VANGUARD INDEX TRUST, 485BPOS, 2000-07-19

VANGUARD INDEX TRUST
485BPOS, 2000-07-19

Previous: M&T BANK CORP, SC 13D, 2000-07-19

Next: FIRST TENNESSEE NATIONAL CORP, 8-K, 2000-07-19

<PAGE>

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT (NO. 2-56846) UNDER THE SECURITIES ACT OF 1933

PRE-EFFECTIVE AMENDMENT NO.
POST-EFFECTIVE AMENDMENT NO. 60

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 62

VANGUARD INDEX TRUST

(EXACT NAME OF REGISTRANT AS SPECIFIED IN DECLARATION OF TRUST)

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

REGISTRANT'S TELEPHONE NUMBER (610) 669-1000

R. GREGORY BARTON, ESQUIRE
P.O. BOX 876
VALLEY FORGE, PA 19482

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

IT IS PROPOSED THAT THIS FILING BECOME EFFECTIVE:
ON ., 2000 PURSUANT TO PARAGRAPH (B) OF RULE 485.

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

VANGUARD VIPERS(TM)

VANGUARD TOTAL STOCK MARKET VIPERS(TM)

VANGUARD SMALL-CAP VIPERS(TM)

VANGUARD VALUE VIPERS(TM)

VANGUARD GROWTH VIPERS(TM)

Exchange-traded classes of fund shares that are not
individually redeemable

Prospectus ., 2000

[THE VANGUARD GROUP LOGO]

<PAGE>

VANGUARD VIPERS(TM)
VANGUARD TOTAL STOCK MARKET VIPERS(TM)
VANGUARD SMALL-CAP VIPERS(TM)
VANGUARD VALUE VIPERS(TM)
VANGUARD GROWTH VIPERS(TM)
Prospectus ., 2000

Vanguard Index Participation Equity Receipts,
An Exchange-traded Class of Shares of certain Vanguard Index Funds

--------------------------------------------------------------------------------
CONTENTS

X AN INTRODUCTION TO VIPER SHARES X MORE ON VIPER SHARES

X PROFILES X VIPER SHARES AND VANGUARD

xVIPERs X INVESTMENT ADVISER

x Total Stock Market VIPERs X DIVIDENDS, CAPITAL GAINS, AND TAXES

x Small-Cap VIPERs X DAILY NAV PRICING

x Value VIPERs GLOSSARY (inside back cover)

x Growth VIPERs

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
A NOTE TO RETAIL INVESTORS:

VIPER Shares can be purchased directly from the issuing fund only in exchange
for a basket of securities that is expected to be worth several million dollars.
Retail investors, therefore, generally will not be able to purchase VIPER Shares
directly from the fund. Rather, most retail investors will purchase VIPER Shares
in the secondary market with the assistance of a broker. Thus, much of the
information contained in this prospectus--such as information about purchasing
and redeeming VIPER Shares from the fund and all references to the Transaction
Fee imposed on purchases and redemptions--is not relevant to retail investors.

-------------------------------------------------------------------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<PAGE>

AN INTRODUCTION TO VIPER SHARES

WHAT ARE VIPER SHARES?
Vanguard Index Participation Equity Receipts, or "VIPER" Shares, are a class of
exchange-traded securities that represent an interest in a portfolio of stocks
held by a particular Vanguard index mutual fund. Five funds, each of which seeks
to track a different segment of the U.S. stock market, offer a VIPER Share
class:

---------------------------------------------------------------------------------------------------
FUND VIPER SHARES SEEKS TO TRACK
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Vanguard Total Stock Market Index Fund Total Stock Market VIPERs The overall stock market
Vanguard 500 Index Fund VIPERs Large-Cap stocks
Vanguard Small-Cap Index Fund Small-Cap VIPERs Small-Cap stocks
Vanguard Growth Index Fund Growth VIPERs Large-Cap growth stocks
Vanguard Value Index Fund Value VIPERs Large-Cap value stocks
---------------------------------------------------------------------------------------------------
</TABLE>

In addition to VIPER Shares, each of these funds offers one or more
conventional classes of fund shares. This prospectus, however, relates only to
VIPER Shares.

HOW ARE VIPER SHARES DIFFERENT FROM OTHER MUTUAL FUND SHARES? Conventional
mutual fund shares are bought from and redeemed with the issuing fund for cash
at a net asset value typically calculated once a day. VIPER Shares, by contrast,
can not be purchased directly from or redeemed directly with the issuing fund
except by or through Authorized Participants (defined below), and then only for
an in-kind basket of securities.

Unlike conventional mutual fund shares, an organized secondary market will
exist for VIPER Shares because VIPER Shares will be listed for trading on the
American Stock Exchange. Investors can purchase and sell VIPER Shares on the
secondary market through a broker . Secondary market transactions occur not at
net asset value, but at market prices that change throughout the day based on
the supply of, and demand for, VIPER Shares.

HOW DO I BUY AND SELL VIPER SHARES?
Each Fund offers and issues VIPER Shares only in bundles of a specified number.
These bundles are known as "Creation Units." To purchase or redeem a Creation
Unit, you must be an Authorized Participant or you must do so through a broker
that is an Authorized Participant. An Authorized Participant is a participant in
the Depository Trust Company that has executed a Participant Agreement with the
Funds' Distributor. Vanguard will provide you with a list of Authorized
Participants upon request. Because Creation Units likely will cost millions of
dollars, and can be purchased only in exchange for a basket of securities (and
not for cash), it is expected that only a limited number of institutional
investors will purchase and redeem VIPER Shares directly with an issuing fund.

Investors who cannot afford to purchase a Creation Unit can acquire VIPER
Shares in one of two ways. If you own Investor Shares of a fund that issues
VIPER Shares, you can convert those shares into VIPER Shares of equivalent
value. For more information about the conversion privilege, see "Conversions and
Exchanges" under MORE ON THE FUNDS. In addition, any investor may purchase VIPER
Shares on the secondary market (i.e., not from the issuing fund) through a
broker; VIPER Shares are listed on the American Stock Exchange and publicly
traded. To acquire VIPER Shares through either means, you must have a brokerage
account. For information about acquiring VIPER Shares through conversion of
Investor Shares or through a secondary market purchase, please contact your bro-
<PAGE>

ker. If you want to sell VIPER Shares, you must do so through your broker; VIPER
Shares can not be converted back into Investor Shares.

Note: When you buy or sell VIPER Shares on the secondary market, your
broker may charge you a commission. In addition, because secondary market
transactions occur at market prices, you may pay more than net asset value when
you buy VIPER Shares, and receive less than net asset value when you sell those
shares.

<PAGE>

PROFILE--VIPERS(TM)

The following profile summarizes key features of VIPERs, an exchange-traded
share class of Vanguard 500 Index Fund.

INVESTMENT OBJECTIVE
VIPERs seek to match the performance of a benchmark index that measures the
investment return of large-capitalization stocks.

INVESTMENT STRATEGIES
Vanguard 500 Index Fund employs a passive management strategy designed to track
the performance of the Standard & Poor's 500 Index, which is dominated by the
stocks of large U.S. companies. The Fund attempts to replicate the target index
by investing all or substantially all of its assets in the stocks that comprise
the Index.

PRIMARY RISKS
- VIPERS' TOTAL RETURN, LIKE STOCK PRICES GENERALLY, WILL FLUCTUATE WITHIN A
WIDE RANGE, SO AN INVESTOR COULD LOSE MONEY OVER SHORT OR EVEN LONG
PERIODS. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices.

- VIPERs are subject to investment style risk, which is the chance that
returns from large-capitalization stocks will trail returns from other
asset classes or the overall stock market. Large-capitalization stocks tend
to go through cycles of doing better--or worse--than the stock market in
general. These periods have, in the past, lasted for as long as several
years.

- Individual VIPERs will be listed for trading on the American Stock Exchange
and can be sold in the secondary market at market prices. Although it is
expected that the market price of a VIPER typically will approximate its
NAV, there may be times when the market price and the NAV vary
significantly. Thus, if you sell VIPERs on the secondary market, you may
receive less than NAV.

PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
VIPERs. Because calendar-year performance information for VIPERs is not yet
available, the information presented in the bar chart and table reflects the
performance of the Investor Shares of Vanguard 500 Index Fund. (Investor Shares
are offered through a separate prospectus). Performance information for the
Investor Shares would be substantially similar, since both share classes are
invested in the same portfolio of securities; their returns differ only to the
extent that the expenses of the two classes differ.

<PAGE>

--------------------------------------------------------------------
ANNUAL TOTAL RETURNS-INVESTOR SHARES

--------------------------------------------------------------------
1990 -3.32%
1991 30.22%
1992 7.42%
1993 9.89%
1994 1.18%
1995 37.45%
1996 22.88%
1997 33.19%
1998 28.62%
1999 21.07%
--------------------------------------------------------------------
Return figures assume that an investor purchased shares at net asset value,
and do not reflect the transaction fee imposed on purchases and redemptions
of Creation Units or the commissions that investors may have to pay their
brokers to buy and sell VIPERs in the secondary market.

-------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was 21.39% (quarter ended December 31, 1998) and the lowest return for a
quarter was -13.76% (quarter ended September 30, 1990).

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (INVESTOR SHARES) FOR YEARS ENDED DECEMBER 31, 1999
--------------------------------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Vanguard 500 Index Fund 21.07% 28.49% 18.07%
S&P 500 Index 21.04 28.56 18.21
--------------------------------------------------------------------------------

FEES AND EXPENSES
The following table describes the fees and expenses you may pay if you buy and
hold VIPERs. The expenses shown under Annual Fund Operating Expenses are based
on estimated amounts for the current fiscal year. VIPERs have no operating
history; actual operating expenses could be different.

SHAREHOLDER FEES* (fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases: None
Sales Charge (Load) Imposed on Reinvested Dividends: None
Transaction Fee on Purchases and Redemptions: Varies*
Transaction Fee Imposed on Reinvested Dividends: None

ANNUAL FUND OPERATING EXPENSES (expenses deducted from the Fund's
assets)
Management Expenses: .%
12b-1 Distribution Fee: None
Other Expenses: .%
TOTAL ANNUAL FUND OPERATING EXPENSES: .%

*An investor purchasing or redeeming Creation Units will pay to the issuing
fund a transaction fee of $., plus an additional transaction fee of up to
$. if the investor does not purchase or redeem through the Continuous Net
Settlement System of the National Securities Clearing Corporation. An
investor buying or selling VIPERs in the secondary market will pay a
commission to his or her broker in an amount established by the broker.

<PAGE>

The following example is intended to help retail investors compare the cost
of investing in VIPERs with the cost of investing in other funds. It illustrates
the hypothetical expenses that such investors would incur over various periods
if they invest $10,000 in VIPERs. This example assumes that VIPERs provide a
return of 5% a year, and that operating expenses remain the same.

-----------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------------------
$. $.% $. $.
-----------------------------------------------------

THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE. ACTUAL FUTURE EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.

--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
DIVIDENDS AND CAPITAL GAINS NET ASSETS (ALL SHARE CLASSES) Dividends are
distributed quarterly in March, AS OF DECEMBER 31, 1999 June, September, and
December; capital gains, $104.7 billion if any, are distributed annually in
December

VANGUARD FUND NUMBER
INVESTMENT ADVISER .
The Vanguard Group, Valley Forge, Pa.,
since inception CUSIP NUMBER
.
INCEPTION DATE
., 2000 AMEX TRADING SYMBOL
.
--------------------------------------------------------------------------------

<PAGE>

PROFILE--TOTAL STOCK MARKET VIPERS(TM)

The following profile summarizes key features of Total Stock Market VIPERs, and
exchange-traded share class of Vanguard Total Stock Market Index Fund.

INVESTMENT OBJECTIVE
Total Stock Market VIPERs seek to match the performance of a benchmark index
that measures the investment return of the overall stock market.

INVESTMENT STRATEGIES
Vanguard Total Stock Market Index Fund employs a passive management strategy
designed to track the performance of the Wilshire 5000 Total Market Index, which
consists of all the U.S. common stocks regularly traded on the New York and
American Stock Exchanges and the Nasdaq over-the-counter market. The Fund
invests all or substantially all of its assets in a representative sample of the
stocks that comprise the Index.

PRIMARY RISKS
- TOTAL STOCK MARKET VIPERS' TOTAL RETURN, LIKE STOCK PRICES GENERALLY, WILL
FLUCTUATE WITHIN A WIDE RANGE, SO AN INVESTOR COULD LOSE MONEY OVER SHORT
OR EVEN LONG PERIODS. Stock markets tend to move in cycles, with periods of
rising prices and periods of falling prices.

- Individual Total Stock Market VIPERs will be listed for trading on the
American Stock Exchange and can be sold in the secondary market at market
prices. Although it is expected that the market price of a Total Stock
Market VIPER typically will approximate its NAV, there may be times when
the market price and the NAV vary significantly. Thus, if you sell Total
Stock Market VIPERs on the secondary market, you may receive less than NAV.

PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
Total Stock Market VIPERs. Because calendar-year performance information for
Total Stock Market VIPERs is not yet available, the information presented in the
bar chart and table reflects the performance of the Investor Shares of Vanguard
Total Stock Market Index Fund. (Investor Shares are offered through a separate
prospectus). Performance information for Total Stock Market VIPERs would be
substantially similar, since both share classes are invested in the same
portfolio of securities; their returns differ only to the extent that the
expenses of the two classes differ.

--------------------------------------------------------------------
ANNUAL TOTAL RETURNS-INVESTOR SHARES

--------------------------------------------------------------------
1993 10.62%
1994 -0.17%
1995 35.79%
1996 20.96%
1997 30.99%
1998 23.26%
1999 23.81%
--------------------------------------------------------------------
Return figures assume that an investor purchased shares at net asset value,
and do not reflect the transaction fee imposed on purchases and redemptions
of Creation Units or the commissions that investors may have to pay their
brokers to buy and sell Total Stock Market VIPERs in the secondary market.

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

During the period shown in the bar chart, the highest return for a calendar
quarter was 21.51% (quarter ended December 31, 1998) and the lowest return for a
quarter was -12.07% (quarter ended September 30, 1998).

1 YEAR 5 YEARS INCEPTION*
--------------------------------------------------------------------------------
Vanguard Total Stock Market Index Fund 23.81% 26.84% 19.80%
Wilshire 5000 Index 23.77 27.11 20.11
--------------------------------------------------------------------------------
*April 27, 1992
--------------------------------------------------------------------------------

FEES AND EXPENSES
The following table describes the fees and expenses you may pay if you buy and
hold Total Stock Market VIPERs. The expenses shown under Annual Fund Operating
Expenses are based on estimated amounts for the current fiscal year. Total Stock
Market VIPERs have no operating history; actual operating expenses could be
different.

SHAREHOLDER FEES (fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases: None
Sales Charge (Load) Imposed on Reinvested Dividends: None
Transaction Fee on Purchases and Redemptions: Varies*
Transaction Fee Imposed on Reinvested Dividends: None

ANNUAL FUND OPERATING EXPENSES (expenses deducted from the Fund's
assets)
Management Expenses: .%
12b-1 Distribution Fee: None
Other Expenses: .%
TOTAL ANNUAL FUND OPERATING EXPENSES: .%

*An investor purchasing or redeeming Creation Units will pay to the issuing
fund a transaction fee of $., plus an additional transaction fee of up to
$. if the investor does not purchase or redeem through the Continuous Net
Settlement System of the National Securities Clearing Corporation. An
investor buying or selling Total Stock Market VIPERs in the secondary
market will pay a commission to his or her broker in an amount established
by the broker.

The following example is intended to help retail investors compare the cost
of investing in Total Stock Market VIPERs with the cost of investing in other
funds. It illustrates the hypothetical expenses that such investors would incur
over various periods if they invest $10,000 in Total Stock Market VIPERs. This
example assumes that Total Stock Market VIPERs provide a return of 5% a year,
and that operating expenses remain the same.

<PAGE>

-------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------
$. $.% $. $.
-------------------------------------------------

THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE. ACTUAL FUTURE EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.

--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
DIVIDENDS AND CAPITAL GAINS NET ASSETS (ALL SHARE CLASSES) Dividends are
distributed quarterly in March, AS OF DECEMBER 31, 1999 June, September, and
December; capital gains, $22.1 billion if any, are distributed annually in
December

<PAGE>

PROFILE--SMALL-CAP VIPERS(TM)

The following profile summarizes key features of Small-Cap VIPERs, an
exchange-traded share class of Vanguard Small-Cap Index Fund.

INVESTMENT OBJECTIVE
Small-Cap VIPERs seek to match the performance of a benchmark index that
measures the investment return of the overall stock market.

INVESTMENT STRATEGIES
Vanguard Small-Cap Index Fund employs a passive management strategy designed to
track the performance of the Russell 2000 Small Stock Index which is made up of
the stocks of smaller U.S. companies. The Russell 2000 Index is comprised of the
2,000 smallest companies out of the 3,000 largest U.S. companies. The Fund
invest all or substantially all of its assets in a representative sample of the
stocks that comprise the Index.

PRIMARY RISKS
- SMALL-CAP VIPERS' TOTAL RETURN, LIKE STOCK PRICES GENERALLY, WILL FLUCTUATE
WITHIN A WIDE RANGE, SO AN INVESTOR COULD LOSE MONEY OVER SHORT OR EVEN
LONG PERIODS. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices.

- Small-Cap VIPERs are subject to investment style risk, which is the chance
that returns from small-capitalization stocks will trail returns from other
asset classes or the overall stock market. Small-capitalization stocks tend
to go through cycles of doing better--or worse--than the stock market in
general. These periods have, in the past, lasted for as long as several
years.

- Individual Small-Cap VIPERs will be listed for trading on the American
Stock Exchange and can be sold in the secondary market at market prices.
Although it is expected that the market price of a Small-Cap VIPER
typically will approximate its NAV, there may be times when the market
price and the NAV vary significantly. Thus, if you sell Small-Cap VIPERs on
the secondary market, you may receive less than NAV.

PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
Small-Cap VIPERs. Because calendar-year performance information for Small-Cap
VIPERs is not yet available, the information presented in the bar chart and
table reflects the performance of the Investor Shares of Vanguard Small-Cap
Index Fund. (Investor Shares are offered through a separate prospectus).
Performance information for the Small-Cap VIPERs would be substantially similar,
since both share classes are invested in the same portfolio of securities; their
returns differ only to the extent that the expenses of the two classes differ.

<PAGE>

--------------------------------------------------------------------
ANNUAL TOTAL RETURNS-INVESTOR SHARES

--------------------------------------------------------------------
1990 -18.13%
1991 45.26%
1992 18.20%
1993 18.70%
1994 -0.15%
1995 28.74%
1996 18.12%
1997 24.59%
1998 -2.61%
1999 23.13%
--------------------------------------------------------------------
Return figures assume that an investor purchased shares at net asset value,
and do not reflect the transaction fee imposed on purchases and redemptions
of Creation Units or the commissions that investors may have to pay their
brokers to buy and sell Small-Cap VIPERs in the secondary market.

-------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was 29.29% (quarter ended March 31, 1991) and the lowest return for a
quarter was -24.00% (quarter ended September 30, 1990).

--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS (INVESTOR SHARES) FOR YEARS ENDED DECEMBER 31, 1999
1 YEAR 5 YEARS 10 YEARS
--------------------------------------------------------------------------------
Vanguard Small-Cap Index Fund 23.13% 17.84% 14.20%
Russell 2000 Index 21.26 16.69 13.40
--------------------------------------------------------------------------------

FEES AND EXPENSES
The following table describes the fees and expenses you may pay if you buy and
hold Small-Cap VIPERs. The expenses shown under Annual Fund Operating Expenses
are based on estimated amounts for the current fiscal year. Small-Cap VIPERs
have no operating history; actual operating expenses could be different.

ANNUAL FUND OPERATING EXPENSES (expenses deducted from the Fund's
assets)
Management Expenses: .%
12b-1 Distribution Fee: None
Other Expenses: .%
TOTAL ANNUAL FUND OPERATING EXPENSES: .%

*An investor purchasing or redeeming Creation Units will pay to the issuing
fund a transaction fee of $., plus an additional transaction fee of up to
$. if the investor does not purchase or redeem through the Continuous Net
Settlement System of the National Securities Clearing Corporation. An
investor buying or selling Small-Cap VIPERs in the secondary market will
pay a commission to his or her broker in an amount established by the
broker.

<PAGE>

The following example is intended to help retail investors compare the cost
of investing in Small-Cap VIPERs with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they invest $10,000 in Small-Cap VIPERs. This example assumes
that Small-Cap VIPERs provide a return of 5% a year, and that operating expenses
remain the same.

-------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------
$. $. $. $.
-------------------------------------------------

THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE. ACTUAL FUTURE EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.

--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
DIVIDENDS AND CAPITAL GAINS NET ASSETS (ALL SHARE CLASSES) Dividends are
distributed quarterly in March, AS OF DECEMBER 31, 1999 June, September, and
December; capital gains, $4.0 billion if any, are distributed annually in
December

<PAGE>

PROFILE--VALUE VIPERS(TM)

The following profile summarizes key features of Value VIPERs, an
exchange-traded share class of Vanguard Value Index Fund.

INVESTMENT OBJECTIVE
Value VIPERs seek to match the performance of a benchmark index that measures
the investment return of the overall stock market.

INVESTMENT STRATEGIES
Vanguard Value Index Fund employs a passive management strategy designed to
track the performance of the Standard & Poor's 500/BARRA Value Index, which
includes those stocks of the S&P 500 Index with lower-than-average price/book
ratios. The Fund attempts to replicate the target index by investing all or
substantially all of its assets in the stocks that comprise the Index.

PRIMARY RISKS
- VALUE VIPERS' TOTAL RETURN, LIKE STOCK PRICES GENERALLY, WILL FLUCTUATE
WITHIN A WIDE RANGE, SO AN INVESTOR COULD LOSE MONEY OVER SHORT OR EVEN
LONG PERIODS. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices.

- Value VIPERs are subject to investment style risk, which is the chance that
returns from value-capitalization stocks will trail returns from other
asset classes or the overall stock market. Value-capitalization stocks tend
to go through cycles of doing better--or worse--than the stock market in
general. These periods have, in the past, lasted for as long as several
years.

- Individual Value VIPERs will be listed for trading on the American Stock
Exchange and can be sold in the secondary market at market prices. Although
it is expected that the market price of a Value VIPER typically will
approximate its NAV, there may be times when the market price and the NAV
vary significantly. Thus, if you sell Value VIPERs on the secondary market,
you may receive less than NAV.

PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
Value VIPERs. Because calendar-year performance information for Value VIPERs is
not yet available, the information presented in the bar chart and table reflects
the performance of the Investor Shares of Vanguard Value Index Fund. (Investor
Shares are offered through a separate prospectus). Performance information for
the Value VIPERs would be substantially similar, since both share classes are
invested in the same portfolio of securities; their returns differ only to the
extent that the expenses of the two classes differ.

<PAGE>

--------------------------------------------------------------------
ANNUAL TOTAL RETURNS-INVESTOR SHARES

--------------------------------------------------------------------
1993 18.35%
1994 -0.73%
1995 36.94%
1996 21.86%
1997 29.77%
1998 14.64%
1999 12.57%
--------------------------------------------------------------------
Return figures assume that an investor purchased shares at net asset value,
and do not reflect the transaction fee imposed on purchases and redemptions
of Creation Units or the commissions that investors may have to pay their
brokers to buy and sell Value VIPERs in the secondary market.

-------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was 17.50% (quarter ended Decmeber 31, 1998) and the lowest return for a
quarter was -12.96% (quarter ended September 30, 1998).

1 YEAR 5 YEARS INCEPTION*
--------------------------------------------------------------------------------
Vanguard Value Index Fund** 12.57% 22.82% 18.66%
Wilshire 5000 Index 12.72 22.94 18.81
--------------------------------------------------------------------------------
*November 2, 1992.
--------------------------------------------------------------------------------

FEES AND EXPENSES
The following table describes the fees and expenses you may pay if you buy and
hold Value VIPERs. The expenses shown under Annual Fund Operating Expenses are
based on estimated amounts for the current fiscal year. Value VIPERs have no
operating history; actual operating expenses could be different.

ANNUAL FUND OPERATING EXPENSES (expenses deducted from the Fund's
assets)
Management Expenses: .%
12b-1 Distribution Fee: None
Other Expenses: .%
TOTAL ANNUAL FUND OPERATING EXPENSES: .%

*An investor purchasing or redeeming Creation Units will pay to the issuing
fund a transaction fee of $., plus an additional transaction fee of up to
$. if the investor does not purchase or redeem through the Continuous Net
Settlement System of the National Securities Clearing Corporation. An
investor buying or selling Value VIPERs in the secondary market will pay a
commission to his or her broker in an amount established by the broker.

<PAGE>

The following example is intended to help retail investors compare the cost
of investing in Value VIPERs with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investors would incur over
various periods if they invest $10,000 in Value VIPERs. This example assumes
that Value VIPERs provide a return of 5% a year, and that operating expenses
remain the same.

-------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------
$. $.% $. $.
-------------------------------------------------

THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE. ACTUAL FUTURE EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.

--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
DIVIDENDS AND CAPITAL GAINS NET ASSETS (ALL SHARE CLASSES) Dividends are
distributed quarterly in March, AS OF DECEMBER 31, 1999 June, September, and
December; capital gains, $3.8 billion if any, are distributed annually in
December

NEWSPAPER ABBREVIATION
INVESTMENT ADVISER .
The Vanguard Group, Valley Forge, Pa.,
since inception VANGUARD FUND NUMBER
.
INCEPTION DATE
., 2000 CUSIP NUMBER
.
NET ASSETS (ALL SHARE CLASSES) AS OF DECEMBER
31, 1999 AMEX TRADING SYMBOL
$3.8 billion .
--------------------------------------------------------------------------------
<PAGE>

PROFILE--GROWTH VIPERS(TM)

The following profile summarizes key features of Growth VIPERs, an
exchange-traded share class of Vanguard Growth Index Fund.

INVESTMENT OBJECTIVE
Growth VIPERs seeks to match the performance of a benchmark index that measures
the investment return of the overall stock market.

INVESTMENT STRATEGIES
Vanguard Growth Index Fund employs a passive management strategy designed to
track the performance of the Standard & Poor's 500/BARRA Growth Index, which
includes those stocks of the S&P 500 Index with higher-than-average price/book
ratios. The Fund attempts to replicate the target index by investing all or
substantially all of its assets in the stocks that comprise the Index.

PRIMARY RISK
- GROWTH VIPERS' TOTAL RETURN, LIKE STOCK PRICES GENERALLY, WILL FLUCTUATE
WITHIN A WIDE RANGE, SO AN INVESTOR COULD LOSE MONEY OVER SHORT OR EVEN
LONG PERIODS. Stock markets tend to move in cycles, with periods of rising
prices and periods of falling prices.

- Growth VIPERs are subject to investment style risk, which is the chance
that returns from growth-capitalization stocks will trail returns from
other asset classes or the overall stock market. Growth-capitalization
stocks tend to go through cycles of doing better--or worse--than the stock
market in general. These periods have, in the past, lasted for as long as
several years.

- Individual Growth VIPERs will be listed for trading on the American Stock
Exchange and can be sold in the secondary market at market prices. Although
it is expected that the market price of a Growth VIPER typically will
approximate its NAV, there may be times when the market price and the NAV
vary significantly. Thus, if you sell Growth VIPERs on the secondary
market, you may receive less than NAV.

PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
Growth VIPERs. Because calendar-year performance information for Growth VIPERs
is not yet available, the information presented in the bar chart and table
reflects the performance of the Investor Shares of Vanguard Growth Index Fund.
(Investor Shares are offered through a separate prospectus). Performance
information for the Growth VIPERs would be substantially similar, since both
share classes are invested in the same portfolio of securities; their returns
differ only to the extent that the expenses of the two classes differ.

<PAGE>

--------------------------------------------------------------------
ANNUAL TOTAL RETURNS-INVESTOR SHARES

--------------------------------------------------------------------
1993 1.53%
1994 2.89%
1995 38.06%
1996 23.74%
1997 36.34%
1998 42.21%
1999 28.76%
--------------------------------------------------------------------
Return figures assume that an investor purchased shares at net asset value,
and do not reflect the transaction fee imposed on purchases and redemptions
of Creation Units or the commissions that investors may have to pay their
brokers to buy and sell Growth VIPERs in the secondary market.

-------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was 24.64% (quarter ended Decmeber 31, 1998) and the lowest return for a
quarter was -7.21% (quarter ended September 30, 1998).

1 YEAR 5 YEARS INCEPTION*
--------------------------------------------------------------------------------
Vanguard Growth Index Fund 28.76% 33.65% 23.74%
S&P 500/BARRA Growth Index 28.25 33.64 23.84
--------------------------------------------------------------------------------
*November 2, 1992.
--------------------------------------------------------------------------------

FEES AND EXPENSES
The following table describes the fees and expenses you may pay if you buy and
hold Value VIPERs. The expenses shown under Annual Fund Operating Expenses are
based on estimated amounts for the current fiscal year. Growth VIPERs have no
operating history; actual operating expenses could be different.

ANNUAL FUND OPERATING EXPENSES (expenses deducted from the Fund's
assets)
Management Expenses: .%
12b-1 Distribution Fee: None
Other Expenses: .%
TOTAL ANNUAL FUND OPERATING EXPENSES: .%

*An investor purchasing or redeeming Creation Units will pay to the issuing
fund a transaction fee of $., plus an additional transaction fee of up to
$. if the investor does not purchase or redeem through the Continuous Net
Settlement System of the National Securities Clearing Corporation. An
investor buying or selling Growth VIPERs in the secondary market will pay a
commission to his or her broker in an amount established by the broker.

<PAGE>

The following example is intended to help retail investors compare the cost
of investing in Growth VIPERs with the cost of investing in other funds. It
illustrates the hypothetical expenses that such investor would incur over
various periods if they invest $10,000 in Growth VIPERs. This example assumes
that Growth VIPERs provide a return of 5% a year, and that operating expenses
remain the same. The results apply whether or not you redeem your investment at
the end of each period.

-------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------
$. $.% $. $.
-------------------------------------------------

THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE. ACTUAL FUTURE EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.

--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
DIVIDENDS AND CAPITAL GAINS NET ASSETS (ALL SHARE CLASSES) Dividends are
distributed quarterly in March, AS OF DECEMBER 31, 1999 June, September, and
December; capital gains, $15.7 billion if any, are distributed annually in
December

<PAGE>

MORE ON VIPER SHARES

The following sections discuss other important features of VIPERs, Total Stock
Market VIPERs, Small-Cap VIPERs, Value VIPERs, and Growth VIPERs.

INDEXING METHODS

In seeking to track a particular index, a fund generally uses one of two methods
to select stocks.

Some index funds hold each stock found in their target indexes in about the
same proportions as represented in the indexes themselves. This is called a
"replication" method. For example, if 5% of the S&P 500 Index were made up of
the stock of a specific company, a fund tracking that index would invest about
5% of its assets in that company.The 500, Value, and Growth Index Funds employ
the replication method of indexing.

Because it would be very expensive to buy and sell all of the stocks held
in certain indexes (the Wilshire 5000 Index, for example, included more than
7,000 stocks as of December 31, 1999), many funds tracking these larger indexes
use a "sampling" technique. At Vanguard, we use a sophisticated computer program
to select a representative sample of stocks from a Fund's target index that will
resemble the full index in terms of industry weightings, market capitalization,
price/earnings ratio, dividend yield, and other characteristics. For instance,
if 10% of the Wilshire 5000 Index were made up of utility stocks, a fund
tracking that index would invest about 10% of its assets in some--but not
all--of those utility stocks. The particular utility stocks selected by the
fund, as a group, would have investment characteristics similar to those of the
utility stocks in the Index. The Total Stock Market and Small-Cap Index Funds
employ the sampling method of indexing.

The following table shows the number of stocks held by each of the issuing
funds, and the number of stocks in each fund's target index, as of December 31,
1999.

----------------------------------------------------------
NUMBER OF NUMBER OF STOCKS
FUND STOCKS HELD IN TARGET INDEX
----------------------------------------------------------
Total Stock Market 3,375 7,093
500 Index 500 500
Small-Cap 1,768 1,857
Value 398 394
Growth 110 106
----------------------------------------------------------

<PAGE>

--------------------------------------------------------------------------------
PLAIN TALK ABOUT

GROWTH FUNDS AND VALUE FUNDS

Growth investing and value investing are two styles employed by stock fund
managers. Growth funds generally focus on companies believed to have
above-average potential for growth in revenue and earnings. Reflecting the
market's high expectations for superior growth, such stocks typically have low
dividend yields and above-average prices in relation to such measures as
revenue, earnings, and book value. Value funds generally emphasize stocks of
companies from which the market does not expect strong growth. The prices of
value stocks typically are below-average in comparison with such factors as
earnings and book value, and these stocks typically have above-average dividend
yields. Growth and value stocks have, in the past, produced similar long-term
returns, though each category has periods when it outperforms the other. In
general, growth funds appeal to investors who will accept more volatility in
hopes of a greater increase in share price. Growth funds also may appeal to
investors with taxable accounts who want a higher proportion of returns to come
as capital gains (which may be taxed at lower rates than dividend income). Value
funds, by contrast, are appropriate for investors who want some dividend income
and the potential for capital gains, but are less tolerant of share-price
fluctuations.

--------------------------------------------------------------------------------

ADDITIONAL RISK INFORMATION

[FLAG]VIPER SHARES ARE SUBJECT TO MARKET RISK, WHICH IS THE CHANCE THAT STOCK
PRICES OVERALL WILL DECLINE OVER SHORT OR EVEN LONG PERIODS. STOCK MARKETS
TEND TO MOVE IN CYCLES, WITH PERIODS OF RISING STOCK PRICES AND PERIODS OF
FALLING STOCK PRICES.

To illustrate the volatility of stock prices, the following table shows the
best, worst, and average total returns for the U.S. stock market over various
periods as measured by the S&P 500 Index, which--in addition to being the target
index for Vanguard 500 Index Fund--is a widely used barometer of stock market
activity. (Total returns consist of dividend income plus change in market
price.) Note that the returns shown do not include the costs of buying and
selling stocks or other expenses that a real-world investment portfolio would
incur. Note, also, that the gap between best and worst tends to narrow over the
long term.

------------------------------------------------------
U.S. STOCK MARKET RETURNS (1926-1999)
------------------------------------------------------
1 YEAR 5 YEARS 10 YEARS 20 YEARS
------------------------------------------------------
Best 54.2% 28.6% 19.9% 17.9%
Worst -43.1 -12.4 -0.9 3.1
Average 13.2 11.0 11.1 11.1
------------------------------------------------------

The table covers all of the 1-, 5-, 10-, and 20-year periods from 1926
through 1999. You can see, for example, that while the average return on common
stocks for all of the 5-year periods was 11.0%, returns for individual 5-year
periods ranged from a -12.4% average (from 1928 through 1932) to 28.6% (from
1995 through 1999). These average returns reflect past performance on common
stocks; you should not regard them as an indication of future returns from
either the stock market as a whole or any VIPER Shares in particular.

<PAGE>

[FLAG] VIPER SHARES ARE ALSO SUBJECT, IN VARYING DEGREES, TO INVESTMENT STYLE
RISK, WHICH IS THE CHANCE THAT RETURNS FROM A SPECIFIC TYPE OF STOCK (FOR
INSTANCE, SMALL-CAP OR VALUE) WILL TRAIL RETURNS FROM OTHER ASSET CLASSES
OR THE OVERALL STOCK MARKET. EACH TYPE OF STOCK TENDS TO GO THROUGH CYCLES
OF DOING BETTER--OR WORSE--THAN COMMON STOCKS IN GENERAL. THESE PERIODS
HAVE, IN THE PAST, LASTED FOR AS LONG AS SEVERAL YEARS.

--------------------------------------------------------------------------------
PLAIN TALK ABOUT
LARGE-CAP, MID-CAP, AND SMALL-CAP STOCKS
Stocks of publicly traded companies--and mutual funds that hold these
stocks--can be classified by the companies' market value, or capitalization.
Market capitalization changes over time, and there is no "official" definition
of the boundaries of large-, mid-, and small-cap stocks. Vanguard generally
defines large-capitalization (large-cap) funds as those holding stocks of
companies whose outstanding shares have a market value exceeding $12 billion;
mid-cap funds as those holding stocks of companies with a market value between
$1 billion and $12 billion; and small-cap funds as those typically holding
stocks of companies with a market value of less than $1 billion. Vanguard
periodically reassesses these classifications.

--------------------------------------------------------------------------------

RISK OF NONDIVERSIFICATION
[FLAG]As index funds, each of the U.S. Stock Index Funds holds the largest
stocks in its target index in approximately the same percentages as those stocks
are represented in its index. When a target index becomes less diversified, a
fund that tracks that index similarly becomes less diversified. This has
happened to the GROWTH INDEX FUND. Due to the rapid appreciation of certain
stocks in its target index, the Fund's top four holdings, as of the date of this
prospectus, represent more than .% of its total assets. By tracking its target
index, the Fund technically has become "nondiversified" under SEC standards,
although it continues to hold more than 100 stock positions in a variety of
market sectors. As the market values of the Fund's largest holdings rise and
fall, there may be times when the Fund is diversified under SEC standards and
other times when it is not. Holders of Growth VIPERs are subject to the risk
that the Fund's performance could be hurt disproportionately by a decline in the
price of just a few stocks.

In the unlikely event that the target index of any of the other Vanguard
U.S. Stock Index Funds becomes dominated by just a few companies, holders of
VIPER Shares issued by those Funds would similarly be subject to the risk of
nondiversification.

SPECIAL RISKS OF EXCHANGE-TRADED SHARES

[FLAG] VIPER SHARES ARE NOT INDIVIDUALLY REDEEMABLE. They can be redeemed with
the Fund at net asset value only in large blocks known as Creation Units.
You may incur brokerage costs in purchasing enough VIPER Shares to
constitute a Creation Unit.

<PAGE>

[FLAG] THE MARKET PRICE OF VIPER SHARES MAY DIFFER FROM NET ASSET VALUE.
Individual VIPER Shares will be listed for trading on the American Stock
Exchange and can be bought and sold in the secondary market at market
prices. Although it is expected that the market price of a VIPER Share
typically will approximate its net asset value (NAV), there may be times
when the market price and the NAV vary significantly. Thus, you may pay
more than NAV when buying VIPER Shares on the secondary market, and you may
receive less than NAV when you sell those shares.

The market price of VIPER Shares, like the price of any
exchange-traded security, includes a "bid-offered spread" charged by the
exchange specialist and other market makers that cover the particular
security. In times of severe market disruption, the bid-offered spread
often increases significantly. This means that VIPER Shares are most likely
to be traded at a discount to NAV, and the discount is likely to be
greatest, when the price of VIPER Shares is falling fastest--and this may
be the time that you most want to sell VIPER Shares.

[FLAG] TRADING HALTS. Trading of VIPER Shares on the American Stock Exchange
will be halted whenver trading in equity securities generally is halted by
the activation of marketwide "circuit breakers," which are tied to large
decreases in the Dow Jones Industrial Average. Trading of VIPER Shares also
would be halted if (i) VIPER Shares are delisted from the AMEX without
first being listed on another exchange, or (ii) AMEX officials determine
that such action is appropriate in the interest of a fair and orderly
market or to protect investors.

PURCHASING VIPER SHARES FROM AN ISSUING FUND
You can purchase VIPER Shares from an issuing fund if you meet the following
criteria and comply with the following procedures.
- Eligible Investors. To purchase VIPER Shares from an issuing fund, you must
be an Authorized Participant or you must purchase through a broker that is
an Authorized Participant. An Authorized Participant is a participant in
the Depository Trust Company that has executed a Participant Agreement with
the Fund's Distributor (typically a brokerage firm).

- Creation Units. You must purchase VIPER Shares in large blocks, known as
"Creation Units." The number of VIPER Shares that comprise a Creation Unit,
and the minimum number of Creation Units you must purchase, are as follows:

--------------------------------------------------------------------------------
FUND NUMBER OF SHARES IN A UNIT MINIMUM PURCHASE
--------------------------------------------------------------------------------
Vanguard 500 Index Fund 60,000 1 unit
Vanguard Total Stock Market Index Fund 60,000 1 unit
Vanguard Small-Cap Index Fund 30,000 1 unit
Vanguard Value Index Fund 60,000 1 unit
Vanguard Growth Index Fund 60,000 1 unit
--------------------------------------------------------------------------------

For any particular fund, the number of VIPER Shares in a Creation Unit will
not change, except in the event of a stock split or similar revaluation. The
Funds will not issue fractional Creation Units.

- In-kind Deposits. To purchase VIPER Shares directly from an issuing fund,
you must deposit with the fund a basket of securities. Each business day,
prior to the opening of trading on the American Stock Exchange, the fund's
adviser will make available, on the DTC bulletin board, a list of the names
and number of shares of each security to be included in that day's creation
basket.

Note: Each fund reserves the right to permit payment of cash in lieu of one
or more securities in the creation basket. This might happen, for example, if a
particular deposit security is unavailable or cannot be traded by the purchaser.

<PAGE>

- Balancing Amount. In addition to the in-kind deposit of securities, you
will either pay to, or receive from, the issuing fund a specified amount of
cash (the "Balancing Amount"). This amount is designed to ensure that the
NAV of your in-kind deposit is identical to the NAV of the Creation Unit it
is used to purchase. The Balancing Amount is equal to the difference
between the NAV of a Creation Unit and the value of the securities in the
creation basket. The fund's adviser will publish, on a daily basis,
information about the previous day's Balancing Amount. You also must pay a
Transaction Fee, described below, in cash. The Balancing Amount and the
Transaction Fee, taken together are referred to as the "Cash Component."

- Placement of Purchase Orders. All purchase orders must be placed with
Vanguard by or through an Authorized Participant. Purchase orders will be
processed either through a manual clearing process run by the DTC or
through an enhanced clearing process that is available only to those DTC
participants that also are participants in the Continuous Net Settlement
System of the National Securities Clearing Corporation ("NSCC"). Authorized
Participants that do not use the NSCC's enhanced clearing process will be
charged a higher Transaction Fee (discussed below). An order must be
received by the Fund's Distributor prior to the close of regular trading on
the New York Stock Exchange (ordinarily 4:00 pm New York time) on the day
the order is placed, and all other procedures set forth in the Participant
Agreement must be followed, in order for you to receive the NAV determined
on that day. In the case of purchase orders made through the DTC's manual
clearing process, the order will be cancelled if the fund's custodian does
not receive the required deposit securities and Cash Component by 11:00 am
and 2:00 pm New York time, respectively, on the next business day.

- Transaction Fee on Purchases of Creation Units. A fixed Transaction Fee of
$. is applicable to each creation transaction, regardless of the number of
Creation Units purchased. An additional fee of up to $. (for a total of $.)
is imposed on transactions effected through the DTC clearing process
described above. Investors that elect to substitute cash in lieu of one or
more deposit securities are subject to an additional charge determined at
the discretion of the Fund. The Transaction Fee is paid to the fund, not to
Vanguard or other third party. It protects existing shareholders of the
fund from the costs associated with the purchase of Creation Units.

REDEEMING VIPER SHARES WITH AN ISSUING FUND

The redemption process is essentially the reverse of the purchase process.
- Eligible Investors. To redeem VIPER Shares with an issuing fund, you must
be an Authorized Participant or you must redeem through a broker that is an
Authorized Participant.
- Creation Units. To redeem VIPER Shares with an issuing fund, you must
tender the shares in Creation Unit-size blocks.

- In-kind Redemption Proceeds. Redemption proceeds will be paid in-kind with
a basket of securities. In most cases, the basket of securities you receive
will be the same as that required of investors purchasing Creation Units on
the same day. There will be times, however, when the creation and
redemption baskets differ. The composition of the redemption basket will be
available on the DTC bulletin board. Note: Each fund reserves the right to
permit a redeeming investor to substitute cash for one or more of the
securities in the redemption basket. This might happen, for example, if a
redeeming investor is unable, by law or policy, to own a particular
redemption security.

- Balancing Amount. Depending on whether the NAV of a Creation Unit is higher
or lower than the value of the redemption securities, you will either
receive from or pay to the
<PAGE>

issuing fund a Balancing Amount in cash. If you are receiving a Balancing
Amount, the amount due will be reduced by the amount of the applicable
Transaction Fee.

- Placement of Redemption Orders. As with purchases, redemptions may be
processed either through the DTC process or the NSCC process. In the case
of orders made through the NSCC process, an order is deemed received on the
date of transmittal if it is received by Vanguard prior to the close of
regular trading on the New York Stock Exchange on that date, and all other
procedures set forth in the Participation Agreement are followed. With
orders made through the DTC process, an order is deemed received on the
date of transmittal if, in addition to the two conditions described in the
preceding sentence, the required number of VIPER Shares specified in the
order is delivered to the Custodian by 11:00 a.m., New York time, on the
next business day after the transmittal date.

- Transaction Fee on Redemption of Creation Units. A fixed Transaction Fee of
$. is applicalbe to each redemption transaction, regardless of the number
of Creation Units redeemed. An additional fee of up to $. (for a total of
$.) may be imposed on transactions effected through the DTC clearing
process. Investors that elect to receive cash in lieu of one or more
securities in the redemption basket are subject to an additional charge
determined at the discretion of the Fund. The Transaction Fee is paid to
the fund, not to Vanguard or other third party. It protects existing
shareholders of the fund from the costs associated with the redemption of
Creation Units.

PURCHASING AND SELLING VIPER SHARES ON THE SECONDARY MARKET

You can buy and sell VIPER Shares on the secondary market in the same way you
buy and sell any other exchange-traded security--through a broker. In most
cases, the broker will charge you a commission to execute the transaction. The
price at which you buy or sell VIPER Shares, i.e., the market price, may be more
or less than the net asset value of the shares. Unless imposed by your broker,
there is no minimum dollar amount you must invest and no minimum number of VIPER
Shares you must buy.

CONVERSIONS AND EXCHANGES

CONVERSIONS. Owners of another class of shares issued by one of the Vanguard
Index Funds may, at no charge, convert those shares into VIPER Shares of
equivalent value of the same Fund. Note: Investors who own conventional shares
of a Vanguard fund through a 401(k) plan or other employer-sponsored retirement
or benefit plan may not convert those shares into VIPER Shares. Vanguard
reserves the right at any time in the future to impose a charge on conversion
transactions or to limit or terminate the conversion privilege. VIPER Shares,
whether acquired through a conversion or purchased in the secondary market,
cannot be converted into shares of another class of the same Fund.

Unless you are an Authorized Participant, you must hold VIPER Shares in a
brokerage account. Thus, before converting shares of another class into VIPER
Shares, you must have an existing, or open a new, brokerage account. To initiate
a conversion of Conventional Shares into VIPER Shares, please contact your
broker.

EXCHANGES. VIPER Shares of one Fund may not be exchanged for VIPER Shares of
another Fund.
<PAGE>

PRECAUTIONARY NOTES

A PRECAUTIONARY NOTE TO RETAIL INVESTORS. DTC or its nominee will be the
registered owner of all outstanding VIPER Shares. Your ownership of VIPER Shares
will be shown on the records of DTC and the DTC Participant broker through whom
you hold the shares. VANGUARD WILL NOT HAVE ANY RECORD OF YOUR OWNERSHIP. Your
account information will be maintained by your broker, who will provide you with
account statements, confirmations of your purchases and sales of VIPER Shares,
and tax information. Your broker also will be responsible for ensuring that you
receive shareholder reports and other communications from the Fund whose VIPER
Shares you own. You will receive other services (e.g., dividend reinvestment and
average cost information) only if your broker offers these services.

A PRECAUTIONARY NOTE TO PURCHASERS OF CREATION UNITS: You should be aware of
certain legal risks unique to investors purchasing Creation Units directly from
the issuing fund.

Because new VIPER Shares may be issued on an ongoing basis, a
"distribution" of VIPER shares could be occurring at any time. As a dealer,
certain activities on your part could, depending on the circumstances, result in
your being deemed a participant in the distribution, in a manner that could
render you a statutory underwriter and subject you to the prospectus delivery
and liability provisions of the Securities Act of 1933. For example, you could
be deemed a statutory underwriter if you purchase Creation Units from an issuing
fund, break them down into the constituent VIPER Shares, and sell those shares
directly to customers, or if you choose to couple the creation of a supply of
new VIPER Shares with an active selling effort involving solicitation of
secondary market demand for VIPER Shares. Whether a person is an underwriter
depends upon all of the facts and circumstances pertaining to that person's
activities, and the examples mentioned here should not be considered a complete
description of all the activities that could cause you to be deemed an
underwriter.

Dealers who are not "underwriters," but are participating in a distribution
(as opposed to engaging in ordinary secondary market transactions), and thus
dealing with VIPER Shares as part of an "unsold allotment" within the meaning of
Section 4(3)(C) of the Securities Act, will be unable to take advantage of the
prospectus delivery exemption provided by Section 4(3) of the Securities Act.

A PRECAUTIONARY NOTE TO INVESTMENT COMPANIES. For purposes of the Investment
Company Act of 1940, VIPER Shares are issued by the Vanguard U.S. Stock Index
Funds, and the acquisition of VIPER Shares by investment companies is subject to
the restrictions of Section 12(d)(1) of that Act.

A NOTE ON UNUSUAL CIRCUMSTANCES: Vanguard can stop selling shares or postpone
payment of redemption proceeds at times when the New York Stock Exchange is
closed or under any emergency circumstances as determined by the U.S. Securities
and Exchange Commission.

TURNOVER RATE
Generally, a passively managed fund sells securities only to respond to
redemption requests or to adjust the number of shares held to reflect a change
in the fund's target index. Turnover rates for large-cap stock index funds tend
to be very low because large-cap indexes, such as the S&P 500, typically do not
change much from year to year. Turnover rates for mid-cap and small-cap stock
index funds tend to be higher (although still relatively <PAGE>

low, compared to actively managed stock funds), because the indexes they track
are more likely to change as a result of mergers, acquisitions, business
failures, or growth of companies.

--------------------------------------------------------------------------------
PLAIN TALK ABOUT

TURNOVER RATE

Before investing in a mutual fund, you should review its turnover rate. This
gives an indication of how transaction costs could affect the fund's future
returns. In general, the greater the volume of buying and selling by the fund,
the greater the impact that brokerage commissions and other transaction costs
will have on its return. Also, funds with high turnover rates may be more likely
to generate capital gains that must be distributed to shareholders as income
subject to taxes. As of December 31, 1999, the average turnover rate for
passively managed domestic equity index funds investing in common stocks was
approximately 18%; for all domestic stock funds, the average turnover rate was
approximately 89%, according to Morningstar, Inc. (A turnover rate of 100% would
occur, for example, if a fund sold and replaced securities valued at 100% of its
net assets within a one-year period.)

--------------------------------------------------------------------------------

INVESTMENT POLICIES

Each of the funds issuing VIPER Shares reserves the right to substitute a
different index for the index it currently tracks if the current index is
discontinued, the fund's license with the sponsor of its target index is
terminated, or for any other reason determined in good faith by the fund's Board
of Trustees. In every such instance, the substitute index will measure the same
general market (large- or small-cap, growth or value) as the current index.

Each fund may invest in foreign securities to the extent necessary to carry
out its investment strategy of holding all, or a representative sample, of the
stocks that comprise the index it tracks. It is not expected that a fund will
invest more than 5% of its assets in foreign securities.

Although index funds, by their nature, tend to be tax-efficient investment
vehicles, the funds generally are managed without regard to tax ramifications.

To track their target indexes as closely as possible, the funds attempt to
remain fully invested (at least 95% of total assets) in stocks. To help stay
fully invested, and to reduce transaction costs, the Funds may invest, to a
limited extent, in stock futures and options contracts, warrants, convertible
securities, and swap agreements, which are types of derivatives.

Losses (or gains) involving futures can sometimes be substantial--in part
because a relatively small price movement in a futures contract may result in an
immediate and substantial loss (or gain) for a fund. Similar risks exist for
warrants (securities that permit their owners to purchase a specific number of
stock shares at a predetermined price), convertible securities (securities that
may be exchanged for another asset), and swap agreements (contracts in which
each party agrees to make payments to the other based on the return of a
specified index or asset).

For this reason, the funds will not use futures, options, warrants,
convertible securities, or swap agreements for speculative purposes or as
leveraged investments that magnify the gains or losses of an investment. A
fund's obligation under futures contracts will not exceed 20% of that fund's
total assets.

The reasons for which a fund will invest in futures and options are:

<PAGE>

- To keep cash on hand to meet shareholder redemptions or other needs while
simulating full investment in stocks.

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

VIPER SHARES AND VANGUARD

The funds issuing VIPER shares are members of The Vanguard Group, a family of
more than 35 investment companies with more than 100 funds holding assets worth
more than $550 billion. All of the funds that are members of The Vanguard Group
share in the expenses associated with business operations, such as personnel,
office space, equipment, and advertising.

Vanguard also provides marketing services to the member funds. Although
shareholders do not pay sales commissions or 12b-1 distribution fees, each fund
pays its allocated share of The Vanguard Group's marketing costs.

--------------------------------------------------------------------------------
PLAIN TALK ABOUT

VANGUARD'S UNIQUE CORPORATE STRUCTURE

The Vanguard Group is truly a MUTUAL mutual fund company. It is owned jointly by
the funds it oversees and thus indirectly by the shareholders in those funds.
Most other mutual funds are operated by for-profit management companies that may
be owned by one person, by a group of individuals, or by investors who own the
management company's stock. By contrast, Vanguard provides its services on an
"at-cost" basis, and the funds' expense ratios reflect only these costs. No
separate management company reaps profits or absorbs losses from operating the
funds.

--------------------------------------------------------------------------------

INVESTMENT ADVISER

The Vanguard Group (Vanguard), P.O. Box 2600, Valley Forge, PA 19482, founded in
1975, serves as adviser to the funds issuing VIPER Shares through its
Quantitative Equity Group. As of December 31, 1999, Vanguard served as adviser
for about $371.4 billion in assets. Vanguard manages the funds on an at-cost
basis, subject to the control of the Trustees and officers of the funds.

The funds have authorized Vanguard to choose brokers or dealers to handle
the purchase and sale of securities for the funds, and to get the best available
price and most favorable execution from these brokers with respect to all
transactions. The funds may direct Vanguard to use a particular broker for
certain transactions in exchange for commission rebates or research services
provided to the funds.

--------------------------------------------------------------------------------
PLAIN TALK ABOUT

THE FUNDS' ADVISER

The individual responsible for overseeing the investments of each fund issuing
VIPER Shares is:

GEORGE U. SAUTER, Managing Director of Vanguard and head of Vanguard's
Quantitative Equity Group; has worked in investment management since 1985;
primary responsibility for Vanguard's stock indexing policy and strategy since
joining the company in 1987; A.B., Dartmouth College; M.B.A., University of
Chicago.
--------------------------------------------------------------------------------

<PAGE>

DIVIDENDS, CAPITAL GAINS, AND TAXES

FUND DISTRIBUTIONS

Each fund issuing VIPER Shares distributes to shareholders virtually all of its
net income (interest and dividends, less expenses), as well as any capital gains
realized from the sale of its holdings. Income dividends for the 500, Total
Stock Market, Value, and Growth Index Funds generally are distributed in March,
June, September, and December; income dividends, for the Small-Cap Index Fund
generally are distributed in December. Capital gains distributions generally
occur in December. In addition, the funds may occasionally be required to make
supplemental dividend or capital gains distributions at some other time during
the year.

DIVIDEND REINVESTMENT SERVICE

Brokers may make available to their customers who own VIPER Shares the DTC
book-entry dividend reinvestment service. If this service is available and used,
dividend distributions of both income and capital gains will automatically be
reinvested in additional whole VIPER Shares of the same Fund. Without this
service, investors would have to take their distributions in cash. To determine
whether the dividend reinvestment service is available, please consult your
broker.

BASIC TAX POINTS

Taxable investors should be aware of the following basic tax points:
- Distributions are taxable to you for federal income tax purposes whether or
not you reinvest these amounts in additional VIPER Shares.
- Distributions declared in December--if paid to you by the end of
January--are taxable for federal income tax purposes as if received in
December.

- Any dividends and short-term capital gains that you receive are taxable to
you as ordinary income for federal income tax purposes.

- Any distributions of net long-term capital gains are taxable to you as
long-term capital gains for federal income tax purposes, no matter how long
you've owned VIPER Shares.

- Capital gains distributions may vary considerably from year to year as a
result of the funds' normal investment activities and cash flows.

- A sale of VIPER Shares is a taxable event. This means that you may have a
capital gain to report as income, or a capital loss to report as a
deduction, when you complete your federal income tax return.

- Dividend and capital gains distributions that you receive, as well as your
gains or losses from any sale or exchange of VIPER Shares, may be subject
to state and local income taxes.

Note:This prospectus provides general tax information only. If you are investing
through a tax-deferred retirement account, such as an IRA, special tax rules
apply. Please consult your tax adviser for detailed information about a fund's
tax consequences for you.

<PAGE>

--------------------------------------------------------------------------------
PLAIN TALK ABOUT

DISTRIBUTIONS

As a shareholder, you are entitled to your share of the fund's income from
interest and dividends, and gains from the sale of investments. You receive such
earnings as either an income dividend or a capital gains distribution. Income
dividends come from both the dividends that the fund earns from its holdings and
the interest it receives from its money market and bond investments. Capital
gains are realized whenever the fund sells securities for higher prices than it
paid for them. These capital gains are either short-term or long-term, depending
on whether the fund held the securities for one year or less, or more than one
year.

--------------------------------------------------------------------------------

DAILY NAV PRICING

The net asset value, or NAV, of each fund's VIPER Shares is calculated each
business day after the close of regular trading on the New York Stock Exchange
(the NAV is not calculated on holidays or other days when the Exchange is
closed). NAV per share is computed by adding up the fund's net assets
attributable to VIPER Shares, and then dividing by the number of VIPER Shares
outstanding. The formula for calculating NAV is:

NET ASSET VALUE = NET VIPER ASSETS - LIABILITIES
----------------------------------
NUMBER OF VIPER SHARES

Remember: If you sell VIPER Shares on the secondary market, you will
receive the market price, which may be higher or lower than NAV. You will
receive NAV only if you redeem your VIPER Shares in Creation Unit blocks.

A NOTE ON PRICING: In calculating a fund's NAV, the fund's investments will
be priced at their market value when market quotations are readily available.
When these quotations are not readily available, investments will be priced at
their fair value, calculated according to procedures adopted by the funds' Board
of Trustees.

The market price of a VIPER Share, for each issuing fund, can be found
daily in the business section of most major newspapers in the listing of
securities traded on the American Stock Exchange.

"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," "500,"
"S&P MidCap 400," and "S&P SmallCap 600" are trademarks of The McGraw-Hill
Companies, Inc., and have been licensed for use by Vanguard U.S. Stock Index
Funds and The Vanguard Group. These mutual funds are not sponsored, endorsed,
sold, or promoted by Standard & Poor's, and Standard & Poor's makes no
representation regarding the advisability of investing in the Funds. "Wilshire
4500" and "Wilshire 5000" are registered trademarks of Wilshire Associates.
Frank Russell Company is the owner of the trademarks and copyrights relating to
the Russell Indexes.

<PAGE>

GLOSSARY OF INVESTMENT TERMS

ACTIVE MANAGEMENT
An investment approach that seeks to exceed the average returns of the financial
markets. Active managers rely on research, market forecasts, and their own
judgment and experience in selecting securities to buy and sell.

CAPITAL GAINS DISTRIBUTION
Payment to fund shareholders of gains realized on securities that a fund has
sold at a profit, minus any realized losses.

COMMON STOCK
A security representing ownership rights in a corporation. A stockholder is
entitled to share in the company's profits, some of which may be paid out as
dividends.

CREATION UNIT
A large block of a specified number of VIPER shares, determined by the issuing
fund. Depository Trust Company participants must buy VIPER shares in creation
unit-size aggregations.

DIVIDEND INCOME
Payment to shareholders of income from interest or dividends generated by a
fund's investments.

EXPENSE RATIO
The percentage of a fund's average net assets used to pay its expenses. The
expense ratio includes management fees, administrative fees, and any 12b-1
distribution fees.

GROWTH STOCK FUND
A mutual fund that emphasizes stocks of companies believed to have above-average
prospects for growth. Reflecting market expectations for superior growth, the
prices of growth stocks often are relatively high in comparison with such
factors as revenue, earnings, book value, and dividends.

INDEX

An unmanaged group of securities whose overall performance is used as a standard
to measure investment performance.

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

PASSIVE MANAGEMENT
A low-cost investment strategy in which a fund attempts to match--rather than
outperform--a particular stock or bond market index. Also known as indexing.

VALUE STOCK FUND
A mutual fund that emphasizes stocks of companies whose growth prospects are
generally regarded as subpar by the market. Reflecting these market
expectations, the prices of vlaue stocks typically are below-average in
comparison with such factors as revenue, earnings, book value, and dividends.

VIPER SHARES
Vanguard Index Participation Equity Receipts, which are exchange-traded shares
issued by certain Vanguard mutual funds that are bought and sold continuously
throughout the day.

VOLATILITY

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

YIELD

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

<PAGE>

[SHIP] [THE VANGUARD GROUP LOGO] Post Office Box 2600 Valley Forge, PA
19482-2600

FOR MORE INFORMATION If you'd like more information about VIPERs(TM), Total
Stock Market VIPERs(TM), Small-Cap VIPERs(TM), Value VIPERs(TM), or Growth
VIPERs(TM) the following documents are available free upon request:

ANNUAL/SEMIANNUAL REPORTS TO SHAREHOLDERS Additional information about the
issuing funds' investments is available in the funds' annual and semiannual
reports to shareholders.

STATEMENT OF ADDITIONAL
INFORMATION (SAI)
The SAI for the issuing fund provides more detailed information about the fund's
VIPER Shares.

The current annual and semiannual reports and the SAIs are incorporated by
reference into (and are thus legally a part of) this prospectus.

To receive a free copy of the latest annual or semiannual report or the SAI, or
to request additional information about VIPER Shares, please contact us as
follows:

THE VANGUARD GROUP
INSTITUTIONAL INVESTOR
INFORMATION
P.O. BOX 2900
VALLEY FORGE, PA 19482-2900

TELEPHONE:
1-888-809-8102

WORLD WIDE WEB:
WWW.VANGUARD.COM

INFORMATION PROVIDED BY THE
SECURITIES AND EXCHANGE
COMMISSION (SEC) You can review and copy information about the issuing funds
(including the SAI) at the SEC's Public Reference Room in Washington, DC. To
find out more about this public service, call the SEC at 1-202-942- 8090.
Reports and other information about the funds are also available on the SEC's
website (www.sec.gov), or you can receive copies of this information, for a fee,
by electronic request at the following e-mail address: [email protected], or by
writing the Public Reference Section, Securities and Exchange Commission,
Washington, DC 20549-0102.

Vanguard 500 Index Fund's
Investment Company Act
file number: 811-2652

Vanguard Total Stock Market Index
Fund's' Investment Company Act

file number: 811-2652

--2000

<PAGE>

The Vanguard U.S. Stock Index Funds Prospectuses from Post-Effective Amendment
No. 57 are incorporated by reference.

<PAGE>

PART B

VANGUARD (R) INDEX FUNDS

(THE TRUST)

STATEMENT OF ADDITIONAL INFORMATION

APRIL 21, 2000; REVISED ., 2000

This Statement is not a prospectus but should be read in conjunction with the
Trust's current Prospectuses, as they may be amended from time to time. The
Trust's current prospectuses are dated April 21, 2000, and ., 2000. To obtain,
without charge, a Prospectus or the most recent Annual Report to Shareholders,
which contains the Funds' Financial Statements as hereby incorporated by
reference, please call:

VANGUARD INVESTOR INFORMATION DEPARTMENT 1-800-662-7447

TABLE OF CONTENTS

DESCRIPTION OF THE TRUST.........................................B-.
INVESTMENT POLICIES..............................................B-.
FUNDAMENTAL INVESTMENT LIMITATIONS...............................B-.
PURCHASE OF SHARES...............................................B-.
SHARE PRICE......................................................B-.
REDEMPTION OF SHARES.............................................B-.
YIELD AND TOTAL RETURN...........................................B-.
MANAGEMENT OF THE FUNDS..........................................B-.
PORTFOLIO TRANSACTIONS...........................................B-.
INFORMATION ABOUT VIPER SHARE CLASS .............................B-.
COMPARATIVE INDEXES..............................................B-.
FINANCIAL STATEMENTS.............................................B-.

DESCRIPTION OF THE TRUST

ORGANIZATION

The Trust was organized as a Pennsylvania business trust in 1975, and was
reorganized as a Delaware business trust in July, 1998. The Trust is registered
with the United States Securities and Exchange Commission (the Commission) under
the Investment Company Act of 1940 (the 1940 Act) as an open-end, diversified
management investment company. It currently offers the following funds:

Vanguard(R) 500 Index Fund

Vanguard(R) Total Stock Market Index Fund

Vanguard(R) Extended Market Index Fund

Vanguard(R) Mid-Cap Index Fund

Vanguard(R) Small-Cap Index Fund

Vanguard(R) Value Index Fund

Vanguard(R) Small-Cap Value Index Fund

Vanguard(R) Growth Index Fund

Vanguard(R) Small-Cap Growth Index Fund

(EACH, A FUND; COLLECTIVELY, THE FUNDS)

Note: Each of the Funds listed above is registered as a diversified management
investment company. However, by tracking its target index, Vanguard Growth Index
Fund technically has become "nondiversified" under SEC standards. As the market
values of the Fund's largest holdings rise and fall, there may be times when the
Fund is diversified under SEC standards and other times when it is not.

B-1

<PAGE>

Each of the Funds offer three classes of shares--Investor Shares,
Institutional Shares, and VIPER Shares--except the 500 Index Fund, which does
not offer Institutional Shares. The Investor and Institutional Shares may
hereinafter be referred to collectively as "Conventional Shares."

- Investor Shares are available to any investor. The minimum investment is
$3,000.

- Institutional Shares are available only to those investing at least $10
million.

- VIPER Shares are an exchange-traded class of shares that cannot be
purchased directly from an issuing fund except by or through certain
authorized institutional investors. More information about the VIPER Shares
appears elsewhere in this Statement of Additional Information.

The Trust has the ability to offer additional Funds, and each Fund has the
ability to offer additional classes of shares. There is no limit on the number
of full and fractional shares that each Fund may issue in the aggregate or for a
particular class.

SERVICE PROVIDERS

CUSTODIANS. State Street Bank and Trust Company, 225 Franklin Street,
Boston, Massachusetts 02110, First Union National Bank, PA4943, 530 Walnut
Street, Philadelphia, Pennsylvania 19106, and The Chase Manhattan Bank, N.A., 4
Chase Metro Tech Center, Brooklyn, New York 11245 serve as the Funds'
custodians. The custodians are responsible for maintaining each Fund's assets
and keeping all necessary accounts and records of Fund assets.

INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, 30 South 17th Street,
Philadelphia, Pennsylvania 19103, serves as the Funds' independent accountants.
The accountants audit each Fund's financial statements and provide other related
services.

TRANSFER AND DIVIDEND-PAYING AGENT. The Funds' transfer agent and
dividend-paying agent is The Vanguard Group, Inc., 100 Vanguard Boulevard,
Malvern, Pennsylvania 19355.

CHARACTERISTICS OF THE FUNDS' SHARES

RESTRICTIONS ON HOLDING OR DISPOSING OF SHARES. There are no restrictions
on the right of shareholders to retain or dispose of each Fund's shares, other
than the possible future termination of any of the Funds or fund classes. Each
Fund or class may be terminated by reorganization into another mutual fund or by
liquidation and distribution of the assets of the affected Fund or class. Unless
terminated by reorganization or liquidation, each Fund and each class will
continue indefinitely.

SHAREHOLDER LIABILITY. The Funds are organized under Delaware law, which
provides that shareholders of a business trust are entitled to the same
limitations of personal liability as shareholders of a corporation organized
under Delaware law. Effectively, this means that a shareholder of a Fund will
not be personally liable for payment of the Fund's debts except by reason of his
or her own conduct or acts. In addition, a shareholder could incur a financial
loss on account of a Fund obligation only if the Fund itself had no remaining
assets with which to meet such obligation. We believe that the possibility of
such a situation arising is extremely remote.

DIVIDEND RIGHTS. The shareholders of a Fund are entitled to receive any
dividends or other distributions declared by the Fund. No shares have priority
or preference over any other shares of the same Fund with respect to
distributions. Distributions will be made from the assets of a Fund, and will be
paid ratably to all shareholders of the Fund (or class) according to the number
of shares of such Fund (or class) held by shareholders on the record date. The
amount of income dividends per share may vary between different share classes of
the same Fund based upon differences in the way that expenses are allocated
between share classes pursuant to a multiple class plan.

VOTING RIGHTS. Shareholders of each Fund are entitled to vote on a matter
if: (i) a shareholder vote is required under the 1940 Act; (ii) the matter
concerns an amendment to the Declaration of Trust that would adversely affect to
a material degree the rights and preferences of the shares of any class or
series; or (iii) the Trustees determine that it is necessary or desirable to
obtain a shareholder vote. The 1940 Act requires a shareholder vote under
various circumstances, including to elect or remove Trustees upon the written
request of shareholders representing 10% or more of a Fund's net assets, and to
change any fundamental policy of the Fund. Shareholders of a Fund receive one
vote for each dollar of net asset value owned on the record date, and a
fractional vote for each fractional dollar of net asset value owned on the
record date. However, only the shares of the Fund affected by a particular
matter are entitled to vote on that matter. In addition, each class has
exclusive voting rights on any matter submitted to shareholders that relates
solely to that class, and each class has separate voting rights on any matter
submitted to shareholders in which the

B-2

<PAGE>

interests of one class differ from the interests of another. Voting rights are
noncumulative and cannot be modified without a majority vote.

LIQUIDATION RIGHTS. In the event a Fund is liquidated, shareholders of that
Fund will be entitled to receive a pro rata share of the Fund's net assets. In
the event a class of shares is liquidated, shareholders of that class will be
entitled to receive a pro rata share of the Fund's net assets that are
attributable to that class.

PREEMPTIVE RIGHTS. There are no preemptive rights associated with shares of
each Fund.

CONVERSION RIGHTS. Shareholders of a Fund may convert their shares into
another class of shares of the same Fund upon the satisfaction of any then
applicable eligibility requirements. Holders of Conventional Shares (except
those holding through a 401(k) or other tax-qualified plan) will be permitted to
convert those shares into VIPER Shares of equivalent value. This conversion
privilege is described elsewhere in this SAI.

REDEMPTION PROVISIONS. Each Fund's redemption provisions are described in
its current prospectuses and elsewhere in this Statement of Additional
Information.

SINKING FUND PROVISIONS. The Funds have no sinking fund provisions.

CALLS OR ASSESSMENT. Each Fund's shares, when issued, are fully paid and
non-assessable.

TAX STATUS OF THE FUNDS

Each Fund intends to continue to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code. This special tax status means
that a Fund will not be liable for federal tax on income and capital gains
distributed to shareholders. In order to preserve its tax status, each Fund must
comply with certain requirements. If a Fund fails to meet these requirements in
any taxable year, it will be subject to tax on its taxable income at corporate
rates, and all distributions from earnings and profits, including any
distributions of net tax-exempt income and net long-term capital gains, will be
taxable to shareholders as ordinary income. In addition, the Fund could be
required to recognize unrealized gains, pay substantial taxes and interest, and
make substantial distributions before regaining its tax status as a regulated
investment company.

INVESTMENT POLICIES

REPURCHASE AGREEMENTS

Each of the Funds may invest in repurchase agreements with commercial banks,
brokers or dealers to generate income from its excess cash balances. A
repurchase agreement is an agreement under which a Fund acquires a fixed-income
security (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
Fund and is unrelated to the interest rate on the underlying instrument. In
these transactions, the securities acquired by the Fund (including accrued
interest earned thereon) must have a total value in excess of the value of the
repurchase agreement and are held by the Fund's custodian bank until
repurchased. In addition, the Board of Trustees will monitor the Fund's
repurchase agreement transactions generally and will establish guidelines and
standards for review of the creditworthiness of any bank, broker or dealer party
to a repurchase agreement with a Fund.

The use of repurchase agreements involves certain risks. For example, if
the other party to the agreement defaults on its obligation to repurchase the
underlying security at a time when the value of the security has declined, the
Fund may incur a loss upon disposition of the security. If the other party to
the agreement becomes insolvent and subject to liquidation or reorganization
under bankruptcy or other laws, a court may determine that the underlying
security is collateral for a loan by the Fund not within the control of the Fund
and therefore the Fund may not be able to substantiate its interest in the
underlying security and may be deemed an unsecured creditor of the other party
to the agreement. While the adviser acknowledges these risks, it is expected
that they will be controlled through careful monitoring procedures.

B-3

<PAGE>

LENDING OF SECURITIES

Each Fund may lend its securities on a short-term or long-term basis to
qualified institutional investors (typically brokers, dealers, banks or other
financial institutions) who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. By lending its portfolio
securities, a Fund can increase its net investment income through the receipt of
interest on the loan. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Fund. The terms, the structure and the aggregate amount of such loans must
be consistent with the 1940 Act, and the rules or interpretations of the
Commission thereunder. These provisions limit the amount of securities a fund
may lend to 33 1/3% of the Fund's total assets, and require that (a) the
borrower pledge and maintain with the Fund collateral consisting of cash, a
letter of credit issued by a domestic U.S. bank, or securities issued or
guaranteed by the United States Government having at all times not less than
100% 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 Fund at any time, and (d) the Fund receive reasonable
interest on the loan (which may include the Fund's investing any cash collateral
in interest bearing short-term investments), any distribution on the loaned
securities and any increase in their market value. Loan arrangements made by the
Fund will comply with all other applicable regulatory requirements, including
the rules of the New York Stock Exchange, which rules presently require the
borrower, after notice, to redeliver the securities within the normal settlement
time of three business days. All relevant facts and circumstances, including the
creditworthiness of the broker, dealer or institution, will be considered in
making decisions with respect to the lending of securities, subject to review by
the Board of Trustees.

At the present time, the Staff of the Commission does not object if an
investment company pays reasonable negotiated fees in connection with loaned
securities, so long as such fees are set forth in a written contract and
approved by the investment company's trustees. In addition, voting rights pass
with the loaned securities, but if a material event occurs that affects the
securities on loan, the Fund must call the loan and vote the securities.

TEMPORARY INVESTMENTS

The Funds may take temporary defensive measures that are inconsistent with a
Fund's normal fundamental or non-fundamental investment policies and strategies
in response to adverse market, economic, political or other conditions. Such
measures could include investments in (a) highly liquid short-term fixed-income
securities issued by or on behalf of municipal or corporate issuers, obligations
of the U.S. Government and its agencies, commercial paper, and bank certificates
of deposit; (b) shares of other investment companies which have investment
objectives consistent with those of the Funds; (c) repurchase agreements
involving any such securities; and (d) other money market instruments. There is
no limit on the extent to which the Funds may take temporary defensive measures.
In taking such measures, the Funds may fail to achieve their investment
objective.

VANGUARD INTERFUND LENDING PROGRAM

The Commission has issued an exemptive order permitting the Funds and other
Vanguard funds to participate in Vanguard's interfund lending program. This
program allows the Vanguard funds to borrow money from and loan money to each
other for temporary or emergency purposes. The program is subject to a number of
conditions, including the requirement that no fund may borrow or lend money
through the program unless it receives a more favorable interest rate than is
available from a typical bank for a comparable transaction. In addition, a
Vanguard fund may participate in the program only if and to the extent that such
participation is consistent with the fund's investment objective and other
investment policies. The Boards of Trustees of the Vanguard funds are
responsible for ensuring that the interfund lending program operates in
compliance with all conditions of the Commission's exemptive order.

ILLIQUID SECURITIES

Each Fund may invest up to 15% of its net assets in illiquid securities.
Illiquid securities are securities that the Fund may not be able to sell or
dispose of in the ordinary course of business within seven business days at
approximately the value at which they are being carried on the Fund's books.

B-4

<PAGE>

FUTURES CONTRACTS

Each Fund may enter into futures contracts, options, warrants, options on
futures contracts, convertible securities, and swap agreements for the purpose
of simulating full investment and reducing transaction costs. The Funds do not
use futures or options for speculative purposes. Each Fund will only use futures
and options to simulate full investment in the underlying index while retaining
a cash balance for fund management purposes. 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 that are standardized as to maturity date and underlying financial
instrument are traded on national futures exchanges. Futures exchanges and
trading are regulated under the Commodity Exchange Act by the Commodity Futures
Trading Commission (CFTC), a U.S. Government agency. Assets committed to futures
contracts will be segregated to the extent required by law.

Although futures contracts by their terms call for actual delivery or
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position ("buying" a
contract which has previously been "sold," or "selling" a contract previously
purchased) in an identical contract to terminate the position. Brokerage
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
completion 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.
Brokers may establish deposit requirements which are higher than the exchange
minimums. Futures contracts are customarily purchased and sold on deposits 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
contract 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. Each Fund
expects 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
unfavorable changes in the value of securities either held for investment
purposes or expected to be acquired by them. Speculators are less inclined to
own, or intend to purchase, 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 Funds
intend to use futures contracts only for bona fide hedging purposes.

Regulations of the CFTC applicable to the Funds require that all of their
futures transactions constitute bona fide hedging transactions except to the
extent that the aggregate initial margins and premiums required to establish any
non-hedging positions do not exceed five percent of the value of any Fund's
portfolio. A Fund will only sell futures contracts to protect the Fund against
declines in the prices of the securities underlying the futures contracts or
purchase contracts to protect against an increase in the price of securities it
intends to purchase. As evidence of this hedging interest, the Fund expects that
the majority of its futures contract purchases will be "completed;" that is,
equivalent amounts of related securities will have been purchased or are being
purchased by the Fund upon sale of open futures contracts.

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

RESTRICTIONS ON THE USE OF FUTURES CONTRACTS. A Fund 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 the Fund's total assets. In addition, a Fund will

B-5

<PAGE>

not enter into futures contracts to the extent that its outstanding obligations
to purchase securities under these contracts would exceed 20% of the Fund'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 Fund would continue to be required to make daily cash payments to
maintain its required margin. In such situations, if a Fund 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 addition, a Fund may be
required to make delivery of the instruments underlying futures contracts it
holds. The inability to close options and futures positions also could have an
adverse impact on the ability to effectively hedge. Each Fund 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
substantial, 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
substantial 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. The Funds also bear the risk that
the adviser will incorrectly predict future stock market trends. However,
because the futures strategy of the Funds is engaged in only for hedging
purposes, the Funds' officers do not believe that the Funds are subject to the
risks of loss frequently associated with futures transactions. A Fund 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 a Fund does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the portfolio securities being hedged. It is also
possible that a Fund could both lose money on futures contracts and also
experience a decline in value of its portfolio securities. There is also the
risk of loss by a Fund of margin deposits in the event of bankruptcy of a broker
with whom the Fund has an open position in a futures contract or related option.

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 unfavorable
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 futures positions and subjecting some futures
traders to substantial losses.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS. Each Fund 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 as of the end of the
year as well as those actually realized during the year. In these cases, any
gain or loss recognized with respect to a futures contract is considered 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. Gains and losses on
certain other futures contracts (primarily non-U.S. futures contracts) are not
recognized until the contracts are closed and are treated as long-term or
short-term depending on the holding period of the contract. Sales of futures
contracts which are intended to hedge against a change in the value of
securities held by a Fund may affect the holding period of such securities and,
consequently, the nature of the gain or loss on such securities upon
disposition. A Fund may be required to defer the recognition of losses on
futures contracts to the extent of any unrecognized gains on related positions
held by the Fund.

In order for each Fund 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

B-6

<PAGE>

sale of securities or of foreign currencies, or other income derived with
respect to the Fund's business of investing in securities or currencies. It is
anticipated that any net gain on futures contracts will be considered qualifying
income for purposes of the 90% requirement.

A Fund will distribute to shareholders annually any net capital gains which
have been recognized for Federal income tax purposes on futures transactions.
Such distributions will be combined with distributions of capital gains realized
on the Fund's other investments and shareholders will be advised on the nature
of the transactions.

FOREIGN INVESTMENTS

Each Fund may invest in foreign securities to the extent necessary to carry out
its investment strategy of holding all, or a representative sample, of the
stocks that comprise the index it tracks. Investors should recognize that
investing in foreign companies involves certain special considerations which are
not typically associated with investing in U.S. companies.

CURRENCY RISK. Since the stocks of foreign companies are frequently
denominated in foreign currencies, and since the Funds may temporarily hold
uninvested reserves in bank deposits in foreign currencies, the Funds will be
affected favorably or unfavorably by changes in currency rates and in exchange
control regulations, and may incur costs in connection with conversions between
various currencies. The investment policies of the Funds permit them to enter
into forward foreign currency exchange contracts in order to hedge a Fund's
holdings and commitments against changes in the level of future currency rates.
Such contracts involve an obligation to purchase or sell a specific currency at
a future date at a price set at the time of the contract.

FEDERAL TAX TREATMENT OF NON-U.S. TRANSACTIONS. Special rules govern the
Federal income tax treatment of certain transactions denominated in terms of a
currency other than the U.S. dollar or determined by reference to the value of
one or more currencies other than the U.S. dollar. The types of transactions
covered by the special rules include the following: (i) the acquisition of, or
becoming the obligor under, a bond or other debt instrument (including, to the
extent provided in Treasury regulations, preferred stock); (ii) the accruing of
certain trade receivables and payables; and (iii) the entering into or
acquisition of any forward contract, futures contract, option or similar
financial instrument if such instrument is not marked to market. The disposition
of a currency other than the U.S. dollar by a taxpayer whose functional currency
is the U.S. dollar is also treated as a transaction subject to the special
currency rules. However, foreign currency-related regulated futures contracts
and nonequity options are generally not subject to the special currency rules if
they are or would be treated as sold for their fair market value at year-end
under the marking-to-market rules applicable to other futures contracts unless
an election is made to have such currency rules apply. With respect to
transactions covered by the special rules, foreign currency gain or loss is
calculated separately from any gain or loss on the underlying transaction and is
normally taxable as ordinary income or loss. A taxpayer may elect to treat as
capital gain or loss foreign currency gain or loss arising from certain
identified forward contracts, futures contracts and options that are capital
assets in the hands of the taxpayer and which are not part of a straddle. The
Treasury Department issued regulations under which certain transactions subject
to the special currency rules that are part of a "section 988 hedging
transaction" (as defined in the Internal Revenue Code of 1986, as amended, and
the Treasury regulations) will be integrated and treated as a single transaction
or otherwise treated consistently for purposes of the Code. Any gain or loss
attributable to the foreign currency component of a transaction engaged in by a
Fund which is not subject to the special currency rules (such as foreign equity
investments other than certain preferred stocks) will be treated as capital gain
or loss and will not be segregated from the gain or loss on the underlying
transaction. It is anticipated that some of the non-U.S. dollar-denominated
investments and foreign currency contracts the Funds may make or enter into will
be subject to the special currency rules described above.

COUNTRY RISK. As foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards and practices comparable
to those applicable to domestic companies, there may be less publicly available
information about certain foreign companies than about domestic companies.
Securities of some foreign companies are generally less liquid and more volatile
than securities of comparable domestic companies. There is generally less
government supervision and regulation of stock exchanges, brokers and listed
companies than in the U.S. In addition, with respect to certain foreign
countries, there is the possibility of expropriation of confiscatory taxation,
political or social instability, or diplomatic developments which could affect
U.S. investments in those countries.

B-7

<PAGE>

Although the Funds will endeavor to achieve most favorable execution costs
in their portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges. In
addition, it is expected that the expenses for custodian arrangements of the
Funds' foreign securities will be somewhat greater than the expenses for the
custodian arrangements for handling U.S. securities of equal value.

Certain foreign governments levy withholding taxes against dividend and
interest income. Although in some countries a portion of these taxes is
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from foreign companies held by the Funds. However, these
foreign withholding taxes are not expected to have a significant impact on the
Funds, since each Fund seeks long-term capital appreciation and any income
should be considered incidental.

FUNDAMENTAL INVESTMENT LIMITATIONS

Each Fund is subject to the following fundamental investment limitations, which
cannot be changed in any material way without the approval of the holders of a
majority of the Fund's shares. For these purposes, a "majority" of shares means
the lesser of: (i) 67% or more of the votes cast, so long as shares representing
more than 50% of a Fund's net asset value are present or represented by proxy;
or (ii) shares representing more than 50% of a Fund's net asset value.

BORROWING. A Fund may not borrow money, except for temporary or emergency
purposes in an amount not exceeding 15% of the Fund's net assets. A Fund may
borrow money through banks, reverse repurchase agreements, or Vanguard's
interfund lending program only, and must comply with all applicable regulatory
conditions. A Fund may not make any additional investments if its outstanding
borrowings exceed 5% of net assets.

COMMODITIES. A Fund may not invest in commodities, except that it may
invest in stock index futures contracts, stock options and options on stock
index futures contracts. No more than 5% of a Fund's total assets may be used as
initial margin deposit for futures contracts, and no more than 20% of a Fund's
total assets may be invested in futures contracts or options at any time.

DIVERSIFICATION. With respect to 75% of its total assets, a Fund may not:
(i) purchase more than 10% of the outstanding voting securities of any one
issuer; or (ii) purchase securities of any issuer if, as a result, more than 5%
of the Fund's total assets would be invested in that issuer's securities. This
limitation does not apply to obligations of the United States Government, its
agencies, or instrumentalities.

ILLIQUID SECURITIES. A Fund may not acquire any security if, as a result,
more than 15% of its net assets would be invested in securities that are
illiquid. From time to time, the Funds' Board of Trustees may determine that
certain restricted securities known as Rule 144A securities are liquid and not
subject to the 15% limitation.

INDUSTRY CONCENTRATION. A Fund may not invest more than 25% of its total
assets in any one industry.

INVESTING FOR CONTROL. A Fund may not invest in a company for purposes of
controlling its management.

INVESTMENT COMPANIES. A Fund may not invest in any other investment
company, except through a merger, consolidation or acquisition of assets, or to
the extent permitted by Section 12 of the 1940 Act. Investment companies whose
shares a Fund acquires pursuant to Section 12 must have investment objectives
and investment policies consistent with those of the Fund.

LOANS. A Fund may not lend money to any person except by purchasing
fixed-income securities that are publicly distributed, lending its portfolio
securities, or through Vanguard's interfund lending program.

MARGIN. A Fund may not purchase securities on margin or sell securities
short, except as permitted by the Fund's investment policies relating to
commodities.

OIL, GAS, MINERALS. A Fund may not invest in interests in oil, gas or other
mineral exploration or development programs.

PLEDGING ASSETS. A Fund may not pledge, mortgage or hypothecate more than
15% of its net assets.

B-8

<PAGE>

PUTS/CALLS. A Fund may not purchase or sell put, call, straddle or spread
options, except as permitted by the Fund's investment policies relating to
commodities.

REAL ESTATE. A Fund may not invest directly in real estate, although it may
invest in securities of companies that deal in real estate.

SENIOR SECURITIES. A Fund may not issue senior securities, except in
compliance with the 1940 Act.

UNDERWRITING. A Fund may not engage in the business of underwriting
securities issued by other persons. The Fund will not be considered an
underwriter when disposing of its investment securities.

The above-mentioned investment limitations are considered at the time
investment securities are purchased.

None of these limitations prevents a Fund from participating in The
Vanguard Group (Vanguard). Because each Fund is a member of the Group, the Funds
may own securities issued by Vanguard, make loans to Vanguard, and contribute to
Vanguard's costs or other financial requirement. See "Management of the Funds"
for more information.

PURCHASE OF SHARES

Each Fund reserves the right in its sole discretion (i) to suspend the offering
of its shares, (ii) to reject purchase or exchange orders when in the judgment
of management such rejection is in the best interest of the Fund, (iii) to
impose a transaction fee on a purchase of the Fund's shares if the purchase, in
the opinion of Vanguard, would disrupt the efficient management of the Fund, and
(iv) to reduce or waive the minimum investment for, or any other restrictions
on, initial and subsequent investments as well as redemption fees for certain
fiduciary accounts or under circumstances where certain economies can be
achieved in sales of the Fund's shares.

IN-KIND PURCHASES OF CONVENTIONAL SHARES. In certain circumstances,
Conventional Shares of a Fund may be purchased "in kind," i.e., in exchange for
securities, rather than for cash. The securities tendered as part of an in-kind
purchase must be included in the Index tracked by the Fund and must have a total
market value of $1 million or more. In addition, each position must have a
market value of $10,000 or more. Such securities also must be liquid securities
which are not restricted as to transfer and have a value that is readily
ascertainable as evidenced by a listing on the American Stock Exchange, the New
York Stock Exchange or NASDAQ. Securities accepted by the Fund will be valued as
set forth under "Share Price" in the Fund's prospectus as of the time of the
next determination of net asset value after such acceptance. Shares of each Fund
are issued at net asset value determined as of the same time. "IN-KIND"
PURCHASES OF THE CONVENTIONAL SHARES OF THE SMALL-CAP VALUE INDEX AND SMALL-CAP
GROWTH INDEX FUNDS WILL NOT BE SUBJECT TO THEIR NORMAL TRANSACTION FEE OF 0.5%.
All dividend, subscription, or other rights that are reflected in the market
price of accepted securities at the time of valuation become the property of the
Fund and must be delivered to the Fund by the investor upon receipt from the
issuer. A gain or loss for Federal income tax purposes would be realized by the
investor upon the exchange depending upon the cost of the securities tendered.

A Fund will not accept securities in exchange for its Conventional Shares
unless: (1) such securities are, at the time of the exchange, eligible to be
held by the Fund; (2) the transaction will not cause the Fund's weightings to
become imbalanced with respect to the weightings of the stocks included in the
corresponding Index; (3) the investor represents and agrees that all securities
offered to the Fund are not subject to any restrictions upon their sale by the
Fund under the Securities Act of 1933, or otherwise; (4) such securities are
traded in an unrelated transaction with a quoted sales price on the same day the
exchange valuation is made; (5) the quoted sales price used as a basis of
valuation is representative (e.g., one that does not involve a trade of
substantial size that artificially influences the price of the security); and
(6) the value of any such security being exchanged will not exceed 5% of the
Fund's net assets immediately prior to the transaction.

Investors interested in purchasing Conventional Shares of a Fund in-kind
should contact Vanguard.

B-9

<PAGE>

CALCULATION OF NET ASSET VALUE

The "net asset value" per share for each share class of the Funds is calculated
by dividing the net assets attributable to each share class by the total number
of shares outstanding for that share class. The net asset value is determined as
of the close of regular trading on the New York Stock Exchange (ordinarily 4:00
p.m. Eastern time) on each day the Exchange is open for trading.

Portfolio securities for which market quotations are readily available
(includes those securities listed on national securities exchanges, as well as
those quoted on the NASDAQ Stock Market) will be valued at the last quoted sales
price on the day the valuation is made. Such securities which are not traded on
the valuation date are valued at the mean of the bid and ask prices. Price
information on exchange-listed securities is taken from the exchange where the
security is primarily traded. Securities may be valued on the basis of prices
provided by a pricing service when such prices are believed to reflect the fair
market value of such securities.

Short-term instruments (those acquired with remaining maturities of 60 days
or less) may be valued at cost, plus or minus any amortized discount or premium,
which approximates market value.

Bonds and other fixed-income securities may be valued 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 of each
security, but take into account institutional-size transactions in similar
groups of securities as well as any developments related to specific securities.

Foreign securities are valued at the last quoted sales price, or the most
recently determined closing price calculated according to local market
convention, available at the time a Fund is valued. Prices are obtained from the
broadest and most representative market on which the securities trade. If events
which materially affect the value of a Fund's investments occur after the close
of the securities markets on which such securities are primarily traded, those
investments may be valued by such methods as the Board of Trustees deems in good
faith to reflect fair value.

In determining a Fund's net asset value per share, all assets and
liabilities initially expressed in foreign currencies will be converted into
U.S. dollars using the officially quoted daily exchange rates used by Morgan
Stanley Capital International in calculating various benchmarking indexes. This
officially quoted exchange rate may be determined prior to or after the close of
a particular securities market. If such quotations are not available or do not
reflect market conditions at the time the Fund is valued, the rate of exchange
will be determined in accordance with policies established in good faith by the
Board of Trustees.

Other assets and securities for which no quotations are readily available
or which are restricted as to sale (or resale) are valued by such methods as the
Board of Trustees deems in good faith to reflect fair value.

The share price for each Fund can be found daily in the mutual fund
listings of most major newspapers under the heading of "Vanguard Index Funds."

REDEMPTION OF SHARES

Each Fund 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 Commission, (ii) during any period
when an emergency exists as defined by the Commission as a result of which it is
not reasonably practicable for the Fund 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.

Each Fund has made an election with the Commission to pay in cash all
redemptions requested by any Conventional shareholder of record limited in
amount during the 90-day period to the lesser of $250,000 or 1% of the net
assets of the Fund at the beginning of such period. This election does not apply
to the VIPER Shares.

No charge is made by any of the Funds for redemptions of Conventional
Shares. A transaction fee is imposed on redemptions of VIPER Shares, as
discussed more fully elsewhere in this Statement of Additional Information.

B-10

<PAGE>

Shares redeemed may be worth more or less than what was paid for them,
depending on the market value of the securities held by the Fund.

TRADING CONVENTIONAL SHARES THROUGH CHARLES SCHWAB

The Funds have authorized Charles Schwab & Co., Inc. (Schwab) to accept on its
behalf purchase and redemption orders for Conventional Shares under certain
terms and conditions. Schwab is also authorized to designate other
intermediaries to accept purchase and redemption orders on the Funds' behalf
subject to those terms and conditions. Under this arrangement, the Funds' will
be deemed to have received a purchase or redemption order when Schwab or, if
applicable, Schwab's authorized designee, accepts the order in accordance with
the Funds' instructions. Customer orders that are properly transmitted to the
Funds by Schwab, or if applicable, Schwab's authorized designee, will be priced
as follows:

If you place your order through Schwab and it is received before 3 p.m.
Eastern time on any business day, your order will be sent to Vanguard that day
and your share price will be based on the Fund's net asset value calculated at
the close of trading that day. If your order is received after 3 p.m. Eastern
time, it will be sent to Vanguard on the following business day and your share
price will be based on the Fund's net asset value calculated at the close of
trading that day.

YIELD AND TOTAL RETURN

Note: Yield and total return information is not shown for VIPER Shares
because these shares did not exist as of December 31, 1999.

The annualized yield of each Fund for the 30-day period ended December 31,
1999 is set forth below.

INVESTOR SHARES INSTITUTIONAL SHARES
--------------- --------------------
500 Index Fund.................. 0.98% N/A
Total Stock Market Index Fund... 1.01 1.11%
Extended Market Index Fund...... 0.82 0.96
Mid-Cap Index Fund.............. 0.92 1.04
Small-Cap Index Fund............ 1.15 1.27
Value Index Fund................ 1.52 1.62
Small-Cap Value Index Fund...... 0.97 *
Growth Index Fund............... 0.50 0.60
Small-Cap Growth Index Fund..... 0.22 *

---------
* As of December 31, 1999, a 30-day yield was not available for the
Institutional Shares.

The average annual total return of each Fund for the one-, five-, and
ten-year periods ended December 31, 1999, or since inception, is set forth
below.

1 YEAR ENDED 5 YEARS ENDED 10 YEARS ENDED
INVESTOR SHARES (1) 12/31/1999 12/31/1999(3) 12/31/1999(4)
------------------ ---------- ------------- -------------
500 Index Fund.............. 21.07% 28.49% 18.07%
Total Stock Market Index Fund 23.81 26.84 19.80
Extended Market Index Fund.. 36.22 24.10 16.33
Mid-Cap Index Fund.......... 15.32 14.93 --
Small-Cap Index Fund........ 23.13 17.84 14.20
Value Index Fund................ 12.57 22.82 18.66
Small-Cap Value Index Fund(2)... 2.83 -6.31 --
Growth Index Fund............... 28.76 33.65 23.74
Small-Cap Growth Index Fund(2).. 19.20 8.17 --

B-11

<PAGE>

1 YEAR ENDED 5 YEARS ENDED 10 YEARS ENDED
INSTITUTIONAL SHARES (1) 12/31/1999 12/31/1999(3) 12/31/1999(4)
-------------------- ---------- ------------- -------------
Total Stock Market Index Fund. 23.93% 22.64% --
Extended Market Index Fund. 36.45 22.47 --
Mid-Cap Index Fund......... 15.41 15.03 --
Small-Cap Index Fund....... 23.33 12.49 --
Value Index Fund........... 12.67 8.79 --
Small-Cap Value Index Fund. -- -- --
Growth Index Fund.......... 28.91 31.15 --
Small-Cap Growth Index Fund -- -- --

---------
(1) Total return figures do not reflect the $10 annual account maintenance fee
for accounts under $10,000 or transaction fees no longer in effect.

(2) Total return figures reflect a 0.50% transaction fee on share purchases.
(3) Average annual total returns since inception for: Mid-Cap Index Fund
(5/21/1998); Small-Cap Value Index Fund (5/21/1998); Small-Cap Growth Index
Fund (5/21/1998); Total Stock Market Index Fund Institutional Shares
(7/7/1997); Extended Market Index Fund Institutional Shares (7/7/1997);
Mid-Cap Index Fund Institutional Shares (5/21/1998); Small-Cap Index Fund
Institutional Shares (7/7/1997); Value Index Fund Institutional Shares
(7/2/1998); and Growth Index Fund Institutional Shares (5/14/1998).

(4) Average annual total returns since inception for: Total Stock Market Index
Fund (4/27/1992); Value Index Fund (11/2/1992); and Growth Index Fund
(11/2/1992).

The Institutional Shares of the Small-Cap Value Index Fund and Small-Cap
Growth Index Fund had no average annual total returns to report as of December
31, 1999.

AVERAGE ANNUAL TOTAL RETURN

Average annual total return is the average annual compounded rate of return for
the periods of one year, five years, ten years or the life of the Fund, all
ended on the last day of a recent month. Average annual total return quotations
will reflect changes in the price of the Fund's shares and assume that all
dividends and capital gains distributions during the respective periods were
reinvested in Fund shares. Average annual total return is calculated by finding
the average annual compounded rates of return of a hypothetical investment over
such periods according to the following formula (average annual total return is
then expressed as a percentage):

T = (ERV/P)1/N-1

Where:

T = average annual total return P = a hypothetical initial investment
of $1,000 n = number of years ERV = ending redeemable value: ERV is
the value, at the end

of the applicable period, of a hypothetical $1,000
investment made at the beginning of the applicable
period.

AVERAGE ANNUAL AFTER-TAX TOTAL RETURN QUOTATION

We calculate the Fund's average annual after-tax total return by finding the
average annual compounded rate of return over the 1-, 5-, and 10-year periods
(or for periods of the Fund's operations) that would equate the initial amount
invested to the after-tax value, according to the following formulas:

After-tax return:

P (1+T) N =ATV

Where:

P = a hypothetical initial payment of $1,000 T = average annual
after-tax total return

B-12

<PAGE>

n = number of years
ATV = after-tax value at the end of the 1-,5-, or 10-year periods of
a hypothetical $1,000 payment made at the beginning of the time
period, assuming no liquidation of the investment at the end of
the measurement periods.

Instructions:

1. Assume all distributions by the Fund are reinvested--less the taxes due on
such distributions--at the price on the reinvestment dates during the
period. Adjustments may be made for subsequent re-characterizations of
distributions.

2. Calculate the taxes due on distributions by the Fund by applying the
highest federal marginal tax rates to each component of the distributions
on the reinvestment date (e.g., ordinary income, short-term capital gain,
long-term capital gain, etc.). For periods after December 31, 1997, the
federal marginal tax rates used for the calculations are 39.6% for ordinary
income and short-term capital gains and 20% for long-term capital gains.
Note that the applicable tax rates may vary over the measurement period.
Assume no taxes are due on the portions of any distributions classified as
exempt interest or non-taxable (i.e. return of capital). Ignore any
potential tax liabilities other than federal tax liabilities (e.g., state
and local taxes).
3. Include all recurring fees that are charged to all shareholder accounts.
For any account fees that vary with the size of the account, assume an
account size equal to the Fund's mean (or median) account size. Assume that
no additional taxes or tax credits result from any redemption of shares
required to pay such fees.

4. State the total return quotation to the nearest hundreth of one percent.

CUMULATIVE TOTAL RETURN

Cumulative total return is the cumulative rate of return on a hypothetical
initial investment of $1,000 for a specified period. Cumulative total return
quotations reflect changes in the price of the Fund's shares and assume that all
dividends and capital gains distributions during the period were reinvested in
Fund shares. Cumulative total return is calculated by finding the cumulative
rates of a return of a hypothetical investment over such periods, according to
the following formula (cumulative total return is then expressed as a
percentage):

C = (ERV/P)-1

Where:

C = cumulative total return P = a hypothetical initial investment of
$1,000 ERV = ending redeemable value: ERV is the value, at the end

of the applicable period, of a hypothetical $1,000
investment made at the beginning of the applicable
period.

SEC YIELDS

Yield is the net annualized yield based on a specified 30-day (or one month)
period assuming semiannual compounding of income. Yield is calculated by
dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula:

YIELD = 2[((A-B)/CD+1) 6 -1]

Where:

a = dividends and interest earned during the period.
b = expenses accrued for the period (net of
reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.

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

B-13

<PAGE>

MANAGEMENT OF THE FUNDS

OFFICERS AND TRUSTEES

The officers of the Funds manage its day-to-day operations and are responsible
to the each Fund's Board of Trustees. The Trustees set broad policies for each
Fund and choose their officers. The following is a list of the Trustees and
officers of the Funds and a statement of their present positions and principal
occupations during the past five years. As a group, the Funds' Trustees and
officers own less than 1% of the outstanding shares of each Fund. Each Trustee
also serves as a Director of The Vanguard Group, Inc., and as a Trustee of each
of the 103 funds administered by Vanguard (102 in the case of Mr. Malkiel and 93
in the case of Mr. MacLaury). The mailing address of the Trustees and officers
of each Fund is Post Office Box 876, Valley Forge, PA 19482.

JOHN J. BRENNAN, (DOB: 7/29/1954) Chairman, Chief Executive Officer & Trustee*
Chairman, Chief Executive Officer and Director of The Vanguard Group, Inc., and
Trustee of each of the investment companies in The Vanguard Group.

JOANN HEFFERNAN HEISEN, (DOB: 1/25/1950) Trustee
Vice President, Chief Information Officer, and member of the Executive Committee
of Johnson & Johnson (Pharmaceuticals/Consumer Products), Director of Johnson &
Johnson*MERCK Consumer Pharmaceuticals Co., The Medical Center at Princeton, and
Women's Research and Education Institute.

BRUCE K. MACLAURY, (DOB: 5/7/1931) Trustee
President Emeritus of The Brookings Institution (Independent Non-Partisan
Research Organization); Director of American Express Bank, Ltd., The St. Paul
Companies, Inc. (Insurance and Financial Services), and National Steel Corp.

BURTON G. MALKIEL, (DOB: 8/28/1932) Trustee
Chemical Bank Chairman's Professor of Economics, Princeton University; Director
of Prudential Insurance Co. of America, Banco Bilbao Gestinova, Baker Fentress &
Co. (Investment Management), The Jeffrey Co. (Holding Company), and Select
Sector SPDR Trust (Exchange-Traded Mutual Fund).

ALFRED M. RANKIN, JR., (DOB: 10/8/1941) Trustee
Chairman, President, Chief Executive Officer, and Director of NACCO Industries
(Machinery/Coal/ Appliances); and Director of The BFGoodrich Co. (Aircraft
Systems/Manufacturing/Chemicals).

JAMES O. WELCH, JR., (DOB: 5/13/1931) Trustee
Retired Chairman of Nabisco Brands, Inc. (Food Products); retired Vice Chairman
and Director of RJR Nabisco (Food and Tobacco Products); Director of TECO
Energy, Inc., and Kmart Corp.

J. LAWRENCE WILSON, (DOB: 3/2/1936) Trustee
Retired Chairman of Rohm & Haas Co. (Chemicals); Director of Cummins Engine Co.
(Diesel Engine Company), The Mead Corp. (Paper Products), and AmeriSource Health
Corp.; and Trustee of Vanderbilt University.

RAYMOND J. KLAPINSKY, (DOB: 12/7/1938) Secretary*
Managing Director of The Vanguard Group, Inc.; Secretary of The Vanguard Group,
Inc. and of each of the investment companies in The Vanguard Group.

THOMAS J. HIGGINS, (DOB: 5/21/1957) Treasurer*
Principal of The Vanguard Group, Inc.; Treasurer of each of the investment
companies in The Vanguard Group.

ROBERT D. SNOWDEN, (DOB: 9/4/1961) Controller*
Principal of The Vanguard Group, Inc.; Controller of each of the investment
companies in The Vanguard Group.

B-14

<PAGE>

---------
*Officers of the Funds are "interested persons" as defined in the 1940 Act.

THE VANGUARD GROUP

Each Fund is a member of The Vanguard Group of Investment Companies, which
consists of more than 100 funds. Through their jointly-owned subsidiary, The
Vanguard Group, Inc. (Vanguard), the Funds and the other funds in The Vanguard
Group obtain at cost virtually all of their corporate management, administrative
and distribution services. Vanguard also provides investment advisory services
on an at-cost basis to several of the Vanguard Funds.

Vanguard employs a supporting staff of management and administrative
personnel needed to provide the requisite services to the Funds and also
furnishes the Funds with necessary office 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 Trustees of the Funds. In addition,
each Fund bears its own direct expenses such as legal, auditing and custodian
fees.

The Funds' officers are officers of Vanguard. No officer or employee owns,
or is permitted to own, any securities of any external adviser for the Funds.

Vanguard has adopted a Code of Ethics designed to prevent employees who may
have access to nonpublic information about the trading activities of the Funds
(access persons) from profiting from that information. The Code permits access
persons to invest in securities for their own accounts, including securities
that may be held by the Funds, but places substantive and procedural
restrictions on their trading activities. For example, the Code requires that
access persons of the Funds receive advance approval for every securities trade
to ensure that there is no conflict with the trading activities of the Funds.

Vanguard was established and operates under an Amended and Restated Funds'
Service Agreement which was approved by the shareholders of each of the funds.
The Amended and Restated Funds' Service Agreement provides that each Vanguard
fund may be called upon to invest up to .40% of its current net assets in
Vanguard as contributions to Vanguard's capitalization, and that there is no
limit on the dollar amount that each Vanguard fund may contribute to Vanguard's
capitalization. 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
December 31, 1999, each of the Funds that comprise the Trust had contributed
capital to Vanguard representing 0.02% of its net assets. The total amount
contributed by these Funds was $29,702,000, which represented 29.7% of
Vanguard's capitalization.

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
relationships; (6) shareholder reporting; and (7) review and evaluation of
advisory and other services provided to the funds by third parties. With respect
to the Funds which have more than one class of shares, expenses associated with
Vanguard's provision of shareholder account services are allocated to each share
class on the basis of the amount incurred by each share class.

DISTRIBUTION. Vanguard Marketing Corporation, a wholly-owned subsidiary of
Vanguard, provides all distribution and marketing activities for the funds in
the Group. The principal distribution expenses are for advertising, promotional
materials and marketing personnel. Distribution services may also include
organizing and offering to the public, from time to time, one or more new
investment companies which will become members of The Vanguard Group. The
Trustees 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 various Vanguard funds based upon relative net assets.
The remaining one half of those 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 nature
shall exceed 125% of the average distribution expense rate for Vanguard, and
that no fund shall incur annual distribution expenses in excess of 20/100 of 1%
of its average month-end net assets. With respect to the funds which have more
than one class of shares, expenses paid to Vanguard for marketing and
distribution activities will be allocated to the class of shares of the fund on
behalf of

B-15

<PAGE>

which the expenses were incurred by making such allocations to each share class
as if each such class were a separate Vanguard fund.

During the fiscal years ended December 31, 1997, 1998, and 1999, the Funds
incurred the following approximate amounts of Vanguard's management (including
transfer agency), distribution, and marketing expenses:

FUND 1997 1998 1999
---- ---- ---- ----
Vanguard Total Stock Market Index Fund $9,113,000 $15,330,000 $27,815,000
Vanguard 500 Index Fund..... $75,851,000 $108,134,000 $156,491,000
Vanguard Extended Market Index Fund $5,518,000 $6,534,000 $8,139,000
Vanguard Mid-Cap Index Fund. N/A $174,000* $907,000
Vanguard Small-Cap Index Fund...........$4,817,000 $6,369,000 $6,812,000
Vanguard Value Index Fund...............$2,723,000 $4,562,000 $6,692,000
Vanguard Small-Cap Value Index Fund..... N/A $102,000* $316,000
Vanguard Growth Index Fund..............$3,147,000 $8,785,000 $23,861,000
Vanguard Small-Cap Growth Index Fund.... N/A $65,000* $203,000

---------
* Since Inception, April 20, 1998.

INVESTMENT ADVISORY SERVICES. The Funds that comprise Vanguard Index Trust
receive all investment advisory services from Vanguard. These services are
provided on an at-cost basis from a money management staff employed directly by
Vanguard. The compensation and other expenses of this staff are paid by the
Vanguard funds utilizing these services. During the fiscal years ended December
31, 1997, 1998 and 1999, the Funds incurred expenses for investment advisory
services in the following amounts:

FUND 1997 1998 1999
---- ---- ---- ----
Vanguard Total Stock Market Index Fund $56,000 $82,000 $120,000
Vanguard 500 Index Fund..... $67,000 $80,000 $100,000
Vanguard Extended Market Index Fund $53,000 $73,000 $120,000
Vanguard Mid-Cap Index Fund. N/A $20,000* $67,000
Vanguard Small-Cap Index Fund........ $67,000 $100,000 $167,000
Vanguard Value Index Fund... $22,000 $37,000 $67,000
Vanguard Small-Cap Value Index Fund.. N/A $20,000* $53,000
Vanguard Growth Index Fund........... $22,000 $37,000 $67,000
Vanguard Small-Cap Growth Index Fund. N/A $20,000* $53,000

---------
*Since Inception, April 20, 1998.

TRUSTEE COMPENSATION

The same individuals serve as Trustees of all Vanguard funds (with two
exceptions, which are noted in the table appearing on page B-17), and each fund
pays a proportionate share of the Trustees' compensation. The funds employ their
officers on a shared basis, as well. However, officers are compensated by The
Vanguard Group, Inc., not the funds.

INDEPENDENT TRUSTEES. The funds compensate their independent Trustees--that
is, the ones who are not also officers of the funds--in three ways:

- The independent Trustees receive an annual fee for their service to the
funds, which is subject to reduction based on absences from scheduled Board
meetings.

- The independent Trustees are reimbursed for the travel and other expenses
that they incur in attending Board meetings.

B-16

<PAGE>

- Upon retirement, the independent Trustees receive an aggregate annual fee
of $1,000 for each year served on the Board, up to fifteen years of
service. This annual fee is paid for ten years following retirement, or
until each Trustee's death.

"INTERESTED" TRUSTEE. Mr. Brennan serves as Trustee, but is not paid in
this capacity. He is however, paid in his role as officer of The Vanguard Group,
Inc.

COMPENSATION TABLE. The following table provides compensation details for
each of the Trustees. We list the amounts paid as compensation and accrued as
retirement benefits by the Fund for each Trustee. In addition, the table shows
the total amount of benefits that we expect each Trustee to receive from all
Vanguard funds upon retirement, and the total amount of compensation paid to
each Trustee by all Vanguard funds.

VANGUARD INDEX TRUST
COMPENSATION TABLE

PENSION OR
RETIREMENT TOTAL
BENEFITS COMPENSATION
AGGREGATE ACCRUED AS ESTIMATED FROM ALL
COMPENSATION PART OF THESE ANNUAL VANGUARD
FROM THESE FUNDS' BENEFITS UPON FUNDS PAID TO
NAMES OF TRUSTEES FUNDS EXPENSES(1) RETIREMENT TRUSTEES(2)
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John C. Bogle (3) . . . . . . . . . None None None None
John J. Brennan. . . . . . . . . . . None None None None
JoAnn Heffernan Heisen . . . . . . . $21,767 $1,199 $15,000 $80,000
Bruce K. MacLaury. . . . . . . . . . $22,553 $2,032 $12,000 $75,000
Burton G. Malkiel. . . . . . . . . . $21,925 $1,985 $15,000 $80,000
Alfred M. Rankin, Jr.. . . . . . . . $21,767 $1,452 $15,000 $80,000
John C. Sawhill. . . . . . . . . . . $21,767 $1,839 $15,000 $80,000
James O. Welch, Jr.. . . . . . . . . $21,767 $2,122 $15,000 $80,000
J. Lawrence Wilson . . . . . . . . . $21,767 $1,533 $15,000 $80,000
</TABLE>

---------
(1) The amounts shown in this column are based on the Funds' fiscal year ended
December 31, 1999.

(2) The amounts reported in this column reflect the total compensation paid to
each Trustee for his or her service as Trustee of 103 Vanguard funds (102
in the case of Mr. Malkiel; 93 in the case of Mr. MacLaury) for the
calendar year.

(3) Mr. Bogle has retired from the Funds' Board, effective December 31, 1999.

PORTFOLIO TRANSACTIONS

In placing portfolio transactions on behalf of a Fund, The Vanguard Group uses
its best judgment to choose the broker most capable of providing the brokerage
services necessary to obtain the best available price and most favorable
execution. The full range and quality of brokerage services available are
considered in making these determinations. In those instances where it is
reasonably determined that more than one broker can offer the brokerage services
needed to obtain the best available price and most favorable execution,
consideration is given to those brokers which supply statistical information and
provide other services in addition to execution services to the Fund.

Since the Funds do not market their shares through intermediary brokers or
dealers, it is not the Funds' practice to allocate brokerage or principal
business on the basis of sales of their shares which may be made through such
firms. However, a Fund may place portfolio orders with qualified broker-dealers
who recommend the Fund to clients, and may, when a number of brokers and dealers
can provide best price and execution on a particular transaction, consider the
sale of Fund shares by a broker or dealer in selecting among broker dealers.

B-17

<PAGE>

During the fiscal years ended December 31, 1997, 1998 and 1999, the Funds paid
brokerage commissions in the following amounts:

FUND 1997 1998 1999
---- ---- ---- ----
Vanguard Total Stock Market Index Fund $840,641 $1,104,269 $2,163,000
Vanguard 500 Index Fund..... $2,956,036 $4,181,268 $6,008,000
Vanguard Extended Market Index Fund $830,234 $966,456 $1,122,000
Vanguard Mid-Cap Index Fund. N/A $109,539 $223,000
Vanguard Small-Cap Index Fund........... $1,480,436 $1,649,209 $2,284,000
Vanguard Value Index Fund... $179,361 $254,984 $552,000
Vanguard Small-Cap Value Index Fund..... N/A $88,369 $166,000
Vanguard Growth Index Fund.............. $294,025 $827,065 $2,959,000
Vanguard Small-Cap Growth Index Fund.... N/A $62,118 $49,000

INFORMATION ABOUT THE VIPER SHARE CLASS

OF VANGUARD INDEX FUNDS

Each Fund offers and issues VIPER Shares, at their net asset value, only in
bundles of a specified number of VIPER Shares. These bundles are known as
"Creation Units." To purchase or redeem a Creation Unit, you must be an
Authorized Participant or you must do so through a broker that is an Authorized
Participant. An Authorized Participant is a participant in the Depository Trust
Company ("DTC") that has executed a Participant Agreement with Vanguard
Marketing Corporation, the Funds' Distributor.

Each Fund issues Creation Units in kind, in exchange for a basket of stocks
that are part of (or soon to be part of) its target index ("Deposit
Securities"). Each Fund also redeems Creation Units in kind; an investor who
tenders a Creation Unit will receive, as redemption proceeds, a basket of stocks
that are part of the fund's portfolio holdings ("Redemption Securities"). The
Deposit Securities and the Redemption Securities may not necessarily be the
same. As part of any creation or redemption transaction, the investor will
either pay or receive some cash in addition to the securities, as described more
fully below. The Funds reserve the right to issue Creation Units for cash,
rather than in kind, although they have no current intention of doing so.

EXCHANGE LISTING AND TRADING

VIPER Shares have been approved for listing on the American Stock Exchange
("AMEX") and will trade on the AMEX at market prices that may differ from net
asset value.

There can be no assurance that, in the future, VIPER Shares will continue
to meet all of the AMEX's listing requirements. The AMEX may, but is not
required to, remove the VIPER Shares of any Fund from listing if: (1) following
the initial 12-month period beginning upon the commencement of trading, there
are fewer than 50 beneficial owners of the VIPER Shares of a Fund for 30 or more
consecutive trading days; (2) the value of the target index tracked by the Fund
is no longer calculated or available; or (3) such other event shall occur or
condition exist that, in the opinion of the AMEX, makes further dealings on the
AMEX inadvisable. The AMEX will also remove the VIPER Shares of a Fund from
listing and trading upon termination of that Fund's VIPER Share class.

As with any stock traded on an exchange, purchases and sales of VIPER
Shares will be subject to usual and customary brokerage commissions.

CONVERSION PRIVILEGE

Owners of Conventional Shares issued by one of the Vanguard Index Funds (except
those who own through an employer-sponsored retirement or benefit plan) may, at
no charge, convert those shares into VIPER Shares of equivalent value of the
same Fund. Vanguard reserves the right at any time in the future to impose a
charge on conversion transactions or to limit or terminate the conversion
privilege. VIPER Shares, whether acquired through a conversion or purchased on
the secondary

B-18

<PAGE>

market, cannot be converted into Conventional Shares. In addition, VIPER Shares
of one Fund may not be exchanged for VIPER Shares of another Fund.

Investors that are not DTC Partipants must hold VIPER Shares in a brokerage
account. Thus, before converting Conventional Shares into VIPER Shares, an
investor must have an existing, or open a new, brokerage account. To initiate a
conversion of Conventional Shares into VIPER Shares, an investor must contact
his or her broker.

BOOK ENTRY ONLY SYSTEM

VIPER Shares of each Fund are registered in the name of the DTC or its
nominee, Cede & Co., and deposited with, or on behalf of, DTC. DTC is a
limited-purpose trust company that was created to hold securities of its
participants (the "DTC Participants") and to facilitate the clearance and
settlement of securities transactions among the DTC Participants in such
securities through electronic book-entry changes in accounts of the DTC
Participants, thereby eliminating the need for physical movement of securities
certificates. DTC Participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own DTC. More specifically, DTC is owned by
a number of its DTC Participants and by the New York Stock Exchange ("NYSE"),
the AMEX and the National Association of Securities Dealers ("NASD"). Access to
the DTC system is also available to others such as banks, brokers, dealers, and
trust companies that clear through or maintain a custodial relationship with a
DTC Participant, either directly or indirectly (the "Indirect Participants").

Beneficial ownership of VIPER Shares is limited to DTC Participants,
Indirect Participants, and persons holding interests through DTC Participants
and Indirect Participants. Ownership of beneficial interests in VIPER Shares
(owners of such beneficial interests are referred to herein as "Beneficial
Owners") is shown on, and the transfer of ownership is effected only through,
records maintained by DTC (with respect to DTC Participants) and on the records
of DTC Participants (with respect to Indirect Participants and Beneficial Owners
that are not DTC Participants). Beneficial Owners will receive from or through
the DTC Participant a written confirmation relating to their purchase of VIPER
Shares.

The Funds recognize DTC or its nominee as the record owner of all VIPER
Shares for all purposes. Beneficial Owners of VIPER Shares are not entitled to
have VIPER Shares registered in their names, and will not receive or be entitled
to physical delivery of share certificates. Each Beneficial Owner must rely on
the procedures of DTC and any DTC Participant and/or Indirect Participant
through which such Beneficial Owner holds its interests, to exercise any rights
of a holder of VIPER Shares.

Conveyance of all notices, statements and other communications to
Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement
between the Trust and DTC, DTC is required to make available to the Trust upon
request and for a fee to be charged to the Trust a listing of the VIPER Shares
of each Fund held by each DTC Participant. The Trust shall inquire of each such
DTC Participant as to the number of Beneficial Owners holding VIPER Shares,
directly or indirectly, through such DTC Participant. The Trust shall provide
each such DTC Participant with copies of such notice, statement, or other
communication, in such form, number and at such place as such DTC Participant
may reasonably request, in order that such notice, statement or communication
may be transmitted by such DTC Participant, directly or indirectly, to such
Beneficial Owners. In addition, the Trust shall pay to each such DTC Participant
a fair and reasonable amount as reimbursement for the expenses attendant to such
transmittal, all subject to applicable statutory and regulatory requirements.

Share distributions shall be made to DTC or its nominee as the registered
holder of all VIPER Shares. DTC or its nominee, upon receipt of any such
distributions, shall credit immediately DTC Participants' accounts with payments
in amounts proportionate to their respective beneficial interests in VIPER
Shares of each Fund as shown on the records of DTC or its nominee. Payments by
DTC Participants to Indirect Participants and Beneficial Owners of VIPER Shares
held through such DTC Participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in a "street name," and will be the
responsibility of such DTC Participants.

The Trust has no responsibility or liability for any aspects of the records
relating to or notices to Beneficial Owners, or payments made on account of
beneficial ownership interests in such VIPER Shares, or for maintaining,
supervising or reviewing any records relating to such beneficial

B-19

<PAGE>

ownership interests, or for any other aspect of the relationship between DTC and
the DTC Participants or the relationship between such DTC Participants and the
Indirect Participants and Beneficial Owners owning through such DTC
Participants.

DTC may determine to discontinue providing its service with respect to
VIPER Shares at any time by giving reasonable notice to the Trust and
discharging its responsibilities with resect thereto under applicable law. Under
such circumstances, the Trust shall take action either to find a replacement for
DTC to perform its functions at a comparable cost or, if such replacement is
unavailable, to issue and deliver printed certificates representing ownership of
VIPER Shares, unless the Trust makes other arrangements with respect thereto
satisfactory to the AMEX (or such other exchange on which VIPER Shares may be
listed).

PURCHASE AND ISSUANCE OF VIPER SHARES IN CREATION UNITS

Each Fund issues and sells VIPER Shares only in Creation Units on a
continuous basis through the Distributor, without a sales load, at their net
asset value next determined after receipt, on any Business Day, of an order in
proper form. The Funds will not issue fractional Creation Units.

A "Business Day" with respect to each Fund is any day on which the NYSE is
open for business. As of the date of the Prospectus, the NYSE observes the
following holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day
(Washington's Birthday), Good Friday, Memorial Day (observed), Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day.

FUND DEPOSIT

The consideration for purchase of a Creation Unit from a Vanguard U.S. Stock
Index Fund generally consists of the in-kind deposit of a designated portfolio
of equity securities (the Deposit Securities) and an amount of cash (the "Cash
Component") consisting of a Balancing Amount (described below) and a Transaction
Fee (also described below). Together, the Deposit Securities and the Cash
Component constitute the "Fund Deposit."

The "Balancing Amount" is an amount equal to the difference between the net
asset value ("NAV") of a Creation Unit and the market value of the Deposit
Securities (the "Deposit Amount"). It ensures that the NAV of a Fund Deposit
(not including the Transaction Fee) is identical to the NAV of the Creation Unit
it is used to purchase. If the Balancing Amount is a positive number (i.e., the
NAV per Creation Unit exceeds the market value of the Deposit Securities), then
that amount will be paid by the purchaser to the Fund in cash. If the Balancing
Amount is a negative number (i.e., the NAV per Creation Unit is less than the
market value of the Deposit Securities), then that amount will be paid by the
Fund to the purchaser in cash (except as offset by the Transaction Fee,
described below).

Vanguard, through the National Securities Clearing Corporation ("NSCC")
(discussed below), makes available on each Business Day, immediately prior to
the opening of business on the AMEX (currently 9:30 a.m., New York time), a list
of the names and the required number of shares of each Deposit Security to be
included in the current Fund Deposit (based on information at the end of the
previous Business Day) for each Fund. Such Fund Deposit is applicable, subject
to any adjustments as described below, in order to effect purchases of Creation
Units of a given Fund until such time as the next-announced Fund Deposit
composition is made available.

The identity and number of shares of the Deposit Securities required for a
Fund Deposit for each Fund changes as rebalancing adjustments and corporate
action events are reflected from time to time by Vanguard with a view to the
investment objective of the Fund. The composition of the Deposit Securities may
also change in response to adjustments to the weighting or composition of the
component stocks of the relevant target index. In addition, the Trust reserves
the right to permit or require the substitution of an amount of cash -- i.e., a
"cash in lieu" amount -- to be added to the Cash Component to replace any
Deposit Security which may not be available in sufficient quantity for delivery
or which may not be eligible for transfer through the Clearing Process
(discussed below), or which may not be eligible for trading by an Authorized
Participant (as defined below) or the investor for which an Authorized
Participant is acting. Brokerage commissions incurred in connection with
acquisition of Deposit Securities not eligible for transfer through the systems
of DTC and hence not eligible for transfer through the Clearing Process
(discussed below) will be an expense of the Fund. However, Vanguard may adjust
the Transaction Fee (described below) to protect existing shareholders from this
expense.

B-20

<PAGE>

PROCEDURES FOR PURCHASING CREATION UNITS

To be eligible to place orders with the Distributor and to purchase
Creation Units from a Fund, you must be an "Authorized Participant," i.e., a DTC
Participant that has executed an agreement with the Trust's Distributor
governing the purchase and redemption of Creation Units (the "Participant
Agreement"). Investors who are not Authorized Participants must make appropriate
arrangements with an Authorized Participant in order to purchase or redeem a
Creation Unit. If your broker is not a DTC Participant or has not executed a
Participant Agreement, it will have to place your order through an Authorized
Participant, which may result in additional charges to you. For a current list
of Authorized Participants, contact the Distributor.

Certain Authorized Participants, in addition to being DTC Participants, are
also NSCC Participants. An "NSCC Participant" is a broker-dealer or other DTC
Participant eligible to clear trades through the Continuous Net Settlement
System of the NSCC (the "Clearing Process"). Purchases (and redemptions) of
Creation Units cleared through the Clearing Process will be subject to a lower
Transaction Fee than those cleared outside the Clearing Process.

To initiate a purchase order for a Creation Unit, whether through the
Clearing Process (through an NSCC Participant) or outside the Clearing Process,
an Authorized Participant must give notice to the Distributor. The order must be
in proper form and must be received by the Distributor prior to the closing time
of the regular trading session on the NYSE ("Closing Time") (ordinarily 4:00
p.m., New York time) to receive that day's NAV. The date on which an order to
purchase (or redeem) Creation Units is placed is referred to as the "Transmittal
Date." Orders must be transmitted by an Authorized Participant by a transmission
method acceptable to the Distributor pursuant to procedures set forth in the
Participation Agreement.

Purchase orders effected outside the Clearing Process are likely to require
transmittal by the Authorized Participant earlier on the Transmittal Date than
orders effected using the Clearing Process. Those persons placing orders outside
the Clearing Process should ascertain the deadlines applicable to DTC and the
Federal Reserve Bank wire system by contacting the operations department of the
broker or depository institution effectuating such transfer of Deposit
Securities and Cash Component.

Neither the Trust, the Distributor, nor any affiliated party will be liable
to an investor who is unable to submit a purchase (or redemption) order by
Closing Time, even if the problem is the responsibility of one of those parties
(e.g., the Distributor's phone systems or fax machines were not operating
properly.)

If you are not an Authorized Participant, you must place your purchase
order with an Authorized Participant in a form acceptable to such Authorized
Participant. In addition, the Authorized Participant may request that you make
certain representations or enter into agreements with respect to the order,
e.g., to provide for payments of cash when required. You should afford
sufficient time to permit proper submission of the order by the Authorized
Participant to the Distributor prior to Closing Time on the Transmittal Date.

PLACEMENT OF PURCHASE ORDERS USING CLEARING PROCESS

The Clearing Process is the process of creating or redeeming Creation Units
through the Continuous Net Settlement System of the NSCC. Fund Deposits made
through the Clearing Process must be delivered by or through an Authorized
Participant that is an NSCC Participant. The Participant Agreement authorizes
the Distributor to transmit through the Transfer Agent to NSCC, on behalf of the
NSCC Participant, such trade instructions as are necessary to effect the NSCC
Participant's purchase order. Pursuant to such trade instructions to NSCC, the
NSCC Participant agrees to deliver the requisite Deposit Securities and the Cash
Component to the Trust, together with such additional information as may be
required by the Distributor.

An order to purchase Creation Units through the Clearing Process is deemed
received on the Transmittal Date if (i) such order is received by the
Distributor not later than the Closing Time on such Transmittal Date, and (ii)
all other procedures set forth in the Participant Agreement are properly
followed. Such order will be effected based on the NAV of the Fund next
determined on that day. An order to purchase Creation Units through the Clearing
Process made in proper form but received after Closing Time on the Transmittal
Date will be deemed received on the next Business Day immediately following the
Transmittal Date and will be effected at the NAV next determined on that day.
The Deposit Securities and the Cash Component will be transferred by the third
NSCC Business Day following the date on which the purchase request is deemed
received.

B-21

<PAGE>

PLACEMENT OF PURCHASE ORDERS OUTSIDE CLEARING PROCESS

An Authorized Participant that wishes to place an order to purchase
Creation Units outside the Clearing Process must state that it is not using the
Clearing Process and that the purchase instead will be effected through a
transfer of securities and cash directly through DTC. The Fund Deposit transfer
must be ordered by the DTC Participant on the Transmittal Date in a timely
fashion so as to ensure the delivery of the requisite number of Deposit
Securities through DTC to the account of the Fund by no later than 11:00 a.m.,
New York time, on the next Business Day immediately following the Transmittal
Date. All questions as to the number of Deposit Securities to be delivered, and
the validity, form and eligibility (including time of receipt) for the deposit
of any tendered securities, will be determined by the Fund, whose determination
shall be final and binding. The amount of cash equal to the Cash Component must
be transferred directly to the Custodian in a timely manner so as to be received
by the Custodian no later than 2:00 p.m., New York time, on the next Business
Day immediately following such Transmittal Date.

An order to purchase Creation Units outside the Clearing Process is deemed
received by the Distributor on the Transmittal Date if (i) such order is
received by the Distributor not later than the Closing Time on such Transmittal
Date; and (ii) all other procedures set forth in the Participant Agreement are
properly followed. However, if the Custodian does not receive both the required
Deposit Securities and the Cash Component by 11:00 a.m. and 2:00 p.m.,
respectively, on the next Business Day immediately following the Transmittal
Date, such order will be cancelled. Upon written notice to the Distributor, such
cancelled order may be resubmitted the following Business Day using a Fund
Deposit as newly constituted to reflect the then current NAV of the Fund. The
delivery of Creation Units so created will occur no later than the third (3rd)
Business Day following the day on which the purchase order is deemed received by
the Distributor.

A Fund may issue Creation Units to a purchaser before receiving some or all
of the Deposit Securities if the purchaser deposits, in addition to the
available Deposit Securities and the Cash Component, cash totaling at least 115%
of the market value of the undelivered Deposit Securities (the "Additional Cash
Deposit"). The order shall be deemed to be received on the Business Day on which
the order is placed provided that the order is placed in proper form prior to
Closing Time on such date and federal funds in the appropriate amount are
deposited with the Custodian by 11:00 a.m., New York time, the following
Business Day. If the order is not placed in proper form by 4:00 p.m. or federal
funds in the appropriate amount are not received by 11:00 a.m. the next Business
Day, then the Fund may reject the order and the investor shall be liable to the
Fund for losses, if any, resulting therefrom. Pending delivery of the missing
Deposit Securities, the purchaser must deposit additional cash with the Fund to
the extent necessary to maintain the Additional Cash Deposit in an amount at
least equal to 115% of the daily marked-to-market value of the missing Deposit
Securities. If the purchaser fails to deliver missing Deposit Securities by 1:00
p.m. on the third Business Day following the day on which the purchase order is
deemed received by the Distributor, or fails to pay additional money to maintain
the Additional Cash Deposit at 115% of the marked-to-market value of the missing
securities within one Business Day following notification by the Distributor
that such a payment is required, the Fund may use the cash on deposit to
purchase the missing Deposit Securities. Authorized Participants will be liable
to the Fund for the costs incurred by the Fund in connection with any such
purchases. These costs will be deemed to include the amount by which the actual
purchase price of the Deposit Securities exceeds the market value of such
Deposit Securities on the day the purchase order was deemed received by the
Distributor, plus the brokerage and related transaction costs associated with
such purchases. The Fund will return any unused portion of the Additional Cash
Deposit once all of the missing Deposit Securities have been properly received
by the Custodian or purchased by the Fund. In addition, the Fund will be
entitled to collect a transaction fee of $4,000 in all such cases. The delivery
of Creation Units so purchased will occur no later than the third Business Day
following the day on which the purchase order is deemed received by the
Distributor.

REJECTION OF PURCHASE ORDERS

Each Fund reserves the absolute right to reject a purchase order
transmitted to it by the Distributor if:

- the order is not in proper form;
- the investor(s), upon obtaining the VIPER Shares ordered, would own 80% or
more of the Fund's currently outstanding VIPER Shares;

B-22

<PAGE>

- the Deposit Securities delivered are not as disseminated through the
facilities of the AMEX for that date by the Custodian, as described above;
- acceptance of the Deposit Securities would have certain adverse tax
consequences to the Fund;
- acceptance of the Fund Deposit would, in the opinion of counsel, be
unlawful;
- acceptance of the Fund Deposit would otherwise, in the discretion of the
Fund or Vanguard, have an adverse effect on the Fund or any of its
shareholders; or

- circumstances outside the control of the Fund, the Transfer Agent, the
Custodian, the Distributor, and Vanguard make it for all practical purposes
impossible to process the order. Examples of such circumstances include
acts of God; public service or utility problems such as fires, floods,
extreme weather conditions, and power outages resulting in telephone,
telecopy, and computer failures; market conditions or activities causing
trading halts; systems failures involving computer or other information
systems affecting the Trust, Vanguard, the Distributor, DTC, NSCC, or any
other participant in the purchase process, and similar extraordinary
events.

The Distributor shall notify the prospective purchaser of a Creation Unit,
and/or the Authorized Participant acting on the purchaser's behalf, of its
rejection of the purchaser's order. The Fund, the Transfer Agent, the Custodian,
and the Distributor are under no duty, however, to give notification of any
defects or irregularities in the delivery of a Fund Deposit, nor shall any of
them incur any liability for the failure to give any such notification.

All questions as to the number of shares of each security in the Deposit
Securities and the validity, form, eligibility, and acceptance for deposit of
any securities to be delivered shall be determined by the issuing Fund, and the
Fund's determination shall be final and binding.

TRANSACTION FEE ON PURCHASES OF CREATION UNITS

Each Fund imposes a transaction fee (payable to the Fund) to compensate the
Fund for the transfer and other transaction costs associated with the issuance
of Creation Units. For purchases effected through the Clearing Process, the
Transaction Fee is $., regardless of how many Creation Units are purchased. An
additional charge of up to $. may be imposed for purchases effected outside the
Clearing Process.

When a Fund permits a purchaser to substitute cash in lieu of depositing
one or more Deposit Securities, the purchaser will be assessed an additional
variable charge on the "cash in lieu" portion of its investment. The amount of
this variable charge shall be established by the Fund in its sole discretion,
but shall not be more than is reasonably needed to compensate the Fund for the
brokerage costs associated with purchasing the relevant Deposit Securities and,
if applicable, the estimated market impact costs of purchasing such securities.

REDEMPTION OF VIPER SHARES IN CREATION UNITS

VIPER Shares may be redeemed only in Creation Units; the Funds will not
redeem VIPER Shares tendered in less than Creation Unit-size aggregations.
Investors should expect to incur brokerage and other costs in connection with
assembling a sufficient number of VIPER Shares to constitute a redeemable
Creation Unit. There can be no assurance, however, that there will be sufficient
liquidity in the public trading market at any time to permit assembly of a
Creation Unit. Redemption requests in good order will receive the NAV next
determined after the request is made.

An investor tendering a Creation Unit generally will receive redemption
proceeds consisting of (1) a basket of Redemption Securities, plus (2) a "Cash
Redemption Amount" equal to the difference between (x) the NAV of the Creation
Unit being redeemed, as next determined after receipt of a request in proper
form, and (y) the value of the Redemption Securities, less (3) a Redemption
Transaction Fee (described below). If the Redemption Securities have a value
greater then the NAV of a Creation Unit, the redeeming investor would pay the
Cash Redemption Amount to the Fund, rather than receiving such amount from the
Fund.

With respect to each Fund, Vanguard, through the NSCC, makes available
immediately prior to the opening of business on the AMEX (currently 9:30 a.m.,
New York time) on each Business Day, the identity of the Redemption Securities
that will be used (subject to possible amendment or correction) to satisfy
redemption requests received in proper form (as defined below) on that day. The
basket of Redemption Securities provided to an investor redeeming a Creation
Unit may not be identical to the basket of Deposit Securities required of a
investor purchasing a Creation Unit. If a

B-23

<PAGE>

Fund and a redeeming investor mutually agree, the Fund may provide such
investor with a basket of Redemption Securities that differs from the
composition of the redemption basket published through NSCC.

TRANSACTION FEES ON REDEMPTIONS OF CREATION UNITS

Each Fund imposes a transaction fee (payable to the Fund) to compensate the
Fund for the transfer and other transaction costs associated with the redemption
of Creation Units. For redemptions effected through the Clearing Process, the
Transaction Fee is $., regardless of how many Creation Units are redeemed. An
additional charge of up to $. may be imposed for redemptions effected outside
the Clearing Process.

When a Fund permits a redeeming investor to receive cash in lieu of one or
more Redemption Securities, the investor will be assessed an additional variable
charge on the "cash in lieu" portion of its redemption. The amount of this
variable charge shall be established by the Fund in its sole discretion, but
shall not be more than is reasonably needed to compensate the Fund for the
brokerage costs associated with selling portfolio securities to raise the
necessary cash and, if applicable, the estimated market impact costs of selling
such securities.

PLACEMENT OF REDEMPTION ORDERS USING CLEARING PROCESS

Orders to redeem Creation Units through the Clearing Process must be
delivered by or through an Authorized Participant that is an NSCC Participant.
An order to redeem Creation Units through the Clearing Process is deemed
received on the Transmittal Date if (i) such order is received by the
Distributor not later than the Closing Time on such Transmittal Date, and (ii)
all other procedures set forth in the Participant Agreement are properly
followed. Such order will be effected based on the NAV of the Fund next
determined on that day. An order to redeem Creation Units through the Clearing
Process made in proper form but received by the Fund after Closing Time on the
Transmittal Date will be deemed received on the next Business Day immediately
following the Transmittal Date and will be effected at the NAV next determined
on that day. The Redemption Securities and the Cash Redemption Amount will be
transferred by the third NSCC Business Day following the date on which the
redemption request is deemed received.

PLACEMENT OF REDEMPTION ORDERS OUTSIDE CLEARING PROCESS

An Authorized Participant that wishes to place an order to redeem a
Creation Unit outside the Clearing Process must state that it is not using the
Clearing Process and that redemption instead will be effected through a transfer
of VIPER Shares directly through DTC. An order to redeem a Creation Unit of a
Fund outside the Clearing Process is deemed received on the Transmittal Date if
(i) such order is received by the Fund's Transfer Agent prior to the Closing
Time on such Transmittal Date; (ii) delivery of the requisite number of the
Fund's VIPER Shares is made through DTC to the Custodian no later than 11:00
a.m., New York time, on the next Business Day following such Transmittal Date
(the "DTC Cut-Off-Time"); and (iii) all other procedures set forth in the
Participant Agreement are properly followed.

After the Transfer Agent has deemed an order for redemption outside the
Clearing Process received, the Transfer Agent will initiate procedures to
transfer the Redemption Securities and the Cash Redemption Amount to the
Authorized Participant on behalf of the redeeming Beneficial Owner by the third
Business Day following the Transmittal Date on which such redemption order is
deemed received by the Transfer Agent.

The calculation of the value of the Redemption Securities and the Cash
Redemption Amount to be delivered upon redemption will be made by the Custodian
according to the procedures set forth under "Calculation of Net Asset Value,"
computed on the Business Day on which a redemption order is deemed received by
the Transfer Agent. Therefore, if a redemption order in proper form is submitted
to the Transfer Agent by an Authorized Participant prior to the Closing Time on
the Transmittal Date, and the requisite number of VIPER Shares of the relevant
Fund are delivered to the Custodian prior to the DTC Cut-Off-Time, then the
value of the Redemption Securities and the Cash Redemption Amount will be
determined by the Custodian on such Transmittal Date. If, however, a redemption
order is submitted to the Distributor by a DTC Participant prior to the Closing
Time on the Transmittal Date but either (i) the requisite number of VIPER Shares
of the relevant Fund are not delivered by the DTC Cut-Off-Time on the next
Business Day following the Transmittal Date, or (ii) the redemption order is not
submitted in proper form, then the redemption order will not be deemed received
as of the Transmittal Date. In such case, the value of the

B-24

<PAGE>

Redemption Securities and the Cash Redemption Amount will be computed on the
Business Day that such order is deemed received by the Distributor, i.e., the
Business Day on which the VIPER Shares of the relevant Fund are delivered
through DTC to the Custodian by the DTC Cut-Off-Time on such Business Day
pursuant to a properly submitted redemption order.

If it is not possible to effect deliveries of the Redemption Securities, a
Fund may in its discretion exercise its option to redeem such VIPER Shares in
cash, and the redeeming Beneficial Owner will be required to receive its
redemption proceeds in cash. In addition, an investor may request a redemption
in cash which the Fund may, in its sole discretion, permit. In either case, the
investor will receive a cash payment equal to the net asset value of its VIPER
Shares based on the NAV of Fund's VIPER Shares next determined after the
redemption request is received in proper form (minus a transaction fee,
including a charge for cash redemptions, described above).

If a redeeming investor (or an Authorized Participant through which it is
acting)is subject to a legal restriction with respect to a particular stock
included in the basket of Redemption Securities, such investor may be paid an
equivalent amount of cash in lieu of the stock. In addition, each Fund reserves
the right to redeem Creation Units for cash to the extent that the Fund could
not lawfully deliver one or more Redemption Securities or could not do so
without first registering such securities under federal or state law.

COMPARATIVE INDEXES

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
Vanguard Index Trust, may from time to time, use one or more of the following
unmanaged indexes for comparative performance purposes.

STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX--includes stocks selected by
Standard & Poor's Index Committee to include leading companies in leading
industries and to reflect the U.S. stock market.

STANDARD & POOR'S 500/BARRA VALUE INDEX--consists of the stocks in the Standard
& Poor's 500 Composite Stock Price Index (S&P 500) with the lowest price-to-book
ratios, comprising 50% of the market capitalization of the S&P 500.

STANDARD & POOR'S 500/BARRA GROWTH INDEX--consists of the stocks in the S&P 500
with the highest price-to-book ratios, comprising 50% of the market
capitalization of the S&P 500.

STANDARD & POOR'S MIDCAP 400 INDEX--is composed of 400 medium sized domestic
stocks.

STANDARD & POOR'S SMALLCAP 600/BARRA VALUE INDEX--contains stocks of the S&P
SmallCap 600 Index which have a lower than average price-to-book ratio.

STANDARD & POOR'S SMALLCAP 600/BARRA GROWTH INDEX--contains stocks of the S&P
SmallCap 600 Index which have a higher than average price-to-book ratio.

RUSSELL 1000 VALUE INDEX--consists of the stocks in the Russell 1000 Index
(comprising the 1,000 largest U.S.-based companies measured by total market
capitalization) with the lowest price-to-book ratios, comprising 50% of the
market capitalization of the Russell 1000.

WILSHIRE 5000 TOTAL MARKET INDEX--consists of more than 7,000 common equity
securities, covering all stocks in the U.S. for which daily pricing is
available.

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

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

RUSSELL 2000 STOCK INDEX--is composed of approximately 2,000 small
capitalization stocks.

MERRILL LYNCH CORPORATE & GOVERNMENT BOND INDEX--consists of over 4,500 U.S.
Treasury, agency and investment grade corporate bonds.

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

B-25

<PAGE>

GOLDMAN SACHS 100 CONVERTIBLE BOND INDEX--currently includes 71 bonds and 29
preferred stocks. The original list of names was generated by screening for
convertible 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 Mortgage
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.

SALOMON BROTHERS BROAD INVESTMENT-GRADE BOND INDEX--is a market-weighted index
that contains approximately 4700 individually priced investment-grade corporate
bonds rated BBB or better, U.S. Treasury/agency issues and mortgage pass-through
securities.

LEHMAN BROTHERS LONG-TERM TREASURY BOND INDEX--is a market weighted index that
contains individually priced U.S. Treasury securities with maturities of 10
years or greater.

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
Index.

COMPOSITE INDEX--65% Standard & Poor's 500 Index and 35% Lehman Brothers
Corporate A or Better Bond Index.

COMPOSITE INDEX--65% Lehman Brothers Long-Term Corporate AA or Better Bond Index
and a 35% weighting in a blended equity composite (75% Standard & Poor's/BARRA
Value Index, 12.5% Standard & Poor's Utilities Index and 12.5% Standard & Poor's
Telephone Index).

LEHMAN BROTHERS LONG-TERM CORPORATE AA OR BETTER BOND INDEX--consists of all
publicly issued, fixed rate, non-convertible 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
$5 trillion.

LEHMAN BROTHERS CORPORATE A OR BETTER BOND INDEX--consists of all publicly
issued, investment grade corporate bonds rated A or better, of all maturity
levels.

LEHMAN BROTHERS MUTUAL FUND SHORT (1-5) GOVERNMENT/CORPORATE INDEX--is a
market-weighted index that contains individually priced U.S. Treasury, agency,
and corporate investment grade bonds rated BBB- or better with maturities
between 1 and 5 years. The index has a market value of over $1.6 trillion.

LEHMAN BROTHERS MUTUAL FUND INTERMEDIATE (5-10) GOVERNMENT/CORPORATE INDEX--is a
market-weighted index that contains individually priced U.S. Treasury, agency,
and corporate securities rated BBB- or better with maturities between 5 and 10
years. The index has a market value of over $800 billion.

LEHMAN BROTHERS LONG (10+) GOVERNMENT/CORPORATE INDEX--is a market-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 $1.1 trillion.

LEHMAN BROTHERS CORPORATE (BAA) BOND INDEX--all publicly offered fixed-rate,
non-convertible domestic corporate bonds rated Baa by Moody's, with a maturity
longer than 1 year and with more than $100 million outstanding. This index
includes over 1,500 issues.

LEHMAN BROTHERS LONG-TERM CORPORATE BOND INDEX--is a subset of the Lehman
Corporate Bond Index covering all corporate, publicly issued, fixed-rate
nonconvertible U.S. debt issues rated at least Baa, with at least $100 million
principal outstanding and maturity greater than 10 years.

B-26

<PAGE>

FINANCIAL STATEMENTS

The Funds' Financial Statements as of and for the year ended December 31, 1999,
appearing in the Vanguard Index Trust 1999 Annual Report to Shareholders and
inserts thereto, and the reports thereon of PricewaterhouseCoopers LLP,
independent accountants, also appearing therein, are incorporated by reference
in this Statement of Additional Information. For a more complete discussion of
the performance, please see the Funds' Annual Report to Shareholders, which may
be obtained without charge.

SAI040-INDEX FUNDS

B-27

<PAGE>

PART C

VANGUARD INDEX TRUST

OTHER INFORMATION

ITEM 23. EXHIBITS

(a) Declaration of Trust*
(b) By-Laws*
(c) Reference is made to Articles III and V of the Registrant's Declaration
of Trust
(d) Not applicable
(e) Not applicable
(f) Reference is made to the section entitled "Management of the Funds" in
the Registrant's Statement of Additional Information
(g) Custodian Agreement**
(h) Amended and Restated Funds' Service Agreement*
(i) Legal Opinion*
(j) Consent of Independent Accountants**
(k) Not Applicable
(l) Not Applicable
(m) Not Applicable
(n) Not Applicable
(o) Rule 18f-3 Plan**
(p) Code of Ethics*

*Filed previously
**To be filed by amendment

ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT

Registrant is not controlled by or under common control with any person.

ITEM 25. INDEMNIFICATION

The Registrant's organizational documents contain provisions indemnifying
Trustees and officers against liability incurred in their official capacity.
Article VII, Section 2 of the Declaration of Trust provides that the Registrant
may indemnify and hold harmless each and every Trustee and officer from and
against any and all claims, demands, costs, losses, expenses, and damages
whatsoever arising out of or related to the performance of his or her duties as
a Trustee or officer. However, this provision does not cover any liability to
which a Trustee or officer would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his or her office. Article VI of the By-Laws
generally provides that the Registrant shall indemnify its Trustees and officers
from any liability arising out of their past or present service in that
capacity. Among other things, this provision excludes any liability arising by
reason of willful misfeasance, bad faith, gross negligence, or the reckless
disregard of the duties involved in the conduct of the Trustee's or officer's
office with the Registrant.

ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

Investment advisory services are provided to the Registrant on an at-cost basis
by The Vanguard Group, Inc., a jointly-owned subsidiary of the Registrant and
the other funds in The Vanguard Group of Investment Companies. See the
information concerning The Vanguard Group, Inc. set forth in Parts A and B. For
information as to any other business, vocation or employment of a substantial
nature in which each director or officer of the Registrant's investment advisor
is or has been engaged for his own account or in the capacity of officer,
employee, partner or trustee, reference is made to Form ADV (File #801-11953)
filed by it under the Investment Advisers Act of 1940.

C-1

<PAGE>

ITEM 27. PRINCIPAL UNDERWRITERS

a. Not Applicable
b. Not Applicable
c. Not Applicable

ITEM 28. LOCATION OF ACCOUNTS AND RECORDS

The books, accounts and other documents required by Section 31(a) under the 1940
Act and the Rules thereunder will be maintained at the offices of Registrant;
Registrant's Transfer Agent, The Vanguard Group, Inc., 100 Vanguard Boulevard,
Malvern, Pennsylvania 19355; and the Registrant's Custodians, State Street Bank
and Trust Company, 225 Franklin Street, Boston, Massachusetts 02105, First Union
National Bank, PA4943, 530 Walnut Street, Philadelphia, PA 19106, and The Chase
Manhattan Bank, N.A., 4 Chase Metro Tech Center, Brooklyn, New York 11245.

ITEM 29. MANAGEMENT SERVICES

Other than as set forth under the description of The Vanguard Group in Part B of
this Registration Statement, the Registrant is not a party to any
management-related service contract.

ITEM 30. UNDERTAKINGS

Not Applicable

C-2

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant hereby certifies that it meets all
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused 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 19th day of July, 2000.

VANGUARD INDEX FUNDS

BY:_____________(signature)________________

(HEIDI STAM) JOHN J. BRENNAN* CHAIRMAN AND
CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities and on the date indicated:

SIGNATURE TITLE DATE
--------------------------------------------------------------------------------

By:/S/ JOHN J. BRENNAN President, Chairman, Chief July 19, 2000
---------------------------Executive Officer, and Trustee
(Heidi Stam)
John J. Brennan*

By:/S/ JOANN HEFFERNAN HEISEN Trustee July 19, 2000
---------------------------
(Heidi Stam)
JoAnn Heffernan Heisen*

By:/S/ BRUCE K. MACLAURY Trustee July 19, 2000
---------------------------
(Heidi Stam)
Bruce K. MacLaury*

By:/S/ BURTON G. MALKIEL Trustee July 19, 2000
---------------------------
(Heidi Stam)
Burton G. Malkiel*

By:/S/ ALFRED M. RANKIN, JR. Trustee July 19, 2000
---------------------------
(Heidi Stam)
Alfred M. Rankin, Jr.*

By:/S/ JAMES O. WELCH, JR. Trustee July 19, 2000
---------------------------
(Heidi Stam)
James O. Welch, Jr.*

By:/S/ J. LAWRENCE WILSON Trustee July 19, 2000
---------------------------
(Heidi Stam)
J. Lawrence Wilson*

By:/S/ THOMAS J. HIGGINS Treasurer and Principal July 19, 2000
---------------------------
(Heidi Stam) Financial Officer and Principal
Thomas J. Higgins* Accounting Officer

*By Power of Attorney. See File Number 33-4424, filed on January 25, 1999.
Incorporated by Reference.