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FUND PROFILE PROSPECTUS
FOR
VANGUARD
WELLESLEY
INCOME FUND
MAY 24, 1996
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1 OBJECTIVE
Vanguard/Wellesley Income Fund seeks to provide current income and some growth
of capital. The Fund may not meet these objectives.
2 INVESTMENT STRATEGIES
The Fund's adviser uses a "balanced" investment approach. Approximately 60% to
65% of the Fund's total assets are invested in intermediate- and long-term
investment-grade* U.S. Government and corporate bonds. The remaining 35% to 40%
of assets are invested in stocks of companies that have a history of
above-average dividends or expectations of increased dividends.
3 RISKS
The Fund's total return will fluctuate, so an investor could lose money over
short or extended periods. Because of its balanced approach, Wellesley Income
Fund is subject to more investment risk than a fund made up entirely of bonds
but less risk than an all-stock fund.
More specifically, investors in the Fund are exposed to . . .
o A HIGH degree of INTEREST RATE RISK (the possibility that bond prices
will fall as interest rates rise -- and vice versa) because of the
Fund's significant investment in bonds. For instance, a 2% increase in
interest rates would cause a 20-year bond to drop approximately 20% in
value, while a 2% decrease in rates would cause the same bond to rise
about 22% in value.
o A HIGH degree of STOCK MARKET RISK (the possibility that stock prices
in general will decline over short or extended periods) because of the
Fund's common stock holdings.
o A LOW degree of CREDIT RISK (the possibility that a bond's issuer will
fail to repay interest and principal) because of the high quality of
the Fund's bond holdings.
*Rated at least Baa by Moody's Investors Services, Inc.
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4 APPROPRIATENESS
This Fund may be suitable for investors who . . .
o Are seeking current income and some capital growth.
o Want a balanced and diversified investment program that includes both
bonds and stocks.
o Plan to invest for at least five years.
o Want a fund that offers less investment risk and share-price
fluctuation than a fund made up entirely of stocks.
The Fund is not suitable for investors who . . .
o Cannot tolerate fluctuating share prices.
5 FEES AND EXPENSES
Vanguard/Wellesley Income Fund -- like all Vanguard Funds -- is offered on a
pure no-load basis (that is, the Fund has no 12b-1 fees or charges to buy or
sell shares).
The Fund's operating expenses are deducted from its total assets before daily
share prices and income distributions are calculated. The Fund's expense ratio
for fiscal year 1995 was 0.35% of assets.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
----------------------------------------------
<S> <C>
Investment Advisory Fees . . . . . . . 0.07%
Distribution Costs . . . . . . . . . . 0.02
Other Expenses . . . . . . . . . . . . 0.26
----
TOTAL OPERATING EXPENSES . . . . . . . 0.35%
====
</TABLE>
The following example illustrates the expenses that you would incur on a $1,000
investment over various periods, assuming (1) a 5% annual rate of return and
(2) redemption at the end of each period.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------
<S> <C> <C> <C>
$4 $11 $20 $44
</TABLE>
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be higher or lower than those
shown.
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6 PAST PERFORMANCE
PERFORMANCE
ANNUAL RETURNS (%) 1986-1995
[GRAPH]
PERFORMANCE SUMMARY
(PERIODS ENDED MARCH 31, 1996)
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
WELLESLEY COMPOSITE
INCOME FUND STOCK/BOND INDEX*
<S> <C> <C>
1 Year +18.8% +19.3%
5 Years +11.8% +11.7%
10 Years +10.8% +11.1%
</TABLE>
Note: In evaluating past performance, it is important to consider that returns
from stocks and bonds were close to their highest levels in history during the
past ten years. Past performance is not indicative of future performance.
Performance figures include the reinvestment of all dividends and any capital
gains distributions. All returns are net of expenses. The performance data
quoted represent past performance. The investment return and principal value of
an investment will fluctuate so that investors' shares, when redeemed, may be
worth more or less than their original cost.
*For comparative purposes, 65% of the Composite Stock/Bond Index is made up of
the Lehman Brothers Long-Term Corporate AA or Better Bond Index (a barometer of
corporate bonds rated AA or better), and 35% is made up of the S&P/BARRA Value
Index (a barometer of dividend-oriented large-company stocks) and the Standard
& Poor's Utilities Index (a barometer of large gas and electric utility
companies). An index is unmanaged; you cannot invest in an index.
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7 INVESTMENT ADVISER
The Fund is managed by Wellington Management Company, which oversees more than
$114 billion in total assets.
Earl E. McEvoy, Senior Vice President of Wellington Management Company, serves
as the Fund's portfolio manager, a position he has held since 1982. Mr. McEvoy
is assisted by John R. Ryan, Senior Vice President and managing partner of
Wellington Management Company, who has managed the Fund's equity investments
since 1986.
8 PURCHASES
You may purchase shares by mail, wire, or exchange from another Vanguard Fund.
The minimum initial investment is $3,000 ($1,000 for IRAs and accounts for
minors).
9 REDEMPTIONS
You may redeem shares by sending a letter to or calling Vanguard. The Fund's
share price is expected to fluctuate and, at redemption, may be higher or lower
than at the time of initial purchase, resulting in a gain or loss.
10 DISTRIBUTIONS
The Fund expects to pay dividends quarterly. Capital gains distributions, if
any, are paid annually. Dividend and capital gains distributions can be
automatically reinvested or received in cash. Both dividend and capital gains
distributions are taxable to you whether reinvested in additional shares or
received in cash.
11 OTHER SERVICES
o Vanguard Fund Express(R) -- electronic transfers between your bank
account and the Fund.
o Vanguard Tele-Account(R) -- around-the-clock access to Vanguard Fund
information, account balances, and some transactions by calling 1-
800-662-6273 (ON-BOARD).
o Investor Information -- toll-free access to Vanguard Associates by
calling 1-800-662-7447 (SHIP).
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This Fund Profile contains key information about the Fund.
If you would like more information before you invest, please
consult the Fund's prospectus. For details about the Fund's
holdings or recent investment strategies, please review the Fund's
most recent annual or semi-annual report. The prospectus and
reports may be obtained at no cost by calling 1-800-662-7447.
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0596-8S (C) 1996 Vanguard Marketing Corporation, Distributor FP27
