VANGUARD HORIZON FUND INC, 485BPOS, 2000-02-03

VANGUARD HORIZON FUND INC
485BPOS, 2000-02-03

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT (NO. 33-56443) UNDER THE SECURITIES ACT OF 1933

PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 8
AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940

AMENDMENT NO. 17

VANGUARD HORIZON FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)

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

REGISTRANT'S TELEPHONE NUMBER (610) 669-1000

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

IT IS PROPOSED THAT THIS AMENDMENT BECOME EFFECTIVE:
ON FEBRUARY 18, 2000, PURSUANT TO PARAGRAPH (B) OF RULE 485.

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

WE HAVE ELECTED TO REGISTER AN INDEFINITE NUMBER OF SECURITIES UNDER THE
SECURITIES ACT OF 1933 PURSUANT TO RULE 24F-2 OF THE INVESTMENT COMPANY ACT OF
1940. REGISTRANT FILED ITS RULE 24F-2 NOTICE FOR ITS FISCAL YEAR ENDED OCTOBER
31, 1999 WITH THE COMMISSION ON JANUARY 27, 2000.

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VANGUARD HORIZON FUNDS
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
<S> <C> <C>
FORM N-1A
ITEM NUMBER LOCATION IN PROSPECTUSES
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Item 1. Front and Back Cover Pages .................Front and Back Cover Pages

Item 2. Risk/Return: Investments, Risk, and
Performance ................................Fund Profile

Item 3. Risk/Return Summary: Fee Table .............Fund Profile

Item 4. Investment Objectives, Principal Investment
Strategies, and Related Risks ..............More on the Fund

Item 5. Management's Discussion of Fund
Performance ................................Herein incorporated by reference to
Registrant's Annual Report to Shareholders
dated October 31, 1999 filed with the
Securities & Exchange Commission's EDGAR
system on December 30, 1999.

Item 6. Management, Organization, and Capital
Structure ..................................The Fund and Vanguard; Investment Advisers

Item 7. Shareholder Information ....................Share Price; Dividends, Capital Gains, and
Taxes; Investing with Vanguard

Item 8. Distribution Arrangements ..................Not Applicable

Item 9. Financial Highlights Information ...........Financial Highlights

FORM N-1A LOCATION IN STATEMENT OF ADDITIONAL
ITEM NUMBER INFORMATION
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Item 10. Cover Page and Table of Contents ...........Cover Page; Table of Contents

Item 11. Fund History ...............................Description of the Funds

Item 12. Description of the Fund and its Investments
and Risks ..................................Investment Policies; Description of the Funds;
Fundamental Investment Limitations

Item 13. Management of the Fund .....................Management of the Funds

Item 14. Control Persons and Principal Holders of
Securities .................................Management of the Funds

Item 15. Investment Advisory and Other Services .....Investment Advisory Services

Item 16. Brokerage Allocation and Other Practices ...Portfolio Transactions

Item 17. Capital Stock and Other Securities .........Description of the Funds

Item 18. Purchase, Redemption, and Pricing of Shares.Purchase of Shares; Redemption of Shares;
Share Price

Item 19. Taxation of the Fund .......................Description of the Funds

Item 20. Underwriters ...............................Not Applicable

Item 21. Calculation of Performance Data ............Yield and Total Return

Item 22. Financial Statements .......................Financial Statements

</TABLE>

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VANGUARD(R)
AGGRESSIVE
GROWTH FUND

Prospectus
February 18, 2000

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

[A MEMBER OF
THE VANGUARD GROUP LOGO]

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VANGUARD AGGRESSIVE GROWTH FUND
Prospectus
February 18, 2000

An Aggressive Growth Stock Mutual Fund

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CONTENTS
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1 FUND PROFILE 13 INVESTING WITH VANGUARD
3 ADDITIONAL INFORMATION 13 SERVICES AND ACCOUNT FEATURES
3 MORE ON THE FUND 14 TYPES OF ACCOUNTS
8 THE FUND AND VANGUARD 15 BUYING SHARES
8 INVESTMENT ADVISER 17 REDEEMING SHARES
9 DIVIDENDS, CAPITAL GAINS, AND TAXES 21 TRANSFERRING REGISTRATION
10 SHARE PRICE 21 FUND AND ACCOUNT UPDATES
11 FINANCIAL HIGHLIGHTS GLOSSARY (inside back cover)
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WHY READING THIS PROSPECTUS IS IMPORTANT
This prospectus explains the objective, risks, and strategies of Vanguard
Aggressive Growth 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 Aggressive Growth
Fund.

INVESTMENT OBJECTIVE
The Fund seeks to provide maximum long-term total return.

INVESTMENT STRATEGIES
The Fund invests in U.S. stocks, with an emphasis on stocks of small- and
mid-capitalization companies. The Fund's investment adviser uses quantitative,
or computer-driven, stock valuation models to manage the Fund. Generally, stocks
are categorized based on two dimensions: market capitalization (i.e., small,
mid, large), and growth versus value. The models then apply fundamental
criteria--such as valuation measures, financial strength relative to other
stocks, and recognition by the market--to identify the most attractive stocks
within each category. The portion of the Fund's assets invested in any one of
the categories will vary over time based on the adviser's expectation for each
category's total return potential.

PERFORMANCE/RISK INFORMATION
The following bar chart is intended to help you understand the risk of investing
in the Fund. It shows how the Fund's performance has varied from one calendar
year to another since inception. In addition, there is a table that shows how
the Fund's average annual total returns compare with those of a relevant market
index over set periods of time. Keep in mind that the Fund's past performance
does not indicate how it will perform in the future.

----------------------------------------------------
ANNUAL TOTAL RETURNS
----------------------------------------------------
1996 25.03%
1997 26.22%
1998 0.61%
1999 19.25%
----------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was 21.40% (quarter ended December 31, 1998), and the lowest return for
a quarter was -20.66% (quarter ended September 30, 1998).

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AVERAGE ANNUAL TOTAL RETURNS FOR YEARS ENDED DECEMBER 31, 1999
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1 YEAR SINCE INCEPTION*
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Vanguard Aggressive
Growth Fund 19.25% 17.68%
Russell 2800 Index** 18.98 17.72
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*August 14, 1995.
**Consists of the Russell 3000 Equity Index of stocks minus its 200
largest companies.
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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 those incurred in the fiscal year ended October 31, 1999.

SHAREHOLDER FEES (fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases: None
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fee: 1%*

ANNUAL FUND OPERATING EXPENSES (expenses deducted from the Fund's assets)
Management Expenses: 0.42%
12b-1 Distribution Fee: None
Other Expenses: 0.04%
TOTAL ANNUAL FUND OPERATING EXPENSES: 0.46%

*The 1% fee applies to shares redeemed (either by selling or exchanging
to another fund) within five years of purchase. The fee is withheld
from redemption proceeds and retained by the Fund. Shares held for five
years or more are not subject to the 1% fee.

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, that operating expenses remain the same, and that you redeem your shares
at the end of the given period.

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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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$152 $262 $258 $579
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You would pay the following expenses if you did not redeem your shares (the
difference being that the Fund's 1% redemption fee would not apply to the one-
and three-year periods below, as it would to those shown above):

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1 YEAR 3 YEARS 5 YEARS 10 YEARS
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$47 $148 $258 $579
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THESE EXAMPLES 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 Aggressive Growth Fund's expense ratio in fiscal year 1999
was 0.46%, or $4.60 per $1,000 of average net assets. The average mid-cap core
mutual fund had expenses of 1.43%, or $14.30 per $1,000 of average net assets
(derived from data provided as of December 31, 1999 by Lipper Inc., which
reports on the mutual fund industry). Management expenses, which comprise one
part of operating expenses, include investment advisory fees as well as other
costs of managing a fund--such as account maintenance, reporting, accounting,
legal, and other administrative expenses.
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ADDITIONAL INFORMATION

DIVIDENDS AND CAPITAL GAINS MINIMUM INITIAL INVESTMENT
Distributed annually in December $3,000; $1,000 for IRAs and custodial
accounts for minors
INVESTMENT ADVISER
The Vanguard Group, Valley Forge, NEWSPAPER ABBREVIATION
Pa., since inception AggGr

INCEPTION DATE VANGUARD FUND NUMBER
August 14, 1995 114

NET ASSETS AS OF OCTOBER 31, 1999 CUSIP NUMBER
$561 million 922038104

SUITABLE FOR IRAS TICKER SYMBOL
Yes VHAGX
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MORE ON THE FUND

This prospectus describes risks you would face as a Fund investor. 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 any mutual fund, you should also take into account
your personal tolerance for daily fluctuations in securities markets. 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 Fund
shareholder.
The following sections explain the primary investment strategies and
policies that the Fund uses in pursuit of its objective. The Fund's Board of
Trustees, which oversees the management of the Fund, may change the Fund's
investment objective or strategies in the interest of shareholders, without a
shareholder vote.
Finally, you'll find information on other important features of the Fund.

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PLAIN TALK ABOUT
GROWTH FUNDS AND VALUE FUNDS

Growth investing and value investing are two styles employed by stock fund
managers. Growth funds generally focus on companies believed to have
above-average potential for growth in revenue and earnings. Reflecting the
market's high expectations for superior growth, such stocks typically have low
dividend yields and above-average prices in relation to such measures as
revenue, earnings, and book value. Value funds generally emphasize stocks of
companies from which the market does not expect strong growth. The prices of
value stocks typically are below-average in comparison with such factors as
earnings and book value, and these stocks typically have above-average dividend
yields. Growth and value stocks have, in the past, produced similar long-term
returns, though each category has periods when it outperforms the other. In
general, growth funds appeal to investors who will accept more volatility in
hopes of a greater increase in share price. Growth funds also may appeal to
investors with taxable accounts who want a higher proportion of returns to come
as capital gains (which may be taxed at lower rates than dividend income). Value
funds, by contrast, are appropriate for investors who want some dividend income
and the potential for capital gains, but are less tolerant of share-price
fluctuations.
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To illustrate the volatility of stock prices, the following table shows the
best, worst, and average total returns for the U.S. stock market over various
periods as measured by the Standard & Poor's 500 Index, a widely used barometer
of market activity. (Total returns consist of dividend income plus change in
market price.) Note that the returns shown do not include the costs of buying
and selling stocks or other expenses that a real-world investment portfolio
would incur. Note, also, that the gap between best and worst tends to narrow
over the long term.

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U.S. STOCK MARKET RETURNS (1926-1999)
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1 YEAR 5 YEARS 10 YEARS 20 YEARS
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Best 54.2% 28.6% 19.9% 17.9%
Worst -43.1 -12.4 -0.9 3.1
Average 13.2 11.0 11.1 11.1
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The table covers all of the 1-, 5-, 10-, and 20-year periods from 1926
through 1999. You can see, for example, that while the average return on stocks
for all of the 5-year periods was 11.0%, returns for individual 5-year periods
ranged from a -12.4% average (from 1928 through 1932) to 28.6% (from 1995
through 1999). These average returns reflect past performance on common stocks;
you should not regard them as an indication of future returns from either the
stock market as a whole or this Fund in particular.
Keep in mind that the S&P 500 Index tracks mainly large-cap stocks.
Historically, mid- and small-cap stocks have been more volatile than--and at
times have performed quite

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differently from--the large-cap stocks found in the S&P 500 Index. This is due
to several factors, including less-certain growth and dividend prospects for
smaller companies.

[FLAG] THE FUND IS SUBJECT TO INVESTMENT STYLE RISK, WHICH IS THE CHANCE THAT
RETURNS FROM THE MARKET SECTOR IN WHICH IT INVESTS WILL TRAIL RETURNS FROM
OTHER MARKET SECTORS. AS A GROUP, SPECIFIC TYPES OF STOCKS (FOR INSTANCE,
SMALL-CAP STOCKS, GROWTH STOCKS, OR HEALTH-CARE 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
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, on average, 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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SECURITY SELECTION
The Fund's investment adviser uses quantitative, or computer-driven, stock
valuation models to manage the Fund. Generally, stocks are categorized based on
two dimensions: market capitalization and growth versus value. The models then
apply fundamental criteria--such as valuation measures, financial strength
relative to other stocks, and recognition by the market--to identify the most
attractive stocks within each category. The portion of the Fund's assets
invested in any one of the categories will vary over time based on the adviser's
judgments about that category's total return potential.

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

The Fund is generally managed without regard to tax ramifications.

OTHER INVESTMENT POLICIES AND RISKS
The Fund may invest in futures contracts, options (including puts and calls),
warrants, convertible securities, and swap agreements, which are all types of
derivatives. Losses (or gains) involving futures can sometimes be
substantial--in part because a relatively small price movement in a futures
contract may result in an immediate and substantial loss (or gain) for a fund.
Similar risks exist for warrants (securities that permit their owners to
purchase a specific number of stock shares at a predetermined price),
convertible securities (securities that may be exchanged for another asset), and
swap agreements (contracts between parties in which each agrees to make payments
to the other based on the return of a specified index or asset).

<PAGE>

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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). Some forms
of derivatives, such as exchange-traded futures and options on securities,
commodities, or indexes, have been trading on regulated exchanges for more than
two decades. These types of 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
other types of derivatives that may be more specialized or complex. If used for
speculation or as leveraged investments, derivatives can carry considerable
risks.
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The Fund will not use derivatives for speculative purposes or as leveraged
investments that magnify gains or losses. In addition, the Fund's obligation
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 priced.

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

THE FUND'S REDEMPTION FEE
The Fund charges a redemption fee on shares that are redeemed (including those
redeemed by exchanging to another Vanguard fund) before they have been held for
five years. Because the Fund is intended for long-term investors, the redemption
fee ensures that the costs associated with short-term trading are borne by the
investors making the transactions--and not by the long-term shareholders who do
not generate the costs.
At Vanguard, all fees are paid directly to the fund itself (unlike a sales
charge or load, which--in the case of many fund companies--is imposed for the
sole benefit of the sponsor, adviser, or sales representative).

<PAGE>

management. A fund may reject a purchase request because of the timing of
the investment or because of a history of excessive trading by the
investor.
- - Each Vanguard fund (except the money market funds) limits the number of
times that an investor can exchange into and out of the fund.
- - Each Vanguard fund reserves the right to stop offering shares at any time.
- - Vanguard's U.S. Stock Index Funds, International Stock Index Funds, REIT
Index Fund, Balanced Index Fund, and Growth and Income Fund generally do
NOT accept exchanges by telephone or fax, or online. (IRAs and some other
retirement accounts are not subject to this rule.)
- - Certain Vanguard funds, including the Aggressive Growth Fund, charge
transaction fees on share redemptions. Other Vanguard funds charge
transaction fees on share purchases.

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

TURNOVER RATE
Although the Fund normally seeks to invest for the long term, it may sell
securities regardless of how long they have been held. The "Financial
Highlights" section of this prospectus shows historic turnover rates for the
Fund. A turnover rate of 100%, for example, would mean that the Fund had 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. As of October 31, 1999, the average turnover rate for all
mid-cap blend funds was approximately 94%, according to Morningstar, Inc.
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<PAGE>

THE FUND AND VANGUARD

The Fund is a member of The Vanguard Group, a family of more than 35 investment
companies with more than 100 funds holding assets worth more than $530 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 Vanguard Group (Vanguard), P.O. Box 2600, Valley Forge, PA 19482, founded in
1974, serves as the Fund's adviser through its Core Management Group. As of
October 31, 1999, Vanguard served as adviser for about $346 billion in assets.
Vanguard manages the Fund on an at-cost basis, subject to the control of the
Trustees and officers of the Fund. For the fiscal year ended October 31, 1999,
the investment advisory expenses for the Fund represented an effective annual
rate of 0.10% of the Fund's average net assets for the year.
The Fund has authorized the adviser 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. Also, the Fund may direct the advisers 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 an advisory agreement or hire a new investment adviser--either as a
replacement for an existing adviser or as an additional adviser. Any significant
change in the Fund's advisory arrangements will be communicated to shareholders
in writing.

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PLAIN TALK ABOUT
THE FUND'S ADVISER

The individual primarily responsible for overseeing the Aggressive Growth Fund's
investments is:

GEORGE U. SAUTER, Managing Director of Vanguard, and head of Vanguard's Core
Management Group; has worked in investment management since 1985; primary
responsibility for Vanguard's stock indexing policy and strategy since joining
the firm in 1987; A.B., Dartmouth College; M.B.A., University of Chicago.
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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.

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PLAIN TALK ABOUT
DISTRIBUTIONS

As a shareholder, you are entitled to your share of the fund's income from
interest and dividends, and gains from the sale of investments. You receive such
earnings as either an income dividend or a capital gains distribution. Income
dividends come from both the dividends that the fund earns from its holdings and
the interest it receives from its money market and bond investments. Capital
gains are realized whenever the fund sells securities for higher prices than it
paid for them. These capital gains are either short-term or long-term depending
on whether the fund held the securities for one year or less, or more than one
year.
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BASIC TAX POINTS
Vanguard will send you a statement each year showing the tax status of all your
distributions. In addition, taxable investors should be aware of the following
basic tax points:
- - 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 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 to your gains or losses from any
sale or exchange of Fund shares.

<PAGE>

INVALID ADDRESSES. If a dividend or capital gains distribution check mailed to
your address of record is returned as undeliverable, Vanguard will automatically
reinvest all future distributions until you provide us with a valid mailing
address.
TAX CONSEQUENCES. This prospectus provides general tax information only. If you
are investing through a tax-deferred retirement account, such as an IRA, special
tax rules apply. Please consult your tax adviser for detailed information about
a fund's tax consequences for you.

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PLAIN TALK ABOUT
"BUYING A DIVIDEND"

Unless you are investing through a tax-deferred retirement account (such as an
IRA), you should avoid buying shares of a fund shortly before it makes a
distribution, because doing so can cost you money in taxes. This is known as
"buying a dividend." For example: On December 15, you invest $5,000, buying 250
shares for $20 each. If the fund pays a distribution of $1 per share on December
16, its share price would drop to $19 (not counting market change). You still
have only $5,000 (250 shares x $19 = $4,750 in share value, plus 250 shares x $1
= $250 in distributions), but you owe tax on the $250 distribution you
received--even if you reinvest it in more shares. To avoid "buying a dividend,"
check a fund's distribution schedule before you invest.
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SHARE PRICE

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

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

Knowing the daily net asset value is useful to you as a shareholder because
it indicates the current value of your investment. The Fund's NAV, multiplied by
the number of shares you own, gives you the dollar amount you would have
received had you sold all of your shares back to the Fund that day.
A NOTE ON PRICING: The Fund's investments will be priced at their market
value when market quotations are readily available. When these quotations are
not readily available, investments will be priced at their fair value,
calculated according to procedures adopted by the Fund's Board of Trustees. The
Fund also may use fair value pricing if the value of a security held by the Fund
is materially affected by events occurring after the close of the primary
markets or exchanges on which such security is traded. In these situations,
prices used by the Fund to calculate its net asset value may differ from quoted
or published prices for the securities.
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 for the Fund, but the most common is AGGGR.

<PAGE>

FINANCIAL HIGHLIGHTS

The following financial highlights table is intended to help you understand the
Fund's financial performance since inception, and certain information reflects
financial results for a single Fund share. The total returns in the table
represent the percentage that an investor would have earned or lost each period
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.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
VANGUARD AGGRESSIVE GROWTH FUND
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
1999 1998 1997 1996 1995*
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $13.11 $15.89 $12.53 $10.23 $10.00
- ------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .15 .13 .15 .18 .04
Net Realized and
Unrealized Gain (Loss)
on Investments 2.62 (1.69) 4.10 2.20 .19
------------------------------------------------------------
Total from Investment
Operations 2.77 (1.56) 4.25 2.38 .23
------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income (.15) (.14) (.18) (.08) --
Distributions from
Realized Capital Gains -- (1.08) (.71) -- --
------------------------------------------------------------
Total Distributions (.15) (1.22) (.89) (.08) --
- ------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $15.73 $13.11 $15.89 $12.53 $10.23
====================================================================================

TOTAL RETURN** 21.30% -10.41% 35.83% 23.40% 1.69%
====================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (Millions) $561 $479 $444 $133 $62
Ratio of Total
Expenses to Average
Net Assets 0.46% 0.43% 0.40% 0.38% 0.06%+
Ratio of Net
Investment Income to
Average Net Assets 1.00% 0.93% 1.28% 1.78% 2.22%+
Turnover Rate 51% 71% 85% 106% 0%
====================================================================================
</TABLE>
* Subscription period for the Fund was June 30, 1995, to August 13, 1995,
during which time all assets were held in money market instruments.
Performance measurement begins August 14, 1995.
** Total return figures do not reflect the 1% fee that is assessed on
redemptions of shares that are held in the Fund for less than five years.
+ Annualized.

<PAGE>

FINANCIAL HIGHLIGHTS (continued)

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

The Fund began fiscal 1999 with a net asset value (price) of $13.11 per share.
During the year, the Fund earned $0.15 per share from investment income
(interest and dividends) and $2.62 per share from investments that had
appreciated in value or that were sold for higher prices than the Fund paid for
them.

Shareholders received $0.15 per share in the form of dividend distributions. A
portion of each year's distributions may come from the prior year's income or
capital gains.

The earnings ($2.77 per share) minus the distributions ($0.15 per share)
resulted in a share price of $15.73 at the end of the year. This was an increase
of $2.62 per share (from $13.11 at the beginning of the year to $15.73 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 21.30% for the year.

As of October 31, 1999, the Fund had $561 million in net assets. For the year,
its expense ratio was 0.46% ($4.60 per $1,000 of net assets); and its net
investment income amounted to 1.00% of its average net assets. It sold and
replaced securities valued at 51% of its net assets.
- --------------------------------------------------------------------------------

"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of The McGraw-Hill Companies, Inc., and have been licensed
for use by The Vanguard Group. Frank Russell Company is the owner of the
trademarks and copyrights relating to the Russell Indexes.

<PAGE>

- --------------------------------------------------------------------------------
INVESTING WITH VANGUARD
Are you looking for the most convenient way to open or add money to a Vanguard
account? Obtain instant access to fund information? Establish an account for a
minor child or for your retirement savings?
Vanguard can help. Our goal is to make it easy and pleasant for you to do
business with us.
The following sections of the prospectus briefly explain the many services
we offer. Booklets providing detailed information are available on the services
marked with a [BOOK ICON]. Please call us to request copies.
- --------------------------------------------------------------------------------

SERVICES AND ACCOUNT FEATURES

Vanguard offers many services that make it convenient to buy, sell or exchange
shares, or to obtain fund or account information.
- --------------------------------------------------------------------------------
TELEPHONE REDEMPTIONS (SALES AND EXCHANGES)
Automatically set up for this Fund unless you notify us otherwise.
- --------------------------------------------------------------------------------
VANGUARD(R) DIRECT DEPOSIT SERVICE [BOOK ICON]
Automatic method for depositing your paycheck or U.S. government payment
(including Social Security and government pension checks) into your account.
- --------------------------------------------------------------------------------
VANGUARD(R) AUTOMATIC EXCHANGE SERVICE [BOOK ICON]
Automatic method for moving a fixed amount of money from one Vanguard fund
account to another.
- --------------------------------------------------------------------------------
VANGUARD FUND EXPRESS(R) [BOOK ICON]
Electronic method for buying or selling shares. You can transfer money between
your Vanguard fund account and an account at your bank, savings and loan, or
credit union on a systematic schedule or whenever you wish.
- --------------------------------------------------------------------------------
VANGUARD DIVIDEND EXPRESS(TM) [BOOK ICON]
Electronic method for transferring dividend and/or capital gains distributions
directly from your Vanguard fund account to your bank, savings and loan, or
credit union account.
- --------------------------------------------------------------------------------
VANGUARD TELE-ACCOUNT(R) 1-800-662-6273 (ON-BOARD) [BOOK ICON]
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 ICON]
You can use your personal computer to perform certain transactions for most
Vanguard funds by accessing our website. To establish this service, you must
register through our website. We will then mail you an account access password
that allows you to process the following financial and administrative
transactions online:
- - Open a new account.*
- - Buy, sell, or exchange shares of most funds.
- - Change your name/address.

<PAGE>

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

*Only current Vanguard shareholders can open a new account online, by exchanging
shares from other existing Vanguard accounts.
- --------------------------------------------------------------------------------
INVESTOR INFORMATION DEPARTMENT: 1-800-662-7447 (SHIP) TEXT TELEPHONE:
1-800-952-3335
Call Vanguard for information on our funds, fund services, and retirement
accounts, and to request literature.
- --------------------------------------------------------------------------------
CLIENT SERVICES DEPARTMENT: 1-800-662-2739 (CREW) TEXT TELEPHONE: 1-800-749-7273
Call Vanguard for information on your account, account transactions, and account
statements.
- --------------------------------------------------------------------------------
SERVICES FOR CLIENTS OF VANGUARD'S INSTITUTIONAL DIVISION: 1-888-809-8102
Vanguard's Institutional Division offers a variety of specialized services for
large institutional investors, including the ability to effect account
transactions through private electronic networks and third-party recordkeepers.
- --------------------------------------------------------------------------------

TYPES OF ACCOUNTS

Individuals and institutions can establish a variety of accounts with Vanguard.
- --------------------------------------------------------------------------------
FOR ONE OR MORE PEOPLE
Open an account in the name of one (individual) or more (joint tenants) people.
- --------------------------------------------------------------------------------
FOR HOLDING PERSONAL TRUST ASSETS [BOOK ICON]
Invest assets held in an existing personal trust.
- --------------------------------------------------------------------------------
FOR INDIVIDUAL RETIREMENT ACCOUNTS [BOOK ICON]
Open a traditional IRA account or a Roth IRA account. Eligibility and other
requirements are established by federal law and Vanguard custodial account
agreements. For more information, please call 1-800-662-7447 (SHIP).
- --------------------------------------------------------------------------------
FOR AN ORGANIZATION [BOOK ICON]
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 ICON]
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-114
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 ICON]
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 (PIN) through Tele-Account at
least seven days before you request your first exchange.
- --------------------------------------------------------------------------------
IMPORTANT NOTE: Once you have initiated a telephone transaction and a
confirmation number has been assigned, the transaction cannot be revoked. We
reserve the right to refuse any purchase request.
- --------------------------------------------------------------------------------
BY WIRE TO OPEN A NEW ACCOUNT OR ADD TO AN EXISTING ACCOUNT [WIRE ICON]
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 Aggressive Growth Fund-114
[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.

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.
- --------------------------------------------------------------------------------
A NOTE ON REDEMPTION FEES
The Fund imposes a 1% redemption fee on shares that are redeemed by any method
within five years of purchase. Currently, redemption fees do not apply to Fund
shares held through Vanguard's separate recordkeeping system for employee
benefit plan accounts, due to certain economies associated with these accounts.
However, the Fund reserves the right to impose redemption fees on its shares at
any time if warranted by the Fund's future costs of processing redemptions from
these accounts.
- --------------------------------------------------------------------------------
NOTE: Once a redemption is initiated and a confirmation number given, the
transaction CANNOT be canceled.
- --------------------------------------------------------------------------------

HOW TO REQUEST A REDEMPTION
You can request a redemption from your Fund account in any one of three ways:
online, by telephone, or by mail.
The Vanguard funds whose shares you cannot exchange online or by telephone
are VANGUARD U.S. STOCK INDEX FUNDS, VANGUARD BALANCED INDEX FUND, VANGUARD
INTERNATIONAL STOCK INDEX FUNDS, VANGUARD REIT INDEX FUND, and VANGUARD GROWTH
AND INCOME FUND. These funds do, however, permit online and telephone exchanges
within IRAs and some other retirement accounts. If you sell shares of these
funds online, you will receive a redemption check at your address of record.
- --------------------------------------------------------------------------------
ONLINE REQUESTS [COMPUTER ICON]
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).
- --------------------------------------------------------------------------------

<PAGE>

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

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

Vanguard Tele-Account Client Services
1-800-662-6273 1-800-662-2739
- --------------------------------------------------------------------------------
SPECIAL INFORMATION: We will automatically establish the telephone redemption
option for your account, unless you instruct us otherwise in writing. While
telephone redemption is easy and convenient, this account feature involves a
risk of loss from unauthorized or fraudulent transactions. Vanguard will take
reasonable precautions to protect your account from fraud. You should do the
same by keeping your account information private and immediately reviewing any
account statements that we send to you. Make sure to contact Vanguard
immediately about any transaction you believe to be unauthorized.
- --------------------------------------------------------------------------------
We reserve the right to refuse a telephone redemption if the caller is unable to
provide:
- - The ten-digit account number.
- - The name and address exactly as registered on the account.
- - The primary Social Security or employer identification number as registered
on the account.
- - The Personal Identification Number (PIN), if applicable (for instance,
Tele-Account).

Please note that Vanguard will not be responsible for any account losses
due to telephone fraud, so long as we have taken reasonable steps to verify the
caller's identity. If you wish to remove the telephone redemption feature from
your account, please notify us in writing.
- --------------------------------------------------------------------------------
A NOTE ON UNUSUAL CIRCUMSTANCES
Vanguard reserves the right to revise or terminate the telephone redemption
privilege at any time, without notice. In addition, Vanguard can stop selling
shares or postpone payment at times when the New York Stock Exchange is closed
or under any emergency circumstances as determined by the U.S. Securities and
Exchange Commission. If you experience difficulty making a telephone redemption
during periods of drastic economic or market change, you can send us your
request by regular or express mail. Follow the instructions on selling or
exchanging shares by mail in this section.
- --------------------------------------------------------------------------------
MAIL REQUESTS [ENVELOPE ICON]
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.

<PAGE>

Vanguard Retirement Accounts:
For information on how to request distributions from:
- - Traditional IRAs and Roth IRAs--call Client Services.
- - SEP-IRAs, SIMPLE IRAs, 403(b)(7) custodial accounts, and Profit-Sharing and
Money Purchase Pension (Keogh) Plans--call Individual Retirement Plans at
1-800-662-2003.

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

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

For clients of Vanguard's Institutional Division . . .

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

<PAGE>

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

TRANSACTIONS ARE PROCESSED AT THE NEXT-DETERMINED SHARE PRICE AFTER VANGUARD HAS
RECEIVED ALL REQUIRED INFORMATION.
- --------------------------------------------------------------------------------
LIMITS ON ACCOUNT ACTIVITY
Because excessive account transactions can disrupt the management of the Fund
and increase the Fund's costs for all shareholders, Vanguard limits account
activity as follows:
- - 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.
- --------------------------------------------------------------------------------

<PAGE>

TRANSFERRING REGISTRATION

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

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

For clients of Vanguard's Institutional Division . . .

FUND AND ACCOUNT UPDATES

STATEMENTS AND REPORTS
We will send you account and tax statements to help you keep track of your Fund
account throughout the year as well as when you are preparing your income tax
returns.
In addition, you will receive financial reports about the Fund twice a
year. These comprehensive reports include an assessment of the Fund's
performance (and a comparison to its industry benchmark), an overview of the
financial markets, a report from the advisers, and the Fund's financial
statements which include a listing of the Fund's holdings.
To keep the Fund's costs as low as possible (so that you and other
shareholders can keep more of the Fund's investment earnings), Vanguard attempts
to eliminate duplicate mailings to the same address. When two or more Fund
shareholders have the same last name and address, we send just one Fund report
to that address--instead of mailing separate reports to each shareholder. If you
want us to send separate reports, notify our Client Services Department at
1-800-662-2739.
- --------------------------------------------------------------------------------
CONFIRMATION STATEMENT
Sent each time you buy, sell, or exchange shares; confirms the trade date and
the amount of your transaction.
- --------------------------------------------------------------------------------
PORTFOLIO SUMMARY [BOOK ICON]
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 December and June for this Fund
- --------------------------------------------------------------------------------
TAX STATEMENTS
Generally mailed in January; report previous year's dividend and capital gains
distributions, proceeds from the sale of shares, and distributions from IRAs or
other retirement accounts.
- --------------------------------------------------------------------------------
AVERAGE COST REVIEW STATEMENT [BOOK ICON]
Issued quarterly for most taxable accounts (accompanies your Portfolio Summary);
shows the average cost of shares that you redeemed during the calendar year,
using only the average cost single category method.
- --------------------------------------------------------------------------------

<PAGE>

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<PAGE>

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<PAGE>

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<PAGE>

GLOSSARY OF INVESTMENT TERMS

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

CASH RESERVES
Cash deposits, short-term bank deposits, and money market instruments that
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, and book value.

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

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

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

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

PRINCIPAL
The amount of money you put into an investment.

SECURITIES
Stocks, bonds, money market instruments, and other investment vehicles.

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

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

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>

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

Post Office Box 2600
Valley Forge, PA 19482-2600

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

ANNUAL/SEMIANNUAL REPORT TO
SHAREHOLDERS
Additional information about the
Fund's investments is available in
the Fund's annual and semiannual
reports to shareholders. In these
reports, you will find a discussion of
the market conditions and
investment strategies that
significantly affected the Fund's
performance during the most recent
fiscal year.

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: 811-07239

P114N-02/18/2000

<PAGE>

VANGUARD(R)
CAPITAL
OPPORTUNITY FUND

Prospectus
February 18, 2000

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

[A MEMBER OF
THE VANGUARD GROUP LOGO]

<PAGE>

VANGUARD CAPITAL OPPORTUNITY FUND
Prospectus
February 18, 2000

An Aggressive Growth Stock Mutual Fund

- --------------------------------------------------------------------------------
CONTENTS
- --------------------------------------------------------------------------------
1 FUND PROFILE 14 INVESTING WITH VANGUARD
3 ADDITIONAL INFORMATION 14 SERVICES AND ACCOUNT FEATURES
3 MORE ON THE FUND 15 TYPES OF ACCOUNTS
8 THE FUND AND VANGUARD 16 BUYING SHARES
9 INVESTMENT ADVISER 18 REDEEMING SHARES
10 DIVIDENDS, CAPITAL GAINS, AND TAXES 22 TRANSFERRING REGISTRATION
11 SHARE PRICE 22 FUND AND ACCOUNT UPDATES
12 FINANCIAL HIGHLIGHTS GLOSSARY (inside back cover)
- --------------------------------------------------------------------------------

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

<PAGE>

FUND PROFILE

The following profile summarizes key features of Vanguard Capital Opportunity
Fund.

INVESTMENT OBJECTIVE
The Fund seeks to provide maximum long-term total return.

INVESTMENT STRATEGIES
The Fund invests primarily in U.S. stocks, with an emphasis on small- and
mid-capitalization companies that have rapid earnings growth prospects. The
Fund's investment adviser uses intense, fundamental research to identify stocks
that are expected to outperform the market over a three-to-five year time
horizon, and that are available at attractive prices relative to their
fundamental values. The Fund may invest up to 15% of its assets in foreign
stocks, and has the flexibility to engage in certain hedging and defensive
techniques, such as "short selling" stocks, purchasing "put options," and
temporarily increasing cash reserves.

PRIMARY RISKS
An investment in the Fund could lose money over short or even long periods. You
should expect the Fund's share price and total return to fluctuate within a wide
range, like the overall stock market. The Fund takes on more risk than the
average stock fund, and its performance could be hurt by:
- - Investment style risk, which is the chance that returns from small- and
mid-capitalization stocks--which comprise most of the Fund's holdings--will
trail returns from the overall stock market. Historically, these stocks
have been more volatile in price than large-cap stocks that dominate the
overall stock market, and they often perform quite differently.
- - Manager risk, which is the chance that poor security selection will cause
the Fund to underperform other funds with similar investment objectives.

----------------------------------------------------
ANNUAL TOTAL RETURNS
----------------------------------------------------
1996 13.41%
1997 -7.93%
1998 31.98%
1999 97.77%
----------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was 37.61% (quarter ended December 31, 1999), and the lowest return for
a quarter was -13.09% (quarter ended December 31, 1997).

<PAGE>

-----------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR YEARS ENDED DECEMBER 31, 1999
-----------------------------------------------------------------------
1 YEAR SINCE INCEPTION*
-----------------------------------------------------------------------
Vanguard Capital Opportunity Fund 97.77% 25.20%
Standard & Poor's Mid-Cap 400/BARRA
Growth Index 28.74 24.96
-----------------------------------------------------------------------
*August 14, 1995.
-----------------------------------------------------------------------

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: 1%*

ANNUAL FUND OPERATING EXPENSES (expenses deducted from the Fund's assets)
Management Expenses: 0.73%
12b-1 Distribution Fee: None
Other Expenses: 0.02%
TOTAL ANNUAL FUND OPERATING EXPENSES: 0.75%

*The 1% fee applies to shares redeemed (either by selling or exchanging to
another fund) within five years of purchase. The fee is withheld from
redemption proceeds and retained by the Fund. Shares held for five years or
more are not subject to the 1% fee.

- -------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------
$181 $353 $417 $930
- -------------------------------------------------

- -------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------
$77 $240 $417 $930
- -------------------------------------------------

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

<PAGE>

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

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 Capital Opportunity Fund's expense ratio in fiscal year 1999
was 0.75%, or $7.50 per $1,000 of average net assets. The average multi-cap
growth mutual fund had expenses of 1.52%, or $15.20 per $1,000 of average net
assets (derived from data provided as of December 31, 1999 by Lipper Inc., which
reports on the mutual fund industry). Management expenses, which comprise one
part of operating expenses, include investment advisory fees as well as other
costs of managing a fund--such as account maintenance, reporting, accounting,
legal, and other administrative expenses.
- --------------------------------------------------------------------------------

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

DIVIDENDS AND CAPITAL GAINS MINIMUM INITIAL INVESTMENT
Distributed annually in December $25,000

INVESTMENT ADVISER NEWSPAPER ABBREVIATION
PRIMECAP Management Company. Pasadena, CapOp
Ca., since February 1, 1998
VANGUARD FUND NUMBER
INCEPTION DATE 111
August 14, 1995
CUSIP NUMBER
NET ASSETS AS OF OCTOBER 31, 1999 922038302
$1.29 billion
TICKER SYMBOL
SUITABLE FOR IRAS VHCOX
Yes
- --------------------------------------------------------------------------------

MORE ON THE FUND

MARKET EXPOSURE
The Fund's primary strategy is to invest chiefly in the stocks of mid- and
small-cap companies that offer strong growth potential. These companies
typically provide little or no dividend income. The Fund will invest in
companies with strong industry positions, increasing sales, superior return on
equity, and talented management teams. In valuing stocks, the adviser seeks to
quantify a firm's "fundamental value." Stock selection is primarily based on the
ratio of a company's fundamental value to its market price, relative to a
universe of

<PAGE>

comparable stocks. Companies with a high fundamental value relative to current
stock price are generally sought. The Fund may not be broadly diversified.

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

<PAGE>

Keep in mind that the S&P 500 Index tracks mainly large-cap stocks.
Historically, mid- and small-cap stocks have been more volatile than--and at
times have performed quite differently from--the large-cap stocks found in the
S&P 500 Index. This is due to several factors, including less-certain growth and
dividend prospects for smaller companies.

[FLAG] THE FUND IS SUBJECT TO INVESTMENT STYLE RISK, WHICH IS THE CHANCE THAT
RETURNS FROM THE MARKET SECTOR IN WHICH IT INVESTS WILL TRAIL RETURNS FROM
OTHER MARKET SECTORS. AS A GROUP, SPECIFIC TYPES OF STOCKS (FOR INSTANCE,
SMALL-CAP STOCKS, VALUE STOCKS, OR HEALTH-CARE 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.

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

SECURITY SELECTION
The investment adviser uses intense, fundamental research to identify stocks
that are expected to outperform the market over a three-to-five year time
horizon, and that are available at attractive prices relative to their
fundamental values. The adviser may invest a relatively large portion of the
Fund's holdings in specific industries. The adviser has the flexibility to
engage in the following hedging and defensive techniques:
- - Sell stock "short" if the stock's issuer is considered to have fundamental
problems (up to 10% of the Fund's net assets). A short sale occurs when an
investor (such as the Fund) sells stock that it does not own, with the
expectation of acquiring the stock at a lower price in time for delivery to
the purchaser. Potential losses from a short sale are unlimited if the
price of the stock rises instead of falls.
- - The Fund may purchase put options--that is, the right to sell stock at a
particular price within a specified period of time (up to 10% of the Fund's
net assets). The Fund would use this technique to hedge (or protect)
investments in the stocks of companies considered to have fundamental
difficulties.
- - Routinely, the Fund may increase its cash reserves up to 15% of net assets
for temporary defensive purposes. Altogether, the Fund may commit no more
than 25% of its assets to these special investment strategies at any time.

<PAGE>

[FLAG] THE FUND IS SUBJECT TO MANAGER RISK, WHICH IS THE CHANCE THAT THE ADVISER
WILL DO A POOR JOB OF SELECTING THE STOCKS OR COUNTRIES IN WHICH THE FUND
INVESTS.

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

In general, the more diversified a fund's stock or bond holdings, the less
likely that a specific security'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 30%
of its assets invested in its ten largest holdings, while some less-diversified
mutual funds have more than 50% of assets invested in their top ten.
- --------------------------------------------------------------------------------

[FLAG] BECAUSE THE FUND INVESTS A HIGHER PERCENTAGE OF ASSETS IN ITS TEN LARGEST
HOLDINGS THAN THE AVERAGE STOCK FUND DOES, THE FUND IS SUBJECT TO THE RISK
THAT ITS PERFORMANCE MAY BE HURT DISPROPORTIONATELY BY THE POOR PERFORMANCE
OF RELATIVELY FEW STOCKS.

The Fund is generally managed without regard to tax ramifications.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
DERIVATIVES

<PAGE>

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 priced.
Although the Fund typically does not make significant investments in
foreign securities, it reserves the right to invest up to 20% of its assets this
way. Foreign securities may be traded in U.S. or foreign markets. To the extent
that it owns foreign securities, the Fund is subject to (1) country risk, which
is the chance that domestic events--such as political upheaval, financial
troubles, or a natural disaster--will weaken a country's securities markets; and
(2) currency risk, which is the chance that a foreign investment will decrease
in value because of unfavorable changes in currency exchange rates.

COSTS AND MARKET-TIMING
Some investors try to profit from a strategy called market-timing--switching
money into investments when they expect prices to rise, and taking money out
when they expect prices 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.
This is why all Vanguard funds have adopted special policies to discourage
short-term trading. Specifically:
- - Each Vanguard fund reserves the right to reject any purchase
request--including exchanges from other Vanguard funds--that it regards as
disruptive to efficient portfolio management. A fund may reject a purchase
request because of the timing of the investment or because of a history of
excessive trading by the investor.
- - Each Vanguard fund (except the money market funds) limits the number of
times that an investor can exchange into and out of the fund.
- - Each Vanguard fund reserves the right to stop offering shares at any time.
- - Vanguard's U.S. Stock Index Funds, International Stock Index Funds, REIT
Index Fund, Balanced Index Fund, and Growth and Income Fund generally do
NOT accept exchanges by telephone or fax, or on-line. (IRAs and some other
retirement accounts are not subject to this rule.)

<PAGE>

- - Certain Vanguard funds, including the Capital Opportunity Fund, charge
transaction fees on share redemptions. Other Vanguard funds charge
transaction fees on share purchases.

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

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

- --------------------------------------------------------------------------------
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. As of October 31, 1999, the average turnover rate for all
mid-cap growth stock funds was approximately 144%, according to Morningstar,
Inc.
- --------------------------------------------------------------------------------

THE FUND AND VANGUARD

<PAGE>

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

INVESTMENT ADVISER

The Fund employs PRIMECAP Management Company (PRIMECAP), 225 South Lake Avenue,
Pasadena, CA 91101, as its investment adviser. PRIMECAP manages the Fund subject
to the control of the Trustees and officers of the Fund, and has provided
advisory services to the Capital Opportunity Fund since February 1, 1998. Before
that, Husic Capital Management (Husic) served as the Fund's investment adviser.
PRIMECAP provides investment advisory services to companies, endowment funds,
employee benefit plans, and foundations; as of October 31, 1999, PRIMECAP
managed over $21 billion in assets. For the fiscal year ended October 31, 1999,
the Fund paid PRIMECAP advisory fees that represented an effective annual rate
of 0.40% of the Fund's average net assets for the year.
The Fund has authorized the adviser 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. Also, the Fund may direct the advisers to use a particular broker
for certain transactions in exchange for commission rebates or research services
provided to the Fund.

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

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

THEO A. KOLOKOTRONES (40%), President of PRIMECAP; has worked in investment
management since 1970; has managed assets since 1983; with PRIMECAP since 1983;
B.A., University of Chicago; M.B.A., Harvard Business School.

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

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

Each of these three individuals manages his portion of the Fund autonomously;
there is no decision-making by committee. The remaining 10% of the Fund is
managed by individuals in PRIMECAP's research department.
- --------------------------------------------------------------------------------

<PAGE>

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

DIVIDENDS, CAPITAL GAINS, AND TAXES

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

<PAGE>

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
"BUYING A DIVIDEND"

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 and certify that it is correct.
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.

SHARE PRICE

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

<PAGE>

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 also may use fair value pricing if the value of a security held by the Fund
is materially affected by events occurring after the close of the primary
markets or exchanges on which such security is traded. In these situations,
prices used by the Fund to calculate its net asset value may differ from quoted
or published prices for the securities.
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 for the Fund, but the most common is CAPOP.

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
VANGUARD CAPITAL OPPORTUNITY FUND
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
1999 1998 1997 1996 1995*
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $11.47 $10.48 $10.81 $9.71 $10.00
- ------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .029 .021 .037 .01 .02
Net Realized and
Unrealized Gain
(Loss) on
Investments 8.751 1.014 (.360) 1.12 (.31)
------------------------------------------------------------
Total from
Investment
Operations 8.780 1.035 (.323) 1.13 (.29)
------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income (.015) (.045) (.007) (.03) --
Distributions from
Realized Capital
Gains (.895) -- -- -- --
------------------------------------------------------------
Total Distributions (.910) (.045) (.007) (.03) --
- ------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $19.34 $11.47 $10.48 $10.81 $9.71
====================================================================================

TOTAL RETURN** 81.74% 9.95% -2.99% 11.67% -3.19%
====================================================================================
RATIOS/SUPPLEMENTAL
DATA
Net Assets, End of
Period (Millions) $1,289 $156 $69 $115 $72
Ratio of Total
Expenses to Average
Net Assets 0.75% 0.94% 0.49% 0.50% 0.47%+
Ratio of Net
Investment Income to
Average Net Assets 0.31% 0.18% 0.27% 0.11% 1.29%+
Turnover Rate 22% 103% 195% 128% 30%
====================================================================================
</TABLE>
* Subscription period for the Fund was June 30, 1995, to August 13, 1995,
during which time all assets were held in money market instruments.
Performance measurement begins August 14, 1995.
** Total return figures do not reflect the 1% fee that is assessed on
redemptions of shares that are held in the Fund for less than five years.
+ Annualized.

<PAGE>

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

The Fund began fiscal 1999 with a net asset value (price) of $11.47 per share.
During the year, the Fund earned $0.029 per share from investment income
(interest and dividends) and $8.751 per share from investments that had
appreciated in value or that were sold for higher prices than the Fund paid for
them.

Shareholders received $0.91 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 ($8.78 per share) minus the distributions ($0.91 per share)
resulted in a share price of $19.34 at the end of the year. This was an increase
of $7.87 per share (from $11.47 at the beginning of the year to $19.34 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 81.74% for the year.

As of October 31, 1999, the Fund had $1.29 billion in net assets. For the year,
its expense ratio was 0.75% ($7.50 per $1,000 of net assets); and its net
investment income amounted to 0.31% of its average net assets. It sold and
replaced securities valued at 22% of its net assets.
- --------------------------------------------------------------------------------

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

<PAGE>

SERVICES AND ACCOUNT FEATURES

<PAGE>

TYPES OF ACCOUNTS

<PAGE>

BUYING SHARES

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
$25,000. The low balance fee is waived for investors who have aggregate Vanguard
account assets of $50,000 or more.
- --------------------------------------------------------------------------------
BY MAIL TO . . . [ENVELOPE ICON]
open a new account
Complete and sign the account registration form and enclose your check.

Make your check payable to: The Vanguard Group-111
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 . . .

<PAGE>

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

Wire to:
FRB ABA 021001088
HSBC Bank USA

For credit to:
Account: 000112046
Vanguard Incoming Wire Account

In favor of:
Vanguard Capital Opportunity Fund-111
[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 21.

<PAGE>

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

<PAGE>

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

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

For clients of Vanguard's Institutional Division . . .

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

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

<PAGE>

TRANSFERRING REGISTRATION

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

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

For clients of Vanguard's Institutional Division . . .

FUND AND ACCOUNT UPDATES

<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 a fund
has sold at a profit, minus any realized losses.

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

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

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

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

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 money you put into an investment.

SECURITIES
Stocks, bonds, money market instruments, and other investment vehicles.

TOTAL RETURN
A percentage change, over a specified time period, in a mutual fund's net asset
value, assuming 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>

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

Post Office Box 2600
Valley Forge, PA 19482-2600

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

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: 811-07239

P111N-02/18/2000

<PAGE>

VANGUARD(R)
GLOBAL ASSET
ALLOCATION FUND

Prospectus
February 18, 2000

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

[A MEMBER OF
THE VANGUARD GROUP LOGO]

<PAGE>

VANGUARD GLOBAL ASSET ALLOCATION FUND
Prospectus
February 18, 2000

A Global Asset Allocation Mutual Fund

- --------------------------------------------------------------------------------
CONTENTS
- --------------------------------------------------------------------------------
1 FUND PROFILE 16 INVESTING WITH VANGUARD
3 ADDITIONAL INFORMATION 16 SERVICES AND ACCOUNT FEATURES
3 MORE ON THE FUND 17 TYPES OF ACCOUNTS
11 THE FUND AND VANGUARD 18 BUYING SHARES
11 INVESTMENT ADVISER 20 REDEEMING SHARES
12 DIVIDENDS, CAPITAL GAINS, AND TAXES 24 TRANSFERRING REGISTRATION
14 SHARE PRICE 24 FUND AND ACCOUNT UPDATES
14 FINANCIAL HIGHLIGHTS GLOSSARY (inside back cover)
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
WHY READING THIS PROSPECTUS IS IMPORTANT
This prospectus explains the objective, risks, and strategies of Vanguard Global
Asset Allocation 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.
- -------------------------------------------------------------------------------

<PAGE>

FUND PROFILE

The following profile summarizes key features of Vanguard Global Asset
Allocation Fund.

INVESTMENT OBJECTIVE
The Fund seeks to provide maximum long-term total return.

INVESTMENT STRATEGIES
The Fund invests in an adjustable mix of stocks, government bonds (including
bonds issued by government agencies and supra-national entities), and cash
reserves selected primarily from nine major markets: Australia, Canada, France,
Germany, Hong Kong, Japan, Spain, the United Kingdom, and the United States. The
adviser uses quantitative, or computer-driven, investment models in seeking to
identify the asset classes and countries (for instance, French bonds or Japanese
stocks) that offer the best relative return prospects, adjusted for risk. The
Fund may simulate common stock performance by investing in stock index futures
contracts. Although the Fund's total futures exposure may reach 50% of assets,
these investments will not be used to leverage the Fund's performance.

PRIMARY RISKS
An investment in the Fund could lose money over short or even long periods. You
should expect the Fund's share price and total return to fluctuate within a wide
range, like the overall stock market. The Fund's performance could be hurt by:
- - Interest rate risk, which is the chance that bond prices overall will
decline over short or even long periods due to rising interest rates.
Interest rate risk will range from low to high for the Fund, depending on
the amount of Fund assets invested in bonds.
- - Country risk, which is the chance that domestic events--such as political
upheaval, financial troubles, or a natural disaster--will weaken a
country's securities markets.
- - Currency risk, which is the chance that investments in a particular country
will decrease in value if the U.S. dollar rises in value against that
country's currency.
- - Manager risk, which is the chance that poor security selection will cause
the Fund to underperform other funds with similar investment objectives.
- - Credit risk, which is the chance that the issuer will fail to pay interest
and principal in a timely manner. Credit risk should be low for the Fund,
since it invests only a portion of its assets in bonds, most of which are
considered high quality.

<PAGE>

----------------------------------------------------
ANNUAL TOTAL RETURNS
----------------------------------------------------
1996 9.97%
1997 9.25%
1998 15.13%
1999 11.83%
----------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was 9.38% (quarter ended December 31, 1998), and the lowest return for a
quarter was -2.87% (quarter ended September 30, 1998).

-------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR YEARS ENDED DECEMBER 31, 1999
-------------------------------------------------------------------------
1 YEAR SINCE INCEPTION*
-------------------------------------------------------------------------
Vanguard Global Asset
Allocation Fund 11.83% 12.11%
Morgan Stanley Capital
International (MSCI) All
Country World Index 27.31 19.36
Russell Global Balanced Index** 16.45 16.80
-------------------------------------------------------------------------
*August 14, 1995.
**Weighted 60% stock investments, 30% bond investments, and 10% U.S.
cash reserves; the stock and bond components are calculated using
established local market indexes in each country.
-------------------------------------------------------------------------

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: 1%*

ANNUAL FUND OPERATING EXPENSES (expenses deducted from the Fund's assets)
Management Expenses: 0.53%
12b-1 Distribution Fee: None
Other Expenses: 0.05%
TOTAL ANNUAL FUND OPERATING EXPENSES: 0.58%

<PAGE>

- -------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------
$164 $300 $324 $726
- -------------------------------------------------

- -------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------
$59 $186 $324 $726
- -------------------------------------------------

THESE EXAMPLES 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.

- --------------------------------------------------------------------------------
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 Global Asset Allocation Fund's expense ratio in fiscal year
1999 was 0.58%, or $5.80 per $1,000 of average net assets. The average global
flexible mutual fund had expenses of 1.77%, or $17.70 per $1,000 of average net
assets (derived from data provided as of December 31, 1999 by Lipper Inc., which
reports on the mutual fund industry). Management expenses, which comprise one
part of operating expenses, include investment advisory fees as well as other
costs of managing a fund--such as account maintenance, reporting, accounting,
legal, and other administrative expenses.

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

DIVIDENDS AND CAPITAL GAINS MINIMUM INITIAL INVESTMENT
Distributed annually in December $3,000; $1,000 for IRAs and custodial
accounts for minors
INVESTMENT ADVISER
Strategic Investment Management, NEWSPAPER ABBREVIATION
Arlington, Va., since inception GlbAA

INCEPTION DATE VANGUARD FUND NUMBER
August 14, 1995 115

NET ASSETS AS OF OCTOBER 31, 1999 CUSIP NUMBER
$99 million 922038401

SUITABLE FOR IRAS TICKER SYMBOL
Yes VHAAX
- --------------------------------------------------------------------------------

MORE ON THE FUND

<PAGE>

this [FLAG] symbol throughout the prospectus. It is used to mark detailed
information about each type of risk that you would confront as a Fund
shareholder.
The following sections explain the primary investment strategies and
policies that the Fund uses in pursuit of its objective. The Fund's Board of
Trustees, which oversees the management of the Fund, may change the Fund's
investment objective or strategies in the interest of shareholders, without a
shareholder vote.
Finally, you'll find information on other important features of the Fund.

MARKET EXPOSURE
The Fund invests in stocks, government bonds (including bonds issued by
government agencies and supra-national entities), and money market securities
from a wide variety of countries. Decisions about which markets and which types
of assets to invest in are made by computer programs that weigh a variety of
factors to identify the most attractive balance of potential return and
potential risks. For its stock segment, the Fund generally holds futures
contracts instead of individual stocks to minimize transaction costs. The Fund
holds only government bonds (including bonds issued by government agencies and
supra-national entities) in its bond segment; the maturities and durations of
bond holdings will vary depending on the interest-rate outlook in various
markets. The Fund uses forward foreign currency contracts in addition to its
other holdings, to actively manage its forward currency exposure relative to the
Global Balanced Index, a benchmark index discussed on page 8.

[FLAG] THE FUND IS SUBJECT TO STOCK MARKET RISK, WHICH IS THE CHANCE THAT STOCK
PRICES OVERALL WILL DECLINE OVER SHORT OR EVEN LONG PERIODS. STOCK MARKETS
TEND TO MOVE IN CYCLES, WITH PERIODS OF RISING PRICES AND PERIODS OF
FALLING PRICES.
IN ADDITION, INVESTMENTS IN FOREIGN STOCK MARKETS CAN BE RISKIER THAN U.S.
STOCK INVESTMENTS. THE PRICES OF INTERNATIONAL STOCKS AND THE PRICES OF
U.S. STOCKS HAVE OFTEN MOVED IN OPPOSITE DIRECTIONS. THESE PERIODS HAVE, IN
THE PAST, LASTED FOR AS LONG AS SEVERAL YEARS.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
THE RISKS OF INTERNATIONAL INVESTING

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

FOREIGN STOCKS
To illustrate the volatility of international stock prices, the following table
shows the best, worst, and average total returns for foreign stock markets over
various periods as measured by the Morgan Stanley Capital International Europe,
Australasia, Far East (MSCI EAFE) Index, a widely used barometer of
international market activity. (Total returns consist of

<PAGE>

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.

- ------------------------------------------------------
INTERNATIONAL STOCK MARKET RETURNS (1969-1999)
- ------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS 20 YEARS
- ------------------------------------------------------
Best 69.9% 36.5% 22.8% 16.3%
Worst -23.2 1.5 5.9 12.0
Average 15.2 13.6 14.5 14.7
- ------------------------------------------------------

The table covers all of the 1-, 5-, 10-, and 20-year periods from 1969
through 1999. Keep in mind that this was a particularly favorable period for all
stock markets. These average returns reflect past performance on international
stocks; you should not regard them as an indication of future returns from
either foreign markets as a whole or this Fund in particular.
Note that the preceding chart does not take into account returns for
foreign stock markets as measured by the MSCI Emerging Markets Free Index, a
widely used barometer of less developed stock markets. Emerging markets can be
substantially more volatile than more developed foreign markets. In addition,
because the MSCI EAFE Index tracks the European and Pacific markets
collectively, the above returns do not reflect the variability of returns from
year to year for these markets individually, or the variability across these and
other geographic regions or market sectors. To illustrate this variability, the
following table shows returns for different international markets--as well as
the U.S. market for comparison--from 1990 through 1999, as measured by their
respective indexes. 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.

- --------------------------------------------------------------------------------
STOCK MARKET RETURNS FOR DIFFERENT INTERNATIONAL MARKETS*
- --------------------------------------------------------------------------------
EUROPEAN PACIFIC EMERGING U.S.
MARKET MARKET MARKETS MARKETS
- --------------------------------------------------------------------------------
1990 -2.00% 34.43% -10.55% -3.10%
1991 14.12 11.51 59.91 30.47
1992 -3.92 -18.51 11.40 7.62
1993 29.25 36.15 74.84 10.08
1994 2.82 12.82 -7.31 1.32
1995 22.08 2.89 0.01** 37.58
1996 21.42 -8.23 15.19 22.96
1997 23.75 -25.74 -16.37 33.36
1998 28.68 2.64 -18.39 28.58
1999 15.77 56.38 60.86 21.04
- --------------------------------------------------------------------------------
* European market returns are measured by the MSCI Europe Index; Pacific
market returns are measured by the MSCI Pacific Free Index; emerging
markets returns are measured by the MSCI Select Emerging Markets Free
Index; and U.S. market returns are measured by the Standard & Poor's 500
Index.
** The inception date of the MSCI Select Emerging Markets Free Index was May
4, 1994; returns shown for 1990-1994 are measured by the MSCI Emerging
Markets Free Index.
- --------------------------------------------------------------------------------

<PAGE>

Keep in mind, however, that these average returns reflect past performance
of the various indexes; you should not consider them as an indication of future
returns from the indexes, or from this Fund in particular.

[FLAG] BECAUSE OF ITS FOREIGN INVESTMENTS, THE FUND IS SUBJECT TO COUNTRY RISK
AND CURRENCY RISK. COUNTRY RISK IS THE CHANCE THAT POLITICAL EVENTS (SUCH
AS A WAR), FINANCIAL PROBLEMS (SUCH AS GOVERNMENT DEFAULT), OR NATURAL
DISASTERS (SUCH AS AN EARTHQUAKE) WILL WEAKEN A COUNTRY'S ECONOMY AND CAUSE
INVESTMENTS IN THAT COUNTRY TO LOSE MONEY. CURRENCY RISK IS THE CHANCE THAT
A "STRONGER" U.S. DOLLAR WILL REDUCE RETURNS FOR AMERICANS INVESTING
OVERSEAS. GENERALLY, WHEN THE DOLLAR RISES IN VALUE AGAINST A FOREIGN
CURRENCY, YOUR INVESTMENT IN THAT COUNTRY LOSES VALUE BECAUSE ITS CURRENCY
IS WORTH FEWER U.S. DOLLARS.

U.S. STOCKS
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. AND FOREIGN GOVERNMENT BONDS AND CASH RESERVES
The Fund invests in U.S. and foreign government bonds (including bonds issued by
government agencies and supra-national entities), and in U.S. and foreign cash
reserves. Bonds held by the Fund may be short- or long-term, ranging in maturity
from 1 to 30 years. In addition, it is expected that all bonds held by the Fund
will be of investment-grade quality.

<PAGE>

[FLAG] DUE TO ITS BOND INVESTMENTS, THE FUND IS SUBJECT TO INTEREST RATE RISK,
WHICH IS THE CHANCE THAT BOND PRICES OVERALL WILL DECLINE OVER SHORT OR
EVEN LONG PERIODS DUE TO RISING INTEREST RATES, AND CREDIT RISK, WHICH IS
THE CHANCE THAT A BOND ISSUER WILL FAIL TO PAY INTEREST AND PRINCIPAL IN A
TIMELY MANNER.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
BONDS AND INTEREST RATES

As a rule, when interest rates rise, bond prices fall. The opposite is also
true: Bond prices go up when interest rates fall. Why do bond prices and
interest rates move in opposite directions? Let's assume that you hold a bond
offering a 5% yield. A year later, interest rates are on the rise and bonds of
comparable quality and maturity are offered with a 6% yield. With
higher-yielding bonds available, you would have trouble selling your 5% bond for
the price you paid--you would have to lower your asking price. On the other
hand, if interest rates were falling and 4% bonds were being offered, you should
be able to sell your 5% bond for more than you paid.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
CREDIT QUALITY

A bond's credit quality depends on the issuer's ability to pay interest on the
bond and, ultimately, to repay the debt. The lower the rating by one of the
independent bond-rating agencies (for example, Moody's or Standard & Poor's),
the greater the chance--in the rating agency's opinion--that the bond issuer
will default, or fail to meet its payment obligations. All things being equal,
the lower a bond's credit rating, the higher its yield should be to compensate
investors for assuming additional risk. Bonds rated in one of the four highest
rating categories are considered "investment grade."
- --------------------------------------------------------------------------------

FUTURES, OPTIONS, AND OTHER DERIVATIVES
The Fund may invest in futures contracts, options (including puts and calls),
warrants, convertible securities, and swap agreements, which are all types of
derivatives. Losses (or gains) involving futures can sometimes be
substantial--in part because a relatively small price movement in a futures
contract may result in an immediate and substantial loss (or gain) for a fund.
Similar risks exist for warrants (securities that permit their owners to
purchase a specific number of stock shares at a predetermined price),
convertible securities (securities that may be exchanged for another asset), and
swap agreements (contracts between parties in which each agrees to make payments
to the other based on the return of a specified index or asset).
The Fund will not use derivatives for speculative purposes or as leveraged
investments that magnify gains or losses. In addition, the Fund's obligation
under futures contracts and options will not exceed 50% of its net assets,
provided that no more than 20% of the Fund's assets are invested in options.
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 priced.

<PAGE>

- - To achieve index-like exposure to foreign markets by using futures
contracts in conjunction with forward foreign currency exchange contracts.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
DERIVATIVES

FORWARD FOREIGN CURRENCY CONTRACTS
The Fund may purchase forward foreign currency contracts to help protect its
holdings against unfavorable short-term changes in exchange rates. A forward
currency exchange contract is an agreement to buy or sell a country's currency
at a specific price on a specific date, usually 30, 60, or 90 days in the
future. In other words, the contract guarantees an exchange rate on a given
date. These contracts will not, however, prevent the Fund's securities from
falling in value during foreign market downswings. Note that the Fund will not
enter into such contracts for speculative purposes.
Under normal circumstances, the Fund will not commit more than 20% of its
assets to forward currency exchange contracts. The Fund uses these contracts in
conjunction with its other portfolio holdings to actively manage its forward
currency exposure relative to the Global Balanced Index, a benchmark index
discussed below. There is no specific limit on the Fund's exposure to forward
currency contracts; however, the Global Balanced Index has approximately 15%
exposure to foreign currency.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
THE GLOBAL BALANCED INDEX

The Global Balanced Index is a measure of the overall investment performance of
nine major markets--Australia, Canada, France, Germany, Hong Kong, Japan, Spain,
the United Kingdom, and the United States--in the three principal asset
categories: stocks, bonds, and cash reserves. The Index is composed of: 60%
global stock investments; 30% global bond investments; and 10% U.S. cash
reserves. Frank Russell Company administers the Index on behalf of the Global
Asset Allocation Fund. Countries may be added to or deleted from the Index in
the future, to keep pace with the Fund's ongoing investment program.
- --------------------------------------------------------------------------------

SECURITY SELECTION
The Fund's investment adviser invests in an adjustable mix of stocks, government
bonds (including bonds issued by government agencies and supra-national
entities), and cash reserves selected primarily from nine major markets:
Australia, Canada, France, Germany, Hong Kong, Japan, Spain, the United Kingdom,
and the United States. In managing the

<PAGE>

Fund, the adviser seeks to outperform a benchmark index of the investment
returns in these markets (see the "Plain Talk" on the Global Balanced Index).
However, the adviser may expand into other markets, including emerging markets,
at any time.
The adviser uses quantitative, or computer-driven, investment models in
seeking to identify the asset classes and countries (for instance, French bonds
or Japanese stocks) that offer the best relative return prospects, adjusted for
risk. The adviser may concentrate the Fund's assets in a few countries and/or
asset classes, but no more than 50% of the Fund's assets will be invested in a
single asset class from a single country (for instance, French bonds).
Rather than looking at the stocks of individual companies, the adviser
takes an indexed approach to common stock investing within particular countries.
As a substitute for common stock investments, the adviser will invest up to 50%
of the Fund's assets in stock index futures for the target country or market.
While this indexed approach will be the norm, the adviser may occasionally
execute modest "tilts" in favor of stocks with particular characteristics (for
instance, lower than average market capitalization) or hold an overweighted
position in a security intended to represent an entire market (for instance, a
closed-end, single-country fund).

[FLAG] THE FUND IS SUBJECT TO MANAGER RISK, WHICH IS THE CHANCE THAT THE ADVISER
WILL DO A POOR JOB OF SELECTING THE SECURITIES, ASSET CLASSES, OR COUNTRIES
IN WHICH THE FUND INVESTS.

The Fund is generally managed without regard to tax ramifications.

<PAGE>

- - Each Vanguard fund reserves the right to reject any purchase
request--including exchanges from other Vanguard funds--that it regards as
disruptive to efficient portfolio management. A fund may reject a purchase
request because of the timing of the investment or because of a history of
excessive trading by the investor.
- - Each Vanguard fund (except the money market funds) limits the number of
times that an investor can exchange into and out of the fund.
- - Each Vanguard fund reserves the right to stop offering shares at any time.
- - Vanguard's U.S. Stock Index Funds, International Stock Index Funds, REIT
Index Fund, Balanced Index Fund, and Growth and Income Fund generally do
NOT accept exchanges by telephone or fax, or on-line. (IRAs and other
retirement accounts are not subject to this rule.)
- - Certain Vanguard funds, including the Global Asset Allocation Fund, charge
transaction fees on share redemptions. Other Vanguard funds charge
transaction fees on share purchases.

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

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

- --------------------------------------------------------------------------------
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. As of October 31, 1999, the average turnover rate for all
global flexible mutual funds was approximately 141%, according to Morningstar,
Inc.
- --------------------------------------------------------------------------------

<PAGE>

THE FUND AND VANGUARD

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

INVESTMENT ADVISER

The Fund employs Strategic Investment Management (Strategic), 1001 19th Street
North, 16th Floor, Arlington, VA 22209, as its investment adviser. Strategic
provides asset management services to companies, institutions, trusts, and
individuals; as of October 31, 1999, Strategic and its affiliated companies
managed over $4.6 billion in assets. Strategic manages the Fund subject to the
control of the Trustees and officers of the Fund.
Strategic's advisory fee is paid at the end of each fiscal quarter. This
fee is based on certain annual percentage rates applied to the Fund's average
month-end net assets for each quarter. Strategic's advisory fee is increased or
decreased based on the Fund's investment performance relative to that of the
Global Balanced Index. For the fiscal year ended October 31, 1999, the Fund paid
Strategic advisory fees that represented an effective annual rate of 0.40% of
the Fund's average net assets before a decrease of 0.28% based on performance.
The Fund has authorized the adviser 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. Also, the Fund may direct the advisers 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 an advisory agreement or hire a new investment adviser--either as a
replacement for an existing adviser or as an additional adviser. Any significant
change in the Fund's advisory arrangements will be communicated to shareholders
in writing. In addition, as the Fund's sponsor and overall manager, The Vanguard
Group may provide investment advisory services to the Fund, on an at-cost basis,
at any time.

<PAGE>

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

The individuals primarily responsible for overseeing the Global Asset Allocation
Fund's investments are:

MICHAEL A. DUFFY, Managing Director of Strategic; has worked in finance since
1982; has managed assets for Strategic since 1987; B.A., University of Michigan;
M.A., Ph.D., University of Chicago.

ERIC BENDICKSON, Portfolio Manager of Strategic; has worked in investment
management since 1986; with Strategic since 1989; has managed assets since 1995;
B.A., The Colorado College; M.B.A., George Washington School of Government and
Business Administration.
- --------------------------------------------------------------------------------

DIVIDENDS, CAPITAL GAINS, AND TAXES

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

<PAGE>

- - 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 to your gains or losses from any
sale or exchange of Fund shares.
- - The Fund may be subject to foreign taxes or foreign tax withholding on
dividends, interest, and some capital gains that it receives on foreign
securities. You may qualify for an offsetting credit or deduction under
U.S. tax laws for your portion of the Fund's foreign tax obligations,
provided that you meet certain requirements. See your tax adviser or IRS
publications for more information.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
"BUYING A DIVIDEND"

<PAGE>

SHARE PRICE

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

FINANCIAL HIGHLIGHTS

<PAGE>

<TABLE>
- ------------------------------------------------------------------------------------
VANGUARD GLOBAL ASSET ALLOCATION FUND
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
1999 1998 1997 1996 1995*
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $11.29 $11.39 $11.29 $10.27 $10.00
- ------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .460 .58 .62 .50 .11
Net Realized and
Unrealized Gain (Loss)
on Investments .945 .61 .40 .75 .16
------------------------------------------------------------
Total from Investment
Operations 1.405 1.19 1.02 1.25 .27
------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income (.620) (.75) (.58) (.20) --
Distributions from
Realized Capital Gains (.485) (.54) (.34) (.03) --
------------------------------------------------------------
Total Distributions (1.105) (1.29) (.92) (.23) --
- ------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $11.59 $11.29 $11.39 $11.29 $10.27
====================================================================================

TOTAL RETURN** 13.44% 11.56% 9.69% 12.34% 2.39%
====================================================================================

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (Millions) $99 $86 $81 $76 $45
Ratio of Total
Expenses to Average
Net Assets 0.58% 0.54% 0.54% 0.79% 0.52%+
Ratio of Net
Investment Income to
Average Net Assets 4.40% 5.12% 5.46% 5.18% 5.42%+
Turnover Rate 188% 182% 162% 191% 17%
====================================================================================
</TABLE>
* Subscription period for the Fund was June 30, 1995, to August 13, 1995,
during which time all assets were held in money market instruments.
Performance measurement begins August 14, 1995.
** Total return figures do not reflect the 1% fee that is assessed on
redemptions of shares that are held in the Fund for less than five years.
+ Annualized.

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

The Fund began fiscal 1999 with a net asset value (price) of $11.29 per share.
During the year, the Fund earned $0.46 per share from investment income
(interest and dividends) and $0.945 per share from investments that had
appreciated in value or that were sold for higher prices than the Fund paid for
them.

Shareholders received $1.105 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 ($1.405 per share) minus the distributions ($1.105 per share)
resulted in a share price of $11.59 at the end of the year. This was an increase
of $0.30 per share (from $11.29 at the beginning of the year to $11.59 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 13.44% for the year.

As of October 31, 1999, the Fund had $99 million in net assets. For the year,
its expense ratio was 0.58% ($5.80 per $1,000 of net assets); and its net
investment income amounted to 4.40% of its average net assets. It sold and
replaced securities valued at 188% of its net assets.
- --------------------------------------------------------------------------------

<PAGE>

SERVICES AND ACCOUNT FEATURES

<PAGE>

TYPES OF ACCOUNTS

<PAGE>

BUYING SHARES

Make your check payable to: The Vanguard Group-115
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 . . .

<PAGE>

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

Wire to:
FRB ABA 021001088
HSBC Bank USA

For credit to:
Account: 000112046
Vanguard Incoming Wire Account

In favor of:
Vanguard Global Asset Allocation Fund-115
[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 23.

<PAGE>

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

<PAGE>

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

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

For clients of Vanguard's Institutional Division . . .

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

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

<PAGE>

TRANSFERRING REGISTRATION

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

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

For clients of Vanguard's Institutional Division . . .

FUND AND ACCOUNT UPDATES

<PAGE>

GLOSSARY OF INVESTMENT TERMS

CAPITAL GAINS DISTRIBUTION
Payment to mutual fund shareholders of gains realized on securities that a 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.

COUNTRY RISK
The chance that domestic events--such as political upheaval, financial troubles,
or a natural disaster--will weaken a country's securities markets.

CURRENCY RISK
The chance that a foreign investment will decrease in value because of
unfavorable changes in currency exchange rates.

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.

INVESTMENT-GRADE
A bond whose credit quality is considered by independent bond-rating agencies to
be sufficient to ensure timely payment of principal and interest under current
economic circumstances.

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 money you put into an investment.

SECURITIES
Stocks, bonds, money market instruments, and other investment vehicles.

TOTAL RETURN
A percentage change, over a specified time period, in a mutual fund's net asset
value, assuming 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>

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

Post Office Box 2600
Valley Forge, PA 19482-2600

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

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: 811-07239

P115N-02/18/2000

<PAGE>

VANGUARD(R)
GLOBAL EQUITY
FUND

Prospectus
February 18, 2000

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

[A MEMBER OF
THE VANGUARD GROUP LOGO]

<PAGE>

VANGUARD GLOBAL EQUITY FUND
Prospectus
February 18, 2000

A Global Stock Mutual Fund

- --------------------------------------------------------------------------------
CONTENTS
- --------------------------------------------------------------------------------
1 FUND PROFILE 15 INVESTING WITH VANGUARD
3 ADDITIONAL INFORMATION 15 SERVICES AND ACCOUNT FEATURES
3 MORE ON THE FUND 16 TYPES OF ACCOUNTS
10 THE FUND AND VANGUARD 17 BUYING SHARES
10 INVESTMENT ADVISER 19 REDEEMING SHARES
11 DIVIDENDS, CAPITAL GAINS, AND TAXES 23 TRANSFERRING REGISTRATION
13 SHARE PRICE 23 FUND AND ACCOUNT UPDATES
13 FINANCIAL HIGHLIGHTS GLOSSARY (inside back cover)
- --------------------------------------------------------------------------------

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

<PAGE>

FUND PROFILE

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

INVESTMENT OBJECTIVE
The Fund seeks to provide maximum long-term total return.

INVESTMENT STRATEGIES
The Fund invests primarily in U.S. and foreign stocks. The Fund's adviser
selects stocks mainly on the basis of industry and company analysis, and not on
the basis of regional or country allocation decisions. The Fund typically
invests across a wide range of industries, and its holdings are expected to
represent a mix of value and growth stocks as well as a mix of established and
emerging stock markets.

----------------------------------------------------
ANNUAL TOTAL RETURNS
----------------------------------------------------
1996 15.59%
1997 6.91%
1998 9.39%
1999 25.95%
----------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was 17.74% (quarter ended December 31, 1998), and the lowest return for
a quarter was -15.62% (quarter ended September 30, 1998).

<PAGE>

------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS FOR YEARS ENDED DECEMBER 31, 1999
------------------------------------------------------------------------
1 YEAR SINCE INCEPTION*
------------------------------------------------------------------------
Vanguard Global Equity Fund 25.95% 14.35%
Morgan Stanley Capital International 27.31 19.36
(MSCI) All Country World Index
------------------------------------------------------------------------
*August 14, 1995.
------------------------------------------------------------------------

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: 1%*

ANNUAL FUND OPERATING EXPENSES (expenses deducted from the Fund's assets)
Management Expenses: 0.64%
12b-1 Distribution Fee: None
Other Expenses: 0.07%
TOTAL ANNUAL FUND OPERATING EXPENSES: 0.71%

- -------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------
$177 $340 $395 $883
- -------------------------------------------------

- -------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------
$73 $227 $395 $883
- -------------------------------------------------

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

<PAGE>

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

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 Global Equity Fund's expense ratio in fiscal year 1999 was
0.71%, or $7.10 per $1,000 of average net assets. The average global stock
mutual fund had expenses of 1.73%, or $17.30 per $1,000 of average net assets
(derived from data provided as of December 31, 1999 by Lipper Inc., which
reports on the mutual fund industry). Management expenses, which comprise one
part of operating expenses, include investment advisory fees as well as other
costs of managing a fund--such as account maintenance, reporting, accounting,
legal, and other administrative expenses.
- --------------------------------------------------------------------------------

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

DIVIDENDS AND CAPITAL GAINS MINIMUM INITIAL INVESTMENT
Distributed annually in December $3,000; $1,000 for IRAs and custodial
accounts for minors
INVESTMENT ADVISER
Marathon Asset Management Limited, NEWSPAPER ABBREVIATION
London, since inception GlbEq

INCEPTION DATE VANGUARD FUND NUMBER
August 14, 1995 129

NET ASSETS AS OF OCTOBER 31, 1999 CUSIP NUMBER
$125 million 922038203

SUITABLE FOR IRAS TICKER SYMBOL
Yes VHGEX
- --------------------------------------------------------------------------------

MORE ON THE FUND

MARKET EXPOSURE
The Fund invests in stocks from the United States and other countries, selecting
securities that appear undervalued based on analyses of industry sectors and
individual companies. Each company is evaluated on the basis of its management's
strategies for new investment and for dealing with competition. The Fund is
widely diversified across companies, industry sectors, and countries. The Fund
holds growth stocks (characterized by relatively high prices in relation to such
fundamental measures as current earnings, dividends, and book

<PAGE>

value) and value stocks (characterized by relatively low prices in relation to
earnings, dividends, and book value).

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

[FLAG] THE FUND IS SUBJECT TO INVESTMENT STYLE RISK, WHICH IS THE CHANCE THAT
RETURNS FROM THE MARKET SECTOR IN WHICH IT INVESTS WILL TRAIL RETURNS FROM
OTHER MARKET SECTORS. AS A GROUP, SPECIFIC TYPES OF STOCKS (FOR INSTANCE,
SMALL-CAP STOCKS, VALUE STOCKS, OR HEALTH-CARE 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.

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

<PAGE>

U.S. STOCKS
The Fund invests in U.S. stocks as a primary investment strategy, and small- and
mid-cap stocks as a secondary investment strategy.
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.

FOREIGN STOCKS
The Fund invests in foreign stocks as a primary investment strategy.
To illustrate the volatility of international stock prices, the following
table shows the best, worst, and average total returns for foreign stock markets
over various periods as measured by the MSCI Europe, Australasia, Far East (MSCI
EAFE) Index, a widely used barometer of international 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.

<PAGE>

The table covers all of the 1-, 5-, 10-, and 20-year periods from 1969
through 1999. Keep in mind that this was a particularly favorable period for all
stock markets. These average returns reflect past performance on international
stocks; you should not regard them as an indication of future returns from
either foreign markets as a whole or this Fund in particular.
Note that the preceding chart does not take into account returns for
foreign stock markets as measured by the MSCI Emerging Markets Free Index, a
widely used barometer of less developed stock markets. Emerging markets can be
substantially more volatile than more developed foreign markets. In addition,
because the MSCI EAFE Index tracks the European and Pacific markets
collectively, the above returns do not reflect the variability of returns from
year to year for these markets individually, or the variability across these and
other geographic regions or market sectors. To illustrate this variability, the
following table shows returns for different international markets--as well as
U.S. markets for comparison--from 1990 through 1999, as measured by their
respective indexes. 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.

<PAGE>

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
THE RISKS OF INTERNATIONAL INVESTING

FORWARD FOREIGN CURRENCY CONTRACTS
As a secondary investment strategy, the Fund may purchase forward foreign
currency contracts to help protect its holdings against unfavorable short-term
changes in exchange rates. A forward currency exchange contract is an agreement
to buy or sell a country's currency at a specific price on a specific date,
usually 30, 60, or 90 days in the future. In other words, the contract
guarantees an exchange rate on a given date. These contracts will not, however,
prevent the Fund's securities from falling in value during foreign market
downswings. Note that the Fund will not enter into such contracts for
speculative purposes.
Under normal circumstances, the Fund will not commit more than 20% of its
assets to forward currency exchange contracts.

SECURITY SELECTION
The Fund's investment adviser selects stocks principally on the basis of
industry and company analysis, and not on the basis of regional or country bets.
For this reason, the Fund's regional weightings--that is, its relative
investment exposure in different geographic areas--will usually range from 50%
to 150% or more of the weightings found in an unmanaged global equity index,
such as the MSCI All Country World Index. The Fund's relative weightings in
individual sectors and stocks are also expected to differ markedly from the
index weightings.
The adviser typically invests across a wide range of industries, and the
Fund's holdings are expected to represent a mix of value and growth stocks as
well as a mix of established and emerging stock markets. Generally, the Fund
will limit its emerging markets holding to no more than 20% of its assets.

<PAGE>

[FLAG] THE FUND IS SUBJECT TO MANAGER RISK, WHICH IS THE CHANCE THAT THE ADVISER
WILL DO A POOR JOB OF SELECTING THE STOCKS OR COUNTRIES IN WHICH THE FUND
INVESTS.

The Fund is generally managed without regard to tax ramifications.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
DERIVATIVES

THE FUND'S REDEMPTION FEE
The Fund charges a redemption fee on shares that are redeemed (including those
redeemed by exchanging to another Vanguard fund) before they have been held for
five

<PAGE>

years. Because the Fund is intended for long-term investors, the redemption fee
ensures that the costs associated with short-term trading are borne by the
investors making the transactions--and not by the long-term shareholders who do
not generate the costs.
At Vanguard, all fees are paid directly to the fund itself (unlike a sales
charge or load, which--in the case of many fund companies--is imposed for the
sole benefit of the sponsor, adviser, or sales representative).

COSTS AND MARKET-TIMING
Some investors try to profit from a strategy called market-timing--switching
money into investments when they expect prices to rise, and taking money out
when they expect prices 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.
This is why all Vanguard funds have adopted special policies to discourage
short-term trading. Specifically:
- - Each Vanguard fund reserves the right to reject any purchase
request--including exchanges from other Vanguard funds--that it regards as
disruptive to efficient portfolio management. A fund may reject a purchase
request because of the timing of the investment or because of a history of
excessive trading by the investor.
- - Each Vanguard fund (except the money market funds) limits the number of
times that an investor can exchange into and out of the fund.
- - Each Vanguard fund reserves the right to stop offering shares at any time.
- - Vanguard's U.S. Stock Index Funds, International Stock Index Funds, REIT
Index Fund, Balanced Index Fund, and Growth and Income Fund generally do
NOT accept exchanges by telephone or fax, or on-line. (IRAs and other
retirement accounts are not subject to this rule.)
- - Certain Vanguard funds, including the Global Equity Fund, charge
transaction fees on share redemptions. Other Vanguard funds charge
transaction fees on share purchases.

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

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

<PAGE>

- --------------------------------------------------------------------------------
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. As of October 31, 1999, the average turnover rate for all
global stock funds was approximately 87%, according to Morningstar, Inc.
- --------------------------------------------------------------------------------

THE FUND AND VANGUARD

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

INVESTMENT ADVISER

The Fund employs Marathon Asset Management Limited (Marathon), Orion House, 5
Upper St. Martin's Lane, London, as its investment adviser. Marathon provides
asset management services to companies and institutions; as of October 31, 1999,
Marathon managed more than $10.2 billion in assets. Marathon manages the Fund
subject to the control of the Trustees and officers of the Fund.
Marathon's advisory fee is paid at the end of each fiscal quarter. The fee
is based on certain annual percentage rates applied to the Fund's average
month-end net assets for each quarter. Marathon's fee is increased or decreased
based on the Fund's investment performance relative to that of the MSCI All
Country World Index. For the fiscal year ended October 31, 1999, the Fund paid
Marathon advisory fees that represented an effective annual rate of 0.44% of the
Fund's average net assets before a decrease of 0.20% based on performance.

<PAGE>

The Fund has authorized the adviser 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. Also, the Fund may direct the advisers 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 an advisory agreement or hire a new investment adviser--either as a
replacement for an existing adviser or as an additional adviser. Any significant
change in the Fund's advisory arrangements will be communicated to shareholders
in writing. In addition, as the Fund's sponsor and overall manager, The Vanguard
Group may provide investment advisory services to the Fund, on an at-cost basis,
at any time.

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

The individual primarily responsible for overseeing the Global Equity Fund's
investments is:

JEREMY J. HOSKING, Director of Marathon; has worked in investment management
since 1979; has managed assets since 1979; with Marathon since 1986; M.A.,
Cambridge University.
- --------------------------------------------------------------------------------

DIVIDENDS, CAPITAL GAINS, AND TAXES

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

<PAGE>

- - Distributions declared in December--if paid to you by the end of
January--are taxable 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 to your gains or losses from any
sale or exchange of Fund shares.
- - The Fund may be subject to foreign taxes or foreign tax withholding on
dividends, interest, and some capital gains that it receives on foreign
securities. You may qualify for an offsetting credit or deduction under
U.S. tax laws for your portion of the Fund's foreign tax obligations,
provided that you meet certain requirements. See your tax adviser or IRS
Publications for more information.

- --------------------------------------------------------------------------------
PLAIN TALK ABOUT
"BUYING A DIVIDEND"

<PAGE>

SHARE PRICE

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

FINANCIAL HIGHLIGHTS

<PAGE>

FINANCIAL HIGHLIGHTS (continued)

<TABLE>
- ------------------------------------------------------------------------------------
VANGUARD GLOBAL EQUITY FUND
YEAR ENDED OCTOBER 31,
------------------------------------------------------------
1999 1998 1997 1996 1995*
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $12.11 $12.79 $11.72 $10.08 $10.00
- ------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net Investment Income .20 .19 .19 .13 .04
Net Realized and
Unrealized Gain (Loss)
on Investments 2.80 (.20) 1.21 1.58 .04
------------------------------------------------------------
Total from Investment
Operations 3.00 (.01) 1.40 1.71 .08
------------------------------------------------------------
DISTRIBUTIONS
Dividends from Net
Investment Income (.26) (.23) (.14) (.07) --
Distributions from
Realized Capital Gains (.75) (.44) (.19) -- --
------------------------------------------------------------
Total Distributions (1.01) (.67) (.33) (.07) --
- ------------------------------------------------------------------------------------
NET ASSET VALUE, END
OF PERIOD $14.10 $12.11 $12.79 $11.72 $10.08
====================================================================================

TOTAL RETURN** 26.52% 0.04% 12.19% 17.05% 0.50%
====================================================================================

RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (Millions) $125 $121 $128 $99 $36
Ratio of Total
Expenses to Average
Net Assets 0.71% 0.68% 0.71% 0.85% 0.57%+
Ratio of Net
Investment Income to
Average Net Assets 1.39% 1.47% 1.67% 1.53% 2.04%+
Turnover Rate 36% 34% 24% 29% 2%
====================================================================================
</TABLE>
* Subscription period for the Fund was June 30, 1995, to August 13, 1995,
during which time all assets were held in money market instruments.
Performance measurement begins August 14, 1995.
** Total return figures do not reflect the 1% fee that is assessed on
redemptions of shares that are held in the Fund for less than five years.
+ Annualized.

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

The Fund began fiscal 1999 with a net asset value (price) of $12.11 per share.
During the year, the Fund earned $0.20 per share from investment income
(interest and dividends) and $2.80 per share from investments that had
appreciated in value or that were sold for higher prices than the Fund paid for
them.

Shareholders received $1.01 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 ($3.00 per share) minus the distributions ($1.01 per share)
resulted in a share price of $14.10 at the end of the year. This was an increase
of $1.99 per share (from $12.11 at the beginning of the year to $14.10 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 26.52% for the year.

As of October 31, 1999, the Fund had $125 million in net assets. For the year,
its expense ratio was 0.71% ($7.10 per $1,000 of net assets); and its net
investment income amounted to 1.39% of its average net assets. It sold and
replaced securities valued at 36% of its net assets.
- --------------------------------------------------------------------------------

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

<PAGE>

SERVICES AND ACCOUNT FEATURES

<PAGE>

TYPES OF ACCOUNTS

<PAGE>

BUYING SHARES

Make your check payable to: The Vanguard Group-129
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 . . .

<PAGE>

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

Wire to:
FRB ABA 021001088
HSBC Bank USA

For credit to:
Account: 000112046
Vanguard Incoming Wire Account

In favor of:
Vanguard Global Equity Fund-129
[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 22.