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                        VANGUARD(R) MUNICIPAL BOND FUNDS
                         VANGUARD STATE TAX-EXEMPT FUNDS
                          SUPPLEMENT TO THE PROSPECTUS

In the "Buying Shares section of the prospectus,  the text titled "Your Purchase
Price" is deleted and replaced with the following:

YOUR PURCHASE PRICE
You buy  shares  at a fund's  NAV  determined  as of your  trade  date.  For all
Vanguard  funds  (except  money market  funds),  purchases  arriving at Vanguard
before the close of regular trading on the New York Stock Exchange  (generally 4
p.m., Eastern time) receive a trade date of the same day, and purchases arriving
after that time  receive a trade date of the first  business day  following  the
date of arrival. For money market funds, the trade date depends on the method of
payment for the purchase.

BY CHECK. For money market fund check purchases  arriving at Vanguard before the
close of  regular  trading  on the New York Stock  Exchange  (generally  4 p.m.,
Eastern  time) the trade date is the first  business day  following  the date of
arrival.  For purchases  arriving  after that time, the trade date is the second
business day  following  the date of arrival.  Money market  instruments  can be
purchases only with federal funds,  and its takes a mutual fund one business day
to convert check proceeds into federal funds.

BY WIRE OR EXCHANGE:  For money market funds, purchases made by wire or exchange
from another  Vanguard fund before the close of regular  trading on the Exchange
receive a trade date of that same day. For purchases  arriving at Vanguard after
that  time,  the trade  date is the first  business  day  following  the date of
arrival.

(C)2001 The Vanguard Group, Inc. All rights reserved.
Vanguard Marketing Corporation, Distributor.                         PSBS 042001