VANGUARD INTERNATIONAL EQUITY INDEX FUND INC, 485APOS, 1994-02-15

VANGUARD INTERNATIONAL EQUITY INDEX FUND INC
485APOS, 1994-02-15

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT (NO. 33-32548) UNDER
THE SECURITIES ACT OF 1933

PRE-EFFECTIVE AMENDMENT NO.

POST-EFFECTIVE AMENDMENT NO. 4
AND

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

VANGUARD INTERNATIONAL EQUITY INDEX FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

P.O. BOX 2600,

VALLEY FORGE, PA 19482
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)

REGISTRANT'S TELEPHONE NUMBER (215) 669-1000

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

IT IS PROPOSED THAT THIS AMENDMENT BECOME EFFECTIVE ON APRIL ., 1994
PURSUANT TO RULE 485(A) UNDER THE SECURITIES ACT OF 1933.

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

REGISTRANT ELECTS TO REGISTER AN INDEFINITE NUMBER OF SHARES PURSUANT TO
REGULATION 24F-2 UNDER THE INVESTMENT COMPANY ACT OF 1940. REGISTRANT FILED
ITS RULE 24F-2 NOTICE FOR THE YEAR ENDED DECEMBER 31, 1993 ON FEBRUARY .,
1994.

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<PAGE>

VANGUARD INTERNATIONAL EQUITY INDEX FUND, INC.

CROSS REFERENCE SHEET

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

VANGUARD INTERNATIONAL EQUITY INDEX FUND, INC.

PROSPECTUS SUPPLEMENT

APRIL 18, 1994

IMPORTANT INFORMATION REGARDING THE EMERGING MARKETS PORTFOLIO

SUBSCRIPTION PERIOD

There will be a subscription period for the Emerging Markets Portfolio
beginning on April 18, 1994, and ending on May 4, 1994. During the
subscription period, the following changes to the Portfolio's policies and
procedures will be in effect:

. Exchanges (page . of the Prospectus). Exchange requests received from
other Vanguard Portfolios will be held during the subscription period and
processed on May 4, 1994. The purpose of holding these exchange requests
is to minimize the brokerage and other transaction costs associated with
transferring monies into the Portfolio. Shareholders who wish to cancel
their exchange purchase during the subscription period can do so by
writing to Vanguard.

. Purchases (page . of the Prospectus). Purchase requests received by check
and the appropriate account registration form will be held and not be
invested during the subscription period. On May 4, 1994, the checks will
be cashed and purchases will be processed. The Emerging Markets Portfolio
will not accept wire purchases during the subscription period. The
purpose of holding these purchase requests is to minimize the brokerage
and other transaction costs associated with investing these monies into
the Portfolio. Shareholders who wish to cancel their purchase during the
subscription period can do so by writing to Vanguard.

PLEASE NOTE THAT AN EXCHANGE FROM ANY VANGUARD FUND INTO THE NEW PORTFOLIO
IS A TAXABLE EVENT, AND INVESTORS MAY INCUR A CAPITAL GAIN OR LOSS. Also,
investors will be required to complete a special application form (enclosed)
in order to open an account in the Portfolio during the subscription period.
Finally, no telephone exchanges from existing fund accounts of any kind
(whether regular or retirement accounts) will be accepted during the
subscription period.
<PAGE>

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(ART) A Member of The Vanguard Group
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PROSPECTUS--APRIL ., 1994
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NEW ACCOUNT INFORMATION: INVESTOR INFORMATION DEPARTMENT--1-800-662-7447 (SHIP)
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SHAREHOLDER ACCOUNT SERVICES: CLIENT SERVICES DEPARTMENT--1-800-662-2739 (CREW)
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INVESTMENT Vanguard International Equity Index Fund, Inc. (the "Fund")
OBJECTIVE AND is an open-end diversified investment company designed as an
POLICIES "index" fund. The Fund consists of three portfolios, each of
which invest in common stocks in order to match the perfor-
mance of a distinct international market index. This prospec-
tus pertains to each of the Fund's Portfolios, except the
Emerging Markets Portfolio, which is offered by a separate
prospectus. The European Portfolio seeks to provide invest-
ment results paralleling those of the Morgan Stanley Capital
International Europe (Free) Index, a diversified index con-
sisting of companies located in thirteen European countries.
The Pacific Portfolio seeks to provide investment results
paralleling those of the Morgan Stanley Capital International
Pacific Index, a diversified index consisting of companies
located in Japan, Australia, New Zealand, Hong Kong and Sin-
gapore. The Portfolios invest primarily in common stocks in-
cluded in their respective indexes. There is no assurance
that either Portfolio will achieve its stated objective.
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OPENING AN To open a regular (non-retirement) account, please complete
ACCOUNT and return the Account Registration Form. If you need assis-
tance in completing this Form, please call our Investor In-
formation Department. To open an Individual Retirement Ac-
count (IRA), please use a Vanguard IRA Adoption Agreement. To
obtain a copy of this form, call 1-800-662-7447, Monday
through Friday, from 8:00 a.m. to 8:00 p.m. (Eastern time).
The minimum initial investment is $3,000 for each Portfolio
($500 for Individual Retirement Accounts and Uniform
Gifts/Transfers to Minors Act accounts). The Fund is offered
on a no-load basis (i.e., there are no sales commissions or
12b-1 fees). However, the Fund incurs expenses for investment
advisory, management, administrative and distribution servic-
es. Shareholders of the Fund will be charged a 1% portfolio
transaction fee on the amount invested, which is paid to the
Fund to offset transaction costs of buying securities, as
well as a $10 annual account maintenance fee. See "Fund Ex-
penses."
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ABOUT THIS This Prospectus is designed to set forth concisely the infor-
PROSPECTUS mation you should know about the Fund before you invest. It
should be retained for future reference. A "Statement of Ad-
ditional Information" containing additional information about
the Fund has been filed with the Securities and Exchange Com-
mission. This Statement is dated April ., 1994 and has been
incorporated by reference into this Prospectus. A copy may be
obtained without charge by writing to the Fund or by calling
the Investor Information Department.
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<TABLE>
<CAPTION>
TABLE OF ONTENTS
Page
<S> <C>
Fund Expenses......... 2
Financial Highlights.. 3
Yield and Total
Return............... 4

FUND INFORMATION
Investment Objective.. 5
Investment Policies... 5
Investment Risks...... 6
Who Should Invest..... 8
Implementation of
Policies............. 9
Investment
Limitations.......... 12
Management of the
Fund................. 13
Investment Adviser.... 13
Dividends, Capital
Gains and Taxes...... 14
The Share Price of
Each Portfolio....... 15
General Information... 16

SHAREHOLDER GUIDE
Opening an Account
and Purchasing
Shares............... 17
Important Information
About Telephone
Transactions......... 19
When Your Account
Will Be Credited..... 20
Selling Your Shares... 20
Exchanging Your
Shares............... 22
Transferring
Registration......... 24
Other Vanguard
Services............. 24
</TABLE>

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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<PAGE>

FUND EXPENSES The following table illustrates ALL expenses and fees that
you would incur as a shareholder of the Fund. The expenses
and fees set forth below are for the 1993 fiscal year.

<TABLE>
<CAPTION>
EUROPEAN PACIFIC
SHAREHOLDER TRANSACTION EXPENSES PORTFOLIO PORTFOLIO
------------------------------------------------------------------
<S> <C> <C>
Sales Load Imposed on Purchases............... None* None*
Sales Load Imposed on Reinvested Dividends.... None None
Redemption Fees............................... None None
Exchange Fees................................. None None
</TABLE>

* Shareholders are charged a 1% portfolio transaction fee,
payable directly to the Portfolio, on each purchase of
shares.

<TABLE>
<CAPTION>
EUROPEAN PACIFIC
ANNUAL FUND OPERATING EXPENSES** PORTFOLIO PORTFOLIO
---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management & Administrative Expenses.... . .
Investment Advisory Fees................ None None
12b-1 Fees.............................. None None
Other Expenses
Distribution Costs..................... . .
Miscellaneous Expenses................. . .
--- ---
Total Other Expenses.................... . .
---- ----
TOTAL OPERATING EXPENSES.............. . .
==== ====

</TABLE>

** In addition to these costs, shareholders in each Portfolio
incur an annual account maintenance fee of $10.

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

EACH PORTFOLIO Each Portfolio assesses a portfolio transaction fee on pur-
CHARGES A 1% chases of Portfolio shares equal to 1% of the dollar amount
TRANSACTION invested. In both Portfolios, the Portfolio transaction fee
FEE is paid to the respective Portfolio, not to Vanguard. It is
not a sales charge. The fee applies to an initial investment
in the Portfolio and all subsequent purchases (including pur-
chases made by exchange from another Vanguard Fund or from
the other Portfolio of the Vanguard International Equity In-
dex Fund), but not to reinvested dividend or capital gains
distributions. The Portfolio transaction fee is deducted au-
tomatically from the amount invested; it cannot be paid sepa-
rately.

The purpose of the 1% transaction fee is to allocate transac-
tion costs associated with new purchases to investors making
those purchases, thus insulating existing shareholders from
those transaction costs. These costs include: (1) brokerage
costs; (2) market impact costs--i.e., the increase in market
prices which may result when the Portfolios purchase thinly
traded stocks; and (3) the effect of the "bid-ask" spread in
international markets.

The 1% fee represents Vanguard's estimate of the brokerage
and other transaction costs incurred by the Portfolios in ac-
quiring international stocks. Without

2
<PAGE>

the 1% fee, each Portfolio would incur these costs directly,
resulting in reduced investment performance for all share-
holders of the Portfolio. With the 1% fee, the transaction
costs of acquiring additional international stocks are borne
not by all existing shareholders, but only by those investors
making additional purchases. Because the purchaser, not the
Portfolio, bears these costs, the Portfolio is expected to
track its benchmark index more closely.

EACH PORTFOLIO Each Portfolio assesses an annual account maintenance fee of
WILL CHARGE A $10 for each shareholder account. The purpose of the $10 fee
$10 ACCOUNT is to allocate part of the costs of maintaining shareholder
MAINTENANCE FEE accounts equally to all accounts. This fee, which is paid di-
rectly by shareholders, is deducted from the Fund's annual
dividend. See "Dividends, Capital Gains and Taxes" for more
information on this fee. The $10 fee amounts to 0.33% on a
$3,000 investment in the Fund, 0.10% on a $10,000 investment,
and 0.01% on a $100,000 investment.

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

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
European Portfolio.. $ . $ . $ . $ .
Pacific Portfolio... $ . $ . $ . $ .
</TABLE>

Included in these estimates are account maintenance fees of
$10, $30, $50 and $100, respectively, for the periods shown.
The $10 annual account maintenance fee is a flat charge which
does not vary by the size of your investment. Accordingly,
for investments larger than $1,000, your total expenses will
be substantially lower in percentage terms than this illus-
tration implies.

THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES OR PERFORMANCE. ACTUAL EXPENSES MAY
BE HIGHER OR LOWER THAN THOSE SHOWN.
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FINANCIAL The following financial highlights for a share outstanding
HIGHLIGHTS throughout each period have been audited by Price Waterhouse,
independent accountants, whose report thereon was unquali-
fied. This information should be read in conjunction with the
Fund's financial statements and notes thereto, which are in-
corporated by reference in the Statement of Additional Infor-
mation and in this Prospectus, and which appear, along with
the report of Price Waterhouse, in the Fund's 1993 Annual Re-
port to Shareholders. For a more complete discussion of the
Fund's performance, please see the Fund's 1993 Annual Report
to Shareholders which may be obtained without charge by writ-
ing to the Fund or by calling our Investor Information De-
partment at 1-800-662-7447.

3
<PAGE>

<TABLE>
<CAPTION>
EUROPEAN PORTFOLIO PACIFIC PORTFOLIO
----------------------------- --------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, MAY 1+ TO DECEMBER 31, MAY 1+ TO
----------------- DEC. 31, -------------------- DEC. 31,
1993 1992 1991 1990 1993 1992 1991 1990
---- ----- ----- --------- ----- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $ . $9.92 $9.06 $10.00 $ . $ 9.42 $ 8.56 $10.00
---- ----- ----- ------ ----- ------ ------ ------
Investment Operations
Net Investment Income.. . .25 .26 .16 . .05 .05 .05
Net Realized and
Unrealized Gain (Loss)
on Investments........ . (.58) .86 (.94) . (1.76) .86 (1.44)
---- ----- ----- ------ ----- ------ ------ ------
TOTAL FROM
INVESTMENT
OPERATIONS......... . (.33) 1.12 (.78) . (1.71) .91 (1.39)
DISTRIBUTIONS
Dividends from Net In-
vestment Income....... . (.26) (.26) (.16) . (.05) (.05) (.05)
Distributions from Re-
alized Capital Gains.. . -- -- -- . (.10) -- --
---- ----- ----- ------ ----- ------ ------ ------
TOTAL DISTRIBUTIONS. . (.26) (.26) (.16) . (.15) (.05) (.05)
- -----------------------------------------------------------------------------------------
NET ASSET VALUE, END OF
PERIOD................. $ . $9.33 $9.92 $ 9.06 $ . $ 7.56 $ 9.42 $ 8.56
=========================================================================================
TOTAL RETURN............ . . . . . . . .
=========================================================================================
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Pe-
riod (Millions)........ . . . . . . . .
Ratio of Expenses to
Average Net Assets..... . .32% .33% .40%* . .32% .32% .35%*
Ratio of Net Investment
Income to Average Net
Assets................. . 3.05% 3.06% 3.68%* . .92% .70% 1.02%*
Portfolio Turnover Rate. . 1% 15%** 3% . 3% 21%** 2%
</TABLE>

* Annualized.
** Portfolio turnover rates for 1991 excluding in-kind redemptions were 3% for
the European Portfolio and 1% for the Pacific Portfolio.

+ Commencement of operations.
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YIELD AND From time-to-time a Portfolio of the Fund may advertise its
TOTAL RETURN yield and total return. Both yield and total return figures
are based on historical earnings and are not intended to in-
dicate future performance. The "total return" of a Portfolio
refers to the average annual compounded rates of return over
one-, five- and ten-year periods or for the life of the Port-
folio (as stated in the advertisement) that would equate an
initial amount invested at the beginning of a stated period
to the ending redeemable value of the investment, assuming
the reinvestment of all dividend and capital gains distribu-
tions.

The "30-day yield" of a Portfolio is calculated by dividing
the net investment income per share earned during a 30-day
period by the net asset value per share on the last day of
the period. Net investment income includes interest and divi-
dend income earned on a Portfolio's securities; it is net of
all expenses and all recurring and nonrecurring charges that
have been applied to all shareholder accounts. The yield cal-
culation assumes that the net investment income earned over
30 days is compounded monthly for six months and then
annualized. Methods used to calculate advertised yields are
standardized for all stock and bond mutual funds. However,
these methods differ from the accounting methods used

4
<PAGE>

by the Portfolio to maintain its books and records, and so
the advertised 30-day yield may not fully reflect the income
paid to your own account or the yield reported in the Portfo-
lio's reports to shareholders.
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INVESTMENT The Fund consists of three Portfolios, each of which seeks to
OBJECTIVE provide investment results that correspond to a particular
international index.

EACH PORTFOLIO The European Portfolio seeks to replicate the aggregate price
SEEKS TO MATCH and yield performance of the Morgan Stanley Capital Interna-
THE INVESTMENT tional Europe (Free) Index ("MSCI-Europe (Free)"), a diversi-
PERFORMANCE OF fied, capitalization weighted index comprised of companies
ITS RESPECTIVE located in thirteen European countries. The Pacific Portfolio
INDEX seeks to replicate the aggregate price and yield performance
of the Morgan Stanley Capital International Pacific Index
("MSCI-Pacific"), a diversified, capitalization weighted in-
dex consisting of companies located in Australia, Japan, Hong
Kong, New Zealand and Singapore. There is no assurance that
either Portfolio will achieve its stated objective.

By holding the two Portfolios in appropriate proportions, an
investor may create an aggregate portfolio designed to ap-
proximate the total return (income plus capital change) of
the Morgan Stanley Capital International Europe, Australia
and Far East (Free) Index ("EAFE Free"), a broadly diversi-
fied international index consisting of more than 1,000 equity
securities of companies located outside of the United States.
As of December 31, 1993, the MSCI-Pacific Index represented
approximately . % of the market capitalization of EAFE
(Free), while the MSCI-Europe (Free) Index represented the
remaining . %.

The Fund is neither sponsored by nor affiliated with Morgan
Stanley Capital International.
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INVESTMENT The European and Pacific Portfolios are not managed according
POLICIES to traditional methods of "active" investment management,
which involve the buying and selling of securities based upon
BOTH PORTFOLIOS economic, financial and market analysis and investment judg-
USE A "PASSIVE" ment. Instead, the Portfolios, utilizing a "passive" or in-
APPROACH TO dexing investment approach, attempt to approximate the in-
INVEST IN vestment performance of their respective indexes through sta-
INTERNATIONAL tistical procedures. The Fund is managed without regard to
STOCKS tax ramifications.

The European Portfolio invests in a statistically selected
sample of approximately 575 stocks included in MSCI-Europe
(Free), an index of equity securities of companies located in
thirteen European countries. Three countries, the United
Kingdom, Germany and France, dominate MSCI-Europe (Free),
with . %, . %, and . % of the market capitalization of the
Index, respectively, as of December 31, 1993. The ten other
countries are individually much less significant to the Index
and, consequently, the Portfolio. The "Free" Index includes
only shares that U.S. investors are "free to purchase." Spe-
cifically, the Index excludes restricted shares in Finland,
Norway, Sweden and Switzerland.

5
<PAGE>

The Pacific Portfolio invests in a statistically selected
sample of the more than 425 stocks included in MSCI-Pacific,
an index of equity securities of Pacific Basin companies. The
MSCI-Pacific Index is dominated by the Japanese stock market,
which represented . % of the market capitalization of the
Index as of December 31, 1993.

The Portfolios are each expected to invest in approximately
250 stocks or more. Stocks are selected for inclusion in each
Portfolio based on country, market capitalization, industry
weightings, and fundamental characteristics such as return
variability, earnings valuation, and yield. Each Portfolio is
constructed to have aggregate investment characteristics sim-
ilar to those of its respective index. In order to parallel
the performance of its respective index, each Portfolio will
invest in each country in approximately the same percentage
as the country's weight in the index.

Each Portfolio's policy is to remain fully invested in common
stocks. Under normal circumstances at least 80% of the assets
of each Portfolio will be invested in stocks that are repre-
sented in its respective index. Each Portfolio may invest in
certain short-term fixed income securities such as cash re-
serves, although cash or cash equivalents are normally ex-
pected to represent less than 1% of each Portfolio's assets.
Each Portfolio may also invest up to 50% of its assets in
stock futures contracts, options, and warrants in order to
invest uncommitted cash balances, maintain liquidity to meet
shareholder redemptions, or minimize trading costs.

The Portfolios will not invest in cash reserves, futures con-
tracts, options or warrants as part of a temporary defensive
strategy, such as lowering a Portfolio's investment in common
stocks, to protect against potential stock market declines.
The Portfolios intend to remain fully invested, to the extent
practicable, in a pool of securities which will approximate
the investment characteristics of their respective indexes.
The Portfolios may also enter into forward foreign currency
exchange contracts in order to maintain the same currency ex-
posure as their respective indexes, but not as part of a de-
fensive strategy to protect against fluctuations in exchange
rates. See "Implementation of Policies" for a description of
these and other investment practices of the Fund.

The investment objective and policies of the Fund are not
fundamental and so may be changed by the Board of Directors
without shareholder approval. However, shareholders would be
notified prior to a material change in either.
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INVESTMENT As mutual funds investing in common stocks, the Portfolios
RISKS are subject to market risk--i.e., the possibility that stock
prices will decline over short or even extended periods. Both
INTERNATIONAL U.S. and foreign stock markets tend to be cyclical, with pe-
STOCKS MAY riods when stock prices generally rise and periods when stock
EXHIBIT prices generally decline.
GREATER
VOLATILITY Investments in foreign stock markets can be as volatile, if
THAN U.S. not more volatile, than investments in U.S. markets. To il-
STOCKS lustrate the volatility of foreign stock

6
<PAGE>

market returns for the U.S. dollar-based investor, the fol-
lowing tables set forth the extremes of foreign stock market
returns, as well as average annual returns, for the period
from 1970 to 1993, as measured by the MSCI-Europe and MSCI-
Pacific Indexes and as calculated for a U.S. dollar investor.
(The MSCI-Europe Index, which includes common stocks that
U.S. investors cannot purchase, is shown here in lieu of the
MSCI-Europe (Free) Index, which was only initiated in January
1988.)

AVERAGE ANNUAL INTERNATIONAL STOCK MARKET RETURNS (1970-1993)

<TABLE>
<CAPTION>
MSCI-
EUROPE 1 YEAR 5 YEARS 10 YEARS
------ ------ ------- --------
<S> <C> <C> <C>
Best................................ + . % + . % + . %
Worst............................... - . - . + .
Average............................. + . + . + .
</TABLE>

<TABLE>
<CAPTION>
MSCI-
PACIFIC 1 YEAR 5 YEARS 10 YEARS
------- ------ ------- --------
<S> <C> <C> <C>
Best............................... + . % + . % + . %
Worst.............................. - . + . + .
Average............................ + . + . + .
</TABLE>

As shown, over the period from 1970 to 1993 the MSCI-Europe
Index has provided an average annual total return of + . %,
and the MSCI-Pacific Index has provided an average annual to-
tal return of + . %. By comparison, the average annual total
return of U.S. stocks during this same period was + . % (as
measured by the Standard & Poor's 500 Composite Stock Price
Index). Note, however, that the period from 1970 to 1993 was
a very favorable one for foreign stock market investing. The
figures on total return and stock market volatility are pro-
vided here only as a guide to potential market risk, and may
not be useful for forecasting future returns in any particu-
lar period.

This table on international stock market returns should not
be viewed as a representation of future returns from interna-
tional stocks or the Portfolios of the Fund, as historical
performance may be a poor guide to future returns, and the
indexes shown do not reflect "real world" transaction costs
and other expenses.

THE JAPANESE Investors should realize that Japanese securities comprised
STOCK MARKET IS . % of the MSCI-Pacific Index as of December 31, 1993, and
A MAJOR that therefore stocks of Japanese companies will represent a
COMPONENT OF correspondingly large component of the Pacific Portfolio's
THE PACIFIC investment assets. Such a large investment in the Japanese
INDEX stock market may entail a higher degree of risk than with
more diversified international portfolios, especially consid-
ering that by fundamental measures of corporate valuation,
such as its high price-earnings ratios and low dividend
yields, the Japanese market as a whole may appear expensive
relative to other world stock markets.

7
<PAGE>

STOCKS FROM Stocks from the United Kingdom, Germany and France comprised
THREE . %, . % and . % of the MSCI-Europe (Free) Index, respec-
COUNTRIES tively, as of December 31, 1993. The remaining ten countries
DOMINATE THE in the MSCI-Europe (Free) Index have much less significant
EUROPE (FREE) capitalization weightings in the Index and will therefore
INDEX have much less impact on the total return of the Index and
the European Portfolio.

INTERNATIONAL For U.S. investors, the returns of foreign investments, such
STOCKS ALSO as those held by the two Portfolios, are influenced by not
EXPOSE only the returns on foreign common stocks themselves, but
INVESTORS TO also by the returns on the currencies in which the stocks are
CURRENCY AND denominated. Currency risk is the risk that changes in for-
OTHER RISKS eign exchange rates will affect, favorably or unfavorably,
the value of foreign securities held by a Portfolio. In a pe-
riod when the U.S. dollar generally rises against foreign
currencies, the returns on foreign stocks for a U.S. investor
will be diminished. By contrast, in a period when the U.S.
dollar generally declines, the returns on foreign stocks will
be enhanced.

Other risks and considerations of international investing in-
clude: differences in accounting, auditing and financial re-
porting standards; generally higher transaction costs on for-
eign portfolio transactions; small trading volumes and gener-
ally lower liquidity of foreign stock markets, which may re-
sult in greater price volatility; foreign withholding taxes
payable on a Portfolio's foreign securities, which may reduce
dividend income payable to shareholders; the possibility of
expropriation or confiscatory taxation; adverse change in in-
vestment or exchange control regulations; difficulty in ob-
taining a judgement from a foreign court; political instabil-
ity which could affect U.S. investment in foreign countries;
and potential restriction on the flow of international capi-
tal.
- --------------------------------------------------------------------------------

WHO SHOULD The Portfolios are designed for investors who seek a low-cost
INVEST "passive" approach for investing in a broadly diversified
portfolio of international common stocks. Unlike other equity
LONG-TERM mutual funds, which generally seek to "beat" market averages
INVESTORS with often unpredictable results, the Portfolios of the Fund
SEEKING TO seek to "match" their respective indexes and thus are ex-
INVEST IN pected to provide a predictable return relative to their re-
INTERNATIONAL spective benchmarks. In particular, the European Portfolio is
COMMON STOCKS designed for investors seeking to approximate the total in-
vestment results (before fund expenses and withholding taxes)
of MSCI-Europe (Free), a diversified index of European common
stocks. The Pacific Portfolio is designed for investors seek-
ing to approximate the total investment results (before fund
expenses and withholding taxes) of MSCI-Pacific, a diversi-
fied index of Pacific Basin common stocks.

The Portfolios are also suitable for investors seeking to
create a portfolio which parallels the performance of the
MSCI-EAFE (Free) Index, a broadly diversified index consist-
ing of over 1,000 international equity securities. By invest-
ing in the two portfolios in the appropriate percentages
( . % in the Pacific Portfolio and . % in the European Port-
folio as of December 31, 1993), a portfolio approximating the
investment characteristics of EAFE (Free) may be created.

8
<PAGE>

The share prices of the Portfolios are expected to be vola-
tile, and investors should be able to tolerate sudden, some-
times substantial fluctuations in the value of their invest-
ment. No assurance can be given that a Portfolio will achieve
its stated objective or that shareholders will be protected
from the risks inherent in equity investing. Investors may
wish to minimize the timing risk of investing in a Portfolio
by purchasing shares on a periodic basis (dollar-cost averag-
ing) rather than investing in one lump sum.

BECAUSE OF THE RISKS ASSOCIATED WITH INTERNATIONAL COMMON
STOCK INVESTMENTS, THE FUND IS INTENDED TO BE A LONG-TERM IN-
VESTMENT VEHICLE AND IS NOT DESIGNED TO PROVIDE INVESTORS
WITH A MEANS OF SPECULATING ON SHORT-TERM MARKET MOVEMENTS.
Investors who engage in excessive account activity generate
additional costs which are borne by all of the Portfolio's
shareholders. In order to minimize such costs the Portfolios
have adopted the following policies. The Portfolios reserve
the right to reject any purchase request (including exchange
purchases from other Vanguard portfolios) that is reasonably
deemed to be disruptive to efficient portfolio management.
Additionally, the Portfolios have adopted exchange privilege
limitations as described in the section "Exchange Privilege
Limitations". Finally, the Portfolios reserve the right to
suspend the offering of its shares. Investors should not con-
sider the Fund a complete investment program, but should
maintain holdings of securities with different risk charac-
teristics--including U.S. common stocks, bonds and money mar-
ket instruments.
- --------------------------------------------------------------------------------

IMPLEMENTATION The Portfolios utilize a number of investment practices in an
OF POLICIES effort to parallel the investment performance of their re-
spective indexes.

THE PORTFOLIOS The MSCI-Europe (Free) Index consists of approximately 575
INVEST IN equity securities from Europe, and the MSCI-Pacific Index
INTERNATIONAL consists of more than 425 equity securities from Australia
COMMON STOCKS and the Far East. The stocks included in each index are cho-
USING A sen by Morgan Stanley Capital International on a statistical
SAMPLING basis. Each stock in MSCI-Europe (Free) and MSCI-Pacific is
TECHNIQUES weighted according to its market value as a percentage of the
total market value of all stocks in the index. (A stock's
market value equals the number of shares outstanding times
the most recent price of the security.) The inclusion of a
stock in the index no way implies that Morgan Stanley Capital
International believes the stock to be an attractive invest-
ment.

The Portfolios will be unable to hold all of the issues that
comprise their respective indexes because of the costs in-
volved and the illiquidity of many of the securities. In-
stead, each Portfolio will attempt to hold a representative
sample of approximately 250 or more of the securities in its
respective index, which will be selected utilizing a statis-
tical technique known as "portfolio optimization." Under this
technique, each stock is considered for inclusion in the
Portfolio based on its contribution to certain country, capi-
talization, industry, and fundamental investment characteris-
tics. Each Portfolio is constructed so that, in the aggre-
gate, the Portfolio's country, capitalization, industry, and
fundamental in

9
<PAGE>

vestment characteristics resemble those of its respective in-
dex. Over time, the portfolio composition is altered (or
"rebalanced") to reflect changes in the characteristics of
the index.

Due to the use of this sampling or "portfolio optimization"
technique, the Portfolios are not expected to track their
benchmark indexes with the same degree of accuracy as large
capitalization domestic index funds. Over time, the correla-
tion between the performance of each Portfolio and its re-
spective index is expected to be greater than 0.95. A corre-
lation of 1.00 would indicate perfect correlation, which
would be achieved when the net asset value of each Portfolio,
including the value of its dividend and capital gains distri-
butions, increases or decreases in exact proportion to
changes in its respective index.

EACH PORTFOLIO Although both Portfolios normally seek to remain substan-
MAY INVEST IN tially fully invested in common stocks, the two Portfolios
SHORT-TERM may invest temporarily in certain short-term fixed income se-
FIXED INCOME curities. Such securities may be used to invest uncommitted
SECURITIES cash balances or to maintain liquidity to meet shareholder
redemptions. These securities include: obligations of the
United States Government and its agencies or instrumentali-
ties; commercial paper, bank certificates of deposit and
bankers' acceptances; and repurchase agreements collateral-
ized by these securities.

EACH PORTFOLIO The Portfolios may utilize stock futures contracts, options,
MAY USE and warrants to a limited extent. Specifically, each Portfo-
FUTURES lio may enter into futures contracts and options provided
CONTRACTS, that not more than 5% of its assets are required as a margin
OPTIONS AND deposit for futures contracts or options. Additionally, the
WARRANTS, Fund's investment in warrants will not exceed more than 5% of
CONVERTIBLE its assets (2% with respect to warrants not listed on the New
SECURITIES AND York or American Stock Exchanges). Futures contracts, op-
SWAP tions, warrants, convertible securities and swap agreements
AGREEMENTS may be used for several reasons: to simulate full investment
in the underlying index while retaining a cash balance for
fund management purposes, to facilitate trading, to reduce
transaction costs or to seek higher investment returns when a
futures contract, option, warrant, convertible security or
swap agreement is priced more attractively than the under-
lying equity security or index. While each of these
securities can be used as leveraged investments, the Portfo-
lios may not use them to leverage its net assets.

10
<PAGE>

contracts, options, warrants, convertible securities and swap
agreements; and (ii) possible lack of a liquid secondary mar-
ket for a futures contract and the resulting inability to
close a futures position prior to its maturity date. The risk
of imperfect correlation will be minimized by investing only
in those contracts whose behavior is expected to resemble
that of a Portfolio's underlying securities. The risk that a
Portfolio will be unable to close out a futures position will
be minimized by entering into such transactions on an ex-
change with an active and liquid secondary market. However
options, warrants, convertible securities and swap agreements
purchased or sold over-the-counter may be less liquid than
exchange traded securities. Illiquid securities, in general,
may not represent more than 15% of the net assets of a Port-
folio of the Fund.

Since there are no futures traded on the MSCI-Europe (Free)
or Pacific Index, it will be necessary for the Portfolio to
utilize a composite of other futures contracts to simulate
the performance of the Indexes. This process may magnify the
"tracking error" of a Portfolio's performance compared to
that of its Index, due to lower correlation of the selected
futures with its Index. The investment adviser will attempt
to reduce this tracking error by investing in futures con-
tracts whose behavior is expected to resemble that of the un-
derlying securities, although there can be no assurance that
these selected futures will perfectly correlate with the per-
formance of either index.

Swap agreements are contracts between parties in which one
party agrees to make payments to the other party based on the
change in market value of a specified index or asset. In re-
turn, the other party agrees to make payments to the first
party based on the return of a different specified index or
asset. Although swap agreements entail the risk that a party
will default on its payment obligations thereunder, the Port-
folios will minimize this risk by entering into agreements
that mark to market no less frequently than quarterly. Swap
agreements also bear the risk that the Portfolios will not be
able to meet its obligation to the counterparty. This risk
will be mitigated by investing the Portfolios in the specific
asset for which it is obligated to pay a return.

EACH PORTFOLIO Each Portfolio may enter into foreign currency forward and
MAY ENTER INTO foreign currency futures contracts in order to maintain the
FORWARD same currency exposure as their respective indexes. A Portfo-
CURRENCY lio may not enter into such contracts for speculative purpos-
CONTRACTS es, or as a way of protecting against anticipated adverse
changes in exchange rates between foreign currencies and the
U.S. dollar. A foreign currency forward contract is an obli-
gation to purchase or sell a specific currency at a future
date, which may be any fixed number of days from the date of
the contract agreed upon by the parties, at a price set at
the time of the contract.

EACH PORTFOLIO Each Portfolio may lend its investment securities to quali-
MAY LEND ITS fied institutional investors for either short-term or long-
SECURITIES term purposes of realizing additional income. Loans of secu-
rities by the Portfolios will be collateralized by cash, let-
ters of credit, or securities issued or guaranteed by the
U.S. Government or its agen

11
<PAGE>

cies. The collateral will equal at least 100% of the current
market value of the loaned securities.

PORTFOLIO Although the Portfolios generally seek to invest for the long
TURNOVER IS term, the Portfolios retain the right to sell securities ir-
EXPECTED TO BE respective of how long they have been held. However, because
LOW of the "passive" investment management approach of the Fund,
the portfolio turnover rate for each Portfolio is expected to
be under 50%, a generally lower turnover rate than for most
other investment companies. A portfolio turnover rate of 50%
would occur if one half of a Portfolio's securities were sold
within one year. Ordinarily, securities will be sold from a
Portfolio only to reflect certain administrative changes in
an index (including mergers or changes in the composition of
an index) or to accommodate cash flows out of the Portfolio
while maintaining the similarity of the Portfolio to its
benchmark index.

EACH PORTFOLIO Each Portfolio may borrow money from a bank up to a limit of
MAY BORROW MONEY 15% of the market value of its assets, but only for temporary
or emergency purposes. A Portfolio may borrow money only to
meet redemption requests prior to the settlement of securi-
ties already sold or in the process of being sold by the
Portfolio. To the extent that a Portfolio borrows money prior
to selling securities, the Portfolio may be leveraged; at
such times, the Portfolio may appreciate or depreciate in
value more rapidly than its benchmark index. Both Portfolios
will repay any money borrowed in excess of 5% of the market
value of their total assets prior to purchasing additional
portfolio securities.
- --------------------------------------------------------------------------------

INVESTMENT Each Portfolio has adopted certain limitations on its invest-
LIMITATIONS ment practices. Specifically, each Portfolio will not:

THE FUND HAS (a) with respect to 75% of its assets, purchase securities of
ADOPTED any issuer (except obligations of the U.S. Government and
CERTAIN its instrumentalities) if, as a result, more than 5% of
FUNDAMENTAL the value of the Portfolio's assets would be invested in
LIMITATIONS the securities of such issuer;

(b) purchase more than 10% of the voting securities of any
issuer;

(d) borrow money except from banks for temporary or emer-
gency purposes and in no event in excess of 15% of the
market value of its total assets.

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

12
<PAGE>

MANAGEMENT OF The Fund is a member of The Vanguard Group of Investment Com-
THE FUND panies, a family of 32 investment companies with 77 distinct
investment portfolios and total assets in excess of $120 bil-
VANGUARD lion. Through their jointly owned subsidiary, The Vanguard
ADMINISTERS Group, Inc. ("Vanguard"), the Fund and the other Funds in the
AND Group obtain at cost virtually all of their corporate manage-
DISTRIBUTES ment, administrative and distribution services. Vanguard also
THE FUND provides investment advisory services on an at-cost basis to
certain Vanguard Funds. As a result of Vanguard's unique cor-
porate structure, the Vanguard Funds have costs substantially
lower than those of most competing mutual funds. In 1993, the
average expense ratio (annual costs including advisory fees
divided by total net assets) for the Vanguard Funds amounted
to . % compared to an average of . % for the mutual fund
industry (data provided by Lipper Analytical Services).

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

Vanguard employs a supporting staff of management and admin-
istrative personnel 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 net expenses, which are allocated among the funds
under methods approved by the Board of Directors (Trustees)
of each fund. In addition, each fund bears its own direct ex-
penses, such as legal, auditing and custodian fees.

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

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

INVESTMENT The Fund receives all investment advisory services on an at-
ADVISER cost basis from Vanguard's Core Management Group, which also
provides investment advisory services to Vanguard Index
VANGUARD Trust, Vanguard Balanced Index Fund, Vanguard Institutional
MANAGES THE Index Fund, a portion of the assets of Vanguard/Windsor II,
FUND ON AN and several indexed separate accounts. Total indexed assets
AT-COST BASIS under management as of December 31, 1993 were $16.4 billion.
The Portfolios of the Fund are not actively managed, but are
instead administered by the Core Management Group using com-
puterized, quantitative techniques. The Group is supervised
by the Officers of the Fund.

13
<PAGE>

tion, consideration may be given to those brokers which sup-
ply statistical information and provide other services in ad-
dition to execution services to the Fund.
- --------------------------------------------------------------------------------

DIVIDENDS, Each Portfolio of the Fund intends to distribute substan-
CAPITAL GAINS tially all of its ordinary income in the form of dividends.
AND TAXES The Portfolios pay annual dividends. Capital gains distribu-
tions, if any, are made annually.

DIVIDENDS AND Each Portfolio's dividend and capital gains distributions may
ANY CAPITAL be reinvested in additional shares or received in cash. See
GAINS WILL BE "Choosing a Distribution Option" for a description of these
PAID ANNUALLY distribution methods.

In order to satisfy certain distribution requirements of the
Tax Reform Act of 1986, each Portfolio may declare special
year-end dividend and capital gains distributions during De-
cember. Such distributions, if received by shareholders by
January 31, are deemed to have been paid by each Portfolio
and received by shareholders on December 31 of the prior
year.

EACH PORTFOLIO Each Portfolio will automatically deduct a $10 annual account
WILL CHARGE A maintenance fee from the dividend income of each Portfolio
$10 ACCOUNT account on a quarterly basis (at a rate of $2.50 per quar-
MAINTENANCE ter). If the dividend to be paid to an account is less than
FEE the fee to be deducted, sufficient shares will be redeemed
from an account to make up the difference. The Board of Di-
rectors reserves the right to change the annual account main-
tenance fee to reflect the actual cost of maintaining smaller
shareholder accounts. For federal tax purposes, the account
maintenance fee does not reduce dividend income and is
treated as an investment expense by each shareholder (deduct-
ible as a miscellaneous itemized deduction in the case of in-
dividual investors).

Each Portfolio of the Fund intends to continue to qualify for
taxation as a "regulated investment company" under the Inter-
nal Revenue Code so that it will not be subject to federal
income tax to the extent its income is distributed to share-
holders. Dividends paid by each Portfolio from net investment
income, whether received in cash or reinvested in additional
shares, will be taxable to shareholders as ordinary income.
For corporate investors, dividends from net investment income
will not generally qualify for the intercorporate dividends-
received deduction.

Distributions paid by a Portfolio from long-term capital
gains, whether received in cash or reinvested in additional
shares, are taxable as long-term capital gains, regardless of
the length of time you have owned shares in a Portfolio. Cap-
ital gains distributions are made when a Portfolio realizes
net capital gains on sales of portfolio securities during the
year. A Portfolio does not seek to realize any particular
amount of capital gains during a year; rather, realized gains
are a by-product of portfolio management activities. Conse-
quently, capital gains distributions may be expected to vary
considerably from year-to-year; there will be no capital
gains distributions in years when a Portfolio realizes net
capital losses or has net capital losses carried over from
prior years.

14
<PAGE>

Note that if you elect to receive capital gains distributions
in cash, instead of reinvesting them in additional shares,
you are in effect reducing the capital at work for you in a
Portfolio. Also, keep in mind that if you purchase shares in
a Portfolio shortly before the record date for a dividend or
capital gains distribution, a portion of your investment will
be returned to you as a taxable distribution, regardless of
whether you are reinvesting your distributions or receiving
them in cash.

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

EACH PORTFOLIO Each Portfolio of the Fund may elect to "pass through" to its
MAY "PASS shareholders the amount of foreign income taxes paid by a
THROUGH" Portfolio. The Portfolios will make such an election only if
FOREIGN TAXES it is deemed to be in the best interests of the shareholders.
If this election is made, shareholders of a Portfolio will be
required to include in their gross income their pro rata
share of foreign taxes paid by the Portfolio. However, share-
holders will be able to treat their pro rata share of foreign
taxes as either an itemized deduction or a foreign credit
against U.S. income taxes (but not both) on their tax return.

A CAPITAL GAIN A sale of shares of a Portfolio is a taxable event, and may
OR LOSS MAY BE result in a capital gain or loss. A capital gain or loss may
REALIZED UPON be realized from an ordinary redemption of shares or an ex-
EXCHANGE OR change of shares between two mutual funds (or two portfolios
REDEMPTION of a mutual fund). You are responsible for calculating any
capital gains or losses realized upon redemption or exchange
of a Portfolio's shares.

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

Each Portfolio is required to withhold 31% of taxable divi-
dends, capital gains distributions, and redemptions paid to
shareholders who have not complied with IRS taxpayer identi-
fication regulations. You may avoid this withholding require-
ment by certifying on your Account Registration Form your
proper Social Security or Taxpayer Identification Number and
by certifying that you are not subject to backup withholding.

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

The tax discussion set forth above is included for general
information only. Prospective investors should consult their
own tax advisers concerning the tax consequences of an in-
vestment in the Fund.
- --------------------------------------------------------------------------------
THE SHARE The share price or "net asset value per share" of each Port-
PRICE OF EACH folio is determined by dividing the total market value of the
PORTFOLIO Portfolio's investments and other assets, less any liabili-
ties, by the number of outstanding shares of the Portfolio.
Portfolio securities are valued at the last quoted sales
price on the day the valuation

15
<PAGE>

is made. Price information on listed securities is taken from
the exchange where the security is primarily traded. Securi-
ties not listed are valued at the latest quoted bid prices.
Other assets and securities for which no quotations are read-
ily available are valued at fair value as determined in good
faith by the Directors. 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.
All assets and liabilities initially expressed in foreign
currencies will be translated into U.S. dollars using the of-
ficially quoted daily exchange rates determined by Morgan
Stanley Capital International in the calculation of their Eu-
rope, Australia and Far East index. If such quotations are
not available, the rate of exchange will be determined in ac-
cordance with policies established by the Board of Directors.

Generally, trading in foreign securities is completed each
day prior to the close of regular trading on the New York
Stock Exchange (generally 4:00 p.m. Eastern time). The values
of foreign securities held by each Portfolio are determined
as of the close of trading of foreign securities for the pur-
pose of computing each Portfolio's net asset value. If events
which materially affect the value of a Portfolio's invest-
ments occur after the close of the securities markets on
which such securities are primarily traded, those investments
will be priced at "fair value" as described above.
- --------------------------------------------------------------------------------

GENERAL The Fund is organized as a Maryland corporation. The Articles
INFORMATION of Incorporation permit the Directors to issue 1,000,000,000
shares of common stock with a $.001 par value. The Board of
Directors has the power to designate one or more classes
("series") of shares of common stock and to classify or re-
classify any unissued shares with respect to such series.
Currently the Fund is offering shares of two series.

The shares of each series are fully paid and non-assessable;
have no preference as to conversion, exchange, dividends, re-
tirement or other features; and have no pre-emptive rights.
Such shares have non-cumulative voting rights, meaning that
the holders of more than 50% of the shares voting for the
election of Directors can elect 100% of the Directors if they
so choose. Annual meetings of shareholders will not be held
except as required by the Investment Company Act of 1940 and
other applicable law. An annual meeting will be held to vote
on the removal of a Director or Directors of the Fund if re-
quested in writing by the holders of not less than 10% of the
outstanding shares of the Fund.

All securities and cash are held by Morgan Stanley Global Se-
curities Services Inc. The Vanguard Group, Inc., Valley
Forge, PA, serves as the Fund's Transfer and Dividend Dis-
bursing Agent. Price Waterhouse serves as independent accoun-
tant for the Fund and will audit its financial statements an-
nually. The Fund is not involved in any litigation.
- --------------------------------------------------------------------------------

16
<PAGE>

SHAREHOLDER GUIDE

OPENING AN You may open a regular (non-retirement) account, either by
ACCOUNT AND mail or wire. Simply complete and return an Account Registra-
PURCHASING tion Form and any required legal documentation, indicating
SHARES the amount you wish to invest. Your purchase must be equal to
or greater than the $3,000 minimum initial investment re-
quirement for each Portfolio ($500 for Uniform
Gifts/Transfers to Minors Act accounts). You must open a new
Individual Retirement Account by mail (IRAs may not be opened
by wire) using a Vanguard IRA Adoption Agreement. Your pur-
chase must be equal to or greater than the $500 minimum ini-
tial investment requirement, but no more than $2,000 if you
are making a regular IRA contribution. Rollover deposits are
limited to the amount withdrawn previously from an IRA or
other qualified Retirement Plan. If you need assistance with
the forms or have any questions about the Fund, please call
our Investor Information Department (1-800-662-7447). NOTE:
For other types of account registrations (e.g., corporations,
associations, other organizations, trusts or powers of attor-
ney), please call us to determine which additional forms you
may need.

Because of the risks associated with common stock invest-
ments, the Fund is intended to be a long-term investment ve-
hicle and is not designed to provide investors with a means
of speculating on short-term stock market movements. Conse-
quently the Fund reserves the right to reject any specific
purchase (and exchange purchase) request. The Fund also re-
serves the right to suspend the offering of shares for a pe-
riod of time.

Both Portfolios' shares are purchased at the next-determined
net asset value after your investment has been received. The
Fund is offered on a no-load basis (i.e., there are no sales
commissions or 12b-1 fees).

IMPORTANT NOTE Each Portfolio of the Fund assesses a transaction fee equal
ON EXPENSES to 1% of the dollar amount invested, as well as a $10 annual
account maintenance fee. See "Fund Expenses."

ADDITIONAL Subsequent investments to regular accounts may be made by
INVESTMENTS mail ($100 minimum), wire ($1,000 minimum), written exchange
from another Vanguard Fund account ($100 minimum), or Van-
guard Fund Express. Subsequent investments to Individual Re-
tirement Accounts may be made by mail ($100 minimum) or ex-
change from another Vanguard Fund account. In some instances,
contributions may be made by wire or Vanguard Fund Express.
Please call us for more information on these options.
--------------------------------------------------------------

17
<PAGE>

ADDITIONAL INVESTMENTS
NEW ACCOUNT TO EXISTING ACCOUNTS

PURCHASING BY Please include the Additional investments
MAIL Complete amount of your initial should include the In-
and sign the investment on the reg- vest-by-Mail remittance
enclosed istration form, make form attached to your
Account your check payable to Fund confirmation state-
Registration The Vanguard Group- ments. Please make your
Form (Portfolio Number), see check payable to The
below for appropriate Vanguard Group-(Portfo-
Portfolio number, and lio Number), see below
mail to: for appropriate Portfo-
VANGUARD FINANCIAL CENTER lio number, write your
P.O. BOX 2600 account number on your
VALLEY FORGE, PA 19482 check and, using the re-
turn envelope provided,
mail to the address in-
dicated on the Invest-
by-Mail Form.

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

VANGUARD INTERNATIONAL EQUITY INDEX FUND PORTFOLIOS:
European Portfolio--79
Pacific Portfolio--72
--------------------------------------------------------------

PURCHASING BY CORESTATES BANK, N.A.
WIRE ABA 031000011
Money should be CORESTATES NO 01019897
wired to: ATTN VANGUARD
BEFORE WIRING VANGUARD INTERNATIONAL EQUITY INDEX FUND
Please contact NAME OF PORTFOLIO
Client Services ACCOUNT NUMBER
(1-800-662-2739) ACCOUNT REGISTRATION

You should notify our Client Services Department of your in-
tended wire purchase by 12:00 noon (Eastern time). To assure
proper receipt, please be sure your bank includes the Portfo-
lio name, the account number Vanguard has assigned to you and
the eight digit CoreStates number. If you are opening a new
account, please complete the Account Registration Form and
mail it to the "New Account" address above after completing
your wire arrangement. Note: Federal Funds wire purchase or-
ders will be accepted only when the Fund and Custodian Bank
are open for business.
---------------------------------------------------------------
PURCHASING BY Telephone exchanges are not accepted for the Fund. You may,
EXCHANGE (from however, open an account by exchange by providing the appro-
a Vanguard priate information on the Account Registration Form. The new
account) account will have the same registration as the existing ac-
count. However, the Fund reserves the right to refuse any ex-
change purchase request.
---------------------------------------------------------------

18
<PAGE>

PURCHASING BY The Fund Express Automatic Investment option lets you move
FUND EXPRESS money from your bank account to your Vanguard account on the
schedule (monthly, bimonthly [every other month], quarterly
Automatic or yearly) you select. To establish this option, please pro-
Investment vide the appropriate information on the Account Registration
Form. We will send you a confirmation of your Fund Express
enrollment; please wait three weeks before using the service.

- --------------------------------------------------------------------------------
CHOOSING A You must select one of three distribution options:
DISTRIBUTION
OPTION 1. AUTOMATIC REINVESTMENT OPTION--Both dividends and capital
gains distributions will be reinvested in additional
shares. This option will be selected for you automatically
unless you specify one of the other options.

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

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

You may change your option by calling our Client Services De-
partment (1-800-662-2739).

In addition, an option to invest your cash dividends and/or
capital gains distributions in another Vanguard Fund account
is available. Please call our Client Services Department (1-
800-662-2739) for information. You may also elect Vanguard
Dividend Express which allows you to transfer your cash divi-
dends and/or capital gains distributions automatically to
your bank account. Please see "Other Vanguard Services" for
more information.
- --------------------------------------------------------------------------------

TAX CAUTION Under Federal Tax laws, the Fund is required to distribute
net capital gains and dividend income to Fund shareholders.
INVESTORS These distributions are made to all shareholders who own Fund
SHOULD ASK shares as of the distribution's record date, regardless of
ABOUT THE how long the shares have been owned. Purchasing shares just
TIMING OF prior to the record date could have a significant impact on
CAPITAL GAINS your tax liability for the year. For example, if you purchase
AND DIVIDEND shares immediately prior to the record date of a sizable cap-
DISTRIBUTIONS ital gain or income dividend distribution, you will be as-
BEFORE sessed taxes on the amount of the capital gain and/or divi-
INVESTING dend distribution later paid even though you owned the Fund
shares for just a short period of time. (Taxes are due on the
distributions even if the dividend or gain is reinvested in
additional Fund shares.) While the total value of your in-
vestment will be the same after the distribution--the amount
of the distribution will offset the drop in the NAV of the
shares--you should be aware of the tax implications the tim-
ing of your purchase may have.

Prospective investors should, therefore, inquire about poten-
tial distributions before investing. The Fund's annual capi-
tal gains distribution normally occurs in December, while in-
come dividends are generally paid in December. For additional
information on distributions and taxes, see the section ti-
tled "Dividends, Capital Gains, and Taxes."
- --------------------------------------------------------------------------------

19
<PAGE>

IMPORTANT The easiest way to establish optional Vanguard services on
INFORMATION your account is to select the options you desire when you
complete your Account Registration Form. IF YOU WISH TO ADD
ESTABLISHING OPTIONS LATER, YOU MAY NEED TO PROVIDE VANGUARD WITH ADDI-
OPTIONAL TIONAL INFORMATION AND A SIGNATURE GUARANTEE. PLEASE CALL OUR
SERVICES CLIENT SERVICES DEPARTMENT (1-800-662-2739) FOR FURTHER AS-
SISTANCE.

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

CERTIFICATES Share certificates will be issued upon request. If a certifi-
cate is lost, you may incur an expense to replace it.

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

CANCELLING The Fund will not cancel any trade (e.g., purchase, exchange
TRADES or redemption) believed to be authentic, received in writing
or by telephone, once the trade has been received.
- --------------------------------------------------------------------------------
WHEN YOUR Your trade date is the date on which your account is credit-
ACCOUNT WILL ed. If your purchase is made by check, Federal Funds wire or
BE CREDITED exchange, and is received by the close of the New York Stock
Exchange (generally 4:00 p.m. Eastern time), your trade date
is the day of receipt. If your purchase is received after the
close of the Exchange, your trade date is the next business
day. There is a transaction fee equal to 1% of the dollar
amount invested. See "Fund Expenses."

In order to prevent lengthy processing delays caused by the
clearing of foreign checks, Vanguard will only accept a for-
eign check which has been drawn in U.S. dollars and has been
issued by a foreign bank with a U.S. correspondent bank.
- --------------------------------------------------------------------------------
SELLING YOUR You may withdraw any portion of the funds in your account by
SHARES redeeming shares at any time. You may initiate a request by
writing or by telephoning. Your redemption proceeds are nor-
mally mailed within two business days after the receipt of
the request in Good Order.

SELLING BY Requests should be mailed to VANGUARD FINANCIAL CENTER, VAN-
MAIL GUARD INTERNATIONAL EQUITY INDEX FUND, P.O. BOX 1120, VALLEY
FORGE, PA 19482. (For express or registered mail, send your
request to Vanguard Financial Center, Vanguard International
Equity Index Fund, 455 Devon Park Drive, Wayne, PA 19087.)

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

20
<PAGE>

DEFINITION OF GOOD ORDER means that the request includes the following:
GOOD ORDER
1. The account number and Portfolio name.

2. The amount of the transaction (specified in dollars or
shares).

3. The signatures of all owners EXACTLY as they are regis-
tered on the account.

4. Any required signature guarantees.

5. Other supporting legal documentation that might be re-
quired in the case of estates, corporations, trusts and
certain other accounts.

6. Any certificates that you are holding for the account.

IF YOU HAVE QUESTIONS ABOUT THIS DEFINITION AS IT PERTAINS TO
YOUR REQUEST, PLEASE CALL OUR CLIENT SERVICES DEPARTMENT (1-
800-662-2739).
--------------------------------------------------------------

SELLING BY To sell shares by telephone, you or your pre-authorized rep-
TELEPHONE resentative may call our Client Services Department at 1-800-
662-2739. The proceeds will be sent to you by mail. Please
see "Important Information About Telephone Transactions."

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

SELLING BY With the Fund Express Automatic Withdrawal option, money will
FUND EXPRESS be automatically moved from your Vanguard Fund account to
your bank account according to the schedule you have select-
Automatic ed. You may elect Fund Express on the Account Registration
Withdrawal Form or call our Investor Information Department (1-800-662-
7447) for a Fund Express Application.
--------------------------------------------------------------

SELLING BY You may sell shares by making an exchange to another Vanguard
EXCHANGE Fund account. Exchanges to or from Vanguard International Eq-
uity Index Fund may be made only by mail. Please see "Ex-
changing Your Shares" for details.
--------------------------------------------------------------
IMPORTANT Shares purchased by check or Fund Express may not be redeemed
REDEMPTION until payment for the purchase is collected, which may take
INFORMATION up to ten calendar days. Your money is invested during the
holding period.
--------------------------------------------------------------
DELIVERY OF Redemption requests received by telephone prior to the close
REDEMPTION of the New York Stock Exchange (generally 4:00 p.m. Eastern
PROCEEDS time) are processed on the day of receipt and the redemption
proceeds are normally sent on the following business day.

Redemption requests received by telephone after the close of
the Exchange are processed on the business day following re-
ceipt and the proceeds are normally sent on the second busi-
ness day following receipt.

Redemption proceeds must be sent to you within seven days of
receipt of your request in Good Order.

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

21
<PAGE>

Fund reserves the right to revise or terminate the telephone
redemption privilege at any time.

Each Portfolio may suspend the redemption right or postpone
payment at times when the New York Stock Exchange is closed
or under any emergency circumstances as determined by the
United States Securities and Exchange Commission.

If the Board of Directors determines that it would be detri-
mental to the best interests of a Portfolio's remaining
shareholders to make payment in cash, a Portfolio may pay re-
demption proceeds in whole or in part by a distribution in
kind of readily marketable securities.
--------------------------------------------------------------

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

MINIMUM Due to the relatively high cost of maintaining smaller ac-
ACCOUNT counts, each Portfolio reserves the right to redeem shares in
BALANCE any account that is below the minimum initial investment
REQUIREMENT amount of $3,000. In addition, if at any time your total in-
vestment in a Portfolio falls below $1,000, you will be noti-
fied that the value of your account is below the Fund's mini-
mum account balance requirement of $1,000. You would then be
allowed 60 days to make an additional investment before the
account is liquidated. Proceeds would be promptly paid to the
shareholder. This minimum does not apply to Individual Re-
tirement Accounts, other retirement accounts, or Uniform
Gifts/Transfers to Minors Act accounts.
- --------------------------------------------------------------------------------
EXCHANGING Should your investment goals change, you may exchange your
YOUR SHARES shares of a Portfolio for those of other available Vanguard
Funds. Exchanges to or from a Portfolio may be made only by
mail. TELEPHONE EXCHANGES ARE NOT ACCEPTED FOR THE FUND EX-
CEPT RETIREMENT ACCOUNTS.

EXCHANGING BY Please be sure to include on your exchange request the name
MAIL and account number of your current Portfolio, the name of the
Fund you wish to exchange into, the amount you wish to ex-
change, and the signatures of all registered account holders.
Send your request to VANGUARD FINANCIAL CENTER, VANGUARD IN-
TERNATIONAL EQUITY INDEX FUND, P.O. BOX 1120, VALLEY FORGE,
PA 19482. (For express or registered mail, send your request
to Vanguard Financial Center, Vanguard International Equity
Index Fund, 455 Devon Park Drive, Wayne, PA 19087.) The ex-
change privilege is only available in states in which the
shares of the Fund are registered for sale. The Fund's shares
are currently registered for sale in all 50 states and the
Fund intends to maintain such registration.
--------------------------------------------------------------
IMPORTANT Before you make an exchange, you should consider the follow-
EXCHANGE ing:
INFORMATION
. Please read the Fund's prospectus before making an ex-
change. For an additional copy and for answers to any ques-
tions you may have, call our Investor Information Depart-
ment (1-800-662-7447).

22
<PAGE>

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

. Exchanges are accepted only if the registrations and the
Taxpayer Identification numbers of the two accounts are
identical.

. The shares to be exchanged must be on deposit and not held
in certificate form.

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

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

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

Every effort will be made to maintain the exchange privilege.
However, the Fund reserves the right to revise or terminate
its provisions, limit the amount of or reject any exchange as
deemed necessary, at any time.
- --------------------------------------------------------------------------------
EXCHANGE The Fund's exchange privilege is not intended to afford
PRIVILEGE shareholders a way to speculate on short-term movements in
LIMITATIONS the market. Accordingly, in order to prevent excessive use of
the exchange privilege that may potentially disrupt the man-
agement of the Fund and increase transaction costs, the Fund
has established a policy of limiting excessive exchange ac-
tivity.

Exchange activity generally will not be deemed excessive if
limited to TWO SUBSTANTIVE EXCHANGE REDEMPTIONS (AT LEAST 30
DAYS APART) from a Portfolio during any twelve month period.
These limitations do not apply to exchanges from Vanguard's
money market portfolios. Notwithstanding these limitations,
the Fund reserves the right to reject any purchase request
(including exchange purchases from other Vanguard portfolios)
that is reasonably deemed to be disruptive to efficient
portfolio management.
- --------------------------------------------------------------------------------

IMPORTANT The ability to initiate redemptions (except wire redemptions)
INFORMATION and exchanges by telephone is automatically established on
ABOUT your account unless you request in writing that telephone
TELEPHONE transactions on your account not be permitted.
TRANSACTIONS
To protect your account from losses resulting from
unauthorized or fraudulent telephone instructions, Vanguard
adheres to the following security procedures:

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

2. PAYMENT POLICY. The proceeds of any telephone redemption
by mail will be made payable to the registered shareowner
and mailed to the address of record, only.

23
<PAGE>

Neither the Fund nor Vanguard will be responsible for the
authenticity of transaction instructions received by
telephone, provided that reasonable security procedures have
been followed. Vanguard believes that the security procedures
described above are reasonable and that if such procedures
are followed, you will bear the risk of any losses resulting
from unauthorized or fraudulent telephone transactions on
your account. If Vanguard fails to follow reasonable security
procedures, it may be liable for any losses resulting from
unauthorized or fraudulent telephone transactions on your
account.
- --------------------------------------------------------------------------------

TRANSFERRING You may transfer the registration of any of your Fund shares
REGISTRATION to another person by completing a transfer form and sending
it to: VANGUARD FINANCIAL CENTER, P.O. BOX 1110, VALLEY
FORGE, PA 19482 ATTENTION: TRANSFER DEPARTMENT. The request
must be in Good Order. To obtain a transfer form and full
instructions, please call our Client Services Department (1-
800-662-2739).
- --------------------------------------------------------------------------------

OTHER VANGUARD For more information about any of these services, please call
SERVICES our Investor Information Department at 1-800-662-7447.

STATEMENTS AND Vanguard will send you a confirmation statement each time you
REPORTS initiate a transaction in your account except for
checkwriting redemptions from Vanguard money market accounts.
You will also receive a comprehensive account statement at
the end of each calendar quarter. The fourth-quarter
statement will be a year-end statement, listing all
transaction activity for the entire calendar year.

Vanguard's Average Cost Statement provides you with the
average cost of shares redeemed from your account, using the
average cost single category method. This service is
available for most taxable accounts opened since January 1,
1986. In general, investors who redeemed shares from a
qualifying Vanguard account may expect to receive their
Average Cost Statement in February of the following year.
Please call our Client Services Department (1-800-662-2739)
for information.

Financial reports on the Fund will be mailed to you semi-
annually, according to the Fund's fiscal year-end.

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

VANGUARD Vanguard's Automatic Exchange Service allows you to move
AUTOMATIC money automatically among your Vanguard Fund accounts. For
EXCHANGE instance, the service can be used to "dollar cost average"
SERVICE from a money market portfolio into a stock or bond fund or to
contribute to an IRA or other retirement plan.

24
<PAGE>

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

The minimum amount that can be transferred by telephone is
$100. However, if you have established one of the automatic
options, the minimum amount is $50. The maximum amount that
can be transferred using any of the options is $100,000.

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

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

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

25
<PAGE>

(LOGO)

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

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

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

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

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

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

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

(LOGO)

P R O S P E C T U S

APRIL 26, 1993

[LOGO OF THE VANGUARD GROUP APPEARS HERE]

<PAGE>

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

(ART) A Member of The Vanguard Group

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

INVESTMENT Vanguard International Equity Index Fund, Inc. (the "Fund")
OBJECTIVE AND is an open-end diversified investment company designed as an
POLICIES "index" fund. The Fund consists of three portfolios, Emerging
Markets, European, and Pacific, each of which invests in com-
mon stocks in order to match the performance of a distinct
international market index. This prospectus relates only to
the Emerging Markets Portfolio (the "Portfolio"). The Portfo-
lio seeks to provide investment results paralleling those of
the Morgan Stanley Capital International Select Emerging Mar-
kets Index, a broadly diversified index consisting of common
stocks of companies in twelve countries in Southeast Asia,
Latin America and Europe. The Portfolio intends to invest 95%
of its assets in securities which are representative of secu-
rities in the Index and 5% in cash reserves. There is no as-
surance that the Portfolio will achieve its stated objective.

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

OPENING AN To open a regular (non-retirement) account, please complete
ACCOUNT and return the Account Registration Form. If you need assis-
tance in completing this Form, please call our Investor In-
formation Department. To open an Individual Retirement Ac-
count (IRA), please use a Vanguard IRA Adoption Agreement. To
obtain a copy of this form, call 1-800-662-7447, Monday
through Friday, from 8:00 a.m. to 8:00 p.m. (Eastern time).
The minimum initial investment is $3,000 ($500 for Individual
Retirement Accounts and Uniform Gifts Transfers to Minors Act
accounts). The Portfolio is offered on a no-load basis (i.e.,
there are no sales commissions or 12b-1 fees). However, the
Portfolio incurs expenses for investment advisory, manage-
ment, administrative and distribution services. Shareholders
of the Portfolio will be charged a 2% portfolio transaction
fee on the amount of shares purchased and a 1% portfolio
transaction fee on redemptions. These fees are paid to the
Portfolio to offset transaction costs of buying and selling
securities. There is also a $10 annual account maintenance
fee. See "Portfolio Expenses."

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

ABOUT THIS This Prospectus is designed to set forth concisely the infor-
PROSPECTUS mation you should know about the Portfolio before you invest.
It should be retained for future reference. A "Statement of
Additional Information" containing additional information
about the Portfolio has been filed with the Securities and
Exchange Commission. This Statement is dated April ., 1994
and has been incorporated by reference into this Prospectus.
A copy may be obtained without charge by writing to the Port-
folio or by calling the Investor Information Department.

- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Portfolio Expenses..... 2
Yield and Total Return. 4
<CAPTION>
FUND INFORMATION
<S> <C>
Investment Objective... 4
Investment Policies.... 4
Investment Risks....... 6
Who Should Invest...... 7
Implementation of
Policies.............. 7
Investment Limitations. 10
Investment Adviser..... 11
Dividends, Capital
Gains and Taxes....... 12
The Share Price of The
Portfolio............. 14
General Information.... 14
<CAPTION>
SHAREHOLDER GUIDE
<S> <C>
Opening an Account and
Purchasing Shares..... 15
When Your Account Will
Be Credited........... 18
Selling Your Shares.... 18
Exchanging Your
Shares................ 20
Important Information
About Telephone
Transactions.......... 21
Transferring
Registration.......... 22
Other Vanguard
Services.............. 22
</TABLE>
- --------------------------------------------------------------------------------

PORTFOLIO The following table illustrates ALL expenses and fees that
EXPENSES you would incur as a shareholder of the Portfolio. The ex-
penses and fees set forth below are estimates, since the
Portfolio had not commenced operations as of the date of this
Prospectus.

<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
-----------------------------------------------------------------
<S> <C>
Sales Load Imposed on Purchases............................. None*
Sales Load Imposed on Reinvested Dividends.................. None
Redemption Fees............................................. 1%**
Exchange Fees............................................... None
</TABLE>

* Shareholders are charged a 2% portfolio transaction fee,
payable directly to the Portfolio, on each purchase of
shares.

** The 1% portfolio transaction fee withheld from redemption
proceeds is paid to the Portfolio.

<TABLE>
<CAPTION>
ANNUAL PORTFOLIO OPERATING EXPENSES***
-------------------------------------------------------------------
<S> <C> <C>
Management & Administrative Expenses.......................... .
Investment Advisory Fees...................................... None
12b-1 Fees.................................................... None
Other Expenses
Distribution Costs....................................... .
Miscellaneous Expenses................................... .
---
Total Other Expenses.......................................... .
----
TOTAL OPERATING EXPENSES.................................... .
====
</TABLE>

*** In addition to these costs, shareholders in the Portfolio
incur an annual account maintenance fee of $10. This fee
will be waived for the 1994 calendar year.

The purpose of this table is to assist you in understanding
the various costs and expenses that you would bear directly
or indirectly as an investor in the Portfolio.

THE PORTFOLIO The Emerging Markets Portfolio assesses a portfolio transac-
CHARGES A 2% tion fee on purchases of Portfolio shares equal to 2% of the
PURCHASE dollar amount invested. The Portfolio transaction fee is paid
TRANSACTION to the Portfolio, not to Vanguard. It is not a sales charge.
FEE The fee applies to an initial investment in the Portfolio and
all subsequent purchases (including purchases made by ex-
change from another Vanguard Fund or from the other Portfo-
lios of Vanguard International Equity Index Fund), but not to
reinvested dividend or capital gain distributions. The Port-
folio purchase transaction fee is deducted automatically from
the amount invested; it cannot be paid separately.

THE PORTFOLIO The Portfolio also assesses a 1% redemption transaction fee.
CHARGES A 1% This 1% charge applies to redemptions or exchanges from the
REDEMPTION Portfolio. The 1% fee is deducted from redemption or exchange
TRANSACTION proceeds and is paid directly to the Portfolio, not to Van-
FEE guard. It is not a contingent deferred sales charge.

The purpose of the transaction fees is to allocate transac-
tion costs associated with purchases and redemptions to the
investors making those purchases and redemptions, thus insu-
lating existing shareholders from transaction costs.

2
<PAGE>

Such costs include: (1) brokerage costs; (2) market impact
costs--i.e., the increase or decrease in market prices which
may result when the Portfolio purchases or sells thinly
traded stocks; and (3) the effect of the "bid-ask" spread
which may be wide on many international stocks.

The fees represent Vanguard's estimate of the brokerage and
other transaction costs incurred by the Portfolio in purchas-
ing and selling stocks in emerging markets. Without the fees,
the Portfolio would not be reimbursed for these costs, which
it incurs directly, resulting in reduced investment perfor-
mance for all shareholders of the Portfolio. With the fees,
the transaction costs of purchasing and selling international
stocks are borne not by all existing shareholders, but by
those investors making the purchases and redemptions. Because
the purchasers and sellers, not the Portfolio, bear these
costs, the Portfolio is expected to track its benchmark index
more closely.

Transaction costs incurred when purchasing or selling emerg-
ing market stocks are extremely high. There are three compo-
nents of transaction costs--brokerage fees, the difference
between the bid/asked spread and market impact. Each one of
these factors is significantly more expensive in emerging
market countries than in the United States, because of less
competition among brokers, lower utilization of technology on
the part of the exchanges and brokers, and generally less
liquid markets. Consequently, brokerage commissions are high,
bid/asked spreads are wide and market impact is significant.
In addition to these customary costs, many of the countries
have exchange fees or stamp taxes.

THE PORTFOLIO The Portfolio assesses an annual account maintenance fee of
WILL CHARGE A $10 for each shareholder account. The purpose of the $10 fee
$10 ACCOUNT is to allocate part of the costs of maintaining shareholder
MAINTENANCE accounts equally to all accounts. This fee, which is paid di-
FEE rectly by shareholders, is deducted annually from the Fund's
dividend. For the calendar year 1994, the $10 account mainte-
nance fee is waived. See "Dividends, Capital Gains and Taxes"
for more information on this fee. The $10 fee amounts to
0.33% on a $3,000 investment in the Portfolio, 0.10% on a
$10,000 investment, and 0.01% on a $100,000 investment.

<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
$ . $ . $ . $ .
</TABLE>

3
<PAGE>

YIELD AND From time-to-time the Portfolio may advertise its yield and
TOTAL RETURN total return. Both yield and total return figures are based
on historical earnings and are not intended to indicate fu-
ture performance. The "total return" of the Portfolio refers
to the average annual compounded rates of return over one-,
five- and ten-year periods or for the life of the Portfolio
(as stated in the advertisement) that would equate an initial
amount invested at the beginning of a stated period to the
ending redeemable value of the investment, assuming the rein-
vestment of all dividend and capital gains distributions.

The "30-day yield" of the Portfolio is calculated by dividing
the net investment income per share earned during a 30-day
period by the net asset value per share on the last day of
the period. Net investment income includes interest and divi-
dend income earned on the Portfolio's securities; it is net
of all expenses and all recurring and nonrecurring charges
that have been applied to all shareholder accounts. The yield
calculation assumes that the net investment income earned
over 30 days is compounded monthly for six months and then
annualized. Methods used to calculate advertised yields are
standardized for all stock and bond mutual funds. However,
these methods differ from the accounting methods used by the
Portfolio to maintain its books and records, and so the ad-
vertised 30-day yield may not fully reflect the income paid
to your own account or the yield reported in the Portfolio's
reports to shareholders.
- --------------------------------------------------------------------------------

INVESTMENT The Emerging Markets Portfolio seeks, with respect to 95% of
OBJECTIVE assets, to provide investment results that parallel the Mor-
gan Stanley Capital International Select Emerging Markets In-
dex ("MSCI--Emerging"). The MSCI--Emerging Index is a diver-
sified index consisting of common stocks located in 12 coun-
tries. This Index provides broader diversification and more
liquidity than other "published" indexes and also takes into
consideration the trading capabilities of foreigners in
emerging stock markets countries.

The Portfolio is neither sponsored by nor affiliated with
Morgan Stanley Capital International.
- --------------------------------------------------------------------------------

INVESTMENT The Emerging Markets Portfolio is not managed according to
POLICIES traditional methods of "active" investment management, which
THE PORTFOLIO involve the buying and selling of securities based upon eco-
USES A nomic, financial and market analysis and investment judgment.
"PASSIVE" Instead, the Portfolio, utilizing a "passive" or indexing in-
APPROACH TO vestment approach, attempts to approximate the investment
INVEST IN performance of its target index through statistical proce-
INTERNATIONAL dures. The Portfolio is managed without regard to tax ramifi-
STOCKS cations.

The Portfolio invests in a statistically selected sample of
approximately. stocks included in the MSCI--Emerging In-
dex, an index of equity securities of companies located in 12
emerging market countries. Three countries, Mexico, Malaysia,
and Hong Kong represent a majority of the Investible Emerging
Markets Index, with 20%, 20%, and 16% of the market capital-
ization of the Index,

4
<PAGE>

respectively, as of December 31, 1993. The nine other coun-
tries and their percentage weightings as of December 31, 1993
were:

<TABLE>
<S> <C>
Greece.................. 1.17%
Portugal................ 1.11%
Turkey.................. 2.32%
EUROPE.................. 4.60%
Argentina............... 4.81%
Brazil.................. 9.05%
Mexico (Free)........... 17.23%
LATIN AMERICA........... 31.10%
Hong Kong............... 15.40%
Indonesia............... 4.67%
Malaysia................ 20.00%
Phillipines (Free)...... 3.54%
Singapore............... 4.60%
Thailand................ 11.09%
ASIA.................... 59.30%
T-Bills................. 5.00%
</TABLE>

The Index includes only shares that U.S. investors are "free"
to purchase and sell and that have sufficient trading liquid-
ity.

The Portfolio is expected to invest in approximately .
stocks or more. Stocks are selected for inclusion in each
Portfolio in order to form a statistically representative
sample corresponding to the MSCI-Emerging Index. The Portfo-
lio is constructed to have aggregate investment characteris-
tics, based on country, market capitalization and industry
weightings, fundamental characteristics such as return vari-
ability, earnings valuation and yield and liquidity measures,
similar to those of its index. In order to parallel the per-
formance of its index, the Portfolio will invest in each
country in approximately the same percentage as the country's
weight in the Index.

The Portfolio's policy is to remain 95% invested in common
stocks. The remaining 5% of the Portfolio will be invested in
cash reserves in order to maintain a higher degree of portfo-
lio liquidity to meet daily redemption requests.

Under normal circumstances at least 80% of the assets of the
Portfolio will be invested in stocks that are represented in
the index and futures contracts and options thereon. The
Portfolio may also invest up to 50% of its assets in stock
futures contracts, options, warrants, convertible securities
or swap agreements in order to invest uncommitted cash bal-
ances, maintain liquidity to meet shareholder redemptions, or
minimize trading costs.

The Portfolio will not invest in cash reserves, futures con-
tracts, options, warrants or swap agreements as part of a
temporary defensive strategy to protect against potential
stock market declines. The Portfolio intends to remain 95%
invested, to the extent practicable, in a pool of securities
which will approximate the investment characteristics of the
MSCI-Emerging Index. The Portfolio may also enter into for-
ward foreign currency exchange contracts in order to maintain
the same currency exposure as the MSCI-Emerging Index, but
not as part of a defensive strategy to protect against fluc-
tuations in exchange rates. See "Implementation of Policies"
for a description of these and other investment practices of
the Portfolio.

5
<PAGE>

The investment objective and policies of the Portfolio are
not fundamental and so may be changed by the Board of Direc-
tors without shareholder approval. However, shareholders
would be notified prior to a material change in either.
- --------------------------------------------------------------------------------

INVESTMENT As a mutual fund investing in common stocks, the Portfolio is
RISKS subject to market risk--i.e., the possibility that stock
prices will decline over short or even extended periods. Both
INTERNATIONAL U.S. and foreign stock markets tend to be cyclical, with pe-
STOCKS MAY riods when stock prices generally rise and periods when stock
EXHIBIT prices generally decline.
GREATER
VOLATILITY In particular, emerging stock markets are associated with
THAN U.S. substantial investment risks. These risks include market vol-
STOCKS atility, investment illiquidity, currency risk, political in-
stability and unexpected changes in economic policy including
capital controls, expropriation, taxes and hyper-inflation.

EMERGING Investors should be aware that emerging markets can be sub-
MARKETS stantially more volatile than both U.S. and more developed
EXHIBIT foreign markets. For example, over the last five years, the
GREATER average positive monthly return for the Wilshire 5000 Index,
VOLATILITY a broad measure of the US equity market was 3.3% The average
THAN DEVELOPED negative monthly return for the Wilshire 5000 Index was -
MARKETS 2.6%. In contrast, the average positive monthly return of the
Morgan Stanley Capital International Emerging Markets Free
Index, a widely quoted emerging market benchmark, was 5.9%.
The average negative monthly return for the MSCI-Emerging
Markets Free Index was -4.8%.

STOCK IN Volatility in emerging markets may be exacerbated by illi-
EMERGING quidity. Average daily volume in all the emerging markets
MARKETS combined is a small fraction of the average daily volume of
ILLIQUID the US market. Illiquidity can cause prices to rise exces-
sively during market expansions and to fall precipitously
during market declines.

CURRENCY RISK Currency risk may have substantial influence on emerging mar-
ket stock returns as well. Currency risk refers to changes in
foreign exchange rates that will affect, favorably or unfa-
vorably, the value of foreign securities held in the portfo-
lio. Currency risk in emerging markets may be exacerbated by
unexpected exchange rate devaluations.

OTHER SPECIAL In addition, returns could be dramatically diminished as a
CONSIDERATIONS result of unexpected political developments and changes in
economic policy. Coups, expropriations, taxes and unstable
economic policies have been witnessed in some of these devel-
oping countries in recent times.

Other risks and considerations of international investing in-
clude: differences in accounting, auditing and financial re-
porting standards; generally higher transaction costs on for-
eign portfolio transactions; foreign withholding taxes pay-
able on the Portfolio's foreign securities, which may reduce
dividend income payable to shareholders; adverse changes in
investment or exchange control regulations; difficulty in ob-
taining judgements from foreign courts; and potential re-
strictions on the flow of international capital.
- --------------------------------------------------------------------------------

6
<PAGE>

WHO SHOULD The Emerging Markets Portfolio is designed for investors who
INVEST seek a low-cost "passive" approach for investing in a broadly
diversified portfolio of common stocks of companies located
LONG-TERM in emerging international markets. Unlike other equity mutual
INVESTORS funds, which generally seek to "beat" market averages with
SEEKING TO unpredictable results, the Portfolio seeks to parallel the
INVEST IN performance of its index and thus is expected to provide a
COMMON STOCKS predictable return relative to its benchmark. In particular,
OF EMERGING the Portfolio is designed for investors seeking to approxi-
MARKETS mate the total investment results (before fund expenses and
withholding taxes) of the MSCI--Emerging Index, a diversified
index of emerging markets common stocks.

The share price of the Portfolio is expected to be volatile,
and investors should be able to tolerate sudden, sometimes
substantial fluctuations in the value of their investment. No
assurance can be given that the Portfolio will achieve its
stated objective or that shareholders will be protected from
the risks inherent in equity investing. Investors may wish to
minimize the timing risk of investing in a Portfolio by pur-
chasing shares on a periodic basis (dollar-cost averaging)
rather than investing in one lump sum.

BECAUSE OF THE RISKS ASSOCIATED WITH INTERNATIONAL COMMON
STOCK INVESTMENTS AND EMERGING MARKETS IN PARTICULAR, THE
PORTFOLIO IS INTENDED TO BE A LONG-TERM INVESTMENT VEHICLE
AND IS NOT DESIGNED TO PROVIDE INVESTORS WITH A MEANS OF
SPECULATING ON SHORT-TERM MARKET MOVEMENTS. Investors who en-
gage in excessive account activity generate additional costs
which are borne by all of the Portfolio's shareholders. In
order to minimize such costs the Portfolio has adopted the
following policies. The Portfolio reserves the right to re-
ject any purchase request (including exchange purchases from
other Vanguard portfolios) that is reasonably deemed to be
disruptive to efficient portfolio management. Additionally,
the Portfolio has adopted exchange privilege limitations as
described in the section "Exchange Privilege Limitations."
Finally the Portfolio reserves the right to suspend the of-
fering of its shares. Investors should not consider the Port-
folio a complete investment program, but should maintain
holdings of securities with different risk characteristics--
including U.S. common stocks, bonds and money market instru-
ments.
- --------------------------------------------------------------------------------

IMPLEMENTATION The Emerging Markets Portfolio utilizes a number of invest-
OF POLICIES ment practices in an effort to parallel the investment per-
formance of its target index.

THE PORTFOLIO The Emerging Markets Index consists of approximately . eq-
INVESTS IN uity securities from emerging market countries in Europe,
INTERNATIONAL Latin America and Southeast Asia. The stocks included in each
COMMON STOCKS index are chosen on a statistical basis. The companies based
USING A in Hong Kong and Singapore are included in the index to pro-
SAMPLING vide participation in more liquid emerging markets; their
TECHNIQUE combined weight is limited to 20% of the Index. Each stock
within Hong Kong and Singapore will be weighted according to
its market value as a percentage of the total market value of
all of the Hong Kong and Singapore stocks included in the in-
dex. (A stock's market value equals the number of shares out-
standing times the most recent price of the security). The
remaining 80% of the Index will be comprised of

7
<PAGE>

common stocks from 10 emerging market countries--Indonesia,
Malaysia, the Phillipines, Thailand, Argentina, Brazil, Mexi-
co, Greece, Portugal and Turkey. Each stock in these coun-
tries will be weighted according to its market value as a
percentage of the total market value of the companies in the
10 countries. From time to time, additional emerging markets
will be analyzed for inclusion in the Index, based on liquid-
ity and tradeability. The inclusion of a stock in the Index
in no way implies that the stock is an attractive investment.

The Portfolio will be unable to hold all of the issues that
comprise its index, because of the costs involved and the il-
liquidity of many of the securities. Instead, the Portfolio
will attempt to hold a representative sample of approximately
. or more of the securities in its index by selecting
stocks utilizing a statistical technique known as "portfolio
optimization." Under this technique, each stock is considered
for inclusion in the Portfolio based on its contribution to
certain country, capitalization, industry, liquidity and fun-
damental investment characteristics. The Portfolio is con-
structed so that, in the aggregate, the Portfolio's country,
capitalization, industry, and fundamental investment charac-
teristics resemble those of the Index. Over time, the portfo-
lio composition is altered (or "rebalanced") to reflect
changes in the characteristics of the index.

Due to the use of this sampling or "portfolio optimization"
technique, the Portfolio is not expected to track its bench-
mark index with the same degree of accuracy as large capital-
ization domestic index funds. Over time, the correlation be-
tween the performance of the Portfolio and its index is ex-
pected to be greater than 0.95. A correlation of 1.00 would
indicate perfect correlation, which would be achieved when
the net asset value of the Portfolio, including the value of
its dividend and capital gains distributions, increases or
decreases in exact proportion to changes in its index. A cor-
relation of 0.95 or higher is expected to be achieved when
the Portfolio exceeds $100 million in assets.

THE PORTFOLIO The Portfolio normally seeks to remain 95% invested in common
MAY INVEST IN stocks and is expected to invest 5% of its assets in certain
SHORT-TERM short-term fixed income securities. In addition, the Portfo-
FIXED INCOME lio may invest temporarily in short-term fixed income securi-
SECURITIES ties in excess of 5% in order to invest uncommitted cash bal-
ances or to maintain liquidity to meet shareholder redemp-
tions. These securities include: obligations of the United
States Government and its agencies or instrumentalities; com-
mercial paper, bank certificates of deposit and bankers' ac-
ceptances; and repurchase agreements collateralized by these
securities.

THE PORTFOLIO The Portfolio may utilize stock futures contracts, options,
MAY USE warrants, convertible securities and swap agreements to a
FUTURES limited extent. Specifically, the Portfolio may enter into
CONTRACTS, futures contracts and options provided that not more than 5%
OPTIONS, of its assets are required as a margin deposit for futures
WARRANTS, contracts or options. Additionally, the Portfolio's invest-
CONVERTIBLE ment in warrants will not exceed more than 5% of its assets.
SECURITIES AND Futures contracts, options, warrants, convertible securities
SWAP and swap agreements may be used for several reasons: to simu-
AGREEMENTS late full investment

8
<PAGE>

in the underlying index while retaining a cash balance for
fund management purposes, to facilitate trading, to reduce
transaction costs or to seek higher investment returns when a
futures contract, option, warrant, convertible security or
swap agreement is priced more attractively than the under-
lying equity security or index. While each of these securi-
ties can be used as leveraged investments, the Portfolio may
not use them to leverage its net assets.

FUTURES The risk of loss associated with futures contracts in some
CONTRACTS, strategies can be substantial due both to the low margin de-
OPTIONS, posits required and the extremely high degree of leverage in-
WARRANTS, volved in futures pricing. As a result, a relatively small
CONVERTIBLE price movement in a futures contract may result in an immedi-
SECURITIES AND ate and substantial loss or gain. However, the Portfolio will
SWAP not use futures contracts, options, warrants, convertible se-
AGREEMENTS curities or swap agreements for speculative purposes or to
POSE CERTAIN leverage its net assets. Accordingly, the primary risks asso-
RISKS ciated with the use of futures contracts, options, warrants,
convertible securities or swap agreements by the Portfolio
are: (i) imperfect correlation between the change in market
value of the stocks held by the Portfolio and the prices of
futures contracts, options, warrants, convertible securities
or swap agreements; and (ii) possible lack of a liquid sec-
ondary market for a futures contract and the resulting in-
ability to close a futures position prior to its maturity
date. The risk of imperfect correlation will be minimized by
investing only in those contracts whose behavior is expected
to resemble that of the Portfolio's underlying securities.
The risk that the Portfolio will be unable to close out a
futures position will be minimized by entering into such
transactions on an exchange with an active and liquid second-
ary market. However, options, warrants, convertible securi-
ties or swap agreements purchased or sold over-the-counter
may be less liquid than exchange traded securities. Illiquid
securities, in general, may not represent more than 15% of
the net assets of the Portfolio.

Since there are currently no futures traded on the MSCI-
Emerging Index, it would be necessary for the Portfolio to
utilize a composite of other futures contracts to simulate
the performance of the Index. This process may magnify the
"tracking error" of the Portfolio's performance compared to
that of the Index, due to lower correlation of the selected
futures with the Index. The investment adviser would attempt
to reduce this tracking error by investing in futures con-
tracts whose behavior is expected to resemble that of the un-
derlying securities, although there can be no assurance that
these selected futures will perfectly correlate with the per-
formance of the Index.

Swap agreements are contracts between parties in which one
party agrees to make payments to the other party based on the
change in market value of a specified index or asset. In re-
turn, the other party agrees to make payments to the first
party based on the return of a different specified index or
asset. Although swap agreements entail the risk that a party
will default on its payment obligations thereunder, the Port-
folio would minimize this risk by entering into agreements
that mark to market no less frequently than quarterly. Swap
agreements also bear the risk that the Portfolio will not be
able to meet its obligation

9
<PAGE>

to the counterparty. This risk would be mitigated by invest-
ing the Portfolio in a specific asset for which it is obli-
gated to pay a return.

THE PORTFOLIO The Portfolio may enter into foreign currency forward and
MAY ENTER INTO foreign currency futures contracts in order to maintain the
FORWARD same currency exposure as the Index. The Portfolio may not
CURRENCY enter into such contracts for speculative purposes, or as a
CONTRACTS way of protecting against anticipated adverse changes in ex-
change rates between foreign currencies and the U.S. dollar.
A foreign currency forward contract is an obligation to pur-
chase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract
agreed upon by the parties, at a price set at the time of the
contract.

THE PORTFOLIO The Portfolio may lend its investment securities to qualified
MAY LEND ITS institutional investors for either short-term or long-term
SECURITIES purposes of realizing additional income. Loans of securities
by the Portfolio will be collateralized by cash, letters of
credit, or securities issued or guaranteed by the U.S. Gov-
ernment or its agencies. The collateral will equal at least
100% of the current market value of the loaned securities.

PORTFOLIO Although the Portfolio generally seeks to invest for the long
TURNOVER IS term, the Portfolio retains the right to sell securities ir-
EXPECTED TO BE respective of how long they have been held. However, because
LOW of the "passive" investment management approach of the Port-
folio, the portfolio turnover rate for the Portfolio is ex-
pected to be under 50%, a generally lower turnover rate than
for most other investment companies. A portfolio turnover
rate of 50% would occur if one half of the Portfolio's secu-
rities were sold within one year. Ordinarily, securities will
be sold from the Portfolio only to reflect certain adminis-
trative changes in an index (including mergers or changes in
the composition of an index) or to accommodate cash flows out
of the Portfolio while maintaining the similarity of the
Portfolio to its benchmark index.

THE PORTFOLIO The Portfolio may borrow money from a bank up to a limit of
MAY BORROW . % of the market value of its assets, but only for tempo-
MONEY rary or emergency purposes. The Portfolio may borrow money
only to meet redemption requests prior to the settlement of
securities already sold or in the process of being sold by
the Portfolio. To the extent that the Portfolio borrows money
prior to selling securities, the Portfolio may be leveraged;
at such times, the Portfolio may appreciate or depreciate in
value more rapidly than its benchmark index. The Portfolio
will repay any money borrowed in excess of 5% of the market
value of its total assets prior to purchasing additional
portfolio securities.
- --------------------------------------------------------------------------------

INVESTMENT The Portfolio has adopted certain limitations on its invest-
LIMITATIONS ment practices. Some of these limitations are that the Port-
folio will not:

THE PORTFOLIO (a) with respect to 75% of its assets, purchase securities of
HAS ADOPTED any issuer (except obligations of the U.S. Government and
CERTAIN its instrumentalities) if, as a result, more than 5% of
FUNDAMENTAL the value of the Portfolio's assets would be invested in
LIMITATIONS the securities of such issuer;

10
<PAGE>

(b) purchase more than 10% of the voting securities of any
issuer;

MANAGEMENT OF The Portfolio is one of three portfolios of Vanguard Interna-
THE FUND tional Equity Index Fund ("the Fund") and is a member of The
Vanguard Group of Investment Companies, a family of 32 in-
vestment companies with 77 distinct investment portfolios and
VANGUARD total assets in excess of $120 billion. Through their jointly
ADMINISTERS owned subsidiary, The Vanguard Group, Inc. ("Vanguard"), the
AND Portfolio and the other funds in the Group obtain at cost
DISTRIBUTES virtually all of their corporate management, administrative
THE PORTFOLIO and distribution services. Vanguard also provides investment
advisory services on an at-cost basis to certain Vanguard
funds. As a result of Vanguard's unique corporate structure,
the Vanguard funds have costs substantially lower than those
of most competing mutual funds. In 1993, the average expense
ratio (annual costs including advisory fees divided by total
net assets) for the Vanguard funds amounted to . % compared
to an average of . % for the mutual fund industry (data pro-
vided by Lipper Analytical Services).

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

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

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

INVESTMENT The Portfolio receives all investment advisory services on an
ADVISER at-cost basis from Vanguard's Core Management Group, which
also provides investment advisory services to the European
VANGUARD and Pacific Portfolios of the Fund, Vanguard Index Trust,
MANAGES THE Vanguard Balanced Index Fund, Vanguard Institutional Index
PORTFOLIO ON Fund, a portion of the assets of Vanguard/Windsor II, a por-
AN tion of the assets of Vanguard/Morgan Growth Fund and several
AT-COST BASIS indexed separate accounts. Total indexed assets under manage-
ment as of December 31, 1993 were $16.4 billion. The Portfo-
lio is not actively managed, but is instead administered by
the Core

11
<PAGE>

Management Group using computerized, quantitative techniques.
The Group is supervised by the Officers of the Portfolio.

In placing portfolio transactions, Vanguard's Core Management
Group uses its best judgment to choose the broker most capa-
ble of providing the brokerage services necessary to obtain
the best available price and most favorable execution at the
lowest commission rate. The full range and quality of broker-
age services available are considered in making these deter-
minations. In those instances where it is reasonably deter-
mined that more than one broker can offer the services needed
to obtain the best available price and most favorable execu-
tion, consideration may be given to those brokers which sup-
ply statistical information and provide other services in ad-
dition to execution services to the Portfolio.
- --------------------------------------------------------------------------------

DIVIDENDS, The Portfolio intends to distribute substantially all of its
CAPITAL GAINS ordinary income in the form of an annual dividend. Capital
AND TAXES gains distributions, if any, are made annually.

DIVIDENDS AND The Portfolio's dividend and capital gains distributions may
ANY CAPITAL be reinvested in additional shares or received in cash. See
GAINS WILL BE "Choosing a Distribution Option" for a description of these
PAID ANNUALLY distribution methods.

In order to satisfy certain distribution requirements of the
Tax Reform Act of 1986, the Portfolio may declare special
year-end dividend and capital gains distributions during De-
cember. Such distributions, if received by shareholders by
January 31, are deemed to have been paid by the Portfolio and
received by shareholders on December 31 of the prior year.

THE PORTFOLIO The Portfolio will automatically deduct a $10 annual account
WILL CHARGE A maintenance fee from the dividend income of the Portfolio ac-
$10 ACCOUNT count annually. However, for the calendar year 1994, the 10
MAINTENANCE annual account maintenance fee will be waived. If the divi-
FEE dend to be paid to an account is less than the fee to be de-
ducted, sufficient shares will be redeemed from an account to
make up the difference. The Board of Directors reserves the
right to change the annual account maintenance fee to reflect
the actual cost of maintaining smaller shareholder accounts.
For federal tax purposes, the account maintenance fee does
not reduce dividend income and is treated as an investment
expense by each shareholder (deductible as a miscellaneous
itemized deduction in the case of individual investors).

The Portfolio intends to qualify for taxation as a "regulated
investment company" under the Internal Revenue Code so that
it will not be subject to federal income tax to the extent
its income is distributed to shareholders. Dividends paid by
the Portfolio from net investment income, whether received in
cash or reinvested in additional shares, will be taxable to
shareholders as ordinary income. For corporate investors,
dividends from net investment income will not generally qual-
ify for the intercorporate dividends-received deduction.

Distributions paid by the Portfolio from long-term capital
gains, whether received in cash or reinvested in additional
shares, are taxable as long-term capi

12
<PAGE>

tal gains, regardless of the length of time you have owned
shares in the Portfolio. Capital gains distributions are made
when the Portfolio realizes net capital gains on sales of
portfolio securities during the year. The Portfolio does not
seek to realize any particular amount of capital gains during
a year; rather, realized gains are a by-product of portfolio
management activities. Consequently, capital gains distribu-
tions may be expected to vary considerably from year-to-year;
there will be no capital gains distributions in years when
the Portfolio realizes net capital losses or has net capital
losses carried over from prior years.

Note that if you elect to receive capital gains distributions
in cash, instead of reinvesting them in additional shares,
you are in effect reducing the capital at work for you in the
Portfolio. Also, keep in mind that if you purchase shares in
the Portfolio shortly before the record date for a dividend
or capital gains distribution, a portion of your investment
will be returned to you as a taxable distribution, regardless
of whether you are reinvesting your distributions or receiv-
ing them in cash.

The Portfolio will notify you annually as to the tax status
of dividend and capital gains distributions paid by the Port-
folio.

THE PORTFOLIO The Portfolio may elect to "pass through" to its shareholders
MAY "PASS the amount of foreign income taxes paid by the Portfolio. The
THROUGH" Portfolio will make such an election only if it is deemed to
FOREIGN TAXES be in the best interests of the shareholders. If this elec-
tion is made, shareholders of the Portfolio will be required
to include in their gross income their pro rata share of for-
eign taxes paid by the Portfolio. However, shareholders will
be able to treat their pro rata share of foreign taxes as ei-
ther an itemized deduction or a foreign credit against U.S.
income taxes (but not both) on their tax return.

A CAPITAL GAIN A sale of shares of the Portfolio is a taxable event, and may
OR LOSS MAY BE result in a capital gain or loss. A capital gain or loss may
REALIZED UPON be realized from an ordinary redemption of shares or an ex-
EXCHANGE OR change of shares between two mutual funds (or two portfolios
REDEMPTION of a mutual fund). You are responsible for calculating any
capital gains or losses realized upon redemption or exchange
of the Portfolio's shares.

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

The Portfolio is required to withhold 31% of taxable divi-
dends, capital gains distributions, and redemptions paid to
shareholders who have not complied with IRS taxpayer identi-
fication regulations. You may avoid this withholding require-
ment by certifying on your Account Registration Form your
proper Social Security or Taxpayer Identification Number and
by certifying that you are not subject to backup withholding.

The Portfolio has obtained a certificate of authority to do
business as a foreign corporation in Pennsylvania and does
business and maintains an office in that state. In the opin-
ion of counsel, shares of the Portfolio will be exempt from
Pennsylvania personal property taxes.

13
<PAGE>

THE SHARE The share price or "net asset value per share" of the Portfo-
PRICE OF THE lio is determined by dividing the total market value of the
PORTFOLIO Portfolio's investments and other assets, less any liabili-
ties, by the number of outstanding shares of the Portfolio.
Portfolio securities are valued at the last quoted sales
price on the day the valuation is made. Price information on
listed securities is taken from the exchange where the secu-
rity is primarily traded. Other assets and securities for
which no quotations are readily available are valued at fair
value as determined in good faith by the Directors. Securi-
ties may be valued on the basis of prices provided by a pric-
ing service when such prices are believed to reflect the fair
market value of such securities. All assets and liabilities
initially expressed in foreign currencies will be translated
into U.S. dollars using the officially quoted daily exchange
rates determined by Morgan Stanley Capital International in
the calculation of the Emerging Markets Index. If such quota-
tions are not available, the rate of exchange will be deter-
mined in accordance with policies established by the Board of
Directors.

Generally, trading in foreign securities is completed each
day prior to the close of regular trading on the New York
Stock Exchange (generally 4:00 p.m. Eastern time). The values
of foreign securities held by the Portfolio are determined as
of the close of trading of foreign securities for the purpose
of computing the Portfolio's net asset value. If events which
materially affect the value of the Portfolio's investments
occur after the close of the securities markets on which such
securities are primarily traded, those investments will be
priced at "fair value" as described above.
- --------------------------------------------------------------------------------

All securities and cash are held by . . The Vanguard
Group, Inc., Valley Forge, PA, serves as the Fund's Transfer
and Dividend Disbursing Agent. Price Waterhouse serves as in-
dependent accountant for the Fund and will audit its finan-
cial statements annually. The Fund is not involved in any
litigation.
- --------------------------------------------------------------------------------

14
<PAGE>

SHAREHOLDER GUIDE

OPENING AN You may open a regular (non-retirement) account, either by
ACCOUNT AND mail or wire. Simply complete and return the Account Regis-
PURCHASING tration Form and any required legal documentation, indicating
SHARES the amount you wish to invest. Your purchase must be equal to
or greater than the $3,000 minimum initial investment re-
quirement for the Portfolio ($500 for Uniform Gifts/Transfers
to Minors Act accounts). You must open a new Individual Re-
tirement Account by mail (IRAs may not be opened by wire) us-
ing a Vanguard IRA Adoption Agreement. Your purchase must be
equal to or greater than the $500 minimum initial investment
requirement, but no more than $2,000 if you are making a reg-
ular IRA contribution. Rollover deposits are limited to the
amount withdrawn previously from an IRA or other qualified
Retirement Plan. If you need assistance with the forms or
have any questions about the Portfolio, please call our In-
vestor Information Department (1-800-662-7447). NOTE: For
other types of account registrations (e.g., corporations, as-
sociations, other organizations, trusts or powers of attor-
ney), please call us to determine which additional forms you
may need.

Because of the risks associated with common stock invest-
ments, the Portfolio is intended to be a long-term investment
vehicle and is not designed to provide investors with a means
of speculating on short-term stock market movements. Conse-
quently the Portfolio reserves the right to reject any spe-
cific purchase (and exchange purchase) request. The Portfolio
also reserves the right to suspend the offering of shares for
a period of time.

IMPORTANT NOTE The Portfolio assesses a transaction fee equal to 2% of the
ON EXPENSES dollar amount invested, as well as a redemption transaction
fee equal to 1% and a $10 annual account maintenance fee. See
"Portfolio Expenses" for more information.

The Portfolio's shares are purchased at the next-determined
net asset value after your investment has been received. The
Portfolio is offered on a no-load basis (i.e., there are no
sales commissions or 12b-1 fees).

15
<PAGE>

NEW ACCOUNT ADDITIONAL INVESTMENTS
TO EXISTING ACCOUNTS

PURCHASING BY Please include the Additional investments should
MAIL Complete amount of your initial include the Invest-by-Mail re-
and sign the investment on the reg- mittance form attached to your
enclosed istration form, make Fund confirmation statements.
Account your check payable to Please make your check payable
Registration The Vanguard Group- . to The Vanguard Group- . ,
Form write your account number on
your check and, using the re-
turn envelope provided, mail to
the address indicated on the
Invest-by-Mail Form.

VANGUARD FINANCIAL CENTER
P.O. BOX 2600
VALLEY FORGE, PA 19482

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

PURCHASING BY CORESTATES BANK, N.A. ABA 031000011 CORESTATES NO
WIRE Money 01019897 ATTN VANGUARD VANGUARD INTERNATIONAL
should be EQUITY INDEX FUND EMERGING MARKETS PORTFOLIO
wired to: ACCOUNT NUMBER ACCOUNT REGISTRATION

BEFORE WIRING You should notify our Client Services Department of your in-
Please contact tended wire purchase by 12:00 noon (Eastern time). To assure
Client proper receipt, please be sure your bank includes the Portfo-
Services (1- lio name, the account number Vanguard has assigned to you and
800-662-2739) the eight digit CoreStates number. If you are opening a new
account, please complete the Account Registration Form and
mail it to the "New Account" address above after completing
your wire arrangement. Note: Federal Funds wire purchase or-
ders will be accepted only when the Fund and Custodian Bank
are open for business.
-----------------------------------------------------

PURCHASING BY Telephone exchanges are not accepted for the Portfolio. You
EXCHANGE (from may, however, open an account by exchange by providing the
a Vanguard appropriate information on the Account Registration Form. The
account) new account will have the same registration as the existing
account. However, the Portfolio reserves the right to refuse
any exchange purchase request.
-----------------------------------------------------

PURCHASING BY The Fund Express Automatic Investment option lets you move
FUND EXPRESS money from your bank account to your Vanguard account on the
schedule (monthly, bimonthly [every other month], quarterly
or yearly) you select. To establish this option, please pro-
Automatic vide the appropriate information on the Account Registration
Investment Form. We

16
<PAGE>

will send you a confirmation of your Fund Express enrollment;
please wait three weeks before using the service.
- --------------------------------------------------------------------------------
CHOOSING A You must select one of three distribution options:
DISTRIBUTION
OPTION 1. AUTOMATIC REINVESTMENT OPTION--Both dividends and capital
gains distributions will be reinvested in additional
shares. This option will be selected for you automatically
unless you specify one of the other options.

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

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

You may change your option by calling our Client Services De-
partment (1-800-662-2739).

TAX CAUTION Under Federal Tax laws, the Portfolio is required to distrib-
ute net capital gains and dividend income to Portfolio share-
INVESTORS holders. These distributions are made to all shareholders who
SHOULD ASK own Portfolio shares as of the distribution's record date,
ABOUT THE regardless of how long the shares have been owned. Purchasing
TIMING OF shares just prior to the record date could have a significant
CAPITAL GAINS impact on your tax liability for the year. For example, if
AND DIVIDEND you purchase shares immediately prior to the record date of a
DISTRIBUTIONS sizable capital gain or income dividend distribution, you
BEFORE will be assessed taxes on the amount of the capital gain
INVESTING and/or dividend distribution later paid even though you owned
the Portfolio shares for just a short period of time. (Taxes
are due on the distributions even if the dividend or gain is
reinvested in additional Portfolio shares.) While the total
value of your investment will be the same after the distribu-
tion--the amount of the distribution will offset the drop in
the NAV of the shares--you should be aware of the tax impli-
cations the timing of your purchase may have.

Prospective investors should, therefore, inquire about poten-
tial distributions before investing. The Portfolio's annual
dividend and capital gain distributions normally occurs in
December. For additional information on distributions and
taxes, see the section titled "Dividends, Capital Gains, and
Taxes."
- --------------------------------------------------------------------------------

17
<PAGE>

CERTIFICATES Share certificates will be issued upon request. If a certifi-
cate is lost, you may incur an expense to replace it.

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

WHEN YOUR Your trade date is the date on which your account is credit-
ACCOUNT WILL ed. If your purchase is made by check, Federal Funds wire or
BE CREDITED exchange, and is received by the close of the New York Stock
Exchange (generally 4:00 p.m. Eastern time), your trade date
is the day of receipt. If your purchase is received after the
close of the Exchange, your trade date is the next business
day. There is a transaction fee equal to 2% of the dollar
amount invested. See "Portfolio Expenses."

SELLING YOUR You may withdraw any portion of the funds in your account by
SHARES redeeming shares at any time. You may initiate a request in
writing or by telephone. Your redemption proceeds are nor-
mally mailed within two business days after the receipt of
the request in Good Order.
--------------------------------------------------------------

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

18
<PAGE>

DEFINITION OF GOOD ORDER means that the request includes the following:
GOOD ORDER

1. The account number and Portfolio name.

2. The amount of the transaction (specified in dollars or
shares).

3. The signatures of all owners EXACTLY as they are regis-
tered on the account.

4. Any required signature guarantees.

5. Other supporting legal documentation that might be re-
quired in the case of estates, corporations, trusts and
certain other accounts.

6. Any certificates that you are holding for the account.

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

Redemption proceeds must be sent to you within seven days of
receipt of your request in Good Order.

19
<PAGE>

Portfolio reserves the right to revise or terminate the tele-
phone redemption privilege at any time.

The Portfolio may suspend the redemption right or postpone
payment at times when the New York Stock Exchange is closed
or under any emergency circumstances as determined by the
United States Securities and Exchange Commission.

If the Board of Directors determines that it would be detri-
mental to the best interests of the Portfolio's remaining
shareholders to make payment in cash, the Portfolio may pay
redemption proceeds in whole or in part by a distribution in
kind of readily marketable securities.
--------------------------------------------------------------

MINIMUM Due to the relatively high cost of maintaining smaller ac-
ACCOUNT counts, the Portfolio reserves the right to redeem shares in
BALANCE any account that is below the minimum initial investment
REQUIREMENT amount of $3,000. In addition, if at any time your total in-
vestment in the Portfolio falls below $1,000, you will be no-
tified that the value of your account is below the Portfo-
lio's minimum account balance requirement of $1,000. You
would then be allowed 60 days to make an additional invest-
ment before the account is liquidated. Proceeds would be
promptly paid to the shareholder. This minimum does not apply
to Individual Retirement Accounts, other retirement accounts,
or Uniform Gifts/Transfers to Minors Act accounts.
- --------------------------------------------------------------------------------

EXCHANGING Should your investment goals change, you may exchange your
YOUR SHARES shares of the Portfolio for those of other available Vanguard
Funds. Exchanges to or from the Portfolio may be made only by
mail. TELEPHONE EXCHANGES ARE NOT ACCEPTED FOR THE PORTFOLIO
EXCEPT RETIREMENT ACCOUNTS.

EXCHANGING BY Please be sure to include on your exchange request the name
MAIL and account number of your Portfolio, the name of the Fund
you wish to exchange into, the amount you wish to exchange,
and the signatures of all registered account holders. Send
your request to VANGUARD FINANCIAL CENTER, VANGUARD INTERNA-
TIONAL EQUITY INDEX FUND, P.O. BOX 1120, VALLEY FORGE, PA
19482. (For express or registered mail, send your request to
Vanguard Financial Center, Vanguard International Equity In-
dex Fund, 455 Devon Park Drive, Wayne, PA 19087.) The ex-
change privilege is only available in states in which the
shares of the Portfolio are registered for sale. The Portfo-
lio's shares are currently registered for sale in all 50
states and the Portfolio intends to maintain such registra-
tion.
--------------------------------------------------------------

20
<PAGE>

IMPORTANT Before you make an exchange, you should consider the follow-
EXCHANGE ing:
INFORMATION

. Please read the Portfolio's prospectus before making an ex-
change. For an additional copy and for answers to any ques-
tions you may have, call our Investor Information Depart-
ment (1-800-662-7447).

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

. Exchanges are accepted only if the registrations and the
Taxpayer Identification numbers of the two accounts are
identical.

. The shares to be exchanged must be on deposit and not held
in certificate form.

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

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

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

Every effort will be made to maintain the exchange privilege.
However, the Portfolio reserves the right to revise or termi-
nate its provisions, limit the amount of or reject any ex-
change as deemed necessary, at any time.
- --------------------------------------------------------------------------------

EXCHANGE The Portfolio's exchange privilege is not intended to afford
PRIVILEGE shareholders a way to speculate on short-term movements in
LIMITATIONS the market. Accordingly, in order to prevent excessive use of
the exchange privilege that may potentially disrupt the man-
agement of the Portfolio and increase transaction costs, the
Portfolio has established a policy of limiting excessive ex-
change activity.

Exchange activity generally will not be deemed excessive if
limited to TWO SUBSTANTIVE EXCHANGE REDEMPTIONS (AT LEAST 30
DAYS APART) from the Portfolio during any twelve month peri-
od. These limitations do not apply to exchanges from Van-
guard's money market portfolios. Notwithstanding these limi-
tations, the Portfolio reserves the right to reject any pur-
chase request (including exchange purchases from other Van-
guard portfolios) that is reasonably deemed to be disruptive
to efficient portfolio management.
- --------------------------------------------------------------------------------

The ability to initiate redemptions (except wire redemptions)
IMPORTANT and exchanges by telephone is automatically established on
INFORMATION your account unless you request in writing that telephone
ABOUT transactions on your account not be permitted.
TELEPHONE
TRANSACTIONS

To protect your account from losses resulting from unautho-
rized or fraudulent telephone instructions, Vanguard adheres
to the following security procedures:

1. SECURITY CHECK. To request a transaction by telephone, the
caller must know (i) the name of the Portfolio; (ii) the 10-
digit account number; (iii) the exact name

21
<PAGE>

in which the account is registered; and (iv) the Social Secu-
rity or Taxpayer Identification number listed on the account.

2. PAYMENT POLICY. The proceeds of any telephone redemption
by mail will be made payable to the registered shareowner and
mailed to the address of record, only.

Neither the Fund nor Vanguard will be responsible for the au-
thenticity of transaction instructions received by telephone,
provided that reasonable security procedures have been fol-
lowed. Vanguard believes that the security procedures de-
scribed above are reasonable and that if such procedures are
followed, you will bear the risk of any losses resulting from
unauthorized or fraudulent telephone transactions on your ac-
count. If Vanguard fails to follow reasonable security proce-
dures, it may be liable for any losses resulting from unau-
thorized or fraudulent telephone transactions on your
account.
- --------------------------------------------------------------------------------

TRANSFERRING You may transfer the registration of any of your Portfolio
REGISTRATION shares to another person by completing a transfer form and
sending it to: VANGUARD FINANCIAL CENTER, P.O. BOX 1110, VAL-
LEY FORGE, PA 19482 ATTENTION: TRANSFER DEPARTMENT. The re-
quest must be in Good Order. To obtain a transfer form and
full instructions, please call our Client Services Department
(1-800-662-2739).
- --------------------------------------------------------------------------------

OTHER VANGUARD For more information about any of these services, please call
SERVICES our Investor Information Department at 1-800-662-7447.

STATEMENTS AND Vanguard will send you a confirmation statement each time you
REPORTS initiate a transaction in your account except for
checkwriting redemptions from Vanguard money market accounts.
You will also receive a comprehensive account statement at
the end of each calendar quarter. The fourth-quarter state-
ment will be a year-end statement, listing all transaction
activity for the entire calendar year.

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

Financial reports on the Portfolio will be mailed to you
semi-annually, according to the Portfolio's fiscal year-end.

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

22
<PAGE>

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

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

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

23
<PAGE>

(LOGO)

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

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

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

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

TELE-ACCOUNT FOR

24-HOUR ACCESS:

1-800-662-6273 (ON BOARD)

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

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

(LOGO)

P R O S P E C T U S

[LOGO OF THE VANGUARD GROUP APPEARS HERE]

<PAGE>

PART B

VANGUARD INTERNATIONAL EQUITY INDEX FUND, INC.

STATEMENT OF ADDITIONAL INFORMATION

APRIL . , 1994

This Statement is not a prospectus, but should be read in conjunction with
the Fund's current Prospectus (dated April . , 1994). To obtain the Prospec-
tus please call:

Vanguard Investor Information Center
1-800-662-7447

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Investment Objective and Policies ......................................... B-1
Investment Limitations .................................................... B-4
Purchase of Shares ........................................................ B-5
Redemption of Shares....................................................... B-6
The Vanguard Group......................................................... B-6
Directors and Officers..................................................... B-7
Portfolio Transactions .................................................... B-8
Performance Measures....................................................... B-9
Foreign Investments........................................................ B-10
Total Return............................................................... B-11
Financial Statements....................................................... B-11
</TABLE>

INVESTMENT OBJECTIVE AND POLICIES

REPURCHASE AGREEMENTS. Each Portfolio along with the other members of The
Vanguard Group, may invest in repurchase agreements with commercial banks,
brokers or dealers to generate income from its excess cash balances. A repur-
chase agreement is an agreement under which a Portfolio acquires a money mar-
ket instrument (generally a security issued by the U.S. Government or an
agency thereof, a banker's acceptance or a certificate of deposit) from a
seller, subject to resale to the seller at an agreed upon price and date (nor-
mally, the next business day). A repurchase agreement may be considered a loan
collateralized by securities. The resale price reflects an agreed upon inter-
est rate effective for the period the instrument is held by a Portfolio and is
unrelated to the interest rate on the underlying instrument. In these transac-
tions, the securities acquired by a Portfolio (including accrued interest
earned thereon) must have a total value in excess of the value of the repur-
chase agreement and are held by the Fund's custodian bank until repurchased.
In addition, the Fund's Board of Directors 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 Portfolio. No more than an aggregate of 10% of the
Portfolio's assets, at the time of investment, will be invested in repurchase
agreements having maturities longer than seven days and securities subject to
legal or contractual restrictions on resale, or for which there are no readily
available market quotations. A Portfolio will enter into repurchase agreements
only with Federal Reserve member banks with minimum assets of at least $2 bil-
lion or registered securities dealers.

The use of repurchase agreements involves certain risks. For example, if the
other party to the agreement defaults on its obligation to repurchase the un-
derlying security at a time when the value of the security has declined, the
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 the Bankruptcy Code or other laws, a court may determine that the under-
lying security is collateral for a loan by a Portfolio not within the control
of the Portfolio and therefore the Portfolio may not be able to substantiate
its interest in the underlying security and may be deemed an unsecured credi-
tor of the other party to the agreement. While the Fund's management acknowl-
edges these risks, it is expected that they can be controlled through careful
monitoring procedures.

B-1
<PAGE>

LENDING OF SECURITIES Each Portfolio may lend its securities to qualified
institutional investors who need to borrow securities in order to complete
certain transactions, such as covering short sales, avoiding failures to de-
liver securities or completing arbitrage operations. By lending its portfolio
securities, a Portfolio attempts to increase its net investment income through
the receipt of interest on the loan. Any gain or loss in the market price of
the securites loaned that might occur during the term of the loan would be for
the account of the Portfolio. A Portfolio may lend its portfolio securities to
qualified brokers, dealers, banks or other financial institutions, so long as
the terms, the structure and the aggregate amount of such loans are not incon-
sistent with the Investment Company Act of 1940, or the Rules and Regulations
or interpretations of the Securites and Exchange Commission (the "Commission")
thereunder, which currently required 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 securi-
ties loaned, (b) the borrower add to such collateral whenever the price of the
securites loaned rises (i.e. the borrower "marks to the market" on a daily ba-
sis), (c) the loan be made subject to termination by a Portfolio at any time
and (d) the Portfolio receive reasonable interest on the loan (which may in-
clude the Portfolio'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 a Portfolio 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 five 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 Fund's Board of
Directors.

FUTURES CONTRACTS, OPTIONS, WARRANTS, CONVERTIBLE SECURITIES AND SWAP
AGREEMENTS Each Portfolio may enter into futures contracts, options, warrants,
options on futures contracts, convertible securities and swap agreements for
the purpose of remaining fully invested and reducing transactions costs.
Futures contracts provide for the future sale by one party and purchase by an-
other party of a specified amount of a specific security at a specified future
time and at a specified price. Futures contracts which are standardized as to
maturity date and underlying financial instrument are traded on national
futures exchanges. The Fund's trading of futures contracts and options is reg-
ulated under the Commodity Exchange Act by the Commodity Futures Trading Com-
mission ("CFTC"), a U.S. Government Agency.

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

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

After a futures contract position is opened, the value of the contract is
marked to market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the

B-2
<PAGE>

contract value may reduce the required margin, resulting in a repayment of ex-
cess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Fund ex-
pects to earn interest income on its margin deposits.

Each Portfolio will use futures contracts and options to simulate full in-
vestment in the underlying index while retaining a cash balance for Fund man-
agement purposes.

Regulations of the CFTC applicable to the Fund require that all of its
futures transactions constitute bona fide hedging transactions. Each Portfolio
will only sell futures contracts to protect securities it owns against price
declines 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 approximately 75% of its futures contract purchases will be
"completed," that is, equivalent amounts of related securities will have been
purchased or are being purchased by a Portfolio upon sale of open futures con-
tracts.

Although techniques other than the sale and purchase of futures contracts
could be used to control a Portfolio's exposure to market fluctuations, the
use of futures contracts may be a more effective means of hedging this expo-
sure. While each Portfolio will incur commission expenses in 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 Portfolio 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 a Portfolio's total assets. Assets committed to futures or options
will be held in a segregated account at the Fund's custodial bank.

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

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

The risk of loss in trading futures contracts in some strategies can be sub-
stantial, due both to the low margin deposits required, and the extremely high
degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and sub-
stantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin,
a subsequent 10% decrease in the value of the futures contract would result in
a total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit if the contract were closed
out. Thus, a purchase or sale of a futures contract may result in losses in
excess of the amount invested in the contract. However, because the futures
strategies of each Portfolio are engaged in only for hedging purposes, the ad-
viser

B-3
<PAGE>

does not believe that a Portfolio is subject to the risks of loss frequently
associated with futures transactions. A Portfolio would presumably have sus-
tained comparable losses if, instead of the futures contacts, it had invested
in the underlying finanical instrument and sold it after the decline.

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

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

SWAP AGREEMENTS Swap agreements are contracts between parties in which one
party agrees to make payments to the other party based on the change in market
value of a specified index or asset. In return, the other party agrees to make
payments to the first party based on the return of a different specified index
or asset. Although swap agreements entail the risk that a party will default
on its payment obligations thereunder, the Portfolio will minimize this risk
by entering into agreements that mark to market no less frequently than
quarterly. Swap agreements also bear the risk that the Portfolio will not be
able to meet its obligation to the counterparty. This risk will be mitigated
by investing the Portfolio in the specific asset for which it is obligated to
pay a return.

FEDERAL TAX TREATMENT OF FUTURES CONTRACTS Except for transactions a Portfo-
lio has identified as hedging transactions, it 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 most 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, with-
out regard to the holding period of the contract. Furthermore, sales of
futures contracts which are intended to hedge against a change in the value of
securities held by a Portfolio may affect the holding period of such securi-
ties and, consequently, the nature of the gain or loss on such securities upon
disposition.

In order for a Portfolio to continue to qualify for Federal income tax
treatment as a regulated investment company, at least 90% of its gross income
for a taxable year must be derived from qualifying income: i.e., dividends,
interest, income derived from loans of securities, gains from the sale of se-
curities or of foreign currencies or other income derived with respect to the
Portfolio's business of investing in securities. In addition, gains realized
on the sale or other disposition of securities held for less than three months
must be limited to less than 30% of the Portfolio's annual gross income. It is
anticipated that any net gain realized from the closing out of futures con-
tracts will be considered gain from the sale of securities and therefore be
qualifying income for purposes of the 90% requirement. In order to avoid real-
izing excessive gains on securities held less than three months, a Portfolio
may be required to defer the closing out of futures contracts beyond the time
when it would otherwise be advantageous to do so. It is anticipated that
unrealized gains on futures contracts, which have

B-4
<PAGE>

been open for less than three months as of the end of the Fund's fiscal year
and which are recognized for tax purposes, will not be considered gains on
sales of securities held less than three months for the purpose of the 30%
test.

Each Portfolio will distribute to shareholders annually any net capital
gains which have been recognized for federal income tax purposes (including
unrealized gains at the end of the Fund's fiscal year) on futures transac-
tions. 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.

INVESTMENT LIMITATIONS

The following restrictions and fundamental policies cannot be changed with-
out approval of the holders of a majority of the outstanding shares of each
Portfolio (as defined in the Investment Company Act of 1940). A Portfolio may
not:

1) invest in commodities or purchase real estate, although it may pur-
chase securities of companies which deal in real estate or interest there-
in, and it may invest in stock index futures contracts, stock futures con-
tracts, foreign currency futures contracts and options and warrants thereon
to the extent that not more than 5% of its assets are required as deposit
to secure obligations under such futures contracts;

2) purchase securities on margin or sell securities short (the deposit or
payment by the Fund of initial or variation margin in order to engage in an
interest-rate futures contract is not considered the purchase of a security
on margin);

3) purchase more than 10% of the outstanding voting securities of any is-
suer;

4) with respect to 75% of its assets invest more than 5% of the value of
its total assets in the securities of any single issuer except obligations
of the U.S. Government and its instrumentalities;

5) borrow money, except from a bank and only as a temporary or emergency
measure and in no event in excess of 15% of total assets taken at the lower
of their value or cost;

6) pledge, mortgage, or hypothecate any of its assets to an extent
greater than 5% of the value of its total assets;

7) issue senior securities (collateral arrangements with regard to ini-
tial and variation margin on futures contracts shall not be considered is-
suance of a senior security);

8) engage in the business of underwriting securities issued by other per-
sons, except to the extent that the Fund may technically be deemed to be an
underwriter under the Securities Act of 1933, as amended, in disposing of
portfolio securities;

9) purchase or otherwise acquire any security if, as a result, more than
15% of its net assets would be invested in securities that are illiquid
(including any investment in the Vanguard Group, Inc.);

10) invest for the purpose of controlling management of any company;

11) invest in securities of other investment companies, except as may be
acquired as a part of a merger, consolidation or acquisition of assets ap-
proved by the Fund's shareholders or otherwise to the extent permitted by
Section 12 of the Investment Company Act of 1940. The Portfolio will invest
only in investment companies which have investment objectives and invest-
ment policies consistent with those of the Fund;

12) have dealing on behalf of the fund with Officers and Directors of the
Fund, except for the purchase or sale of securities on an agency or commis-
sion basis;

13) make loans to any officers, directors or employees of the Fund;

14) invest in assessable securities or securities involving unlimited li-
ability on the part of the holders thereof;

B-5
<PAGE>

15) make loans except (i) by purchasing bonds, debentures or similar ob-
ligations (including repurchase agreements, which are either publicly dis-
tributed or customarily purchased by institutional investors) and (ii) by
lending its securities to banks, brokers, or dealers and other financial
institutions so long as such loans are not inconsistent with the Investment
Company Act or the Rules and Regulations or interpretations of the Securi-
ties and Exchange Commission thereunder;

16) invest directly in oil, gas or other mineral exploration or develop-
ment programs.

These limitations are considered at the time investment securities are pur-
chased. Notwithstanding these limitations, a Portfolio may own all or any por-
tion of the securities of, or make loans to, or contribute to the costs or
other financial requirements of any company which will be wholly owned by the
Fund and one or more other investment companies and is primarily engaged in
the business of providing, at-cost, management, administrative, distribution
or related services to the Fund and other investment companies. See "The Van-
guard Group."

PURCHASE OF SHARES

The Fund reserves the right in its sole discretion (i) to suspend the offer-
ings of its shares, (ii) to reject purchase orders when in the judgment of
management such rejection is in the best interests of the Fund, and (iii) to
reduce or waive the minimum for initial and subsequent investments for certain
fiduciary accounts or under circumstances where certain economies can be
achieved in sales of the Fund's shares.

REDEMPTION OF SHARES

The 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 Securities and Exchange
Commission (the "Commission"), (ii) during any period when an emergency exists
as defined by the rules of the Commission as a result of which it is not rea-
sonably 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.

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

No charge is made by the Fund for redemptions from the European and Pacific
Portfolios. There is a 1% redemption transaction fee charged for redemptions
from the Emerging Market Portfolio. The redemption transaction fee is paid to
the Portfolio to reimburse the Portfolio for transaction costs it incurs while
liquidating securities in order to fund redemptions. Any redemption may be
more or less than the shareholder's cost depending on the market value of the
securities held by a Portfolio of the Fund.

THE VANGUARD GROUP

The Fund is a member of The Vanguard Group of Investment Companies, which
consists of 32 investment companies.

B-6
<PAGE>

Through their jointly-owned subsidiary, The Vanguard Group, Inc. ("Van-
guard"), the Fund and the other Funds in the 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
certain Vanguard Funds.

Vanguard employs a supporting staff of management and administrative person-
nel 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 net expenses, which are allocated among the Funds
under methods approved by the Board of Directors (Trustees) of each Fund. In
addition, each Fund bears its own direct expenses, such as legal, auditing and
custodian fees.

The Fund's Officers are also Officers and employees of Vanguard. No Officer
or employee owns, or is permitted to own, any securities of any external ad-
viser for the Funds.

The Vanguard Group was established and operates under a Funds' Service
Agreement which was approved by the shareholders of each of the Funds. The
amounts which each of the Funds have invested are adjusted from time to time
in order to maintain the proportionate relationship between each Fund's rela-
tive net assets and its contribution to Vanguard's capital. For the year ended
December 31, 1993 the Fund had contributed capital of $ . representing . %
of Vanguard's capitalization. The Fund's Service Agreement was amended on May
10, 1993, to provide as follows: (a) each Vanguard Fund may invest up to 0.40%
of its current net assets in Vanguard and (b) there is no other limitation on
the amount that each Vanguard Fund may contribute to Vanguard's Capitaliza-
tion.

MANAGEMENT. Corporate management and administrative services include: (1)
executive staff; (2) accounting and financial; (3) legal and regulatory; (4)
shareholder account maintenance; (5) monitoring and control of custodian rela-
tionships; (6) shareholder reporting; and (7) review and evaluation of advi-
sory and other services provided to the Funds by third parties. The Fund's
share of Vanguard's actual net costs of operation relating to management and
administrative services (including transfer agency) for the year ended Decem-
ber 31, 1993 totaled approximately $ . .

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

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

One-half of the distribution expenses of a marketing and promotional nature
is allocated among the Funds based upon 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 contri-
bution for distribution expenses of a marketing and promotional nature shall
exceed 125% of average distribution expense rate for the Group, and that no
Fund shall incur annual distribution expenses in excess of 20/100 of 1% of its
average month-end net assets. During the fiscal year ended December 31, 1993,
the Fund paid approximately $ . of the Group's distribution and marketing ex-
penses, which represented an effective annual rate of 3/100 of 1% of its aver-
age month-end net assets.

INVESTMENT ADVISORY SERVICES. Vanguard's Core Management Group provides in-
vestment advising services to the Fund and also to the following Funds: Van-
guard Index Trust, Vanguard Balanced Index Fund, Vanguard Institutional Index
Fund, a portion of the assets of Vanguard/Windsor

B-7
<PAGE>

II, and several indexed separate accounts.

Vanguard's Fixed Income Group also provides investment advisory services to
the following Funds: Vanguard Municipal Bond Fund; Vanguard Money Market Re-
serves; several Portfolios of Vanguard Fixed Income Securities Fund; Vanguard
California Tax-Free Fund; Vanguard Ohio Tax-Free Fund; Vanguard New York In-
sured Tax-Free Fund; Vanguard New Jersey Tax-Free Fund; Vanguard Pennsylvania
Tax-Free Fund; Vanguard Florida Tax-Free Fund; Vanguard Bond Index Fund; Van-
guard Admiral Funds; and Vanguard Institutional Money Market Portfolio. These
services are provided on an at-cost basis by the Fixed Income Group. The com-
pensation and other expenses of this staff are paid by the Funds utilizing
these services.

REMUNERATION OF DIRECTORS AND OFFICERS. The Fund pays each Director, who is
not also an Officer, an annual fee plus travel and other expenses incurred in
attending Board meeetings. The Fund's Officers and employees are paid by Van-
guard which, in turn, is reimbursed by the Fund and each other Fund in the
Group, for its proportionate share of Officers' and employees' salaries and
retirement benefits. The Fund's proportionate share of remuneration paid to
Officers for the year ended December 31, 1993 was $ . . Under its retirement
plan, Vanguard contributes annually an amount equal to 10% of each Officer's
annual compensation plus 5.7% of that part of the Officer's compensation dur-
ing the year, if any, that exceeds the Social Security Taxable Wage Base then
in effect. Directors who are not officers are paid an annual fee upon retire-
ment equal to $1,000 for each year of service on the Board up to a maximum of
15 years. The Fund's proportionate share of retirement contributions for its
Officers for the year ended December 31, 1993 was approximately $ . .

DIRECTORS AND OFFICERS

The Officers of the Fund manage its day to day operations and are responsi-
ble to the Fund's Board of Directors. The Directors set broad policies for the
Fund and choose its Officers. The following is a list of the Directors and Of-
ficers of the Fund and a statement of their present positions and principal
occupations during the past five years. The mailing address of the Directors
and Officers of the Fund is: Post Office Box 876, Valley Forge, PA 19482.

JOHN C. BOGLE, Chairman, Chief Exec-
utive Officer and Director*

Chairman, Chief Executive Officer,
and Director of The Vanguard
Group, Inc., and of each of the
investment companies in The Van-
guard Group; Director of The Mead
Corporation and General Accident
Insurance.

JOHN J. BRENNAN, President &
Director*
President and Director of The Van-
guard Group, Inc., and of each of
the other investment companies in
The Vanguard Group.

ROBERT E. CAWTHORN, Director
Chairman and Chief Executive Offi-
cer, Rhone-Poulenc Rorer, Inc.;
Director of Immune Response Corp.
and Sun Company, Inc.; Trustee,
Universal Health Realty Income
Trust.

BARBARA BARNES HAUPTFUHRER, Director
Director of The Great Atlantic and
Pacific Tea Company, ALCO Standard
Corp., Raytheon Company, Knight-
Ridder, Inc. and Massachusetts Mu-
tual Life Insurance Co.

BRUCE K. MACLAURY, Director
President, The Brookings Institu-
tion; Director of Dayton Hudson
Corporation, American Express
Bank, Ltd. and the St. Paul Compa-
nies, Inc.

BURTON G. MALKIEL, Director
Chemical Bank Chairmen's Professor
of Economics, Princeton Universi-
ty; Director of Prudential Insur-
ance Co. of America, Amdahl Corpo-
ration, Baker Fentress & Co.,
Jeffrey Co., The Southern New
England Telephone Company, and
Armstrong Rubber Co.; Governor,
American Stock Exchange, Inc.

ALFRED M. RANKIN, JR., Director

President, Chief Executive Officer
and Director of NACCO Industries,
Inc.; Director of The BFGoodrich
Company, The Standard Products Com-
pany and The Reliance Electric Com-
pany.

JOHN C. SAWHILL, Director
President and Chief Executive Offi-
cer, The Nature Conservancy; for-
merly, Director and Senior Partner,
McKinsey & Co.; President, New York
University; Director of Pacific Gas
and Electric Company and NACCO In-
dustries.

B-8

<PAGE>

JAMES O. WELCH, JR., Director
Retired Chairman of Nabisco
Brands, Inc. and retired Vice
Chairman and Director of RJR Na-
bisco; Director of TECO Energy,
Inc.

J. LAWRENCE WILSON, Director
Chairman and Director of Rohm &
Haas Company; Director of Cummins
Engine Company, Vanderbilt Uni-
versity and Trustee of the Culver
Educational Foundation.

RAYMOND J. KLAPINSKY, Secretary*
Senior Vice President and Secre-
tary of The Vanguard Group, Inc.;
Secretary of each of the invest-
ment companies in The Vanguard
Group.

RICHARD F. HYLAND, Treasurer*
Treasurer of The Vanguard Group,
Inc. and of each of the investment
companies in The Vanguard Group.

KAREN E. WEST, Controller*
Vice President of The Vanguard
Group, Inc.; Controller of each of
the investment companies in The Van-
guard Group.

- --------
* Officers of the Fund are "inter-
ested persons" as defined in the
Investment Company Act of 1940.

PORTFOLIO TRANSACTIONS

In placing portfolio transactions, the Fund uses its best judgment to choose
the broker most capable of providing the brokerage services necessary to obtain
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 will be given to those brokers which
supply statistical information and provide other services in addition to execu-
tion services to the Fund.

Since the Fund does not market its shares through intermediary brokers or
dealers, it is not the Fund's practice to allocate brokerage or principal busi-
ness on the basis of sales of its shares which may be made through such firms.
However, the 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.
For the years ended December 31, 1991, 1992 and 1993 the Fund paid approxi-
mately $537,048, $875,337 and $ . in brokerage commissions, respectively.

PERFORMANCE MEASURES

The Fund may use one or more of the following unmanaged indexes for compara-
tive performance purposes:

MORGAN STANLEY CAPITAL INTERNATIONAL SELECT EMERGING MARKETS INDEX--

MORGAN STANLEY CAPITAL INTERNATIONAL EAFE (FREE) INDEX--is an arithmetic, mar-
ket value-weighted average of the performance of over 1,000 securities listed
on the stock exchanges of countries in Europe, Australia and the Far East.

FT-ACTUARIES WORLD INDEX--includes approximately 2,400 securities from 24 coun-
tries including the U.S.

FT-ACTUARIES EURO-PACIFIC INDEX--a subset of the FT Actuaries World Index,
which excludes companies in the U.S., Canada, Mexico and South Africa.

SALOMON-RUSSELL PRIMARY MARKET INDEX--consists of the approximately 700 largest
stocks within 23 countries.

B-9
<PAGE>

SALOMON-RUSSELL EXTENDED MARKET INDEX--consists of approximately 1,000 medium
and small capitalization stocks from 23 countries.

SALOMON-RUSSELL BROAD MARKET INDEX--consists of all of the stocks within the
Primary Market Index and the Extended Market Index.

RUSSELL UNIVERSE OF NON-U.S. EQUITY PORTFOLIOS--a universe of separate ac-
counts and pooled funds available to U.S. investors, which invest in interna-
tional equities.

RUSSELL UNIVERSE OF WORLD EQUITY PORTFOLIOS--a universe of equity-oriented
global portfolios.

LIPPER INTERNATIONAL UNIVERSE--a universe of mutual funds that invest in in-
ternational equities.

LIPPER DIVERSIFIED INTERNATIONAL UNIVERSE--a universe of mutual funds that in-
vest in international equities from more than one country.

LIPPER INTERNATIONAL AVERAGE--the average return of the portfolios included in
the Lipper International Universe.

LIPPER DIVERSIFIED INTERNATIONAL AVERAGE--the average return of the portfolios
included in the Lipper Diversified International Universe.

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

WILSHIRE 5000 EQUITY INDEXES--consists of nearly 5,000 common equity securi-
ties, covering all stocks in the U.S. for which daily pricing is available.

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

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.

BARING EMERGING MARKETS INDEX--a diversified index of approximately 250 rela-
tively liquid stocks from . emerging market countries.

SALOMON BROTHERS BROAD INVESTMENT-GRADE BOND--is a market-weighted index that
contains approximately 4,700 individually priced investment-grade corporate
bonds rated BBB or better, U.S. Treasury and agency issues and mortgage pass-
through securities.

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

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--35% Standard & Poor's 500 Index and 65% Salomon Brothers High
Grade Bond Index.

COMPOSITE INDEX--65% Standard & Poor's 500 Index, 35% Salomon Brothers High
Grade Bond Index.

B-10
<PAGE>

FOREIGN INVESTMENTS

FOREIGN INVESTMENTS. Investors should recognize that investing in foreign
companies involves certain special considerations which are not typically as-
sociated with investing in U.S. companies. Since the stocks of foreign compa-
nies are frequently denominated in foreign currencies, and since the Fund may
temporarily hold uninvested reserves in bank deposits in foreign currencies,
it will be affected favorably or unfavorably by changes in currency rates and
in exchange control regulations, and may incur costs in connection with con-
versions between various currencies. The investment policies of the Fund per-
mit it to enter into forward foreign currency exchange contracts in order to
hedge its holdings and commitments against changes in the level of future cur-
rency rates. Such contracts involve an obligation to purchase or sell a spe-
cific currency at a future date at a price set at the time of the contract.

As foreign companies are not generally subject to uniform accounting, audit-
ing and financial reporting standards and practices comparable to those appli-
cable 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 secu-
rities 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 or confiscatory taxation, political or so-
cial instability, or diplomatic developments which could affect U.S. invest-
ments in those countries.

Although the Fund will endeavor to achieve most favorable execution costs in
its portfolio transactions, fixed commissions on many foreign stock exchanges
are generally higher than negotiated commissions on U.S. exchanges. In addi-
tion, it is expected that the expenses for custodian arrangements of the
Fund's foreign securities will be somewhat greater than the expenses for a
Fund that invests primarily in domestic securities.

Certain foreign governments levy withholding taxes against dividend and in-
terest income. Although in some countries a portion of these taxes are recov-
erable, the non-recovered portion of foreign withholding taxes will reduce the
income received from the companies comprising the Fund's Portfolio.

Over the last decade the growth in the international stock markets has con-
siderably outpriced that of that of the U.S. Stock Market. Almost two-thirds
of the worlds equity market capitalization now lies outside the United States.

As of December 31, 1993, the total market capitalization of the Morgan Stan-
ley Capital International World Stock Market Index was $ . trillion. The ma-
jor countries and regions comprising the Index are as follows:

<TABLE>
<CAPTION>
PERCENT OF WORLD INDEX
CAPITALIZATION
----------------------
<S> <C> <C>
United States.................................... . %
Canada........................................... .
Japan............................................ .
Other Pacific Basin.............................. .
-----------
Total Pacific Basin.............................. .
Europe........................................... .
</TABLE>

B-11
<PAGE>

TOTAL RETURN

The average annual total return for the European Portfolio since its incep-
tion on June 18, 1990 and for the one year period ended December 31, 1993 was
. % and . %, respectively. The average annual return for the Pacific Portfo-
lio for the same periods was . % and . %, respectively.

FINANCIAL STATEMENTS

The Fund's Financial Statements for the year ended December 31, 1993, in-
cluding the financial highlights, appearing in the Fund's 1993 Annual Report
to Shareholders, and the report thereon of Price Waterhouse, independent ac-
countants, also appearing therein, are incorporated by reference in this
Statement of Additional Information. The Fund's Annual Report to Shareholders
is enclosed with this Statement of Additional Information.

B-12
<PAGE>

PART C

VANGUARD INTERNATIONAL EQUITY INDEX FUND, INC.

OTHER INFORMATION

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS

(A) FINANCIAL STATEMENTS

The Registrant's Financial Statements for the year ended December 31, 1993,
including Price Waterhouse's report thereon, are incorporated by reference, in
the Statement of Additional Information, from the Registrant's 1993 Annual Re-
port to Shareholders which has been filed under cover of Form SE as an Exhibit
to this Registration Statement. The Financial Statements included in the An-
nual Report are:

1. Statement of Net Assets as of December 31, 1993

2. Statement of Operations for the year ended December 31, 1993

3. Statement of Changes of Net Assets for the years ended December 31, 1992
and 1993

4. Financial Highlights for the respective periods presented in the period
ended December 31, 1993

5. Notes to Financial Statements

6. Report of Independent Accountants

(B) EXHIBITS

1. Articles of Incorporation

2. By-Laws of Registrant

3. Not Applicable

4. Not Applicable

5. Not Applicable

6. Not Applicable

7. Reference is made to the section entitled "Management of the Fund" in
the Registrant's Statement of Additional Information

8. Form of Custody Agreement

9. Form of Vanguard Service Agreement

10. Opinion of Counsel

11. Consent of Independent Accountants*

12. Financial Statements--reference is made to (a) above

13. Not Applicable

14. Not Applicable

15. Not Applicable

16. Schedule for Computation of Performance Quotations*

- --------

*Filed herewith

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

Reference is made to the caption "The Vanguard Group" in the Prospectus con-
stituting Part A and "Management of the Fund" in the Statement of Additional
Information constituting Part B of this Registration Statement.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES

As of December 31, 1993 there were . shareholders of the Pacific Portfolio
and . shareholders of the European Portfolio.

C-1
<PAGE>

ITEM 27. INDEMNIFICATION

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

Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the pyament by the registrant of expenses
incurred or paid by a director, officer or controlling person of the regis-
trant in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the securi-
ties being registered, the registrant will, unless in the opinion of its coun-
sel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the fi-
nal adjudication of such issue.

ITEM 28. 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 Regis-
trant and the other Funds in the Group. See the information concerning the
Vanguard Group, Inc. set forth in Parts A and B.

ITEM 29. PRINCIPAL UNDERWRITERS

(a) None.
(b) Not Applicable

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS

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

ITEM 31. MANAGEMENT SERVICES

Other than the Amended and Restated Funds' Service Agreement with The Van-
guard Group, Inc. which is filed herewith as Exhibit 9 and described in Part B
hereof under "Management of the Fund;" the Registrant is not a party of any
management-related service contract.

ITEM 32. UNDERTAKINGS

Registrant hereby undertakes to comply with the provisions of section 16(c)
of the 1940 Act in regard to shareholders' rights to call a meeting of share-
holders for the purpose of voting on the removal of directors and to assist in
shareholder communications in such matters, to the extent required by law.

Registrant hereby undertakes to provide an Annual Report to Shareholders or
prospective investors, free of charge upon request.

C-2
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT HAS DULY CAUSED THIS POST-
EFFECTIVE AMENDMENT TO THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE TOWN OF VALLEY FORGE AND
THE COMMONWEALTH OF PENNSYLVANIA, ON THE 15TH DAY OF FEBRUARY, 1994.

Vanguard International Equity Index
Fund

Raymond J. Klapinsky
By__________________________________
(RAYMOND J. KLAPINSKY) JOHN C.
BOGLE* CHAIRMAN AND CHIEF
EXECUTIVE OFFICER

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

SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
Raymond J. Klapinsky Chairman of the February 15, 1994
- ------------------------------------- Board, Director,
(RAYMOND J. KLAPINSKY) and Chief Executive
JOHN C. BOGLE* Officer

Raymond J. Klapinsky President and February 15, 1994
- ------------------------------------- Director
(RAYMOND J. KLAPINSKY)

JOHN J. BRENNAN*
Raymond J. Klapinsky Director February 15, 1994
- -------------------------------------
(RAYMOND J. KLAPINSKY)

BARBARA B. HAUPTFUHRER*
Raymond J. Klapinsky Director February 15, 1994
- -------------------------------------
(RAYMOND J. KLAPINSKY)

BRUCE K. MACLAURY
Raymond J. Klapinsky Director February 15, 1994
- -------------------------------------
(RAYMOND J. KLAPINSKY)

BURTON G. MALKIEL*
Raymond J. Klapinsky Director February 15, 1994
- -------------------------------------
(RAYMOND J. KLAPINSKY)

JOHN C. SAWHILL*
Raymond J. Klapinsky Director February 15, 1994
- -------------------------------------
(RAYMOND J. KLAPINSKY)

JAMES O. WELCH, JR.*
Raymond J. Klapinsky Director February 15, 1994
- -------------------------------------
(RAYMOND J. KLAPINSKY)

J. LAWRENCE WILSON*
Raymond J. Klapinsky Treasurer and February 15, 1994
- ------------------------------------- Principal Financial
(RAYMOND J. KLAPINSKY) Officer and
RICHARD F. HYLAND* Accounting Officer

</TABLE>

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

INDEX TO EXHIBITS

<TABLE>
<S> <C>
Exhibit No. 11................ Consent of Independent Accountants
Exhibit No. 16................ Schedule of Computation of Performance Quotations
</TABLE>

<PAGE>

EXHIBIT 11

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information, constituting parts of this amended Regis-
tration Statement on Form N-1A, of our report dated February 1, 1993 relating
to the financial statements, including the financial highlights, appearing in
the December 31, 1992 Annual Report to Shareholders of Vanguard International
Equity Index Fund, Inc. (comprised of the Pacific Portfolio and the European
Portfolio), which is also incorporated by reference into the Registration
Statement. We also consent to the references to us under the headings "Finan-
cial Highlights" and "General Information" in the Prospectus and "Financial
Statements" in the Statement of Additional Information.

By: (Signature)
Price Waterhouse

Philadelphia, PA

February 15, 1994

<PAGE>

EXHIBIT 16

SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS VANGUARD INTERNATIONAL
EQUITY INDEX FUND--EUROPEAN PORTFOLIO

1. Average Annual Total Return (As of December 31, 1993)

P(1 + T)n = ERV

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

T = average annual total return

N = number of years

ERV = ending redeemable value at the end of the period

EXAMPLE:

One Year

P = 1,000
T = . %
N = 1
ERV = $ .

Since inception May 1, 1990

P = 1,000
T = . %
N = Since inception (June 18, 1990)
ERV = $ .

SCHEDULE FOR COMPUTATION OF PERFORMANCE QUOTATIONS VANGUARD INTERNATIONAL
EQUITY INDEX FUND--PACIFIC PORTFOLIO

1. Average Annual Total Return (As of December 31, 1993)

P(1 + T)n = ERV

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

T = average annual total return

N = number of years

ERV = ending redeemable value at the end of the period

EXAMPLE:

One Year

P = 1,000
T = . %
N = 1
ERV = $ .

Since inception May 1, 1990

P = 1,000
T = . %
N = Since inception (June 18, 1990)
ERV = $ .