VANGUARD EQUITY INCOME FUND INC, 485APOS, 2000-03-02

VANGUARD EQUITY INCOME FUND INC
485APOS, 2000-03-02

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT (NO. 33-19446) 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 FENWAY FUNDS
(FORMERLY KNOWN AS VANGUARD EQUITY INCOME 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 FILING BECOME EFFECTIVE:
ON MAY 16, 2000, PURSUANT TO PARAGRAPH (A) OF RULE 485.

APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
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SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS
DATED MARCH 2, 2000

VANGUARD(R)
GROWTH EQUITY
FUND

Prospectus
., 2000

This prospectus contains
financial data for the
Fund through the
fiscal year ended
September 30, 1999.

INFORMATION CONTAINED IN THIS PROSPECTUS IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT FOR VANGUARD GROWTH EQUITY FUND HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE.THIS NEW
FUND IS BEING FORMED THROUGH THE PROPOSED REORGANIZATION OF AN EXISTING FUND,
KNOWN AS TURNER GROWTH EQUITY FUND. SHAREHOLDERS OF TURNER GROWTH EQUITY FUND
MAY OR MAY NOT APPROVE THE REORGANIZATION PROPOSAL. IF THE PROPOSAL IS NOT
APPROVED BY SHAREHOLDERS, THE REGISTRATION STATEMENT PREVIOUSLY FILED FOR
VANGUARD GROWTH EQUITY FUND WILL BE WITHDRAWN.

SHARES OF VANGUARD GROWTH EQUITY FUND MAY NOT BE SOLD, NOR MAY OFFERS TO BUY BE
ACCEPTED, PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
COMMUNICATION SHALL NOT CONSTITUTE AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE
OF THESE SECURITIES IN ANY STATES IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES
LAWS OF ANY SUCH STATE.

[A MEMBER OF
THE VANGUARD GROUP LOGO]

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VANGUARD GROWTH EQUITY FUND
Prospectus
., 2000

A Growth Stock Mutual Fund

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CONTENTS
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. FUND PROFILE . FINANCIAL HIGHLIGHTS

. ADDITIONAL INFORMATION . INVESTING WITH VANGUARD

. A WORD ABOUT RISK . Services and Account Features

. WHO SHOULD INVEST . Types of Accounts

. PRIMARY INVESTMENT STRATEGIES . Buying Shares

. THE FUND AND VANGUARD . Redeeming Shares

. INVESTMENT ADVISERS . Transferring Registration

. DIVIDENDS, CAPITAL GAINS, AND TAXES . Fund and Account Updates

. 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 Growth
Equity 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 Growth Equity Fund.

INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation.

INVESTMENT STRATEGIES
The Fund invests primarily in common stocks and other equity securities of U.S.
companies with medium and large-capitalizations that are believed to have strong
earnings growth potential and to be reasonably valued at the time of purchase.
The Fund will invest in securities of companies that are diversified across
economic sectors, and will attempt to maintain sector weightings that
approximate those of the Russell 1000 Growth Index.

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

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ANNUAL TOTAL RETURNS
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1993 15.38%
1994 -6.73%
1995 29.96%
1996 19.23%
1997 31.36%
1998 38.07%
1999 53.60%
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The Fund's year-to-date return as of the most recent calendar quarter ended
March 31, 2000, was .%.

During the period shown in the bar chart, the highest return for a calendar
quarter was 39.67% (quarter ended December 31,1999) and the lowest return for a
quarter was -8.85% (quarter ended September 30,1998).

*Prior to . 2000, Vanguard Growth Equity Fund was organized as Turner Growth
Equity Fund and was sponsored by Turner Investment Partners, LLC, its investment
adviser. The reorganization brought the Fund into the Vanguard Group, while
maintaining the same investment objective, strategies and adviser.
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------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR YEARS ENDED DECEMBER 31, 1999
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SINCE
1 YEAR 5 YEARS INCEPTION*
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Vanguard Growth Equity Fund 53.60% 33.98% 23.68%
Russell 1000 Growth Index 33.16 34.21 22.08
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*March 11, 1992

FEES AND EXPENSES
The following table describes the fees and expenses you would pay if you buy and
hold shares of the Fund. The expenses shown under Annual Fund Operating Expenses
are based on amounts now in effect.*

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: .%
12b-1 Distribution Fee: None
Other Expenses: 0.65%
TOTAL ANNUAL FUND OPERATING EXPENSES:

*The information in the table has been restated to reflect current expenses
rather than last year's expenses because these amounts changed materially when
the Fund became a member of The Vanguard Group on ., 2000.

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.

-------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------
$. $. $. $.
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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 Growth Equity Fund's estimated expense ratio for its first
full year of operations as a Vanguard fund is 0.65%, or $6.50 per $1,000 of
average net assets. The average growth and equity mutual fund had expenses in
1999 of .%, or $. per $1,000 of average net assets, (derived from data provided
by Lipper Inc., which reports on the mutual fund industry).
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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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ADDITIONAL INFORMATION
DIVIDENDS AND CAPITAL GAINS MINIMUM INITIAL INVESTMENT
Distributed . $3,000; $1,000 for IRAs and custodial accounts
for minors
INVESTMENT ADVISER
Turner Invetment Partners, NEWSPAPER ABBREVIATION
Inc. .
Berwyn, PA, since inception
VANGUARD FUND NUMBER
INCEPTION DATE .
March 11, 1992
CUSIP NUMBER
NET ASSETS AS OF SEPTEMBER .
30, 1999
$142.8 million TICKER SYMBOL
.
SUITABLE FOR IRAS
Yes
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A WORD ABOUT RISK

This prospectus describes risks you would face as an investor in Vanguard Growth
Equity 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 Vanguard Growth Equity 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 equity 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 seeking a fund that emphasizes companies with established records
of growth.

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 on 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.

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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, the prices of such stocks are
typically above-average in relation to such measures as revenue, earnings, and
book value. Generally, growth stocks have below-average dividend yields relative
to value stocks. 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 to 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.
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PRIMARY INVESTMENT STRATEGIES

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

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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 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 primarily in the common stocks of U.S. companies with medium
and large capitalizations, that are believed to have strong earnings growth
potential and that are reasonably valued at the time of purchase.

[FLAG] THE FUND IS SUBJECT TO MARKET RISK, WHICH IS THE POSSIBILITY 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.

------------------------------------------------------
U.S. STOCK MARKET RETURNS (1926-1999)
------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS 20 YEARS
------------------------------------------------------
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
------------------------------------------------------

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

<PAGE>

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.

[FLAG] THE FUND IS SUBJECT TO INVESTMENT STYLE RISK, WHICH IS THE POSSIBILITY
THAT RETURNS FROM MEDIUM AND LARGE-CAPITALIZATION GROWTH STOCKS WILL TRAIL
RETURNS FROM OTHER ASSET CLASSES OR THE OVERALL STOCK MARKET. AS A GROUP,
MEDIUM AND LARGE-CAPITALIZATION 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
FUND DIVERSIFICATION
In general, the more diversified a fund's stock holdings, the less likely it is
that a specific stock's poor performance will hurt the fund. One measure of a
fund's diversification is the percentage of its assets represented by its ten
largest holdings. The average U.S. equity mutual fund has about 34% of its
assets invested in its ten largest holdings, while some less-diversified funds
have more than 50% of their assets invested in the stocks of just ten companies.
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SECURITY SELECTION

Turner Investment Partners, Inc. (Turner), the Fund's adviser, seeks to buy
stocks of companies with strong earnings dynamics, and sell those with
deteriorating earnings prospects. Turner believes forecasts for market timing
and sector rotation are unreliable, and introduce an unacceptable level of risk.
Turner also believes that it is imprudent to be overly invested in any
individual security. Accordingly, Turner invests the Fund's assets across major
economic sectors and attempts to maintain sector exposure that approximates its
performance benchmark, the Russell 1000 Growth Index (the "Index"). In addition,
Turner generally invests no more than 2% of the Fund's assets in any one
security. However, a security's weighting within the Fund at the time of
purchase may equal up to twice its weighting within the Index, if such security
represents between 1% and 5% of the Index. For securities representing more than
5% of the Index, the Fund may invest in up to one and one-half times the Index
weighting. This policy allows Turner's stock selection process to be the primary
determinant of performance.
The Fund is run by Turner according to traditional methods of active
investment management. This means that securities are bought and sold according
to Turner's judgments about companies and their financial prospects, within the
context of the stock market and the economy in general.
The Fund is generally managed without regard to tax ramifications.

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

Fund's average turnover rate for the past five years has been about 216%. (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 for all domestic stock funds is
approximately 86%, according to Morningstar, Inc.
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OTHER INVESTMENT POLICIES AND RISKS
Besides investing in common stocks of growth companies, the Fund may make
certain other kinds of investments to achieve its objective.
The Fund may invest a portion of its assets in securities that are
convertible to common stocks, warrants, rights to purchase common stocks, and
American Depository Receipts (ADRs).
The Fund may also invest in stock futures, stock index futures, and options
contracts, which are traditional types of derivatives. Losses (or gains)
involving futures can sometimes be substantial--in part because a relatively
small movement in a futures contract may result in an immediate and substantial
loss (or gain) for a fund. This Fund will not use futures for speculative
purposes or as leveraged investments that magnify the gains or losses of an
investment. The Fund's obligation to purchase securities under futures contracts
will not exceed 20% of its total assets.
The reasons for which the Fund will invest in futures and options are:
- - To keep cash on hand to meet shareholder redemptions or other needs while
simulating full investment in stocks.
- - To reduce the Fund's transaction costs or add value when these instruments
are favorably prices.
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.
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PLAIN TALK ABOUT
DERIVATIVES
A derivative is a financial contract whose value is based on (or "derived" from)
a traditional security (such as a stock or a bond), an asset (such as a
commodity like gold), or a market index (such as the S&P 500 Index). Futures and
options are derivatives that have been trading on regulated exchanges for more
than two decades. These "traditional" derivatives are standardized contracts
that can easily be bought and sold, and whose market values are determined and
published daily. It is these characteristics that differentiate futures and
options from the relatively new types of derivatives. If used for speculation or
as leveraged investments, derivatives can carry considerable risks.
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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 distinct investment portfolios holding assets worth
more than $. 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.

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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 Turner Investment Partners, Inc. ("Turner"), 1235 Westlakes
Drive, Suite 350, Berwyn, PA 19312 as its investment adviser. Turner manages the
Fund subject to the control of the Trustees and officers of the Fund.
Turner's advisory fee is paid quarterly. The fee is based on certain annual
percentage rates applied to the Fund's average month-end assets for each
quarter. In addition, the quarterly fee is increased or decreased based upon
Turner's performance in comparison to its benchmark index. For these purposes,
Turner's cumulative investment performance over a trailing 36-month period is
compared to the cumulative total return of the Russell 1000 Growth Index over
the same period.
For the fiscal year ended September 30, 1999, the investment advisory fees
paid to Turner represented an effective annual rate of 0.75% of the Fund's
average net assets. (Please note that these fees were calculated under a prior
advisory agreement. Had the
<PAGE>

current fee schedule been in place for fiscal 1999, the investment advisory fee
would have represented an effective annual rate of .% of the Fund's average net
assets.)
The Fund has authorized Turner 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, Turner may
choose brokers who charge higher commissions. If more than one broker can obtain
the best available price and favorable execution of a transaction, then Turner
is authorized to choose a broker who, in addition to executing the transaction,
will provide research services to Turner or the Fund. Also, the Fund may direct
Turner 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 Turner or as an additional adviser. However, any such change
will be communicated to shareholders in writing.

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PLAIN TALK ABOUT
THE FUND'S ADVISER
Turner Investment Partners, Inc. is a professional advisory firm founded in
1990, specializing in growth equity investing. As of March 31, 2000, Turner had
discretionary management authority with respect to approximately $. billion in
assets, including 10 non-Vanguard mutual funds with $. in assets.

ROBERT E. TURNER, CFA, Chairman and Chief Investment Officer of Turner since
co-founding the firm in 1990; has worked in investment management since 1981;
B.S. and M.B.A., Bradley University.

JOHN HAMMERSCHMIDT, Senior Equity Portfolio Manager of Turner since 1992; has
worked in investment management since 1983; B.S., Lehigh University; M.B.A.,
Duke University.

CHRISTOPHER MCHUGH, Senior Equity Portfolio Manager of Turner since 1990; has
worked in investment management since 1986; B.S., Philadelphia College of
Textiles and Science; M.B.A., St. Joseph's University.

MARK TURNER, President of Turner since co-founding the firm in 1990; has worked
in investment management since 1982; B.S., Bradley University; M.B.A.,
University of Illinois.
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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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<PAGE>

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. 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.

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:
- - Distributions are taxable to you whether or not you reinvest these amounts
in additional Fund shares.
- - 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.
- - State and local income taxes may apply to any dividend or capital gains
distributions that you receive, as well as your gains or losses from any
sale or exchange of Fund shares.

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
<PAGE>

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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.
- --------------------------------------------------------------------------------

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:

NET ASSET VALUE = TOTAL ASSETS - LIABILITIES
----------------------------
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 ..

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>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
VANGUARD GROWTH EQUITY FUND (4)
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------
SIX
MONTHS
ENDED
MARCH
31,
2000 1999 1998 1997 1996(2) 1995
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR $12.87 $16.64 $17.03 $14.97 $2.46
- -----------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income (0.05) (0.05) (0.03) 0.02 0.10
Net Realized and Unrealized Gain (Loss)
on Investments 4.66 1.10 4.23 2.91 2.52
--------------------------------------------------------------------
Total from Investment Operations 4.61 1.05 4.20 2.93 2.62
--------------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net Investment Income -- -- -- (0.02) (0.11)
Distributions from Realized Capital
Gains (1.60) (4.82) (4.59) (0.85) --
Total Distributions (1.60) (4.82) (4.59) (0.87) (0.11)
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF YEAR $15.88 $12.87 $16.64 $17.03 $14.97
=====================================================================================================
TOTAL RETURN(1) 38.16% 10.71% 32.61% 20.61% 21.15%
=====================================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (Thousands) $142,824 $97,857 $99,590 $96,164 $115,819
Ratio of Total Expenses to Average
Net Assets 0.96% 1.04% 1.02% 1.06%(3) 1.03%
Ratio of Net Income (Loss) to
Average Net Assets (0.42)% (0.42)% (0.25)% 0.03%(3) 0.69%
Ratio of Expenses to Average Net
Assets (excluding waivers) 0.96% 1.12% 1.05% 1.06%(3) 1.03%
Ratio of Net Investment Income (Loss)
to Average Net Assets (excluding
waivers) (0.42)% (0.50)% (0.28) 0.03%(3) 0.69%
Turnover Rate 328.26% 249.58% 178.21% 147.79% 177.86%
=====================================================================================================
</TABLE>

(1) Returns are for the period indicated and have not been annualized.
(2) On April 19, 1996, the Board of Trustees of the Fund voted to approve a
tax-free reorganization of the Fund. In connection with the reorganization,
the Fund changed its fiscal year end from October 31 to September 30,
effective September 30, 1996.
(3) Annualized.
(4) The Fund was organized as Turner Growth Equity Fund, and was not a member
of the Vanguard Group. On ., 2000, the Fund acquired all assets and
liabilities of Turner Growth Equity Fund in a tax-free reorganization. The
Fund had no operations prior to the reorganization.
<PAGE>

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

The Fund began fiscal 1999 with a net asset value (price) of $12.87 per share.
During the year, the Fund's expenses exceeded its investment income by $0.05 per
share. The Fund earned $4.66 per share from investments that had appreciated in
value or that were sold for higher prices than the Fund paid for them.

Shareholders received $1.60 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 ($4.61 per share) minus the distributions ($1.60 per share)
resulted in a share price of $15.88 at the end of the year. This was an increase
of $4.01 per share (from $12.87 at the beginning of the year to $15.88 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 38.16% for the year.

As of September 30, 1999, the Fund had $142.824 million in net assets. For the
year, its expense ratio was 0.96% ($9.60 per $1,000 of net assets); and its net
investment income amounted to (0.42)% of its average net assets. It sold and
replaced securities valued at 328.26% of its net assets.
- --------------------------------------------------------------------------------

<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 [BOOKLET]. 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 DIRECT DEPOSIT SERVICE [BOOKLET]
Automatic method for depositing your paycheck or U.S. government payment
(including Social Security and government pension checks) into your account.
- --------------------------------------------------------------------------------
VANGUARD AUTOMATIC EXCHANGE SERVICE [BOOKLET]
Automatic method for moving a fixed amount of money from one Vanguard fund
account to another.
- --------------------------------------------------------------------------------
VANGUARD FUND EXPRESS(R)[BOOKLET]
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 [BOOKLET]
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)[BOOKLET]
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 [BOOKLET]
Invest assets held in an existing personal trust.
- --------------------------------------------------------------------------------
FOR INDIVIDUAL RETIREMENT ACCOUNTS [BOOKLET]
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 [BOOKLET]
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
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 . . .
open a new account
$3,000 (regular account); $1,000 (traditional IRAs and Roth IRAs).

add to an existing account
$100 by mail or exchange; $1,000 by wire.
- --------------------------------------------------------------------------------
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]
open a new account
Complete and sign the account registration form and enclose your check.

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-.
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:
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
- --------------------------------------------------------------------------------
IMPORTANT NOTE: To prevent check fraud, Vanguard will not accept checks made
payable to third parties.
- --------------------------------------------------------------------------------
BY TELEPHONE TO . . .[TELEPHONE]
open a new 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).

<PAGE>

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.

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

*You must obtain a Personal Identification Number through Tele-Account at least
seven days before you request your first exchange.
- --------------------------------------------------------------------------------
IMPORTANT NOTE: Once you have requested 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 OPEN A NEW ACCOUNT OR 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 Growth Equity Fund-.
[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.
- --------------------------------------------------------------------------------

<PAGE>

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 20. A signature
guarantee may be obtained from most commercial and savings banks, credit unions,
trust companies, or member firms of a U.S. stock exchange.

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. For
exchanges, the purchase side of the transaction will be based on the receiving
fund's next-determined share price, again 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, VANGUARD TOTAL
INTERNATIONAL STOCK INDEX FUND, and VANGUARD GROWTH AND INCOME FUND. These funds
do, however, permit online and telephone exchanges within IRAs and other
retirement accounts. If you sell shares of these funds online, you will receive
a redemption check at 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 [TELEPHONE]
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.
<PAGE>

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 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, 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.
<PAGE>

REDEEMING SHARES (continued)
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
- --------------------------------------------------------------------------------
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 banks, credit unions,
and licensed brokers.
<PAGE>

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:
- - 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.
- - 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

<PAGE>

For clients of Vanguard's Institutional Division. . .

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 adviser, 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 mail-ings 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 [BOOKLET]
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 October and April 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 [BOOKLET]
Issued quarterly for most taxable accounts opened after ., 2000 (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>

(THIS PAGE INTENTIONALLY LEFT BLANK.)

<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.

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, the
prices of growth stocks often are relatively high in comparison with such
factors as revenue, earnings, book value, and dividends.

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.

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

SECURITIES
Stocks, bonds, and other investment vehicles.

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

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

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

[SHIP]
[THE VANGUARD GROUP LOGO]
Post Office Box 2600
Valley Forge, PA 19482-2600

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

ANNUAL/SEMIANNUAL REPORTS 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 20549-6009.

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

P0.N-.

<PAGE>

VANGUARD(R)
GROWTH EQUITY FUND

Participant Prospectus
., 2000

This prospectus contains
financial data for the
Fund through the
fiscal year ended
September 30, 1999.

[A MEMBER OF
THE VANGUARD GROUP LOGO]

<PAGE>

VANGUARD GROWTH EQUITY FUND
Participant Prospectus
., 2000

A Growth Stock Mutual Fund

. ADDITIONAL INFORMATION . SHARE PRICE

. A WORD ABOUT RISK . FINANCIAL HIGHLIGHTS

. WHO SHOULD INVEST . INVESTING WITH VANGUARD

. PRIMARY INVESTMENT STRATEGIES . ACCESSING FUND INFORMATION BY
COMPUTER

. THE FUND AND VANGUARD GLOSSARY (inside back cover)

. INVESTMENT ADVISERS
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
WHY READING THIS PROSPECTUS IS IMPORTANT
This prospectus explains the objective, risks, and strategies of Vanguard Growth
Equity 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.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------

FUND PROFILE

The following profile summarizes key features of Vanguard Growth Equity Fund.

INVESTMENT OBJECTIVE
The Fund seeks to provide long-term capital appreciation.

Vanguard Growth Equity Fund 53.60% 33.98% 23.68%
Russell 1000 Growth Index 33.16 34.21 22.08
------------------------------------------------------------------
*March 11, 1992

ANNUAL FUND OPERATING EXPENSES (EXPENSES DEDUCTED FROM THE FUND'S
ASSETS)
Management Expenses: .%
12b-1 Distribution Fee: None
Other Expenses: 0.65%
TOTAL ANNUAL FUND OPERATING EXPENSES:

-------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------
$. $. $. $.
-------------------------------------------------

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>

- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION
DIVIDENDS AND CAPITAL GAINS NEWSPAPER ABBREVIATION
Distributed . .

INVESTMENT ADVISER VANGUARD FUND NUMBER
Turner Invetment Partners, Inc. .
Berwyn, PA, since inception
CUSIP NUMBER
INCEPTION DATE .
March 11, 1992
TICKER SYMBOL
NET ASSETS AS OF SEPTEMBER 30, 1999 .
$142.8
- --------------------------------------------------------------------------------

================================================================================
A WORD ABOUT RISK

<PAGE>

WHO SHOULD INVEST

The Fund may be a suitable investment for you if:
- - You wish to add a growth equity 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.
n You are not looking for current income. n You are seeking a fund that
emphasizes companies with established records of growth.

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

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 on 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.

<PAGE>

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

MARKET EXPOSURE
The Fund invests primarily in the common stocks of U.S. companies with medium
and large capitalizations, that are believed to have strong earnings growth
potential and that are reasonably valued at the time of purchase.

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

<PAGE>

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
FUND DIVERSIFICATION

In general, the more diversified a fund's stock holdings, the less likely it is
that a specific stock's poor performance will hurt the fund. One measure of a
fund's diversification is the percentage of its assets represented by its ten
largest holdings. The average U.S. equity mutual fund has about 34% of its
assets invested in its ten largest holdings, while some less-diversified funds
have more than 50% of their assets invested in the stocks of just ten companies.
- --------------------------------------------------------------------------------

SECURITY SELECTION
Turner Investment Partners, Inc. (Turner), the Fund's adviser, seeks to buy
stocks of companies with strong earnings dynamics, and sell those with
deteriorating earnings prospects. Turner believes forecasts for market timing
and sector rotation are unreliable, and introduce an unacceptable level of risk.
Turner also believes that it is imprudent to be overly invested in any
individual security. Accordingly, Turner invests the Fund's assets across major
economic sectors and attempts to maintain sector exposure that approximates its
performance benchmark, the Russell 1000 Growth Index (the "Index"). In addition,
Turner generally invests no more than 2% of the Fund's assets in any one
security. However, a security's weighting within the Fund at the time of
purchase may equal up to twice its weighting within the Index, if such security
represents between 1% and 5% of the Index. For securities representing more than
5% of the Index, the Fund may invest in up to one and one-half times the Index
weighting. This policy allows Turner's stock selection process to be the primary
determinant of performance.
The Fund is run by Turner according to traditional methods of active
investment management. This means that securities are bought and sold according
to Turner's judgments about companies and their financial prospects, within the
context of the stock market and the economy in general.
The Fund is generally managed without regard to tax ramifications.

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

<PAGE>

TURNOVER RATE
The Fund retains the right to sell securities regardless of how long the
securities have been held. Historically, due to its investment strategy, the
Fund has had a HIGH turnover rate. The Fund's average turnover rate for the past
five years has been about 216%. (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.)

OTHER INVESTMENT POLICIES AND RISKS

Besides investing in common stocks of growth companies, the Fund may make
certain other kinds of investments to achieve its objective.
The Fund may invest a portion of its assets in securities that are
convertible to common stocks, warrants, rights to purchase common stocks, and
American Depository Receipts (ADRs).
The Fund may also invest in stock futures, stock index futures, and options
contracts, which are traditional types of derivatives. Losses (or gains)
involving futures can sometimes be substantial--in part because a relatively
small movement in a futures contract may result in an immediate and substantial
loss (or gain) for a fund. This Fund will not use futures for speculative
purposes or as leveraged investments that magnify the gains or losses of an
investment. The Fund's obligation to purchase securities under futures contracts
will not exceed 20% of its total assets.
The reasons for which the Fund will invest in futures and options are:
- - To keep cash on hand to meet shareholder redemptions or other needs while
simulating full investment in stocks.
- - To reduce the Fund's transaction costs or add value when these instruments
are favorably prices.
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.
<PAGE>

THE FUND AND VANGUARD

INVESTMENT ADVISER

ROBERT E. TURNER, CFA, Chairman and Chief Investment Officer of Turner since
co-founding the firm in 1990; has worked in investment management since 1981;
B.S. and M.B.A., Bradley University.

JOHN HAMMERSCHMIDT, Senior Equity Portfolio Manager of Turner since 1992; has
worked in investment management since 1983; B.S., Lehigh University; M.B.A.,
Duke University.

<PAGE>

DIVIDENDS, CAPITAL GAINS, AND TAXES

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.
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.

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:

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

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>

(1) Returns are for the period indicated and have not been annualized.
(2) On April 19, 1996, the Board of Trustees of the Fund voted to approve a
tax-free reorganization of the Fund. In connection with the reorganization,
the Fund changed its fiscal year end from October 31 to September 30,
effective September 30, 1996.
(3) Annualized.
(4) The Fund was originally organized as Turner Growth Equity Fund, and was not
a member of the Vanguard Group.On ., 2000, the Fund acquired all assets and
liabilities of Turner Growth Equity Fund in a tax-free reorganization. The
Fund had no operations prior to the reorganization.

<PAGE>

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

Shareholders received $1.60 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.

<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 a 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 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>

(THIS PAGE INTENTIONALLY LEFT BLANK.)

<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.

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.

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.

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

SECURITIES
Stocks, bonds, and other investment vehicles.

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

FOR MORE INFORMATION

If you'd like more information about
Vanguard Growth Equity Fund, the
following documents are available
free upon request:

ANNUAL/SEMIANNUAL REPORTS 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

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

I0.N-./2000

<PAGE>

PART B

VANGUARD(R) FENWAY FUNDS
(THE TRUST)

STATEMENT OF ADDITIONAL INFORMATION

JANUARY 21, 2000;
REVISED MAY ., 2000

This Statement is not a Prospectus but should be read in conjunction with the
Trust's current Prospectuses (dated January 21, 2000 for Vanguard Equity Income
Fund and May ., 2000 for Vanguard Growth Equity Fund). To obtain the
Prospectuses or the most recent Annual Reports to Shareholders, which contain
the Trust's financial statements as hereby incorporated by reference, please
call:

INVESTOR INFORMATION DEPARTMENT
1-800-662-7447

TABLE OF CONTENTS

PAGE
----
DESCRIPTION OF THE TRUST ...................................................B-.
INVESTMENT POLICIES ........................................................B-.
FUNDAMENTAL INVESTMENT LIMITATIONS .........................................B-.
PURCHASE OF SHARES .........................................................B-.
REDEMPTION OF SHARES .......................................................B-.
SHARE PRICE ................................................................B-.
MANAGEMENT OF THE FUNDS ....................................................B-.
YIELD AND TOTAL RETURNS ....................................................B-.
INVESTMENT ADVISORY SERVICES ...............................................B-.
PORTFOLIO TRANSACTIONS .....................................................B-.
FINANCIAL STATEMENTS .......................................................B-.
COMPARATIVE INDEXES ........................................................B-.

DESCRIPTION OF THE TRUST

ORGANIZATION

The Trust was organized as Vanguard Equity Income Fund, Inc., a Maryland
corporation, in 1987, and was reorganized as Vanguard Equity Income, a Delaware
business trust, in May 1998. On March 1, 2000, the Trust was renamed Vanguard
Fenway Funds. The Trust 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 company. It currently
offers the following funds:

Vanguard Equity Income Fund
Vanguard Growth Equity Fund

(INDIVIDUALLY, THE FUND; COLLECTIVELY THE FUNDS)

The Trust has the ability to offer additional funds or classes of shares.
There is no limit on the number of full and fractional shares that each Fund may
issue.

SERVICE PROVIDERS

CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, serves as the custodian for Vanguard Equity Income
Fund.The custodian for Vanguard

B-1
<PAGE>

Capital Growth Fund is First Union National Bank, PA4943, 530 Walnut Street,
Philadelphia, Pennsylvania 19106. The custodians are responsible for maintaining
the Funds' assets and keeping all necessary accounts and records.

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

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

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 Funds' shares, other
than the possible future termination of the Funds. Each 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 Funds will
continue indefinitely.

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

VOTING RIGHTS. Shareholders are entitled to a 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 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 a Fund's net assets, and to change any fundamental
policy of a Fund. Shareholders of each Fund 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. However, only the
shares of the Fund affected by a particular matter are entitled to vote on that
matter. Voting rights are non-cumulative 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 applicable Fund's net assets.

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

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

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

SINKING FUND PROVISIONS. The Funds have no sinking fund provisions.

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

B-2
<PAGE>

TAX STATUS OF THE FUNDS

Each Fund intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code. This special tax status means that a
Fund will not be liable for federal tax on income and capital gains distributed
to shareholders. In order to preserve its tax status, each Fund must comply with
certain requirements. If a 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 Funds' investment objectives and policies
set forth in the Prospectuses. Vanguard Equity Income Fund intends to invest at
least 65% of its total assets in equity securities intended to produce income.
Vanguard Growth Equity Fund intends to invest at least 65% of its total assets
in common stocks of growth companies.

FUTURES CONTRACTS AND OPTIONS

Each Fund may enter into futures contracts, options, and options on futures
contracts in order to maintain cash reserves while simulating full investment.
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified future
time and at a specified price. Futures contracts which are standardized as to
maturity date and underlying financial instrument are traded on national futures
exchanges. Futures exchanges and trading are regulated under the Commodity
Exchange Act by the Commodity Futures Trading Commission (CFTC), a U.S.
Government Agency. Assets committed to futures contracts will be segregated to
the extent required by law.

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

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

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

Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset
unfavorable changes in the value of securities otherwise held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own the securities underlying the futures contracts which they trade, and use
futures
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<PAGE>

contracts with the expectation of realizing profits from fluctuations in the
value of the underlying securities. Each Fund intends to use futures contracts
only for bona fide hedging purposes. Regulations of the CFTC applicable to each
Fund require that all of its futures transactions constitute bona fide hedging
transactions except to the extent that the aggregate initial margins and
premiums required to establish any non-hedging positions do not exceed five
percent of the value of the respective Fund's portfolio.

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

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS. Each 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, each Fund will not enter into futures
contracts to the extent that its outstanding obligations to purchase securities
under these contracts would exceed 20% of the Fund's total assets.

RISK FACTORS IN FUTURES TRANSACTIONS. Positions in futures 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,
each 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, each Fund may be
required to make delivery of the instruments underlying the futures contracts it
holds. The inability to close options and futures positions also could have an
adverse impact on the ability to effectively hedge. Each Fund will minimize the
risk that it will be unable to close out a futures contract by only entering
into futures which are traded on national futures exchanges and for which there
appears to be a liquid secondary market.

The 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 in the value of the futures contract 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 futures strategies of
each Fund are engaged in only for hedging purposes, the Advisers do not believe
that the Funds are subject to the risks of loss frequently associated with
futures transactions. Each Fund would presumably have sustained comparable
losses if, instead of the futures contract, it had invested in the underlying
financial instrument and sold it after the decline.

Utilization of futures transactions by each 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 each Fund could both lose money on futures contracts and also
experience a decline in the value of its portfolio securities. There is also the
risk of loss by each Fund of margin deposits in the event of bankruptcy of a
broker with whom the respective Fund has an open position in a futures contract
or related option.

Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a

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<PAGE>

trading session. Once the daily limit has been reached in a particular type of
contract, no trades may be made on that day at a price beyond that limit. The
daily limit governs only price movement during a particular trading day and
therefore does not limit potential losses, because the limit may prevent the
liquidation of unfavorable positions. Futures contract prices have occasionally
moved to the daily limit for several consecutive trading days with little or no
trading, thereby preventing prompt liquidation of futures positions and
subjecting some futures traders to substantial losses.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS. Except for transactions that
each Fund has identified as hedging transactions, each 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 held as of the end of
the year as well as those actually realized during the year. In most cases, any
gain or loss recognized with respect to a futures contract is considered to be
60% long-term capital gain or loss and 40% short-term capital gain or loss,
without regard to the holding period of the contract. Furthermore, sales of
futures contracts which are intended to hedge against a change in the value of
securities held by each Fund may affect the holding period of such securities
and, consequently, the nature of the gain or loss on such securities upon
disposition. The Funds 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 Funds.

In order for each 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, and gains from the sale of
securities or foreign currencies, or other income derived with respect to its
business of investing in such securities or currencies. It is anticipated that
any net gain realized from the closing out of futures contracts will be
considered qualifying income for purposes of the 90% requirement.

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

REPURCHASE AGREEMENTS

Each Fund, along with other members of The Vanguard Group, may invest in
repurchase agreements with commercial banks, brokers or dealers either for
defensive purposes due to market conditions or to generate income from its
excess cash balances. A repurchase agreement is an agreement under which a Fund
acquires a fixed-income security (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 a Fund and is unrelated to the interest rate on the
underlying instrument. In these transactions, the securities acquired by a 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, each Fund's Board of Trustees will monitor repurchase
agreement transactions generally and will establish guidelines and standards for
review by the investment adviser of the creditworthiness of any bank, broker or
dealer party to a repurchase agreement.

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, a
Fund may incur a loss upon disposition of the security. If the other party to
the agreement becomes insolvent and subject to the liquidation or reorganization
under the Bankruptcy Code or other laws, a court may determine that the
underlying security is collateral for a loan by a Fund not within the control of
a 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

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<PAGE>

substantiate its interest in the underlying security and may be deemed an
unsecured creditor of the other party to the agreement. While the Funds'
management acknowledges these risks, it is expected that they can be controlled
through careful monitoring procedures.

LENDING OF SECURITIES

Each Fund may lend its investment 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 investment securities, a Fund attempts to
increase its net investment income through the receipt of interest on the loan.
Any gain or loss in the market price of the securities loaned that might occur
during the term of the loan would be for the account of the Fund. The terms, the
structure and the aggregate amount of such loans must be consistent with the
1940 Act and the Rules and Regulations or interpretations of theCommission
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 pledge
and maintain with the Fund collateral consisting of cash, an irrevocable letter
of credit or securities issued or guaranteed by the United States Government
having at all times not less than 100% of the value of the securities loaned,
(b) the borrower add to such collateral whenever the price of the securities
loaned rises (i.e., the borrower "marks to the market" on a daily basis), (c)
the loan be made subject to termination by the Fund at any time and (d) the Fund
receive reasonable interest on the loan (which may include the Fund's investing
any cash collateral in interest bearing short-term investments), any
distribution on the loaned securities and any increase in their market value.
Loan arrangements made by a Fund will comply with all other applicable
regulatory requirements, including the rules of the New York Stock Exchange,
which 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 Funds' 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 securities, but if a material event will occur affecting an
investment on the loan, the loan must be called and the securities voted.

VANGUARD INTERFUND LENDING PROGRAM

The Commission has issued an exemptive order permitting each 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.

TEMPORARY INVESTMENTS

Each 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) repurchase agreements involving any such securities; (c) shares
of other investment companies which have investment objectives consistent with
those of the Fund; and (d) other

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<PAGE>

money market instruments. There is no limit on the extent to which a Fund may
take temporary defensive measures. In taking such measures, a Fund may fail to
achieve its investment objective.

FOREIGN INVESTMENTS

As indicated in the Prospectuses, Vanguard Equity Income Fund and Vanguard
Growth Equity Fund each may invest up to 20% of its total 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, Vanguard Equity
Income Fund and Vanguard Growth Equity 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 each Fund permit it to enter into forward foreign
currency exchange contracts in order to hedge holdings and commitments against
changes in the level of future currency rates. Such contracts involve an
obligation to purchase or sell a specific currency at a future date at a price
set at the time of the contract.

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 U.S. taxpayer 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 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 gain 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 the 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.

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 foreign stock exchanges, brokers and
listed companies than in the U.S. In addition, with respect to certain foreign
countries, there is the possibility of

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<PAGE>

expropriation or confiscatory taxation, political or social instability, or
diplomatic developments which could affect U.S. investments in companies in
those countries.

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

ILLIQUID SECURITIES

Each 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 a Fund's books.

Each Fund may invest in restricted, privately placed securities that, under
the Commission's rules, 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 a Fund to convert to cash if needed.

If a substantial market develops for a restricted security held by a Fund,
it will be treated as a liquid security, in accordance with procedures and
guidelines approved by the Funds' 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 (the 1933
Act). While the Funds' investment advisers determine the liquidity of restricted
securities on a daily basis, the Board oversees and retains ultimate
responsibility for the advisers' decisions. Several factors 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.

AMERICAN DEPOSITARY RECEIPTS ("ADRS")

ADRs are securities, typically issued by a U.S. financial institutional (a
"depositary"), that evidence ownership interests in a security or a pool of
securities issued by a foreign issuer and deposited with the depositary. ADRs
may be available through "sponsored" or "unsponsored" facilities. A sponsored
facility is established jointly by the issuer of the security underlying the
receipt and a depositary, whereas an unsponsored facility may be established by
a depositary without participation by the issuer of the underlying security.
Holders of unsponsored depositary receipts generally bear all the costs of the
unsponsored facility. The depositary of an unsponsored facility frequently is
under no obligation to distribute shareholder communications received from the
issuer of the deposited security or to pass through, to the holders of the
receipts, voting rights with respect to the deposited securities.

CONVERTIBLE SECURITIES

Convertible securities are corporate securities that are exchangeable for a set
number of another security at a prestated price. Convertible securities
typically have characteristics of both fixed income and equity securities.
Because of the conversion feature, the market value of a convertible security
tends to move with the market value of the underlying stock. The value of a
convertible security is also affected by prevailing interest rates, the credit
quality of the issuer and any call provisions.

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<PAGE>

VARIABLE AND FLOATING RATE INSTRUMENTS

Certain obligations may carry variable or floating rates of interest, and may
involve a conditional or undconditional demand feature. Such instruments bear
interest at rates which are not fixed, but which vary with changes in specified
market rates or indices. The interest rates on these securities may be reset
daily, weekly, quarterly or some other reset period, and may have a floor or
ceiling on interest rate changes. There is a risk that the current interest rate
on such obligations may not accurately reflect existing market interest rates. A
demand instrument with a demand notice exceeding seven days may be considered
illiquid if there is no secondary market for such security.

WARRANTS

Warrants are instruments giving holders the right, but not the obligation, to
buy equity or fixed income securities of a company at a given price during a
specified period.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES

When-issued or delayed delivery securities are subject to market fluctuations
due to changes in market interest rates and it is possible that the market value
at the time of settlement could be higher or lower than the purchase price if
the general level of interest rates has changed. Although a Fund generally
purchases securities on a when-issued or forward commitment basis with the
intention of actually acquiring securities for its investment portfolio, a Fund
may dispose of a when-issued security or forward commitment prior to settlement
if it deems appropriate.

FUNDAMENTAL INVESTMENT LIMITATIONS

Each 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 assets value are present or represented by proxy; or (ii) more than
50% of a Fund's net asset value.

BORROWING. Vanguard Equity Income Fund may not borrow money, except for
temporary purposes in an amount not exceeding 15% of the Fund's net assets.
Vanguard Growth Equity Fund may not borrow money in an amount exceeding 33 1/ 3%
of the value of its total assets, provided that, for purposes of this
limitation, investment strategies which either obligate the Fund to purchase
securities or require the Fund to segregate assets are not considered to be
borrowings. For Vanguard Growth Equity Fund, asset coverage of at least 300% is
required for all borrowings, except where the Fund has borrowed for temporary
purposes in amounts not exceeding 5%. Each Fund may borrow money through banks,
or Vanguard's interfund lending program only, and must comply with all
applicable regulatory conditions. Each Fund may not make any additional
investments whenever outstanding borrowings exceed 5% of net assets.

COMMODITIES. The Fund may not invest in commodities, except that each Fund
may invest in stock futures contracts, stock options and options on stock
futures contracts. No more than 5% of the Fund's total assets may be used as
initial margin deposit for futures contracts, and no more than 20% of the Fund's
total assets may be obligated under 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, its
agencies, or instrumentalities.

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

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<PAGE>

INVESTING FOR CONTROL. The Fund may not invest in a company for the purpose
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 by purchasing fixed
income securities that are publicly distributed, by entering into repurchase
agreements, by lending its portfolio securities, or 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.*

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.

* For Vanguard Growth Equity Fund, this is a non-fundamental limitation and may
be changed by the Fund's Board of Trustees.

None of these limitations prevents the Funds from participating in The
Vanguard Group (Vanguard). Because the Trust is a member of the Group, each 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 Funds"
for more information.

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

PURCHASE OF SHARES

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

TRADING SHARES THROUGH CHARLES SCHWAB

Each 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 each Fund's behalf subject to those terms and conditions.
Under this arrangement, a 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 each Fund's instructions. Customer orders
that are properly transmitted to each Fund by Schwab, or if applicable, Schwab's
authorized designee, will be priced as follows:

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<PAGE>

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

Each 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 rules of the Commission as a result
of which it is not reasonably practicable for each 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.

Each 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 Funds for redemptions. Shares redeemed may be
worth more or less than what was paid for them, depending on the market value of
the securities held by the Funds.

SHARE PRICE

Each Fund's share price, or "net asset value" per share, is calculated by
dividing the total assets of the Fund, less all liabilities, by the total number
of shares outstanding. The net asset value is determined as of the close of the
New York Stock Exchange (the Exchange) generally 4:00 p.m. Eastern time on each
day that 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. Any foreign securities are valued at the latest
quoted sales price available before the time when assets are valued. 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.

Short-term instruments (those acquired 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.

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 each Fund can be found daily in the mutual fund
listings of most major newspapers under the heading of Vanguard Funds.

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MANAGEMENT OF THE FUNDS
-----

OFFICERS AND TRUSTEES

The Officers of the Funds manage their day-to-day operations and are responsible
to the Funds' Board of Trustees. The Trustees set broad policies for each Fund
and choose its Officers. The following is a list of Trustees and Officers of
each 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 103
funds administered by Vanguard (93 in the case of Mr. MacLaury). The mailing
address of the Trustees and Officers of the Funds 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.

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), and The Mead Corp. (Paper Products); 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.

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.

B-12
<PAGE>

THE VANGUARD GROUP

Each 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 Funds 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 of the 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 a share of Vanguard's total 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. In order to generate additional revenues for Vanguard and thereby reduce
the funds' expenses, Vanguard also provides certain administrative services to
other organizations.

The funds' 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 have invested are adjusted from time to time
in order to maintain the proportionate relationship between each fund's relative
net assets and its contribution to Vanguard's capital. At May 31, 2000, Vanguard
Equity Income Fund had contributed $. to Vanguard, representing .% of the Fund's
net assets and .% of Vanguard's capitalization. (Vanguard Growth Equity Fund had
not commenced operations as a Vanguard fund as of May 31, 2000.) The Amended and
Restated Funds' Service Agreement provides as follows: (a) each Vanguard fund
may be called upon to invest up to .40% of its current assets in Vanguard, and
(b) there is no other limitation on the dollar amount that each Vanguard fund
may contribute to Vanguard's capitalization.

MANAGEMENT. Corporate management and administrative services include: (1)
executive staff; (2) accounting and financial; (3) legal and regulatory; (4)
shareholder account maintenance; (5) monitoring and control of custodian
relationships; (6) shareholder reporting; and (7) review and evaluation of
advisory and other services provided to the funds by third parties.

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
the 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.

B-13
<PAGE>

During the fiscal years ended September 30, 1997, 1998, and 1999, Vanguard
Equity Income Fund incurred the following approximate amounts of The Vanguard
Group's management (including transfer agency), distribution, and marketing
expenses: $4,423,000, $5,443,000, and $7,897,000, respectively.

Prior to joining the Vanguard Group, Vanguard Growth Equity Fund was party
to an administration agreement, under which, for the fiscal years ended
September 30, 1997, 1998, and 1999, the Fund paid the following administrative
fees, net of waivers: $110,759, $114,049, and $117,203, respectively.

INVESTMENT ADVISORY SERVICES. An experienced investment management staff
employed directly by Vanguard provides investment advisory services to Vanguard
Equity Income Fund and many Vanguard funds. These services are provided on an
internalized, at-cost basis. The compensation and other expenses of this staff
are paid by the 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 Funds 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. All information shown is for the fiscal year
ended September 30, 1999:

VANGUARD FENWAY FUNDS
TRUSTEES' COMPENSATION TABLE

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PENSION OR
RETIREMENT TOTAL
BENEFITS COMPENSATION
ACCRUED AS ESTIMATED FROM ALL
AGGREGATE PART OF THIS ANNUAL VANGUARD
COMPENSATION FUND'S BENEFITS UPON FUNDS PAID TO
NAMES OF TRUSTEES FROM THIS FUND EXPENSES RETIREMENT TRUSTEES(1)
- ----------------------------------------------------------------------------------------------------------------------
John C. Bogle /(2)/ . . . . . . . . . . . . . . . . . None None None None
John J. Brennan . . . . . . . . . . . . . . . . . . . None None None None
Barbara Barnes Hauptfuhrer /(3)/ . . . . . . . . . . $167 $21 $15,000 $0
JoAnn Heffernan Heisen. . . . . . . . . . . . . . . . $667 $37 $15,000 $80,000
Bruce K. MacLaury . . . . . . . . . . . . . . . . . . $697 $62 $12,000 $75,000
Alfred M. Rankin, Jr. . . . . . . . . . . . . . . . . $667 $44 $15,000 $80,000
John C. Sawhill . . . . . . . . . . . . . . . . . . . $667 $57 $15,000 $80,000
James O. Welch, Jr. . . . . . . . . . . . . . . . . . $667 $65 $15,000 $80,000
J. Lawrence Wilson. . . . . . . . . . . . . . . . . . $667 $48 $15,000 $80,000
</TABLE>

(1) 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 (93 in
the case of Mr. MacLaury).

(2) Mr. Bogle has retired from the Vanguard Equity Income Fund's Board,
effective December 31, 1999.

(3) Mrs. Hauptfuhrer has retired from the Vanguard Equity Income Fund's Board,
effective December 31, 1998.

<PAGE>

YIELD AND TOTAL RETURNS

The yield of Vanguard Equity Income Fund for the 30-day period ended September
30, 1999 was 2.64%. The yield is calculated daily. The average annual total
return of Vanguard Equity Income Fund for one, five, and ten years ended
September 30, 1999, was 12.56%, 19.53% and 12.96%, respectively.

The yield of Vanguard Growth Equity Fund for the 30-day period ended September
30, 1999 was 0.00%. The yield is calculated daily. The average annual total
return of Vanguard Growth Equity Fund for the one-, and five-years ended
September 30, 1999, and since inception, was 38.16%, 24.63%. and 19.17%,
respectively.

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.

AVERAGE ANNUAL TOTAL RETURN

Average annual total return is the average annual compounded rate of return for
the periods of one year, five years, ten years or the life of a Fund, all ended
on the last day of a recent month. Average annual total return quotations will
reflect changes in the price of each 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
B-15
<PAGE>

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:

After-tax return:

P (1+T)(N/) = ATV

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 each 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 each 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

B-16
<PAGE>

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.

INVESTMENT ADVISORY SERVICES

VANGUARD EQUITY INCOME FUND
- ---------------------------

The Fund currently has four investment advisers: Newell Associates (Newell), 525
University Avenue, Palo Alto, California 94301; John A. Levin & Co., Inc.
(Levin), One Rockefeller Plaza, 19th Floor, New York, NY 10020; Wellington
Management Company, LLP (Wellington Management), 75 State Street, Boston MA
02109; and The Vanguard Group, Inc. (Vanguard), Post Office Box 2600, Valley
Forge, PA 19482. Prior to January 1, 1995, Newell was the sole investment
adviser to the Fund. Spare, Kaplan, Bischel & Associates (Spare Kaplan) served
as an adviser to the Fund from 1995 through 1999. Levin was added as an
investment adviser effective January 1, 1995. Vanguard was added as an adviser
effective January 16, 1998. Wellington Management was added as an adviser
effective January 1, 2000. The Fund has entered into investment advisory
agreements with Newell, Levin, and Wellington Management which provide that the
advisers manage the investment and reinvestment of the Fund's assets and
continuously review, supervise and administer the Fund's investment program. The
advisers discharge their responsibilities subject to the control of the Officers
and Trustees of the Fund.

The proportion of the net assets of the Fund managed by each adviser is
established by the Board of Trustees, and may be changed in the future as
circumstances warrant. As of March 31, 2000, Newell was responsible for
approximately .% of the Fund's investment, and Levin was responsible for
approximately .%, and Wellington Management was responsible for approximately
.%. Vanguard's advisory role is limited; it currently manages just the Fund's
cash reserves, which normally represent about 5% of the Fund's assets.

NEWELL ASSOCIATES

The Fund pays Newell 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 average month-end net assets managed by Newell for the
quarter:

NET ASSETS ANNUAL RATE
- ---------- -----------
First $250 million...... .200%
Next $500 million....... .150%
Next $250 million....... .100%
Over $1 billion......... .080%

During the fiscal years ended September 30, 1997, 1998, and 1999, Vanguard
Equity Income Fund incurred the following advisory fees owed to Newell:
$1,526,568, $1,851,435, and $2,150,288, respectively.

JOHN A. LEVIN & CO., INC.

The Fund pays Levin a basic advisory fee at the end of each fiscal quarter,
calculated by applying a quarterly rate, based on the following annual
percentage rates, to the average month-end assets of the Fund managed by Levin
(Levin Portfolio) for the quarter:

B-17
<PAGE>

NET ASSETS ANNUAL RATE
- ---------- -----------
First $100 million...... 0.40%
Next $200 million....... 0.25%
Next $200 million....... 0.30%
Next $500 million....... 0.25%
Over $1 billion......... 0.10%

The basic fee paid to Levin, as provided above, may be increased or
decreased by applying an incentive/penalty adjustment to the basic fee
reflecting the investment performance of the Levin Portfolio relative to the
return of the Standard and Poor's 500 Composite Stock Price Index (S&P 500
Index), an index which emphasizes large capitalization companies.

The following table sets forth the incentive/penalty fee rates payable by
the Fund to Levin under the investment advisory agreement:

THREE YEAR PERFORMANCE PERFORMANCE FEE
DIFFERENTIAL VS. THE S&P 500 INDEX ADJUSTMENT*
- ----------------------------------
Less than 0%................. -0.40 x Basic Fee
Between 0% and 3%............ -0.20 x Basic Fee
Between 3% and 6%............ 0.00 x Basic Fee
Between 6% and 9%............ 0.20 x Basic Fee
More than 9%................. 0.40 x Basic Fee

* For purposes of this calculation, the Basic Fee is calculated by applying a
quarterly rate based on the Annual Basic Fee Rate using average assets over the
same period over which the performance is measured.

The investment performance of the Levin Portfolio, for any period,
expressed as a percentage of the "Levin Portfolio Unit Value" at the beginning
of such period, will be the sum of: (i) the change in the Levin Portfolio Unit
Value during such period; (ii) the unit value of the Fund's cash distributions
from the Levin Portfolio's net investment income and realized net capital gains
(whether long-term or short-term) having an ex-dividend date occurring within
such period; and (iii) the unit value of capital gains taxes paid or accrued
during such period by the Fund for undistributed long-term capital gains
realized from the Levin Portfolio.

The Levin Portfolio Unit Value will be determined by dividing the total net
assets of the Levin Portfolio by a given number of units. On the initial date of
the agreement, the number of units in the Levin Portfolio will equal the total
shares outstanding of the Fund. After such initial date, as assets are added to
or withdrawn from the Levin Portfolio, the number of units of the Levin
Portfolio will be adjusted based on the unit value of the Levin Portfolio on the
day such changes are executed.

The investment record of the S&P 500 Index will be calculated monthly by
(i) multiplying the total return for the month (change in market price plus
dividends) of each stock included in the S&P 500 Index by its weighings in the
S&P 500 Index at the beginning of the month, and (ii) adding the values
discussed in (i). For any period, therefore, the investment record of the S&P
500 Index will be the compounded monthly returns of the S&P 500 Index.

For the purposes of determining the incentive/penalty fee adjustment, the
net assets managed by Levin will be averaged over the same period as the
investment performance of those assets and the investment record of the S&P 500
Index are computed.

Under the Fund's investment advisory agreement with Levin, the maximum
performance adjustment for an incentive fee is made at a difference of +9
percentage points from the performance of the index over a thirty-six month
period. The maximum performance adjustment for a penalty fee is made at a
difference of less than +0 percentage points from the performance of the index
over a thirty-six month period. On a per year basis, these maximum adjustments

B-18
<PAGE>

effectively would occur at differences from the index of +3 percentage points
and less than +0 percentage point, respectively.

In the event of termination of this Agreement, the fee paid to Levin shall
be computed on the basis of the period ending on the last business day on which
this Agreement is in effect subject to a pro rata adjustment based on the number
of days elapsed in the current fiscal quarter as a percentage of the total
number of days in such quarter.

During the fiscal years ended September 30, 1997, 1998, and 1999, Vanguard
Equity Income Fund incurred the following advisory fees owed to Levin:

1997 1998 1999
---- ---- ----
Basic Fee................... $781,369 $1,084,801 $1,583,863
Increase or Decrease for Performance (228,534) (290,030) (402,526)
Adjustment.................. --------- --------- ---------
Total....................... $552,835 $794,771 $1,181,337
======== ======== ==========

WELLINGTON MANAGEMENT COMPANY, LLP

The Fund pays Wellington Management a basic advisory fee at the end of each
fiscal quarter, calculated by applying a quarterly rate, based on the following
annual percentage rates, to the average month-end net assets of the Fund managed
by Wellington Management (Wellington Management Portfolio) for the quarter:

NET ASSETS ANNUAL RATE
- ---------- -----------
First $1 billion........ .125%
Next $4 billion......... .100%
Over $5 billion......... .080%

The basic fee paid to Wellington Management, as provided above, may be
increased or decreased by applying an incentive/penalty adjustment to the basic
fee reflecting the investment performance of the Wellington Management Portfolio
relative to the return of the Lipper Equity Income average.

The following table sets forth the incentive/penalty fee rates payable by
the Fund to Wellington Management under the investment advisory agreement:

THREE YEAR PERFORMANCE
DIFFERENTIAL VS. THE LIPPER EQUITY PERFORMANCE FEE
INCOME AVERAGE ADJUSTMENT*
- -------------- ---------------
Exceeds by 3% to 6%.......... 0.10 x Basic Fee
Exceeds by more than 6%...... 0.20 x Basic Fee
Trails by 3% to 6%........... -0.10 x Basic Fee
Trails by more than 6%....... -0.20 x Basic Fee

The Performance Fee Adjustment will not be fully operable until the quarter
ending December 31, 2002. Until that time, the following transition rules will
apply:

(A) JANUARY 1, 2000 THROUGH SEPTEMBER 30, 2000. Wellington Management's
compensation will be the Basic Fee. No Performance Fee Adjustment will apply
during this period.

B-19
<PAGE>

(B) OCTOBER 1, 2000 THROUGH DECEMBER 31, 2002. Beginning October 1, 2000,
the Performance Fee Adjustment will take effect on a progressive basis with
regards to the number of months elapsed between January 1, 2000, and the quarter
for which Wellington Management's fee is being computed. During this period, the
Performance Fee Adjustment will be multiplied by a fraction. The fraction will
equal the number of months elapsed since January 1, 2000, divided by thirty-six.

(C) ON AND AFTER DECEMBER 31, 2002. For the quarter ending December 31,
2002, and thereafter, the Performance Fee Adjustment will be fully operable. The
period used to calculate the Adjustment shall be the 36 months preceding the end
of the quarter for which the fee is being computed.

The investment performance of the Wellington Management Portfolio for any
period, expressed as a percentage of the "Wellington Management Portfolio unit
value" at the beginning of such period, will be calculated in a manner
consistent with the total return methodology used by Lipper Inc., to calculate
investment performance.

The "Wellington Management Portfolio unit value" will be determined by
dividing the total net assets of the Wellington Management Portfolio by a given
number of units. Initially, the number of units in the Wellington Management
Portfolio will equal the total shares outstanding of the Fund on January 1,
2000. Subsequently, as assets are added to or withdrawn from the Wellington
Management Portfolio, the number of units of the Wellington Management Portfolio
will be adjusted based on the unit value of the Wellington Management Portfolio
on the day such changes are executed. Any cash buffer maintained by the Fund
outside of the Wellington Management Portfolio shall neither be included in the
total net assets of the Wellington Management Portfolio nor included in the
computation of the Wellington Management Portfolio Unit Value.

The investment record of the Lipper Equity Income average for any period
will be obtained from an independent source at the end of each applicable
quarter. The calculation will be based on the thirty-six month period ending
with the applicable quarter and will be gross of applicable costs and expenses.

In the event of termination of this agreement with Wellington Management,
the fees will be computed on the basis of the period ending on the last business
day on which this agreement is in effect, subject to a pro rata adjustment based
on the number of days elapsed in the current fiscal quarter as a percentage of
the total number of days in such quarter.

This agreement became effective on January 1, 2000, and will continue in
effect until December 31, 2002, and thereafter, only so long as such continuance
is approved at least annually by votes of the Fund's Board of Trustees who are
not parties to the agreement or interested persons of any such party, cast in
person at a meeting called for the purpose of voting on such approval. In
addition, the question of continuance of the advisory agreement may be presented
to the shareholders of the Fund; in such event, such continuance will be
effected only if approved by the affirmative vote of a majority of the
outstanding voting securities of the Fund.

The Fund's Board of Trustees may, without the approval of shareholders,
provide for:

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

. A change in the terms of an advisory agreement.

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

Any such change will be communicated to shareholders in writing.
B-20
<PAGE>

DESCRIPTION OF THE ADVISERS

NEWELL ASSOCIATES. Newell Associates, a California corporation, was founded
in 1986 to provide investment management services to institutions. Newell
Associates uses its proprietary Relative Yield Strategy to determine when stocks
are undervalued and, therefore, candidates for purchase or overvalued and,
therefore, candidates for sale. The officers of the corporation are: Roger D.
Newell, Chairman; Robert A. Huret, Vice Chairman; and Jennifer C. Newell, CFA,
President.

JOHN A. LEVIN & CO. INC. John A. Levin, which commenced operations in 1982,
provides investment advisory services to institutional and private clients,
including registered investment trusts and several private investment
partnerships. The investment process at Levin emphasizes identifying investment
value through fundamental research. John A. Levin, a founding principal and
Chairman and Chief Executive Officer of Levin, and Jeffrey A. Kigner,
Co-Chairman and Chief Investment Officer of Levin, are responsible for managing
the portion of the Fund's assets managed by Levin. Levin is an indirect
subsidiary of Baker, Fentress & Company.

WELLINGTON MANAGEMENT COMPANY, LLP. Wellington Management is a professional
investment advisory firm that provides services to individuals, employee benefit
plans, endowment funds, and other institutions. The firm was founded in 1928,
and is organized as a Massachusetts limited liability partnership. The managing
partners of Wellington Management are Duncan M. McFarland, Laurie A. Gabriel,
and John R. Ryan. Mr. Ryan is the portfolio manager who is primarily responsible
for Wellington Management's portion of the Fund.

THE VANGUARD GROUP. The Vanguard Group is a family of more than 100 funds
holding assets worth more than $530 billion. Vanguard serves as an investment
adviser to the Fund and currently manages about $320 billion in total assets.

VANGUARD GROWTH EQUITY FUND
- ---------------------------

TURNER INVESTMENT PARTNERS. The Fund pays Turner a Basic Fee at the end of
each fiscal quarter, calculated by applying a quarterly rate, based on the
following annual percentage rates, to the average month-end net assets of the
Fund.

NET ASSETS ANNUAL RATE
---------- ------ ----
First $200 million. . . . . . . . 0.50%
Next $300 million. . . . . . . . 0.40%
Next $1.5 billion. . . . . . . . 0.30%
Over $2 billion. . . . . . . . . 0.20%

The Basic Fee paid to Turner, as provided above, may be increased or
decreased by applying performance adjustment ("Adjustment"). The Adjustment will
be calculated as a percentage of the Basic Fee and will change proportionately
with the investment performance of the Fund relative to the return of the
Russell 1000 Growth Index for the 36-month period ending with the then-ended
quarter.

The following table sets forth the incentive/penalty fee rates payable by
the Fund to Turner under the investment advisory agreement.

B-21
<PAGE>

CUMULATIVE 36-MONTH ADJUSTMENT AS A
PERFORMANCE OF PORTFOLIO PERCENTAGE OF BASIC FEE (B)
VERSUS THE INDEX (A) ---------------------------
- --------------------
Trails by more than 9% -75%
Trails by 0% to 9% Linear decrease from 0% to 75%
Exceeds by 0% to 9% Linear increase from 0% to +75%
Exceeds by more than 9% +75%

(a) During the first thirty-six month (36) period, inception-to-date Fund
performance versus performance of the Index for the same period will be
utilized. Subject to the transition rules provided for below, the +/-9%
hurdle rate illustrated in the table above will be multiplied by a
fraction, the numerator being the months elapsed since inception and the
denominator being thirty-six (36).

For purposes of the Adjustment calculator, the Basic Fee is calculated by
applying the above rate schedule against the average month-end net assets over
the same time period for which the performance is measured.

(b) Linear application of the adjustment provides for an infinite number of
results within the stated range. Example: Cumulative 36-month performance
of Portfolio versus the Index is +7.2%. Accordingly, a performance fee
adjustment of +60% [(7.2% divided by 9.0%) times 75% maximum] of the Basic
Fee would be due and payable.

The Adjustment will not be fully operable until the Fund has operated under this
Agreement for a full 36 months. Until that time, the following transition rules
will apply:

(a) JUNE 1, 2000 THROUGH MAY 31, 2001. Adviser compensation will be the Basic
Fee. No Adjustment will apply during this period.

(b) JUNE 1, 2001 THROUGH MAY 31, 2003. Beginning June 1, 2001 the Adjustment
will take effect on a progressive basis with regards to the number of
months elapsed between June 1, 2000 and the quarter end for which the
Adviser fee is being computed. During this period, the Adjustment that has
been determined as provided above will be multiplied by a fraction. The
fraction's numerator will equal the number of months that have elapsed
since June 1, 2000 and the denominator will be thirty-six (36).

During the fiscal years ended September 30, 1997, 1998, and 1999, Vanguard
Growth Equity Fund incurred the following investment advisory fees:**

1997 1998 1999
---- ---- ----
Basic Fee................... $694,046 $664,499 $987,424
Advisory Fee Waived......... $24,250 $76,793 $0

** These fees were paid under a prior investment advisory fee structure.

DESCRIPTION OF THE ADVISER
- --------------------------

TURNER INVESTMENT PARTNERS. Turner Investment Partners is a professional
advisory firm, founded in March 1990. Robert E. Turner is the Chairman and
controlling shareholder of the Adviser. As of December 31, 1999, Turner had
discretionary management authority with respect to approximately $., provides
investment advisory services to $5.6 billion of assets. Turner has provided
investment advisory services to investment companies since 1992.

B-22
<PAGE>

DURATION AND TERMINATION OF INVESTMENT ADVISORY AGREEMENTS

The Fund's current agreements are renewable for successive one-year periods,
only if each renewal is specifically approved by a vote of the Fund's Board of
Trustees, including the affirmative votes of a majority of Trustees who are not
parties to the contract or "interested persons" (as defined in the 1940 Act) of
any such party, cast in person at a meeting called for the purpose of
considering such approval. An 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 the adviser, or (2) by the
adviser upon 90 days' written notice to the Fund.

PORTFOLIO TRANSACTIONS

The investment advisory agreements authorize the Advisers (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 direct the
Advisers to use their best efforts to obtain the best available price and most
favorable execution as to all transactions for the Fund. The Advisers have
undertaken to execute each investment transaction at a price and commission
which provides the most favorable total cost or proceeds reasonably obtainable
under the circumstances.

In placing portfolio transactions, each Adviser will use its best judgment
to choose the broker most capable of providing the brokerage services necessary
to obtain the best available price and most favorable execution. The full range
and quality of brokerage services available will be considered in making these
determinations. In those instances where it is reasonably determined that more
than one broker can offer the brokerage services needed to obtain the best
available price and most favorable execution, consideration may be given to
those brokers which supply investment research and statistical information and
provide other services in addition to execution services to the Fund and/or the
Adviser. Each Adviser 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 agreements also incorporate the concepts of Section
28(e) of the Securities Exchange Act of 1934 by providing that, subject to the
approval of the Fund's Board of Trustees, each Adviser may cause the Fund to pay
a broker-dealer which furnishes brokerage and research services a higher
commission than that which might be charged by another broker-dealer for
effecting the same transaction; provided that such commission is deemed
reasonable in terms of either that particular transaction or the overall
responsibilities of the Adviser to the Fund.

Currently, it is the Fund's policy that each Adviser 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. Each Adviser 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 the Adviser and/or the Fund. However, each
Adviser has informed the Fund that it generally will not pay higher commission
rates solely for the purpose of obtaining research services.

Some securities considered for investment by the Fund may also be
appropriate for other clients served by each Adviser. If purchase or sale of
securities consistent with the investment policies of the Fund and one or more
of these other clients serviced by the Adviser 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 the Adviser. 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.

During the fiscal years ended September 30, 1997, 1998 and 1999, Vanguard
Equity Income Fund paid $1,097,967, $1,404,979, and $1,624,448 respectively, in
brokerage commissions. During the fiscal years ended September 30, 1997, 1998,
and 1999, Vanguard Growth Equity Fund paid $335,291, $464,404, and $671,953,
respectively, in brokerage commissions.

B-23
<PAGE>

5% SHAREHOLDERS

As of May 31, 2000, the following persons were the only persons who were record
owners (or to the knowledge of the Trust, beneficial owners) of 5% or more of
the shares of the Vanguard Growth Equity Fund. The Trust believes that most of
the shares referred to below were held by the persons indicated in accounts for
their fiduciary, agency, or custodial customers.

FINANCIAL STATEMENTS

Vanguard Equity Income Fund's financial statements for the year ended September
30, 1999, including the financial highlights for each of the five fiscal years
in the period ended September 30, 1999, appearing in the Vanguard Equity Income
Fund 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 each Fund's Annual
Report to Shareholders, which may be obtained without charge.

The financial statements of Turner Growth Equity Fund for the fiscal year ended
September 30, 1999, including notes thereto and the report of Ernest & Young LLB
thereon, are also incorporated by reference in this Statement of Additional
Information. (Prior to ., 2000, Vanguard Growth Equity Fund was organized as
Turner Growth Equity Fund.)

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

STANDARD & 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--consists of the stocks in the Standard
& Poor's 500 Composite Stock Price Index with the lowest price-to-book ratios,
comprising 50% of the market capitalization of the S&P 500.

STANDARD & POOR'S SMALLCAP 600/BARRA VALUE INDEX--contains stocks of the S&P
SmallCap 600 Index which have a lower than average price-to-book ratio.

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

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

WILSHIRE 5000 EQUITY INDEX--consists of more than 7,000 common equity
securities, covering all stocks in the U.S. for which daily listing 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.

RUSSELL 1000 GROWTH INDEX--

RUSSELL 3000 STOCK INDEX--a diversified portfolio of over 3,000 common stocks
accounting for over 90% of the market value of publicly traded stocks in the
U.S.

B-24
<PAGE>

RUSSELL 2000 STOCK INDEX--composed of the 2,000 smallest securities in the
Russell 3000, representing approximately 7% of the Russell 3000 total market
capitalization.

RUSSELL 2000 VALUE INDEX--contains stocks from the Russell 2000 Index with a
less-than-average growth orientation.

MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX--is an arithmetic, market
value-weighted average of the performance of over 900 securities listed on the
stock exchanges of countries in Europe, Australia, Asia and the Far East.

GOLDMAN SACHS 100 CONVERTIBLE BOND INDEX--currently includes 71 bonds and 29
preferreds. The original list of names was generated by screening for
convertible issues of $100 million or greater in market capitalization. The
index is priced monthly.

SALOMON BROTHERS GNMA INDEX--includes pools of mortgages originated by private
lenders and guaranteed by the mortgage pools of the Government National Mortgage
Association.

SALOMON BROTHERS HIGH-GRADE CORPORATE BOND INDEX--consists of publicly issued,
non-convertible corporate bonds rated Aa or Aaa. It is a value weighted, total
return index, including approximately 800 issues with maturities of 12 years or
greater.

SALOMON BROTHERS BROAD INVESTMENT-GRADE BOND INDEX--is a market-weighted index
that contains over 4,800 individually priced investment-grade corporate bonds
rated BBB or better, U.S. Treasury/agency issues and mortgage pass-through
securities.

LEHMAN 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 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.

LEHMAN BROTHERS LONG-TERM CORPORATE BOND INDEX--is a subset of the Lehman
Corporate Bond Index covering all corporate, publicly issued, fixed-rate,
nonconvertible U.S. debt issues rated at least Baa, with at least $100 million
principal outstanding and maturity greater than 10 years.

BOND BUYER MUNICIPAL BOND INDEX--is a yield index on current coupon high grade
general obligation municipal bonds.

STANDARD & POOR'S PREFERRED INDEX--is a yield index based upon the average yield
of four high grade, non-callable preferred stock issues.

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

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

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

COMPOSITE INDEX--65% Lehman Long-Term Corporate AA or Better Bond Index and a
35% weighting in a blended equity composite (75% Standard & Poor's 500/BARRA
Value Index, and 12.5% Standard & Poor's Utilities Index and 12.5% Standard &
Poor's Telephone Index).

LEHMAN LONG-TERM CORPORATE AA OR BETTER BOND INDEX--consists of all publicly
issued, fixed rate, nonconvertible investment grade, dollar-denominated,
SEC-registered corporate debt rated AA or AAA.

LEHMAN BROTHERS AGGREGATE BOND INDEX--is a market weighted index that contains
over 4,000 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.

B-25
<PAGE>

LEHMAN BROTHERS MUTUAL FUND SHORT (1-5) GOVERNMENT/CORPORATE INDEX--is a market
weighted index that contains over 1,500 individually priced U.S. Treasury,
agency, and corporate investment grade bonds rated BBB- or better with
maturities between 1 and 5 years. The index has a market value of over $1.6
trillion.

LEHMAN BROTHERS MUTUAL FUND INTERMEDIATE (5-10) GOVERNMENT/CORPORATE INDEX--is a
market weighted index that contains over 1,500 individually priced U.S.
Treasury, agency, and corporate securities rated BBB- or better with maturities
between 5 and 10 years. The index has a market value of over $800 billion.

LEHMAN BROTHERS LONG (10+) GOVERNMENT/CORPORATE INDEX--is a market weighted
index that contains over 1,900 individually priced U.S. Treasury, agency, and
corporate securities rated BBB- or better with maturities greater than 10 years.
The index has a market value of over $1.1 trillion.

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

LIPPER BALANCED FUND AVERAGE--an industry benchmark of average balanced funds
with similar investment objectives and policies, as measured by Lipper Inc.

LIPPER NON-GOVERNMENT MONEY MARKET FUND AVERAGE--an industry benchmark of
average non-government money market funds with similar investment objectives and
policies, as measured by Lipper Inc.

LIPPER GOVERNMENT MONEY MARKET FUND AVERAGE--an industry benchmark of average
government money market funds with similar investment objectives and policies,
as measured by Lipper Inc.

LIPPER GENERAL EQUITY FUND AVERAGE--an industry benchmark of average general
equity funds with similar investment objectives and policies, as measured by
Lipper Inc.

LIPPER FIXED INCOME FUND AVERAGE--an industry benchmark of average fixed income
funds with similar investment objectives and policies, as measured by Lipper
Inc.

LIPPER EQUITY INCOME FUND AVERAGE--an industry benchmark of average equity
income funds with similar investment objectives and policies, as measured by
Lipper Inc.

SAI065-05/16/ 2000

B-26

<PAGE>

PART C

VANGUARD FENWAY FUNDS
---------------------
OTHER INFORMATION

ITEM 23. EXHIBITS

Exhibit Description
- -------------------

(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 Contracts**
(e) Not applicable
(f) Reference is made to the section entitled "Management of the Funds" 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.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Newell Associates (Newell) is an investment adviser registered under the
Investment Advisers Act of 1940, as amended (the Advisers Act). The list
required by this Item 26 of officers and directors of Newell, 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 Newell pursuant to the Advisers Act (SEC File No. 801-26949).

C-1
<PAGE>

Spare, Kaplan, Bischel & Associates (Spare Kaplan) is an investment adviser
registered under the Advisers Act. The list required by this Item 26 of officers
and directors of Spare Kaplan, 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 Spare Kaplan pursuant to
the Advisers Act (SEC File No. 801-35258).

John A. Levin & Co., Inc. (Levin) is an investment adviser registered under the
Advisers Act. The list required by this Item 26 of officers and directors of
Levin, 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 Levin pursuant to the Advisers Act (SEC File No.
801-18010).

The Vanguard Group, Inc. (Vanguard) is an investment adviser registered under
the Advisers Act. The list required by this Item 26 of officers and directors of
Vanguard, together with any information as to any business profession, vocation,
or employment of 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 Vanguard pursuant to the Advisers Act (SEC File No.
801-11953).

Wellington Management Company, LLP (Wellington Management) is an investment
adviser registered under the Advisers Act. The list required by this Item 26 of
officers and partners of Wellington Management, together with any information as
to any business profession, vocation, or employment of substantial nature
engaged in by such officers and partners during the past two years, is
incorporated herein by reference from Schedules B and D of Form ADV filed by
Wellington Management pursuant to the Advisers Act (SEC File No. 801-15908).

Turner Investment Partners, Inc., (Turner) is an investment adviser registered
under the Advisers Act. The list required by this Item 26 of officers and
partners of Turner, together with any information as to any business profession,
vocation, or employment of substantial nature engaged in by such officers and
partners during the past two years, is incorporated herein by reference from
Schedules B and D of Form ADV filed by Turner pursuant to the Advisers Act (SEC
File No. 801-07527).

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) under the 1940 Act and the rules promulgated thereunder will be maintained
at the offices of Registrant; Registrant's Transfer Agent, The Vanguard Group,
Inc., Valley Forge, Pennsylvania 19482; 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, the 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 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 2nd day of March, 2000.

VANGUARD FENWAY FUNDS
- ---------------------

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

By:/S/ JOHN J. BRENNAN President, Chairman, Chief March 2, 2000
---------------------------Executive Officer, and Trustee
(Heidi Stam)
John J. Brennan*

By:/S/ JOANN HEFFERNAN HEISEN Trustee March 2, 2000
---------------------------
(Heidi Stam)
JoAnn Heffernan Heisen*

By:/S/ BRUCE K. MACLAURY Trustee March 2, 2000
---------------------------
(Heidi Stam)
Bruce K. MacLaury*

By:/S/ ALFRED M. RANKIN, JR. Trustee March 2, 2000
---------------------------
(Heidi Stam)
Alfred M. Rankin, Jr.*

By:/S/ JOHN C. SAWHILL Trustee March 2, 2000
---------------------------
(Heidi Stam)
John C. Sawhill*

By:/S/ JAMES O. WELCH, JR. Trustee March 2, 2000
---------------------------
(Heidi Stam)
James O. Welch, Jr.*

By:/S/ J. LAWRENCE WILSON Trustee March 2, 2000
---------------------------
(Heidi Stam)
J. Lawrence Wilson*

By:/S/ THOMAS J. HIGGINS Treasurer and Principal March 2, 2000
---------------------------
(Heidi Stam) Financial Officer and Principal
Thomas J. Higgins* Accounting Officer

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