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                                 VANGUARD FUNDS
                             PROSPECTUS SUPPLEMENT
                                        
                                  MAY 19, 1997

EXCHANGING SHARES ON-LINE

An exchange is the selling of shares of one fund to purchase shares of another.
You may use your personal computer to exchange shares of most Vanguard funds by
accessing Vanguard's website (http://www.vanguard.com). To establish this
service for your account, you must first register through our website. We will
then send to you, by mail, an account access password that will enable you to
make on-line exchanges.

On-line exchanges are subject to the same limitations and policies that apply
to telephone exchanges, as described in the funds' prospectuses. The Vanguard
funds that you cannot purchase or sell through on-line exchange are VANGUARD
INDEX TRUST, VANGUARD BALANCED INDEX FUND, VANGUARD INTERNATIONAL EQUITY INDEX
FUND, VANGUARD REIT INDEX PORTFOLIO, VANGUARD TOTAL INTERNATIONAL PORTFOLIO,
AND VANGUARD GROWTH AND INCOME PORTFOLIO (formerly known as Vanguard
Quantitative Portfolios). These funds do permit on-line exchanges within IRAs
and other retirement accounts.

                                                                         PSESO