VANGUARD ADMIRAL FUNDS INC, 485BPOS, 1996-05-17

VANGUARD ADMIRAL FUNDS INC
485BPOS, 1996-05-17

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT (NO. 33-49023) UNDER
THE SECURITIES ACT OF 1933

PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 5
AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 6

VANGUARD ADMIRAL FUNDS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

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

REGISTRANT'S TELEPHONE NUMBER (610) 669-1000

RAYMOND J. KLAPINSKY, ESQUIRE
P.O. BOX 876
VALLEY FORGE, PA 19482

IT IS PROPOSED THAT THIS AMENDMENT BECOME EFFECTIVE ON MAY 24, 1996 PURSUANT
TO RULE 485(B) UNDER THE SECURITIES ACT OF 1933.

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

REGISTRANT ELECTS TO REGISTER AN INDEFINITE NUMBER OF SHARES PURSUANT TO
REGULATION 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940. REGISTRANT FILED
ITS RULE 24F-2 NOTICE FOR THE YEAR ENDED JANUARY 31, 1996 ON MARCH 14, 1996.

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VANGUARD ADMIRAL FUNDS, INC.

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
FORM N-1A
ITEM NUMBER LOCATION IN PROSPECTUS
<C> <C> <S>
Item 1. Cover Page............................ Cover Page
Item 2. Synopsis.............................. Highlights
Item 3. Condensed Financial Information....... Financial Highlights
Item 4. General Description of Registrant..... Investment Objective;
Investment Limitations;
Investment Policies;
General Information
Item 5. Management of the Fund................ Management of the Fund;
The Vanguard Group
Item 6. Capital Stock and Other Securities.... Opening an Account and
Purchasing Shares; Selling
Your Shares; The Share
Price of Each Portfolio;
Dividends and Taxes;
General Information
Item 7. Purchase of Securities Being Offered.. Cover Page; Opening an
Account and Purchasing
Shares
Item 8. Redemption or Repurchase.............. Selling Shares
Item 9. Pending Legal Proceedings............. Not Applicable
<CAPTION>
FORM N-1A LOCATION IN STATEMENT
ITEM NUMBER OF ADDITIONAL INFORMATION
<C> <C> <S>
Item 10. Cover Page............................ Cover Page
Item 11. Table of Contents..................... Cover Page
Item 12. General Information and History....... Investment Objectives and
Policies
Item 13. Investment Objective and Policies..... Investment Objectives and
Policies; Investment
Limitations
Item 14. Management of the Fund................ Management of the Fund
Item 15. Control Persons and Principal Holders
of Securities......................... Management of the Fund
Item 16. Investment Advisory and Other
Services.............................. Management of the Fund
Item 17. Brokerage Allocation.................. Not Applicable
Item 18. Capital Stock and Other Securities.... Financial Statements
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchase of Shares;
Redemption of Shares
Item 20. Tax Status............................ Appendix
Item 21. Underwriters.......................... Not Applicable
Item 22. Calculations of Yield Quotations of
Money Market Fund .................... Calculation of Yield
Item 23. Financial Statements.................. Financial Statements
</TABLE>
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[LOGO OF VANGUARD ADMIRAL FUNDS APPEARS HERE] A Member of The Vanguard Group

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PROSPECTUS--MAY 24, 1996
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NEW ACCOUNT INFORMATION: INVESTOR INFORMATION DEPARTMENT--1-800-662-7447 (SHIP)
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SHAREHOLDER ACCOUNT SERVICES: CLIENT SERVICES DEPARTMENT--1-800-662-2739 (CREW)
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INVESTMENT Vanguard Admiral Funds, Inc. (the "Fund") is an open-end di-
OBJECTIVES AND versified investment company. The Fund consists of four Port-
POLICIES folios, each of which invests in U.S. Treasury securities
within prescribed maturity and quality standards:
. Admiral U.S. Treasury Money Market Portfolio
. Admiral Short-Term U.S. Treasury Portfolio
. Admiral Intermediate-Term U.S. Treasury Portfolio
. Admiral Long-Term U.S. Treasury Portfolio
The objective of each of these four Portfolios is to provide
current income consistent with the preservation of capital
and liquidity. The Admiral U.S. Treasury Money Market Portfo-
lio also seeks to maintain a constant net asset value of
$1.00 per share. AN INVESTMENT IN THE MONEY MARKET PORTFOLIO
IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT AND
THERE CAN BE NO ASSURANCE THAT THE PORTFOLIO WILL BE ABLE TO
MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE. There
can be no assurance that any of the Fund's Portfolios will
achieve its stated objective. Shares of the Fund are neither
insured nor guaranteed by any agency of the U.S. Government,
including the FDIC.
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OPENING AN Please complete and return the Account Registration Form. If
ACCOUNT you need assistance in completing this Form, please call the
Investor Information Department. To open an Individual Re-
tirement Account (IRA), please use a Vanguard IRA Adoption
Agreement. To obtain a copy of this form, call 1-800-662-
7447, Monday through Friday, from 8:00 a.m. to 9:00 p.m., and
Saturday, from 9:00 a.m. to 4:00 p.m. (Eastern time). The
minimum initial investment is $50,000 per Portfolio. The Fund
is offered on a no-load basis (i.e., there are no sales com-
missions or 12b-1 fees). However, the Fund incurs expenses
for investment advisory, management, administrative and dis-
tribution services.
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ABOUT THIS This Prospectus is designed to set forth concisely the infor-
PROSPECTUS mation you should know about the Fund before you invest. It
should be retained for futurereference. A "Statement of Addi-
tional Information" containing additional information about
the Fund has been filed with the Securities and
ExchangeCommission. This Statement is dated May 24, 1996, and
has been incorporated by reference into this Prospectus. A
copy may be obtained without charge by writing to the Fund or
by calling the Investor Information Department.
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<TABLE>
<CAPTION>

TABLE OF CONTENTS Page
<S> <C>
Highlights............................................................ 2
Fund Expenses......................................................... 4
Financial Highlights.................................................. 5
Yield and Total Return................................................ 6

FUND INFORMATION

Investment Objectives................................................. 7
Investment Policies................................................... 7
Investment Risks...................................................... 8
Who Should Invest..................................................... 10
Implementation of Policies............................................ 10
Investment Limitations................................................ 13
Management of the Fund................................................ 14
Investment Adviser.................................................... 14
Dividends, Capital Gains and Taxes.................................... 16
The Share Price of Each Portfolio..................................... 17
General Information................................................... 19

SHAREHOLDER GUIDE

Opening an Account and Purchasing Shares.............................. 20
When Your Account Will Be Credited.................................... 23
Selling Your Shares................................................... 24
Exchanging Your Shares................................................ 27
Important Information About Telephone Transactions.................... 28
Transferring Registration............................................. 29
Other Vanguard Services............................................... 29
</TABLE>
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR AD-
EQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OF-
FENSE.
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<PAGE>

HIGHLIGHTS

ADMIRAL U.S. TREASURY MONEY MARKET PORTFOLIO--expects to
maintain a dollar-weighted average maturity of 90 days or
less and seeks to maintain a stable $1.00 share price. An in-
vestment in the Admiral U.S. Treasury Money Market Portfolio
is neither insured nor guaranteed by the U.S. Government, and
there is no assurance that the Portfolio will be able to
maintain a stable net asset value of $1.00 per share.

ADMIRAL SHORT-TERM U.S. TREASURY PORTFOLIO--expects to main-
tain a dollar-weighted average maturity of 1 to 3 years.

ADMIRAL INTERMEDIATE-TERM U.S. TREASURY PORTFOLIO--expects to
maintain a dollar-weighted average maturity of 5 to 10 years.

ADMIRAL LONG-TERM U.S. TREASURY PORTFOLIOS--expects to main-
tain a dollar-weighted average maturity of 15 to 30
years. PAGE 7
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RISK As mutual funds investing in U.S. Treasury securities, the
CHARACTERISTICS four Portfolios of the Fund are subject primarily to interest
rate risk and income risk. INTEREST RATE RISK is the poten-
tial for a decline in bond prices due to rising market inter-
est rates. The Admiral U.S. Treasury Money Market Portfolio,
which is expected to maintain a stable $1.00 share price,
provides minimal exposure to interest rate risk. In contrast,
share prices for the Admiral Short-Term, Intermediate-Term,
and Long-Term U.S. Treasury Portfolios will fluctuate as in-
terest rates change, with longer-maturity Portfolios gener-
ally exhibiting greater price fluctuations than shorter-matu-
rity Portfolios.

INCOME RISK is the potential for a decline in a Portfolio's
income due to falling market interest rates. In relative
terms, income risk will be higher for the Fund's shorter-term
Portfolios and lower for the Fund's longer-term Portfolios.
The following table summarizes both the income and interest
rate risks to which the four Portfolios are subject:
<TABLE>
<CAPTION>
INTEREST INCOME
ADMIRAL PORTFOLIO RATE RISK RISK
------------------------------------------------------------
<S> <C> <C>
U.S. Treasury Money Market Negligible Very high
Short-Term U.S. Treasury Low to moderate High
Intermediate-Term U.S. Treasury Moderate to high Moderate
Long-Term U.S. Treasury High to very high Low
</TABLE>
PAGE 8
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2
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THE VANGUARD The Fund is a member of The Vanguard Group of Investment Com-
GROUP panies, a group of more than 30 investment companies with
more than 90 distinct investment portfolios and total assets
in excess of $190 billion. The Vanguard Group, Inc. ("Van-
guard"), a subsidiary jointly owned by the Vanguard Funds,
provides all management, administrative, distribution and ac-
counting services on an at-cost basis to the Funds in the
Group.

PAGE 14
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INVESTMENT The Fund receives investment advisory services on an at-cost
ADVISER basis from Vanguard's Fixed Income Group. As a result, the
Fund receives its investment advisory services at a substan-
tially lower cost than would be possible if the Fund paid an
investment advisory fee to an external investment adviser.
PAGE 14
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DIVIDEND Each Portfolio declares a dividend each business day based on
POLICY its ordinary income. Dividends are paid monthly and may be
received in cash or reinvested to buy additional shares.

PAGE 16
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TAXES Dividends paid by the Fund's Portfolios are generally subject
to federal income tax. It is expected that most of the income
from the Fund's Portfolios will be attributable to U.S. Trea-
sury and other "direct" Government obligations. Such income
is exempt from state and local income taxes in most states.
Any capital gains distributions from a Portfolio are subject
to federal income tax, as well as applicable state and local
taxes. A sale of shares, whether by outright redemption,
checkwriting redemption, or an exchange, is a taxable event
and may result in a capital gain or loss.

PAGE 16
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PURCHASING You may purchase shares by mail, wire or exchange from an-
SHARES other Vanguard Fund. The minimum initial investment is
$50,000 per Portfolio; the minimum for subsequent investments
is $100. There are no sales commissions or 12b-1 fees.
PAGE 20
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SELLING SHARES You may redeem shares of each Portfolio by mail, telephone,
wire or check. There is no charge for redemption, except for
wire withdrawals under $5,000, which are subject to a $5
charge. Your bank may also assess a fee for incoming wires.
PAGE 24
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SERVICES TO The Fund offers free checkwriting services (minimum $250 per
SHAREHOLDERS check) for easy access to your account balance.
PAGE 24

The Fund also offers other special services: Direct Deposit,
for electronic deposit of most Government and private payroll
checks; Fund Express, for electronic transfers between the
Fund and your bank account; and Tele-Account, for 24-hour
telephone access to your Fund account balance and certain
transactions.
PAGE 29
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3
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FUND EXPENSES The following table illustrates ALL expenses and fees that
you would incur as a shareholder of the Fund. The expenses
set forth below are for the 1996 fiscal year.
<TABLE>
<CAPTION>
INTERMEDIATE- U.S. TREASURY
SHORT-TERM TERM LONG-TERM MONEY
SHAREHOLDER TRANSACTION U.S. TREASURY U.S. TREASURY U.S. TREASURY MARKET
EXPENSES PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales Load Imposed on
Purchases.............. None None None None
Sales Load Imposed on
Reinvested Dividends... None None None None
Redemption Fees*........ None None None None
Exchange Fees........... None None None None
<CAPTION>
INTERMEDIATE- U.S. TREASURY
SHORT-TERM TERM LONG-TERM MONEY
ANNUAL FUND OPERATING U.S. TREASURY U.S. TREASURY U.S. TREASURY MARKET
EXPENSES PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management &
Administrative
Expenses............... 0.10% 0.10% 0.10% 0.10%
Investment Advisory
Fees................... 0.01 0.01 0.01 0.01
12b-1 Fees.............. None None None None
Other Expenses
Distribution Costs..... 0.03 0.02 0.02 0.03
Miscellaneous Expenses. 0.01 0.02 0.02 0.01
---- ---- ---- ----
Total Other Expenses 0.04% 0.04% 0.04% 0.04%
---- ---- ---- ----
TOTAL OPERATING
EXPENSES............. 0.15% 0.15% 0.15% 0.15%
==== ==== ==== ====
* Wire redemptions under $5,000 are subject to a $5 charge.
</TABLE>

The purpose of this table is to assist you in understanding
the various expenses that you would bear directly or indi-
rectly as an investor in the Fund.

The following example illustrates the expenses that you would
incur on a $1,000 investment over various periods, assuming
(1) a 5% annual rate of return and (2) redemption at the end
of each period.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Admiral U.S. Treasury Money Market
Portfolio........................ $2 $5 $8 $19
Admiral Short-Term U.S. Treasury
Portfolio........................ $2 $5 $8 $19
Admiral Intermediate-Term U.S.
Treasury Portfolio............... $2 $5 $8 $19
Admiral Long-Term U.S. Treasury
Portfolio........................ $2 $5 $8 $19
</TABLE>

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY
BE HIGHER OR LOWER THAN THOSE SHOWN.
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4
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FINANCIAL The following financial highlights for a share outstanding
HIGHLIGHTS throughout the period have been audited by Price Waterhouse
LLP, independent accountants, whose report thereon was un-
qualified. This information should be read in conjunction
with the Fund's financial statements and notes thereto,
which, together with the remaining portions of the Fund's
1996 Annual Report to Shareholders, are incorporated by ref-
erence in the Statement of Additional Information and this
Prospectus, and which appear, along with the report of Price
Waterhouse LLP, in the Fund's 1996 Annual Report to the
Shareholders. For a more complete discussion of the Fund's
performance, please see the Fund's 1996 Annual Report to
Shareholders which may be obtained without charge by writing
to the Fund or calling our Investor Information Department at
1-800-662-7447.

<TABLE>
<CAPTION>
------------------------------------------- -------------------------------------------
SHORT-TERM U.S. TREASURY
U.S. TREASURY MONEY MARKET PORTFOLIO PORTFOLIO
------------------------------------------- -------------------------------------------
YEAR ENDED JANUARY 31, YEAR ENDED JANUARY 31,
------------------------- DEC. 14, 1992+ ------------------------- DEC. 14, 1992+
1996 1995 1994 TO JAN. 31, 1993 1996 1995 1994 TO JAN. 31, 1993
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 9.77 $ 10.26 $ 10.17 $10.00
------- ------- ------- ------ ------- ------- ------- ------
INVESTMENT OPERATIONS
Net Investment Income.. .055 .041 .029 .004 .626 .518 .448 .065
Net Realized and
Unrealized Gain (Loss)
on Investments........ -- -- -- -- .460 (.468) .101 .170
------- ------- ------- ------ ------- ------- ------- ------
TOTAL FROM INVESTMENT
OPERATIONS........... .055 .041 .029 .004 1.086 .050 .549 .235
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DISTRIBUTIONS
Dividends from Net
Investment Income..... (.055) (.041) (.029) (.004) (.626) (.518) (.448) (.065)
Distributions from
Realized Capital
Gains................. -- -- -- -- -- (.022) (.011) --
------- ------- ------- ------ ------- ------- ------- ------
TOTAL DISTRIBUTIONS... (.055) (.041) (.029) (.004) (.626) (.540) (.459) (.065)
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NET ASSET VALUE, END OF
PERIOD................. $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 10.23 $ 9.77 $ 10.26 $10.17
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TOTAL RETURN............ 5.66% 4.19% 2.99% 0.41% 11.41% 0.57% 5.50% 2.35%
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RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (Millions)...... $ 1,778 $ 1,371 $ 860 $ 149 $ 426 $ 333 $ 252 $ 63
Ratio of Expenses to
Average Net Assets..... .15% .15% .15% .15%* .15% .15% .15% .15%*
Ratio of Net Investment
Income to Average Net
Assets................. 5.50% 4.21% 3.06% 3.12%* 6.22% 5.30% 4.38% 4.87%*
Portfolio Turnover Rate. N/A N/A N/A N/A 95% 129% 90% 7%
</TABLE>
*Annualized.
+Commencement of operations.

5
<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------- --------------------------------------------
INTERMEDIATE-TERM U.S. LONG-TERM U.S. TREASURY
TREASURY PORTFOLIO PORTFOLIO
-------------------------------------------- --------------------------------------------
YEAR ENDED JANUARY 31, YEAR ENDED JANUARY 31,
-------------------------- DEC. 14, 1992+ -------------------------- DEC. 14, 1992+
1996 1995 1994 TO JAN. 31, 1993 1996 1995 1994 TO JAN. 31, 1993
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD.... $ 9.58 $10.58 $ 10.29 $10.00 $ 9.40 $10.90 $ 10.30 $10.00
------- ------- ------- ------ ------- ------- ------- ------
INVESTMENT OPERATIONS
Net Investment Income.. .665 .598 .578 .084 .691 .670 .709 .096
Net Realized and
Unrealized Gain (Loss)
on Investments........ 1.120 (.995) .418 .290 1.749 (1.405) .881 .300
------- ------- ------- ------ ------- ------- ------- ------
TOTAL FROM INVESTMENT
OPERATIONS........... 1.785 (.397) .996 .374 2.440 (.735) 1.590 .396
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DISTRIBUTIONS
Dividends from Net
Investment Income..... (.665) (.598) (.578) (.084) (.691) (.670) (.709) (.096)
Distributions from
Realized Capital
Gains................. -- (.005) (.128) -- (.089) (.095) (.281) --
------- ------- ------- ------ ------- ------- ------- ------
TOTAL DISTRIBUTIONS... (.665) (.603) (.706) (.084) (.780) (.765) (.990) (.096)
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NET ASSET VALUE,
END OF PERIOD.......... $ 10.70 $ 9.58 $ 10.58 $10.29 $ 11.06 $ 9.40 $ 10.90 $10.30
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TOTAL RETURN............ 19.16% (3.67)% 9.89% 3.75% 26.74% (6.60)% 15.90% 3.97%
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RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (Millions)...... $ 585 $ 357 $ 332 $ 78 $ 186 $ 136 $ 99 $ 49
Ratio of Expenses to
Average Net Assets..... .15% .15% .15% .15%* .15% .15% .15% .15%*
Ratio of Net Investment
Income to Average Net
Assets................. 6.49% 6.15% 5.46% 6.31%* 6.66% 7.06% 6.58% 7.22%*
Portfolio Turnover Rate. 64% 134% 102% 0% 125% 44% 51% 17%
</TABLE>
*Annualized.
+Commencement of operations.
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From time to time a Portfolio of the Fund may advertise its
YIELD AND yield and total return. Both yield and total return figures
TOTAL RETURN are based on historical earnings and are not intended to in-
dicate future performance. The "total return" of a Portfolio
refers to the average annual compounded rates of return over
one-, five- and ten-year periods or over the life of a Port-
folio (as stated in the advertisement) that would equate an
initial amount invested at the beginning of a stated period
to the ending redeemable value of the investment, assuming
the reinvestment of all dividends and capital gains distribu-
tions.

The Admiral U.S. Treasury Money Market Portfolio's "seven-
day" or "current" yield reflects the income earned by a hypo-
thetical account in the Portfolio during a seven-day period,
expressed as an annual percentage rate. The Portfolio's "ef-
fective yield" assumes the income over the seven-day period
is reinvested weekly, resulting in a slightly higher stated
yield through compounding.

6
<PAGE>

In accordance with industry guidelines set forth by the U.S.
Securities and Exchange Commission, the "30-day yield" of the
Admiral Short-Term, Intermediate-Term, and Long-Term U.S.
Treasury Portfolios is calculated by dividing net investment
income per share earned during a 30-day period by the net as-
set value per share on the last day of the period. Net in-
vestment income includes interest and dividend income earned
on a Portfolio's securities; it is net of all expenses and
all recurring and nonrecurring charges that have been applied
to all shareholder accounts. The yield calculation assumes
that net investment income earned over 30 days is compounded
monthly for six months and then annualized. Methods used to
calculate advertised yields are standardized for all stock
and bond mutual funds. However, these methods differ from the
accounting methods used by a Portfolio to maintain its books
and records, and so the advertised 30-day yield may not fully
reflect the income paid to an investor's account.
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INVESTMENT The Fund is an open-end diversified investment company. The
OBJECTIVES Fund consists of four Portfolios, each of which invests pri-
marily in U.S. Treasury securities within prescribed maturity
and quality standards.

THE PORTFOLIOS The objective of each Portfolio is to provide current income
SEEK TO consistent with the preservation of capital and liquidity.
PROVIDE CURRENT The Admiral U.S. Treasury Money Market Portfolio also seeks
INCOME to maintain, but does not guarantee, a constant net asset
value of $1.00 per share. There is no assurance that any of
the Fund's Portfolios will achieve its stated objective.

The investment objective of each Portfolio is fundamental and
so cannot be changed without the approval of a majority of
the Portfolio's shareholders.
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INVESTMENT The Fund offers a money market Portfolio and three bond Port-
POLICIES folios. All four Portfolios invest primarily in securities
backed by the full faith and credit of the U.S. Government.
Such securities include U.S. Treasury obligations (bills,
notes and bonds), as well as other full faith and credit ob-
ligations of the U.S. Government. The latter include securi-
ties issued by the General Services Administration, Govern-
ment National Mortgage Association, Rural Electrification Ad-
ministration, Small Business Administration, Federal Financ-
ing Bank, and other Governmental agencies. The Fund is man-
aged without regard to tax ramifications.

THE FOUR THE ADMIRAL U.S. TREASURY MONEY MARKET PORTFOLIO invests 100%
PORTFOLIOS of its assets in securities backed by the full faith and
INVEST IN U.S. credit of the U.S. Government. Also, at least 65% of the
TREASURY Portfolio's assets will be invested in U.S. Treasury bills,
SECURITIES notes and bonds. In seeking to provide a stable share price
of $1.00, the Portfolio is expected to maintain a dollar-
weighted average maturity of 90 days or less, and will pur-
chase securities with an effective maturity of 13 months or
less.

THE ADMIRAL SHORT-TERM, INTERMEDIATE-TERM, AND LONG-TERM U.S.
TREASURY PORTFOLIOS each invest at least 85% of their assets
in securities backed by the full faith and credit of the U.S.
Government. Also, at least 65% of each Portfolio's

7
<PAGE>

assets will be invested in U.S. Treasury bills, notes and
bonds. The three Portfolios differ primarily in terms of av-
erage maturity. The Admiral Short-Term U.S. Treasury Portfo-
lio is expected to maintain a dollar-weighted average matu-
rity of between 1 and 3 years; the Admiral Intermediate-Term
U.S. Treasury Portfolio, a dollar-weighted average maturity
of between 5 and 10 years; and the Admiral Long-Term U.S.
Treasury Portfolio, a dollar-weighted average maturity of be-
tween 15 and 30 years.

The balance of the assets of Admiral Short-Term, Intermedi-
ate-Term, and Long-Term U.S. Treasury Portfolios may be in-
vested in other U.S. Government agency securities, as well as
repurchase agreements collateralized by such securities. The
three Portfolios may also invest in bond (interest rate)
futures contracts and options to a limited extent and not for
speculative purposes. See "Implementation of Policies" for a
description of these and other investment practices of the
Fund.

Each Portfolio is responsible for voting the shares of all
securities it holds.

The investment policies of each Portfolio are not fundamental
and so may be changed without shareholder approval by the
Board of Directors. However, shareholders would be notified
of any material change in a Portfolio's policies.
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INVESTMENT As mutual funds investing in fixed-income securities, the
RISKS four Portfolios of the Fund are subject to interest rate
risk, income risk, credit risk and manager risk.

EXCEPT FOR THE INTEREST RATE RISK is the potential for a decline in bond
MONEY MARKET prices due to rising market interest rates. In general, bond
PORTFOLIO, prices vary inversely with interest rates. If interest rates
SHARE PRICES rise, bond prices generally fall; if interest rates fall,
WILL FLUCTUATE bond prices generally rise. The change in price depends on
several factors, including the bond's maturity date. In gen-
eral, bonds with longer maturities are more sensitive to in-
terest rates than bonds with shorter maturities.

These principles of interest rate risk also apply to U.S.
Treasury and U.S. Government agency securities. As with other
bond investments, U.S. Government securities will rise and
fall in value as interest rates change. A SECURITY BACKED BY
THE U.S. TREASURY OR A U.S. GOVERNMENT AGENCY IS GUARANTEED
ONLY AS TO THE TIMELY PAYMENT OF INTEREST AND PRINCIPAL WHEN
HELD TO MATURITY. THE CURRENT MARKET PRICES FOR SUCH SECURI-
TIES ARE NOT GUARANTEED AND WILL FLUCTUATE.

The Admiral U.S. Treasury Money Market Portfolio, with a dol-
lar-weighted average maturity of less than 90 days, invests
in short-term instruments and seeks to maintain a stable
$1.00 share price. As a result, the Portfolio is expected to
provide minimal exposure to interest rate risk. In relative
terms, share price fluctuations are expected to be low to
moderate for the Admiral Short-Term U.S. Treasury Portfolio,
moderate to high for the Admiral Intermediate-Term U.S. Trea-
sury Portfolio, and high to very high for the Admiral Long-
Term U.S. Treasury Portfolio, refecting the differing average
maturity characteristics of the three Portfolios. To illus-
trate the relative risk exposure of the Fund's three bond

8
<PAGE>

Portfolios, the chart below depicts the effect of an immedi-
ate 2% change in interest rates on the principal value of
three bonds of varying maturities:

PERCENT CHANGE IN THE PRICE OF A PAR BOND YIELDING 7.5%

<TABLE>
<CAPTION>
2% INCREASE IN 2% DECREASE IN
STATED MATURITY INTEREST RATES INTEREST RATES
---------------------------- -------------- --------------
<S> <C> <C>
Short-Term (2.5 years) - 4.3% + 4.6%
Intermediate-Term (10 years) -12.7% +15.2%
Long-Term (20 years) -17.8% +24.1%
</TABLE>

Note: By comparison, the Admiral U.S. Treasury Money Market
Portfolio seeks to maintain a stable $1.00 per share
price.

This chart is intended to provide you with guidelines for de-
termining the degree of interest rate risk you may be willing
to assume. The yield and price changes shown should not be
taken as representative of a Portfolio's current or future
yield or expected change in a Portfolio's share price.

<TABLE>
<CAPTION>
INTEREST INCOME
ADMIRAL PORTFOLIO RATE RISK RISK
---------------------------------------------------------
<S> <C> <C>
U.S. Treasury Money Market Negligible Very high
Short-Term U.S. Treasury Low to moderate High
Intermediate-Term U.S. Treasury Moderate to high Moderate
Long-Term U.S. Treasury High to very high Low
</TABLE>
CREDIT RISK is the possibility that an issuer of securities
held by a Portfolio will fail to make timely payment of in-
terest or principal. Because all four Portfolios invest pri-
marily in securities backed by the full faith and credit of
the U.S. Government, credit risk is expected to be negligi-
ble.

Finally, the investment adviser manages the Fund's Portfolios
according to the traditional methods of "active" investment
management, which involve the buying and selling of securi-
ties based upon economic, financial and market analysis and
investment judgement. MANAGER RISK refers to the possibility
that a Portfolio's investment adviser may fail to execute the
Portfolio's investment strategy effectively. As a result, a
Portfolio may fail to achieve its stated objective.
- --------------------------------------------------------------------------------

9
<PAGE>

WHO SHOULD The four Portfolios of the Fund are intended for investors
INVEST who are seeking current income from their investments consis-
tent with the preservation of capital and liquidity. The
INVESTORS Portfolios are also suitable for investors with common stock
SEEKING holdings who are seeking a complementary money market or
CURRENT INCOME fixed-income investment in order to create a more diversified
and balanced investment mix. Because of the risks associated
with bond investments, the Fund is intended to be a long-term
investment vehicle and is not designed to provide investors
with a means of speculating on short-term bond market move-
ments. Investors who engage in excessive account activity
generate additional costs which are borne by all of the
Fund's shareholders. In order to minimize such costs, the
Fund has adopted the following policies. The Fund reserves
the right to reject any purchase request (including exchange
purchases from other Vanguard portfolios) that is reasonably
deemed to be disruptive to efficient portfolio management,
either because of the timing of the investment or previous
excessive trading by the investor. Additionally, the Fund has
adopted exchange privilege limitations as described in the
section "Exchange Privilege Limitations." Finally, the Fund
reserves the right to suspend the offering of its shares.

You should base your selection of a Portfolio (or Portfolios)
of the Fund on your own objectives, risk preferences, and
time horizon.

THE ADMIRAL U.S. TREASURY MONEY MARKET PORTFOLIO is designed
for investors who are seeking current income and a stable
share price. The yield of the Portfolio is expected to fluc-
tuate from day to day and be lower on average than yields
from the Fund's other Portfolios. The Portfolio is suitable
as a short-term investment vehicle, emphasizing maximum pro-
tection of principal.

THE ADMIRAL SHORT-TERM AND INTERMEDIATE-TERM U.S. TREASURY
PORTFOLIOS are designed for investors who are willing to ac-
cept moderate to high share price fluctuations in exchange
for potentially higher and more durable yields. The choice
between the two is principally one of current yield and expo-
sure to interest rate risk. The Portfolios are intended for
investors with medium-term time horizons (e.g., three to five
years).

THE ADMIRAL LONG-TERM U.S. TREASURY PORTFOLIO is intended for
investors who are seeking the highest, most durable streams
of income and who can tolerate high to very high fluctuations
in share price in pursuit of their income objectives. Invest-
ors in the Portfolio should have a long-term investment hori-
zon (e.g., more than five years).
- --------------------------------------------------------------------------------
IMPLEMENTATION The Portfolios of the Fund follow a number of additional in-
OF POLICIES vestment practices in pursuit of their objectives.

THREE The Admiral Short-Term, Intermediate-Term, and Long-Term U.S.
PORTFOLIOS MAY Treasury Portfolios may invest in repurchase agreements ac-
INVEST IN cording to the restrictions and limitations set forth above
REPURCHASE in "Investment Policies." A repurchase agreement is a means
AGREEMENTS of investing monies for a short period. In a repurchase
agreement, a seller--a U.S. commercial bank or recognized
U.S. securities dealer--sells

10
<PAGE>

securities to a Portfolio and agrees to repurchase the secu-
rities at the Portfolio's cost plus interest within a speci-
fied period (normally one day). In these transactions, the
securities purchased by the Portfolio will have a total value
equal to or in excess of the value of the repurchase agree-
ment, and will be held by the Fund's Custodian Bank until re-
purchased.

The use of repurchase agreements involves certain risks. For
example, if the seller of the agreement defaults on its obli-
gation to repurchase the underlying securities at a time when
the value of these securities has declined, the Portfolio may
incur a loss upon disposition of them. If the seller of the
agreement becomes insolvent and subject to liquidation or re-
organization under the bankruptcy code or other laws, a bank-
ruptcy court may determine that the underlying securities are
collateral not within the control of the Portfolio and there-
fore subject to sale by the trustee in bankruptcy. Finally,
it is possible that the Portfolio may not be able to substan-
tiate its interest in the underlying securities. While the
Fund's management acknowledges these risks, it is expected
that they can be controlled through stringent security selec-
tion and careful monitoring.

DERIVATIVE Derivatives are instruments whose values are linked to or de-
INVESTING rived from an underlying security. The most common and con-
ventional types of derivative securities are futures and op-
tions.

THREE The Admiral Short-Term, Intermediate-Term, and Long-Term U.S.
PORTFOLIOS MAY Treasury Portfolios may invest in futures contracts and op-
INVEST IN tions to a limited extent. Specifically, these three Portfo-
FUTURES lios may enter into futures contracts provided that not more
CONTRACTS AND than 5% of each Portfolio's assets are required as a futures
OPTIONS contract margin deposit; in addition, each of the three Port-
folios may enter into futures contracts and options transac-
tions only to the extent that obligations under such con-
tracts or transactions represent not more than 20% of a Port-
folio's assets.

Futures contracts and options may be used for several common
fund management strategies: to maintain cash reserves while
simulating full investment, to facilitate trading, to reduce
transaction costs, or to seek higher investment returns when
a specific futures contract is priced more attractively than
other futures contracts or the underlying security or index.
The Portfolios intend to use futures contracts only for bona
fide hedging purposes and will not use futures contracts or
options for speculative purposes.

The Portfolios may use futures contracts for bona fide "hedg-
ing" purposes. In executing a hedge, a manager sells, for ex-
ample, stock index futures to protect against a decline in
the stock market. As such, if the market drops, the value of
the futures position will rise, thereby offsetting the de-
cline in value of the Portfolios' stock holdings.

The Fund may also invest in other conventional derivatives
designed to replicate the risk/return characteristics of a
conventional fixed income note or bond. Such derivatives
would be managed, in both structure and concentration, to ad-
here to the Fund's investment policy restrictions as to mar-
ket and credit risk.

11
<PAGE>

THE FUND MAY The Portfolios also invest in a relatively conservative class
INVEST IN CMOS of collateralized mortgage obligations (CMOs) which feature a
high degree of cash flow predictability and less vulnerabil-
ity to mortgage prepayment risk. To reduce credit risk, Van-
guard purchases these less risky classes of collateralized
mortgage obligations issued only by agencies of the U.S. Gov-
ernment or privately-issued collateralized mortgage obliga-
tions that carry high-quality investment-grade ratings.

FUTURES The primary risks associated with the use of futures con-
CONTRACTS AND tracts and options are: (i) imperfect correlation between the
OPTIONS POSE change in market value of the bonds held by a Portfolio and
CERTAIN RISKS the prices of futures contracts and options; and (ii) possi-
ble lack of a liquid secondary market for a futures contract
and the resulting inability to close a futures position prior
to its maturity date. The risk of imperfect correlation will
be minimized by investing only in those contracts whose price
fluctuations are expected to resemble those of the Portfo-
lio's underlying securities. The risk that a Portfolio will
be unable to close out a futures position will be minimized
by entering into such transactions on a national exchange
with an active and liquid secondary market.

THREE The Admiral Short-Term, Intermediate-Term, and Long-Term U.S.
PORTFOLIOS MAY Treasury Portfolios of the Fund may lend their investment se-
LEND THEIR curities to qualified institutional investors for either
SECURITIES short-term or long-term purposes of realizing additional in-
come. Loans of securities by a Portfolio will be collateral-
ized by cash, letters of credit, or securities issued or
guaranteed by the U.S. Government or its agencies. The col-
lateral will equal at least 100% of the current market value
of the loaned securities, and such loans may not exceed 33
1/3% of the value of the Portfolio's securities.

THREE The Admiral Short-Term, Intermediate-Term, and Long-Term U.S.
PORTFOLIOS MAY Treasury Portfolios may invest up to 15% of their net assets
INVEST IN in restricted or illiquid securities. Restricted securities
RESTRICTED are securities which are not freely marketable or which are
SECURITIES subject to restrictions upon sale under the Securities Act of
1933. (Included within this limit are restricted securities
and other securities for which price quotations are not read-
ily available.) Pursuant to Rule 144A under the Securities
Act of 1933, as amended, if a substantial market among quali-
fied institutional buyers develops for such securities held
by any of these three Portfolios, the Fund intends to treat
such securities as liquid securities, in accordance with pro-
cedures approved by the Fund's Board of Directors.

THREE The Admiral Short-Term, Intermediate-Term, and Long-Term U.S.
PORTFOLIOS MAY Treasury Portfolios may invest in collateralized mortgage ob-
INVEST IN CMOS ligations (CMOs), bonds that are collateralized by whole loan
mortgages or mortgage pass-through securities. Generally, the
three Portfolios will purchase CMOs which are collateralized
by mortgage securities issued or guaranteed by the U.S. Gov-
ernment or its agencies. The bonds issued under a CMO struc-
ture are divided into groups (or tranches) with varying matu-
rities, and the cash flows generated by the mortgages or
mortgage pass-through securities in the collateral pool are
used to first pay interest and then principal to CMO invest-
ors (such as the Fund's Portfolios).

12
<PAGE>

Under a CMO structure, the repayment of principal among the
different groups in prioritized in accordance with the terms
of the particular CMO issuance. The "fastest-pay" group of
bonds would initially receive all principal payments. When
that group of bonds is retired, the next group or groups, in
the sequence specified in the prospectus, receive all princi-
pal payments until all of the groups are retired. Many CMO
issues also include minimum reinvestment rate and minimum
sinking-fund guarantees.

Aside from market risk, the primary risk involved in any
mortgage security, such as a CMO, is exposure to prepayment
risk. Prepayment risk is the possibility that, as interest
rates fall, homeowners are more likely to refinance their
home mortgages. When home mortgages are refinanced, the prin-
cipal on CMO bonds held by the Portfolios are "prepaid" ear-
lier than expected. The Portfolios must then reinvest the un-
anticipated principal in new bond issuances, just at a time
when interest rates on new mortgage investments are falling.
To the extent a particular group of bonds is exposed to this
risk, the bondholder is generally compensated in the form of
enhanced yield.

Typically, the Portfolios will invest in CMOs that most ap-
propriately reflect their average maturity characteristics
and market risk profiles. Consequently, the Admiral Short-
Term U.S. Treasury Portfolio invests only in CMOs with short-
term average maturities that are believed to be highly pre-
dictable. Similarly, the Admiral Intermediate- and Long-Term
U.S. Treasury Portfolios will invest in those CMOs that carry
market risks and expected maturities commensurate with inter-
mediate- and long-term bonds.

PORTFOLIO Although they generally seek to invest for the long term, the
TURNOVER RATES Admiral Short-Term, Intermediate-Term and Long-Term U.S.
WILL VARY Treasury Portfolios retain the right to sell securities re-
gardless of how long they have been held. It is anticipated
that the annual portfolio turnover rate for the Admiral In-
termediate-Term and Long-Term U.S. Treasury Portfolios will
generally not exceed 200%. A 200% turnover rate would occur,
for example, if all of the securities in a Portfolio were re-
placed two times within one year. For the Admiral Short-Term
U.S. Treasury Portfolio, the portfolio turnover rate will be
higher due to the short-term maturities of the securities
purchased, but is not expected to exceed 300%. A higher Port-
folio turnover rate will cause a Portfolio to incur addi-
tional brokerage costs and may cause a Portfolio to realize a
higher level of capital gains or losses.
- --------------------------------------------------------------------------------
INVESTMENT Each Portfolio of the Fund has adopted certain limitations
LIMITATIONS designed to reduce its risk exposure. These limitations in-
clude the following:

THE FUND HAS (a) A Portfolio will not, with respect to 75% of its assets
ADOPTED (100% for the Admiral U.S. Treasury Money Market Portfo-
CERTAIN lio), invest more than 5% of the value of its assets in
FUNDAMENTAL the securities of any single company, excluding obliga-
LIMITATIONS tions of the United States Government and its agencies
and instrumentalities.

(b) A Portfolio will not borrow money except for emergency
purposes and then not in excess of 15% of total assets.

13
<PAGE>

(c) A Portfolio will not pledge, mortgage or hypothecate its
assets to an extent greater than 15% of the value of its
total assets.

These investment limitations are considered at the time in-
vestment securities are purchased. The limitations described
here and in the Statement of Additional Information may be
changed only with the approval of a majority of the
Fund's shareholders.
- --------------------------------------------------------------------------------

MANAGEMENT OF The Fund is a member of The Vanguard Group of Investment Com-
THE FUND panies, a family of more than 30 investment companies with
more than 90 distinct investment portfolios and total assets
VANGUARD in excess of $190 billion. Through their jointly-owned sub-
ADMINISTERS sidiary, The Vanguard Group, Inc. ("Vanguard"), the Fund and
AND the other funds in the Group obtain at cost virtually all of
DISTRIBUTES their corporate management, administrative, shareholder ac-
THE FUND counting and distribution services. Vanguard also provides
investment advisory services on an at-cost basis to certain
Vanguard funds. As a result of Vanguard's unique corporate
structure, the Vanguard funds have costs substantially lower
than those of most competing mutual funds. In 1995, the aver-
age expense ratio (annual costs including advisory fees di-
vided by total net assets) for the Vanguard funds amounted to
approximately .31% compared to an average of 1.11% for the
mutual fund industry (data provided by Lipper Analytical
Services).

The Officers of the Fund manage its day-to-day operations and
are responsible to the Fund's Board of Directors. The Direc-
tors set broad policies for the Fund and choose its Officers.
A list of the Directors and Officers of the Fund and a state-
ment of their present positions and principal occupations
during the past five years can be found in the Statement of
Additional Information.

Vanguard employs a supporting staff of management and admin-
istrative personnel needed to provide the requisite services
to the funds and also furnishes the funds with necessary of-
fice space, furnishings and equipment. Each fund pays its
share of Vanguard's total expenses, which are allocated among
the funds under methods approved by the Board of Directors
(Trustees) of each fund. In addition, each fund bears its own
direct expenses, such as legal, auditing and custodian fees.

Vanguard also provides distribution and marketing services to
the Vanguard funds. The funds are made available to investors
on a no-load basis (i.e., there are no sales commissions or
12b-1 fees). However, each fund bears its share of the
Group's distribution costs.
- --------------------------------------------------------------------------------

INVESTMENT The four Portfolios of the Fund receive all investment advi-
ADVISER sory services on an at-cost basis from Vanguard's Fixed In-
come Group. The Group provides investment advisory services
VANGUARD to more than 40 Vanguard money market and bond portfolios,
MANAGES THE both taxable and tax-exempt. Total assets under management by
FUND'S Vanguard's Fixed Income Group were approximately $66 billion
INVESTMENTS as of December 31, 1995. The Fixed Income Group is supervised
by the Officers of the Fund.

14
<PAGE>

Ian A. MacKinnon, Senior Vice President of Vanguard, has been
in charge of the Fixed Income Group since its inception in
1981. Mr. MacKinnon is responsible for setting the broad in-
vestment strategies employed by the Fund, and for overseeing
the portfolio managers who implement those strategies on a
day-to-day basis. The portfolio managers are as follows:

. Robert F. Auwaerter, a Principal of Vanguard, serves as
portfolio manager of the Admiral Intermediate-Term and
Long-Term U.S. Treasury Portfolios. Associated with the
Fixed Income Group since 1981, Mr. Auwaerter has managed
these Portfolios since their inception.

. John Hollyer, a Principal of Vanguard, serves as portfolio
manager of the Admiral Money Market and Short-Term U.S.
Treasury Portfolios. Associated with the Fixed Income Group
since 1989, Mr. Hollyer began managing the Portfolios in
1993. (Previously, the Portfolios were managed by Mr.
Auwaerter.) Prior to joining Vanguard, Mr. Hollyer traded
U.S. Government bonds for an international investment bank.

The Fixed Income Group manages the investment and reinvest-
ment of the assets of the Fund's Portfolios and continuously
reviews, supervises and administers each Portfolio's invest-
ment program, subject to the maturity and quality standards
specified in this Prospectus and supplemental guidelines ap-
proved by the Fund's Board of Directors. The Fixed Income
Group's selection of investments for the Portfolios is based
on: (a) continuing credit analysis of those instruments held
in the Portfolios and those being considered for inclusion
therein; (b) possible disparities in yield relationships be-
tween different fixed-income securities; and (c) actual or
anticipated movements in the general level of interest rates.

The Fixed Income Group is also responsible for the allocation
of principal business and portfolio brokerage and the negoti-
ation of commissions. The purchase and sale of investment se-
curities by the Fund will ordinarily be principal transac-
tions. Portfolio securities will normally be purchased di-
rectly from the issuer or from an underwriter or market maker
for the securities. There usually will be no brokerage com-
missions paid by a Portfolio for securities purchased from an
issuer. Purchases from underwriters of securities will in-
clude a commission or concession paid by the issuer to the
underwriter, and purchases from dealers serving as market
makers will include a dealer's mark-up.

In purchasing and selling securities for each of the Portfo-
lios, it is the Fund's policy to seek to obtain quality exe-
cution at the most favorable prices through issuers or re-
sponsible broker-dealers. In selecting broker-dealers to exe-
cute the securities transactions for the Portfolios, consid-
eration will be given to such factors as: the price of the
security; the rate of the commission; the size and difficulty
of the order; the reliability, integrity, financial condi-
tion, general execution and operational capabilities of com-
peting broker-dealers; and the overall brokerage and research
services provided to the Fund.
- --------------------------------------------------------------------------------

15
<PAGE>

DIVIDENDS, Dividends consisting of virtually all of the ordinary income
CAPITAL GAINS of each Portfolio are declared daily and are payable to
AND TAXES shareholders of record at the close of the previous business
day. Such dividends are paid on the first business day of
DIVIDENDS ARE each month. Capital gains distributions, if any, will be made
PAID ON THE annually.
FIRST BUSINESS
DAY OF EACH The Fund's dividend and capital gains distributions may be
MONTH reinvested in additional shares or received in cash. See
"Choosing a Distribution Option" for a description of these
distribution methods.

In order to satisfy certain requirements of the Tax Reform
Act of 1986, the Fund may declare year-end dividend and capi-
tal gains distributions during December. Such distributions,
if received by shareholders by January 31, are deemed to have
been paid by the Fund and received by shareholders on Decem-
ber 31 of the prior year.

DIVIDENDS WILL Each Portfolio of the Fund intends to continue to qualify for
BE SUBJECT TO taxation as a "regulated investment company" under the Inter-
FEDERAL INCOME nal Revenue Code so that each Portfolio will not be subject
TAX to federal income tax to the extent its income is distributed
to shareholders. Dividends paid by each Portfolio from net
investment income and net short-term capital gains, whether
received in cash or reinvested in additional shares, will be
taxable to shareholders as ordinary income. For corporate in-
vestors, dividends paid by the Fund from net investment in-
come will generally not qualify for the intercorporate divi-
dends-received deduction.

Distributions paid by the Fund from net long-term capital
gains (excess of long-term capital gains over long-term capi-
tal losses), if any, whether received in cash or reinvested
in additional shares, are taxable as long-term capital gains,
regardless of the length of time you have owned shares in the
Fund. Distributions paid by the Fund from net short-term cap-
ital gains (excess of short-term capital gains over short-
term capital losses), if any, whether received in cash or re-
invested in additional shares, are taxable as ordinary in-
come. Capital gains distributions are made when the Fund re-
alizes net capital gains on sales of portfolio securities
during the year. For the Fund, realized capital gains are not
expected to be a significant or predictable part of invest-
ment return.

The Fund will notify you annually as to the tax status of
dividend and capital gains distributions paid by the Fund.

A CAPITAL GAIN A sale of a Portfolio's shares is a taxable event and may re-
OR LOSS MAY BE sult in a capital gain or loss. A capital gain or loss may be
REALIZED UPON realized from an ordinary redemption of shares, a
EXCHANGE OR checkwriting redemption, or an exchange of shares between two
REDEMPTION mutual funds (or two portfolios of a mutual fund). Since the
Admiral U.S. Treasury Money Market Portfolio seeks to main-
tain a constant $1.00 share price for both purchases and re-
demptions, shareholders are not expected to realize a capital
gain or loss upon sale.

Dividend distributions, capital gains distributions, and cap-
ital gains or losses from redemptions and exchanges may be
subject to state and local taxes. The

16
<PAGE>

portion of a Portfolio's income derived from "full faith and
credit" U.S. Government obligations is exempt from state and
local taxes in most states. The Fund will indicate each year
the portion of a Portfolio's income, if any, that may qualify
for this exemption.

The Fund is required to withhold 31% of taxable dividends,
capital gains distributions, and redemptions paid to share-
holders who have not complied with IRS taxpayer identifica-
tion regulations. You may avoid this withholding requirement
by certifying on your Account Registration Form your proper
Social Security or Employer Identification number and by cer-
tifying that you are not subject to backup withholding.

The Fund has obtained a Certificate of Authority to do busi-
ness as a foreign corporation in Pennsylvania, and does busi-
ness and maintains an office in that state. In the opinion of
counsel, the shares of the Fund will be exempt from Pennsyl-
vania personal property taxes.

The tax discussion set forth above is included for general
information only. Prospective investors should consult their
own tax advisers concerning the state tax consequences of an
investment in the Fund.
- --------------------------------------------------------------------------------

THE SHARE Each Portfolio's net asset value (or price per share) is de-
PRICE OF EACH termined by dividing the Portfolio's total value of invest-
PORTFOLIO ments and other assets, less any liabilities, by the number
of outstanding shares of each Portfolio. Each Portfolio's net
asset value is determined as of the regular close of the New
York Stock Exchange (generally 4:00 p.m. Eastern time) on
each day the Exchange is open for trading.

ADMIRAL U.S. TREASURY MONEY MARKET PORTFOLIO. It is the pol-
icy of the Portfolio to attempt to maintain a net asset value
of $1.00 per share for purposes of sales and redemptions. The
instruments held by the Portfolio are valued on the basis of
amortized cost, which does not take into account unrealized
capital gains or losses. This involves valuing an instrument
at its cost and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the im-
pact of fluctuating interest rates on the market value of the
instrument. While this method provides certainty in valua-
tion, it may result in periods during which value, as deter-
mined by amortized cost, is higher or lower than the price
the Portfolio would receive if it sold the instrument.

The use of amortized cost and the maintenance of the Portfo-
lio's per share net asset value at $1.00 is based on its
election to operate under the provisions of Rule 2a-7 under
the Investment Company Act of 1940. As a condition of operat-
ing under that rule, the Portfolio must maintain a dollar-
weighted average portfolio maturity of 90 days or less, pur-
chase only instruments having remaining maturities of 13
months or less, and invest only in securities that are deter-
mined by the Directors to present minimal credit risks and
that are of high quality as determined by any major rating
service, or in the case of any instrument not so rated, con-
sidered by the Directors to be of comparable quality.

17
<PAGE>

The Directors have also agreed to establish procedures rea-
sonably designed, taking into account current market condi-
tions and the Portfolio's investment objective, to stabilize
the net asset value per share as computed for the purposes of
sales and redemptions at $1.00. These procedures include pe-
riodic review, as the Directors deem appropriate and at such
intervals as are reasonable in light of current market condi-
tions, of the relationship between the amortized cost value
per share and a net asset value per share based upon avail-
able indications of market value. In such a review, invest-
ments for which market quotations are readily available are
valued at the most recent bid price or quoted yield equiva-
lent for such securities or for securities of comparable ma-
turity, quality and type as obtained from one or more of the
major market makers for the securities to be valued. Other
investments and assets are valued at fair value, as deter-
mined in good faith by the Directors.

In the event of a deviation of over 1/2 of 1% between the
Portfolio's net asset value based upon available market quo-
tations or market equivalents and $1.00 per share based on
amortized cost, the Directors will promptly consider what ac-
tion, if any, should be taken. The Directors will also take
such action as they deem appropriate to eliminate or to re-
duce, to the extent reasonably practicable, any material di-
lution or other unfair results which might arise from differ-
ences between the two. Such action may include redeeming
shares in kind, selling instruments prior to maturity to re-
alize capital gains or losses or to shorten average maturity,
withholding dividends, paying distributions from capital or
capital gains, or utilizing a net asset value per share based
upon available market quotations.

ADMIRAL SHORT-TERM, INTERMEDIATE-TERM, AND LONG-TERM U.S.
TREASURY PORTFOLIOS. Net asset value includes interest on
fixed-income securities, which is accrued daily. Securities
which are traded on a stock exchange and over-the-counter
will be valued according to the broadest and most representa-
tive market, and it is expected that for bonds and other
fixed-income securities this ordinarily will be the over-the-
counter market.

However, bonds and other fixed-income securities may be val-
ued on the basis of prices provided by a pricing service when
such prices are believed to reflect the fair market value of
such securities. The prices provided by a pricing service may
be determined without regard to bid or last sale prices but
take into account institutional size trading in similar
groups of securities and any developments related to specific
securities. Securities not priced in this manner are valued
at the most recent quoted bid price. Short-term instruments
maturing within 60 days of the valuation date may be valued
at cost, plus or minus any amortized discount or premium.
Other assets and securities for which no quotations are read-
ily available will be valued in good faith at fair market
value using methods determined by the Board of Directors.

18
<PAGE>

Share prices for the Admiral Short-Term, Intermediate-Term,
and Long-Term U.S. Treasury Portfolios can be found daily in
the mutual fund listings of most major newspapers under the
heading of Vanguard.
- --------------------------------------------------------------------------------

GENERAL The Fund is a Maryland corporation. The Fund's Articles of
INFORMATION Incorporation permit the Directors to issue 21,500,000,000
shares of common stock, with a $.001 par value. The Board of
Directors has the power to designate one or more classes
("Portfolios") of shares of common stock and to classify or
reclassify any unissued shares with respect to such Portfo-
lios. Currently the Fund is offering shares of four Portfo-
lios.

The shares of each Portfolio are fully paid and non-assessa-
ble; have no preference as to conversion, exchange, divi-
dends, retirement or other features; and have no pre-emptive
rights. The shares of each Portfolio have non-cumulative vot-
ing rights, meaning that the holders of more than 50% of the
shares voting for the election of Directors can elect 100% of
the Directors if they choose to do so.

Annual meetings of shareholders will not be held except as
required by the Investment Company Act of 1940 and other ap-
plicable law. An annual meeting will be held on the removal
of a Director or Directors of the Fund if requested in writ-
ing by holders of not less than 10% of the outstanding shares
of the Fund.

State Street Bank and Trust Company, Boston, MA, has been re-
tained to act as custodian of the assets of the Admiral
Short-Term, Intermediate-Term, and Long-Term U.S. Treasury
Portfolios. CoreStates Bank, N.A., Philadelphia, PA has been
retained as the custodian of the assets of the Admiral U.S.
Treasury Money Market Portfolio. CoreStates Bank, N.A., Phil-
adelphia, PA also holds daily cash balances that are used by
the Funds' Portfolios to invest in repurchase agreements or
securities acquired in these transactions.

The Vanguard Group, Inc., Valley Forge, PA, serves as the
Fund's Transfer and Dividend Disbursing Agent. Price
Waterhouse LLP serves as independent accountants for the Fund
and will audit its financial statements annually. The Fund is
not involved in any litigation.
- --------------------------------------------------------------------------------

19
<PAGE>

SHAREHOLDER GUIDE

OPENING AN To open a new account, either by mail or by wire, simply com-
ACCOUNT AND plete and return an Account Registration Form and any re-
PURCHASING quired legal documentation. Please indicate the Portfolio you
SHARES have chosen and the amount you wish to invest. Your purchase
must be equal to or greater than the $50,000 minimum initial
investment requirement in any Portfolio. (This minimum ini-
tial requirement also applies to Individual Retirement Ac-
counts and Uniform Gifts/Transfers to Minors Act accounts.)
If you need assistance with the Account Registration Form or
have any questions about this Fund, please call our Investor
Information Department at 1-800-662-7447. NOTE: For other
types of account registrations (e.g., corporations, associa-
tions, other organizations, trusts, or powers of attorney),
please call us to determine which additional forms you may
need.

The Fund's shares are purchased at the next-determined net
asset value after your investment has been received in the
form of Federal Funds. See "When Your Account Will Be Credit-
ed." The Fund is offered on a no-load basis (i.e., there are
no sales commissions or 12b-1 fees).

PURCHASE 1) Because of the risks associated with bond investments, the
RESTRICTIONS Fund is intended to be a long-term investment vehicle and
is not designed to provide investors with a means of spec-
ulating on short-term bond market movements. Consequently,
the Fund reserves the right to reject any specific pur-
chase (and exchange purchase) request. The Fund also re-
serves the right to suspend the offering of shares for a
period of time.

2) Vanguard will not accept third-party checks to purchase
shares of the Fund. Please be sure your purchase check is
made payable to the Vanguard Group.

ADDITIONAL Subsequent investments may be made by mail ($100 minimum per
INVESTMENTS Portfolio), wire ($1,000 minimum per Portfolio), exchange
from another Vanguard Fund account ($100 minimum per Portfo-
lio), or Vanguard Fund Express.
--------------------------------------------------------------
ADDITIONAL INVESTMENTS TO
NEW ACCOUNT EXISTING ACCOUNTS

PURCHASING BY Please include the Additional investments
MAIL amount of your initial should include the In-
Complete and investment and the vest-by-Mail remit-
sign the name of the Portfolios tance form attached to
enclosed you have selected on your Fund confirmation
Account the registration form, statements. Please
Registration make your check pay- make your check pay-
Form able to The Vanguard able to The Vanguard
Group (Portfolio Num- Group (Portfolio Num-
ber), see page 21 for ber), see page 21 for
the appropriate number the appropriate num-
and mail to: ber. Write your ac-
count number on your
VANGUARD FINANCIAL CENTER check and, using the
P.O. BOX 2600 return envelope pro-
VALLEY FORGE, PA 19482 vided, mail to the ad-
dress indicated on the
Invest-by-Mail Form.

20
<PAGE>

For express or VANGUARD FINANCIAL CENTER All written requests should be
registered mail, 455 DEVON PARK DRIVE mailed to one of the addresses
send to: WAYNE, PA 19087 indicated for new accounts. Do
not send registered or express
mail to the post office box
address.

VANGUARD ADMIRAL FUNDS:
Admiral U.S. Treasury Money Market Portfolio--11
Admiral Short-Term U.S. Treasury Portfolio--12
Admiral Intermediate-Term U.S. Treasury Portfolio--19
Admiral Long-Term U.S. Treasury Portfolio--20
--------------------------------------------------------------
PURCHASING BY CORESTATES BANK, N.A.
WIRE ABA 031000011
Money should be CORESTATES NO 0144 6936 (for Admiral U.S. Treasury
wired to: Money Market Portfolio)
CORESTATES NO 0101 9897 (for Admiral Short-Term,
BEFORE WIRING Intermediate-Term, and Long-Term U.S. Treasury
Please contact Portfolios)
Client Services ATTN VANGUARD
(1-800-662-2739) VANGUARD ADMIRAL FUNDS
NAME OF PORTFOLIO
ACCOUNT NUMBER
ACCOUNT REGISTRATION

To assure proper receipt, please be sure your bank includes
the Portfolio name, the account number Vanguard has assigned
to you and the eight-digit Corestates number. If you are
opening a new account, please complete the Account Registra-
tion Form and mail it to the "New Account" address after com-
pleting your wire arrangement. NOTE: Federal Funds wire pur-
chase orders will be accepted only when the Fund and Custo-
dian Bank are open for business.
--------------------------------------------------------------
PURCHASING BY You may open an account or purchase additional shares by mak-
EXCHANGE (from ing an exchange from an existing Vanguard Fund account. The
a Vanguard new account will have the same registration as the existing
account) account. Please note: the Fund reserves the right to refuse
any exchange purchase request. If you need additional infor-
mation, please call our Client Services Department at 1-800-
662-2739.
--------------------------------------------------------------
PURCHASING BY The Fund Express Special Purchase option lets you move money
FUND EXPRESS from your bank account to your Vanguard account on an "as
needed" basis. Or if you choose the Automatic Investment op-
Special Purchase tion, money will be moved automatically from your bank ac-
and Automatic count to your Vanguard account on the schedule (monthly, bi-
Investment monthly [every other month], quarterly or yearly) you select.
To establish these Fund Express options, please provide the
appropriate information on the Account Registration Form. We
will send you a confirmation of your Fund Express service;
please wait three weeks before using the service.
- --------------------------------------------------------------------------------

21
<PAGE>

You must select one of three distribution options:

CHOOSING A 1. AUTOMATIC REINVESTMENT OPTION--Both dividends and capital
DISTRIBUTION gains distributions will be reinvested in additional Fund
OPTION shares. This option will be selected for you automatically
unless you specify another option.

2. CASH DIVIDEND OPTION--Your dividends will be paid in cash
and your capital gains will be reinvested in additional
Fund shares.

3. ALL CASH OPTION--Both dividend and capital gains distri-
butions will be paid in cash.

In addition, an option to invest your cash dividends and/or
capital gains distributions in another Vanguard Fund account
is available. Please call our Client Services Department (1-
800-662-2739) for information. You may also elect Vanguard
Dividend Express which allows you to transfer your cash divi-
dends and/or capital gains distributions automatically to
your bank account. Please see "Other Vanguard Services" for
more information.
- --------------------------------------------------------------------------------
TAX CAUTION Under Federal tax laws, the Fund is required to distribute
net capital gains and dividend income to Fund shareholders.
INVESTORS These distributions are made to all shareholders who own Fund
SHOULD ASK shares as of the distribution's record date, regardless of
ABOUT THE how long the shares have been owned. Purchasing shares just
TIMING OF prior to the record date could have a significant impact on
CAPITAL GAINS your tax liability for the year. For example, if you purchase
AND DIVIDEND shares immediately prior to the record date of a sizable cap-
DISTRIBUTIONS ital gain distribution, you will be assessed taxes on the
BEFORE amount of the capital gain distribution later paid even
INVESTING though you owned the Fund shares for just a short period of
time. (Taxes are due on the distributions even if the divi-
dend or gain is reinvested in additional Fund shares.) While
the total value of your investment will be the same after the
capital gain distribution--the amount of the capital gain
distribution will offset the drop in the net asset value of
the shares--you should be aware of the tax implications the
timing of your purchase may have.

Prospective investors should, therefore, inquire about poten-
tial distributions before investing. The Fund's annual capi-
tal gains distribution normally occurs in December, while in-
come dividends are generally paid on the first business day
of each month. For additional information on distributions
and taxes, see the section titled "Dividends, Capital Gains,
and Taxes."
- --------------------------------------------------------------------------------
IMPORTANT The easiest way to establish optional Vanguard services on
INFORMATION your account is to select the options you desire when you
complete your Account Registration Form. If you wish to add
ESTABLISHING shareholder options later, you may need to provide Vanguard
OPTIONAL with additional information and a signature guarantee. Please
SERVICES call our Client Services Department (1-800-662-2739) for fur-
ther assistance.

22
<PAGE>

SIGNATURE For our mutual protection, we may require a signature guaran-
GUARANTEES tee on certain written transaction requests. A signature
guarantee verifies the authenticity of your signature, and
may be obtained from banks, brokers and any other guarantor
that Vanguard deems acceptable. A SIGNATURE GUARANTEE CANNOT
BE PROVIDED BY A NOTARY PUBLIC.

CERTIFICATES Share certificates will not be issued for the Fund.

BROKER-DEALER If you purchase shares in Vanguard Funds through a registered
PURCHASES broker-dealer or investment adviser, the broker-dealer or ad-
viser may charge a service fee.

CANCELLING The Fund will not cancel any trade (e.g., a purchase, ex-
TRADES change or redemption) believed to be authentic, received in
writing or by telephone, once the trade request has been re-
ceived.

ELECTRONIC If you would prefer to receive a prospectus for the Fund or
PROSPECTUS any of the Vanguard Funds in an electronic format, please
DELIVERY call 1-800-231-7870 for additional information. If you elect
to do so, you may also receive a paper copy of the prospec-
tus, by calling 1-800-662-7447.

- --------------------------------------------------------------------------------
WHEN YOUR The trade date is the date on which your account is credited.
ACCOUNT WILL It is generally the day on which the Fund receives your in-
BE CREDITED vestment in the form of Federal Funds (monies credited to the
Fund's Custodian Bank by a Federal Reserve Bank). Your trade
date varies according to your method of payment for your
shares.

Purchases of Fund shares by check (except the Money Market
Portfolio) will receive a trade date the day the funds are
received in Good Order by Vanguard. Thus, if your purchase by
check is received by the close of regular trading on the New
York Stock Exchange (generally 4:00 p.m. Eastern time), your
trade date is the business day your check is received in Good
Order. If your purchase is received after the close of the
Exchange your trade date is the business day following re-
ceipt of your check.

For purchases by check for the Money Market Portfolio, the
Fund is ordinarily credited with Federal Funds within one
business day. Thus, if your purchase by check is received by
the regular close of the New York Stock Exchange (generally
4:00 p.m. Eastern time), your trade date is the business day
following receipt of your check. If your purchase is received
after the close of the Exchange, your trade date is the sec-
ond business day following receipt of your check.

For purchases by Federal Funds wire or exchange from another
Vanguard Fund, the Fund is credited immediately with Federal
Funds. Thus, if your purchase by Federal Funds wire or ex-
change is received by the close of the Exchange, your trade
date is the day of receipt. If your purchase is received af-
ter the close of the Exchange, your trade date is the busi-
ness day following receipt of your wire or exchange.

Your shares are purchased at the next determined net asset
value after your investment has been received in the form of
Federal Funds. You will begin to

23
<PAGE>

earn dividends on the calendar day following the trade date.
(For a Friday trade date, you will begin earning dividends on
Saturday.) For a purchase by Federal Funds wire into Admiral
U.S. Treasury Money Market Portfolio, you may qualify for a
dividend on the date of purchase if you have notified the
Fund of your intention to make the purchase by 10:45 a.m.
(Eastern time) on the business day of the wire.

In order to prevent lengthy processing delays caused by the
clearing of foreign checks, Vanguard will only accept a for-
eign check which has been drawn in U.S. dollars and has been
issued by a foreign bank with a U.S. correspondent bank. The
name of the U.S. correspondent bank must be printed on the
face of the foreign check.
- --------------------------------------------------------------------------------

SELLING YOUR You may withdraw any portion of the funds in your account by
SHARES redeeming shares at any time. You generally may initiate a
request by writing or by telephoning. Your redemption pro-
ceeds are normally mailed, credited or wired--depending upon
the method of withdrawal you have previously chosen--within
two business days after the receipt of the request in Good
Order.

SELLING BY You may withdraw funds from your account by writing a check
WRITING A payable in the amount of $250 or more. When a check is pre-
CHECK sented for payment to the Fund's agent, CoreStates Bank, the
Fund will redeem sufficient shares in your account at the net
asset value next determined to cover the amount of the check.

In order to establish the checkwriting option on your ac-
count, all registered shareholders must sign a signature
card. After your completed signature card is received by the
Fund, an initial supply of checks will be mailed within 10
business days. There is no charge for checks or for their
clearance. CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS
SHOULD CALL OR WRITE VANGUARD'S CLIENT SERVICES DEPARTMENT
(1-800-662-2739) BEFORE SUBMITTING SIGNATURE CARDS, AS ADDI-
TIONAL DOCUMENTS MAY BE REQUIRED TO ESTABLISH THE
CHECKWRITING SERVICE.

Before establishing the checkwriting option, you should be
aware that:

1. Writing a check (a redemption of shares) is a taxable
event.
2. The Fund does not allow an account to be closed through
the checkwriting option.
3. Vanguard cannot guarantee a stop payment on any check. If
you wish to reverse a stop payment order, you must do so
in writing.
4. The Fund reserves the right to terminate or alter this
service at any time.
- --------------------------------------------------------------------------------
SELLING BY Requests should be mailed to VANGUARD FINANCIAL CENTER, VAN-
MAIL GUARD ADMIRAL FUNDS, P.O. BOX 1120, VALLEY FORGE, PA 19482.
(For express or registered mail, send your request to Van-
guard Financial Center, Vanguard Admiral Funds, 455 Devon
Park Drive, Wayne, PA 19087.)

The redemption price of shares will be the Portfolio's net
asset value next determined after Vanguard has received all
required documents in Good Order.
--------------------------------------------------------------

24
<PAGE>

GOOD ORDER means that the request includes the following:

DEFINITION 1. The account number and portfolio name.
OFGOOD ORDER 2. The amount of the transaction (specified in dollars or
shares).
3. The signatures of all owners EXACTLY as they are regis-
tered on the account.
4. Any required signature guarantees.
5. Other supporting legal documentation that might be re-
quired in the case of estates, corporations, trusts, and
certain other accounts.

IF YOU HAVE QUESTIONS ABOUT THIS DEFINITION AS IT PERTAINS TO
YOUR REQUEST, PLEASE CALL OUR CLIENT SERVICES DEPARTMENT AT
1-800-662-2739.
--------------------------------------------------------------
SELLING BY To sell shares by telephone you or your pre-authorized repre-
TELEPHONE sentative may call our Client Services Department at 1-800-
662-2739. For telephone redemptions, you may have the pro-
ceeds sent to you by mail or by wire. In addition to the de-
tails below, please see "Important Information About Tele-
phone Transactions".

BY MAIL: Telephone mail redemption is automatically estab-
lished on your account unless you indicate otherwise on your
Account Registration Form. You may redeem any amount by call-
ing Vanguard. The proceeds will be paid to the registered
shareholders and mailed to the address of record. PLEASE
NOTE: As a protection against fraud, your telephone mail re-
demption privilege will be suspended for 10 calendar days
following any expedited address change to your account. An
expedited address change is one that is made by telephone, by
Vanguard Online or, in writing, without the signatures of all
account owners.

BY WIRE: Telephone wire redemption must be specifically
elected for your account. The best time to elect telephone
wire redemption is at the time you complete your Account Reg-
istration Form. If you do not presently have telephone wire
redemption and wish to establish it, please contact our Cli-
ent Services Department.

With the wire redemption option, you may withdraw a minimum
of $1,000 and have the amount wired directly to your bank ac-
count. Wire redemptions less than $5,000 are subject to a $5
charge deducted by Vanguard. There is no Vanguard charge for
wire redemptions of $5,000 or more. However, your bank may
assess a separate fee for incoming wires.

A request to change the bank associated with your wire re-
demption option must be received in writing, signed by each
registered shareholder, and accompanied by a voided check or
preprinted deposit slip. A signature guarantee is required if
your bank registration is not identical to your Vanguard Fund
account registration.
--------------------------------------------------------------

25
<PAGE>

SELLING BY If you select the Fund Express Automatic Withdrawal option,
FUND EXPRESS money will be automatically moved from your Vanguard Fund ac-
count to your bank account according to the schedule you have
Automatic selected. The Special Redemption option lets you move money
Withdrawal & from your Vanguard account to your bank account on an "as
Special needed" basis. To establish these Fund Express options,
Redemption please provide the appropriate information on the Account
Registration Form. We will send you a confirmation of your
Fund Express service; please wait three weeks before using
the service.
--------------------------------------------------------------
SELLING BY You may sell shares of a Portfolio by making an exchange into
EXCHANGE another Vanguard Fund account. Please see "Exchanging Your
Shares" for details.
--------------------------------------------------------------
IMPORTANT Shares purchased by check or Fund Express may be redeemed at
REDEMPTION any time. However, your redemption proceeds will not be paid
INFORMATION until payment for the purchase is collected, which may take
up to ten calendar days.
--------------------------------------------------------------
DELIVERY OF Redemption requests received by telephone prior to the close
REDEMPTION of the New York Stock Exchange (generally 4:00 p.m. Eastern
PROCESS time) are processed on the day of receipt and the redemption
proceeds are normally sent on the following business day.

Redemption requests received by telephone after the close of
the Exchange are processed on the business day following re-
ceipt and the proceeds are normally sent on the second busi-
ness day following receipt. Redemption proceeds must be sent
to you within seven days of receipt of your request in Good
Order, except as described above in "Important Redemption In-
formation."

If you experience difficulty in making a telephone redemption
during periods of drastic economic or market changes, your
redemption request may be made by regular or express mail. It
will be implemented at the net asset value next determined
after your request has been received by Vanguard in Good Or-
der. The Fund reserves the right to revise or terminate the
telephone redemption privilege at any time.

The Fund may suspend the redemption right or postpone payment
at times when the New York Stock Exchange is closed or under
any emergency circumstances as determined by the United
States Securities and Exchange Commission. If the Board of
Directors determines that it would be detrimental to the best
interest of the Fund's remaining shareholders to make payment
in cash, the Fund may pay redemption proceeds in amounts in
excess of $250,000 in whole or in part by a distribution in
kind of readily marketable securities.
--------------------------------------------------------------

VANGUARD'S If you make a redemption from a qualifying account, Vanguard
AVERAGE COST will send you an Average Cost Statement which provides you
STATEMENT with the tax basis of the shares you redeemed. Please see
"Statements and Reports" for additional information.
--------------------------------------------------------------

26
<PAGE>

LOW BALANCE Due to the relatively high cost of maintaining smaller ac-
FEE AND counts, the Fund reserves the right to liquidate any non-re-
MINIMUM tirement account that is below the minimum initial investment
ACCOUNT amount of $50,000. In addition, if at any time the total in-
BALANCE vestment does not have a value of at least $50,000, you may
REQUIREMENT be notified that the value of your account is below the
Fund's minimum account balance requirement. You would then be
allowed 60 days to make an additional investment before the
account is liquidated. Proceeds would be promptly paid to the
shareholder.

Vanguard will not liquidate your account if it has fallen be-
low $50,000 solely as a result of declining bond market
prices (i.e., a decline in a Portfolio's net asset value).

- --------------------------------------------------------------------------------
EXCHANGING Should your investment goals change, you may exchange your
YOUR SHARES shares of Vanguard Admiral Funds for those of other available
Vanguard Funds.

EXCHANGING BY When exchanging shares by telephone, please have ready the
TELEPHONE Portfolio name, account number, Social Security Number or Em-
ployer Identification number listed on the account, and exact
Call Client name and address in which the account is registered. Only the
Services at registered shareholder may complete such an exchange. Re-
1-800-662-2739 quests for telephone exchanges received prior to close of
trading on the New York Stock Exchange (generally 4:00 p.m.
Eastern time) are processed at the close of business that
same day.

Requests received after close of the Exchange are processed
the next business day. TELEPHONE EXCHANGES ARE NOT ACCEPTED
INTO OR FROM VANGUARD BALANCED INDEX FUND, VANGUARD INDEX
TRUST, VANGUARD QUANTITATIVE PORTFOLIOS AND VANGUARD INTERNA-
TIONAL EQUITY INDEX FUND. If you experience difficulty in
making a telephone exchange, your exchange request may be
made by regular or express mail, and it will be implemented
at the closing net asset value on the date received by Van-
guard provided the request is received in Good Order.
--------------------------------------------------------------
EXCHANGING BY Please be sure to include on your exchange request the name
MAIL and account number of your current Fund, the name of the Fund
you wish to exchange into, the amount you wish to exchange,
and the signatures of all registered account holders. Send
your request to VANGUARD FINANCIAL CENTER, VANGUARD ADMIRAL
FUNDS, P.O. BOX 1120, VALLEY FORGE, PA 19482. (For express or
registered mail, send your request to Vanguard Financial Cen-
ter, Vanguard Admiral Funds, 455 Devon Park Drive, Wayne, PA
19087.)
--------------------------------------------------------------
IMPORTANT Before you make an exchange, you should consider the follow-
EXCHANGE ing:
INFORMATION
. Please read the Fund's prospectus before making an ex-
change. For a copy and for answers to any questions you may
have, call our Investor Information Department (1-800-662-
7447).

. An exchange is treated as a redemption and a purchase.
Therefore, you could realize a taxable gain or loss on the
transaction.

27
<PAGE>

. Exchanges are accepted only if the registrations and Tax-
payer Identification numbers of the two accounts are
identical.

. New accounts are not currently accepted in Vanguard/Windsor
Fund or Vanguard/PRIMECAP Fund.

. The redemption price of shares redeemed by exchange is the
net asset value next determined after Vanguard has received
all required documents in Good Order.

. When opening a new account by exchange, you must meet the
minimum investment requirement of the new Fund.

Every effort will be made to maintain the exchange privilege.
However, the Fund reserves the right to revise or terminate
its provisions, limit the amount of or reject any exchange,
as deemed necessary, at any time.

The exchange privilege is only available in states in which
the shares of the Fund are registered for sale. The Fund's
shares are currently registered for sale in all 50 states and
the Fund intends to maintain such registration.
- --------------------------------------------------------------------------------
EXCHANGE The Fund's exchange privilege is not intended to afford
PRIVILEGE shareholders a way to speculate on short-term movements in
LIMITATIONS the market. Accordingly, in order to prevent excessive use of
the exchange privilege that may potentially disrupt the man-
agement of the Fund and increase transaction costs, the Fund
has established a policy of limiting excessive exchange ac-
tivity.

For the Admiral Short-Term, Intermediate-Term and Long-Term
U.S. Treasury Portfolios, exchange activity will not be
deemed excessive if limited to TWO SUBSTANTIVE EXCHANGE RE-
DEMPTIONS (AT LEAST 30 DAYS APART) from a Portfolio during
any twelve-month period. These limitations do not apply to
exchanges from Vanguard's money market portfolios, including
the Admiral U.S. Treasury Money Market Portfolio. Notwith-
standing these limitations, the Fund reserves the right to
reject any purchase request (including exchange purchases
from other Vanguard portfolios) that is reasonably deemed to
be disruptive to efficient portfolio management.
- --------------------------------------------------------------------------------
IMPORTANT The ability to initiate redemptions (except wire redemptions)
INFORMATION and exchanges by telephone is automatically established on
ABOUT your account unless you request in writing that telephone
TELEPHONE transactions on your account not be permitted.
TRANSACTIONS
To protect your account from losses resulting from unautho-
rized or fraudulent telephone instructions, Vanguard adheres
to the following security procedures:

1.SECURITY CHECK. To request a transaction by telephone, the
caller must know (i) the name of the Portfolio; (ii) the 10-
digit account number; (iii) the exact name and address used
in the registration; and (iv) the Social Security or Employer
Identification number listed on the account.

28
<PAGE>

2.PAYMENT POLICY. The proceeds of any telephone redemption by
mail will be made payable to the registered shareowner and
mailed to the address of record, only. In the case of a tele-
phone redemption by wire, the wire transfer will be made only
in accordance with the shareowner's prior written instruc-
tions.

Neither the Fund nor Vanguard will be responsible for the au-
thenticity of transaction instructions received by telephone,
provided that these or other reasonable security procedures
have been followed. Vanguard believes that the security pro-
cedures described above are reasonable, and that if such pro-
cedures are followed, you will bear the risk of any losses
resulting from unauthorized or fraudulent telephone transac-
tions on your account. If Vanguard fails to follow reasonable
security procedures, it may be liable for any losses result-
ing from unauthorized or fraudulent telephone transactions on
your account.
- --------------------------------------------------------------------------------
TRANSFERRING You may transfer the registration of any of your Fund shares
REGISTRATION to another person by writing: Vanguard Financial Center, P.O.
Box 1110, Valley Forge, PA 19482, Attention: Transfer Depart-
ment. The request must be in Good Order. Before mailing your
request, please call our Client Services Department (1-800-
662-2739) for full instructions.
- --------------------------------------------------------------------------------
STATEMENTS AND Vanguard will send you a confirmation statement each time you
REPORTS initiate a transaction in your account (except for
checkwriting redemptions from Vanguard money market ac-
counts). You will also receive a comprehensive account state-
ment at the end of each calendar quarter. The fourth-quarter
statement will be a year-end statement, listing all transac-
tion activity for the entire calendar year.

Vanguard's Average Cost Statement provides you with the aver-
age cost of shares redeemed from your account, using the av-
erage cost single category method. This service is available
for most taxable accounts opened since January 1, 1986. In
general, investors who redeemed shares from a qualifying Van-
guard account may expect to receive their Average Cost State-
ment along with their Portfolio Summary Staement. Please call
our Client Services Department (1-800-662-2739) for informa-
tion.

Financial reports on the Fund will be mailed to you
semiannually, according to the Fund's fiscal year-end.
- --------------------------------------------------------------------------------
OTHER VANGUARD For more information about any of these services, please call
SERVICES our Investor Information Department at 1-800-662-7447.

VANGUARD With Vanguard's Direct Deposit Service, most U.S. Government
DIRECT DEPOSIT checks (including Social Security and military pension
SERVICE checks) and private payroll checks may be automatically de-
posited into your Vanguard Fund account. Separate brochures
and forms are available for direct deposit of U.S. Government
and private payroll checks.

VANGUARD Vanguard's Automatic Exchange Service allows you to move
AUTOMATIC money automatically among your Vanguard Fund accounts. For
EXCHANGE instance, the service can be used
SERVICE

29
<PAGE>

to "dollar cost average" from a money market portfolio into a
stock or bond fund or to contribute to an IRA or other re-
tirement plan. Please contact our Client Services Department
at 1-800-662-2739 for additional information.

VANGUARD FUND Vanguard's Fund Express allows you to transfer money between
EXPRESS your Fund account and your account at a bank, savings and
loan association, or a credit union that is a member of the
Automated Clearing House (ACH) system. You may elect this
service on the Account Registration Form or call our Investor
Information Department (1-800-662-7447) for a Fund Express
application.

Special rules govern how your Fund Express purchases or re-
demptions are credited to your account. In addition, some
services of Fund Express cannot be used with specific Van-
guard Funds. For more information, please refer to the Van-
guard Fund Express brochure.

VANGUARD Vanguard's Dividend Express allows you to transfer your divi-
DIVIDEND dends and/or capital gains distributions automatically from
EXPRESS your Fund account, one business day after the Fund's payable
date, to your account at a bank, savings and loan associa-
tion, or a credit union that is a member of the Automated
Clearing House (ACH) system. You may elect this service on
the Account Registration Form or call our Investor Informa-
tion Department (1-800-662-7447) for a Vanguard Dividend Ex-
press application.

VANGUARD TELE- Vanguard's Tele-Account is a convenient, automated service
ACCOUNT that provides share price, price change and yield quotations
on Vanguard Funds through any TouchTone (TM) telephone. This
service also lets you obtain information about your account
balance, your last transaction, and your most recent dividend
or capital gains payment. To contact Vanguard's Tele-Account
service, dial 1-800-ON-BOARD (1-800-662-6273). A brochure of-
fering detailed operating instructions is available from our
Investor Information Department (1-800-662-7447).
- --------------------------------------------------------------------------------

30
<PAGE>

[LOGO OF VANGUARD ADMIRAL FUNDS APPEARS HERE]
- ---------------------------------------------

THE VANGUARD GROUP
OF INVESTMENT
COMPANIES
Vanguard Financial Center
P.O. Box 2600
Valley Forge, PA 19482

INVESTOR INFORMATION
DEPARTMENT:
1-800-662-7447 (SHIP)

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

TELE-ACCOUNT FOR
24-HOUR ACCESS:
1-800-662-6273 (ON BOARD)

TELECOMMUNICATION SERVICE
FOR THE HEARING-IMPAIRED:
1-800-662-2738

TRANSFER AGENT:
The Vanguard Group Inc.
Vanguard Financial Center
Valley Forge, PA 19482

P012

[LOGO OF VANGUARD ADMIRAL FUNDS APPEARS HERE]

P R O S P E C T U S

MAY 24, 1996

[LOGO OF THE VANGURAD GROUP APPEARS HERE]

<PAGE>

PART B

VANGUARD ADMIRAL FUNDS, INC.

STATEMENT OF ADDITIONAL INFORMATION

MAY 24, 1996

This Statement is not a prospectus but should be read in conjunction with
the Fund's current Prospectus (dated May 24, 1996). To obtain this Prospectus,
please call the Investor Information Department:

1-800-662-7447

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies.......................................... 1
Purchase of Shares......................................................... 5
Redemption of Shares....................................................... 6
Shareholder Services....................................................... 6
Investment Limitations..................................................... 7
Management of the Fund..................................................... 9
Portfolio Transactions..................................................... 12
Performance Measures....................................................... 13
Other Definitions.......................................................... 15
Financial Statements....................................................... 15
Appendix--Description of Securities and Ratings............................ 16
</TABLE>

INVESTMENT OBJECTIVE AND POLICIES

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

REPURCHASE AGREEMENTS The Admiral Short-Term, Intermediate-Term, and Long-
Term U.S. Treasury Portfolios may invest in repurchase agreements with commer-
cial banks, brokers or dealers either for defensive purposes due to market
conditions or to generate income from its excess cash balances. A repurchase
agreement is an agreement under which the Portfolio acquires a money market
instrument (generally a security issued by the U.S. Government or an agency
thereof, a banker's acceptance or a certificate of deposit) from a commercial
bank, broker or dealer, subject to resale to the seller at an agreed upon
price and date (normally, the next business day). A repurchase agreement may
be considered a loan collateralized by securities. The resale price reflects
an agreed upon interest rate effective for the period the instrument is held
by the Portfolio and is unrelated to the interest rate on the underlying in-
strument. In these transactions, the securities acquired by the Portfolio (in-
cluding accrued interest earned thereon) must have a total value in excess of
the value of the repurchase agreement and are held by a custodian bank until
repurchased. In addition, the Fund's Board of Directors will monitor a Portfo-
lio's repurchase agreement transactions generally and will establish guide-
lines and standards for review by the investment adviser of the creditworthi-
ness of any bank, broker or dealer party to a repurchase agreement with the
Portfolio. No more than an aggregate of 15% of the Admiral Short-Term, Inter-
mediate-Term, and Long-Term U.S. Treasury Portfolios' net assets, at the time
of investment, will be invested in repurchase agreements having maturities
longer than seven days and securities subject to legal or contractual restric-
tions on resale for which there are no readily available market quotations.
From time to time, the Fund's Board of Directors

1
<PAGE>

may determine that certain restricted securities known as Rule 144A securities
are liquid and not subject to the 15% limitation described above.

The use of repurchase agreements involves certain risks. For example, if the
other party to the agreement defaults on its obligation to repurchase the un-
derlying security at a time when the value of the security has declined, the
Portfolio may incur a loss upon disposition of the security. If the other
party to the agreement becomes insolvent and subject to liquidation or reorga-
nization under the Bankruptcy Code or other laws, a court may determine that
the underlying security is collateral for a loan by the Portfolio not within
the control of the Portfolio and therefore the realization by the Portfolio on
such collateral may be automatically stayed. Finally, it is possible that the
Portfolio may not be able to substantiate its interest in the underlying secu-
rity and may be deemed an unsecured creditor of the other party to the agree-
ment. While each Portfolio's management acknowledges these risks, it is ex-
pected that they can be controlled through careful monitoring procedures.

LENDING OF SECURITIES The Admiral Short-Term, Intermediate-Term, and Long-
Term U.S. Treasury Portfolios may lend its investment securities to qualified
brokers, dealers, banks or other financial institutions, so long as the terms
and the structure of such loans are not inconsistent with the Investment Com-
pany Act of 1940, as amended, or the Rules and Regulations or interpretations
of the Securities and Exchange Commission thereunder, which currently require
that (a) the borrower pledge and maintain with the Portfolio collateral con-
sisting of cash, and irrevocable letter of credit or securities issued or
guaranteed by the United States Government having a value at all times not
less than 100 percent of the value of the securities loaned, (b) the borrower
add to such collateral whenever the price of the securities loaned rises
(i.e., the borrower "marks to the market" on a daily basis), (c) the loan be
made subject to termination by the Portfolio at any time and (d) the Portfolio
receive reasonable interest on the loan (which may include the Portfolio's in-
vesting any cash collateral in interest bearing short-term investments), and
distributions on the loaned securities and any increase in their market value.
Each Portfolio of the Fund will not lend securities if, as a result, the ag-
gregate of such loans exceeds 33 1/3% of the value of the Portfolio's total
assets. Loan arrangements made by the Fund will comply with all other applica-
ble regulatory requirements, including the rules of the New York Stock Ex-
change, which rules presently require the borrower, after notice, to redeliver
the securities within the normal settlement time of three business days.

RESTRICTED SECURITIES Each Portfolio except Admiral U.S. Treasury Money Mar-
ket Portfolio may invest in restricted securities (privately placed debt secu-
rities) and other securities which are not readily marketable, but will not
acquire such securities if as a result they, together with the aggregate of
other securities for which no quotations are readily available, would comprise
more than 15% of the value of the Portfolio's net assets.

Restricted securities may be sold only in privately negotiated transactions
or in a public offering with respect to which a registration statement is in
effect under the Securities Act of 1933. Where registration is required, a
Portfolio may be obligated to pay all or part of the registration expenses and
a considerable period may elapse between the time of the decision to sell and
the time the Portfolio may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions
were to develop, the Portfolio might obtain a less favorable price than pre-
vailed when it decided to sell. Restricted securities will be priced at fair
value as determined in good faith by the Board of Directors. If through the
appreciation of restricted securities or the depreciation of unrestricted se-
curities, a Portfolio should be in a position where more than 15% of the value
of its net assets are invested in illiquid assets, including restricted secu-
rities, the Portfolio will take appropriate steps to protect liquidity.

The Admiral Short-Term, Intermediate-Term, and Long-Term U.S. Treasury Port-
folios may own restricted securities to a limited extent. Restricted securi-
ties are securities which are not freely marketable or which are subject to
restrictions upon sale under the Securities Act of 1933. These three

2
<PAGE>

Portfolios may invest up to 15% of their assets in restricted securities. (In-
cluded within this limit are restricted securities and other securities for
which price quotations are not readily available). Pursuant to Rule 144A under
the Securities Act of 1933, as amended, if a substantial market among quali-
fied institutional buyers develops for such securities held by any of these
three Portfolios, the Fund intends to treat such securities as liquid securi-
ties, in accordance with procedures approved by the Fund's Board of Directors.

FUTURES CONTRACTS AND OPTIONS Each Portfolio except Admiral U.S. Treasury
Money Market Portfolio may enter into futures contracts, options, and options
on futures contracts for several reasons: to simulate full investment in the
underlying securities while retaining a cash balance for Fund management pur-
poses, to facilitate trading, to reduce transaction costs, or to seek higher
investment returns when a futures contract is priced more attractively than
other futures contracts or the underlying security or index. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security at a specified future time and at a
specified price. Futures contracts which are standardized as to maturity date
and underlying financial instrument or index are traded on national futures
exchanges. Futures exchanges and trading are regulated under the Commodity Ex-
change Act by the Commodity Futures Trading Commission ("CFTC"), a U.S. Gov-
ernment Agency. Assets committed to futures contracts will be segregated at
the Fund's custodian bank to the extent required by law.

Although futures contracts by their terms call for actual delivery or ac-
ceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Clos-
ing out an open futures position is done by taking an opposite position ("buy-
ing" a contract which has previously been "sold," or "selling" a contract pre-
viously purchased) in an identical contract to terminate the position. Broker-
age commissions are incurred when a futures contract is bought or sold.

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

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

Traders in futures contracts may be broadly classified as either "hedgers"
or "speculators." Hedgers use the futures markets primarily to offset unfavor-
able changes in the value of securities otherwise held for investment purposes
or expected to be acquired by them. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from fluctuations in the
prices of underlying securities. The Portfolios intend to use futures con-
tracts only for bona fide hedging purposes.

Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions. A Portfolio
will only sell futures contracts to protect securities

3
<PAGE>

or other futures contracts it owns against price declines or purchase con-
tracts to protect against an increase in the price of securities or other
futures contracts it intends to purchase.

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

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS The Admiral Short-Term, Inter-
mediate-Term, and Long-Term U.S. Treasury Portfolios will not enter into
futures contract transactions to the extent that, immediately thereafter, the
sum of its initial margin deposits on open contracts exceeds 5% of the market
value of each Portfolio's total assets. In addition these three Admiral Port-
folios will not enter into futures contracts to the extent that its outstand-
ing obligations to purchase securities under these contracts would exceed 20%
of the Portfolio's total assets.

RISK FACTORS IN FUTURES TRANSACTIONS Positions in futures contracts may be
closed out only on an Exchange which provides a secondary market for such
futures. However, there can be no assurance that a liquid secondary market
will exist for any particular futures contract at any specific time. Thus, it
may not be possible to close a futures position. In the event of adverse price
movements, a Portfolio would continue to be required to make daily cash pay-
ments to maintain its required margin. In such situations, if the Portfolio
has insufficient cash, it may have to sell portfolio securities to meet daily
margin requirements at a time when it may be disadvantageous to do so. In ad-
dition, the Portfolio may be required to make delivery of the instruments un-
derlying futures contracts it holds. The inability to close options and
futures positions also could have an adverse impact on the ability to effec-
tively hedge it.

A Portfolio will minimize the risk that it will be unable to close out a
futures contract by only entering into futures which are traded on national
futures exchanges and for which there appears to be a liquid secondary market.

The risk of loss in trading futures contracts in some strategies can be sub-
stantial, due both to the low margin deposits required, and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and sub-
stantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin,
a subsequent 10% decrease in the value of the futures contract would result in
a total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of the Portfolio are engaged in only for hedging purposes, the Ad-
viser does not believe that the Portfolio is subject to the risks of loss fre-
quently associated with futures transactions. The Portfolio would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the decline.

Utilization of futures transactions by the Portfolio does involve the risk
of imperfect or no correlation where the securities underlying futures con-
tracts have different maturities than the portfolio securities being hedged.
It is also possible that the Portfolio could both lose money on futures con-
tracts and also experience a decline in value of its portfolio securities.
There is also the risk of loss by the Portfolio of margin deposits in the
event of bankruptcy of a broker with whom the Portfolio has an open position
in a futures contract or related option. Additionally, investments in futures
and options involve the risk that the investment adviser will incorrectly pre-
dict stock market and interest rate trends.

4
<PAGE>

Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades
may be made on that day at a price beyond that limit. The daily limit governs
only price movement during a particular trading day and therefore does not
limit potential losses, because the limit may prevent the liquidation of unfa-
vorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of future positions and subjecting some
futures traders to substantial losses.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS Each Portfolio is required for
Federal income tax purposes to recognize as income for each taxable year its
net unrealized gains and losses on certain futures contracts held as of the
end of the year as well as those actually realized during the year. In most
cases, any gain or loss recognized with respect to a futures contract is con-
sidered to be 60% long-term capital gain or loss and 40% short-term capital
gain or loss, without regard to the holding period of the contract. Further-
more, sales of futures contracts which are intended to hedge against a change
in the value of securities held by the Portfolio may affect the holding period
of such securities and, consequently, the nature of the gain or loss on such
securities upon disposition. A Portfolio may be required to defer the recogni-
tion of losses on futures contracts to the extent of any unrecognized gains on
related positions held by the Portfolio.

In order for a Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income; i.e., dividends,
interest, income derived from loans of securities, gains from the sale of se-
curities or of foreign currencies or other income derived with respect to the
Portfolio's business of investing in securities or currencies. In addition,
gains realized on the sale or other disposition of securities held for less
than three months must be limited to less than 30% of the Portfolio's annual
gross income. It is anticipated that any net gain realized from the closing
out of futures contracts will be considered gain from the sale of securities
and therefore be qualifying income for purposes of the 90% requirement. In or-
der to avoid realizing excessive gains on securities held less than three
months, the Portfolio may be required to defer the closing out of futures con-
tracts beyond the time when it would otherwise be advantageous to do so. It is
anticipated that unrealized gains on futures contracts, which have been open
for less than three months as of the end of the Portfolio's fiscal year and
which are recognized for tax purposes, will not be considered gains on sales
of securities held less than three months for the purpose of the 30% test.

A Portfolio will distribute to shareholders annually any net capital gains
which have been recognized for Federal income tax purposes (including
unrealized gains at the end of the Portfolio's fiscal year) on futures trans-
actions. Such distributions will be combined with distributions of capital
gains realized on the Portfolio's other investments and shareholders will be
advised on the nature of the transactions.

PURCHASE OF SHARES

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

5
<PAGE>

REDEMPTION OF SHARES

Each Portfolio may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange is closed, or
trading on the Exchange is restricted as determined by the Securities and Ex-
change Commission (the "Commission"), (ii) during any period when an emergency
exists as defined by the rules of the Commission as a result of which it is
not reasonably practicable for a Portfolio to dispose of securities owned by
it, or fairly to determine the value of its assets, and (iii) for such other
periods as the Commission may permit.

The Fund has made an election with the Commission to pay in cash all redemp-
tions requested by any shareholder of record limited in amount during any 90-
day period to the lesser of $250,000 or 1% of the net assets of the Fund at
the beginning of such period. Such commitment is irrevocable without the prior
approval of the Commission. Redemptions in excess of the above limits may be
paid in whole or in part, in readily marketable investment securities or in
cash, as the Directors may deem advisable; however, payment will be made
wholly in cash unless the Directors believe that economic or market conditions
exist which would make such a practice detrimental to the best interests of
the Fund. If redemptions are paid in investment securities, such securities
will be valued as set forth in the Prospectus under "The Share Price of Each
Portfolio" and a redeeming shareholder would normally incur brokerage expenses
if he converted these securities to cash.

No charge is made by a Portfolio for redemptions. Any redemption may be more
or less than the shareholder's cost depending on the market value of the secu-
rities held by the Portfolio.

SIGNATURE GUARANTEES To protect your account, the Fund and Vanguard from
fraud, signature guarantees are required for certain redemptions. Signature
guarantees enable the Fund to verify the identity of the person who has autho-
rized a redemption from your account. SIGNATURE GUARANTEES ARE REQUIRED IN
CONNECTION WITH: (1) ALL REDEMPTIONS, REGARDLESS OF THE AMOUNT INVOLVED, WHEN
THE PROCEEDS ARE TO BE PAID TO SOMEONE OTHER THAN THE REGISTERED OWNER(S),
AND/OR TO AN ADDRESS OTHER THAN THE ADDRESS OF RECORD; AND (2) SHARE TRANSFER
REQUESTS. These requirements are not applicable to redemptions in Vanguard's
prototype retirement plans, except in connection with: (1) distributions made
when the proceeds are to be paid to someone other than the plan participant;
(2) certain authorizations to effect exchanges by telephone; and (3) when pro-
ceeds are to be wired. These requirements may be waived by the Fund in certain
instances.

A guarantor must be a bank, broker, or any other guarantor that Vanguard
deems acceptable. NOTARIES PUBLIC ARE NOT ACCEPTABLE GUARANTORS.

The signature guarantees must appear either: (1) on the written request for
redemption; (2) on a separate instrument for assignment ("stock power") which
should specify the total number of shares to be redeemed; or (3) on all stock
certificates tendered for redemption and, if shares held by the Fund are also
being redeemed, on the letter or stock power.

SHAREHOLDER SERVICES

EXCHANGE PRIVILEGE Each Portfolio's shares may be exchanged without cost for
shares of any other Portfolio, or for the shares of any open-end Fund cur-
rently offering its shares to new investors in The Vanguard Group ("Van-
guard"). A shareholder of any other open-end Fund in Vanguard may likewise ex-
change his shares for shares of any of the Fund's Portfolios. Exchange re-
quests may be made either by mail, telephone or telegraph.

6
<PAGE>

Telephone and telegraph exchanges (referred to as "expedited exchanges")
will be accepted only if the account of the shareholder and the registration
of the two accounts is identical. Requests for expedited exchanges received
prior to the close of the New York Stock Exchange (generally 4:00 p.m. Eastern
time) will be processed at the next determined net asset value after such re-
quest is received. Requests received after the close of the New York Stock Ex-
change (generally 4:00 p.m. Eastern time) will be processed on the next busi-
ness day. NO EXPEDITED EXCHANGES WILL BE ACCEPTED INTO, OR FROM, VANGUARD IN-
DEX TRUST FUND, VANGUARD BALANCED INDEX FUND, VANGUARD INTERNATIONAL EQUITY
INDEX FUND AND VANGUARD QUANTITATIVE PORTFOLIOS. Neither the Fund nor Vanguard
will be responsible for the authenticity of exchange instructions received by
telephone or telegraph. Expedited exchanges may also be subject to limitations
as to amounts and frequency, and to other restrictions established by the
board of directors to assure that such exchanges do not disadvantage the Fund
and its shareholders. Shareholders may obtain the terms of these limitations,
which may be revised at any time, from Vanguard.

Any such exchange will be based on the respective net asset values of the
shares involved. There are no sales commissions or charges of any kind. Before
making an exchange, a shareholder should consider the investment objectives
and policies of the Portfolio or Fund to be purchased, and other relevant in-
formation (including the minimum initial investment), which can be found in
the prospectus relating to that particular Portfolio or Fund. A prospectus for
any of the Vanguard Funds or Portfolios may be obtained from Vanguard.

For Federal income tax purposes an exchange between Funds or Portfolios is a
taxable event and, accordingly, a capital gain or loss may be realized. In a
revenue ruling relating to circumstances similar to the Fund's, an exchange
between series of a Fund was also deemed to be a taxable event. It is likely,
therefore, that a capital gain or loss would be realized on an exchange be-
tween Portfolios; you may want to consult your tax adviser for further infor-
mation in this regard. The exchange privilege may be modified or terminated at
any time, and any of the Portfolios or Vanguard Funds may limit or discontinue
the offering of its shares without notice to shareholders.

TRANSFER OF SHARES Fund shares may be transferred to another person by send-
ing appropriate written instructions to Vanguard. The account must be clearly
identified and include the number of shares to be transferred and the signa-
tures of all registered owners. The signature on the letter of instructions or
any stock power must be guaranteed. As in the case of withdrawals, the written
request must be received in "Good Order" before any transfer can be made.

INFORMATION FOR SHAREHOLDERS Following any purchase or redemption, a share-
holder will receive a statement which reflects all activity during the current
calendar year. Each shareholder will also receive a quarterly statement, which
includes valuation as of the day the statement is prepared.

Shareholders will receive semiannual financial statements audited at least
annually by independent accountants whose selection is ratified by sharehold-
ers.

INVESTMENT LIMITATIONS

The Fund is subject to the following limitations which may not be changed
with respect to a particular Portfolio without the approval of at least a ma-
jority of the outstanding voting securities (as defined in the Investment Com-
pany Act of 1940) of that Portfolio. A Portfolio will not:

(1) Invest in commodities or commodity contracts or purchase or sell real
estate, although it may purchase and sell marketable securities of compa-
nies which deal in real estate or interests therein; except that Admiral
Short-Term, Intermediate-Term, and Long-Term U.S. Treasury Portfolios may
invest in bond futures contracts, bond options and options on bond futures
contracts

7
<PAGE>

to the extent that not more than 5% of its assets are required as deposit
margin for futures contracts and not more than 20% of its assets are in-
vested in such instruments at any time;

(2) Write, purchase or sell warrants, put or call options, or combina-
tions thereof, except as specified above in (1);

(3) invest in interests in oil, gas, or other mineral exploration or de-
velopment programs;

(4) Make loans to other persons (except by (i) the purchase of the debt
obligations in which the Portfolio is authorized to invest in accordance
with its investment policies, and (ii) as provided under "Lending of Secu-
rities");

(5) Purchase securities on margin or sell securities short, except as
specified above in (1);

(6) With respect to 75% of the value of its total assets, purchase the
securities of any issuer (except obligations of the United States govern-
ment and its instrumentalities) if as a result the Portfolio would hold
more than 10% of the outstanding voting securities of the issuer, or more
than 5% of the value of the Portfolio's total assets would be invested in
the securities of such issuer;

(7) Borrow money, except for temporary or emergency purposes not in ex-
cess of 15% of the value of the total of the Portfolio taken at the lower
of their market value or cost;

(8) Pledge, mortgage or hypothecate the Portfolio's assets to an extent
greater than 15% of the value of its total assets;

(9) Engage in the business of underwriting securities issued by other
persons, except to the extent that the Fund may technically be deemed to be
an underwriter under the Securities Act of 1933, as amended, in disposing
of investment securities;

(10) Purchase a security which is subject to legal or contractual re-
strictions on resale or for which there is no readily available market or
engage in a repurchase agreement maturing in more than seven days if, as a
result thereof, more than 15% of the Portfolio's net assets (any of the
Portfolio's net assets in the case of Admiral U.S. Treasury Money Market
Portfolio) (taken at current value) would be invested in such securities;

(11) Invest for the purpose of controlling management of any company;

(12) Invest in securities of other investment companies, except as they
may be acquired as a part of a merger, consolidation or acquisition of as-
sets approved by the Fund's shareholders or otherwise to the extent permit-
ted by Section 12 of the 1940 Act. The Fund will invest only in investment
companies which have investment objectives and investment policies consis-
tent with those of the Fund.

(13) Concentrate its investments in a particular industry, although it
may invest up to 25% of the Portfolio's total assets (taken at value) in
the securities of issuers, all of which conduct their principal business
activities in the same industry, provided that (i) this limitation does not
apply to obligations issued or guaranteed by the U.S. Government, or its
agencies or instrumentalities, and (ii) utility companies will be divided
according to their services; for example, gas, gas transmission, electric
and gas, electric, and telephone will each be considered a separate indus-
try; and

(14) Issue senior securities.

The above-referenced investment limitations are considered at the time that
portfolio securities are purchased. Notwithstanding these limitations, the
Fund may own all or any portion of the securities of, or make loans to, or
contribute to the costs or other financial requirements of any company which
will be wholly owned by the Fund and one or more other investment companies
and is primarily engaged in the business of providing, at cost, management,
administrative or related services to the Fund and other investment companies.
See "MANAGEMENT OF THE FUND."

8
<PAGE>

As a non-fundamental policy each Portfolio (i) may not purchase or retain
securities of an issuer if an officer or director of such issuer is an officer
or Director of the Fund or its investment adviser and one or more of such of-
ficers or Directors of the Fund or its investment adviser owns beneficially
more than 1/2% of the shares or securities of such issuer and all such direc-
tors and officers owning more than 1/2% of such shares or securities together
own more than 5% of such shares or securities (ii) will not invest more than
5% of the value of its total assets at the time of investment in the securi-
ties of any issuer or issuers which have records of less than three years'
continuous operation. Additionally, the Admiral U.S. Treasury Money Market
Portfolio has no present intention to borrow money in excess of 5% of the
value of the Portfolio's total assets in the next year.

MANAGEMENT OF THE FUND

DIRECTORS AND OFFICERS The Officers of the Fund manage its day-to-day opera-
tions and are responsible to the Fund's Board of Directors. The Directors set
broad policies for each Fund and choose its Officers. The following is a list
of the Directors and Officers of the Funds and a statement of their present
positions and principal occupations during the past five years. The mailing
address of the Directors and Officers of the Fund is Post Office Box 876, Val-
ley Forge, PA 19482.

JOHN C. BOGLE, Chairman and Director* ALFRED M. RANKIN, JR., Director
Chairman and Director of the Van- Chairman, President, and Chief Ex-
guard Group, Inc., and each of the ecutive Officer of NACCO Indus-
investment companies in The Van- tries; Director of The BFGoodrich
guard Group; Director of the Mead Company and The Standard Products
Corporation and General Accident Company.
Insurance.

JOHN J. BRENNAN, President, Chief JOHN C. SAWHILL, Director
Executive Officer and Director* President and Chief Executive Offi-
President, Chief Executive Officer cer, The Nature Conservancy; for-
and Director of the Fund, The Van- merly, Director and Senior Partner,
guard Group, Inc. and each of the McKinsey & Co.; Director of Pacific
other investment companies in The Gas and Electric Company and NACCO
Vanguard Group. Industries.

ROBERT E. CAWTHORN, Director JAMES O. WELCH, JR., Director
Chairman of Rhone-Poulenc Rorer, Retired Chairman of Nabisco Brands,
Inc.; Director of Sun Company, Inc. and retired Vice Chairman and
Inc. Director of RJR Nabisco; Director
of TECO Energy, Inc.; and Director
BARBARA BARNES HAUPTFUHRER, Director of Kmart Corporation.
Director of The Great Atlantic and
Pacific Tea Company, Raytheon Com- J. LAWRENCE WILSON, Director
pany, Knight-Ridder, Inc., Massa- Chairman and Chief Executive Offi-
chusetts Mutual Life Insurance cer of Rohm & Haas Company, Direc-
Co., and ALCO Standard, Corp. and tor of Cummins Engine Company; and
Trustee Emerita of Wellesley Col- Trustee of Vanderbilt University.
lege.
RAYMOND J. KLAPINSKY, Secretary*
BRUCE K. MACLAURY, Director Senior Vice President and Secretary
President, The Brookings Institu- of The Vanguard Group, Inc.; Secre-
tion; Director of American Express tary of each of the investment com-
Bank, Ltd., The St. Paul Compa- panies in The Vanguard Group.
nies, Inc. and Scott Paper Compa-
ny. RICHARD F. HYLAND, Treasurer*
Treasurer of The Vanguard Group,
BURTON G. MALKIEL, Director Inc. and of each of the investment
Chemical Bank Chairman's Professor companies in The Vanguard Group.
of Economics, Princeton Universi-
ty; Director of Prudential Insur- KAREN E. WEST, Controller*
ance Co. of America, Amdahl Corpo- Vice President of The Vanguard
ration, Baker Fentress & Co., The Group, Inc.; Controller of each of
Jeffrey Co., and Southern New En- the Investment companies in The
gland Communications Company. Vanguard Group.
--------
* Officers of the Fund are "inter-
ested persons" as defined in the
Investment Company Act of 1940.

9
<PAGE>

THE VANGUARD GROUP The Fund is a member of The Vanguard Group of Investment
Companies. Through their jointly-owned subsidiary, The Vanguard Group, Inc.
("Vanguard"), the Fund and the other Funds in the group obtain at cost virtu-
ally all of their corporate management, administrative and distribution serv-
ices. Vanguard also provides investment advisory services on an at-cost basis
to certain of the Vanguard Funds.

Vanguard employs a supporting staff of management and administrative per-
sonnel needed to provide the requisite services to the Funds and also fur-
nishes the Funds with necessary office space, furnishings and equipment. Each
Fund pays its share of Vanguard's net expenses which are allocated among the
Funds under methods approved by the Board of Directors (trustees) of each
Fund. In addition, each Fund bears its own direct expenses, such as legal, au-
diting and custodian fees.

The Vanguard Group adheres to a Code of Ethics established pursuant to Rule
17j-1 under the Investment Company Act of 1940. The Code is designed to pre-
vent unlawful practices in connection with the purchase or sale of securities
by persons associated with Vanguard. Under Vanguard's Code of Ethics certain
officers and employees of Vanguard who are considered access persons are per-
mitted to engage in personal securities transactions. However, such transac-
tions are subject to procedures and guidelines substantially similar to those
recommended by the mutual fund industry and approved by the U.S. Securities
and Exchange Commission.

The Vanguard Group was established and operates under a Funds' Service
Agreement which was approved by the shareholders of each of the Funds. The
amounts which each of the Funds has invested are adjusted from time to time in
order to maintain the proportionate relationship between each Fund's relative
net assets and its contribution to Vanguard's capital. At January 31, 1996,
the Fund had contributed capital of $340,000 to Vanguard representing 1.7% of
Vanguard's capitalization. The Funds' Service Agreement provides for the fol-
lowing arrangement : (1) each Vanguard Fund may invest a maximum of 0.40% of
its assets in Vanguard and (2) there is no restriction on the maximum cash in-
vestment that the Vanguard Funds may make in Vanguard.

MANAGEMENT. Corporate management and administrative services include: (1)
executive staff; (2) accounting and financial; (3) legal and regulatory; (4)
shareholder account maintenance; (5) monitoring and control of custodian rela-
tionships; (6) shareholder reporting; and (7) review and evaluation of advi-
sory and other services provided to the Funds by third parties. The Fund's
share of Vanguard's actual net costs of operation relating to management and
administrative services (including transfer agency) for the fiscal year ended
January 31, 1996, totaled approximately $2,637,000.

DISTRIBUTION. Vanguard provides all distribution and marketing activities
for the Funds in the Group. Vanguard Marketing Corporation, a wholly-owned
subsidiary of The Vanguard Group, Inc., acts as Sales Agent for shares of the
Funds, in connection with any sales made directly to investors in the states
of Florida, Missouri, New York, Ohio, Texas and such other states as it may be
required.

The principal distribution expenses are for advertising, promotional materi-
als and marketing personnel. Distribution services may also include organizing
and offering to the public, from time to time, one or more new investment com-
panies which will become members of the Group. The Directors and officers of
Vanguard determine the amount to be spent annually on distribution activities,
the manner and amount to be spent on each Fund, and whether to organize new
investment companies.

One half of the distribution expenses of a marketing and promotional nature
is allocated among the Funds based upon their relative net assets. The remain-
ing one half of these expenses is allocated among the Funds based upon each
Fund's sales for the preceding 24 months relative to the total sales of the
Funds as a Group, provided, however, that no Fund's aggregate quarterly rate
of contribution for distribution expenses of a marketing and promotional na-
ture shall exceed 125% of the average distribution expense rate for the Group,
and that no Fund shall incur annual distribution expenses in

10
<PAGE>

excess of 20/100 1% of its average month-end net assets. During the fiscal
year ended January 31, 1996, the Fund paid approximately $680,000 of the
Groups distribution and marketing expenses, which represented an effective an-
nual rate of .03 of 1% of the Fund's average net assets.

INVESTMENT ADVISORY SERVICES. Vanguard also provides investment advisory
services to the Fund; Vanguard Municipal Bond Fund; Vanguard Money Market Re-
serves; the several Portfolios of Vanguard Fixed Income Securities Fund; Van-
guard Institutional Index Fund; Vanguard Bond Index Fund; Vanguard California
Tax-Free Fund; Vanguard Florida Insured Tax-Free Fund; Vanguard New Jersey
Tax-Free Fund; Vanguard New York Insured Tax-Free Fund; Vanguard Ohio Tax-Free
Fund; Vanguard Pennsylvania Tax-Free Fund; Vanguard Balanced Index Fund; Van-
guard Index Trust; Vanguard International Equity Index Fund; Vanguard Tax-Man-
aged Fund; the Aggressive Growth Portfolio of Vanguard Horizon Fund; several
Portfolios of Vanguard Variable Insurance Fund; a portion of Vanguard/Windsor
II; a portion of Vanguard/Morgan Growth Fund as well as several in depth sepa-
rate accounts. These services are provided on an at-cost basis from a money
management staff employed directly by Vanguard. The investment management
staff is supervised by the senior officers of the Fund who are directly re-
sponsible to the Board of Directors of the Fund. The Board of Directors,
elected annually by shareholders, sets broad policies for the Fund and chooses
its officers. The compensation and other expenses of this staff are paid by
the Funds utilizing these services. During the year ended January 31, 1996,
the Fund paid approximately $310,000 of Vanguard's investment advisory ex-
penses.

REMUNERATION OF DIRECTORS AND OFFICERS. The Fund pays each Director, who is
not also an officer, an annual fee plus travel and other expenses incurred in
attending Board meetings. During the fiscal year ended January 31, 1996, the
Fund paid approximately $8,000 in Directors fees and expenses to its "non-in-
terested" Directors. The Fund's officers and employees are paid by Vanguard
which, in turn, is reimbursed by the Fund, and each other Fund in the Group,
for its proportionate share of officers' and employees' salaries and retire-
ment benefits. During the year ended January 31, 1996, the Fund's proportion-
ate share of remuneration paid to all officers of the Fund, as a group, was
approximately $ . .

Under its retirement plan, Vanguard contributes annually an amount equal to
10% of each officer's annual compensation plus 5.7% of that part of the offi-
cer's compensation during the year that exceeds the Social Security Taxable
Wage Base then in effect. Under the Thrift Plan, all officers are permitted to
make pre-tax basic contributions in a maximum amount equal to 4% of total com-
pensation. Vanguard matches the basic contributions on a 100% basis. Directors
who are not Officers are paid an annual fee based on the number of years of
service on the Board, up to fifteen years of service, upon retirement. The fee
is equal to $1,000 for each year of service and each investment company member
of The Vanguard Group contributes a proportionate amount to this fee based on
its relative net assets. This fee is paid, subsequent to a Director's retire-
ment, for a period of ten years or until the death of a retired Director. The
Fund's proportionate shares of retirement contributions made by Vanguard under
its retirement and thrift plans on behalf of all officers of the Fund, as a
group, during the 1996 fiscal year was approximately $ . .

11
<PAGE>

The following table provides detailed information with respect to the
amounts paid or accrued for the Directors for the fiscal year ended January
31, 1996.

VANGUARD ADMIRAL FUNDS
COMPENSATION TABLE

<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
RETIREMENT FROM ALL
AGGREGATE BENEFITS ACCRUED ESTIMATED VANGUARD FUNDS
COMPENSATION AS PART OF ANNUAL BENEFITS PAID TO
NAMES OF DIRECTORS FROM FUND FUND EXPENSES UPON RETIREMENT DIRECTORS/3/
------------------ ------------ ---------------- --------------- ------------------
<S> <C> <C> <C> <C>
John C. Bogle/1/,/2/.... -- -- -- --
John J. Brennan/2/...... -- -- -- --
Barbara Barnes
Hauptfuhrer............ $855 $146 $15,000 $59,000
Robert E. Cawthorn...... $855 $122 $13,000 $59,000
Bruce K. MacLaury....... $943 $144 $12,000 $55,000
Burton G. Malkiel....... $870 $ 97 $15,000 $60,000
Alfred M. Rankin, Jr. .. $870 $ 77 $15,000 $60,000
John C. Sawhill......... $870 $ 91 $15,000 $60,000
James O. Welch, Jr. .... $855 $112 $15,000 $59,000
J. Lawrence Wilson...... $870 $ 81 $15,000 $60,000
</TABLE>
- --------

1. For the period reported in this table, Mr. Bogle was the Fund's Chief Exec-
utive Officer, and therefore an "Interested Director."

2. As "Interested Directors," Messrs. Bogle and Brennan receive no compensa-
tion for their service.

3. The amounts reported in this column reflect the total compensation paid to
each Director for their service as Director or Trustee of 34 Vanguard Funds
(27 in the case of Mr. MacLaury).

PORTFOLIO TRANSACTIONS

Brokers or dealers who execute transactions for the four Portfolios are se-
lected by Vanguard's investment management staff which is responsible for us-
ing its best efforts to obtain the best available price and most favorable ex-
ecution for each transaction. Principal transactions are made directly with
issuers, underwriters and market makers and usually do not involve brokerage
commissions, although underwriting commissions and dealer markups may be in-
volved. Brokerage transactions are placed with brokers deemed most capable of
providing favorable terms; where more than one broker can offer such terms,
consideration may be given to brokers who provide the staff with research and
statistical information.

Vanguard's investment management staff may occasionally make recommendations
to other Vanguard Funds or clients which result in their purchasing or selling
securities simultaneously with the Portfolios. As a result, the demand for se-
curities being purchased or the supply of securities being sold may increase,
and this could have an adverse effect on the price of those securities. It is
the staff's policy not to favor one client over another in making recommenda-
tions or placing an order. If two or more clients are purchasing a given secu-
rity on the same day from the same broker-dealer, such transactions may be av-
eraged as to price.

Since the Fund does not market its shares through intermediary brokers or
dealers, it is not the Fund's practice to allocate brokerage or principal
business on the basis of sales of its shares which may be made through such
firms. However, the Fund may place portfolio orders with qualified brokers or
dealers who recommend the shares of the Fund to their clients and may, when a
number of brokers and dealers can provide comparable best price and execution
on a particular transaction, consider

12
<PAGE>

the sale of shares by a broker or dealer in selecting among qualified brokers
or dealers. The Fund paid no brokerage commissions during the fiscal year
ended January 31, 1996.

PERFORMANCE MEASURES

Vanguard may use reprinted material discussing The Vanguard Group, Inc. or
any of the member funds of The Vanguard Group of Investment Companies.

Each of the investment company members of The Vanguard Group, including each
Portfolio of Vanguard Admiral Funds, Inc., may, from time to time, use one or
more of the following unmanaged indices for comparative performance purposes.

STANDARD AND POOR'S 500 COMPOSITE STOCK PRICE INDEX--is a well diversified
list of 500 companies representing the U.S. Stock Market.

WILSHIRE 5000 EQUITY INDEX--consists of more than 6,000 common equity securi-
ties, covering all stocks in the U.S. for which daily pricing is available.

WILSHIRE 4500 EQUITY INDEX--consists of all stocks in the Wilshire 5000 except
for the 500 stocks in the Standard and Poor's 500 Index.

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

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

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

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

LEHMAN LONG-TERM TREASURY BOND--is composed of all bonds covered by the
Shearson Lehman Hutton Treasury Bond Index with maturities of 10 years or
greater.

MERRILL LYNCH CORPORATE & GOVERNMENT BOND--consists of over 4,500 U.S. Trea-
sury, Agency and investment grade corporate bonds.

LEHMAN CORPORATE (BAA) BOND INDEX--all publicly offered fixed-rate, noncon-
vertible domestic corporate bonds rated Baa by Moody's, with a maturity longer
than 1 year and with more than $25 million outstanding. This index includes
over 1,000 issues.

LEHMAN BROTHERS LONG-TERM CORPORATE BOND INDEX--is a subset of the Lehman Cor-
porate Bond Index covering all corporate, publicly issued, fixed-rate noncon-
vertible U.S. debt issues rated at least Baa, with at least $50 million prin-
cipal outstanding and maturity greater than 10 years.

BOND BUYER MUNICIPAL INDEX (20 YEAR) BOND--is a yield index on current-coupon
high-grade general-obligation municipal bonds.

13
<PAGE>

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

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

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

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

COMPOSITE INDEX--65% Lehman Long-Term Corporate AA or Better Bond Index and a
35% weighting in a blended equity composite (75% Standard & Poor's/BARRA Value
Index and 25% Standard & Poor's Utilities Index).

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

LEHMAN BROTHERS AGGREGATE BOND INDEX--is a market-weighted index that contains
individually priced U.S. Treasury, agency, corporate, and mortgage pass-
through securities corporate rated Baa or better. The Index has a market value
of over $4 trillion.

LEHMAN BROTHERS MUTUAL FUND SHORT (1-5) GOVERNMENT/CORPORATE INDEX--is a mar-
ket-weighted index that contains individually priced U.S. Treasury, agency,
and corporate investment grade bonds rated BBB--or better with maturities be-
tween 1 and 5 years. The Index has a market value of over $1.3 trillion.

LEHMAN BROTHERS MUTUAL FUND INTERMEDIATE (5-10) GOVERNMENT/CORPORATE INDEX--is
a market-weighted index that contains individually priced U.S. Treasury, agen-
cy, and corporate securities rated BBB--or better with maturities between 5
and 10 years. The Index has a market value of over $600 billion.

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

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

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

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

14
<PAGE>

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

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

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

TAX ADVANTAGE OF U.S. TREASURY INCOME

<TABLE>
<CAPTION>
NET CURRENT PORTFOLIO YIELD
EFFECTIVE -----------------------------
STATE 3.00% 4.00% 5.00% 6.00% 7.00%
INCOME TAX ----- ----- ----- ----- -----
RATE* TAXABLE EQUIVALENT YIELD
---------- -----------------------------
<S> <C> <C> <C> <C> <C>
3.00%........................................... 3.09% 4.12% 5.15% 6.19% 7.22%
6.00%........................................... 3.19% 4.26% 5.32% 6.38% 7.45%
9.00%........................................... 3.30% 4.40% 5.49% 6.59% 7.69%
</TABLE>
- --------

* Assumes state income tax taken as a deduction on Federal tax return (31% tax
bracket). Yields are not indicative of current or future performance. This
chart is for illustrative purposes only. See page 17 of the Prospectus.

OTHER DEFINITIONS

Marketing literature for the Portfolios of Vanguard Admiral Funds, Inc., may
from time to time refer to or discuss a Portfolio's DURATION. Duration is the
weighted average life of a Portfolio's debt instruments measured on a present-
value basis; it is generally superior to dollar-weighted average maturity as a
measure of a Portfolio's potential volatility due to changes in interest
rates.

Unlike a Portfolio's dollar-weighted average maturity, which takes into ac-
count only the stated maturity date of the Portfolio's debt instruments, dura-
tion represents a weighted average of both interest and principal payments,
discounted by the current yield-to-maturity of the securities held. For exam-
ple, a four-year, zero-coupon bond, which pays interest only upon maturity
(along with principal), has both a maturity and duration of 4 years. However,
a four-year bond priced at par with an 8% coupon has a maturity of 4 years but
a duration of 3.6 years (at an 8% yield), reflecting the bond's earlier pay-
ment of interest.

In general, a bond with a longer duration will fluctuate more in price than
a bond with a shorter duration. Also, for small changes in interest rates, du-
ration serves to approximate the resulting change in a bond's price. For exam-
ple, a 1% change in interest rates will cause roughly a 4% move in the price
of a zero-coupon bond with a 4-year duration, while an 8% coupon bond (with a
3.6 year duration) will change by approximately 3.6%.

FINANCIAL STATEMENTS

The Fund's financial statements for the fiscal year ended January 31, 1996,
including the financial highlights, appearing in the Fund's Annual Report to
shareholders, and the report thereon of Price Waterhouse LLP, independent ac-
countants, also appearing therein, are incorporated by reference in this
Statement of Additional Information. The Fund's Annual Report to Shareholders
is enclosed with this Statement of Additional Information.

15
<PAGE>

APPENDIX--DESCRIPTION OF SECURITIES AND RATINGS

I. DESCRIPTION OF BOND RATINGS

Excerpts from Moody's Investors Service, Inc., ("Moody's") description of
its four highest bond ratings: AAA--judged to be the best quality. They carry
the smallest degree of investment risk; AA--judged to be of high quality by
all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds: A--possess many favorable investment attributes and
are to be considered as "upper medium grade obligations"; BAA--considered as
medium grade obligations, i.e., they are neither highly protected nor poorly
secured. Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be characteris-
tically unreliable over any great length of time. BA judged to have specula-
tive elements; their future cannot be considered as well assured; B--generally
lack characteristics of the desirable investment; CAA--are of poor standing.
Such issues may be in default or there may be present elements of danger with
respect to principal or interest; CA--speculative in a high degree; often in
default; C--lowest rated class of bonds; regarded as having extremely poor
prospects.

Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and 3 indicates a
ranking toward the lower end of the category.

Excerpts from Standard & Poor's Corporation ("S&P") description of its five
highest bond ratings: AAA--highest grade obligations. Capacity to pay interest
and repay principal is extremely strong; AA--also qualify as high grade obli-
gations. A very strong capacity to pay interest and repay principal and dif-
fers from AAA issues only in small degree; A--regarded as upper medium grade.
They have a strong capacity to pay interest and repay principal although it is
somewhat susceptible to the adverse effects of changes in circumstances and
economic conditions than debt in higher rated categories; BBB--regarded as
having an adequate capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity to
pay interest and repay principal for debt in this category than in higher
rated categories. This group is the lowest which qualifies for commercial bank
investment. BB, B, CCC, CC--predominately speculative with respect to capacity
to pay interest and repay principal in accordance with terms of the obliga-
tion; BB indicates the lowest degree of speculation and CC the highest.

S&P applies indicators "+," no character and "-" to its rating categories.
The indicators show relative standing within the major rating categories.

II. U.S. GOVERNMENT SECURITIES

The term "U.S. Government securities" refers to a variety of securities
which are issued or guaranteed by the United States Treasury, by various agen-
cies of the United States Government, and by various instrumentalities which
have been established or sponsored by the United States Government. The term
also refers to "repurchase agreements" collateralized by such securities.

U.S. Treasury securities are backed by the "full faith and credit" of the
United States. Securities issued or guaranteed by Federal agencies and U.S.
Government-sponsored instrumentalities may or may not be backed by the full
faith and credit of the United States. In the case of securities not backed by
the full faith and credit of the United States, the investor must look princi-
pally to the agency or instrumentality issuing or guaranteeing the obligation
for ultimate repayment, and may not be able to assert a claim against the
United States itself in the event the agency or instrumentality does not meet
its commitment.

16
<PAGE>

Some of the U.S. Government agencies that issue or guarantee securities in-
clude the Export- Import Bank of the United States. Farmers Home Administra-
tion, Federal Housing Administration, Maritime Administration, Small Business
Administration, and The Tennessee Valley Authority.

An instrumentality of the U.S. Government is a government agency organized
under Federal charter with government supervision. Instrumentalities issuing
or guaranteeing securities include, among others, Federal Home Loan Banks, the
Federal Land Banks, Central Bank for Cooperative, Federal Intermediate Credit
Banks, and the Federal National Mortgage Association.

III. ZERO COUPON TREASURY BONDS

Admiral Short- and Intermediate-Term U.S. Treasury Portfolios may invest in
zero coupon Treasury bonds, a term used to describe U.S. Treasury notes and
bonds which have been stripped of their unmatured interest coupons, or the
coupons themselves, and also receipts or certificates representing interest in
such stripped debt obligations and coupons. The timely payment of coupon in-
terest and principal on these instruments remains guaranteed by the "full
faith and credit" of the United States Government.

A zero coupon bond does not pay interest. Instead, it is issued at a sub-
stantial discount to its "'face value"--what it will be worth at maturity. The
difference between a security's issue or purchase price and its face value
represents the imputed interest an investor will earn if the security is held
until maturity. For tax purposes, a portion of this imputed interest is deemed
as income received by zero coupon bondholders each year. The Fund, which ex-
pects to qualify as a regulated investment company, intends to pass along such
interest as a component of a Portfolio's distributions of net investment in-
come.

Zero coupon bonds may offer investors the opportunity to earn higher yields
than those available on U.S. Treasury bonds of similar maturity. However, zero
coupon bond prices may also exhibit greater price volatility than ordinary
debt securities because of the manner in which their principal and interest is
returned to the investor.

IV. COLLATERALIZED MORTGAGE OBLIGATION

The Admiral Short-, Intermediate- and Long-Term U.S. Treasury Portfolios may
invest in collateralized mortgage obligations (CMOs), bonds that are collater-
alized by whole loan mortgages or mortgage pass-through securities. Generally,
the three Portfolios will purchase CMOs which are collateralized by mortgage
securities issued or guaranteed by the U.S. Government or its agencies. The
bonds issued in a CMO deal are divided into groups, and each group of bonds is
referred to as a "tranche". Under the CMO structure, the cash flows generated
by the mortgages or mortgage pass-through securities in the collateral pool
are used to first pay interest and then pay principal to the CMO bondholders.
The bonds issued under a CMO structure are retired sequentially as opposed to
the pro rata return of principal found in traditional pass-through obliga-
tions. Subject to the various provisions of individual CMO issues, the cash
flow generated by the underlying collateral (to the extent it exceeds the
amount required to pay the stated interest) is used to retire the bonds. Under
the CMO structure, the repayment of principal among the different tranches is
prioritized in accordance with the terms of the particular CMO Issuance. The
"fastest-pay" tranches of bonds, as specified in the prospectus for the issu-
ance, would initially receive all principal payments. When that tranche of
bonds is retired, the next tranche, or tranches, in the sequence, as specified
in the prospectus, receive all of the principal payments until they are re-
tired. The sequential retirement of bond groups continues until the last
tranche, or group of bonds, is retired. Accordingly, the CMO structure allows
the issuer to use cash flows of long maturity, monthly-pay collateral to for-
mulate securities with short, intermediate and long final maturities and ex-
pected average lives. Aside from market risk, the primary risk involved in any
mortgage security, such as a CMO issuance, is its exposure to prepayment

17
<PAGE>

risk. To the extent a particular tranche is exposed to this risk, the bond-
holder is generally compensated in the form of higher yield. In order to pro-
vide security, in addition to the underlying collateral, many CMO issues also
include minimum reinvestment rate and minimum sinking-fund guarantees. Typi-
cally, the Portfolios will invest in those CMOs that most appropriately re-
flect their average maturities and market risk profiles. Consequently, the
Short-Term Portfolios invest only in CMOs with short-term average maturities
believed to be highly predictable. Similarly, Admiral Intermediate- and Long-
Term Treasury Portfolios will invest in those CMOs that carry market risks and
expected average maturities consistent with intermediate- and long-term bonds.

Subject to the applicable limits set forth above, in the Funds' Prospectus
and in the Funds' investment limitations, the Admiral Short-, Intermediate-
and Long-Term U.S. Treasury Portfolios have no specific limitation on the
amount of assets they may invest in CMOs.

18
<PAGE>

PART C

VANGUARD ADMIRAL FUNDS, INC.

OTHER INFORMATION

ITEM 24. (A) FINANCIAL STATEMENTS

The Registrant's Financial Statements for the fiscal year ended January 31,
1996, including Price Waterhouse LLP's report thereon, are incorporated by
reference, in the Statement of Additional Information, from the Registrant's
1996 Annual Report to Shareholders which has been filed with the Commission.
The Financial Statements included in the Annual Report are:

1. Statement of Net Assets as of January 31, 1996

2. Statement of Operations for the year ended January 31, 1996

3. Statement of Changes of Net Assets for the respective periods ended Jan-
uary 31, 1995 and 1996

4. Financial Highlights for the three years ended January 31, 1996, and the
period December 14, 1992 to January 31, 1993
5. Notes to Financial Statements
6. Report of Independent Accountants

(B) EXHIBITS

11. Consent of Independent Accountants*
16. Schedule for Computation of Performance Quotations*
27. Financial Data Schedule

- --------
*Filed herewith.

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Registrant is not controlled by or under common control with any person. The
officers of the Registrant, the investment companies in The Vanguard Group of
Investment Companies and The Vanguard Group, Inc. are identical. Reference is
made to the caption "Management of the Fund" in the Prospectus constituting
Part A and in the Statement of Additional Information constituting Part B of
this Registration Statement.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

As of January 31, 1996 each Portfolio of the Fund had the following number
of shareholders:

<TABLE>
<S> <C>
Admiral U.S. Treasury Money Market Portfolio........................... 6,086
Admiral Short-Term U.S. Treasury Portfolio............................. 2,328
Admiral Intermediate-Term U.S. Treasury Portfolio...................... 2,855
Admiral Long-Term U.S. Treasury Portfolio.............................. 1,161
</TABLE>

ITEM 27. INDEMNIFICATION

Reference is made to Article IX of Registrant's Articles of Incorporation.

Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by

C-1
<PAGE>

the registrant of expenses incurred or paid by a trustee, officer or control-
ling person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling pre-
cedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Reference is made to the caption "Investment Advisers" in the prospectus
constituting Part "A" of this Registration Statement and "Investment Advisory
Services" in Part "B" of this Registration Statement.

ITEM 29. PRINCIPAL UNDERWRITERS

(a) None
(b) Not Applicable

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

The books, accounts and other documents required by Section 31(a) under the
Investment Company Act and the rules promulgated thereunder will be maintained
in the physical possession of Registrant; Registrant's Transfer Agent, The
Vanguard Group, Inc. c/o The Vanguard Financial Center, Valley Forge, Pennsyl-
vania 19482; and the Registrant's Custodians, CoreStates Bank, N.A., Philadel-
phia, Pa. and State Street Bank and Trust Company, Boston, MA.

ITEM 31. MANAGEMENT SERVICES

Other than the Amended and Restated Funds' Service Agreement with The Van-
guard Group, Inc. has previously been filed and is described in Part B hereof
under "Management of the Fund"; the Registrant is not a party of any manage-
ment-related service contract.

ITEM 32. UNDERTAKINGS

Annual meetings will not be held except as required by the Investment Com-
pany Act of 1940 ("1940 Act") and other applicable law. Annual meetings of
shareholders will not be held except as required by the Investment Company Act
("Act") or other applicable law. Registrant undertakes to comply with the pro-
visions of Section 16(c) of the 1940 Act in regard to shareholders' rights to
call a meeting of shareholders for the purpose of voting on the removal of Di-
rectors and to assist in shareholder communications in such matters, to the
extent required by law.

A copy of the Registrant's latest annual report to shareholders will be fur-
nished, upon request and without charge, to each person to whom a copy of the
Fund's Prospectus is delivered.

C-2
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL THE
REQUIREMENTS FOR EFFECTIVENESS OF THIS REGISTRATION STATEMENT PURSUANT TO RULE
485 (B) UNDER THE SECURITIES ACT OF 1933 AND HAS DULY CAUSED THIS POST-
EFFECTIVE AMENDMENT TO THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE TOWN OF VALLEY FORGE AND
THE COMMONWEALTH OF PENNSYLVANIA, ON THE 17TH DAY OF MAY 1996.

Vanguard Admiral Funds, Inc.

By Raymond J. Klapinsky
-----------------------------------

JOHN C. BOGLE*
CHAIRMAN

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS POST-EFFEC-
TIVE AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOL-
LOWING PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED:

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
Raymond J. Klapinsky
- ------------------------------------- Chairman of the May 17, 1996
JOHN C. BOGLE* Board and Director

Raymond J. Klapinsky
- ------------------------------------- President, Director May 17, 1996
JOHN J. BRENNAN* and Chief Executive
Officer

Raymond J. Klapinsky Director
- ------------------------------------- May 17, 1996
ROBERT C. CAWTHORN*

Raymond J. Klapinsky Director
- ------------------------------------- May 17, 1996
BARBARA B. HAUPTFUHRER*

Raymond J. Klapinsky Director
- ------------------------------------- May 17, 1996
BURTON G. MALKIEL*

Raymond J. Klapinsky Director
- ------------------------------------- May 17, 1996
BRUCE K. MACLAURY, JR.*

Raymond J. Klapinsky Director
- ------------------------------------- May 17, 1996
ALFRED M. RANKIN, JR.*

Raymond J. Klapinsky Director
- ------------------------------------- May 17, 1996
JOHN C. SAWHILL*

Raymond J. Klapinsky Director
- ------------------------------------- May 17, 1996
JAMES O. WELCH, JR.*

Raymond J. Klapinsky Director
- ------------------------------------- May 17, 1996
J. LAWRENCE WILSON*

Raymond J. Klapinsky Treasurer and
- ------------------------------------- Principal Financial May 17, 1996
RICHARD F. HYLAND* Officer and
Accounting Officer
</TABLE>

* By Power of Attorney. See File Number 2-14336, January 23, 1990. Incorpo-
rated by Reference.
<PAGE>

VANGUARD ADMIRAL FUNDS, INC.

INDEX TO EXHIBITS

<TABLE>
<S> <C>
Accountants' Consent.................................................. EX-99.B11
Schedule for Computation of Performance Quotations.................... EX-99.B16
Financial Data Schedule............................................... EX-27
</TABLE>

<PAGE>

EX-99.B11

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus and
the Statement of Additional Information, constituting parts of this amended
Registration Statement on Form N-1A, of our report dated February 29, 1996 re-
lating to the financial statements and financial highlights appearing in the
January 31, 1996 Annual Report to Shareholders of Vanguard Admiral Funds, Inc.
(comprised of the U.S. Treasury Money Market, Short-Term U.S. Treasury, Inter-
mediate-Term U.S. Treasury and Long-Term U.S. Treasury Portfolios). We also
consent to the references to us under the headings "Financial Highlights" and
"General Information" in the Prospectus and "Financial Statements" in the
Statement of Additional Information.

Price Waterhouse LLP

Thirty South Seventeenth Street
Philadelphia, Pennsylvania 19103

May 16, 1996

<PAGE>

EX-99.B16

SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
VANGUARD ADMIRAL FUNDS--U.S. TREASURY MONEY MARKET PORTFOLIO

1.AVERAGE ANNUAL TOTAL RETURN (As of January 31, 1996)

P(1 + T)/n/ = ERV

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

N = number of years

ERV = ending redeemable value at the end of the period

EXAMPLE:
ONE YEAR
--------
<TABLE>
<S> <C>
P = $1,000
T = +5.66%
N = 1
ERV = $1,056.56
</TABLE>
- -------
* Since inception on December 14, 1992
P = $1,000

T = +4.23%
N = *

ERV= $1,138.43

<PAGE>

EX-99.B16

SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
VANGUARD ADMIRAL FUNDS--SHORT-TERM U.S. TREASURY PORTFOLIO

1.AVERAGE ANNUAL TOTAL RETURN (As of January 31, 1996)

P(1 + T)/n/ = ERV

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

N = number of years

ERV = ending redeemable value at the end of the period

EXAMPLE:
<TABLE>
<CAPTION>
ONE YEAR
--------
<C> <S>
P = $1,000
T = +11.41%
N = 1
ERV = $1,114.13
</TABLE>
- -------
* Since inception on December 14, 1992
P = $1,000

T = +6.27%
N = *

ERV = $1,209.88

2.YIELD (30 Days Ended January 31, 1996)

a - b
Yield = 2[(----- + 1)/6/ -1]
c X d

Where: a = dividends and interest paid during the period

b = expense dollars during the period (net of reimbursements)

c = the average daily number of shares outstanding during the
period

d = the maximum offering price per share on the last day of the
period

Example:
a = $1,872,978.87

b = $52,096.00

c = 41,498,605.789

d = $10.22

Yield = 5.21%
<PAGE>

EX-99.B16

SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
VANGUARD ADMIRAL FUNDS--INTERMEDIATE-TERM U.S. TREASURY PORTFOLIO

1.AVERAGE ANNUAL TOTAL RETURN (As of January 31, 1996)

P(1 + T)/n/ = ERV

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

N = number of years

ERV = ending redeemable value at the end of the period

EXAMPLE:
<TABLE>
<CAPTION>
ONE YEAR
--------
<C> <S>
P = $1,000
T = +19.16
N = 1
ERV = $1,191.56
</TABLE>
- -------
* Since inception on December 14, 1992
P = $1,000

T = +8.97%
N = *

ERV = $1,308.74

2.YIELD (30 Days Ended January 31, 1996)

a - b
Yield = 2[(----- + 1)/6/ -1]
c X d

Where: a = dividends and interest paid during the period

b = expense dollars during the period (net of reimbursements)

c = the average daily number of shares outstanding during the
period

d = the maximum offering price per share on the last day of the
period

Example:
a = $2,718,681.90

b = $70,374.00

c = 53,776,553.843

d = $10.67

Yield = 5.60%
<PAGE>

EX-99.B16

SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS
VANGUARD ADMIRAL FUNDS--LONG-TERM U.S. TREASURY PORTFOLIO

1.AVERAGE ANNUAL TOTAL RETURN (As of January 31, 1996)

P(1 + T)/n/ = ERV

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

N = number of years

ERV = ending redeemable value at the end of the period

EXAMPLE:
<TABLE>
<CAPTION>
ONE YEAR
--------
<C> <S>
P = $1,000
T = +26.74%
N = 1
ERV = $1,267.38
</TABLE>
- -------
* Since inception on December 14, 1992
P = $1,000

T = +12.01%
N = *

ERV = $1,426.39

2.YIELD (30 Days Ended January 31, 1996)

a - b
Yield = 2[(----- + 1)/6/ -1]
c X d

Where: a = dividends and interest paid during the period

b = expense dollars during the period (net of reimbursements)

c = the average daily number of shares outstanding during the
period

d = the maximum offering price per share on the last day of the
period

Example:
a = $950,371.64

b = $22,889.00

c = 16,887,919.730

d = $11.03

Yield = 6.05%

<PAGE>
<ARTICLE> 6
<CIK> 0000891190
<NAME> VANGUARD ADMIRAL FUNDS, INC.
<SERIES>
<NUMBER> 001
<NAME> ADMIRAL U.S. TREASURY MONEY MARKET PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 1,745,316
<INVESTMENTS-AT-VALUE> 1,745,316
<RECEIVABLES> 41,488
<ASSETS-OTHER> 202
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,787,006
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,662
<TOTAL-LIABILITIES> 8,662
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,778,296
<SHARES-COMMON-STOCK> 1,778,296
<SHARES-COMMON-PRIOR> 1,371,419
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 48
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,778,344
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 90,222
<OTHER-INCOME> 0
<EXPENSES-NET> 2,393
<NET-INVESTMENT-INCOME> 87,829
<REALIZED-GAINS-CURRENT> 73
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 87,902
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 87,829
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,644,118
<NUMBER-OF-SHARES-REDEEMED> 1,320,063
<SHARES-REINVESTED> 82,822
<NET-CHANGE-IN-ASSETS> 406,950
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (25)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 191
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,393
<AVERAGE-NET-ASSETS> 1,596,849
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.055
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.055
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000891190
<NAME> VANGUARD ADMIRAL FUNDS, INC.
<SERIES>
<NUMBER> 002
<NAME> ADMIRAL SHORT-TERM U.S. TREASURY PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 413,197
<INVESTMENTS-AT-VALUE> 424,856
<RECEIVABLES> 5,793
<ASSETS-OTHER> 51
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 430,700
<PAYABLE-FOR-SECURITIES> 3,265
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,410
<TOTAL-LIABILITIES> 4,675
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 420,181
<SHARES-COMMON-STOCK> 41,642
<SHARES-COMMON-PRIOR> 34,073
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,815)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11,659
<NET-ASSETS> 426,025
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 24,480
<OTHER-INCOME> 0
<EXPENSES-NET> 576
<NET-INVESTMENT-INCOME> 23,904
<REALIZED-GAINS-CURRENT> 1,729
<APPREC-INCREASE-CURRENT> 15,462
<NET-CHANGE-FROM-OPS> 41,095
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 23,904
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26,346
<NUMBER-OF-SHARES-REDEEMED> 20,626
<SHARES-REINVESTED> 1,849
<NET-CHANGE-IN-ASSETS> 93,068
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (7,544)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 45
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 576
<AVERAGE-NET-ASSETS> 383,750
<PER-SHARE-NAV-BEGIN> 9.77
<PER-SHARE-NII> 0.626
<PER-SHARE-GAIN-APPREC> 0.460
<PER-SHARE-DIVIDEND> 0.626
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.23
<EXPENSE-RATIO> 0.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000891190
<NAME> VANGUARD ADMIRAL FUNDS, INC.
<SERIES>
<NUMBER> 003
<NAME> ADMIRAL INTERMEDIATE-TERM U.S. TREASURY PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 544,978
<INVESTMENTS-AT-VALUE> 578,578
<RECEIVABLES> 16,939
<ASSETS-OTHER> 66
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 595,583
<PAYABLE-FOR-SECURITIES> 2,331
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,567
<TOTAL-LIABILITIES> 10,898
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 561,358
<SHARES-COMMON-STOCK> 54,668
<SHARES-COMMON-PRIOR> 37,279
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (10,273)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,600
<NET-ASSETS> 584,685
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 32,856
<OTHER-INCOME> 0
<EXPENSES-NET> 752
<NET-INVESTMENT-INCOME> 32,104
<REALIZED-GAINS-CURRENT> 6,041
<APPREC-INCREASE-CURRENT> 46,712
<NET-CHANGE-FROM-OPS> 84,857
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 32,104
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 31,613
<NUMBER-OF-SHARES-REDEEMED> 16,469
<SHARES-REINVESTED> 2,244
<NET-CHANGE-IN-ASSETS> 227,551
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (16,314)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 55
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 752
<AVERAGE-NET-ASSETS> 493,450
<PER-SHARE-NAV-BEGIN> 9.58
<PER-SHARE-NII> 0.665
<PER-SHARE-GAIN-APPREC> 1.120
<PER-SHARE-DIVIDEND> 0.665
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.70
<EXPENSE-RATIO> 0.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<PAGE>
<ARTICLE> 6
<CIK> 0000891190
<NAME> VANGUARD ADMIRAL FUNDS, INC.
<SERIES>
<NUMBER> 004
<NAME> ADMIRAL LONG-TERM U.S. TREASURY PORTFOLIO
<MULTIPLIER> 1,000
<CURRENCY> US

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 165,749
<INVESTMENTS-AT-VALUE> 183,375
<RECEIVABLES> 6,931
<ASSETS-OTHER> 22
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 190,328
<PAYABLE-FOR-SECURITIES> 1,145
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 3,305
<TOTAL-LIABILITIES> 4,450
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 167,727
<SHARES-COMMON-STOCK> 16,803
<SHARES-COMMON-PRIOR> 14,450
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 525
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 17,626
<NET-ASSETS> 185,878
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,823
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</TABLE>