VANGUARD 16 Redeeming Shares

8 INVESTMENT ADVISER 20 Transferring Registration

9 DIVIDENDS, CAPITAL GAINS, AND TAXES 21 Fund and Account Updates

10 SHARE PRICE GLOSSARY (inside back cover)

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WHY READING THIS PROSPECTUS IS IMPORTANT

This prospectus explains the objective, risks, and strategies of Vanguard
PRIMECAP Fund. To highlight terms and concepts important to mutual fund
investors, we have provided "Plain Talk(R)" 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.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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FUND PROFILE

The following profile summarizes key features of Vanguard PRIMECAP Fund.

NOTE: THE FUND IS CURRENTLY CLOSED TO NEW INVESTORS. EXISTING SHAREHOLDERS
MAY PURCHASE ADDITIONAL FUND SHARES, BUT MAY NOT INVEST MORE THAN $25,000 EACH
YEAR.

INVESTMENT OBJECTIVE

The Fund seeks to provide long-term capital growth.

INVESTMENT STRATEGIES

The Fund invests in stocks with above-average earnings growth potential that is
not reflected in the current market price. The Fund's portfolio consists
predominantly of large-cap and mid-cap stocks.

PRIMARY RISKS

THE FUND'S TOTAL RETURN, LIKE STOCK PRICES GENERALLY, WILL FLUCTUATE WITHIN A
WIDE RANGE, SO AN INVESTOR COULD LOSE MONEY OVER SHORT OR EVEN LONG PERIODS. The
Fund is also subject to:

- - Investment style risk, which is the chance that returns from large-cap and
mid-cap growth stocks will trail returns from other asset classes or the
overall stock market.

- - Manager risk, which is the chance that poor security selection will cause
the Fund to underperform other funds with similar investment objectives.

PERFORMANCE/RISK INFORMATION

The bar chart and table below provide an indication of the risk of investing in
the Fund. The bar chart shows the Fund's performance in each calendar year over
a ten-year period. The table shows how the Fund's average annual total returns
for one, five, and ten calendar years compare with those of a broad-based
securities market index. Keep in mind that the Fund's past performance does not
necessarily indicate how it will perform in the future.

----------------------------------------------------
ANNUAL TOTAL RETURNS
----------------------------------------------------
1990 -2.79%
1991 33.14%
1992 8.99%
1993 18.03%
1994 11.41%
1995 35.48%
1996 18.31%
1997 36.79%
1998 25.44%
1999 41.34%
----------------------------------------------------

During the ten-year period shown in the bar chart, the highest return for a
calendar quarter was 28.84% (quarter ended December 31, 1998) and the lowest
return for a quarter was -21.57% (quarter ended September 30, 1990).

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AVERAGE ANNUAL TOTAL RETURNS FOR YEARS ENDED DECEMBER 31, 1999
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1 YEAR 5 YEARS 10 YEARS
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Vanguard PRIMECAP Fund 41.34% 31.20% 21.84%
Standard & Poor's 500 Index 21.04 28.56 18.21
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PLAIN TALK ABOUT
THE COSTS OF INVESTING

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

The following table describes the fees and expenses you may pay if you buy and
hold shares of the Fund. The expenses shown under Annual Fund Operating Expenses
are based upon those incurred in the fiscal year ended December 31, 1999.

SHAREHOLDER FEES (fees paid directly from your investment)

Sales Charge (Load) Imposed on Purchases: None
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fee: None
Exchange Fee: None

ANNUAL FUND OPERATING EXPENSES (expenses deducted from the Fund's assets)
Management Expenses: 0.49%
12b-1 Distribution Fee: None
Other Expenses: 0.02%
TOTAL ANNUAL FUND OPERATING EXPENSES: 0.51%

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. It illustrates the
hypothetical expenses that you would incur over various periods if you invest
$10,000 in the Fund. This example assumes that the Fund provides a return of 5%
a year, and that operating expenses remain the same. The results apply whether
or not you redeem your investment at the end of each period.

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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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$52 $164 $285 $640
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THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE. ACTUAL FUTURE EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.

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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 PRIMECAP Fund's expense ratio in fiscal year 1999 was 0.51%,
or $5.10 per $1,000 of average net assets. The average multi-cap core mutual
fund had expenses in 1999 of 1.38%, or $13.80 per $1,000 of average net assets
(derived from data provided by Lipper Inc., which reports on the mutual fund
industry). Management expenses, which are one part of operating expenses,
include investment advisory fees as well as other costs of managing a fund--such
as account maintenance, reporting, accounting, legal, and other administrative
expenses.
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ADDITIONAL INFORMATION

DIVIDENDS AND CAPITAL GAINS MINIMUM INITIAL INVESTMENT
Distributed annually in December The Fund is currently closed to new
investors. Existing shareholders may
INVESTMENT ADVISER purchase additional Fund shares, but may not
PRIMECAP Management Company, invest more than $25,000 each year.
Pasadena, Calif., since inception
NEWSPAPER ABBREVIATION
INCEPTION DATE Prmcp
November 1, 1984
VANGUARD FUND NUMBER
NET ASSETS AS OF DECEMBER 31, 059
1999
$17.9 billion CUSIP NUMBER
921936100
SUITABLE FOR IRAS
Yes TICKER SYMBOL
VPMCX
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A WORD ABOUT RISK

This prospectus describes risks you would face as an investor in Vanguard
PRIMECAP 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. As you consider an investment in the Fund, you should also
take into account your personal tolerance for the daily fluctuations of the
stock market.

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

The Fund may be a suitable investment for you if:

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

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

- - You are not looking for current income.

- - You are comfortable with the volatility that accompanies growth-stock
investing.

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THE VANGUARD FUNDS DO NOT PERMIT MARKET-TIMING. DO NOT INVEST IN THIS FUND
IF YOU ARE A MARKET-TIMER.

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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.
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The Fund has adopted the following policies, among others, to discourage
short-term trading:

- - 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. A purchase request could be rejected
because of the timing of the investment or because of a history of
excessive trading by the investor.

- - There is a limit to the number of times you can exchange into and out of
the Fund (see "Redeeming Shares" in the INVESTING WITH VANGUARD section).

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

PRIMARY INVESTMENT STRATEGIES

This section explains the strategies that the investment adviser uses in pursuit
of the Fund's objective, long-term growth of capital. The Fund's Board of
Trustees oversees the management of the Fund, and may change the investment
strategies in the interest of shareholders. In addition, this section discusses
several important risks--market risk, investment style risk, and manager
risk--faced by investors in the Fund.

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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.
Market capitalization changes over time, and there is no "official" definition
of the boundaries of large-, mid-, and small-cap stocks. Vanguard generally
defines large-capitalization (large-cap) funds as those holding stocks of
companies whose outstanding shares have a market value exceeding $12 billion;
mid-cap funds as those typically holding stocks of companies with a market value
between $1 billion and $12 billion; and small-cap funds as those typically
holding stocks of companies with a market value of less than $1 billion.
Vanguard periodically reassesses these classifications.

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MARKET EXPOSURE

The Fund invests chiefly in the common stocks of mid- and large-capitalization
companies that offer favorable prospects for capital growth and sell at
attractive prices, but that typically produce little current income.

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

To illustrate the volatility of stock prices, the following table shows the
best, worst, and average total returns for the U.S. stock market over various
periods as measured by the Standard & Poor's 500 Index, a widely used barometer
of market activity. (Total returns consist of dividend income plus change in
market price.) 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, that the gap between best and worst tends to narrow
over the long term.

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U.S. STOCK MARKET RETURNS (1926-1999)
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1 YEAR 5 YEARS 10 YEARS 20 YEARS
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Best 54.2% 28.6% 19.9% 17.9%
Worst -43.1 -12.4 -0.9 3.1
Average 13.2 11.0 11.1 11.1
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The table covers all of the 1-, 5-, 10-, and 20-year periods from 1926
through 1999. You can see, for example, that while the average return on stocks
for all of the 5-year periods was 11.0%, returns for individual 5-year periods
ranged from a -12.4% average (from 1928 through 1932) to 28.6% (from 1995
through 1999). These average returns reflect past performance on common stocks;
you should not regard them as an indication of future returns from either the
stock market as a whole or this Fund in particular.

Growth stocks, which are the Fund's primary investments, are likely to be
even more volatile in price than the stock market as a whole. Historically,
growth funds have tended to outperform in bull markets and underperform in
declining markets. Of course, there is no guarantee that this pattern will
continue in the future. The Fund also holds a significant number of mid-cap
stocks, which tend to be more volatile than the large-cap stocks that dominate
the S&P 500 Index.

[FLAG] THE FUND IS SUBJECT TO INVESTMENT STYLE RISK, WHICH IS THE CHANCE THAT
RETURNS FROM GROWTH STOCKS WILL TRAIL RETURNS FROM OTHER ASSET CLASSES OR
THE OVERALL STOCK MARKET. AS A GROUP, GROWTH STOCKS TEND TO GO THROUGH
CYCLES OF DOING BETTER--OR WORSE--THAN COMMON STOCKS IN GENERAL. THESE
PERIODS HAVE, IN THE PAST, LASTED FOR AS LONG AS SEVERAL YEARS.

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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 believed to have
above-average potential for growth in revenue and earnings. Reflecting the
market's high expectations for superior growth, such stocks typically have low
dividend yields and above-average prices in relation to such measures as
revenue, earnings, and book value. Value funds generally emphasize stocks of
companies from which the market does not expect strong growth. The prices of
value stocks typically are below-average in comparison with such factors as
earnings and book value, and these stocks typically have above-average dividend
yields. Growth and value stocks have, in the past, produced similar long-term
returns, though each category has periods when it outperforms the other. In
general, growth funds appeal to investors who will accept more volatility in
hopes of a greater increase in share price. Growth funds also may appeal to
investors with taxable accounts who want a higher proportion of 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.

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SECURITY SELECTION

PRIMECAP Management Company (PRIMECAP), adviser to the Fund, selects common
stocks that it believes have above-average earnings growth potential that is not
reflected in the current market price. Stocks selected for the Fund typically
have strong positions within their industries, increasing sales, improving
profitability, good long-term prospects for above-average growth in earnings,
and strong management teams.

Based on careful analysis, PRIMECAP attempts to quantify a company's
"fundamental value." It then compares the fundamental value with the market
price of the company's stock. PRIMECAP decides whether to purchase the stock
based mainly on how attractive its market price is in relation to its
fundamental value. Although the Fund invests with a long-term horizon of three
to five years, it may sell a stock if its market price appears to have risen
above its fundamental value, or if other securities appear to be more favorably
priced.

PRIMECAP does not try to market-time. However, if attractively priced
stocks cannot be found, the Fund's cash levels will increase.

Because the Fund's selections are determined by an analysis of each
individual stock, the Fund's makeup may differ substantially from the overall
market's characteristics. For example, the proportion of the Fund's assets
invested in a particular industry may be significantly larger or smaller than
the proportion of the overall stock market represented by that industry.

As of December 31, 1999, the Fund had invested 39.1% of total net assets in
its top ten holdings.

The Fund is generally managed without regard to tax ramifications.

[FLAG] THE FUND IS SUBJECT TO MANAGER RISK, WHICH IS THE CHANCE THAT THE ADVISER
MAY DO A POOR JOB OF SELECTING STOCKS.

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TURNOVER RATE

Although the Fund generally seeks to invest for the long term, it may sell
securities regardless of how long the securities have been held. The Fund's
average turnover rate for the past five years has been about 12%. (A turnover
rate of 100% would occur, for example, if the Fund sold and replaced securities
valued at 100% of its net assets within a one- year period.)

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PLAIN TALK ABOUT
TURNOVER RATE

Before investing in a mutual fund, you should review its turnover rate. This
gives an indication of how transaction costs could affect 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 turnover rates may be more likely
to generate capital gains that must be distributed to shareholders as income
subject to taxes. The average turnover rate in 1999 for all large cap growth
funds was approximately 97%, according to Morningstar, Inc.

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OTHER INVESTMENT POLICIES AND RISKS

Although the Fund typically does not make significant investments in securities
of companies based outside the United States, the Fund reserves the right to
invest up to 20% of its assets in foreign securities. These securities may be
traded in U.S. or foreign markets. To the extent that it owns foreign stocks,
the Fund is subject to (1) country risk, which 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, and (2) currency risk, which is
the possibility that Americans investing abroad could lose money because of a
rise in the value of the U.S. dollar versus foreign currencies.

The Fund may temporarily depart from its normal investment policies--for
instance, by investing substantially in cash reserves--in response to
extraordinary market, economic, political, or other conditions. In doing so, the
Fund may succeed in avoiding losses but otherwise fail to achieve its investment
objective.

THE FUND AND VANGUARD

The Fund is a member of The Vanguard Group, a family of more than 35 investment
companies with more than 100 funds holding assets worth more than $520 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 distribution fees, each fund
pays its allocated share of The Vanguard Group's marketing costs.

<PAGE>

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PLAIN TALK ABOUT
VANGUARD'S UNIQUE CORPORATE STRUCTURE

The Vanguard Group is truly a MUTUAL mutual fund company. It is owned jointly by
the funds it oversees and thus indirectly by the shareholders in those funds.
Most other mutual funds are operated by for-profit management companies that may
be owned by one person, by a group of individuals, or by investors who own the
management company's stock. By contrast, Vanguard provides its services on an
"at-cost" basis, and the funds' expense ratios reflect only these costs. No
separate management company reaps profits or absorbs losses from operating the
funds.
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INVESTMENT ADVISER

The Fund employs PRIMECAP Management Company, 225 South Lake Avenue, Pasadena,
CA 91101, as its investment adviser. PRIMECAP manages the Fund subject to the
control of the Trustees and officers of the Fund.

PRIMECAP's advisory fee is paid quarterly. This fee is based on certain
annual percentage rates applied to the Fund's average month-end assets for each
quarter.

For the fiscal year ended December 31, 1999, the advisory fees represented
an effective annual rate of 0.19%.

The Fund has authorized PRIMECAP to choose brokers or dealers to handle the
purchase and sale of securities for the Fund, and to get the best available
price and most favorable execution from these brokers with respect to all
transactions.

In the interest of obtaining better execution of a transaction, PRIMECAP
may choose brokers who charge higher commissions. If more than one broker can
obtain the best available price and most favorable execution of a transaction,
then PRIMECAP is authorized to choose a broker who, in addition to executing the
transaction, will provide research services to PRIMECAP or the Fund. Also, the
Fund may direct PRIMECAP to use a particular broker for certain transactions in
exchange for commission rebates or research services provided to the Fund.

The Board of Trustees may, without prior approval from shareholders, change
the terms of the advisory agreement or hire a new investment adviser--either as
a replacement for PRIMECAP or as an additional adviser. Any significant change
in the Fund's advisory arrangement will be communicated to shareholders in
writing. In addition, as the Fund's sponsor and overall manager, The Vanguard
Group may provide investment advisory services to the Fund, on an at-cost basis,
at any time.

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PLAIN TALK ABOUT
THE FUND'S ADVISER

The individuals who oversee the Fund's investments, along with the percentage of
Fund assets for which each is primarily responsible, are:

HOWARD B. SCHOW (30%), Chairman of PRIMECAP; has worked in investment management
since 1956; has managed assets since 1967; with PRIMECAP since 1983; B.A.,
Williams College; M.B.A., Harvard Business School.

THEO A. KOLOKOTRONES (35%), President of PRIMECAP; has worked in investment
management since 1970; has managed assets since 1979; with PRIMECAP since 1983;
B.A., University of Chicago; M.B.A., Harvard Business School.

JOEL P. FRIED (20%), Executive Vice President of PRIMECAP; has worked in
investment management since 1985; has managed assets since 1986; with PRIMECAP
since 1986; B.S., University of California, Los Angeles; M.B.A., Anderson
Graduate School of Business, University of California, Los Angeles.

Each of these three individuals manages his portion of the Fund autonomously;
there is no decision-making by committee. The remaining 15% of the Fund is
managed by individuals in PRIMECAP's research department.

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DIVIDENDS, CAPITAL GAINS, AND TAXES

FUND DISTRIBUTIONS

The Fund distributes to shareholders virtually all of its net income (interest
and dividends, less expenses), as well as any capital gains realized from the
sale of its holdings. Distributions generally occur in December. 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 receive
distributions of income dividends or capital gains in cash, or you can have them
automatically reinvested in more shares of the Fund.

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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 a capital gains distribution. Income
dividends come from both the dividends that the fund earns from its holdings and
the interest it receives from its money market and bond investments. Capital
gains are realized whenever the fund sells securities for higher prices than it
paid for them. These capital gains are either short-term or long-term, depending
on whether the fund held the securities for one year or less, or more than one
year.
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BASIC TAX POINTS

Vanguard will send you a statement each year showing the tax status of all your
distributions. In addition, taxable investors should be aware of the following
basic tax points: n Distributions are taxable to you for federal income tax
purposes whether or not you reinvest these amounts in additional Fund shares.

<PAGE>

- - Distributions declared in December--if paid to you by the end of
January--are taxable for federal income tax purposes as if received in
December.

- - Any dividends and short-term capital gains that you receive are taxable to
you as ordinary income for federal income tax purposes.

- - Any distributions of net long-term capital gains are taxable to you as
long-term capital gains for federal income tax purposes, no matter how long
you've owned shares in the Fund.

- - Capital gains distributions may vary considerably from year to year as a
result of the Fund's normal investment activities and cash flows.

- - A sale or exchange of Fund shares is a taxable event. This 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.

- - Dividend and capital gains distributions that you receive, as well as your
gains or losses from any sale or exchange of Fund shares, may be subject to
state and local income taxes.

GENERAL INFORMATION

BACKUP WITHHOLDING. By law, Vanguard must withhold 31% of any taxable
distributions or redemptions from your account if you do not:

- - provide us with your correct taxpayer identification number;

- - certify that the taxpayer identification number is correct; and

- - confirm that you are not subject to backup withholding.

Similarly, Vanguard must withhold from your account if the IRS instructs us to
do so.

FOREIGN INVESTORS. The Vanguard funds generally do not offer their shares for
sale outside of the United States. Foreign investors should be aware that U.S.
withholding and estate taxes may apply to any investments in Vanguard funds.

INVALID ADDRESSES. If a dividend or capital gains distribution check mailed to
your address of record is returned as undeliverable, Vanguard will automatically
reinvest all future distributions until you provide us with a valid mailing
address.

TAX CONSEQUENCES. This prospectus provides general tax information only. If you
are investing through a tax-deferred retirement account, such as an IRA, special
tax rules apply. Please consult your tax adviser for detailed information about
a fund's tax consequences for you.

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PLAIN TALK ABOUT
"BUYING A DIVIDEND"

Unless you are investing through 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 doing so can cost you money in taxes. 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 still have only $5,000 (250 shares x $19 = $4,750 in share value, plus 250
shares x $1 = $250 in distributions), but you owe tax on the $250 distribution
you received--even if you reinvest it in more shares. To avoid "buying a
dividend," check a fund's distribution schedule before you invest.
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<PAGE>

SHARE PRICE

The Fund's share price, called its net asset value, or NAV, is calculated each
business day after the close of regular trading on the New York Stock Exchange
(the NAV is not calculated on holidays or other days when the Exchange is
closed). Net asset value per share is computed by adding up the total value of
the Fund's investments and other assets, subtracting any of its liabilities
(debts), and then dividing by the number of Fund shares outstanding:

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

Knowing the daily net asset value is useful to you as a shareholder because
it indicates the current value of your investment. The Fund's NAV, multiplied by
the number of 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.

A NOTE ON PRICING: The Fund's investments will be priced at their market
value when market quotations are readily available. When these quotations are
not readily available, investments will be priced at their fair value,
calculated according to procedures adopted by the Fund's Board of Trustees.

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 PRMCP.

FINANCIAL HIGHLIGHTS

The following financial highlights table is intended to help you understand the
Fund's financial performance for the past five years, and certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost each year on
an investment in the Fund (assuming reinvestment of all dividend and capital
gains distributions). This information has been derived from the financial
statements audited by PricewaterhouseCoopers LLP, independent accountants, whose
report--along with the Fund's financial statements--is included in the Fund's
most recent annual report to shareholders. You may have the annual report sent
to you without charge by contacting Vanguard.

<PAGE>

FINANCIAL HIGHLIGHTS (continued)

- --------------------------------------------------------------------------------
VANGUARD PRIMECAP FUND
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
NET ASSET VALUE,
BEGINNING OF YEAR $47.66 $39.56 $30.08 $26.23 $19.98
- --------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .26 .34 .21 .19 .22
Net Realized and
Unrealized Gain (Loss)
on Investments 19.07 9.63 10.77 4.59 6.84
--------------------------------------------------------
Total from Investment
Operations 19.33 9.97 10.98 4.78 7.06
--------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income (.27) (.35) (.20) (.20) (.22)
Distributions from
Realized Capital Gains (4.65) (1.52) (1.30) (.73) (.59)
--------------------------------------------------------
Total Distributions (4.92) (1.87) (1.50) (.93) (.81)
- --------------------------------------------------------------------------------
NET ASSET VALUE, END
OF YEAR $62.07 $47.66 $39.56 $30.08 $26.23
- --------------------------------------------------------------------------------
TOTAL RETURN 41.34% 25.44% 36.79% 18.31% 35.48%
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Year (Millions) $17,912 $11,210 $8,186 $4,204 $3,237
Ratio of Total
Expenses to Average
Net Assets 0.51% 0.51% 0.51% 0.59% 0.58%
Ratio of Net
Investment Income to
Average Net Assets 0.50% 0.78% 0.69% 0.69% 0.99%
Turnover Rate 19% 13% 13% 10% 7%
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
HOW TO READ THE FINANCIAL HIGHLIGHTS TABLE

The Fund began fiscal 1999 with a net asset value (price) of $47.66 per share.
During the year, the Fund earned $0.26 per share from investment income
(interest and dividends) and $19.07 per share from investments that had
appreciated in value or that were sold for higher prices than the Fund paid for
them.

Shareholders received $4.92 per share in the form of dividend and capital gains
distributions. A portion of each year's distributions may come from the prior
year's income or capital gains.

The earnings ($19.33 per share) minus the distributions ($4.92 per share)
resulted in a share price of $62.07 at the end of the year. This was an increase
of $14.41 per share (from $47.66 at the beginning of the year to $62.07 at the
end of the year). For a shareholder who reinvested the distributions in the
purchase of more shares, the total return from the Fund was 41.34% for the year.

As of December 31, 1999, the Fund had $17.9 billion in net assets. For the year,
its expense ratio was 0.51% ($5.10 per $1,000 of net assets); and its net
investment income amounted to 0.50% of its average net assets. It sold and
replaced securities valued at 19% of its net assets.
- --------------------------------------------------------------------------------

"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc., and have been licensed
for use by The Vanguard Group.

<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. 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, or to obtain fund or account information.
- --------------------------------------------------------------------------------
TELEPHONE REDEMPTIONS (SALES AND EXCHANGES)
Automatically set up for this Fund unless you notify us otherwise.
- --------------------------------------------------------------------------------
VANGUARD(R) DIRECT DEPOSIT SERVICE [BOOK]
Automatic method for depositing your paycheck or U.S. government payment
(including Social Security and government pension checks) into your account.
- --------------------------------------------------------------------------------
VANGUARD(R) AUTOMATIC EXCHANGE SERVICE [BOOK]
Automatic method for moving a fixed amount of money from one Vanguard fund
account to another.
- --------------------------------------------------------------------------------
VANGUARD FUND EXPRESS(R) [BOOK]
Electronic method for buying or selling 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(TM) [BOOK]
Electronic method for transferring dividend and/or capital gains distributions
directly from your Vanguard fund account to your bank, savings and loan, or
credit union account.
- --------------------------------------------------------------------------------
VANGUARD TELE-ACCOUNT(R) 1-800-662-6273 (ON-BOARD) [BOOK]

Toll-free 24-hour access to Vanguard fund and account information--as well as
some transactions--by using any touch-tone phone. Tele-Account provides total
return, share price, 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 shares to and from most
Vanguard funds.

- --------------------------------------------------------------------------------
ACCESS VANGUARD(TM) www.vanguard.com [COMPUTER]

You can use your personal computer to perform certain transactions for most
Vanguard funds by accessing our website. To establish this service, you must
register through our website. We will then mail you an account access password
that allows you to process the following financial and administrative
transactions online:

- - Open a new account.*
- - Buy, sell, or exchange shares of most funds.
- - Change your name/address.

<PAGE>

- - Add/change fund options (including dividend options, Vanguard Fund Express,
bank instructions, checkwriting, and Vanguard Automatic Exchange Service).
(Some restrictions may apply.) Please call our Client Services Department
for assistance.

*Only current Vanguard shareholders can open a new account online, by exchanging
shares from other existing Vanguard accounts.
- --------------------------------------------------------------------------------
INVESTOR INFORMATION DEPARTMENT: 1-800-662-7447 (SHIP) TEXT TELEPHONE:
1-800-952-3335
Call Vanguard for information on our funds, fund services, and retirement
accounts, and to request literature.
- --------------------------------------------------------------------------------
CLIENT SERVICES DEPARTMENT: 1-800-662-2739 (CREW) TEXT TELEPHONE: 1-800-749-7273

Call Vanguard for information on your account, account transactions, and account
statements.

- --------------------------------------------------------------------------------
SERVICES FOR CLIENTS OF VANGUARD'S INSTITUTIONAL DIVISION: 1-888-809-8102
Vanguard's Institutional Division offers a variety of specialized services for
large institutional investors, including the ability to effect account
transactions through private electronic networks and third-party recordkeepers.
- --------------------------------------------------------------------------------

TYPES OF ACCOUNTS

Individuals and institutions can establish a variety of accounts with Vanguard.
- --------------------------------------------------------------------------------
FOR ONE OR MORE PEOPLE
Open an account in the name of one (individual) or more (joint tenants) people.
- --------------------------------------------------------------------------------
FOR HOLDING PERSONAL TRUST ASSETS [BOOK]
Invest assets held in an existing personal trust.
- --------------------------------------------------------------------------------
FOR INDIVIDUAL RETIREMENT ACCOUNTS [BOOK]
Open a traditional IRA account or a Roth IRA account. Eligibility and other
requirements are established by federal law and Vanguard custodial account
agreements. For more information, please call 1-800-662-7447 (SHIP).
- --------------------------------------------------------------------------------
FOR AN ORGANIZATION [BOOK]
Open an account as a corporation, partnership, endowment, foundation, or other
entity.
- --------------------------------------------------------------------------------
FOR THIRD-PARTY TRUSTEE RETIREMENT INVESTMENTS
Open an account as a retirement trust or plan based on an existing corporate or
institutional plan. These accounts are established by the trustee of the
existing plan.
- --------------------------------------------------------------------------------
VANGUARD PROTOTYPE PLANS
Open a variety of retirement accounts using Vanguard prototype plans for
individuals, sole proprietorships, and small businesses. For more information,
please call 1-800-662-2003.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
A NOTE ON INVESTING WITH VANGUARD THROUGH OTHER FIRMS
You may purchase or sell Fund shares through a financial intermediary such as a
bank, broker, or investment adviser. If you invest with Vanguard through an
intermediary, please read that firm's program materials carefully to learn of
any special rules that may apply. For example, special terms may apply to
additional service features, fees, or other policies. Consult your intermediary
to determine when your order will be priced.
- --------------------------------------------------------------------------------

<PAGE>

BUYING SHARES

You buy your shares at the Fund's next-determined net asset value after Vanguard
receives your request. As long as your request is received before the close of
regular trading on the New York Stock Exchange, generally 4 p.m. Eastern time,
you will buy your shares at that day's net asset value.
- --------------------------------------------------------------------------------
MINIMUM INVESTMENT TO . . .

add to an existing account
$100 by mail or exchange; $1,000 by wire.
NOTE: THE FUND IS CURRENTLY CLOSED TO NEW INVESTORS. EXISTING SHAREHOLDERS MAY
PURCHASE ADDITIONAL FUND SHARES, BUT MAY NOT INVEST MORE THAN $25,000 EACH YEAR.

- --------------------------------------------------------------------------------
A NOTE ON LOW BALANCES
The Fund reserves the right to close any nonretirement fund account whose
balance falls below the minimum initial investment. The Fund will deduct a $10
annual fee in June if your nonretirement account balance at that time is below
$2,500. The low balance fee is waived for investors who have aggregate Vanguard
account assets of $50,000 or more.
- --------------------------------------------------------------------------------
BY MAIL TO . . . [ENVELOPE]
add to an existing account

Mail your check with an Invest-By-Mail form detached from your confirmation
statement to the address listed on the form. Please do not alter Invest-By-Mail
forms, since they are fund- and account-specific.

Make your check payable to: The Vanguard Group-59
All purchases must be made in U.S. dollars, and checks must be drawn on U.S.
banks.

First-class mail to: Express or Registered mail to:
Vanguard Group The Vanguard Group
P.O. Box 1110 455 Devon Park Drive
Valley Forge, PA 19482-1110 Wayne, PA 19087-1815

For clients of Vanguard's Institutional Division . . .

First-class mail to: Express or Registered mail to:
The Vanguard Group The Vanguard Group
P.O. Box 2900 455 Devon Park Drive
Valley Forge, PA 19482-2900 Wayne, PA 19087-1815
- --------------------------------------------------------------------------------
IMPORTANT NOTE: To prevent check fraud, Vanguard will not accept checks made
payable to third parties.
- --------------------------------------------------------------------------------
BY TELEPHONE TO . . . [PHONE]
add to an existing account

Call Vanguard Tele-Account* 24 hours a day--or Client Services during business
hours--to exchange from another Vanguard fund account with the same registration
(name, address, taxpayer identification number, and account type). (Note that
some restrictions apply to index fund accounts.) 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 available.

<PAGE>

Vanguard Tele-Account Client Services
1-800-662-6273 1-800-662-2739

*You must obtain a Personal Identification Number (PIN) through Tele-Account at
least seven days before you request your first exchange.
- --------------------------------------------------------------------------------
IMPORTANT NOTE: Once you have initiated a telephone transaction and a
confirmation number has been assigned, the transaction cannot be revoked. We
reserve the right to refuse any purchase request.

- --------------------------------------------------------------------------------
BY WIRE TO ADD TO AN EXISTING ACCOUNT [WIRE]

Call Client Services to arrange your wire transaction. Wire transactions to
retirement accounts are only available for asset transfers and rollovers from
other financial institutions. Individual IRA contributions will not be accepted
by wire.

Wire to:
FRB ABA 021001088
HSBC Bank USA

For credit to:
Account: 000112046
Vanguard Incoming Wire Account

In favor of:
Vanguard PRIMECAP Fund-59
[Account number, or temporary number for a new account]
[Registered account owner(s)]
[Registered address]
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
A NOTE ON LARGE PURCHASES
It is important that you call Vanguard before you invest a large dollar amount.
It is our responsibility to consider the interests of all Fund shareholders, and
so we reserve the right to refuse any purchase that may disrupt the Fund's
operation or performance.
- --------------------------------------------------------------------------------

REDEEMING SHARES

This section describes how you can redeem--that is, sell or exchange--the Fund's
shares.

When Selling Shares:
- - Vanguard sends the redemption proceeds to you or a designated third party.*
- - You can sell all or part of your Fund shares at any time.

*May require a signature guarantee; see footnote on page 19.

<PAGE>

When Exchanging Shares:
- - The redemption proceeds are used to purchase shares of a different Vanguard
fund.
- - You must meet the receiving fund's minimum investment requirements.
- - Vanguard reserves the right to revise or terminate the exchange privilege,
limit the amount of an exchange, or reject an exchange at any time, without
notice.

- - In order to exchange into an account with a different registration
(including a different name, address, or taxpayer identification number),
you must include the guaranteed signatures of all current account owners on
your written instructions.

In both cases, your transaction will be based on the Fund's next-determined
share price, subject to any special rules discussed in this prospectus.
- --------------------------------------------------------------------------------
NOTE: Once a redemption is initiated and a confirmation number given, the
transaction CANNOT be canceled.

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

HOW TO REQUEST A REDEMPTION
You can request a redemption from your Fund account in any one of three ways:
online, by telephone, or by mail.

The Vanguard funds whose shares you cannot exchange online or by telephone
are VANGUARD U.S. STOCK INDEX FUNDS, VANGUARD BALANCED INDEX FUND, VANGUARD
INTERNATIONAL STOCK INDEX FUNDS, VANGUARD REIT INDEX FUND, and VANGUARD GROWTH
AND INCOME FUND. These funds do, however, permit online and telephone exchanges
within IRAs and some other retirement accounts. If you sell shares of these
funds online, a redemption check will be sent to your address of record.

- --------------------------------------------------------------------------------
ONLINE REQUESTS [COMPUTER]
ACCESS VANGUARD at www.vanguard.com

You can use your personal computer to sell or exchange shares of most Vanguard
funds by accessing our website. To establish this service, you must register
through our website. We will then mail you an account access password that will
enable you to sell or exchange shares online (as well as perform other
transactions).

- --------------------------------------------------------------------------------
TELEPHONE REQUESTS [PHONE]
All Account Types Except Retirement:
Call Vanguard Tele-Account 24 hours a day--or Client Services during business
hours--to sell or exchange shares. You can exchange shares from this Fund to
open an account in another Vanguard fund or to add to an existing Vanguard fund
account with an identical registration.

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

Vanguard Tele-Account Client Services
1-800-662-6273 1-800-662-2739
- --------------------------------------------------------------------------------
SPECIAL INFORMATION: We will automatically establish the telephone redemption
option for your account, unless you instruct us otherwise in writing. While
telephone redemption is easy and convenient, this account feature involves a
risk of loss from unauthorized or fraudulent transactions. Vanguard will take
reasonable precautions to protect your account from fraud. You should do the
same by keeping your account information private and immediately reviewing any
account statements that we send

<PAGE>

to you. Make sure to contact Vanguard immediately about any transaction you
believe to be unauthorized.
- --------------------------------------------------------------------------------
We reserve the right to refuse a telephone redemption if the caller is unable to
provide:
- - The ten-digit account number.
- - The name and address exactly as registered on the account.
- - The primary Social Security or employer identification number as registered
on the account.

- - The Personal Identification Number (PIN), if applicable (for instance,
Tele-Account).

Please note that Vanguard will not be responsible for any account losses
due to telephone fraud, so long as we have taken reasonable steps to verify the
caller's identity. If you wish to remove the telephone redemption feature from
your account, please notify us in writing.
- --------------------------------------------------------------------------------
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 this section.
- --------------------------------------------------------------------------------
MAIL REQUESTS [ENVELOPE]
All Account Types Except Retirement:
Send a letter of instruction signed by all registered account holders. Include
the fund name and account number and (if you are selling) a dollar amount or
number of shares OR (if you are exchanging) the name of the fund you want to
exchange into and a dollar amount or number of shares. To exchange into an
account with a different registration (including a different name, address,
taxpayer identification number, or account type), you must provide Vanguard with
written instructions that include the guaranteed signatures of all current
owners of the fund from which you wish to redeem.

Vanguard Retirement Accounts:
For information on how to request distributions from:
- - Traditional IRAs and Roth IRAs--call Client Services.
- - 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.

First-class mail to: Express or Registered mail to:

The Vanguard Group The Vanguard Group
P.O. Box 1110 455 Devon Park Drive
Valley Forge, PA 19482-1110 Wayne, PA 19087-1815

For clients of Vanguard's Institutional Division . . .

First-class mail to: Express or Registered mail to:
The Vanguard Group The Vanguard Group
P.O. Box 2900 455 Devon Park Drive
Valley Forge, PA 19482-2900 Wayne, PA 19087-1815

<PAGE>

- --------------------------------------------------------------------------------
A NOTE ON LARGE REDEMPTIONS

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

If you redeem more than $250,000 worth of Fund shares within any 90-day
period, the Fund reserves the right to pay part or all of the redemption
proceeds above $250,000 in-kind, i.e., in securities, rather than in cash. If
payment is made in-kind, you may incur brokerage commissions if you elect to
sell the securities for cash.
- --------------------------------------------------------------------------------

OPTIONS FOR REDEMPTION PROCEEDS

You may receive your redemption proceeds in one of three ways: check, exchange
to another Vanguard fund, or Fund Express redemption.

- --------------------------------------------------------------------------------
CHECK REDEMPTIONS
Normally, Vanguard will mail your check within two business days of a
redemption.
- --------------------------------------------------------------------------------
EXCHANGE REDEMPTIONS
As described above, an exchange involves using the proceeds of your redemption
to purchase shares of another Vanguard fund.
- --------------------------------------------------------------------------------

FUND EXPRESS REDEMPTIONS
Vanguard will electronically transfer funds to your pre-linked checking or
savings account.

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

FOR OUR MUTUAL PROTECTION
For your best interests and ours, Vanguard applies these additional requirements
to redemptions:

REQUEST IN "GOOD ORDER"
All redemption requests must be received by Vanguard in "good order." This means
that your request must include:
- - The Fund name and account number.
- - The amount of the transaction (in dollars or shares).
- - Signatures of all owners exactly as registered on the account (for mail
requests).
- - Signature guarantees (if required).*
- - Any supporting legal documentation that may be required.
- - Any outstanding certificates representing shares to be redeemed.

*For instance, a signature guarantee must be provided by all registered account
shareholders when redemption proceeds are to be sent to a different person or
address. A signature guarantee can be obtained from most commercial and savings
banks, credit unions, trust companies, or member firms of a U.S. stock
exchange.

TRANSACTIONS ARE PROCESSED AT THE NEXT-DETERMINED SHARE PRICE AFTER VANGUARD HAS
RECEIVED ALL REQUIRED INFORMATION.
- --------------------------------------------------------------------------------
LIMITS ON ACCOUNT ACTIVITY

Because excessive account transactions can disrupt the management of the Fund
and increase the Fund's costs for all shareholders, Vanguard limits account
activity as follows: n You may make no more than TWO SUBSTANTIVE "ROUND TRIPS"
THROUGH THE FUND during any 12-month period.

- - Your round trips through the Fund must be at least 30 days apart.
- - The Fund may refuse a share purchase at any time, for any reason.

<PAGE>

- - Vanguard may revoke an investor's telephone exchange privilege at any time,
for any reason.

A "round trip" is a redemption from the Fund followed by a purchase back into
the Fund. Also a "round trip" covers transactions accomplished by any
combination of methods, including transactions conducted by check, wire, or
exchange to/from another Vanguard fund. "Substantive" means a dollar amount that
Vanguard determines, in its sole discretion, could adversely affect the
management of the Fund.
- --------------------------------------------------------------------------------
RETURN YOUR SHARE CERTIFICATES
Any portion of your account represented by share certificates cannot be redeemed
until you return the certificates to Vanguard. Certificates must be returned
(unsigned), along with a letter requesting the sale or exchange you wish to
process, via certified mail to:

The Vanguard Group
455 Devon Park Drive
Wayne, PA 19087-1815
- --------------------------------------------------------------------------------

ALL TRADES ARE FINAL
Vanguard will not cancel any transaction request (including any purchase or
redemption) that we believe to be authentic once the request has been initiated
and a confirmation number assigned.
- --------------------------------------------------------------------------------
UNCASHED CHECKS
Please cash your distribution or redemption checks promptly. Vanguard will not
pay interest on uncashed checks.

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

TRANSFERRING REGISTRATION

You can transfer the registration of your Fund shares to another owner by
completing a transfer form and sending it to Vanguard.

First-class mail to: Express or Registered mail to:

The Vanguard Group The Vanguard Group
P.O. Box 1110 455 Devon Park Drive
Valley Forge, PA 19482-1110 Wayne, PA 19087-1815

For clients of Vanguard's Institutional Division . . .
First-class mail to: Express or Registered mail to:
The Vanguard Group The Vanguard Group
P.O. Box 2900 455 Devon Park Drive
Valley Forge, PA 19482-2900 Wayne, PA 19087-1815
- --------------------------------------------------------------------------------

<PAGE>

FUND AND ACCOUNT UPDATES

STATEMENTS AND REPORTS
We will send you account and tax statements to help you keep track of your 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
financial markets, a report from the advisers, and the Fund's financial
statements which include a listing of the Fund's holdings.
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 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, notify our Client Services Department at
1-800-662-2739.
- --------------------------------------------------------------------------------
CONFIRMATION STATEMENT
Sent each time you buy, sell, or exchange shares; confirms the trade date and
the amount of your transaction.
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY [BOOK]
Mailed quarterly for most accounts; shows the market value of 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.
- --------------------------------------------------------------------------------
TAX STATEMENTS
Generally mailed in January; report previous year's dividend and capital gains
distributions, proceeds from the sale of shares, and distributions from IRAs or
other retirement accounts.
- --------------------------------------------------------------------------------
AVERAGE COST REVIEW STATEMENT [BOOK]

Issued quarterly for most taxable accounts (accompanies your Portfolio Summary);
shows the average cost of shares that you redeemed during the calendar year,
using only the average cost single category method.

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

<PAGE>

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<PAGE>

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<PAGE>

(THIS PAGE INTENTIONALLY LEFT BLANK.)

<PAGE>

GLOSSARY OF INVESTMENT TERMS

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

CASH RESERVES
Cash deposits, short-term bank deposits, and money market instruments which
include 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.

DIVIDEND INCOME
Payment to shareholders of income from interest or dividends generated by a
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
distribution fees.

FUND DIVERSIFICATION
Holding a variety of securities so that a fund's return is not badly hurt by the
poor performance of a single security, industry, or country.

GROWTH STOCK FUND

A mutual fund that emphasizes stocks of companies believed to have above-average
prospects for growth. Reflecting market expectations for superior growth, growth
stocks typically have low dividend yields and above-average prices in relation
to such factors as revenue, earnings, and book value.

INVESTMENT ADVISER
An organization that makes the day-to-day decisions regarding a fund'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.

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.

SECURITIES

Stocks, bonds, money market instruments, and interests in other investment
vehicles.

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

VALUE STOCK FUND

A mutual fund that emphasizes stocks of companies whose growth prospects are
generally regarded as subpar by the market. Reflecting these market
expectations, the prices of value stocks typically are below-average in
comparison with such factors as earnings and book value, and these stocks
typically have above-average dividend yields.

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

<PAGE>

[SHIP(R) LOGO]
[THE VANGUARD GROUP(R) LOGO]

Post Office Box 2600
Valley Forge, PA 19482-2600

FOR MORE INFORMATION
If you'd like more information about
Vanguard PRIMECAP Fund, the
following documents are available
free upon request:

ANNUAL/SEMIANNUAL REPORT
TO SHAREHOLDERS
Additional information about the
Fund's investments is available in
the Fund's annual and semiannual
reports to shareholders.

STATEMENT OF ADDITIONAL
INFORMATION (SAI)
The SAI provides more detailed
information about the Fund.

The current annual and semiannual
reports and the SAI are
incorporated by reference into
(and are thus legally a part of)
this prospectus.

To receive a free copy of the latest
annual or semiannual report or the
SAI, or to request additional
information about the Fund or other
Vanguard funds, please contact us
as follows:

THE VANGUARD GROUP
INVESTOR INFORMATION
DEPARTMENT
P.O. BOX 2600
VALLEY FORGE, PA 19482-2600

TELEPHONE:
1-800-662-7447 (SHIP)

TEXT TELEPHONE:
1-800-952-3335

WORLD WIDE WEB:
WWW.VANGUARD.COM

If you are a current Fund shareholder
and would like information about
your account, account transactions,
and/or account statements,
please call:

CLIENT SERVICES DEPARTMENT
TELEPHONE:
1-800-662-2739 (CREW)

TEXT TELEPHONE:
1-800-749-7273

INFORMATION PROVIDED BY THE
SECURITIES AND EXCHANGE
COMMISSION (SEC)
You can review and copy
information about the Fund
(including the SAI) at the SEC's
Public Reference Room in
Washington, DC. To find out more
about this public service, call the
SEC at 1-800-SEC-0330. Reports and
other information about the Fund
are also available on the SEC's
website (www.sec.gov), or you can
receive copies of this information,
for a fee, by writing the Public
Reference Section, Securities and
Exchange Commission, Washington,
DC 20549-0102.

Fund's Investment Company Act
file number: 811-4098

P059N-04/07/2000

<PAGE>

VANGUARD(R)
PRIMECAP FUND

Participant Prospectus
April 7, 2000

- ----------------
This prospectus contains
financial data for the
Fund through the
fiscal year ended
December 31, 1999.

[A MEMBER OF
THE VANGUARD GROUP LOGO]

<PAGE>

VANGUARD PRIMECAP FUND
Participant Prospectus

April 7, 2000

A Growth Stock Mutual Fund

- --------------------------------------------------------------------------------
CONTENTS
- --------------------------------------------------------------------------------

1 FUND PROFILE 9 DIVIDENDS, CAPITAL GAINS, AND TAXES

3 ADDITIONAL INFORMATION 9 SHARE PRICE

3 A WORD ABOUT RISK 10 FINANCIAL HIGHLIGHTS

3 WHO SHOULD INVEST 12 INVESTING WITH VANGUARD

5 PRIMARY INVESTMENT STRATEGIES 13 ACCESSING FUND INFORMATION BY
COMPUTER
7 THE FUND AND VANGUARD
GLOSSARY (inside back cover)
8 INVESTMENT ADVISER

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

- --------------------------------------------------------------------------------
WHY READING THIS PROSPECTUS IS IMPORTANT

- --------------------------------------------------------------------------------
IMPORTANT NOTE
This prospectus is intended 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.
- --------------------------------------------------------------------------------

<PAGE>

FUND PROFILE

The following profile summarizes key features of Vanguard PRIMECAP Fund.

INVESTMENT OBJECTIVE

The Fund seeks to provide long-term capital growth.

INVESTMENT STRATEGIES

The Fund invests in stocks with above-average earnings growth potential that is
not reflected in the current market price. The Fund's portfolio consists
predominantly of large-cap and mid-cap stocks.

PRIMARY RISKS

THE FUND'S TOTAL RETURN, LIKE STOCK PRICES GENERALLY, WILL FLUCTUATE WITHIN A
WIDE RANGE, SO AN INVESTOR COULD LOSE MONEY OVER SHORT OR EVEN LONG PERIODS. The
Fund is also subject to:

- - Investment style risk, which is the chance that returns from large-cap and
mid-cap growth stocks will trail returns from other asset classes or the
overall stock market.

- - Manager risk, which is the chance that poor security selection will cause
the Fund to underperform other funds with similar investment objectives.

PERFORMANCE/RISK INFORMATION

<PAGE>

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
THE COSTS OF INVESTING

FEES AND EXPENSES

SHAREHOLDER FEES (fees paid directly from your investment)

Sales Charge (Load) Imposed on Purchases: None
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fee: None
Exchange Fee: None

ANNUAL FUND OPERATING EXPENSES (expenses deducted from the Fund's assets)
Management Expenses: 0.49%
12b-1 Distribution Fee: None
Other Expenses: 0.02%
TOTAL ANNUAL FUND OPERATING EXPENSES: 0.51%

THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE. ACTUAL FUTURE EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.

<PAGE>

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
FUND EXPENSES

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION

DIVIDENDS AND CAPITAL GAINS NEWSPAPER ABBREVIATION
Distributed annually in December Prmcp

INVESTMENT ADVISER VANGUARD FUND NUMBER
PRIMECAP Management Company, 059
Pasadena, Calif., since inception

INCEPTION DATE CUSIP NUMBER
November 1, 1984 921936100

NET ASSETS AS OF DECEMBER 31, TICKER SYMBOL
1999 VPMCX
$17.9 billion

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

- --------------------------------------------------------------------------------
A WORD ABOUT RISK

WHO SHOULD INVEST

The Fund may be a suitable investment for you if:

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

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

- - You are not looking for current income.

- - You are comfortable with the volatility that accompanies growth-stock
investing.

<PAGE>

THE VANGUARD FUNDS DO NOT PERMIT MARKET-TIMING. DO NOT INVEST IN THIS FUND
IF YOU ARE A MARKET-TIMER.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
COSTS AND MARKET-TIMING

The Fund has adopted the following policies, among others, to discourage
short-term trading:

- - There is a limit to the number of times you can exchange into and out of
the Fund (see "Exchanges" in the INVESTING WITH VANGUARD section).

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

PRIMARY INVESTMENT STRATEGIES

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
LARGE-CAP, MID-CAP, AND SMALL-CAP STOCKS

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

MARKET EXPOSURE

<PAGE>

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
GROWTH FUNDS AND VALUE FUNDS

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

SECURITY SELECTION

PRIMECAP does not try to market-time. However, if attractively priced
stocks cannot be found, the Fund's cash levels will increase.

As of December 31, 1999, the Fund had invested 39.1% of total net assets in
its top ten holdings.

The Fund is generally managed without regard to tax ramifications.

[FLAG] THE FUND IS SUBJECT TO MANAGER RISK, WHICH IS THE CHANCE THAT THE ADVISER
MAY DO A POOR JOB OF SELECTING STOCKS.

<PAGE>

TURNOVER RATE

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
TURNOVER RATE

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

OTHER INVESTMENT POLICIES AND RISKS

THE FUND AND VANGUARD

<PAGE>

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
VANGUARD'S UNIQUE CORPORATE STRUCTURE

INVESTMENT ADVISER

PRIMECAP's advisory fee is paid quarterly. This fee is based on certain
annual percentage rates applied to the Fund's average month-end assets for each
quarter.

For the fiscal year ended December 31, 1999, the advisory fees represented
an effective annual rate of 0.19%.

<PAGE>

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
THE FUND'S ADVISER

The individuals who oversee the Fund's investments, along with the percentage of
Fund assets for which each is primarily responsible, are:

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

DIVIDENDS, CAPITAL GAINS, AND TAXES

Your dividend and capital gains distributions will be reinvested in
additional Fund shares and accumulate on a tax-deferred basis if you are
investing through an employer-sponsored retirement or savings plan. You will not
owe taxes on these distributions until you begin withdrawals from the plan. You
should consult your plan administrator, your plan's Summary Plan Description, or
your tax adviser about the tax consequences of plan withdrawals.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
DISTRIBUTIONS

<PAGE>

SHARE PRICE

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

FINANCIAL HIGHLIGHTS

<PAGE>

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
HOW TO READ THE FINANCIAL HIGHLIGHTS TABLE

Shareholders received $4.92 per share in the form of dividend and capital gains
distributions. A portion of each year's distributions may come from the prior
year's income or capital gains.

"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc., and have been licensed
for use by The Vanguard Group.

<PAGE>

INVESTING WITH VANGUARD

The 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.
- - If you have any questions about the Fund or Vanguard, including those about
the Fund's investment objective, strategies, or risks, contact Vanguard's
Participant Services Center, toll-free, at 1-800-523-1188.
- - If you have questions about your account, contact your plan administrator
or the organization that provides recordkeeping services for your plan.

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

TRANSACTIONS
Contributions, exchanges, or redemptions of the 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.

In all cases, your transaction will be based on the Fund's next-determined
net asset value after Vanguard receives your request (or, in the case of new
contributions, the next-determined net asset value after Vanguard receives the
order from your plan administrator). As long as this request is received before
the close of regular trading on the New York Stock Exchange, generally 4 p.m.
Eastern time, you will receive that day's net asset value.

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 this 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 participant exchange activity to no more than FOUR
SUBSTANTIVE "ROUND TRIPS" THROUGH THE FUND (at least 90 days apart) during any
12-month period. A "round trip" is a redemption from the Fund followed by a
purchase back into the Fund. "Substantive" means a dollar amount that Vanguard
determines, in its sole discretion, could adversely affect the management of the
Fund.
Before making an exchange to or from another fund available in your plan,
consider the following:
- - Certain investment options, particularly funds made up of company stock or
investment contracts, may be subject to unique restrictions.
- - Make sure to read that fund's prospectus. Contact Participant Services,
toll-free, at 1-800-523-1188 for a copy.
- - Vanguard can accept exchanges only as permitted by your plan. Contact your
plan administrator for details on the exchange policies that apply to your
plan.

<PAGE>

ACCESSING FUND INFORMATION BY COMPUTER

- --------------------------------------------------------------------------------
VANGUARD ON THE WORLD WIDE WEB WWW.VANGUARD.COM
Use your personal computer to visit Vanguard's education-oriented website, which
provides timely news and information about Vanguard 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>

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<PAGE>

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<PAGE>

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<PAGE>

GLOSSARY OF INVESTMENT TERMS

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

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

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

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
distribution fees.

FUND DIVERSIFICATION
Holding a variety of securities so that a fund's return is not badly hurt by the
poor performance of a single security, industry, or country.

GROWTH STOCK FUND

INVESTMENT ADVISER
An organization that makes the day-to-day decisions regarding a fund'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.

SECURITIES

Stocks, bonds, money market instruments, and interests in other investment
vehicles.

VALUE STOCK FUND

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

<PAGE>

[SHIP(R) LOGO]
[THE VANGUARD GROUP(R) LOGO]

Institutional Division
Post Office Box 2900
Valley Forge, PA 19482-2900

FOR MORE INFORMATION
If you'd like more information about
Vanguard PRIMECAP Fund, the
following documents are available
free upon request:

ANNUAL/SEMIANNUAL REPORT
TO SHAREHOLDERS
Additional information about the
Fund's investments is available in
the Fund's annual and semiannual
reports to shareholders.

STATEMENT OF ADDITIONAL
INFORMATION (SAI)
The SAI provides more detailed
information about the Fund.

The current annual and semiannual
reports and the SAI are
incorporated by reference into
(and are thus legally a part of)
this prospectus.

To receive a free copy of the latest
annual or semiannual report or the
SAI, or to request additional
information about the Fund or other
Vanguard funds, please contact us
as follows:

THE VANGUARD GROUP
PARTICIPANT SERVICES CENTER
P.O. BOX 2900
VALLEY FORGE, PA 19482-2900

TELEPHONE:
1-800-523-1188

TEXT TELEPHONE:
1-800-523-8004

WORLD WIDE WEB:
WWW.VANGUARD.COM

Fund's Investment Company Act
file number: 811-4098

I059N-04/07/2000

<PAGE>

PART B

VANGUARD PRIMECAP FUND
(THE FUND)

STATEMENT OF ADDITIONAL INFORMATION

APRIL 7, 2000

This Statement is not a prospectus but should be read in conjunction with
the Fund's current Prospectus (dated April 7, 2000). To obtain, without charge,
the Prospectus or the most recent Annual Report to Shareholders, which contains
the Fund's financial statements as hereby incorporated by reference, please
call:

INVESTOR INFORMATION DEPARTMENT
1-800-662-7447

TABLE OF CONTENTS

PAGE
----
DESCRIPTION OF THE FUND......................................................B-1
INVESTMENT POLICIES..........................................................B-2
FUNDAMENTAL INVESTMENT LIMITATIONS...........................................B-6
SHARE PRICE..................................................................B-7
PURCHASE OF SHARES...........................................................B-8
REDEMPTION OF SHARES.........................................................B-8
MANAGEMENT OF THE FUND.......................................................B-9
INVESTMENT ADVISORY SERVICES................................................B-12
PORTFOLIO TRANSACTIONS......................................................B-12
YIELD AND TOTAL RETURN......................................................B-13
COMPARATIVE INDEXES.........................................................B-15
FINANCIAL STATEMENTS........................................................B-16

DESCRIPTION OF THE FUND

ORGANIZATION

The Fund was organized as a Maryland corporation on November 1, 1984, and
was reorganized as a Delaware business trust on July 30, 1998. The Fund is
registered with the United States Securities and Exchange Commission (the
Commission) under the Investment Company Act of 1940 (the 1940 Act) as an
open-end diversified management investment company. It currently offers a single
class of shares, but has the ability to offer additional share classes. There is
no limit on the full and fractional shares that the Fund may issue.

SERVICE PROVIDERS

CUSTODIANS. State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110 serves as the Fund's custodian. The custodian is
responsible for maintaining the Fund's assets and keeping all necessary accounts
and records of Fund assets.

INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, 30 South 17th Street,
Philadelphia, Pennsylvania 19103, serves as the Fund's independent accountants.
The accountants audit financial statements for the Fund and provide other
related services.

TRANSFER AND DIVIDEND-PAYING AGENT. The Fund's transfer agent and
dividend-paying agent is The Vanguard Group, Inc., 100 Vanguard Boulevard,
Malvern, Pennsylvania 19355.

B-1

<PAGE>

CHARACTERISTICS OF THE FUND'S SHARES

RESTRICTIONS ON HOLDING OR DISPOSING OF SHARES. There are no restrictions
on the right of shareholders to retain or dispose of the Fund's shares, other
than the possible future termination of the Fund. The Fund may be terminated by
reorganization into another mutual fund or by liquidation and distribution of
its assets. Unless terminated by reorganization or liquidation, the Fund will
continue indefinitely.

SHAREHOLDER LIABILITY. The Fund is organized under Delaware law, which
provides that shareholders of a business trust are entitled to the same
limitations of personal liability as shareholders of a corporation organized
under Delaware law. Effectively, this means that a shareholder of the Fund will
not be personally liable for payment of the Fund's debts except by reason of his
or her own conduct or acts. In addition, a shareholder could incur a financial
loss on account of a Fund obligation only if the Fund itself had no remaining
assets with which to meet such obligation. We believe that the possibility of
such a situation arising is extremely remote.

DIVIDEND RIGHTS. The shareholders of the Fund are entitled to receive any
dividends or other distributions declared by the Fund. No shares have priority
or preference over any other shares with respect to distributions. Distributions
will be made from the assets of the Fund, and will be paid ratably to all
shareholders according to the number of shares held by shareholders on the
record date.

VOTING RIGHTS. Shareholders are entitled to vote on a matter if: (i) a
shareholder vote is required under the 1940 Act; (ii) the matter concerns an
amendment to the Declaration of Trust that would adversely affect to a material
degree the rights and preferences of the shares of any class or fund; or (iii)
the Trustees determine that it is necessary or desirable to obtain a shareholder
vote. The 1940 Act requires a shareholder vote under various circumstances,
including to elect or remove Trustees upon the written request of shareholders
representing 10% or more of the Fund's net assets, and to change any fundamental
policy of the Fund. Fund shareholders receive one vote for each dollar of net
asset value owned on the record date, and a fractional vote for each fractional
dollar of net asset value owned on the record date. Voting rights are
noncumulative and cannot be modified without a majority vote.

LIQUIDATION RIGHTS. In the event of liquidation, shareholders will be
entitled to receive a pro rata share of the Fund's net assets.

PREEMPTIVE RIGHTS. There are no preemptive rights associated with the
Fund's shares.

CONVERSION RIGHTS. There are no conversion rights associated with the
Fund's shares.

REDEMPTION PROVISIONS. The Fund's redemption provisions are described in
its current prospectus and elsewhere in this Statement of Additional
Information.

SINKING FUND PROVISIONS. The Fund has no sinking fund provisions.

CALLS OR ASSESSMENT. The Fund's shares, when issued, are fully paid and non
assessable.

TAX STATUS OF THE FUND

The Fund intends to continue to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code. This special tax status means
that the Fund will not be liable for federal tax on income and capital gains
distributed to shareholders. In order to preserve its tax status, the Fund must
comply with certain requirements. If the Fund fails to meet these requirements
in any taxable year, it will be subject to tax on its taxable income at
corporate rates, and all distributions from earnings and profits, including any
distributions of net tax-exempt income and net long-term capital gains, will be
taxable to shareholders as ordinary income. In addition, the Fund could be
required to recognize unrealized gains, pay substantial taxes and interest, and
make substantial distributions before regaining its tax status as a regulated
investment company.

INVESTMENT POLICIES

The following policies supplement the Fund's investment objective and
policies set forth in the Prospectus.

REPURCHASE AGREEMENTS. The Fund may invest, directly or indirectly, 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

B-2

<PAGE>

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 Trustees monitors the Fund's repurchase agreement
transactions generally and has established guidelines and standards for review
by the investment adviser of the creditworthiness of any bank, broker, or dealer
that is a party to a repurchase agreement with the Fund.

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 security 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 bankruptcy 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 adviser
acknowledges these risks, it is expected that they can be controlled through
careful monitoring procedures.

FUTURES CONTRACTS AND OPTIONS. Although it has no present intention to do
so, the Fund is authorized to enter into stock futures contracts, options, and
options on futures contracts for the following reasons: to maintain cash
reserves while simulating full investment, to facilitate trading, to reduce
transaction 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. 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
portfolio 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 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 Contracts. 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 contracts which are traded on national futures exchanges and for
which there appears to be a liquid secondary market.

The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (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. However, because the Fund will
hold futures only for hedging purposes, the investment adviser does not believe
that the Fund is subject to the risks of loss typically associated with futures
transactions. The Fund

B-3

<PAGE>

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 a 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 a Fund could both lose money on futures contracts and experience a
decline in the value of its portfolio securities. There is also the risk of loss
by a 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.

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 these 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. Gains and losses on
certain other futures contracts (primarily non-U.S. futures contracts) are not
recognized until the contracts are closed and are treated as long-term or
short-term depending on the holding period of the contract. 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. The 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 or currencies. It is anticipated that
any net gain recognized on futures contracts will be considered 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 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 transactions.

LENDING OF SECURITIES. The Fund may lend its portfolio securities to
qualified institutional investors (typically brokers, dealers, banks or other
financial institutions) 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 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 terms and the structure of such loans must be consistent with the
1940 Act, and the Rules and Regulations or interpretations of the Commission
thereunder. These provisions limit the amount of securities a fund may lend to
33 1/3% of the Fund's total assets, and require that (a) the borrower pledges
and maintains with the Fund collateral consisting of cash, a letter of credit,
or securities issued or guaranteed by the United States Government having a
value at all times not less than 100% of the value of the securities loaned, (b)
the borrower adds 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
is made subject to termination by the Fund at any time, and (d) the Fund
receives reasonable interest on the loan (which may include the Fund's investing
any cash collateral in interest bearing short-term investments), any
distributions 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 Trustees.

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 Trustees. In addition, voting rights pass
with the loaned

B-4

<PAGE>

securities, but if a material event will occur affecting an investment on loan,
the loan must be called and the securities voted.

VANGUARD INTERFUND LENDING PROGRAM. The Commission has issued an exemptive
order permitting the Fund to participate in Vanguard's interfund lending
program. This program allows the Vanguard funds to borrow money from and loan
money to each other for temporary or emergency purposes. The program is subject
to a number of conditions, including the requirement that no fund may borrow or
lend money through the program unless it receives a more favorable interest rate
than is available from a typical bank for a comparable transaction. In addition,
a fund may participate in the program only if and to the extent that such
participation is consistent with the fund's investment objective and other
investment policies. The Boards of Trustees of the Vanguard funds are
responsible for ensuring that the interfund lending program operates in
compliance with all conditions of the Commission's exemptive order.

FOREIGN INVESTMENTS. The Fund may invest up to 20% of its assets in
securities of foreign companies. Investors should recognize that investing in
foreign companies involves certain special considerations which are not
typically associated with investing in U.S. companies.

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 the Fund's
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.

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, 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 custodian arrangements of the Fund's
foreign securities will be somewhat greater than the expenses for the custodian
arrangements for handling U.S. securities of equal value.

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 received from foreign companies held by the Fund. However, these
foreign withholding taxes are not expected to have a significant impact on the
Fund, since the Fund seeks long-term capital appreciation and any income should
be considered incidental.

Federal Tax Treatment of Non-U.S. Transactions. Special rules govern the
Federal income tax treatment of certain transactions denominated in terms of a
currency other than the U.S. dollar or determined by reference to the value of
one or more currencies other than the U.S. dollar. The types of transactions
covered by the special rules include the following; (i) the acquisition of, or
becoming the obligor under, a bond or other debt instrument (including, to the
extent provided in Treasury regulations, preferred stock); (ii) the accruing of
certain trade receivables and payables; and (iii) the entering into or
acquisition of any forward contract, futures contract, option or similar
financial instrument if such instrument is not marked to market. The disposition
of a currency other than the U.S. dollar by a taxpayer whose functional currency
is the U.S. dollar is also treated as a transaction subject to the special
currency rules. However, foreign currency-related regulated futures contracts
and nonequity options are generally not subject to the special currency rules if
they are or would be treated as sold for their fair market value at year-end
under the marking-to-market rules applicable to other futures contracts unless
an election is made to have such currency rules apply. With respect to
transactions covered by

B-5

<PAGE>

the special rules, foreign currency gain or loss is calculated separately from
any gain or loss on the underlying transaction and is normally taxable as
ordinary income or loss. A taxpayer may elect to treat as capital gain or loss
foreign currency gain or loss arising from certain identified forward contracts,
futures contracts, and options that are capital assets in the hands of the
taxpayer and which are not part of a straddle. The Treasury Department issued
regulations under which certain transactions subject to the special currency
rules that are part of a "section 988 hedging transaction" (as defined in the
Internal Revenue Code of 1986, as amended, and the Treasury regulations) will be
integrated and treated as a single transaction or otherwise treated consistently
for purposes of the Code. Any gain or loss attributable to the foreign currency
component of a transaction engaged in by a Fund which is not subject to the
special currency rules (such as foreign equity investments other than certain
preferred stocks) will be treated as capital gain or loss and will not be
segregated from the gain or loss on the underlying transaction. It is
anticipated that some of the non-U.S. dollar-denominated investments and foreign
currency contracts the Fund may make or enter into will be subject to the
special currency rules described above.

ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
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 the Fund's books.

The Fund may invest in restricted, privately placed securities that, under
securities laws, may be sold only to qualified institutional buyers. Because
these securities can be resold only to qualified institutional buyers, they may
be considered illiquid securities--meaning that they could be difficult for the
Fund to convert to cash if needed.

If a substantial market develops for a restricted security held by the
Fund, it will be treated as a liquid security, in accordance with procedures and
guidelines approved by the Fund's Board of Trustees. This generally includes
securities that are unregistered that can be sold to qualified institutional
buyers in accordance with Rule 144A under the Securities Act of 1933. While the
Fund's investment adviser determines the liquidity of restricted securities on a
daily basis, the Board oversees and retains ultimate responsibility for the
adviser's decisions. Several factors that the Board considers in monitoring
these decisions include the valuation of a security, the availability of
qualified institutional buyers, and the availability of information about the
security's issuer.

TEMPORARY INVESTMENTS. The Fund may take temporary defensive measures that
are inconsistent with the Fund's normal fundamental or non fundamental
investment policies and strategies in response to adverse market, economic,
political, or other conditions. Such measures could include investments in (a)
highly liquid short-term fixed income securities issued by or on behalf of
municipal or corporate issuers, obligations of the U.S. Government and its
agencies, commercial paper, and bank certificates of deposit; (b) shares of
other investment companies which have investment objectives consistent with
those of the Fund; (c) repurchase agreements involving any such securities; and
(d) other money market instruments. There is no limit on the extent to which the
Fund may take temporary defensive measures. In taking such measures, the Fund
may fail to achieve its investment objective.

FUNDAMENTAL INVESTMENT LIMITATIONS

The Fund is subject to the following fundamental investment limitations,
which cannot be changed in any material way without the approval of the holders
of a majority of the Fund's shares. For these purposes, a "majority" of the
Fund's shares means shares representing the lesser of: (i) 67% or more of the
votes cast to approve a change, so long as shares representing more than 50% of
the Fund's net asset value are present or represented by proxy; or (ii) more
than 50% of the Fund's net asset value.

BORROWING. The Fund may not borrow money, except for temporary or emergency
purposes in an amount not exceeding 15% of the Fund's net assets. The Fund may
borrow money through banks, reverse repurchase agreements, or Vanguard's
interfund lending program only, and must comply with all applicable regulatory
conditions. The Fund may not make any additional investments if its outstanding
borrowings exceed 5% of net assets.

COMMODITIES. The Fund may not invest in commodities, except that it may
invest in stock futures contracts, stock options, and options on stock futures
contracts. No more than 5% of the Fund's total assets

B-6

<PAGE>

may be used as initial margin deposit for futures contracts, and no more than
20% of the Fund's total assets may be invested in futures contracts or options
at any time.

DIVERSIFICATION. With respect to 75% of its total assets, the Fund may not:
(i) purchase more than 10% of the outstanding voting securities of any one
issuer; or (ii) purchase securities of any issuer if, as a result, more than 5%
of the Fund's total assets would be invested in that issuer's securities. This
limitation does not apply to obligations of the United States Government or its
agencies or instrumentalities.

ILLIQUID SECURITIES. The Fund may not acquire any security if, as a result,
more than 15% of its net assets would be invested in securities that are
illiquid.

INDUSTRY CONCENTRATION. The Fund may not invest more than 25% of its total
assets in any one industry.

INVESTING FOR CONTROL. The Fund may not invest in a company for purposes of
controlling its management.

INVESTMENT COMPANIES. The Fund may not invest in any other investment
company, except through a merger, consolidation or acquisition of assets, or to
the extent permitted by Section 12 of the 1940 Act. Investment companies whose
shares the Fund acquires pursuant to Section 12 must have investment objectives
and investment policies consistent with those of the Fund.

LOANS. The Fund may not lend money to any person except (i) by purchasing
bonds or other fixed income securities or by entering into repurchase
agreements; (ii) by entering into collateralized repurchase agreements; (iii) as
provided under the heading "Lending of Securities"; or (iv) to another Vanguard
fund through Vanguard's interfund lending program.

MARGIN. The Fund may not purchase securities on margin or sell securities
short, except as permitted by the Fund's investment policies relating to
commodities.

OIL, GAS, MINERALS. The Fund may not invest in interests in oil, gas, or
other mineral exploration or development programs.

OPTIONS. The Fund may not purchase or sell put or call options, except as
permitted by the Fund's investment policies relating to commodities.

PLEDGING ASSETS. The Fund may not pledge, mortgage, or hypothecate more
than 15% of its net assets.

REAL ESTATE. The Fund may not invest directly in real estate, although it
may invest in securities of companies that deal in real estate.

SENIOR SECURITIES. The Fund may not issue senior securities, except in
compliance with the 1940 Act.

UNDERWRITING. The Fund may not engage in the business of underwriting
securities issued by other persons. The Fund will not be considered an
underwriter when disposing of its investment securities.

None of these limitations prevents the Fund from participating in The
Vanguard Group (Vanguard). As a member of the Group, the Fund may own securities
issued by Vanguard, make loans to Vanguard, and contribute to Vanguard's costs
or other financial requirements. See "Management of the Fund" for more
information.

Compliance with the investment limitations set forth above is measured at
the time the securities are purchased. If a percentage restriction is adhered to
at the time the investment is made, a later change in percentage resulting from
a change in the market value of assets will not constitute a violation of such
restriction.

SHARE PRICE

Each Fund's share price, or "net asset value" per share, is calculated by
dividing the total assets of each Fund, less all liabilities, by the total
number of shares outstanding. The net asset value is determined as of the close
of regular trading on the New York Stock Exchange (the Exchange) generally 4:00
p.m. Eastern time on each day the Exchange is open for trading.

Portfolio securities for which market quotations are readily available
(includes those securities listed on national securities exchanges, as well as
those quoted on the NASDAQ Stock Market) will be valued at the last quoted sales
price on the day the valuation is made. Such securities which are not traded on
the valuation date are valued at the mean of the bid and ask prices. Price
information on exchange-listed securities is taken from the exchange where the
security is primarily traded. Securities may be valued on the basis of prices
provided by a pricing service when such prices are believed to reflect the fair
market value of such securities.

B-7

<PAGE>

Short-term instruments (those with remaining maturities of 60 days or less)
may be valued at cost, plus or minus any amortized discount or premium, which
approximates market value.

Bonds and other fixed income securities may be valued on the basis of
prices provided by a pricing service when such prices are believed to reflect
the fair market value of such securities. The prices provided by a pricing
service may be determined without regard to bid or last sale prices of each
security, but take into account institutional-size transactions in similar
groups of securities as well as any developments related to specific securities.

Foreign securities are valued at the last quoted sales price, or the most
recently determined closing price calculated according to local market
convention, available at the time the Fund is valued. Prices are obtained from
the broadest and most representative market on which the securities trade. If
events which materially affect the value of the Fund's investments occur after
the close of the securities markets on which such securities are primarily
traded, those investments may be valued by such methods as the Board of Trustees
deems in good faith to reflect fair value.

In determining the Fund's net asset value per share, all assets and
liabilities initially expressed in foreign currencies will be converted into
U.S. dollars using the officially quoted daily exchange rates used by Morgan
Stanley Capital International in calculating various benchmarking indices. This
officially quoted exchange rate may be determined prior to or after the close of
a particular securities market. If such quotations are not available or do not
reflect market conditions at the time the Fund is valued, the rate of exchange
will be determined in accordance with policies established in good faith by the
Board of Trustees.

Other assets and securities for which no quotations are readily available
or which are restricted as to sale (or resale) are valued by such methods as the
Board of Trustees deems in good faith to reflect fair value.

The share price for the Fund can be found daily in the mutual fund listings
of most major newspapers under the heading of "Vanguard Funds."

PURCHASE OF SHARES

The Fund reserves the right in its sole discretion (i) to suspend the
offerings of its shares; (ii) to reject purchase and exchange 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 (such as employee benefit plans) or under circumstances where certain
economies can be achieved in sales of the Fund's shares.

The Fund has authorized Charles Schwab & Co., Inc. (Schwab) to accept on
its behalf purchase and redemption orders under certain terms and conditions.
Schwab is also authorized to designate other intermediaries to accept purchase
and redemption orders on the Fund's behalf subject to those terms and
conditions. Under this arrangement, the Fund will be deemed to have received a
purchase or redemption order when Schwab or, if applicable, Schwab's authorized
designee, accepts the order in accordance with the Fund's instructions. Customer
orders that are properly transmitted to the Fund by Schwab, or if applicable,
Schwab's authorized designee, will be priced as follows:

Orders received by Schwab before 3 p.m. Eastern time on any business day
will be sent to Vanguard that day and your share price will be based on the
Fund's net asset value calculated at the close of trading that day. Orders
received by Schwab after 3 p.m. Eastern time, will be sent to Vanguard on the
following business day and your share price will be based on the Fund's net
asset value calculated at the close of trading that day.

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 Commission; (ii) during any
period when an emergency exists as defined by 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.

B-8

<PAGE>

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.

No charge is made by the Fund for redemptions. Shares redeemed by a Fund
shareholder may be worth more or less than what was paid for them, depending on
the market value of the securities held by the Fund.

MANAGEMENT OF THE FUND

OFFICERS AND TRUSTEES

The officers of the Fund manage its day-to-day operations and are
responsible to the Fund's Board of Trustees. The Trustees set broad policies for
the Fund and choose its officers. The following is a list of the Trustees and
officers of the Fund and a statement of their present positions and principal
occupations during the past five years. As a group, the Fund's Trustees and
officers own less than 1% of the outstanding shares of the Fund. Each Trustee
also serves as a Director of The Vanguard Group, Inc., and as a Trustee of each
of the funds administered by Vanguard. The mailing address of the Trustees and
officers of the Fund is Post Office Box 876, Valley Forge, PA 19482.

JOHN J. BRENNAN, (DOB: 7/29/1954) Chairman, Chief Executive Officer & Trustee*
Chairman, Chief Executive Officer and Director of The Vanguard Group, Inc., and
Trustee of each of the investment companies in The Vanguard Group.

JOANN HEFFERNAN HEISEN, (DOB: 1/25/1950) Trustee
Vice President, Chief Information Officer, and member of the Executive Committee
of Johnson & Johnson (Pharmaceuticals/Consumer Products), Director of Johnson &
Johnson*MERCK Consumer Pharmaceuticals Co., The Medical Center at Princeton, and
Women's Research and Education Institute.

BRUCE K. MACLAURY, (DOB: 5/7/1931) Trustee
President Emeritus of The Brookings Institution (Independent Non-Partisan
Research Organization): Director of American Express Bank, Ltd., The St. Paul
Companies, Inc. (Insurance and Financial Services), and National Steel Corp.

BURTON G. MALKIEL, (DOB: 8/28/1932) Trustee
Chemical Bank Chairman's Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Banco Bilbao Gestinova, Baker Fentress &
Co. (Investment Management), The Jeffrey Co. (Holding Company), and Select
Sector SPDR Trust (Exchange-traded Mutual Fund).

ALFRED M. RANKIN, JR., (DOB: 10/8/1941) Trustee
Chairman, President, Chief Executive Officer, and Director of NACCO Industries,
Inc. (Machinery/Coal/ Appliances); and Director of The BFGoodrich Co. (Aircraft
Systems/Manufacturing/Chemicals).

JOHN C. SAWHILL, (DOB: 6/12/1936) Trustee
President and Chief Executive Officer of The Nature Conservancy (Non-Profit
Conservation Group); Director of Pacific Gas and Electric Co., Procter & Gamble
Co., NACCO Industries (Machinery/Coal/Appliances), and Newfield Exploration Co.
(Energy); formerly, Director and Senior Partner of McKinsey & Co., and President
of New York University.

JAMES O. WELCH, JR., (DOB: 5/13/1931) Trustee
Retired Chairman of Nabisco Brands, Inc. (Food Products); retired Vice Chairman
and Director of RJR Nabisco (Food and Tobacco Products); Director of TECO
Energy, Inc., and Kmart Corp.

J. LAWRENCE WILSON, (DOB: 3/2/1936) Trustee
Retired Chairman of Rohm & Haas Co. (Chemicals); Director of Cummins Engine
Co.(Diesel Engine Company), The Mead Corp. (Paper Products), and AmeriSource
Health Corp.; and Trustee of Vanderbilt University.

RAYMOND J. KLAPINSKY, (DOB: 12/7/1938) Secretary*
Managing Director of The Vanguard Group, Inc.; Secretary of The Vanguard Group,
Inc. and of each of the investment companies in The Vanguard Group.

B-9

<PAGE>

THOMAS J. HIGGINS, (DOB: 5/21/1957) Treasurer*
Principal of The Vanguard Group, Inc.; Treasurer of each of the investment
companies in The Vanguard Group.

ROBERT D. SNOWDEN, (DOB: 9/4/1961) 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 1940 Act.

THE VANGUARD GROUP

The Fund is a member of The Vanguard Group of Investment Companies, which
consists of more than 100 funds. Through their jointly-owned subsidiary, The
Vanguard Group, Inc. (Vanguard), the Fund and the other funds in The Vanguard
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 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.

Vanguard adheres to a Code of Ethics established pursuant to Rule 17j-1
under the 1940 Act. 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 similar to, and in many cases more restrictive than, those
recommended by a blue ribbon panel of mutual fund industry executives.

Vanguard was established and operates under an Amended and Restated 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. The Amended and Restated
Funds' Service Agreement provides that each Vanguard fund may be called upon to
invest up to 0.40% of its current net assets in Vanguard as contributions to
Vanguard's capitalization. At December 31, 1999, the Fund had contributed
capital to Vanguard representing 0.02% of its net assets. The amount contributed
by the Fund was $3,342,000, which represented 3.3% of 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 Fund by third parties.

DISTRIBUTION. Vanguard Marketing Corporation, a wholly-owned subsidiary of
The Vanguard Group, Inc., provides all distribution and marketing activities for
the funds in the Group. 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 Vanguard Group. The
Trustees 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 Vanguard Group, and that no fund shall
incur annual distribution expenses in excess of 20/100 of 1% of its average
month-end net assets.

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<PAGE>

During the fiscal years ended December 31, 1997, 1998, and 1999, the Fund
incurred approximately $15,719,000, $28,809,000, and $43,214,000 of The Vanguard
Group's management (including transfer agency), distribution, and marketing
expenses, respectively.

INVESTMENT ADVISORY SERVICES

Vanguard provides investment advisory services to several Vanguard funds.
These services are provided on an at-cost basis from an experienced investment
management staff employed directly by Vanguard. The compensation and other
expenses of this staff are paid by the Vanguard funds utilizing these services.

TRUSTEE COMPENSATION

The same individuals serve as Trustees of all Vanguard funds (with two
exceptions, which are noted in the table appearing below), and each fund pays a
proportionate share of the 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 TRUSTEES. The funds compensate their independent Trustees--that
is, the ones who are not also officers of the fund--in three ways:

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

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

- - Upon retirement, the independent 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 each Trustee's death.

"INTERESTED" TRUSTEE. Mr. Brennan serves as a Trustee, but is not paid in
this capacity. He is, however, paid in his role as officer of The Vanguard
Group, Inc.

COMPENSATION TABLE. The following table provides compensation details for
each of the Trustees. We list the amounts paid as compensation and accrued as
retirement benefits by the Fund for each Trustee. In addition, the table shows
the total amount of benefits that we expect each Trustee to receive from all
Vanguard funds upon retirement, and the total amount of compensation paid to
each Trustee by all Vanguard funds.

VANGUARD PRIMECAP FUND
COMPENSATION TABLE

PENSION OR TOTAL
AGGREGATE RETIREMENT COMPENSATION
COMPENSATION BENEFITS ACCRUED ESTIMATED ANNUAL FROM ALL VANGUARD
FROM THIS AS PART OF THIS BENEFITS UPON FUNDS PAID TO
NAMES OF TRUSTEES FUND(1) FUND'S EXPENSES(1) RETIREMENT TRUSTEES(2)
- --------------------------------------------------------------------------------------------------
John C. Bogle(3) None None None None
John J. Brennan None None None None
JoAnn Heffernan Heisen $2,585 $142 $15,000 $80,000
Bruce K. MacLaury $2,677 $242 $12,000 $75,000
Burton G. Malkiel $2,603 $236 $15,000 $80,000
Alfred M. Rankin, Jr. $2,585 $172 $15,000 $80,000
John C. Sawhill $2,585 $218 $15,000 $80,000
James O. Welch, Jr. $2,585 $252 $15,000 $80,000
J. Lawrence Wilson $2,585 $182 $15,000 $80,000
</TABLE>
- ---------
(1) The amounts shown in this column are based on the Fund's fiscal year ended
December 31, 1999.

(2) The amounts reported in this column reflect the total compensation paid to
each Trustee for his or her service as Trustee of 103 Vanguard funds (102
in the case of Mr. Malkiel; 93 in the case of Mr. MacLaury) for the 1999
calendar year.

(3) Mr. Bogle has retired from the Fund's Board, effective December 31, 1999.

B-11

<PAGE>

INVESTMENT ADVISORY SERVICES

The Fund has entered into an investment advisory agreement with PRIMECAP
Management Company (PRIMECAP), located at 225 South Lake Street, Pasadena, CA
91101, under which PRIMECAP manages the investment and reinvestment of the
Fund's assets and continuously reviews, supervises, and administers the Fund's
investment program. PRIMECAP discharges its responsibilities subject to the
control of the officers and Trustees of the Fund.

PRIMECAP is a California corporation whose outstanding shares are owned by
its directors and officers. The directors of the corporation and the offices
they currently hold are: Howard Bernard Schow, Chairman; Mitchell John Milias,
Vice Chairman; and Theofanis Anastasios Kolokotrones, President.

The Fund pays PRIMECAP an advisory 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 for the quarter:

NET ASSETS RATE
---------- ----
First $50 million ............................ .500%
Next $200 million ............................ .450%
Next $250 million ............................ .375%
Next $1,750 million .......................... .250%
Next $2,750 million .......................... .200%
Next $5,000 million .......................... .175%
Over $10,000 million ......................... .150%

During the fiscal years ended December 31, 1997, 1998, and 1999, the Fund
incurred investment advisory fees of approximately $14,455,000, $20,669,000, and
$26,764,000, respectively.

The agreement is renewable for one-year periods, so long as such
continuance is specifically approved at least annually by a vote of the Fund's
Board of Trustees, including the affirmative votes of a majority of the Trustees
who are not parties to the contract or "interested persons" (as defined in the
1940 Act) of any such party. The agreement is automatically terminated if
assigned, and may be terminated without penalty at any time (1) by vote of the
Board of Trustees of the Fund on 60 days' written notice to PRIMECAP; or (2) by
PRIMECAP upon 90 days' written notice to the Fund.

PORTFOLIO TRANSACTIONS

The investment advisory agreement authorizes PRIMECAP (with the approval of
the Fund's Board of Trustees) to select the brokers or dealers that will execute
the purchases and sales of portfolio securities for the Fund and directs
PRIMECAP to use its best efforts to obtain the best available price and most
favorable execution as to all transactions for the Fund. PRIMECAP has 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.

In placing portfolio transactions, PRIMECAP will use its 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
PRIMECAP. PRIMECAP considers such information useful in the performance of its
obligations under the agreement, but is unable to determine the amount by which
such services may reduce its expenses.

The investment advisory agreement also incorporates 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 Trustees, the adviser may cause the Fund to pay
a broker-dealer which furnishes brokerage and research services a higher
commission

B-12

<PAGE>

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 PRIMECAP
to the Fund.

Currently, it is the Fund's policy that PRIMECAP 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. PRIMECAP will only pay such higher commissions
if it believes 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 PRIMECAP and/or the Fund. However, PRIMECAP has informed
the Fund that it generally will not pay higher commission rates specifically for
the purpose of obtaining research services.

During the fiscal years ended December 31, 1997, 1998, and 1999, the Fund
paid approximately $3,097,602, $3,541,233, and $3,915,358 in brokerage
commissions, respectively.

Some securities considered for investment by the Fund may also be
appropriate for other clients served by PRIMECAP. If purchase or sale of
securities consistent with the investment policies of the Fund and one or more
of these other clients serviced by PRIMECAP are considered at or about the same
time, transactions in such securities will be allocated among the Fund and such
other clients in a manner deemed equitable by PRIMECAP. Although there may be no
specified formula for allocating such transactions, the allocation methods used,
and the results of such allocations, will be subject to periodic review by the
Fund's Board of Trustees.

YIELD AND TOTAL RETURN

The Fund's yield for the 30-day period ended December 31, 1999 was 0.65%.
The Fund's average annual total returns for the one-, five-, and ten-year
periods ended December 31, 1999 were 41.34%, 31.20%, and 21.84%, respectively.

AVERAGE ANNUAL TOTAL RETURN

Average annual total return is the average annual compounded rate of return
for the periods of one year, five years, and ten years, all ended on the last
day of a recent month. Average annual total return quotations will reflect
changes in the price of the Fund's shares and assume that all dividends and
capital gains distributions during the respective periods were reinvested in
Fund shares.

Average annual total return is calculated by finding the average annual
compounded rates of return of a hypothetical investment over such periods
according to the following formula (average annual total return is then
expressed as a percentage):

T = (ERV/P)1/N - 1

Where:

T =average annual total return
P =a hypothetical initial investment of $1,000
n =number of years
ERV =ending redeemable value: ERV is the
value, at the end of the applicable period,
of a hypothetical $1,000 investment made at
the beginning of the applicable period

AVERAGE ANNUAL AFTER-TAX TOTAL RETURN QUOTATION

We calculate the Fund's average annual after-tax total return by finding
the average annual compounded rate of return over the 1-, 5-, and 10-year
periods that would equate the initial amount invested to the after-tax value,
according to the following formulas:

P (1+T)N = ATV

B-13

<PAGE>

Where:

P =a hypothetical initial payment of $1,000
T =average annual after-tax total return
n =number of years
ATV =after-tax value at the end of the 1-, 5-, or 10-year
periods of a hypothetical $1,000 payment made at the
beginning of the time period, assuming no liquidation
of the investment at the end of the measurement periods

Instructions:

1. Assume all distributions by the Fund are reinvested--less the taxes due on
such distributions--at the price on the reinvestment dates during the
period. Adjustments may be made for subsequent re-characterizations of
distributions.

2. Calculate the taxes due on distributions by the Fund by applying the
highest federal marginal tax rates to each component of the distributions
on the reinvestment date (e.g., ordinary income, short-term capital gain,
long-term capital gain, etc.). For periods after December 31, 1997, the
federal marginal tax rates used for the calculations are 39.6% for ordinary
income and short-term capital gains and 20% for long-term capital gains.
Note that the applicable tax rates may vary over the measurement period.
Assume no taxes are due on the portions of any distributions classified as
exempt interest or non-taxable (i.e., return of capital). Ignore any
potential tax liabilities other than federal tax liabilities (e.g., state
and local taxes).

3. Include all recurring fees that are charged to all shareholder accounts.
For any account fees that vary with the size of the account, assume an
account size equal to the Fund's mean (or median) account size. Assume that
no additional taxes or tax credits result from any redemption of shares
required to pay such fees.

4. State the total return quotation to the nearest hundredth of one percent.

CUMULATIVE TOTAL RETURN

Cumulative total return is the cumulative rate of return on a hypothetical
initial investment of $1,000 for a specified period. Cumulative total return
quotations reflect changes in the price of the Fund's shares and assume that all
dividends and capital gains distributions during the period were reinvested in
Fund shares. Cumulative total return is calculated by finding the cumulative
rates of a return of a hypothetical investment over such periods, according to
the following formula (cumulative total return is then expressed as a
percentage):

C = (ERV/P) - 1

Where:

C =cumulative total return
P =a hypothetical initial investment of $1,000
ERV =ending redeemable value: ERV is the value, at the end
of the applicable period, of a hypothetical $1,000
investment made at the beginning of the applicable
period

SEC YIELDS

Yield is the net annualized yield based on a specified 30-day (or one
month) period assuming semiannual compounding of income. Yield is calculated by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula:

YIELD = 2[((A-B)/CD+1)6 - 1]

Where:

a =dividends and interest earned during the period
b =expenses accrued for the period (net of reimbursements)
c =the average daily number of shares outstanding during
the period that were entitled to receive dividends
d =the maximum offering price per share on the last day of
the period

B-14

<PAGE>

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
PRIMECAP Fund, may, from time to time, use one or more of the following
unmanaged indexes for comparative performance purposes.

STANDARD AND POOR'S 500 COMPOSITE STOCK PRICE INDEX--includes stocks selected by
Standard & Poor's Index Committee to include leading companies in leading
industries and to reflect the U.S. stock market.

STANDARD & POOR'S MIDCAP 400 INDEX--is composed of 400 medium sized domestic
stocks.

STANDARD & POOR'S 500/BARRA VALUE INDEX--contains stocks of the S&P 500 Index
which have a lower than average price-to-book ratio.

STANDARD & POOR'S SMALL CAP 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 SMALL CAP 600/BARRA GROWTH INDEX--contains stocks of the S&P
SmallCap 600 Index which have a higher than average price-to-book ratio.

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 INDEXES--consists of approximately 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,
nonconvertible 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 BROTHERS LONG-TERM TREASURY BOND INDEX--is a market weighted index that
contains individually priced U.S. Treasury securities 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 BROTHERS 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 $100 million outstanding. This index
includes over 1,500 issues.

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, noncallable 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.

B-15

<PAGE>

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).

LEHMAN BROTHERS 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.

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
$5 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
one and five 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 five and
ten years. The index has a market value of over $800 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 ten years. The
index has a market value of over $1.1 trillion.

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 for the year ended December 31, 1999,
including the financial highlights for each of the five years in the period
ended December 31, 1999, appearing in the Vanguard PRIMECAP Fund's 1999 Annual
Report to Shareholders, and the report thereon of PricewaterhouseCoopers LLP,
independent accountants, also appearing therein, are incorporated by reference
in this Statement of Additional Information. For a more complete discussion of
the performance, please see the Fund's Annual Report to Shareholders, which may
be obtained without charge.

SAI059-04/07/2000

B-16

<PAGE>

PART C

VANGUARD PRIMECAP FUND
OTHER INFORMATION

ITEM 23. EXHIBITS

(a) Declaration of Trust**
(b) By-Laws**
(c) Reference is made to Articles III and V of the Registrant's Declaration
of Trust
(d) Investment Advisory Contract**
(e) Not applicable
(f) Reference is made to the section entitled "Management of the Fund" in the
Registrant's Statement of Additional Information
(g) Custodian Agreement**
(h) Amended and Restated Funds' Service Agreement**
(i) Legal Opinion**
(j) Consent of Independent Accountants*
(k) Not Applicable
(l) Not Applicable
(m) Not Applicable
(n) Not Applicable
(o) Not Applicable
-- --------------
* Filed herewith
** Filed previously

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Registrant is not controlled by or under common control with any person.

ITEM 25. INDEMNIFICATION

The Registrant's organizational documents contain provisions indemnifying
Trustees and officers against liability incurred in their official capacity.
Article VII, Section 2 of the Declaration of Trust provides that the Registrant
may indemnify and hold harmless each and every Trustee and officer from and
against any and all claims, demands, costs, losses, expenses, and damages
whatsoever arising out of or related to the performance of his or her duties as
a Trustee or officer. However, this provision does not cover any liability to
which a Trustee or officer would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his or her office. Article VI of the By-Laws
generally provides that the Registrant shall indemnify its Trustees and officers
from any liability arising out of their past or present service in that
capacity. Among other things, this provision excludes any liability arising by
reason of willful misfeasance, bad faith, gross negligence, or the reckless
disregard of the duties involved in the conduct of the Trustee's or officer's
office with the Registrant.

C-1

<PAGE>

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

PRIMECAP Management Company (PRIMECAP) is an investment adviser registered under
the Advisers Act of 1940, as amended (the Advisers Act). The list required by
this Item 26 of officers and directors of PRIMECAP, together with any
information as to any business profession, vocation, or employment of a
substantial nature engaged in by such officers and directors during the past two
years, is incorporated herein by reference from Schedules B and D of Form ADV
filed by PRIMECAP pursuant to the Advisers Act (SEC File No. 801-19765). See
also the information under the captions "Investment Adviser" in the prospectus
constituting Part A of this Registration Statement, and "Investment Advisory
Services" in the Statement of Additional Information constituting Part B of this
Registration Statement.

ITEM 27. PRINCIPAL UNDERWRITERS

(a) Not Applicable
(b) Not Applicable
(c) Not Applicable

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

The books, accounts, and other documents required to be maintained by Section
31(a) of the Investment Company Act and the rules promulgated thereunder will be
maintained at the offices of Registrant; Registrant's Transfer Agent, The
Vanguard Group, Inc., 100 Vanguard Boulevard, Malvern, Pennsylvania 19355; and
the Registrant's Custodian, State Street Bank and Trust Company, 225 Franklin
Street, Boston, Massachusetts 02105.

ITEM 29. MANAGEMENT SERVICES

Other than as set forth under the description of The Vanguard Group in Part B of
this Registration Statement, Registrant is not a party to any management-related
service contract.

ITEM 30. UNDERTAKINGS

Not Applicable

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 all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 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 17th day of March, 2000.

VANGUARD PRIMECAP FUND
BY:_________________________________
(signature)
(HEIDI STAM)
JOHN J. BRENNAN*
CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated:

SIGNATURE TITLE DATE
- --------------------------------------------------------------------------------

By:/S/ JOHN J. BRENNAN President, Chairman, Chief March 17, 2000
--------------------------- Executive Officer, and Trustee
(Heidi Stam)
John J. Brennan*

By:/S/ JOANN HEFFERNAN HEISEN Trustee March 17, 2000
---------------------------
(Heidi Stam)
JoAnn Heffernan Heisen*

By:/S/ BRUCE K. MACLAURY Trustee March 17, 2000
---------------------------
(Heidi Stam)
Bruce K. MacLaury*

By:/S/ BURTON G. MALKIEL Trustee March 17, 2000
---------------------------
(Heidi Stam)
Burton G. Malkiel*

By:/S/ ALFRED M. RANKIN, JR. Trustee March 17, 2000
---------------------------
(Heidi Stam)
Alfred M. Rankin, Jr.*

By:/S/ JOHN C. SAWHILL Trustee March 17, 2000
---------------------------
(Heidi Stam)
John C. Sawhill*

By:/S/ JAMES O. WELCH, JR. Trustee March 17, 2000
---------------------------
(Heidi Stam)
James O. Welch, Jr.*

By:/S/ J. LAWRENCE WILSON Trustee March 17, 2000
---------------------------
(Heidi Stam)
J. Lawrence Wilson*

By:/S/ THOMAS J. HIGGINS Treasurer, Principal Financial March 17, 2000
--------------------------- Officer and Principal
(Heidi Stam) Accounting Officer
Thomas J. Higgins*

*By Power of Attorney. See File Number 33-4424, filed on January 25, 1999.
Incorporated by Reference.

<PAGE>

INDEX TO EXHIBITS

Consent of Independent Accountants .................................... Ex-99.BJ

Exhibit-99.BJ

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. 19 to the registration statement on Form N-1A (the "Registration
Statement") of our report dated February 2, 2000, relating to the financial
statements and financial highlights appearing in the December 31, 1999 Annual
Report to Shareholders of Vanguard PRIMECAP 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
headings "Financial Statements" and "Service Providers--Independent Accountants"
in the Statement of Additional Information.

PricewaterhouseCoopers LLP
Philadelphia, PA

March 16, 2000