VANGUARD FIXED INCOME SECURITIES FUND INC, 485APOS, 1999-03-31

VANGUARD FIXED INCOME SECURITIES FUND INC
485APOS, 1999-03-31

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<PAGE>

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form N-1A

REGISTRATION STATEMENT (NO. 2-47371) UNDER
THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.

Post-Effective Amendment No. 48

and

REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 49

VANGUARD FIXED INCOME SECURITIES FUND

(Exact Name of Registrant as Specified in Declaration of Trust)

100 Vanguard Boulevard
Malvern, PA 19355-0741
(Address of Principal Executive Office)

Registrant's Telephone Number (610) 669-1000

R. Gregory Barton, Esquire
P.O. Box 2600
Valley Forge, PA 19482

It is hereby requested that this filing become effective on June 1, 1999
pursuant to paragraph (a) of Rule 485.

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

We have elected to register an indefinite number of shares pursuant to Regu-
lation 24f-2 under the Investment Company Act of 1940. We filed our Rule 24f-2
Notice for the year ended January 31, 1999 on April . , 1999.

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<PAGE>

VANGUARD FIXED INCOME SECURITIES FUND

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
Form N-1A
Item Number Location in Prospectus
<C> <C> <S>
Item 1. Front and Back Cover Pages............ Front and Back Cover Pages
Item 2. Risk/Return Summary: Investments,
Risks, and Performance................ Fund Profile
Item 3. Risk/Return Summary: Fee Table........ Fee Table
Item 4. Investment Objectives, Principal
Investment Strategies, and Related A Word About Risk; Who
Risks................................. Should Invest; Primary
Investment Strategies
Item 5. Management's Discussion of Fund
Performance........................... Herein incorporated by
reference to Registrant's
Report to Shareholders
dated January 31, 1999
filed with the Securities
and Exchange Commission's
EDGAR system on .
Item 6. Management, Organization, and Capital
Structure............................. The Fund and Vanguard;
Investment Adviser
Item 7. Shareholder Information............... Share Price; Dividends,
Capital Gains, and Taxes;
Investing With Vanguard
Item 8. Distribution Arrangements............. Inside Front Cover Page
Item 9. Financial Highlights Information...... Financial Highlights
<CAPTION>
Form N-1A Location in Statement
Item Number of Additional Information
<C> <C> <S>
Item 10. Cover Page and Table of Contents...... Cover Page; Table of
Contents
Item 11. Fund History.......................... Description of the Trust
Item 12. Description of the Fund and its
Investments and Risks................. Investment Policies;
Description of the Trust;
and Fundamental Investment
Limitations
Item 13. Management of the Fund................ Management of the Trust
Item 14. Control Persons and Principal Holders
of Securities......................... Management of the Trust
Item 15. Investment Advisory and Other Investment Advisory
Services.............................. Services
Item 16. Brokerage Allocation and Other
Practices............................. Portfolio Transactions
Item 17. Capital Stock and Other Securities.... Description of the Trust
Item 18. Purchase, Redemption, and Pricing of
Securities Being Offered.............. Purchase of Shares;
Redemption of Shares; and
Share Price
Item 19. Taxation of the Fund.................. Description of the Trust
Item 20. Underwriters.......................... Not Applicable
Item 21. Calculation of Performance Data....... Yield and Total Return
Item 22. Financial Statements.................. Financial Statements
</TABLE>
<PAGE>

An Introduction to Vanguard Bond Funds

Vanguard Bond Funds consist of nine separate bond funds, eight of which are
offered through this prospectus (Vanguard High-Yield Corporate Fund is offered
through a separate prospectus). Each of these Funds seeks to provide a high
level of current income. To achieve this objective, each Fund invests in fixed
income securities meeting defined credit quality and average maturity standards.
These standards vary, as shown in the following table. As a result, the relative
levels of income provided by the Funds will vary to some extent, with the
Short-Term Treasury Fund generally providing the lowest level and the Long-Term
Corporate Fund providing the highest.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Dollar-Weighted
Fund Primary Investments Average Maturity
------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Treasury U.S. Treasury bonds 1-3 years
Short-Term Federal U.S. government agency bonds 1-3 years
Short-Term Corporate Investment grade corporate bonds 1-3 years
Intermediate-Term Treasury U.S. Treasury bonds 5-10 years
Intermediate-Term Corporate Investment grade corporate bonds 5-10 years
GNMA GNMA mortgage certificates Generally 5-10 years
Long-Term Treasury U.S. Treasury bonds 15-30 years
Long-Term Corporate Investment grade corporate bonds 15-30 years
------------------------------------------------------------------------------------
</TABLE>
On the following pages, you'll find profiles that summarize key features of
each fund. Following the profiles, there is important additional information
common to all of the Funds.
<PAGE>

Fund Profile--Vanguard Short-Term Treasury Fund

The following profile summarizes key features of Vanguard Short-Term Treasury
Fund.

INVESTMENT OBJECTIVE

The Fund seeks to provide a high level of current income and preserve investors'
principal, while investing in bonds that meet defined quality and maturity
standards.

INVESTMENT STRATEGIES

The Fund invests at least 85% of its assets in high-quality, short-term bonds
whose interest and principal payments are backed by the full faith and credit of
the U.S. government. In addition, at least 65% of the Fund's assets will always
be invested in U.S. Treasury securities. The Fund will maintain an average
maturity of between one and three years. For more information on investment
strategies, see pages 22-23.

PRIMARY RISKS

The Fund is subject to several risks, any of which could cause an investor to
lose money. These include:

PERFORMANCE/RISK INFORMATION

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

----------------------------------------------------------------------
Annual Total Returns
----------------------------------------------------------------------

----------------------------------------------------------------------
The Fund's return for the most recent calendar quarter ended March 31,
1999, was .%.
----------------------------------------------------------------------
During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended _________) and the lowest return for a quarter
was -.% (quarter ended __________).

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
Average Annual Total Returns for Years Ended December 31, 1998
-----------------------------------------------------------------------------------
1 Year 5 Years Since Inception*
-----------------------------------------------------------------------------------
<S> <C> <C> <C>
Vanguard Short-Term Treasury Fund . % . % . %
Lehman Brothers 1-5 Year U.S. Treasury
Bond Index . . .
-----------------------------------------------------------------------------------
*October 28, 1991
-----------------------------------------------------------------------------------
</TABLE>
<PAGE>

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 upon those incurred in the fiscal year ended January 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 Fees: None
Exchange Fees: None

Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: . %
12b-1 Distribution Fees: None
Other Expenses: . %
Total Annual Fund Operating Expenses: . %

---------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------
$. $. $. $.
---------------------------------------------------------------------

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.

Additional Information

Dividends and capital gains
Dividends are declared daily and distributed on the first business day of each
month; capital gains, if any, are distributed annually in December

Investment Adviser
Vanguard Fixed Income Group, Valley Forge, Pa., since inception

Inception Date
October 28, 1991

Net Assets as of January 31, 1999
$ . billion

Newspaper Abbreviation
STTrsy

Vanguard Fund Number
032

Cusip Number
922031703

Ticker Symbol
VFISX
<PAGE>

Fund Profile--Vanguard Short-Term Federal Fund
The following profile summarizes key features of Vanguard Short-Term Federal
Fund.

INVESTMENT OBJECTIVE

The Fund seeks to provide a high level of current income and preserve investors'
principal, while investing in bonds that meet defined quality and maturity
standards.

INVESTMENT STRATEGIES

The Fund invests primarily in high-quality, short-term bonds issued by U.S.
government agencies. Most of the securities held by the Fund are not backed by
the full faith and credit of the U.S. government. The Fund will maintain an
average maturity of between one and three years. For more information on
investment strategies, see pages 22-23.

PRIMARY RISKS

The Fund is subject to several risks, any of which could cause an investor to
lose money. These include:

. Income risk, which is the chance that falling interest rates will cause the
Fund's income to decline. Income risk is generally high for short-term bonds.
. 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 is generally low for short-term bonds.
. Credit risk, which is the chance that a bond issuer will fail to pay interest
and principal in a timely manner. Credit risk, which has the potential to hurt
the Fund's performance, should be very low for the Fund.

PERFORMANCE/RISK INFORMATION

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

----------------------------------------------------------------------
Annual Total Returns
----------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended ______) and the lowest return for a quarter was
-.% (quarter ended ___________).
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
Average Annual Total Returns for Years Ended December 31, 1998
----------------------------------------------------------------------------------------
1 Year 5 Years 10 Years
----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Vanguard Short-Term Federal Fund . % . % . %
Lehman Brothers 1-5 Year U.S. Government Bond Index . . .
----------------------------------------------------------------------------------------
</TABLE>
<PAGE>

FEES AND EXPENSES

Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: .%
12b-1 Distribution Fees: None
Other Expenses: .%
Total Annual Fund Operating Expenses: .%

----------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
----------------------------------------------------------------------
$. $. $. $.
----------------------------------------------------------------------

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.

Additional Information

Dividends and Capital Gains
Dividends are declared daily and distributed on the first business day of each
month; capital gains, if any, are distributed annually in December

Investment Adviser
Vanguard Fixed Income Group, Valley Forge, Pa., since inception

Inception Date
December 31, 1987

Net Assets as of January 31, 1999
$ . billion

Newspaper Abbreviation
STFe

Vanguard Fund Number
049

Cusip Number
922031604

Ticker Symbol
VSGBX
<PAGE>

Fund Profile--Vanguard Short-Term Corporate Fund

The following profile summarizes key features of Vanguard Short-Term Corporate
Fund.

INVESTMENT OBJECTIVE

The Fund seeks to provide a high level of current income and preserve investors'
principal, while investing in bonds that meet defined quality and maturity
standards.

INVESTMENT STRATEGIES

The Fund invests in a variety of high-quality and, to a lesser extent,
medium-quality fixed income securities, primarily short-term and
intermediate-term corporate bonds. The Fund will maintain an average maturity of
between one and three years. For more information on investment strategies, see
pages 22-23.

PRIMARY RISKS

The Fund is subject to several risks, any of which could cause an investor to
lose money. These include:

PERFORMANCE/RISK INFORMATION

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

----------------------------------------------------------------------
Annual Total Returns
----------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended________ ) and the lowest return for a quarter
was -.% (quarter ended____________).

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Average Annual Total Returns for Years Ended December 31, 1998
--------------------------------------------------------------------------------
1 Year 5 Years 10 Years
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Vanguard Short-Term Corporate Fund . % . % . %
Lehman Brothers 1-5 Year Investment Grade
Debt Index . . .
--------------------------------------------------------------------------------
</TABLE>
<PAGE>

FEES AND EXPENSES

Shareholder Fees (fees paid directly from your investment)

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

Annual Fund Operating Expenses (expenses deducted from the Fund's assets)

Management Expenses: .%
12b-1 Distribution Fees: None
Other Expenses: .%
Total Annual Fund Operating Expenses: .%

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.

Additional Information

Dividends and Capital Gains
Dividends are declared daily and distributed on the first business day of each
month; capital gains, if any, are distributed annually in December

Investment Adviser
Vanguard Fixed Income Group, Valley Forge, Pa, since inception

Inception Date
October 29, 1982

Net Assets as of January 31, 1999
$ . billion

Newspaper Abbreviation
STCor

Vanguard Fund Number
039

Cusip Number
922031406

Ticker Symbol
VFSTX
<PAGE>

Fund Profile--Vanguard Intermediate-Term Treasury Fund

The following profile summarizes key features of Vanguard Intermediate-Term
Treasury Fund.

INVESTMENT OBJECTIVE
The Fund seeks to provide a high level of current income and preserve investors'
principal, while investing in bonds that meet defined quality and maturity
standards.

INVESTMENT STRATEGIES
The Fund invests at least 85% of its assets in intermediate-term bonds whose
interest and principal payments are backed by the full faith and credit of the
U.S. government. In addition, at least 65% of the Fund's assets will always be
invested in U.S. Treasury securities. The Fund will maintain an average maturity
of between five and ten years.

For more information on investment strategies, see pages 22-23.

PRIMARY RISK

The Fund is subject to several risks, any of which could cause an investor to
lose money. These include:

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

------------------------------------------------------------------------
Annual Total Returns
------------------------------------------------------------------------

------------------------------------------------------------------------
The Fund's return for the most recent calendar quarter ended March 31,
1999, was .%.
------------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended___________ ) and the lowest return for a quarter
was -.% (quarter ended ________________).

------------------------------------------------------------------------
Average Annual Total Returns for Years Ended December 31, 1998
------------------------------------------------------------------------
1 Year 5 Years Since Inception*
------------------------------------------------------------------------
Vanguard Intermediate-Term
Treasury Fund .% .% .%
Lehman Brothers 5-10 Year
U.S. Treasury Bond Index . . .
------------------------------------------------------------------------
*October 28, 1991

<PAGE>

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 upon those incurred in the fiscal year ended January 31, 1999.

Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: .%
12b-1 Distribution Fees: None
Other Expenses: .%
Total Annual Fund Operating Expenses: .%

------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------------
$. $. $. $.
------------------------------------------------------------------------

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.

Additional Information

Dividends and Capital Gains
Dividends are declared daily and distributed on the first business day of each
month; capital gains, if any, are distributed annually in December

Investment Adviser
Vanguard Fixed Income Group, Valley Forge, Pa., since inception

Inception Date
October 28, 1991

Net Assets as of January 31, 1999
$ . billion

Newspaper Abbreviation
ITTsry

Vanguard Fund Number
035

Cusip Number
922031802

Ticker Symbol
VFITX
<PAGE>

Fund Profile--Vanguard Intermediate-Term Corporate Fund

The following profile summarizes key features of Vanguard Intermediate-Term
Corporate Fund.

INVESTMENT OBJECTIVE
The Fund seeks to provide a high level of current income and preserve investors'
principal, while investing in bonds that meet defined quality and maturity
standards.

INVESTMENT STRATEGIES
The Fund invests in a variety of high-quality and, to a lesser extent,
medium-quality fixed income securities, primarily short-term and
intermediate-term corporate bonds. At least 80% of the Fund's assets will
normally be invested in a combination of investment-grade corporate bonds and
securities of the U.S. government and its agencies. The Fund is permitted to
invest in foreign bonds, so long as they are denominated in U.S. dollars. The
Fund will maintain an average maturity of between five and ten years. For more
information on investment strategies, see pages 21-23.

PRIMARY RISKS

The Fund is subject to several risks, any of which could cause an investor to
lose money. These include:

. Income risk, which is the chance that falling interest rates will cause the
Fund's income to decline. Income risk is generally moderate for
intermediate-term bonds.
. 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 is generally moderate for intermediate-term bonds.
. Call risk, which is the chance that during periods of falling interest rates,
a bond issuer will "call"--or repay--a high-yielding bond before its maturity
date. Forced to reinvest the unanticipated proceeds at lower rates, the Fund
would experience a decline in income--and the potential for taxable capital
gains. Call risk is generally low for intermediate-term bonds.
. Credit risk, which is the chance that a bond issuer will fail to pay interest
and principal in a timely manner. Credit risk, which has the potential to hurt
the Fund's performance, should be low for the Fund.

------------------------------------------------------------------------
Annual Total Returns
------------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended __________) and the lowest return for a quarter
was -.% (quarter ended __________________).
<PAGE>

Vanguard Intermediate-Term
Corporate Fund .% .% .%
Lehman Brothers 5-10 Year
Investment Grade Debt Bond Index . . .
------------------------------------------------------------------------
*November 1, 1993
------------------------------------------------------------------------

Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: .%
12b-1 Distribution Fees: None
Other Expenses: .%
Total Annual Fund Operating Expenses: .%

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.

Additional Information

Dividends and Capital Gains
Dividends are declared daily and distributed on the first business day of each
month; capital gains, if any, are distributed annually in December

Investment Adviser
Vanguard Fixed Income Group, Valley Forge, Pa., since inception

Inception Date
November 1, 1993

Net Assets as of January 31, 1999
$ . billion

Newspaper Abbreviation
ITCorp

Vanguard Fund Number
071

Cusip Number
922031885

Ticker Symbol
VFICX
<PAGE>

Fund Profile--Vanguard GNMA Fund
The following profile summarizes key features of Vanguard GNMA Fund.

INVESTMENT OBJECTIVE
The Fund seeks to provide a high level of current income and preserve investors'
principal, while investing in bonds that meet defined quality and maturity
standards.

INVESTMENT STRATEGIES
The Fund invests at least 80% of its assets in Government National Mortgage
Association ("GNMA" or "Ginnie Mae") pass-through certificates, which are
fixed-income securities representing ownership in a pool of mortgage loans
backed by the U.S. government. The balance of the Fund's assets may be invested
in U.S. Treasury or other U.S. government agency securities, as well as
repurchase agreements collateralized by such securities. The Fund's average
maturity depends on homeowner prepayments of the underlying mortgages, but
normally falls within an intermediate-term range (5-10 years). For more
information on investment strategies, see pages 22-23.

PRIMARY RISKS
The Fund is subject to several risks, any of which could cause an investor to
lose money. These include:

. Prepayment risk, which is the chance that mortgage-backed bonds will be paid
off early due to homeowners refinancing their mortgages during periods of
falling interest rates. Forced to reinvest the unanticipated proceeds at lower
rates, the Fund would experience a decline in income--and the potential for
taxable capital gains.
. Income risk, which is the chance that falling interest rates will cause the
Fund's income to decline. Income risk is generally moderate for
intermediate-term bonds.
. Interest rate risk, which is the chance that bond prices overall will decline
over short or even long periods due to rising interest rates. Also, declining
interest rates will not lift GNMA prices as much as the prices of comparable
bonds. This is because the market tends to discount GNMA prices for prepayment
risk when interest rates fall. Interest rate risk is generally moderate for
intermediate-term bonds.

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

------------------------------------------------------------------------
Annual Total Returns
------------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended ________) and the lowest return for a quarter was
-.% (quarter ended _____________).
<PAGE>

------------------------------------------------------------------------
Average Annual Total Returns for Years Ended December 31, 1998
------------------------------------------------------------------------
1 Year 5 Years 10 Years
------------------------------------------------------------------------
Vanguard GNMA Fund .% .% .%
Lehman Brothers GNMA Bond Index . . .
------------------------------------------------------------------------

Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: .%
12b-1 Distribution Fees: None
Other Expenses: .%
Total Annual Fund Operating Expenses: .%

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.

Additional Information

Dividends and Capital Gains
Dividends are declared daily and distributed on the first business day of each
month; capital gains, if any, are distributed annually in December

Investment Adviser
Wellington Management Company, LLP, Boston, Mass., since inception

Inception Date
June 27, 1980

Net Assets as of January 31, 1999
$ . billion

Newspaper Abbreviation
GNMA

Vanguard Fund Number
036

Cusip Number
922031307

Ticker Symbol
VFIIX
<PAGE>

Fund Profile--Vanguard Long-Term Treasury Fund

The following profile summarizes key features of Vanguard Long-Term Treasury
Fund.

INVESTMENT OBJECTIVE
The Fund seeks to provide a high level of current income and preserve investors'
principal, while investing in bonds that meet defined quality and maturity
standards.

INVESTMENT STRATEGIES
The Fund invests at least 85% of its assets in long-term bonds whose principal
and interest payments are backed by the full faith and credit of the U.S.
government. In addition, at least 65% of the Fund's assets will always be
invested in U.S. Treasury securities. The Fund will maintain an average maturity
of between 15 and 30 years. For more information on investment strategies, see
pages 22-23.

PRIMARY RISKS
The Fund is subject to several risks, any of which could cause an investor to
lose money. These include:

. 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 is generally high for long-term bonds.
. Income risk, which is the chance that falling interest rates will cause the
Fund's income to decline. Income risk is generally low for long-term bonds.

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

------------------------------------------------------------------------
Annual Total Returns
------------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was o% (quarter ended ________) and the lowest return for a quarter was
- -.% (quarter ended ______________).

------------------------------------------------------------------------
Average Annual Total Returns for Years Ended December 31, 1998
------------------------------------------------------------------------
1 Year 5 Years 10 Years
------------------------------------------------------------------------
Vanguard Long-Term Treasury Fund .% .% .%
Lehman Brothers Long U.S. Treasury Bond Index . . .
------------------------------------------------------------------------
<PAGE>

Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: .%
12b-1 Distribution Fees: None
Other Expenses: .%
Total Annual Fund Operating Expenses: .%

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.

Additional Information

Dividends and Capital Gains
Dividends are declared daily and distributed on the first business day of each
month; capital gains, if any, are distributed annually in December

Investment Adviser
Vanguard Fixed Income Group, Valley Forge, Pa., since inception

Inception Date
May 19, 1986

Net Assets as of January 31, 1999
$ . billion

Newspaper Abbreviation
LTTrsy

Vanguard Fund Number
083

Cusip Number
922031505

Ticker Symbol
VUSTX
<PAGE>

Fund Profile--Vanguard Long-Term Corporate Fund

The following profile summarizes key features of Vanguard Long-Term Corporate
Fund.

INVESTMENT OBJECTIVE
The Fund seeks to provide a high level of current income and preserve investors'
principal, while investing in bonds that meet defined quality and maturity
standards.

INVESTMENT STRATEGIES
The Fund invests in a variety of high-quality and, to a lesser extent,
medium-quality fixed-income securities, primarily long-term corporate bonds. At
least 80% of the Fund's assets will normally be invested in a combination of
investment-grade corporate bonds and securities of the U.S. government and its
agencies. The Fund is permitted to invest in foreign bonds, so long as they are
denominated in U.S. dollars. The Fund will maintain an average weighted maturity
of between 15 and 25 years. For more information on investment strategies, see
pages 22-23.

PRIMARY RISKS
The Fund is subject to several risks, any of which could cause an investor to
lose money. These include:

. 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 is generally high for long-term bonds.
. Call risk, which is the chance that during periods of falling interest rates,
a bond issuer will "call"--or repay--a high-yielding bond before its maturity
date. Forced to reinvest the unanticipated proceeds at lower rates, the Fund
would experience a decline in income--and the potential for taxable capital
gains. Call risk is generally moderate for long-term bonds.
. Income risk, which is the chance that falling interest rates will cause the
Fund's income to decline. Income risk is generally low for long-term bonds.
. Credit risk, which is the chance that a bond issuer will fail to pay interest
and principal in a timely manner. Credit risk, which has the potential to hurt
the Fund's performance, should be low for the Fund.

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

-----------------------------------------------------------------
Annual Total Returns
-----------------------------------------------------------------

-----------------------------------------------------------------
The Fund's return for the most recent calendar quarter ended
March 31, 1999, was .%.
-----------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended_______) and the lowest return for a quarter was
- - .% (quarter ended_______).
<PAGE>

-----------------------------------------------------------------
Average Annual Total Returns for Years Ended December 31, 1998
-----------------------------------------------------------------
1 Year 5 Years 10 Years
-----------------------------------------------------------------
Vanguard Long-Term Corporate Fund .% .% .%
Lehman Brothers Long Corporate
AA or Better Bond . . .
-----------------------------------------------------------------

Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: .%
12b-1 Distribution Fees: None
Other Expenses: .%
Total Annual Fund Operating Expenses: .%

-----------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------------
$. $. $. $.
-----------------------------------------------------------------

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.

Additional Information

Dividends and Capital Gains
Dividends are declared daily and distributed on the first business day of each
month; capital gains, if any, are distributed annually in December

Investment Adviser
Wellington Management Company, LLP, Boston, Mass., since inception

Inception Date
July 9, 1973

Net Assets as of January 31, 1999
$ . billion

Newspaper Abbreviation
LTCorp

Vanguard Fund Number
028

Cusip Number
922031109

Ticker Symbol
VWESX
<PAGE>

More on the Fund

The following sections discuss other important features of the Fund, including
additional risk information, investment strategies, costs and market timing, and
turnover rate. Note that the Fund's investment objective is not fundamental, and
may be changed without a shareholder vote.

Additional Risk Information

Because the Fund invests primarily in bonds, it is subject to certain risks.

[GRAPHIC APPEARS HERE]
The Fund is subject to income risk, which is the possibility that the Fund's
dividends (income) will decline due to falling interest rates. Income risk is
generally high for short-term bonds.

Changes in interest rates will affect bond prices as well as bond income.

[GRAPHIC APPEARS HERE]
The Fund is subject to interest rate risk, which is the possibility that bond
prices overall will decline over short or even long periods due to rising
interest rates. Interest rate risk should be low for short-term bonds.

In the past, bond investors have seen the value of their investment rise and
fall--sometimes significantly--with changes in interest rates. Between December
1976 and September 1981, for instance, rising interest rates caused long-term
bond prices to fall by almost 48%.

Because the Fund invests mainly in bonds, changes in interest rates will
impact, to varying degrees, the value of the Fund's assets. To illustrate how
much of an impact, the following table shows the effect of a 2% change (both up
and down) in interest rates on three bonds with a face value of $1,000; each has
a different maturity.

- --------------------------------------------------------------------------------
How Interest Rate Changes Affect Bonds*
- --------------------------------------------------------------------------------
Value of a $1,000 Bond Value of a $1,000 Bond
After a 2% Increase After a 2% Decrease
Type of Bond (Maturity) in Interest Rates in Interest Rates
- --------------------------------------------------------------------------------
Short-Term (2.5 years) $956 $1,046
Intermediate-Term (10 years) 870 1,156
Long-Term (20 years) 816 1,251
- --------------------------------------------------------------------------------
*Assuming a 7% yield.
- --------------------------------------------------------------------------------

These figures are for illustration only; you should not regard them as an
indication of future returns from the bond market as a whole or the Fund in
particular.

PLAIN TALK ABOUT
Bonds and Interest Rates

PLAIN TALK ABOUT
Bond Maturities

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." The Fund's Statement of
Additional Information includes a detailed description of the credit rating
scales used by major, independent bond-rating agencies.

[GRAPHIC APPEARS HERE]
The Fund is subject to credit risk, which is the possibility that a bond issuer
will fail to pay interest and principal in a timely manner.

Since the Fund invests primarily in high-quality bonds, credit risk should be
low for the Fund. The average dollar-weighted credit quality of the Fund's
holdings as rated by Moody's Investors Service, as of January 31, 1999, was o.

The following table details the Fund's credit quality policies. Note that the
Fund applies these policies at the time of investment. The Fund may hold onto
bonds that have been downgraded, even if they are no longer eligible for
purchase by the Fund.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
Credit Ratings of the Fund's Investments (Percentage of Fund Assets)
- ------------------------------------------------------------------------------------------
High
Issued or Highest Upper Speculative
or Backed Quality Medium Medium or Lower
by U.S. Gov't (non-Gov't) Quality Quality Quality
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short-Term Corporate Fund --At least 70%-- No more 0%
than 30%
- ------------------------------------------------------------------------------------------
</TABLE>

The Fund may invest no more than 30% of its assets in medium-quality bonds,
preferred stocks, and convertible securities.

To a limited extent, the Fund is also exposed to event risk, which is the
possibility that corporate fixed-income securities held by the Fund may suffer a
substantial decline in credit quality and market value due to a corporate
restructuring.

The Fund is generally managed without regard to tax ramifications.

[GRAPHIC APPEARS HERE]
The Fund is subject to manager risk, which is the possibility that the Fund's
adviser will do a poor job of selecting securities.

PLAIN TALK ABOUT
Types of Bonds

Investment Strategies

The grid below shows, at a glance, the types of financial instruments that may
be purchased by the Fund. Explanations of each type of financial instrument
follow the grid.
- --------------------------------------------------------------------------------
Short-Term Corporate Fund
- --------------------------------------------------------------------------------
Corporate Debt .
- --------------------------------------------------------------------------------
U.S. Government & Agency Bonds .
- --------------------------------------------------------------------------------
State & Municipal Bonds .
- --------------------------------------------------------------------------------
Cash Reserves .
- --------------------------------------------------------------------------------
Futures, Options, and Other Derivatives .
- --------------------------------------------------------------------------------
Asset-Backed Securites .
- --------------------------------------------------------------------------------
International Dollar-Denominated Bonds .
- --------------------------------------------------------------------------------
Preferred Stocks .
- --------------------------------------------------------------------------------
Convertible Securities .
- --------------------------------------------------------------------------------
Collateralized Mortgage Obligations (CMOs) .
- --------------------------------------------------------------------------------
Restricted or Illiquid Securities .
- --------------------------------------------------------------------------------

. Corporate debt. As the name implies, corporate debt obligations--usually
called bonds--represent loans by an investor to a corporation.

. U.S. government and agency bonds. These bonds represent loans by an
investor to the U.S. Treasury Department or a wide variety of govern-
mental agencies and instrumentalities. Timely payment of principal and
interest on U.S. Treasury bonds is always guaranteed by the full faith
and credit of the U.S. government; many (but not all) agency bonds have
the same guarantee.

. State and municipal bonds. These bonds represent loans by an investor to a
state or municipal government, or one of their agencies or instrumentalities.

. Cash reserves. This blanket term describes a variety of short-term fixed-in-
come investments, including money market instruments, commercial paper, bank
certificates of deposit, banker's acceptances, and repurchase agreements.
Repurchase agreements represent short-term (normally overnight) loans by the
Fund to commercial banks or large securities dealers.

. Futures, options, and other derivatives. The Fund may invest up to 20%
of its total assets in bond futures contracts, options, and other types of
derivatives.

Losses (or gains) involving futures contracts 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 other types of derivatives. For this reason, the Fund will not use futures,
options, or other derivatives for speculative purposes or as leveraged
investments that magnify the gains or losses of an investment.

PLAIN TALK ABOUT
Derivatives

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 bonds.

. To reduce the Fund's transaction costs or add value when these instruments are
favorably priced.

. Asset-backed securities. These bonds represent partial ownership in pools of
consumer or commercial loans-- most often credit card, automobile, or trade
receivables. Asset-backed securities are issued by entities formed solely for
that purpose, but their value ultimately depends on repayments by underlying
borrowers. A primary risk of asset-backed securities is that their maturity is
difficult to predict and driven by borrowers' prepayments.

. International dollar-denominated bonds. The Fund may invest in bonds of
foreign issuers, so long as they are denominated in U.S. dollars. To the
extent that it owns foreign bonds, the Fund is subject to country risk, which
is the possibility that political events (such as 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. Because the bond's value is designated in dollars rather than the
currency of the issuer's country, the investor is not exposed to currency
risk; rather, the issuer assumes that risk usually in order to attract U.S.
investors.

. Preferred Stock. Holders of preferred stock receive set dividends from the
issuer. Their claim on the issuer's income and assets rank before that of
common stock holders, but after that of bond holders.

. Convertible securities. Bonds or preferred stocks that are convertible into,
or exchangeable for, common stocks are known as convertible securities.

. Collateralized mortgage obligations (CMOs). CMOs are special bonds that are
collateralized by mortgages or mortgage pass-through securities. In a CMO
deal, cash flow rights on underlying mortgages--the rights to receive
principal and interest payments--are divided up and prioritized to create
short-, intermediate-, and long-term bonds. CMOs rely on assumptions about the
timing of cash flows on the underlying mortgages, including expected
prepayment rates. The primary risk of a CMO is that these assumptions are
wrong, which would either shorten or lengthen the bond's maturity. The Fund
will invest only in CMOs that are believed consistent with its maturity and
credit quality standards.

. Restricted or illiquid securities. Restricted securities are privately placed
securities that, pursuant to the rules of the Securities and Exchange
Commission, can only be sold to qualified institutional buyers. Because these
securities can in turn be resold only to qualified institutional investors,
they may be considered illiquid securities--that is, they could be difficult
for the Fund to convert to cash, if needed. The Fund will not invest more than
15% of its net assets in illiquid securities. The Fund's Board of Trustees
may, from time to time, determine that certain restricted securities are
liquid; such securities would not be subject to the 15% limitation. In other
words, the Fund may invest in restricted, liquid securities without limit.

The Fund may, from time to time, take temporary defensive measures--such as
holding cash reserves without limit--that are inconsistent with the Fund's
primary investment strategies, in response to adverse market, economic,
political, or other conditions. In taking such measures, the Fund may not
achieve its investment objective.

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 investors who do not generate the costs. Although
the Short-Term Corporate Fund Institutional Shares is suitable for investors'
short-term needs, the Fund discourages market-timing, and therefore has adopted
the following policies, among others, to discourage short-term trading:

. The Fund reserves the right to reject any purchase request--including
exchanges from other Vanguard funds-- that it regards as disruptive to the
efficient management of the Fund. This could be because of the timing of the
request or because of a history of excessive trading by the investor.
<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. The average turnover rate for all short-term corporate bond
funds is approximately .%, according to Morningstar, Inc.

. There is a limit on the number of times you can exchange into and out of the
Fund (see "Redeeming Shares" in the Investing with Vanguard section).

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

The Vanguard funds do not permit market-timing. Do not invest in this Fund if
you are a market-timer.

Turnover Rate

The Fund may sell securities regardless of how long the securities have been
held. Shorter-term bonds will mature or be sold--and need to be replaced--more
frequently than longer-term bonds. As a result, shorter-term bond funds tend to
have higher turnover rates than longer-term bond funds.

The Fund and Vanguard

Vanguard Short-Term Corporate Fund is part of Vanguard Fixed Income Securities
Funds, a member of The Vanguard Group. Vanguard is a family of more than 35
investment companies with more than 100 distinct investment portfolios holding
assets worth more than $450 billion. All of the Vanguard funds share in the
expenses associated with business operations, such as personnel, office space,
equipment, and advertising.

Investment Adviser

Vanguard Fixed Income Group (the Group), P.O. Box 2600, Valley Forge, PA, 19482,
provides advisory services on an at-cost basis to the Fund. For the fiscal year
ended January 31, 1999, the Fund's investment advisory expenses represented an
effective annual rate of .% of the Fund's average net assets.

The Fund has authorized the Group to choose brokers or dealers to handle the
purchase and sale of securities for the Funds, and to get the

PLAIN TALK ABOUT
Vanguard's Unique Corporate Structure

PLAIN TALK ABOUT
The Fund's Adviser

Vanguard Fixed Income Group provides investment advisory services to many
Vanguard funds; as of January 31, 1999, the Group managed more than $130
billion. The individuals responsible for overseeing the Fund's investments are:

Robert F. Auwaerter, Principal of Vanguard and Fund Manager of the Short-Term
Corporate Fund since 1983; has worked in investment management since 1978; has
managed portfolio investments since 1979; B.S., University of Pennsylvania;
M.B.A., Northwestern University.

best available price and most favorable execution from these brokers with
respect to all transactions. Also, the Fund may direct the Group to use a
particular broker for certain transactions in exchange for commission rebates or
research services provided to the Fund.

Year 2000 Challenge

In addition to taking every reasonable step to secure our internal systems and
external relationships, Vanguard is further developing contingency plans
intended to assure that unexpected systems failures will not adversely affect
the Fund's operations. Vanguard intends to monitor these processes through the
rollover of 1999 into 2000 and to quickly implement alternate solutions if
necessary.

However, despite Vanguard's efforts and contingency plans, noncompliant
computer systems could have a material adverse effect on the Fund's business,
operations, or financial condition. Additionally, the Fund's performance could
be hurt if a computer-system failure at a company or governmental unit affects
the price of securities the Fund owns.

Dividends, Capital Gains, and Taxes

As a shareholder, you are entitled to your share of the Fund's net income
(interest less expenses).The Fund's income dividends accrue daily and are
distributed monthly; capital gains distributions, if any, generally occur in
December. In addition, the Fund may occasionally be required to make
supplemental capital gains distributions at some other time during the year. You
can receive distributions of income or capital gains in cash, or you can have
them automatically invested in more shares of the Fund. In either case, these
distributions are taxable to you. It is important to note that

PLAIN TALK ABOUT
Distributions

PLAIN TALK ABOUT
"Buying a Capital Gain"

distributions of dividends and capital gains that are declared in December--if
paid to you by the end of January-- are taxed as if they had been paid to you in
December.

. The dividends and short-term capital gains that you receive are considered
ordinary income for tax purposes.

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

. Although the Fund does not seek to realize any particular amount of capital
gains during a year, such gains are realized from time to time as by-products
of its ordinary investment activities. Consequently, distributions may vary
considerably from year to year.

. If you sell or exchange shares, any gain or loss you have 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.

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

The tax information in this prospectus is provided as general information and
will not apply to you if you are investing through a tax-deferred account such
as an IRA or a qualified employee benefit plan. (Non-U.S. investors may be
subject to U.S. withholding and estate tax.) You should consult your tax adviser
about the tax consequences of an investment in the Fund.

Important Note: By law, the Fund must withhold 31% of your taxable
distributions and any redemption proceeds if you do not provide your correct
taxpayer identification number, or certify that it is correct, or if the IRS
instructs the Fund to do so.
<PAGE>

Share Price

The Fund's share price, called its net asset value, or NAV, is calculated each
business day after the close of trading on the New York Stock Exchange (the NAV
is not calculated on holidays or other days the Exchange is closed). Net asset
value per share is computed by dividing the net assets attributed to each class
by the number of Fund shares outstanding for each class:

Total Assets - Liabilities
Net Asset Value = ----------------------------------
Number of Shares Outstanding

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

The Fund's share price can be found daily in the mutual fund listings of most
major newspapers under the heading "Vanguard Funds." Different newspapers use
different abbreviations for the Fund, but the most common is STCorIst.
<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 each table
represent the rate that an investor would have earned or lost each year on an
investment in the Fund (assuming reinvestment of all dividends and
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 Vanguard Bond
Funds' most recent annual report to shareholders. You may have the annual report
sent to you without charge by contacting Vanguard.

FINANCIAL HIGHLIGHTS TABLE TO COME

PLAIN TALK ABOUT
How to Read the Financial Highlights Table

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

"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500,"
and "500" are trademarks of The McGraw-Hill Companies, Inc.
<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?
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 [GRAPHIC APPEARS HERE]. Please call us to request copies.

Services and Account Features

. Open a new account.*

. Buy, sell, or exchange shares of most funds.

. Change your name/address.

. Add/change fund options (including dividend options, bank instructions,
checkwriting, and Vanguard Automatic Exchange Service).

* Only current Vanguard shareholders can open a new account online, by
exchanging shares from other existing Vanguard accounts.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------

Types of Accounts

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. You may convert Investor Shares
of the Fund into Institutional Shares provided that you meet the minimum initial
investment requirements for Institutional Shares.
- --------------------------------------------------------------------------------
Minimum Investment to . . .
open a new account
$10 million

add to an existing account
$100 by mail or exchange; $1,000 by wire.
- --------------------------------------------------------------------------------
By Wire to Open a New Account or Add to an Existing Account [GRAPHIC APPEARS
HERE]
Call your assigned Service Associate to arrange your wire transaction.

Wire to:
FRB ABA 021001088
Marine Midland Bank, New York

For credit to:
Account: 000112046
Vanguard Incoming Wire Account

In favor of:
Vanguard Short-Term Corporate Fund Institutional Shares-858
[Account number, or temporary number for a new account]
[Registered account owner/s]
[Registered address]
- --------------------------------------------------------------------------------
By Mail to . . . [GRAPHIC APPEARS HERE]
open a new account
Complete and sign the application 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.

Make your check payable to: The Vanguard Group-858
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 2900 100 Vanguard Boulevard
Valley Forge, PA 19482-2900 Malvern, PA 19355
- --------------------------------------------------------------------------------
IMPORTANT NOTE: To prevent check fraud, Vanguard will not accept checks made
payable to third parties.
- --------------------------------------------------------------------------------
<PAGE>

Buying Shares (continued)

- --------------------------------------------------------------------------------
By Telephone to . . . [GRAPHIC APPEARS HERE]
open a new account
Call Vanguard Tele-Account* 24 hours a day--or your assigned Service Associate
during business hours--to exchange from another Vanguard fund account with the
same registration (name, address, taxpayer identification number, and account
type).

add to an existing account
Call Vanguard Tele-Account* 24 hours a day--or your assigned Service Associate
during business hours--to exchange from another Vanguard fund account with the
same registration (name, address, taxpayer identification number, and account
type).

Vanguard Tele-Account
1-800-662-6273
*You must obtain a Personal Identification Number through Tele-Account at
least seven days before you request your first exchange.
- --------------------------------------------------------------------------------
IMPORTANT NOTE: Once you've requested a telephone transaction and a confirmation
number has been assigned, the transaction cannot be revoked. We reserve the
right to refuse any purchase request.
- --------------------------------------------------------------------------------
You can redeem (that is, sell or exchange) shares purchased by check 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.
We must consider the interests of all Fund shareholders and so reserve the right
to refuse any purchase that will disrupt the Fund's operation or performance.
- --------------------------------------------------------------------------------

Redeeming Shares

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

When Selling Shares:
. Vanguard sends the redemption proceeds to you or a designated third party.*
. You can sell all or part of your Fund shares at any time.
*May require a signature guarantee; see footnote on page 16.

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.

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. You can also sell shares by check.
- --------------------------------------------------------------------------------
<PAGE>

Note: The Vanguard funds whose shares you cannot exchange online or by
telephone are Vanguard U.S. Stock Index Funds, Vanguard Balanced Index Fund,
Vanguard International Stock Index Funds, Vanguard REIT Index Fund, Vanguard
Total International Stock Index Fund, and Vanguard Growth and Income Fund. These
funds do, however, permit online and telephone exchanges within IRAs and other
retirement accounts. If you sell shares of these funds online, you will receive
a redemption check at your address of record.
- --------------------------------------------------------------------------------
Telephone Requests [GRAPHIC APPEARS HERE]
Call Vanguard Tele-Account 24 hours a day--or your assigned Service Associate
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.
- --------------------------------------------------------------------------------
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:

[X] The ten-digit account number.
[X] The name and address exactly as registered on the account.
[X] The primary Social Security or employer identification number as registered
on the account.
[X] The Personal Identification Number, if applicable.

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 [GRAPHIC APPEARS HERE]
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.
- --------------------------------------------------------------------------------
Check Requests [GRAPHIC APPEARS HERE]
You can sell shares by writing a check for $250 or more.
- --------------------------------------------------------------------------------
<PAGE>

Redeeming Shares (continued)

- --------------------------------------------------------------------------------
A Note on Large Redemptions
It is important that you call Vanguard before you redeem a large dollar amount.
We must consider the interests of all fund shareholders and so reserve the right
to delay delivery of your redemption proceeds--up to seven days--if the amount
will disrupt the Fund's operation or performance.
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, wire
(money market funds and other daily dividend funds only), or exchange to another
Vanguard fund.
- --------------------------------------------------------------------------------
Check Redemptions
Normally, Vanguard will mail your check within two business days of a
redemption.
- --------------------------------------------------------------------------------
Wire Redemptions [GRAPHIC APPEARS HERE]
The wire redemption option is not automatic; you must establish it by completing
a special form or the appropriate section of your account application. Wire
redemptions can be initiated by mail or by telephone during Vanguard's business
hours, but not online.

For Other Daily Dividend Funds:
For telephone requests made by 4 p.m. EST, the wire will arrive at your bank by
the close of business on the following business day.
- --------------------------------------------------------------------------------
NOTE: Wire redemptions of less than $5,000 are subject to a $5 processing fee.
- --------------------------------------------------------------------------------
Exchange Redemptions
As described above, an exchange involves using the proceeds of your redemption
to purchase shares of another Vanguard fund.
- --------------------------------------------------------------------------------

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:
[X] The Fund name and account number.
[X] The amount of the transaction (in dollars or shares).
[X] Signatures of all owners exactly as registered on the account (for mail
requests).
[X] Signature guarantees (if required).*
[X] Any supporting legal documentation that may be required.
[X] Any outstanding certificates representing shares to be redeemed.

*For instance, a signature guarantee must be provided by all registered
account shareholders when redemption proceeds are to be sent to a different
person or address. A signature guarantee can be obtained from most banks,
credit unions, and licensed brokers.

- --------------------------------------------------------------------------------
Limits on Account Activity
Because excessive account transactions can disrupt management of the Fund and
increase the Fund's costs for all shareholders, Vanguard limits account activity
as follows:

A "round trip" is a redemption from the Fund followed by a purchase back into
the Fund. Also, "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.
- --------------------------------------------------------------------------------
All Trades Final
Vanguard will not cancel any transaction request (including any purchase or
redemption) that we believe to be authentic once the request has been received
and a confirmation number assigned.
- --------------------------------------------------------------------------------

Transferring Registration

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

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 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 we find that two or more Fund
shareholders have the same last name and address, we send just one Fund report
to that address--instead of mailing separate reports to each shareholder. If you
want us to send separate reports, however, you may notify our Institutional
Division at 1-888-809-8102.
- --------------------------------------------------------------------------------
Confirmation Statement
Sent each time you buy, sell, or exchange shares; confirms the trade date and
the amount of your transaction.
- --------------------------------------------------------------------------------
Portfolio Summary [GRAPHIC APPEARS HERE]
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 March and September for this Fund.
- --------------------------------------------------------------------------------
<PAGE>

Fund and Account Updates (continued)

- --------------------------------------------------------------------------------
Tax Statements
Generally mailed in January; report previous year's dividend and capital gains
distributions, and proceeds from the sale of shares.
- --------------------------------------------------------------------------------
Average Cost Review Statement [GRAPHIC APPEARS HERE]
Issued quarterly for most taxable accounts (accompanies your Portfolio
Summary); shows the average cost of shares that you redeemed during the calendar
year, using the average cost single category method.
- --------------------------------------------------------------------------------
Checkwriting Statement
Sent monthly to shareholders using Vanguard's checkwriting option. Our statement
provides images of the front and back of each checkwriting draft paid in the
previous month. This consolidated statement is sent instead of the original
canceled drafts, which will not be returned.
- --------------------------------------------------------------------------------

Mandatory Conversion to Investor Shares

The Fund reserves the right to convert an investor's Institutional Shares into
Investor Shares of the Fund if the investor's account balance falls below $10
million. Any such conversion will be preceded by written notice to the investor.
- --------------------------------------------------------------------------------
<PAGE>

(This page intentionally left blank.)
<PAGE>

Glossary of Investment Terms

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

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.

Face Value
The amount to be paid at maturity of a bond; also known as the par value or
principal.

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

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

Maturity
The date when a bond issuer agrees to repay the bond's principal, or face value,
to the bond's buyer.

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

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

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

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

[LOGO OF THE VANGUARD GROUP(R) APPEARS HERE]

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

For More Information
If you'd like more information about Vanguard Short-Term Corporate Fund
Institutional Shares, the following documents are available free upon request:

Annual/Semiannual Report to Shareholders
Additional information about the Fund's investments is available in Vanguard
Bond Funds' 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 for Vanguard Bond Funds 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:

If you are an Individual Investor:
The Vanguard Group
Investor Information Department
P.O. Box 2900
Valley Forge, PA 19482-2900

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

Text Telephone:
1-800-952-3335

If you are a client of Vanguard's
Institutional Division:
The Vanguard Group
Institutional Investor Information
P.O. Box 2900
Valley Forge, PA 19482-2900

Telephone:
1-888-809-8102

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:
1-800-662-2738

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, D.C. 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: 811-2368

I858N-06/01/1999
<PAGE>

Vanguard Short-Term Corporate Fund
Institutional Shares
Prospectus
June 1, 1999
A Bond Mutual Fund

Contents

1 Fund Profile

2 Additional Information

3 More on the Fund

7 The Fund and Vanguard

7 Investment Adviser

8 Year 2000 Challenge

8 Dividends, Capital Gains, and Taxes

10 Share Price

11 Financial Highlights

12 Investing with Vanguard

12 Services and Account Features

12 Types of Accounts

13 Buying Shares

14 Redeeming Shares

17 Transferring Registration

17 Fund and Account Updates

18 Mandatory Conversion to Investor Shares

Glossary (inside back cover)

- --------------------------------------------------------------------------------
Why Reading This Prospectus Is Important

This prospectus explains the objective, risks, and strategies of Vanguard
Short-Term Corporate Fund Institutional Shares (a part of Vanguard Bond Funds).
To highlight terms and concepts important to mutual fund investors, we have
provided "Plain Talk(R)" explanations along the way. Reading the prospectus will
help you to decide whether the Fund is the right investment for you. We suggest
that you keep it for future reference.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Important Note

The Short-Term Corporate Fund features two separate classes of shares: Investor
Shares and Institutional Shares. Short-Term Corporate Fund Institutional Shares
have an investment minimum of $10 million and are available through this
prospectus. Short-Term Corporate Fund Investor Shares have an investment minimum
of $3,000, and are available through separate prospectuses (one for individual
investors and one for participants in employer-sponsored retirement or savings
plans). Investor Shares and Institutional Shares do not have the same expenses;
as a result, the performance of these separate classes will differ.
- --------------------------------------------------------------------------------

Fund Profile--Vanguard High-Yield Corporate Fund

The following profile summarizes key features of Vanguard High-Yield Corporate
Fund.

INVESTMENT OBJECTIVE
The Fund seeks to provide a high level of current income.

INVESTMENT STRATEGIES
The Fund invests primarily in low-quality, high-risk corporate bonds, commonly
referred to as "junk bonds." These bonds are typically intermediate-term (with
maturities between five and ten years). Under normal circumstances, at least 80%
of the Fund's assets will be invested in high-yield corporate bonds rated B or
better by Moody's Investors Service or Standard & Poor's Corporation. Not more
than 20% of the Fund's assets may be invested in any of the following, taken as
a whole: bonds that are rated less than B or that are unrated; convertible
securities; and preferred stocks. For more information on security selection,
see pages 5-6.

PRIMARY RISKS
The Fund is subject to several risks, any of which could cause an investor to
lose money. These include:

[_] Credit risk, which is the chance that a bond issuer will fail to pay
principal and interest in a timely manner, reducing the Fund's return.
Credit risk will be substantial for the Fund.

[_] 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 is generally moderate for intermediate-term bonds.

[_] Income risk, which is the chance that falling interest rates will cause the
Fund's income to decline. Income risk is generally moderate for
intermediate-term bonds.

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

Because of the speculative nature of junk bonds, you should carefully consider
the risks associated with this Fund before you purchase shares.

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

- --------------------------------------------------------------------------------
Annual Total Returns
- --------------------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended ____) and the lowest return for a quarter was -.%
(quarter ended ____).
<PAGE>

- --------------------------------------------------------------------------------
Average Annual Total Returns for Years Ended December 31, 1998
- --------------------------------------------------------------------------------
1 Year 5 Years 10 Years
- --------------------------------------------------------------------------------
Vanguard High-Yield Corporate Fund . % . % . %
Lehman Brothers High Yield Bond Index . . .
- --------------------------------------------------------------------------------

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.

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 High-Yield Corporate Fund's expense ratio in fiscal year 1999
was . %, or $. per $1,000 of average net assets. The average high-yield bond
fund had expenses in 1998 of .%, or $ . per $1,000 of average net assets,
according to Lipper, Inc., which reports on the mutual fund industry.

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

Annual Fund Operating Expenses (expenses deducted from
the Fund's assets)
Management Expenses: . %
12b-1 Distribution Fees: None
Other Expenses: . %
Total Annual Fund Operating Expenses: . %

*The 1% fee applies to shares redeemed (either by selling or exchanging to
another fund) within one year of purchase. The fee is withheld from redemption
proceeds and retained by the Fund. Shares held for more than one year 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, and that operating expenses remain the same. The results apply whether
or not you redeem your investment at the end of each period.
- --------------------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
$. $. $. $.
- --------------------------------------------------------------------------------

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.
<PAGE>

Additional Information

Dividends and capital gains
Dividends are declared daily and distributed on the first business day of each
month; capital gains, if any, are distributed annually in December

Investment Adviser
Wellington Management Company, LLP, Boston, Mass., since inception

Inception Date
December 27, 1978

Net Assets as of January 31, 1999
$ . billion

Suitable for IRAs
Yes

Minimum Initial Investment
$3,000; $1,000 for IRAs and custodial accounts for minors

Newspaper Abbreviation
HYCor

Vanguard Fund Number
029

Cusip Number
922031208

Ticker Symbol
VWEHX

================================================================================
A Word About Risk

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

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

================================================================================

Who Should Invest

The Fund may be a suitable investment for you if:

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

[_] You are seeking a high level of current income.

[_] You characterize your investment temperament as "aggressive."

[_] You are willing to accept substantial investment risk.

PLAIN TALK ABOUT
Costs and Market-Timing

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

The Vanguard funds do not permit market-timing. Do not invest in this Fund if
you are a market-timer.
<PAGE>

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

[_] The Fund reserves the right to reject any purchase request--including
exchanges from other Vanguard funds-- that it regards as disruptive to the
efficient management of the Fund. This could be because of the timing of the
investment or because of a history of excessive trading by the investor.

[_] There is a limit on the number of times you can exchange into and out of the
Fund (see "Redeeming Shares" in the Investing with Vanguard section).

[_] The Fund imposes a 1% redemption fee on shares that are redeemed by any
method within one year of purchase.

[_] The Fund reserves the right to stop offering shares at any time.

Primary Investment Strategies

This section explains the strategies that the investment adviser uses in pursuit
of the Fund's objective, a high level of current income. It also explains how
the adviser implements these strategies. In addition, this section discusses
several important risks--credit risk, interest rate risk, income risk, and
manager risk--faced by investors in the Fund. The Fund's Board of Trustees
oversees the management of the Fund, and may change the investment strategies in
the interest of shareholders. The Fund's objective is not fundamental, and so
may be changed without a shareholder vote.

PLAIN TALK ABOUT
Junk Bonds

Junk bonds are low-quality, high-risk corporate bonds that generally offer a
high level of current income. Considered speculative by the major rating
agencies, these bonds are rated less than Baa by Moody's Investors Service or
BBB by Standard & Poor's Corporation (these ratings are typical for bonds that
provide the highest income return). Junk bonds are often issued as a result of
corporate restructurings--such as leveraged buyouts, mergers, acquisitions, or
other similar events. They also may be issued by smaller, less creditworthy
companies or by highly leveraged firms, which are generally less able than more
financially stable firms to make scheduled payments of interest and principal.
Because of their low credit quality, junk bonds must pay higher interest to
compensate investors for the substantial credit risk they assume. In order to
minimize credit risk, high-yield corporate funds often diversify their holdings
among many bond issuers.

Market Exposure
The Fund's primary strategy is to invest in high-yielding, low-quality corporate
bonds, commonly known as "junk bonds." Typically, the Fund purchases
intermediate-term bonds, which have a remaining maturity of between five and ten
years.

[GRAPHIC APPEARS HERE] Because of its investment in junk bonds, the Fund is
subject to substantial credit risk, which is the
possibility that a bond issuer will fail to pay interest
and principal in a timely manner.

For more information about credit risk, see "Security Selection" on pages 5-6.
The Fund is also subject to other risks generally associated with bonds.

[GRAPHIC APPEARS HERE] The Fund is subject to interest rate risk, which is the
possibility that bond prices overall will decline over
short or even long periods due to rising interest rates.
Interest rate risk should be moderate for intermediate-
term bonds.

Changes in interest rates will affect bond income as well as bond prices.

[GRAPHIC APPEARS HERE] The Fund is subject to income risk, which is the
possibility that the Fund's dividends (income) will fall
due to falling interest rates. Income risk should be
moderate for intermediate-term bonds.

PLAIN TALK ABOUT
Bonds and Interest Rates

PLAIN TALK ABOUT
Bond Maturities

A bond is issued with a specific maturity date--the date when the bond's issuer,
or seller, must pay back the bond's initial value (known as its "face value").
Bond maturities generally range from less than one year (short term) to 30 years
(long term). The longer a bond's maturity, the more risk you, as a bond
investor, face as interest rates rise-- but also the more interest you could
receive. Long-term bonds are more suitable for investors willing to take greater
risks in hope of higher yields; short-term bond investors should be willing to
accept lower yields in return for less fluctuation in the value of their
investment.

- --------------------------------------------------------------------------------
How Interest Rate Changes Affect Bonds*
- --------------------------------------------------------------------------------
Value of a $1,000 Bond Value of a $1,000 Bond
After a 2% Increase After a 2% Decrease
Type of Bond (Maturity) in Interest Rates in Interest Rates
- --------------------------------------------------------------------------------
Short-Term (2.5 years) $956 $1,046
Intermediate-Term (10 years) 870 1,156
Long-Term (20 years) 816 1,251
- --------------------------------------------------------------------------------
*Assuming a 7% yield.
- --------------------------------------------------------------------------------

These figures are for illustration only; you should not regard them as an
indication of future returns from the bond market as a whole or the Fund in
particular.

Security Selection

Wellington Management Company, LLP (WMC), adviser to the Fund, seeks
to minimize the substantial investment risk posed by junk bonds primarily
through solid credit research and broad diversification among issuers.

[GRAPHIC APPEARS HERE] The Fund is subject to manager risk, which is the
possibility that the adviser may do a poor job of
selecting securities.

At least 80% of the Fund's assets will be invested in high-yield corporate
bonds rated B or better by Moody's Investors Service or Standard & Poor's
Corporation. Not more than 20% of the Fund's assets may be invested in any of
the following, taken as a whole: bonds that are rated less than B or that are
unrated; convertible securities; and preferred stocks. If unrated, a bond must
be, in the adviser's opinion, at least equivalent to a Caa rating by Moody's or
a CCC rating by Standard & Poor's.
The Fund will not invest in bonds that, at the time of initial investment, are
rated less than Caa by Moody's or CCC by Standard & Poor's. However, the Fund
may continue to hold bonds that have been downgraded, even if they are no longer
eligible for purchase by the Fund.
In the past, the Fund has not invested in non-income-producing high-yield
bonds, such as zero coupon bonds--which pay interest only at maturity--or
payment-in-kind bonds--which pay interest in the form of additional securities.
Although it has no present plans to do so, the Fund may invest up to 5% of its
assets in such bonds in the future.
<PAGE>

PLAIN TALK ABOUT
Credit Quality

Bonds rated less than Baa by Moody's or BBB by Standard & Poor's, such as
those held by the Fund, are classified as non-investment grade. These bonds
carry a high degree of risk and are considered speculative by the major rating
agencies.

Credit quality in the high-yield bond market can change suddenly and
unexpectedly, and even recently-issued credit ratings may not fully reflect the
actual risks posed by a particular high-yield bond. For these reasons, it is the
Fund's policy not to rely primarily on ratings issued by established credit
rating agencies, but to utilize these ratings in conjunction with the adviser's
own independent and ongoing review of credit quality.
WMC selects bonds on a company-by-company basis, emphasizing fundamental
research and a long-term investment horizon. WMC's analysis focuses on the
nature of a company's business, its strategy, and the quality of its management.
Based on this analysis, the adviser looks for companies whose prospects are
stable or improving, and whose bonds offer an attractive yield. Companies with
improving prospects are normally more attractive because they offer better
assurance of debt repayment and greater potential for capital appreciation.
As of January 31, 1999, the Fund's holdings had the following credit quality
characteristics:

- --------------------------------------------------------------------------------
Investment Percent of Fund's Net Assets
- --------------------------------------------------------------------------------
Corporate bonds
Aa/AA .%
Baa/BBB .
Ba/BB .
B .
Caa/CC .
Nonrated .
U.S. Treasury securities .
Cash reserves .
- --------------------------------------------------------------------------------

To minimize credit risk, the Fund normally diversifies its holdings among
bonds of at least 100 separate issuers representing many industries; as of
January 31, 1999, the Fund held bonds of . corporate issuers. As a result, there
should be less chance that the Fund will be hurt by a particular bond issuer's
failure to pay either principal or interest.
The Fund may, from time to time, take temporary defensive measures--such as
holding cash reserves without limit--that are inconsistent with the Fund's
primary investment strategies, in response to adverse market, economic,
political, or other conditions. In taking such measures, the Fund may not
achieve its investment objective.
<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. The average turnover rate for all high-yield corporate funds
is approximately .%, according to Morningstar, Inc.

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

The Fund and Vanguard

Vanguard High-Yield Corporate Fund is part of Vanguard Fixed Income Securities
Funds, a member of The Vanguard Group. Vanguard is a family of more than 35
investment companies with more than 100 distinct investment portfolios holding
assets worth more than $. billion. All of the Vanguard funds share in the
expenses associated with business operations, such as personnel, office space,
equipment, and advertising.
Vanguard also provides marketing services to the funds. Although shareholders
do not pay sales commissions or 12b-1 distribution fees, each fund pays its
allocated share of The Vanguard Group's marketing costs.

Investment Adviser

The Fund employs Wellington Management Company, LLP (WMC), 75 State Street,
Boston MA 02109, as its investment adviser. WMC manages the Fund subject to the
control of the Trustees and officers of the Fund.
Under the advisory agreement, the High-Yield Corporate Fund is required to pay
WMC a quarterly fee based on certain annual percentage rates applied to the
Fund's average month-end assets for the quarter. For the fiscal year ended
January 31, 1999, the advisory fees paid by the High-Yield Corporate Fund
represented an effective annual rate of .% of the Fund's average net assets.

PLAIN TALK ABOUT
Vanguard's Unique Corporate Structure

PLAIN TALK ABOUT
The Fund's Adviser

Wellington Management Company, LLP, is an investment advisory firm founded in
1928. As of January 31, 1999, WMC managed more than $. billion in total assets.
The individual primarily responsible for overseeing the High-Yield Corporate
Fund's investments is:

Earl E. McEvoy, Senior Vice President and Partner of Wellington Management
Company, and Fund Manager of the High-Yield Corporate Fund since 1984; has
worked in investment management since 1972; with WMC since 1978; B.A., Dartmouth
College; M.B.A., Columbia Business School.
<PAGE>

The Fund has authorized WMC 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 WMC to use a particular broker for
certain transactions in exchange for commission rebates or research services
provided to the Fund.
The Board of Trustees may, without prior approval from shareholders, change
the terms of the advisory agreement or hire a new investment adviser, either as
a replacement for WMC or as an additional adviser. However, any such change will
be communicated to shareholders in writing.

Year 2000 Challenge

The common practice in computer programming of using just two digits to identify
a year has resulted in the Year 2000 challenge throughout the information
technology industry. If unchanged, many computer applications and systems could
misinterpret dates occurring after December 31, 1999, leading to errors or
failure. Such failure could adversely affect a fund's operations, including
pricing, securities trading, and the servicing of shareholder accounts.
The Vanguard Group is dedicated to providing uninterrupted, high-quality
performance from our computer systems before, during, and after 2000. In July
1998, we completed the renovation and initial testing of our internal systems.
Vanguard is diligently working with external partners, suppliers, and vendors,
including fund managers and other service providers, to assure that the systems
with which we interact remain operational at all times.
In addition to taking every reasonable step to secure our internal systems and
external relationships, Vanguard is further developing contingency plans
intended to assure that unexpected systems failures will not adversely affect
the Fund's operations. Vanguard intends to monitor these processes through the
rollover of 1999 into 2000 and to quickly implement alternate solutions if
necessary.
However, despite Vanguard's efforts and contingency plans, noncompliant
computer systems could have a material adverse effect on the Fund's business,
operations, or financial condition. Additionally, the Fund's performance could
be hurt if a computer-system failure at a company or governmental unit affects
the price of securities the Fund owns.

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. The capital gains are either short-term or long-term depending on
whether the fund held the securities for less than or more than one year.

Dividends, Capital Gains, and Taxes

[_] The dividends and short-term capital gains that you receive are considered
ordinary income for tax purposes.
<PAGE>

PLAIN TALK ABOUT
"Buying a Capital Gain"

[_] Any distributions of net long-term capital gains by the Fund are taxable to
you as long-term capital gains, no matter how long you've owned shares in
the Fund.
[_] Although the Fund does not seek to realize any particular amount of capital
gains during a year, such gains are realized from time to time as by-
products of its ordinary investment activities. Consequently, distributions
may vary considerably from year to year.
[_] If you sell or exchange shares, any gain or loss you have 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.
[_] Distributions of dividends or capital gains, and capital gains or losses
from your sale or exchange of Fund shares, may be subject to state and local
income taxes as well.

The tax information in this prospectus is provided as general information and
will not apply to you if you are investing through a tax-deferred account such
as an IRA or a qualified employee benefit plan. (Non-U.S. investors may be
subject to U.S. withholding and estate tax.) You should consult your tax adviser
about the tax consequences of an investment in the Fund.

Share Price

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

Total Assets - Liabilities
Net Asset Value = ----------------------------------
Number of Shares Outstanding

Knowing the daily net asset value is useful to you as a shareholder because it
indicates the current value of your investment. The Fund's NAV, multiplied by
the number of shares you own, gives you the dollar amount you would have
received had you sold all of your shares back to the Fund that day.
A Note on Pricing: The Fund's investments will be priced at their market value
when market quotations are readily available. When these quotations are not
readily available, investments will be priced at their fair value, calculated
according to procedures adopted by the Fund's Board of Trustees.
The Fund's share price can be found daily in the mutual fund listings of most
major newspapers under the heading "Vanguard Funds." Different newspapers use
different abbreviations for the Fund, but the most common is HYCor.
<PAGE>

PLAIN TALK ABOUT
How to Read the Financial Highlights Table

The Fund began fiscal 1999 with a net asset value (price) of $. per share.
During the period, the Fund earned $ . per share from investment income
(interest) and $ . per share from investments that had appreciated in value or
that were sold for higher prices than the Fund paid for them.
Shareholders received $. per share in the form of dividend and capital gains
distributions. A portion of each year's distributions may come from the prior
year's income or capital gains.
The earnings ($ . per share) minus the distributions ($. per share) resulted
in a share price of $ . at the end of the year. This was an increase of $ . per
share (from $. at the beginning of the year to $ . 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 .% for the year.
As of January 31, 1999, the Fund had $ . billion in net assets. For the year,
its expense ratio was .% ($ . per $1,000 of net assets); and its net investment
income amounted to .% of its average net assets. It sold and replaced securities
valued at . % of its net assets.

Financial Highlights

The following financial highlights table is intended to help you understand the
Fund's financial performance for the past five years, and certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost each year on
an investment in the Fund (assuming reinvestment of all dividends and
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.

FINANCIAL HIGHLIGHTS TABLE TO COME

"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.
<PAGE>

Investing with Vanguard

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 [GRAPHIC APPEARS HERE]. Please call us to request copies.

Services and Account Features

Vanguard offers many services that make it convenient to buy, sell, or exchange
shares, or to obtain fund or account information.
- --------------------------------------------------------------------------------
Telephone Redemptions (Sales and Exchanges)
Automatically set up for this Fund unless you notify us otherwise.
- --------------------------------------------------------------------------------
Vanguard Direct Deposit Service(TM)[GRAPHIC APPEARS HERE]
Automatic method for depositing your paycheck or U.S. government payment
(including Social Security and government pension checks) into your account.
- --------------------------------------------------------------------------------
Vanguard Automatic Exchange Service(TM) [GRAPHIC APPEARS HERE]
Automatic method for moving a fixed amount of money from one Vanguard fund
account to another.
- --------------------------------------------------------------------------------
Vanguard Fund Express(R) [GRAPHIC APPEARS HERE]
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) [GRAPHIC APPEARS HERE]
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) [GRAPHIC APPEARS HERE]
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 fund shares.
- --------------------------------------------------------------------------------
Access Vanguard(TM) www.vanguard.com [GRAPHIC APPEARS HERE]
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 the website. We will then send to you, by mail, 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.
[_] Add/change fund options (including dividend options, Vanguard Fund Express,
bank instructions, checkwriting, and Vanguard Automatic Exchange Service).
*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: 1-800-662-2738
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.

- --------------------------------------------------------------------------------
<PAGE>

Types of Accounts

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 account whose balance
falls below the minimum initial investment. The Fund will deduct a $10 annual
fee in June if your nonretirement account balance falls below $2,500.
The fee is waived if your total Vanguard account assets are $50,000 or more.
- --------------------------------------------------------------------------------
By Mail to . . . [GRAPHIC APPEARS HERE]
open a new account
Complete and sign the application 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.
<PAGE>

Make your check payable to: The Vanguard Group-29
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 2600 455 Devon Park Drive
Valley Forge, PA 19482-2600 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 . . . [GRAPHIC APPEARS HERE]
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).

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

Vanguard Tele-Account Client Services
1-800-662-6273 1-800-662-2739
*You must obtain a Personal Identification Number through Tele-Account at
least seven days before you request your first exchange.
- --------------------------------------------------------------------------------
IMPORTANT NOTE: Once you've requested a telephone transaction and a confirmation
number has been assigned, the transaction cannot be revoked. We reserve the
right to refuse any purchase request.
- --------------------------------------------------------------------------------

By Wire to Open a New Account or Add to an Existing [GRAPHIC APPEARS HERE]
Account
Call Client Services to arrange your wire transaction. Wire transactions are not
available for retirement accounts, except for asset transfers and direct
rollovers.

Wire to:
FRB ABA 021001088
Marine Midland Bank, New York

For credit to:
Account: 000112046
Vanguard Incoming Wire Account

In favor of:
Vanguard High-Yield Corporate Fund-29
[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.
<PAGE>

Buying Shares (continued)

- --------------------------------------------------------------------------------
A Note on Large Purchases
It is important that you call Vanguard before you invest a large dollar amount.
We must consider the interests of all Fund shareholders and so reserve the right
to refuse any purchase that will disrupt the Fund's operation or performance.
- --------------------------------------------------------------------------------

Redeeming Shares

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

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

* May require a signature guarantee; see footnote on page 16.

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 both cases, your transaction will be based on the Fund's next-determined
share price, subject to any special rules discussed in this prospectus. For
exchanges, the purchase side of the transaction will be based on the receiving
fund's next-determined share price, again subject to any special rules discussed
in this prospectus.
- --------------------------------------------------------------------------------
A Note on Redemption Fees
The Fund imposes a 1% redemption fee on shares that are redeemed by any method
within one year of purchase. Currently, redemption fees do not apply to Fund
shares held through Vanguard's separate record-keeping 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 processed 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.
- --------------------------------------------------------------------------------
Online Requests [GRAPHIC APPEARS HERE]
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 the website. We will then send you, by mail, an account access password
that will enable you to sell or exchange shares online (as well as perform other
transactions).
Note: The Vanguard funds whose shares you cannot exchange online or by
telephone are Vanguard U.S. Stock Index Funds, Vanguard Balanced Index Fund,
Vanguard International Stock Index Funds, Vanguard REIT Index Fund, Vanguard
Total International Stock Index Fund, and Vanguard Growth and Income Fund. These
funds do, however, permit online and telephone exchanges within IRAs and other
retirement accounts. If you sell shares of these funds online, you will receive
a redemption check at your address of record.
- --------------------------------------------------------------------------------
<PAGE>

- --------------------------------------------------------------------------------
Telephone Requests [GRAPHIC APPEARS HERE]
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 the 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:
[X] The ten-digit account number.
[X] The name and address exactly as registered on the account.
[X] The primary Social Security or employer identification number as
registered on the account.
[X] The Personal Identification Number, if applicable.

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 [GRAPHIC APPEARS HERE]
All Account Types Except Retirement: Send a letter of instruction
signed by all registered account holders. Include the fund name and account
number and (if you are selling) a dollar amount or number of shares OR (if you
are exchanging) the name of the fund you want to exchange into and a dollar
amount or number of shares. To exchange into an account with a different
registration (including a different name, address, taxpayer identification
number, or account type), you must provide Vanguard with written instructions
that include the guaranteed signatures of all current owners of the fund from
which you wish to redeem.

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

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

First-class mail to: Express or Registered mail to:
The Vanguard Group The Vanguard Group
P.O. Box 1120 455 Devon Park Drive
Valley Forge, PA 19482-1120 Wayne, PA 19087-1815
<PAGE>

Redeeming Shares (continued)

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.
We must consider the interests of all fund shareholders and so reserve the right
to delay delivery of your redemption proceeds--up to seven days--if the amount
will disrupt the Fund's operation or performance.
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 Other Daily Dividend Funds:
For telephone requests made by 4 p.m. EST, the wire will arrive at your bank by
the close of business on the following business day.
- --------------------------------------------------------------------------------
Exchange Redemptions
As described above, an exchange involves using the proceeds of your redemption
to purchase shares of another Vanguard fund.
- --------------------------------------------------------------------------------

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:
[X] The Fund name and account number.
[X] The amount of the transaction (in dollars or shares).
[X] Signatures of all owners exactly as registered on the account (for mail
requests).
[X] Signature guarantees (if required).*
[X] Any supporting legal documentation that may be required.
[X] Any outstanding certificates representing shares to be redeemed.

*For instance, a signature guarantee must be provided by all registered
account shareholders when redemption proceeds are to be sent to a different
person or address. A signature guarantee can be obtained from most banks,
credit unions, and licensed brokers.

[_] 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, "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 Final
Vanguard will not cancel any transaction request (including any purchase or
redemption) that we believe to be authentic once the request has been received
and a confirmation number assigned.
- --------------------------------------------------------------------------------

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

Fund and Account Updates (continued)

To keep the Fund's costs as low as possible (so that you and other shareholders
can keep more of the Fund's investment earnings), Vanguard attempts to eliminate
duplicate mailings to the same address. When we find that two or more Fund
shareholders have the same last name and address, we send just one Fund report
to that address--instead of mailing separate reports to each shareholder. If you
want us to send separate reports, however, you may notify our Investor
Information Department at 1-800-662-7447.
- --------------------------------------------------------------------------------
Confirmation Statement Sent each time
you buy, sell, or exchange shares; confirms the trade date and the amount of
your transaction.
- --------------------------------------------------------------------------------
Portfolio Summary [GRAPHIC APPEARS HERE]
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 March and September 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 [GRAPHIC APPEARS HERE]
Issued quarterly for most taxable accounts (accompanies your Portfolio Summary);
shows the average cost of shares that you redeemed during the calendar year,
using the average cost single category method.
- --------------------------------------------------------------------------------
<PAGE>