VANGUARD INTERNATIONAL EQUITY INDEX FUND INC, 485APOS, 1999-03-01

VANGUARD INTERNATIONAL EQUITY INDEX FUND INC
485APOS, 1999-03-01

Previous: GUARDIAN SEPARATE ACCOUNT D, N-30D, 1999-03-01

Next: KANSAS TAX EXEMPT TRUST SERIES 31, 24F-2NT, 1999-03-01

<PAGE>

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

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. 15

and

REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 18

VANGUARD INTERNATIONAL EQUITY

INDEX FUND

(Exact Name of Registrant as Specified in Declaration of Trust)

P.O. Box 2600,
Valley Forge, PA 19482
(Address of Principal Executive Office)

Registrant's Telephone Number (610) 669-1000

R. Gregory Barton, Esquire
P.O. Box 876
Valley Forge, PA 19482

It is proposed that this amendment become effective: on April 30, 1999, pur-
suant 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.

We have elected to register an indefinite number of shares pursuant to Regu-
lation 24f-2 under the Investment Company Act of 1940. Registrant filed its
Rule 24f-2 Notice for the year ended December 31, 1998 on . .

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

VANGUARD INTERNATIONAL EQUITY INDEX FUND

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
Form N-1A
Item Number Location in Prospectus
<C> <C> <S>
Item 1. Front and Back Cover Pages............ Front and Back Cover Pages
Item 2. Risk/Return Summary: Investments,
Risks and Performance................. Fund Profile
Item 3. Risk/Return Summary: Fee Table........ Fee Table
Item 4. Investment Objectives, Principal
Investment Strategies, and Related A Word About Risk; Who
Risks................................. Should Invest; Primary
Investment Strategies
Item 5. Management's Discussion of Fund
Performance........................... Herein incorporated by
reference to Registrant's
Annual Report to
Shareholders dated December
31, 1998 filed with the
Securities & Exchange
Commission's EDGAR system
on . .
Item 6. Capital Management, Organization, and
Structure............................. The Fund and Vanguard;
Investment Adviser
Item 7. Shareholder Information............... Share Price; Dividends,
Capital Gains, and Taxes;
Investing with Vanguard
Item 8. Distribution Arrangements............. Inside Front Cover Page
Item 9. Financial Highlights Information...... Financial Highlights
<CAPTION>
Form N-1A Location in Statement
Item Number of Additional Information
<C> <C> <S>
Item 10. Cover Page and Table of Contents...... Cover Page; Table of
Contents
Item 11. Fund History.......................... Description of the Trust
Item 12. Description of the Fund and its
Investments and Risks................. Investment Policies;
Description of the Trust;
and Fundamental Investment
Limitations
Item 13. Management of the Fund................ Management of the Trust
Item 14. Control Persons and Principal Holders
of Securities......................... Management of the Trust
Item 15. Investment Advisory and Other Investment Advisory
Services.............................. Services
Item 16. Brokerage Allocation and Other
Practices............................. Portfolio Transactions
Item 17. Capital Stock and Other Securities.... Description of the Trust
Item 18. Purchase, Redemption and Pricing of
Shares................................ Purchase of Shares;
Redemption of Shares; and
Share Price
Item 19. Taxation of the Fund.................. Description of the Trust
Item 20. Underwriters.......................... Not Applicable
Item 21. Calculation of Performance Data....... Total Return
Item 22. Financial Statements.................. Financial Statements
</TABLE>
<PAGE>

Vanguard International Stock Index Funds

Prospectus
April 30, 1999

A Group of International Stock Index Mutual Funds

Contents

1 An Introduction to Index Funds

2 Fund Profiles
2 Vanguard European Stock Index Fund
5 Vanguard Pacific Stock Index Fund
8 Vanguard Emerging Markets Stock Index Fund
11 Vanguard Total International Stock Index Fund

14 More on the Funds

19 The Funds and Vanguard

19 Investment Adviser

20 Year 2000 Challenge

20 Dividends, Capital Gains, and Taxes

21 Share Price

22 Financial Highlights

25 Investing with Vanguard

25 Services and Account Features

26 Types of Accounts

26 Buying Shares

28 Redeeming Shares

31 Transferring Registration

32 Fund and Account Updates

Glossary (inside back cover)

- --------------------------------------------------------------------------------
Why Reading This Prospectus Is Important
This prospectus explains the objective, risks, and strategies of each of the
Vanguard International Stock Index Funds. To highlight terms and concepts
important to mutual fund investors, we have provided "Plain Talk(R)"
explanations along the way. Reading the prospectus will help you to decide which
Fund, if any, is the right investment for you. We suggest that you keep it for
future reference.
- --------------------------------------------------------------------------------

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
<PAGE>

This prospectus provides information about the four Vanguard International
Stock Index Funds. After the introduction below, you'll find profiles that
summarize key features of each Fund. Following the profiles, there is important
additional information common to all of the Funds.

An Introduction to Index Funds

What is indexing?

An index is a group of securities whose overall performance is used as a
standard to measure investment performance. An index (or "passively managed")
fund tries to match, as closely as possible, the performance of an established
target index. The fund does this by holding either all--or a representative
sample--of the securities in the index.

Index funds may seek to track indexes that hold a certain type of stock--such
as growth or value, small-cap or large-cap, or those from just one industry--or
they may seek to track indexes that consist of a broader range of stocks--for
example, the entire foreign stock market.

Because they use a passive (or "indexing") investment approach, index funds
are not actively managed by investment advisers who buy and sell securities
based on research and analysis, in an attempt to outperform the market as a
whole. Rather, index funds simply mirror what the target index does, for better
or worse.

Why invest in index funds?

Index funds appeal to many investors for a number of reasons:

. Simplicity. Indexing is a straightforward market-matching strategy.

. Diversification. Indexes generally cover a wide variety of companies and
industries.

. Relative performance predictability. An index fund is expected to move in the
same direction--up or down-- as its target index and to closely parallel its
performance.

. Low cost. Index funds do not have many of the expenses of an actively managed
fund--such as research-- and keep trading activity, and thus brokerage
commissions, to a minimum.

. Low realization of capital gains. Because an index fund typically sells
securities only to respond to redemption requests or to adjust the number of
shares it holds to reflect a change in its target index, the fund's turnover
rate--and thus its realization of capital gains--is usually very low.

Keep in mind that an index fund has operating expenses and transaction costs; a
market index does not. Therefore, an index fund--while expected to track its
target index as closely as possible--will typically be unable to match the
performance of the index exactly.

For more information about index funds, see "Indexing Methods" under More on
the Funds.

PLAIN TALK ABOUT

The Costs of Investing

Costs are an important consideration in choosing a mutual fund. That's because
you, as a shareholder, pay the costs of operating a fund, plus any transaction
costs associated with the fund's buying and selling of securities. These costs
can erode a substantial portion of the gross income or capital appreciation a
fund achieves. Even seemingly small differences in expenses can, over
time, have a dramatic effect on a fund's performance.
<PAGE>

Fund Profile--Vanguard European Stock Index Fund

The following profile provides you with a summary of the key features of
Vanguard European Stock Index Fund.

INVESTMENT OBJECTIVE

The Fund seeks to match the performance of the Morgan Stanley Capital
International Europe Index, which is made up of more than 550 common stocks of
companies located in 15 European countries--mostly in the United Kingdom,
Germany, and France, (which comprise .%, .%, and .% of the Index's market
capitalization, respectively), as well as in Austria, Belgium, Denmark, Finland,
Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, and
Switzerland.

INVESTMENT STRATEGIES

The Fund employs a "passively managed" investment--or index--approach, by
holding a mix of securities that seeks to match the performance of the MSCI
Europe Index. For more information about passive management, see "Indexing
Methods" under More on the Funds.

PRIMARY RISKS

The Fund's total return, like stock prices generally, will fluctuate within a
wide range, so an investor could lose money over short or even long periods. In
addition to facing the same risks as U.S. stock funds, the Fund is subject to
the risks associated with foreign investing. Among these are:

. Country risk, which is the chance that a country's economy will be hurt by
political troubles, financial problems, or natural disasters.

. Currency risk, which is the chance that returns will be hurt by a rise in the
value of the U.S. dollar versus foreign currencies.

PERFORMANCE/RISK INFORMATION

The bar chart and table below provide an indication of the risk of investing in
the Fund. The bar chart shows the Fund's performance in each calendar year since
inception. The table shows how the Fund's average annual returns for one and
five calendar years and since inception compare with those of a broad-based
securities market index. Keep in mind that the Fund's past performance does not
indicate how it will perform in the future.

-----------------------------------------------------------
Annual Total Returns
-----------------------------------------------------------

-----------------------------------------------------------
Return figures do not reflect the annual account maintenance
fee of $10 for accounts with balances of less than $10,000.
-----------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended__________) and the lowest return for a quarter
was -.% (quarter ended_______________).
<PAGE>

------------------------------------------------------------------
Average Annual Total Returns for Years Ended December 31, 1998
------------------------------------------------------------------
1 Year 5 Years Since
Inception*
------------------------------------------------------------------
Vanguard European Stock Index Fund . % . % . %
Morgan Stanley Capital International
Europe Index . . .
------------------------------------------------------------------
*June 18, 1990
------------------------------------------------------------------

FEES AND EXPENSES

The following table describes the fees and expenses you would pay if you buy and
hold shares of the Fund. The expenses shown under Annual Fund Operating Expenses
are based upon those incurred in the fiscal year ended December 31, 1998.

Shareholder Fees (fees paid directly from your investment)

Sales Charge (Load) Imposed on Purchases: None
Transaction Fee on Purchases*: 0.5%
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fees: None
Exchange Fees: None

Annual Fund Operating Expenses (expenses deducted from the Fund's assets)

Management Expenses: .%
12b-1 Distribution Fees: None
Other Expenses: .%
Total Annual Fund Operating Expenses: .%

*The transaction fee on purchases is deducted from all purchases
(including exchanges from other Vanguard funds) but not from reinvested
dividends and capital gains.

For accounts with current balances of less than $10,000, Vanguard will deduct
an account maintenance fee from your annual distribution of the Fund's dividends
($10 each December). If your distribution is less than the fee, fractional
shares will be automatically redeemed to make up the difference.

The following example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. It illustrates the
hypothetical expenses that you would incur over various periods if you invest
$10,000 in the Fund. This example assumes that the Fund provides a return of 5%
a year, and that operating expenses remain the same. The results apply whether
or not you redeem your investment at the end of each period. (Note: The $10
annual account maintenance fee on accounts with current balances of less than
$10,000 is not included).

------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------------
$ . $ . $ . $ .
------------------------------------------------------------------

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.
<PAGE>

Fund Profile--Vanguard European Stock Index Fund (continued)
<TABLE>
Additional Information
<S> <C>
Dividends and Capital Gains Minimum Initial Investment
Paid annually in December $3,000; $1,000 for custodial accounts for minors

Investment Adviser Newspaper Abbreviation
Vanguard Core Management Group, Valley Forge, Pa., Europe
since inception

Inception Date Vanguard Fund Number
June 18, 1990 079

Net Assets as of December 31, 1998 Cusip Number
$ . billion 922042205

Suitable for IRAs Ticker Symbol
Yes VEURX
</TABLE>
<PAGE>

Fund Profile--Vanguard Pacific Stock Index Fund

The following profile summarizes key features of Vanguard Pacific Stock Index
Fund.

INVESTMENT OBJECTIVE

The Fund seeks to match the performance of the Morgan Stanley Capital
International Pacific Free Index(.), which consists of more than 500 common
stocks of companies located in Japan (which comprises o% of the Index's market
capitalization), Australia, Hong Kong, New Zealand, and Singapore.

*The designation "Free" in the name of the Index refers to the securities that
the index tracks. Some countries restrict foreign investment in certain
industries, so only stocks that can be bought freely by a fund are tracked.

INVESTMENT STRATEGIES

The Fund employs a "passively managed" investment--or index--approach, by
holding a mix of securities that seeks to match the performance of the MSCI
Pacific Free Index. For more information about passive management, see "Indexing
Methods" under More on the Funds.

PRIMARY RISKS

. Country risk, which is the chance that a country's economy will be hurt by
political troubles, financial problems, or natural disasters.

. Currency risk, which is the chance that returns will be hurt by a rise in the
value of the U.S. dollar versus foreign currencies.

PERFORMANCE/RISK INFORMATION

The bar chart and table below provide an indication of the risk of investing in
the Fund. The bar chart shows the Fund's performance in each calendar year since
inception. The table shows how the Fund's average annual returns for one and
five years and since inception compare with those of a broad-based securities
market index. Keep in mind that the Fund's past performance does not indicate
how it will perform in the future.

------------------------------------------------------------------
Annual Total Returns
------------------------------------------------------------------

------------------------------------------------------------------
Return figures do not reflect the annual account maintenance fee of
$10 for accounts with balances of less than $10,000.
------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was *% (quarter ended____________) and the lowest return for a quarter
was -*% (quarter ended____________).
<PAGE>

Fund Profile--Vanguard Pacific Stock Index Fund (continued)

--------------------------------------------------------------------
Average Annual Total Returns for Years Ended December 31, 1998
--------------------------------------------------------------------
Since
1 Year 5 Years Inception*
--------------------------------------------------------------------
Vanguard Pacific Stock Index Fund . % . % . %
Morgan Stanley Capital International
Pacific Free Index . . .
--------------------------------------------------------------------
*June 18, 1990
--------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees (fees paid directly from your investment)

Sales Charge (Load) Imposed on Purchases: None
Transaction Fee on Purchases*: 0.5%
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fees: None
Exchange Fees: None

Annual Fund Operating Expenses (expenses deducted from the Fund's assets)

Management Expenses: .%
12b-1 Distribution Fees: None
Other Expenses: .%
Total Annual Fund Operating Expenses: .%

* The transaction fee on purchases is deducted from all purchases
(including exchanges from other Vanguard funds) but not from reinvested
dividends and capital gains.

The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. It illustrates the
hypothetical expenses that you would incur over various periods if you invest
$10,000 in the Fund. This example assumes that the Fund provides a return of 5%
a year, and that operating expenses remain the same. The results apply whether
or not you redeem your investment at the end of each period. (Note: The $10
annual account maintenance fee on accounts with current balances of less than
$10,000 is not included.) .

-----------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
-----------------------------------------------------------
$ . $ . $ . $ .
-----------------------------------------------------------

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.
<PAGE>

<TABLE>
<CAPTION>
7
Additional Information
<S> <C>
Dividends and Capital Gains Minimum Initial Investment
Paid annually in December $3,000; $1,000 for custodial accounts for minors

Investment Adviser Newspaper Abbreviation
Vanguard Core Management Group, Valley Forge, Pa., Pacific
since inception

Inception Date Vanguard Fund Number
June 18, 1990 072

Net Assets as of December 30, 1998 Cusip Number
$ . billion 922042106

Suitable for IRAs Ticker Symbol
Yes VPACX

</TABLE>
<PAGE>

Fund Profile--Vanguard Emerging Markets Stock Index Fund

The following profile summarizes key features of Vanguard Emerging Markets Stock
Index Fund.

INVESTMENT OBJECTIVE

The Fund seeks to match the performance of the Morgan Stanley Capital
International Select Emerging Markets Free* Index, which includes more than
600 common stocks of companies located in 15 emerging markets of Europe, Asia,
Africa, and Latin America--mostly in Brazil, Hong Kong, South Africa, and Mexico
(which comprise .%, .%, .%, and .% of the Index's market capitalization,
respectively), as well as Argentina, the Czech Republic, Greece, Hungary,
Indonesia, Israel, Philippines, Poland, Singapore, Thailand, and Turkey.

*The designation "Free" in the name of the Index refers to the securities that
the index tracks. Some countries re- strict foreign investment in certain
industries, so only stocks that can be bought freely by a fund are tracked. Most
European countries do not restrict foreign investment.

INVESTMENT STRATEGIES

The Fund employs a "passively managed" investment--or index--approach, by
holding a mix of securities that seeks to match the performance of the MSCI
Select Emerging Markets Index. For more information about passive management,
see "Indexing Methods" under More on the Funds.

PRIMARY RISKS

The Fund's total return, like stock prices generally, can fluctuate within a
wide range, so an investor could lose money over short or even extended periods.
In addition to facing the same risks as U.S. stock funds, the Fund is subject to
the risks associated with foreign investing. Among these are:

. Country risk, which is the chance that a country's economy will be hurt by
political troubles, financial problems, or natural disasters.

. Currency risk, which is the chance that returns will be hurt by a rise in the
value of the U.S. dollar versus foreign currencies.

PERFORMANCE/RISK INFORMATION

The bar chart and table below provide an indication of the risk of investing in
the Fund. The bar chart shows the Fund's performance in each calendar year since
inception. The table shows how the Fund's average annual returns for one
calendar year and since inception compare with those of a broad-based securities
market index. Keep in mind that the Fund's past performance does not indicate
how it will perform in the future.

-----------------------------------------------------------
Annual Total Returns
-----------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended__________) and the lowest return for a quarter
was -.% (quarter ended__________).

---------------------------------------------------------------------------
Average Annual Total Returns For Years Ended December 31, 1998
---------------------------------------------------------------------------
1 Year Since Inception*
---------------------------------------------------------------------------
Vanguard Emerging Markets Stock Index Fund . % . %
Morgan Stanley Capital International Select
Emerging Markets Free Index . .
---------------------------------------------------------------------------
*March 1, 1994
---------------------------------------------------------------------------

FEES AND EXPENSES
The following tables describe the fees and expenses you would pay if you buy and
hold shares of the Fund. The expenses shown under Annual Fund Operating Expenses
are based upon those incurred in the fiscal year ended December 31, 1998.

Shareholder Fees (fees paid directly from your investment)
Sales Charge(Load) Imposed on Purchase: None
Transaction Fee on Purchases*: 1%
Sales Charge(Load) Imposed on Reinvested Dividends: None
Redemption Fees**: 1%

Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: .%
12b-1 Distribution Fees: None
Other Expenses: .%
Total Annual Fund Operating Expenses: .%

*The transaction fee on purchases is deducted from all purchases
(including exchanges from other Vanguard funds) but not from
reinvested dividends and capital gains.

**The redemption fee applies to all redemptions (sales or exchanges);
it is deducted from redemption proceeds, and retained by Fund.

For accounts with current balances of less than $10,000, Vanguard will deduct
an account maintenance fee from your annual distribution of the Fund's dividends
($10 each December). If you receive a distribution that is less than the fee,
fractional shares will automatically be redeemed to make up the difference.

The following example is intended to help you compare the cost of investing in
the Fund with the cost of investing in other mutual funds. It illustrates the
hypothetical expenses that you would incur over various periods if you invest
$10,000 in the Fund. This example assumes that the Fund provides a return of 5%
a year, that operating expenses remain the same, and that you redeem all your
shares at the end of each period.

---------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
---------------------------------------------------------------------
$ . $ . $ . $ .
---------------------------------------------------------------------
<PAGE>

Fund Profile--Vanguard Emerging Markets Stock Index Fund (continued)

You would pay the following expenses if you did not redeem your shares (the
difference being that the Fund's 1% redemption fee would not apply to any of the
periods below, as it would to those above):

(Note: The $10 annual account maintenance fee on accounts with current
balances of less than $10,000 is not included in either table.)

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.

<TABLE>
<S> <C>
Additional Information

Dividends and Capital Gains Minimum Initial Investment
Paid annually in December $3,000; $1,000 for custodial accounts for minors

Investment Adviser Newspaper Abbreviation
Vanguard Core Management Group, Valley Forge, Pa., EmerMkt
since inception
Vanguard Fund Number
Inception Date 533
May 4, 1994
Cusip Number
Net Assets as of December 31, 1998 922042304
$. billion
Ticker Symbol
Suitable for IRAs VEIEX
Yes
</TABLE>
<PAGE>

Fund Profile--Vanguard Total International Stock Index Fund

The following profile summarizes key features of Vanguard Total International
Stock Index Fund.

INVESTMENT OBJECTIVE
The Fund seeks to match the performance of the Total International Composite
Index, which is a combination of the indexes tracked by the European, Pacific,
and Emerging Markets Index Stock Funds.

INVESTMENT STRATEGIES
The Fund employs a "passively managed" investment--or index--approach, by
holding a mix of securities that seeks to match the performance of the Total
International Composite Index . As a "fund of funds," the Fund invests in the
European, Pacific, and Emerging Markets Stock Index Funds, in proportions based
on each market segment's contribution to the market capitalization of the Total
International Composite Index. For more information about passive management,
see "Indexing Methods" under More on the Funds.

PRIMARY RISKS
The Fund's total returns, like stock prices generally, will fluctuate within a
wide range, so an investor could lose money over short or even long periods. In
addition to facing the same risks as U.S. stock funds, the Fund is subject to
the risks associated with foreign investing. Among these are:

* Country risk, which is the chance that a country's economy will be hurt by
political troubles, financial problems, or natural disasters.

* Currency risk, which is the chance that returns will be hurt by a rise in the
value of the U.S. dollar versus foreign currencies.

PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
the Fund. The bar chart shows the Fund's performance in each calendar year since
inception. The table shows how the Fund's average annual returns for one
calendar year and since inception compare with those of a broad-based securities
market index. Keep in mind that the Fund's past performance does not indicate
how it will perform in the future.

---------------------------------------------------------------------
Annual Total Returns
---------------------------------------------------------------------

---------------------------------------------------------------------
Return figures do not reflect the annual account maintenance fee of
$10 for accounts with balances of less than $10,000.
---------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended____) and the lowest return for a quarter was -.%
(quarter ended____________).
<PAGE>

Fund Profile--Vanguard Total International Stock Index Fund (continued)

---------------------------------------------------------------------
Average Annual Total Returns For Years Ended December 31, 1998
---------------------------------------------------------------------
1 Year Since
Inception*
---------------------------------------------------------------------
Vanguard Total International Stock Index Fund . % . %
Total International Composite Index** . .
---------------------------------------------------------------------
*March 1, 1994
**Consists of the Morgan Stanley Capital International Europe,
Australasia, Far East Index + Select Emerging Markets Free Index.
---------------------------------------------------------------------

FEES AND EXPENSES
The following table describes the fees and expenses you would pay if you buy and
hold shares of the Fund. The expenses shown under Annual Fund Operating Expenses
are based upon those incurred in the fiscal year ended December 31, 1998.

Shareholder Fees (fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases: None
Transaction Fee on Purchases*: 0.5%
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fees: None
Exchange Fees: None

Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: .%
12b-1 Distribution Fees: None
Other Expenses: .%
Total Annual Fund Operating Expenses: .%

*The transaction fee on purchases is deducted from all purchases
(including exchanges from other Vanguard funds) but not from reinvested
dividends and capital gains.

For accounts with current balances of less than $10,000, Vanguard will deduct
an account maintenance fee from your annual distribution of the Fund's dividends
($10 each December). If you receive a distribution that is less than the fee,
fractional shares will automatically be redeemed to make up the difference.

Although the Fund is expected to incur no net expenses directly, the Fund's
shareholders indirectly bear the expenses of the underlying funds in which the
Fund invests. See The Funds and Vanguard. The Fund's expense ratio, based on
its underlying investments, was . % as of December 31, 1998.

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.
<PAGE>

13
<TABLE>
<S> <C>
Additional Information

Dividends and Capital Gains Minimum Initial Investment
Paid annually in December $3,000; $1,000 for custodial accounts for minors

Investment Adviser Newspaper Abbreviation
Vanguard Core Management Group, Valley Forge, Pa., TotIntl
since inception
Vanguard Fund Number
Inception Date 113
April 29, 1996
Cusip Number
Net Assets as of December 31, 1998 921909602
$. billion
Ticker Symbol
Suitable for IRAs VGTSX
Yes
</TABLE>
<PAGE>

More on the Funds

The following sections discuss other important features of Vanguard
International Stock Index Funds, including indexing methods, fund
characteristics, additional risk information, costs and market timing, fund
turnover, and other investment policies and risks.

PLAIN TALK ABOUT
"Fund of Funds"

The term "fund of funds" is used to describe a mutual fund that pursues its
objective by investing in other mutual funds rather than in individual stocks or
bonds. A fund of funds may charge for its own direct expenses, in addition to
bearing a proportionate share of the expenses charged by the underlying funds in
which it invests. Funds of funds are best suited for long-term investors.

Indexing Methods
In seeking to track a particular index, a fund may use one of two indexing
methods to select the stocks it invests in.

Some index funds hold each stock found in their target indexes in about the
same proportions as represented in the indexes themselves. For example, if 5% of
the S&P 500 Index were made up of the stock of a specific company, a fund
tracking that index would invest about 5% of its assets in that company.

Other index funds may use a different selection process. Because it would be
very expensive to buy and sell all of the stocks held in certain indexes (the
MSCI Select Emerging Markets Index, for example, includes more than 600 stocks),
funds tracking these larger indexes use a "sampling" technique. Using a
sophisticated computer program, these funds select stocks that will recreate
their target indexes in terms of industry, size, country, and other
characteristics. For instance, if 10% of the MSCI Select Emerging Markets Index
were made up of the stocks of a certain country, the Emerging Markets Stock
Index Fund would invest about 10% of its assets in stocks of the Index from that
country. The European, Pacific, and Emerging Markets Stock Index Funds each
employ this method of indexing. As a "fund of funds," the Total International
Stock Index Fund allocates its assets among these three Funds.

-------------------------------------------------------------------
Number of Stocks Number of Stocks
Fund Held in Target Index
-------------------------------------------------------------------
European . .
Pacific . .
Emerging Markets . .
-------------------------------------------------------------------

<PAGE>

Additional Risk Information

To track their target indexes as closely as possible, the European Stock Index
and Pacific Stock Index Funds attempt to remain fully invested in foreign
stocks. The Emerging Markets Stock Index Fund normally invests 95% of its assets
in foreign stock, holding the remaining 5% in cash reserves to meet daily
redemption requests. The Total International Stock Index Fund normally holds
100% of its assets in shares of the other three Funds.

[GRAPHIC APPEARS HERE]
Each Fund is subject to market risk, which is the possibility that stock
prices overall will decline over short or even long periods. Stock markets
tend to move in cycles, with periods of rising prices and periods of falling
prices.

In addition, investments in foreign stock markets can be as risky, if not
more risky, than U.S. stock investments. The prices of international stocks
and the prices of U.S. stocks have often moved in opposite directions. These
periods have, in the past, lasted for as long as several years.

To illustrate the volatility of international stock prices, the following
table shows the best, worst, and average total returns for foreign stock markets
over various periods as measured by the Morgan Stanley Capital International
Europe, Australasia, Far East (MSCI EAFE) Index, a widely used barometer of
international market activity. (Total returns consist of dividend income plus
change in market price.) Note that the returns shown do not include the costs of
buying and selling stocks or other expenses that a real-world investment
portfolio would incur. Note, also, that the gap between best and worst tends to
narrow over the long term.

PLAIN TALK ABOUT

The Risks of
International Investing

Because foreign stock markets operate differently from the U.S. market,
Americans investing abroad will encounter risks not typically associated with
U.S. companies. For instance, foreign companies are not subject to the same
accounting, auditing, and financial reporting standards and practices as U.S.
companies; and their stock may not be as liquid as the stock of similar U.S.
companies. In addition, foreign stock exchanges, brokers, and companies
generally have less government supervision and regulation than their
counterparts in the United States. These factors, among others, could negatively
impact the returns Americans receive from a foreign investment.

-----------------------------------------------------------------------
International Stock Market Returns (1969-1998)
-----------------------------------------------------------------------
1 Year 5 Years 10 Years 20 Years
-----------------------------------------------------------------------
Best . . . .
Worst . . . .
Average . . . .
-----------------------------------------------------------------------

The table covers all of the 1-, 5-, 10-, and 20-year periods from 1969 through
1998. Keep in mind that this was a particularly favorable period for foreign
markets. For instance, over 10-year periods, foreign stocks provided an average
return of .%, compared to .% for U.S. stocks (as measured by the Standard &
Poor's 500 Composite Stock Price Index) during the same time frame. These
average returns reflect past performance on international stocks; you should not
regard them as an indication of future returns from either foreign markets as a
whole or any of the Funds in particular.

Keep in mind, too, that none of the Funds will mirror the returns of the MSCI
EAFE Index, since the Funds attempt to track different indexes (for example, the
European Stock Index Fund seeks to track the MSCI Europe Index, which is only
one component of the MSCI EAFE Index).

Also note that the preceding chart does not take into account returns for
foreign stock markets as measured by the MSCI Select Emerging Markets Index, a
widely used barometer of less developed stock markets. Emerging markets can be
substantially more volatile than more developed foreign markets. In addition,
because the MSCI EAFE Index tracks the European and Pacific markets
collectively, the above returns do not reflect the variability of returns from
year to year for these markets individually, or the variability across these and
other geographic regions or market sectors. To illustrate this variability, the
following table shows returns for different international markets--as well as
the U.S. market for comparison--from 1990-98, as measured by their respective
indexes. Note that the returns shown do not include the costs of buying and
selling stocks or other expenses that a real-world investment portfolio would
incur.
<PAGE>

-----------------------------------------------------------------------
Stock Market Returns For Different International Markets
-----------------------------------------------------------------------
European Pacific Emerging U.S.
Market* Market* Markets* Markets
-----------------------------------------------------------------------
1990
1991
1992
1993
1994
1995 .%+
1996
1997
1998
-----------------------------------------------------------------------
*European market returns are measured by the MSCI Europe Index; Pacific
market returns are measured by the MSCI Pacific Free Index; Emerging
markets returns are measured by the MSCI Select Emerging Markets Index;
and U.S. market returns are measured by the Standard & Poor's 500
Composite Stock Price Index.
+The inception date of the MSCI Select Emerging Markets Index was May 4,
1994; returns shown for 1990-1994 are measured by the MSCI Emerging
Markets Free Index.
-----------------------------------------------------------------------

PLAIN TALK ABOUT

Regional Versus Broad
International Investing

Regional funds are international funds that invest in a particular geographical
region, such as Europe or the Pacific Basin. Because they concentrate their
holdings in a single region, these funds typically have higher share price
volatility than broadly diversified international stock funds (which, by
investing in many different foreign markets, offset losses from one country with
gains from another at any given time).

Keep in mind, however, that these average returns reflect past performance of
the various indexes; you should not consider them as an indication of future
returns from the indexes, or from any of the Funds in particular.

European Stock Index Fund. Stocks from the United Kingdom, Germany, and France
comprised .%, .%, and .% of the MSCI Europe Index, respectively, as of December
31, 1998; stocks from the remaining 12 countries in the Index have much less
significant market capitalization weightings in the Index and thus much less
impact on its total return. As a result, the total return of the European Stock
Index Fund, which seeks to track the Index, will be most impacted by stocks from
the United Kingdom, Germany, and France.

Pacific Stock Index Fund. Japanese stocks comprised [77%] of the MCSI Pacific
Free Index as of December 31, 1998. Therefore, Japanese stocks will represent a
correspondingly large component of the Pacific Stock Index Fund's assets as the
Fund seeks to track the Index. Such a large investment in the Japanese stock
market may involve a higher degree of risk than with more diversified
international funds.

Emerging Markets Stock Index Fund. As discussed above, emerging markets can be
substantially more volatile than both U.S and more developed foreign markets.
Therefore, the Emerging Markets Stock Index Fund may expose investors to a
higher degree of volatility than funds that invest in more developed markets.
Foreign investing generally gives rise to other risks as well.

[GRAPHIC APPEARS HERE]
Each Fund is subject to currency risk, which is the possibility that a
stronger U.S. dollar will reduce returns for Americans investing overseas.
Generally, when the dollar rises in value against another country's
currency, your investment in that country loses value because its currency
is worth fewer U.S. dollars. On the other hand, a weaker U.S. dollar
generally leads to higher returns for Americans holding foreign investments.

Each Fund is also subject to country risk, which is the possibility that
political events (a war, national elections), financial problems (rising
inflation, government default), or natural disasters (an earthquake, a
flood) will weaken a country's economy and cause investments in that country
to lose money.
<PAGE>

PLAIN TALK ABOUT
Vanguard's Transaction Fees

Some of Vanguard's index funds charge a transaction fee on purchases of fund
shares to offset the higher costs of trading certain securities, particularly
small-company and international stocks. The transaction fee ensures that these
higher costs are borne by the investors making the transactions--and not by
shareholders already in the fund. In addition, most of Vanguard's index funds
charge an account maintenance fee on accounts under $10,000 to divide the
costs of maintaining accounts equitably among shareholders.

At Vanguard, all fees are paid directly to the fund itself (unlike a sales
charge or load, which--for many fund companies--ends up in the pocket of the
sponsor, adviser, ors ales representative). Without transaction fees, an index
fund would have trouble tracking its target index.

Security Selection

In seeking to track its target index, each Fund invests in a portfolio of
foreign stocks selected through statistical methods.

European Stock Index Fund. The Fund invests in a statistically selected sample
of more than 550 common stocks included in the Morgan Stanley Capital
International (MSCI) Europe Index, which is made up of the stocks of companies
located in 15 European countries. Three countries--the United Kingdom, Germany,
and France--dominate the Index, with .% .%, .%, and .%, respectively, as of
December 31, 1998. The other 12 countries, which include Austria, Belgium,
Denmark, Finland, Ireland, Italy, the Netherlands, Norway, Portugal, Spain,
Sweden, and Switzerland, are much less significant to the Index and,
consequently, the Fund.

Pacific Stock Index Fund. The Fund invests in a statistically selected sample
of the approximately 500 common stocks included in the Morgan Stanley Capital
International (MSCI)--Pacific Free Index, which is comprised of the stocks of
Pacific Basin companies. The Index is dominated by the Japanese stock market,
which represented .% of the market capitalization of the Index as of December
31, 1998. The other four countries include Australia, Hong Kong, New Zealand,
and Singapore.

The designation "Free" in the name of the Index refers to the securities that
the Index tracks: Some countries restrict foreign investment in certain
industries, so only stocks that can be bought freely by a fund are tracked.

Emerging Markets Stock Index Fund. The Fund invests in a statistically
selected sample of the approximately 600 common stocks included in the Morgan
Stanley Capital International Select Emerging Markets Free Index, which is made
up of the stocks of companies located in 15 emerging markets of Europe. Four
countries--Brazil, Hong Kong, Mexico, and South Africa--represent a majority of
the Index, with .%, .%, .%, and .% of the market capitalization of the
Index, respectively, as of December 31, 1998. The other 11 countries include
Argentina, the Czech Republic, Greece, Hungary, Indonesia, Israel, Philippines,
Poland, Singapore, Thailand, and Turkey.

Note: Effective January 1, 1999, Malaysia was eliminated from the MSCI Select
Emerging Markets Free Index. Accordingly, the Fund has liquidated its Malaysian
holdings, which represented approximately 3.5% of its net assets at the end of
1998. Malaysian government regulations currently require the Fund to hold the
proceeds of these securities in ringgits--the Malaysian currency--for at least
one year, and the Malaysian government may impose additional restrictions
affecting the Fund at any time. The Fund considers ringgits illiquid, and will
count these holdings towards its 15% limit on investments in illiquid
securities. The adviser expects to maintain the Fund's normal investment
exposure--approximately 95% of assets in stocks and 5% in cash reserves--by
purchasing stock futures contracts equal in value to any ringgit holdings.

Each Fund is generally managed without regard to tax ramifications.

Costs and Market-Timing

Some investors try to profit from a strategy called market-timing--switching
money into investments when they expect prices to rise, and taking money out
when they expect prices to fall. As money is shifted in and out, a fund incurs
expenses for buying and selling securities. These costs are borne by all fund
shareholders, including the
<PAGE>

long-term investors who do not generate the costs. Therefore, the Vanguard
International Stock Index Funds have adopted the following policies, among
others, designed to discourage short-term trading:

*Each Fund reserves the right to reject any purchase request--including
exchanges from other Vanguard funds--that it regards as disruptive to the
efficient management of the Fund. This could be because of the timing of the
investment or because of a history of excessive trading by the investor.

*Each Fund charges a transaction fee on purchases. In addition, the Emerging
Markets Stock Index Fund charges a transaction fee on redemptions.

*Telephone exchanges are not accepted for non-IRAs.

*There is a limit on the number of times you can exchange into and out of a Fund
(see "Redeeming Shares" in the Investing with Vanguard section).

*Each Fund reserves the right to stop offering shares at any time.

The Vanguard funds do not permit market-timing. Do not invest in these Funds if
you are a market-timer.

PLAIN TALK ABOUT
Turnover Rate

Before investing in a mutual fund, you should review its turnover rate. This
gives an indication of how transaction costs could affect the fund's future
returns. In general, the greater the volume of buying and selling by the fund,
the greater the impact that brokerage commissions and other transaction costs
will have on its return. Also, funds with high turnover rates may be more
likely to generate capital gains that must be distributed to shareholders as
income subject to taxes. The average turnover rate for passively managed
foreign stock index funds is roughly .%; for all foreign stock funds, the
average turnover is approximately .%.

Turnover Rate

Although each Fund seeks to invest for the long term, the Funds retain the right
to sell securities regardless of how long the securities have been held.
Generally, a passively-managed fund sells securities only to respond
to redemption requests or to adjust the number of shares held to reflect a
change in the fund's target index. Because of this, the turnover rate for each
Fund has been extremely low, with averages over the past five years (or since
inception) ranging from .% for the _____ Fund to .% for the _____ Fund. (A
turnover rate of 100% would occur, for example, if a Fund sold and replaced
securities valued at 100% of its net assets within a one-year period.)

PLAIN TALK ABOUT
Derivatives

A derivative is a financial contract whose value is based on (or "derived"
from) a traditional security (such as a stock or a bond), an asset (such as a
commodity like gold), or a market index (such as the S&P 500 Index). Futures
and options are derivatives that have been trading on regulated exchanges for
more than two decades. These "traditional" derivatives are standardized
contracts that can easily be bought and sold, and whose market values are
determined and published daily. It is these characteristics that differentiate
futures and options from the relatively new types of derivatives. If used for
speculation or as leveraged investments, derivatives can carry considerable
risks.

Other Investment Policies and Risks

Besides investing in common stocks of foreign companies, each Fund may make
certain other kinds of investments to achieve its objective. Each Fund may
change its objective without shareholder approval.
Each Fund may enter into forward foreign currency contracts, in order to
maintain the same currency exposure as its respective Index. A forward foreign
currency contract is an agreement to buy or sell a country's currency at a
specific price on a specific date, usually 30, 60, or 90 days in the future. In
other words, the contract guarantees an exchange rate on a given date. Managers
of international stock funds use these contracts to guard against sudden,
unfavorable changes in U.S. dollar/ foreign currency exchange rates. However,
the Funds will use these contracts for different reasons:

. To gain currency exposure when investing in stock index futures.
. To settle trades in a foreign currency.

The Funds may also invest, to a limited extent, in stock futures and options
contracts, warrants, convertible securities, and swap agreements, which are
types of derivatives. Losses (or gains) involving futures contracts can
sometimes be substantial--in part because a relatively small
<PAGE>

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

For this reason, the Funds will not use futures, options, warrants,
convertible securities, or swap agreements for speculative purposes or as
leveraged investments that magnify the gains or losses of an investment. The
value of all futures contracts in which a Fund acquires an interest cannot
exceed 20% of the Fund's total assets.

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

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

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

The Funds and Vanguard

Vanguard International Stock Index Funds are offered by The Vanguard Group, a
family of more than . investment companies with more than . distinct investment
portfolios and total net assets of more than $. billion. All of the Vanguard
funds share in the expenses associated with business operations, such as
personnel, office space, equipment, and advertising.

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

As a result, the Fund is expected to operate at a very low or zero expense
ratio. Since its inception in 1996, the Fund in fact has incurred no direct
expenses.

Vanguard reimburses the Total International Stock Index Fund for (i) the Fund's
contributions to the cost of operating the underlying funds in which it invests,
and (ii) certain savings in administrative and marketing costs that Vanguard
expects to derive from the fund's operation.

Investment Adviser

Vanguard Core Management Group (the "Group"), P.O. Box 2600, Valley Forge, PA
19482, provides advisory services on an at-cost basis to the European, Pacific,
and Emerging Markets Stock Index Funds. The Total International Stock Index Fund
does not have its own investment adviser, but rather benefits from the advisory
services provided to the European, Pacific, and Emerging Markets Stock Index
Funds by the Group. For the fiscal year ended December 31, 1998,
the advisory and administrative fees represented an effective annual rate of
. % for European Stock Index Fund, . % for Pacific Stock Index Fund, and . %
for Emerging Markets Stock Index Fund.

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

PLAIN TALK ABOUT
Vanguard's Unique
Corporate Structure

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

PLAIN TALK ABOUT
The Funds' Adviser

Vanguard Core Management Group provides investment advisory services to many
Vanguard funds; as of December 31, 1998, the Group managed more than
$. billion in total assets. The individual responsible for overseeing the
European, Pacific, and Emerging Markets Stock Index Funds' investments is:

George U. Sauter, Managing Director of Vanguard; has worked in investment
management since 1985; has managed portfolio investments since 19__; A.B.,
Dartmouth College; M.B.A., University of Chicago.
<PAGE>

Year 2000 Challenge

The common practice in computer programming of using just two digits to identify
a year has resulted in the Year 2000 challenge throughout the information
technology industry. If unchanged, many computer applications and systems could
misinterpret dates occurring after December 31, 1999, leading to errors or
failure. Such failure could adversely affect a fund's operations, including
pricing, securities trading, and the servicing of shareholder accounts.

The Vanguard Group is dedicated to providing uninterrupted, high-quality
performance from our computer systems before, during, and after 2000. In July
1998, we completed the renovation and initial testing of our internal systems.
Vanguard is diligently working with external partners, suppliers, and vendors,
including fund managers and other service providers, to assure that the systems
with which we interact remain operational at all times.

In addition to taking every reasonable step to secure our internal systems and
external relationships, Vanguard is further developing contingency plans
intended to assure that unexpected systems failures will not adversely affect
the Funds' operations. Vanguard intends to monitor these processes through the
rollover of 1999 into 2000 and to quickly implement alternate solutions if
necessary.

However, despite Vanguard's efforts and contingency plans, noncompliant
computer systems could have a material adverse effect on a Fund's business,
operations, or financial condition. Additionally, a Fund's performance could be
hurt if a computer-system failure at a company or governmental unit affects the
price of securities the Fund owns.

Dividends, Capital Gains, and Taxes

The Funds distribute to shareholders virtually all of their net income (interest
and dividends less expenses) as well as any capital gains realized from the sale
of their holdings. Distributions generally occur in December. In addition, the
Funds may occasionally be required to make supplemental dividend or capital
gains distributions at some other time during the year. You can receive
distributions of income or capital gains in cash, or you can have them
automatically invested in more shares of the Fund. In either case, these
distributions are taxable to you. It is important to note that distributions of
dividends and capital gains that are declared in December--if paid to you by the
end of January-- are taxed as if they had been paid to you in December.

Vanguard will send you a statement each year showing the tax status of all
your distributions.

* The dividends and short-term capital gains that you receive are considered
ordinary income for tax purposes.
* Any distributions of net long-term capital gains by a Fund are taxable to you
as long-term capital gains, no matter how long you've owned shares in the
Fund. Long-term capital gains may be taxed at different rates depending on how
long the Fund held the securities.
* Although the Funds do not seek to realize capital gains, such gains are
realized from time to time as by-products of their ordinary investment
activities. Consequently, distributions may vary from year to year.
* If you sell or exchange shares, any gain or loss you have is a taxable event.
This means that you may have a capital gain to report as income, or a capital
loss to report as a deduction, when you complete your federal income tax
return.
* Distributions of dividends or capital gains, and capital gains or losses from
your sale or exchange of Fund shares, may be subject to state and local income
taxes as well.

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

* Foreign governments may withhold taxes on dividends and interest paid, while
imposing taxes on other payments or gains, with respect to foreign securities.
If you meet certain holding period requirements, an offsetting tax credit or
deduction may be available. If you do not meet these requirements, you may
still be entitled to a deduction for certain foreign taxes.

The tax information in this prospectus is provided as general information and
will not apply to you if you are investing through a tax-deferred account such
as an IRA or a qualified employee benefit plan. (Non-U.S. investors may be sub-
ject to U.S. withholding and estate tax.) You should consult your tax adviser
about the tax consequences of an investment in any of the Funds.

Important Note: By law, each Fund must withhold 31% of your taxable
distributions and any redemption proceeds if you do not provide your correct
taxpayer identification number, or certify that it its correct, or if the IRS
instructs the Fund to do so.

Share Price

Each Fund's share price, called its net asset value, or NAV, is calculated each
business day after the close of trading on the New York Stock Exchange (the NAV
is not calculated on holidays or other days the Exchange is closed). Net asset
value per share is computed by adding up the total value of the Fund's
investments and other assets, subtracting any of its liabilities (debts), and
then dividing by the number of Fund shares outstanding:

Total Assets - Liabilities
Net Asset Value = -------------------------------
Number of Shares Outstanding

Knowing the daily net asset value is useful to you as a shareholder because it
indicates the current value of your investment. The Fund's NAV, multiplied by
the number of shares you own, gives you the dollar amount you would have
received had you sold all of your shares back to the Fund that day. Because
foreign securities markets may operate on days which are not business days in
the United States, the value of a Fund's holdings may change on days when
shareholders will not be able to purchase or redeem the Fund's shares.

A Note on Pricing: A Fund's investments will be priced at their market value
when market quotations are readily available. When these quotations are not
readily available, investments will be priced at their fair value, calculated
according to procedures adopted by the Funds' Board of Trustees. A Fund also may
use fair value pricing if the value of a security held by the Fund is materially
affected by events occurring after the close of the primary markets or exchanges
on which such security is traded. In these situations, prices used by the Fund
to calculate its net asset value may differ from quoted or published prices for
the underlying securities.

Each Fund's share price can be found daily in the mutual fund listings of most
major newspapers under the heading "Vanguard Index Funds." Different newspapers
use different abbreviations for each Fund, but the most common are Europe,
Pacific, EmerMkt, and TotIntl.
<PAGE>

PLAIN TALK ABOUT
How to Read the Financial
Highlights Table

This explanation uses the European Stock Index Fund as an example. The Fund
began the fiscal year with a net asset value (price) of $__ per share. During
the year, the Fund earned $__ per share from investment income (interest and
dividends) and $__ per share from investments that had appreciated in value or
that were sold for higher prices than the Fund paid for them.
Shareholders received $__ per share in the form of dividend and capital gains
distributions. A portion of each year's distributions may come from the prior
year's income or capital gains.
The earnings ($__ per share) minus the distributions ($__ per share) resulted
in a share price of $__ at the end of the year. This was an increase of $__ per
share (From $__ at the beginning of the year to $__ at the end of the year). For
a shareholder who reinvested the distributions in the purchase of more shares,
the total return from the Fund was __% for the year.
As of December 31, 1998, the Fund had $__ billion in net assets. For the year,
its expense ratio was __% ($__ per $1,000 of net assets); and its net investment
income amounted to __% of its average net assets. It sold and replaced
securities valued at __% of its total net assets.

Financial Highlights

The following financial highlights tables are intended to help you understand
each Fund's financial performance for the past five years or since inception,
and certain information reflects financial results for a single Fund share in
each case. The total returns in each table represent the rate that an investor
would have earned or lost each year on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
derived from the financial statements audited by PricewaterhouseCoopers LLP,
independent accountants, whose report--along with each Fund's financial
statements--is included in the Funds' most recent annual report to shareholders.
You may have the annual report sent to you without charge by contacting
Vanguard.

FINANCIAL HIGHLIGHTS TABLE TO COME

From time to time, the Vanguard funds advertise yield and total return
figures. Yield is a measure of past dividend income. Total return includes both
past dividend income (assuming that it has been reinvested) plus realized and
unrealized capital appreciation (or depreciation). Neither yield nor total
return should be used to predict the future performance of a fund.
<PAGE>

FINANCIAL HIGHLIGHTS TABLE TO COME

FINANCIAL HIGHLIGHTS TABLE TO COME
<PAGE>

FINANCIAL HIGHLIGHTS TABLE TO COME

The Funds are not sponsored, sold, promoted, or endorsed by Morgan Stanley
Capital International. Standard & Poor's((R)),," "S&P((R)),," "S&P 500((R)),"
"Standard & Poor's 500," and "500," are trademarks of The McGraw-Hill Companies,
Inc., and have been licensed for use by The Vanguard Group.
<PAGE>

Investing with Vanguard
Are you looking for the most convenient way to open or add money to a Vanguard
account? Obtain instant access to fund information? Establish an account for a
minor child or for your retirement savings?
Vanguard can help. Our goal is to make it easy and pleasant for you to do
business with us.
The following sections of the prospectus briefly explain the many services we
offer. Booklets providing detailed information are available on the services
marked with a [GRAPHIC APPEARS HERE]. Please call us to request copies.

Services and Account Features

Vanguard offers many services that make it convenient to buy, sell, or exchange
shares, or to obtain fund or account information.
- --------------------------------------------------------------------------------
Telephone Redemptions (Sales and Exchanges)
Automatically set up for these Funds unless you notify us otherwise.
- --------------------------------------------------------------------------------
Vanguard Direct Deposit Service((TM)) [GRAPHIC APPEARS HERE]
Automatic method for depositing your paycheck or U.S. government payment
(including Social Security and government pension checks) into your account.
- --------------------------------------------------------------------------------
Vanguard Automatic Exchange Service((TM)) [GRAPHIC APPEARS HERE]
Automatic method for moving a fixed amount of money from one Vanguard fund
account to another.
- --------------------------------------------------------------------------------
Vanguard Fund Express((R)) [GRAPHIC APPEARS HERE]
Electronic method for buying or selling shares. You can transfer money between
your Vanguard fund account and an account at your bank, savings and loan, or
credit union on a systematic schedule or whenever you wish.
- --------------------------------------------------------------------------------
Vanguard Dividend Express((TM)) [GRAPHIC APPEARS HERE]
Electronic method for transferring dividend and/or capital gains distributions
directly from your Vanguard fund account to your bank, savings and loan, or
credit union account.
- --------------------------------------------------------------------------------
Vanguard Tele-Account((R)) 1-800-662-6273 (ON-BOARD) [GRAPHIC APPEARS HERE]
Toll-free 24-hour access to Vanguard fund and account information--as well as
some transactions--by using any touch-tone phone. Tele-Account provides total
return, share price, price change, and yield quotations for all Vanguard funds;
gives your account balances and history (e.g., last transaction, latest dividend
distribution); and allows you to sell or exchange fund shares.
- --------------------------------------------------------------------------------
Access Vanguard(TM) www.vanguard.com [GRAPHIC APPEARS HERE]
You can use your personal computer to perform certain transactions for most
Vanguard funds by accessing our website. To establish this service, you must
register through the website. We will then send to you, by mail, an account
access password that allows you to process the following financial and
administrative transactions online:
. Open a new account.(*)
. Buy, sell or exchange shares of most funds.
. Change your name/address.
. Add/change fund options (including dividend options, Vanguard Fund Express,
bank instructions, checkwriting, and Vanguard Automatic Exchange Service).
(*) Only current Vanguard shareholders can open a new account online, by
exchanging shares from other existing Vanguard accounts.
- --------------------------------------------------------------------------------
Investor Information Department: 1-800-662-7447 (SHIP) Text Telephone:
1-800-952-3335
Call Vanguard for information on our funds, fund services, and retirement
accounts, and to request literature.
- --------------------------------------------------------------------------------
Client Services Department: 1-800-662-2739 (CREW) Text Telephone: 1-800-662-2738
Call Vanguard for information on your account, account transactions, and account
statements.
- --------------------------------------------------------------------------------
Services for Clients of Vanguard's Institutional Division: 1-888-809-8102
Vanguard's Institutional Division offers a variety of specialized services for
large institutional investors, including the ability to effect account
transactions through private electronic networks and third-party recordkeepers.
- --------------------------------------------------------------------------------
<PAGE>

Types of Accounts

Individuals and institutions can establish a variety of accounts with Vanguard.
- --------------------------------------------------------------------------------
For One or More People
Open an account in the name of one (individual) or more (joint tenants) people.
- --------------------------------------------------------------------------------
For Holding Personal Trust Assets [GRAPHIC APPEARS HERE]
Invest assets held in an existing personal trust.
- --------------------------------------------------------------------------------
For Individual Retirement Accounts [GRAPHIC APPEARS HERE]
Open a traditional IRA account or a Roth IRA account. Eligibility and other
requirements are established by federal law and Vanguard custodial account
agreements. For more information, please call 1-800-662-7447 (SHIP).
- --------------------------------------------------------------------------------
For an Organization [GRAPHIC APPEARS HERE]
Open an account as a corporation, partnership, endowment, foundation, or other
entity.
- --------------------------------------------------------------------------------
For Third-Party Trustee Retirement Investments
Open an account as a retirement trust or plan based on an existing corporate or
institutional plan. These accounts are established by the trustee of the
existing plan.
- --------------------------------------------------------------------------------
Vanguard Prototype Plans
Open a variety of retirement accounts using Vanguard prototype plans for
individuals, sole proprietorships, and small businesses. For more information,
please call 1-800-662-2003.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
A Note on Investing with Vanguard Through Other Firms
You may purchase or sell Fund shares through a financial intermediary such as a
bank, broker, or investment adviser. If you invest with Vanguard through an
intermediary, please read that firm's program materials carefully to learn of
any special rules that may apply. For example, special terms may apply to
additional service features, fees or other policies. Consult your intermediary
to determine when your order will be priced.
- --------------------------------------------------------------------------------

Buying Shares

You buy your shares at a Fund's next-determined net asset value after Vanguard
receives your request. As long as your request is received before the close of
trading on the New York Stock Exchange, generally 4 p.m. Eastern time, you will
buy your shares at that day's net asset value.
- --------------------------------------------------------------------------------
Minimum Investment to . . .
open a new account
$3,000 (regular account); $1,000 (traditional IRAs and Roth IRAs).

add to an existing account
$100 by mail or exchange; $1,000 by wire.
- --------------------------------------------------------------------------------
A Note on Low Balances
Each Fund reserves the right to close any nonretirement account whose balance
falls below the minimum initial investment. The Fund will deduct a $10 annual
fee in June if your nonretirement account balance falls below $2,500.
The fee is waived if your total Vanguard account assets are $50,000 or more.
- --------------------------------------------------------------------------------
By Mail to . . . [GRAPHIC APPEARS HERE]
open a new account
Complete and sign the application form and enclose your check.

add to an existing account
Mail your check with an Invest-By-Mail form detached from your confirmation
statement to the address listed on the form.
<PAGE>

Make your check payable to: The Vanguard Group-(insert appropriate Fund number;
see below)
European Stock Index Fund-79;
Pacific Stock Index Fund-72;
Emerging Markets Stock Index Fund-533;
Total International Stock Index Fund-113
All purchases must be made in U.S. dollars, and checks must be drawn on U.S.
banks.

First-class mail to: Express or Registered mail to:
The Vanguard Group The Vanguard Group
P.O. Box 2600 455 Devon Park Drive
Valley Forge, PA 19482-2600 Wayne, PA 19087-1815

For clients of Vanguard's Institutional Division . . .

First-class mail to: Express or Registered mail to:
The Vanguard Group The Vanguard Group
P.O. Box 2900 455 Devon Park Drive
Valley Forge, PA 19482-2900 Wayne, PA 19087-1815
- --------------------------------------------------------------------------------
IMPORTANT NOTE: To prevent check fraud, Vanguard will not accept checks made
payable to third parties.
- --------------------------------------------------------------------------------
By Telephone to . . . [GRAPHIC APPEARS HERE]
open a new account
Call Vanguard Tele-Account(*) 24 hours a day--or Client Services during business
hours--to exchange from another Vanguard fund account with the same registration
(name, address, taxpayer identification number, and account type).

add to an existing account
Call Vanguard Tele-Account(*) 24 hours a day--or Client Services during business
hours--to exchange from another Vanguard fund account with the same registration
(name, address, taxpayer identification number, and account type). Use Vanguard
Fund Express (see "Services and Account Features") to transfer assets from your
bank account. Call Client Services before your first use to verify that this
option is in place.

Vanguard Tele-Account Client Services
1-800-662-6273 1-800-662-2739
(*) You must obtain a Personal Identification Number through Tele-Account at
least seven days before you request your first exchange.
- --------------------------------------------------------------------------------
IMPORTANT NOTE: Once you've requested a telephone transaction and a confirmation
number has been assigned, the transaction cannot be revoked. We reserve the
right to refuse any purchase request.
- --------------------------------------------------------------------------------
By Wire to Open a New Account or Add to an Existing Account [GRAPHIC APPEARS
HERE]
Call Client Services to arrange your wire transaction. Wire transactions are not
available for retirement accounts, except for asset transfers and direct
rollovers.

Wire to:
FRB ABA 021001088
Marine Midland Bank, New York

For credit to:
Account: 000112046
Vanguard Incoming Wire Account
<PAGE>

Buying Shares (continued)

In favor of:
European Stock Index Fund-79;
Pacific Stock Index Fund-72;
Emerging Markets Stock Index Fund-533;
Total International Stock Index Fund-113
[Account number, or temporary number for a new account]
[Registered account owner/s]
[Registered address]
- --------------------------------------------------------------------------------
You can redeem (that is, sell or exchange) shares purchased by check or
Vanguard Fund Express at any time. However, while your redemption request will
be processed at the next-determined net asset value after it is received, your
redemption proceeds will not be available until payment for your purchase is
collected, which may take up to ten calendar days.
- --------------------------------------------------------------------------------
A Note on Large Purchases
It is important that you call Vanguard before you invest a large dollar amount.
We must consider the interests of all Fund shareholders and so reserve the right
to refuse any purchase that will disrupt the Fund's operation or performance.
- --------------------------------------------------------------------------------

Redeeming Shares

This section describes how you can redeem--that is, sell or exchange--a Fund's
shares.

When Selling Shares:
* Vanguard sends the redemption proceeds to you or a designated third party.(*)
* You can sell all or part of your Fund shares at any time.

(*) May require a signature guarantee; see footnote on page 30.

When Exchanging Shares:
* The redemption proceeds are used to purchase shares of a different Vanguard
fund.
* You must meet the receiving fund's minimum investment requirements.
* Vanguard reserves the right to revise or terminate the exchange privilege,
limit the amount of an exchange, or reject an exchange at any time, without
notice.

In both cases, your transaction will be based on the Fund's next-determined
share price, subject to any special rules discussed in this prospectus. For
exchanges, the purchase side of the transaction will be based on the receiving
fund's next-determined share price, again subject to any special rules discussed
in this prospectus.
- --------------------------------------------------------------------------------
A Note on Redemption Fees: The Emerging Markets Stock Index Fund imposes a 1%
redemption fee on all share redemptions. Currently, redemption fees do not apply
to Fund shares held through Vanguard's separate recordkeeping system for
employee benefit plan accounts, due to certain economies associated with these
accounts. However, the Fund reserves the right to impose redemption fees on its
shares at any time if warranted by the Fund's future costs of processing
redemptions from these accounts.
- --------------------------------------------------------------------------------
Note: Once a redemption is processed and a confirmation number given, the
transaction cannot be canceled.
<PAGE>

HOW TO REQUEST A REDEMPTION
You can request a redemption from your Fund account in any one of three ways:
online, by telephone, or by mail.
- --------------------------------------------------------------------------------
Online Requests [GRAPHIC APPEARS HERE]
Access Vanguard at www.vanguard.com
You can use your personal computer to sell or exchange shares of most Vanguard
funds by accessing our web site. To establish this service, you must register
through the website. We will then send you, by mail, an account access password
that will enable you to sell or exchange shares online (as well as perform other
transactions).
Note: The Vanguard funds whose shares you cannot exchange online or by
telephone are Vanguard U.S. Stock Index Funds, Vanguard Balanced Index Fund,
Vanguard International Stock Index Funds, Vanguard REIT Index Fund, Vanguard
Total International Stock Index Fund, and Vanguard Growth and Income Fund. These
funds do, however, permit online and telephone exchanges within IRAs and other
retirement accounts. If you sell shares of these funds online, you will receive
a redemption check at your address of record.
- --------------------------------------------------------------------------------
Telephone Requests [GRAPHIC APPEARS HERE]
All Account Types Except Retirement:
Call Vanguard Tele-Account 24 hours a day--or Client Services during business
hours--to sell shares.

Retirement Accounts:
You can exchange--but not sell--shares by calling Tele-Account or Client
Services.

Vanguard Tele-Account Client Services
1-800-662-6273 1-800-662-2739
- --------------------------------------------------------------------------------
SPECIAL INFORMATION: We will automatically establish the telephone redemption
option for your account, unless you instruct us otherwise in writing. While
telephone redemption is easy and convenient, this account feature involves a
risk of loss from unauthorized or fraudulent transactions. Vanguard will take
reasonable precautions to protect your account from fraud. You should do the
same by keeping your account information private and immediately reviewing any
account statements that we send to you. Make sure to contact Vanguard
immediately about any transaction you believe to be unauthorized.
- --------------------------------------------------------------------------------
We reserve the right to refuse a telephone redemption if the caller is unable to
provide:
*The ten-digit account number.
*The name and address exactly as registered on the account.
*The primary Social Security or employer identification number as registered on
the account.
*The Personal Identification Number, if applicable.
Please note that Vanguard will not be responsible for any account losses due
to telephone fraud, so long as we have taken reasonable steps to verify the
caller's identity. If you wish to remove the telephone redemption feature from
your account, please notify us in writing.
- --------------------------------------------------------------------------------
A Note on Unusual Circumstances

Vanguard reserves the right to revise or terminate the telephone redemption
privilege at any time, without notice. In addition, Vanguard can stop selling
shares or postpone payment at times when the New York Stock Exchange is closed
or under any emergency circumstances as determined by the U.S. Securities and
Exchange Commission. If you experience difficulty making a telephone redemption
during periods of drastic economic or market change, you can send us your
request by regular or express mail. Follow the instructions on selling or
exchanging shares by mail in this section.
- --------------------------------------------------------------------------------
Mail Requests [GRAPHIC APPEARS HERE]
All Account Types Except Retirement:
Send a letter of instruction signed by all registered account holders. Include
the fund name and account number and (if you are selling) a dollar amount or
number of shares OR (if you are exchanging) the name of the fund you want to
exchange into and a dollar amount or number of shares. To exchange into an
account with a different registration (including a different name, address,
taxpayer identification number, or account type), you must provide Vanguard with
written instructions that include the guaranteed signatures of all current
owners of the fund from which you wish to redeem.
<PAGE>

Redeeming Shares (continued)

Vanguard Retirement Accounts:
For information on how to request distributions from:
* Traditional IRAs and Roth IRAs--call Client Services.
* SEP-IRAs, SIMPLE IRAs, 403(b)(7) custodial accounts, and Profit-Sharing and
Money Purchase Pension (Keogh) Plans--call Individual Retirement Plans at
1-800-662-2003.

Depending on your account registration type, additional documentation may be
required.

First-class mail to: Express or Registered mail to:
The Vanguard Group The Vanguard Group
P.O. Box 1120 455 Devon Park Drive
Valley Forge, PA 19482-1120 Wayne, PA 19087-1815

For clients of Vanguard's Institutional Division ...

First-class mail to: Express or Registered mail to:
The Vanguard Group The Vanguard Group
P.O. Box 2900 455 Devon Park Drive
Valley Forge, PA 19482-2900 Wayne, PA 19087-1815
- --------------------------------------------------------------------------------
A Note on Large Redemptions
It is important that you call Vanguard before you redeem a large dollar amount.
We must consider the interests of all fund shareholders and so reserve the right
to delay delivery of your redemption proceeds--up to seven days--if the amount
will disrupt a Fund's operation or performance.
If you redeem more than $250,000 worth of Fund shares within any 90-day period,
the Fund reserves the right to pay part or all of the redemption proceeds above
$250,000 in kind, i.e., in securities, rather than in cash. If payment is made
in kind, you may incur brokerage commissions if you elect to sell the securities
for cash.
- --------------------------------------------------------------------------------

OPTIONS FOR REDEMPTION PROCEEDS
You may receive your redemption proceeds in one of two ways: check or exchange
to another Vanguard fund.
- --------------------------------------------------------------------------------
Check Redemptions
Normally, Vanguard will mail your check within two business days of a
redemption.
- --------------------------------------------------------------------------------
Exchange Redemptions
As described above, an exchange involves using the proceeds of your redemption
to purchase shares of another Vanguard fund.
- --------------------------------------------------------------------------------

FOR OUR MUTUAL PROTECTION
For your best interests and ours, Vanguard applies these additional requirements
to redemptions:

Request in "Good Order"
All redemption requests must be received by Vanguard in "good order." This means
that your request must include:
x The Fund name and account number.
x The amount of the transaction (in dollars or shares).
x Signatures of all owners exactly as registered on the account (for mail
requests).
x Signature guarantees (if required).(*)
x Any supporting legal documentation that may be required.
x Any outstanding certificates representing shares to be redeemed.

(*) For instance, a signature guarantee must be provided by all registered
account shareholders when redemption proceeds are to be sent to a different
person or address. A signature guarantee can be obtained from most banks,
credit unions, and licensed brokers.

Transactions are processed at the next-determined share price after Vanguard has
received all required information.

<PAGE>

31
- --------------------------------------------------------------------------------
Limits on Account Activity

Because excessive account transactions can disrupt management of a Fund and
increase the Fund's costs for all shareholders, Vanguard limits account activity
as follows:

* You may make no more than two substantive "round trips" through the Fund
during any 12-month period.
* Your round trips through the Fund must be at least 30 days apart.
* The Fund may refuse a share purchase at any time, for any reason.
* Vanguard may revoke an investor's telephone exchange privilege at any time,
for any reason.

A "round trip" is a redemption from the Fund followed by a purchase back into
the Fund. Also, "round trip" covers transactions accomplished by any combination
of methods, including transactions conducted by check, wire, or exchange to/from
another Vanguard fund. "Substantive" means a dollar amount that Vanguard
determines, in its sole discretion, could adversely affect the management of the
Fund.
- --------------------------------------------------------------------------------
Return Your Share Certificates
Any portion of your account represented by share certificates cannot be redeemed
until you return the certificates to Vanguard. Certificates must be returned
(unsigned), along with a letter requesting the sale or exchange you wish to
process, via certified mail to:

The Vanguard Group
455 Devon Park Drive
Wayne, PA 19087-1815
- --------------------------------------------------------------------------------
All Trades Final
Vanguard will not cancel any transaction request (including any purchase or
redemption) that we believe to be authentic once the request has been received
and a confirmation number assigned.
- --------------------------------------------------------------------------------

Transferring Registration

You can transfer the registration of your Fund shares to another owner by
completing a transfer form and sending it to Vanguard.

First-class mail to: Express or Registered mail to:
The Vanguard Group The Vanguard Group
P.O. Box 1110 455 Devon Park Drive
Valley Forge, PA 19482-1110 Wayne, PA 19087-1815

For clients of Vanguard's Institutional Division . . .

Fund and Account Updates

STATEMENTS AND REPORTS

We will send you account and tax statements to help you keep track of your Fund
account throughout the year as well as when you are preparing your income tax
returns.
In addition, you will receive financial reports about a Fund twice a year.
These comprehensive reports include an assessment of the Fund's performance (and
a comparison to its industry benchmark), an overview of the markets, a report
from the advisers, and the Fund's financial statements which include a listing
of the Fund's holdings.
To keep each Fund's costs as low as possible (so that you and other
shareholders can keep more of the Fund's investment earnings), Vanguard attempts
to eliminate duplicate mailings to the same address. When we find that two or
more Fund shareholders have the same last name and address, we send just one
Fund report to that address--instead of mailing separate reports to each
shareholder. If you want us to send separate reports, however, you may notify
our Investor Information Department at 1-800-662-7447.
- --------------------------------------------------------------------------------
Confirmation Statement
Sent each time you buy, sell, or exchange shares; confirms the trade date and
the amount of your transaction.
- --------------------------------------------------------------------------------
Portfolio Summary [GRAPHIC APPEARS HERE]
Mailed quarterly for most accounts; shows the market value of your account at
the close of the statement period, as well as distributions, purchases, sales,
and exchanges for the current calendar year.
- --------------------------------------------------------------------------------
Fund Financial Reports
Mailed in February and August for these Funds.
- --------------------------------------------------------------------------------
Tax Statements
Generally mailed in January; report previous year's dividend and capital gains
distributions, proceeds from the sale of shares, and distributions from IRAs or
other retirement accounts.
- --------------------------------------------------------------------------------
Average Cost Review Statement [GRAPHIC APPEARS HERE]
Issued quarterly for most taxable accounts (accompanies your Portfolio Summary);
shows the average cost of shares that you redeemed during the calendar year,
using the average cost single category method.
- --------------------------------------------------------------------------------
<PAGE>

Glossary of Investment Terms

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

Capital Gains Distribution
Payment to mutual fund shareholders of gains realized on securities that the
fund has sold at a profit, minus any realized losses.

Cash Reserves
Cash deposits, short-term bank deposits, and money market instruments which
include U.S. Treasury bills, bank certificates of deposit (CDs), repurchase
agreements, commercial paper, and banker's acceptances.

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

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

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

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

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

Mutual Fund
An investment company that pools the money of many people and invests it in a
variety of securities in an effort to achieve a specific objective over time.

Net Asset Value (NAV)
The market value of a mutual fund's total assets, minus liabilities, divided by
the number of shares outstanding. The value of a single share is called its
share value or share price.

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

Principal
The amount of your own money you put into an investment.

Securities
Stocks, bonds, money market instruments, and other investment vehicles.

Total Return
A percentage change, over a specified time period, in a mutual fund's net asset
value, with the ending net asset value adjusted to account for the reinvestment
of all distributions of dividends and capital gains.

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

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

[LOGO OF THE VANGUARD GROUP(R) APPEARS HERE]
Post Office Box 2600
Valley Forge, PA 19482-2600

For More Information If you'd like more information about Vanguard International
Stock Index Funds, the following documents are available free upon request:

Annual/Semiannual Report to Shareholders
Additional information about the Funds' investments is available in the Funds'
annual and semiannual reports to shareholders. In these reports, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Funds' performance during the most recent fiscal year.

Statement of Additional
Information (SAI)
The SAI provides more detailed information about the Funds (there is a separate
SAI for Vanguard Total International Stock Index Fund, which is legally a part
of Vanguard STAR Funds).

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

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

The Vanguard Group
Investor Information
Department
P.O. Box 2600
Valley Forge, PA 19482-2600

Telephone:
1-800-662-7447 (SHIP)
Text Telephone: 1-800-952-3335

If you are a current Fund shareholder and would like information about your
account, account transactions, and/or account statements, please call:

Client Services Department
Telephone:
1-800-662-2739 (CREW)

Text Telephone:
1-800-662-2738

Information provided by the Securities and Exchange Commission (SEC)
You can review and copy information about the Funds (including the SAIs) at the
SEC's Public Reference Room in Washington, D.C. To find out more about this
public service, call the SEC at 1-800-SEC-0330. Reports and other information
about the Funds are also available on the SEC's website (www.sec.gov), or you
can receive copies of this information, for a fee, by writing the Public
Reference Section, Securities and Exchange Commission, Washington , DC
20549-6009.

Funds' Investment Company Act
file number: 811-5972

P079N-04/30/1999

<PAGE>

Vanguard International Stock Index Funds

Participant Prospectus
April 30, 1999

A Group of International Stock Index Mutual Funds

<TABLE>
<CAPTION>
Contents
<S> <C>
1 An Introduction to Index Funds 20 Year 2000 Challenge
2 Fund Profiles 20 Dividends, Capital Gains, and Taxes
2 Vanguard European Stock Index Fund 21 Share Price
5 Vanguard Pacific Stock Index Fund
8 Vanguard Emerging Markets Stock Index Fund 22 Financial Highlights
11 Vanguard Total International Stock Index Fund 25 Investing with Vanguard
14 More on the Funds 25 Accessing Fund Information by Computer
19 The Funds and Vanguard Glossary (inside back cover)
19 Investment Adviser
</TABLE>
- --------------------------------------------------------------------------------
Why Reading This Prospectus Is Important
This prospectus explains the objective, risks, and strategies of each of the
Vanguard International Stock Index Funds. To highlight terms and concepts
important to mutual fund investors, we have provided "Plain Talk((R))"
explanations along the way. Reading the prospectus will help you to decide
which Fund, if any, is the right investment for you. We suggest that you
keep it for future reference.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Important Note
This prospectus is intended for participants in employer-sponsored
retirement or savings plans. Another version--for investors who would like
to open a personal investment account--can be obtained by calling Vanguard
at 1-800-662-7447.
- --------------------------------------------------------------------------------

An Introduction to Index Funds

What is indexing?
An index is a group of securities whose overall performance is used as a
standard to measure investment performance. An index (or "passively managed")
fund tries to match, as closely as possible, the performance of an established
target index. The fund does this by holding either all--or a representative
sample--of the securities in the index.

Why invest in index funds?

Index funds appeal to many investors for a number of reasons:

. Simplicity. Indexing is a straightforward market-matching strategy.
. Diversification. Indexes generally cover a wide variety of companies and
industries.
. Relative performance predictability. An index fund is expected to move in
the same direction--up or down--as its target index and to closely
parallel its performance.
. Low cost. Index funds do not have many of the expenses of an actively
managed fund--such as research--and keep trading activity, and thus
brokerage commissions, to a minimum.
. Low realization of capital gains. Because an index fund typically sells
securities only to respond to redemption requests or to adjust the number
of shares it holds to reflect a change in its target index, the fund's
turnover rate--and thus its realization of capital gains--is usually very
low.

For more information about index funds, see "Indexing Methods" under More on
the Funds.

PLAIN TALK ABOUT

The Costs of Investing

Costs are an important consideration in choosing a mutual fund. That's
because you, as a shareholder, pay the costs of operating a fund, plus any
transaction costs associated with the fund's buying and selling of
securities. These costs can erode a substantial portion of the gross income
or capital appreciation a fund achieves. Even seemingly small differences in
expenses can, over time, have a dramatic effect on a fund's performance.
<PAGE>

Fund Profile--Vanguard European Stock Index Fund

The following profile provides you with a summary of the key features of
Vanguard European Stock Index Fund.

INVESTMENT OBJECTIVE
The Fund seeks to match the performance of the Morgan Stanley Capital
International Europe Index, which is made up of more than 550 common stocks of
companies located in 15 European countries--mostly in the United Kingdom,
Germany, and France, (which comprise .%, .%, and .% of the Index's market
capitalization, respectively), as well as in Austria, Belgium, Denmark, Finland,
Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden, and
Switzerland.

INVESTMENT STRATEGIES
The Fund employs a "passively managed" investment--or index--approach, by
holding a mix of securities that seeks to match the performance of the MSCI
Europe Index. For more information about passive management, see "Indexing
Methods" under More on the Funds.

PRIMARY RISKS
The Fund's total return, like stock prices generally, will fluctuate within a
wide range, so an investor could lose money over short or even long periods. In
addition to facing the same risks as U.S. stock funds, the Fund is subject to
the risks associated with foreign investing. Among these are:

. Country risk, which is the chance that a country's economy will be hurt by
political troubles, financial problems, or natural disasters.
. Currency risk, which is the chance that returns will be hurt by a rise in
the value of the U.S. dollar versus foreign currencies.

PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
the Fund. The bar chart shows the Fund's performance in each calendar year since
inception. The table shows how the Fund's average annual returns for one and
five calendar years and since inception compare with those of a broad-based
securities market index. Keep in mind that the Fund's past performance does not
indicate how it will perform in the future.

------------------------------------------------------------
Annual Total Returns
------------------------------------------------------------

------------------------------------------------------------
Return figures do not reflect the annual account maintenance
fee of $10 for accounts with balances of less than $10,000.
------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended _________) and the lowest return for a quarter was
- -.% (quarter ended __________).
<PAGE>

3
----------------------------------------------------------------------
Average Annual Total Returns for Years Ended December 31, 1998
----------------------------------------------------------------------
1 Year 5 Years Since Inception*

Vanguard European Stock Index Fund . % . % . %
Morgan Stanley Capital International
Europe Index . . .
----------------------------------------------------------------------
*June 18, 1990
----------------------------------------------------------------------

Shareholder Fees (fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases: None
Transaction Fee on Purchases(*): 0.5%
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fees: None
Exchange Fees: None

Annual Fund Operating Expenses (expenses deducted from the Fund's
assets)
Management Expenses: . %
12b-1 Distribution Fees: None
Other Expenses: . %
Total Annual Fund Operating Expenses: . %

*The transaction fee on purchases is deducted from all purchases
(including exchanges from other Vanguard funds) but not from
reinvested dividends and capital gains.

For accounts with current balances of less than $10,000, Vanguard will
deduct an account maintenance fee from your annual distribution of the Fund's
dividends ($10 each December). If your distribution is less than the fee,
fractional shares will be automatically redeemed to make up the difference.

The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. It illustrates the
hypothetical expenses that you would incur over various periods if you invest
$10,000 in the Fund. This example assumes that the Fund provides a return of 5%
a year, and that operating expenses remain the same. The results apply whether
or not you redeem your investment at the end of each period. (Note: The $10
annual account maintenance fee on accounts with current balances of less than
$10,000 is not included).

----------------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
----------------------------------------------------------------------
$. $. $. $.
----------------------------------------------------------------------

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.
<PAGE>

Fund Profile--Vanguard European Stock Index Fund(continued)

Additional Information

Dividends and Capital Gains Newspaper Abbreviation
Paid annually in December Europe

Investment Adviser Vanguard Fund Number
Vanguard Core Management Group, Valley Forge, Pa., 079
since inception
Cusip Number
Inception Date 922042205
June 18, 1990
Ticker Symbol
Net Assets as of December 31, 1998 VEURX
$ . billion
<PAGE>

5
Fund Profile--Vanguard Pacific Stock Index Fund

The following profile summarizes key features of Vanguard Pacific Stock Index
Fund.

INVESTMENT OBJECTIVE
The Fund seeks to match the performance of the Morgan Stanley Capital
International Pacific Free Index(*), which consists of more than 500 common
stocks of companies located in Japan (which comprises .% of the Index's market
capitalization), Australia, Hong Kong, New Zealand, and Singapore.

INVESTMENT STRATEGIES
The Fund employs a "passively managed" investment--or index--approach, by
holding a mix of securities that seeks to match the performance of the MSCI
Pacific Free Index. For more information about passive management, see "Indexing
Methods" under More on the Funds.

. Country risk, which is the chance that a country's economy will be hurt by
political troubles, financial problems, or natural disasters.

. Currency risk, which is the chance that returns will be hurt by a rise in
the value of the U.S. dollar versus foreign currencies.

PERFORMANCE/RISK INFORMATION
The bar chart and table below provide an indication of the risk of investing in
the Fund. The bar chart shows the Fund's performance in each calendar year since
inception. The table shows how the Fund's average annual returns for one and
five years and since inception compare with those of a broad-based securities
market index. Keep in mind that the Fund's past performance does not indicate
how it will perform in the future.

----------------------------------------------------------------------
Annual Total Returns
----------------------------------------------------------------------

----------------------------------------------------------------------
Return figures do not reflect the annual account maintenance fee of
$10 for accounts with balances of less than $10,000.
----------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended __________) and the lowest return for a quarter
was -.% (quarter ended __________).
<PAGE>

Fund Profile--Vanguard Pacific Stock Index Fund (continued)
----------------------------------------------------------------------
Average Annual Total Returns for Years Ended December 31, 1998
----------------------------------------------------------------------

1 Year 5 Years Since Inception*

Vanguard Pacific Stock Index Fund . % . % . %
Morgan Stanley Capital International
Pacific Free Index . . .
----------------------------------------------------------------------
*June 18, 1990
----------------------------------------------------------------------

Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: . %
12b-1 Distribution Fees: None
Other Expenses: . %
Total Annual Fund Operating Expenses: . %

*The transaction fee on purchases is deducted from all purchases (including
exchanges from other Vanguard funds) but not from reinvested dividends and
capital gains.

For accounts with current balances of less than $10,000, Vanguard will
deduct an account maintenance fee from your annual distribution of the Fund's
dividends ($10 each December). If your distribution is less than the fee,
fractional shares will be automatically redeemed to make up the difference.

The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. It illustrates the
hypothetical expenses that you would incur over various periods if you invest
$10,000 in the Fund. This example assumes that the Fund provides a return of 5%
a year, and that operating expenses remain the same. The results apply whether
or not you redeem your investment at the end of each period. (Note: The $10
annual account maintenance fee on accounts with current balances of less than
$10,000 is not included.).

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.
<PAGE>

Additional Information

Dividends and Capital Gains Newspaper Abbreviation
Paid annually in December Pacific

Investment Adviser Vanguard Fund Number
Vanguard Core Management Group, Valley Forge, Pa., 072
since inception
Cusip Number
Inception Date 922042106
June 18, 1990
Ticker Symbol
Net Assets as of December 30, 1998 VPACX
$ . billion
<PAGE>

Fund Profile--Vanguard Emerging Markets Stock Index Fund

The following profile summarizes key features of Vanguard Emerging Markets Stock
Index Fund.

INVESTMENT OBJECTIVE
The Fund seeks to match the performance of the Morgan Stanley Capital
International Select Emerging Markets Free(*) Index, which includes more than
600 common stocks of companies located in 15 emerging markets of Europe, Asia,
Africa, and Latin America--mostly in Brazil, Hong Kong, South Africa, and Mexico
(which comprise .%, .%, .%, and .% of the Index's market capitalization,
respectively), as well as Argentina, the Czech Republic, Greece, Hungary,
Indonesia, Israel, Philippines, Poland, Singapore, Thailand, and Turkey.

INVESTMENT STRATEGIES
The Fund employs a "passively managed" investment--or index--approach, by
holding a mix of securities that seeks to match the performance of the MSCI
Select Emerging Markets Index. For more information about passive management,
see "Indexing Methods" under More on the Funds.

PRIMARY RISKS
The Fund's total return, like stock prices generally, can fluctuate within a
wide range, so an investor could lose money over short or even extended periods.
In addition to facing the same risks as U.S. stock funds, the Fund is subject to
the risks associated with foreign investing. Among these are:

. Country risk, which is the chance that a country's economy will be hurt by
political troubles, financial problems, or natural disasters.

. Currency risk, which is the chance that returns will be hurt by a rise in
the value of the U.S. dollar versus foreign currencies.

----------------------------------------------------------------------
Annual Total Returns
----------------------------------------------------------------------

<PAGE>

During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended __________) and the lowest return for a quarter
was -.% (quarter ended __________).

----------------------------------------------------------------------
Average Annual Total Returns For Years Ended December 31, 1998
----------------------------------------------------------------------
1 Year Since Inception*
----------------------------------------------------------------------
Vanguard Emerging Markets Stock Index Fund . % . %
Morgan Stanley Capital International Select
Emerging Markets Free Index . .
----------------------------------------------------------------------
*March 1, 1994
----------------------------------------------------------------------

Shareholder Fees (fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases: None
Transaction Fee on Purchases*: 1%
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fees**: 1%

Annual Fund Operating Expenses (expenses deducted from the Fund's assets)
Management Expenses: . %
12b-1 Distribution Fees: None
Other Expenses: . %
Total Annual Fund Operating Expenses: . %

*The transaction fee on purchases is deducted from all purchases
(including exchanges from other Vanguard funds) but not from reinvested
dividends and capital gains.
**The redemption fee applies to all redemptions (sales or exchanges); it
is deducted from redemption proceeds, and retained by Fund.

For accounts with current balances of less than $10,000, Vanguard will
deduct an account maintenance fee from your annual distribution of the Fund's
dividends ($10 each December). If you receive a distribution that is less than
the fee, fractional shares will automatically be redeemed to make up the
difference.

The following example is intended to help you compare the cost of investing
in the Fund with the cost of investing in other mutual funds. It illustrates the
hypothetical expenses that you would incur over various periods if you invest
$10,000 in the Fund. This example assumes that the Fund provides a return of 5%
a year, that operating expenses remain the same, and that you redeem all your
shares at the end of each period.

Fund Profile--Vanguard Emerging Markets Stock Index Fund (continued)

(Note: The $10 annual account maintenance fee on accounts with current
balances of less than $10,000 is not included in either table.)

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.

Additional Information

Dividends and Capital Gains Newspaper Abbreviation
Paid annually in December EmerMkt

Investment Adviser Vanguard Fund Number
Vanguard Core Management Group, Valley Forge, Pa., 533
since inception
Cusip Number
Inception Date 922042304
May 4, 1994
Ticker Symbol
Net Assets as of December 31, 1998 VEIEX
$ . billion
<PAGE>

11
Fund Profile--Vanguard Total International Stock Index Fund

The following profile summarizes key features of Vanguard Total International
Stock Index Fund.

. Country risk, which is the chance that a country's economy will be hurt by
political troubles, financial problems, or natural disasters.

. Currency risk, which is the chance that returns will be hurt by a rise in
the value of the U.S. dollar versus foreign currencies.

----------------------------------------------------------------------
Annual Total Returns
----------------------------------------------------------------------

During the period shown in the bar chart, the highest return for a calendar
quarter was .% (quarter ended __________) and the lowest return for a quarter
was -.% (quarter ended __________).
<PAGE>

Fund Profile--Vanguard Total International Stock Index Fund (continued)

--------------------------------------------------------------------
Average Annual Total Returns For Years Ended December 31, 1998
--------------------------------------------------------------------
1 Year Since
Inception(*)
--------------------------------------------------------------------
Vanguard Total International Stock Index Fund . % . %
Total International Composite Index(**) . .
--------------------------------------------------------------------
(*) March 1, 1994
(**) Consists of the Morgan Stanley Capital International Europe,
Australasia, Far East Index + Select Emerging Markets Free
Index.
------------------------------------------------------------------

Shareholder Fees (fees paid directly from your investment)

Sales Charge (Load) Imposed on Purchases: None
Transaction Fee on Purchases(*): 0.5%
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fees: None
Exchange Fees: None

Annual Fund Operating Expenses (expenses deducted from the
Fund's assets)

Management Expenses: . %
12b-1 Distribution Fees: None
Other Expenses: . %
Total Annual Fund Operating Expenses: . %

* The transaction fee on purchases is deducted from all purchases
(including exchanges from other Vanguard funds) but not from
reinvested dividends and capital gains.

For accounts with current balances of less than $10,000, Vanguard will
deduct an account maintenance fee from your annual distribution of the Fund's
dividends ($10 each December). If you receive a distribution that is less than
the fee, fractional shares will automatically be redeemed to make up the
difference.

Although the Fund is expected to incur no net expenses directly, the Fund's
shareholders indirectly bear the expenses of the underlying funds in which
the Fund invests. See The Funds and Vanguard. The Fund's expense ratio, based
----------------------
on its underlying investments, was .% as of December 31, 1998.

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

------------------------------------------------------------
1 Year 3 Years 5 Years 10 Years
------------------------------------------------------------
$ . $ . $ . $ .
------------------------------------------------------------

This example should not be considered to represent actual expenses or
performance from the past or for the future. Actual future expenses may be
higher or lower than those shown.
<PAGE>

Additional Information

Dividends and Capital Gains Newspaper Abbreviation
Paid annually in December TotIntl

Investment Adviser Vanguard Fund Number
Vanguard Core Management Group, Valley Forge, Pa., 113
since inception

Inception Date Cusip Number
April 29, 1996 921909602

Net Assets as of December 31, 1998 Ticker Symbol
$ . billion VGTSX
<PAGE>

More on the Funds

Indexing Methods

In seeking to track a particular index, a fund may use one of two indexing
methods to select the stocks it invests in.

Some index funds hold each stock found in their target indexes in about the same
proportions as represented in the indexes themselves. For example, if 5% of the
S&P 500 Index were made up of the stock of a specific company, a fund tracking
that index would invest about 5% of its assets in that company.

PLAIN TALK ABOUT

"Fund of Funds"

Other index funds may use a different selection process. Because it would
be very expensive to buy and sell all of the stocks held in certain indexes (the
MSCI Select Emerging Markets Index, for example, includes more than 600 stocks),
funds tracking these larger indexes use a "sampling" technique. Using a
sophisticated computer program, these funds select stocks that will recreate
their target indexes in terms of industry, size, country, and other
characteristics. For instance, if 10% of the MSCI Select Emerging Markets Index
were made up of the stocks of a certain country, the Emerging Markets Stock
Index Fund would invest about 10% of its assets in stocks of the Index from that
country. The European, Pacific, and Emerging Markets Stock Index Funds each
employ this method of indexing. As a "fund of funds," the Total International
Stock Index Fund allocates its assets among these three Funds.

--------------------------------------------------------------
Number of Stocks Number of Stocks
Fund Held in Target Index
--------------------------------------------------------------
European . .
Pacific . .
Emerging Markets . .
--------------------------------------------------------------

<PAGE>

PLAIN TALK ABOUT
The Risks of
International Investing

Additional Risk Information

To track their target indexes as closely as possible, the European Stock Index
and Pacific Stock Index Funds attempt to remain fully invested in foreign
stocks. The Emerging Markets Stock Index Fund normally invests 95% of its assets
in foreign stocks, holding the remaining 5% in cash reserves to meet daily
redemption requests. The Total International Stock Index Fund normally holds
100% of its assets in shares of the other three Funds.

[GRAPHIC APPEARS HERE]

Each Fund is subject to market risk, which is the possibility that stock
prices overall will decline over short or even long periods. Stock markets
tend to move in cycles, with periods of rising prices and periods of
falling prices.

In addition, investments in foreign stock markets can be as risky,
if not more risky, than U.S. stock investments. The prices of
international stocks and the prices of U.S. stocks have often moved in
opposite directions. These periods have, in the past, lasted for as long
as several years.

----------------------------------------------------------
International Stock Market Returns (1969-1998)
----------------------------------------------------------
1 Year 5 Years 10 Years 20 Years
----------------------------------------------------------
Best . . . .
Worst . . . .
Average . . . .
----------------------------------------------------------

The table covers all of the 1-, 5-, 10-, and 20-year periods from 1969
through 1998. Keep in mind that this was a particularly favorable period for
foreign markets. For instance, over 10-year periods, foreign stocks provided an
average return of .%, compared to .% for U.S. stocks (as measured by the
Standard & Poor's 500 Composite Stock Price Index) during the same time frame.
These average returns reflect past performance on international stocks; you
should not regard them as an indication of future returns from either foreign
markets as a whole or any of the Funds in particular.

--------------------------------------------------------------------
Stock Market Returns For Different International Markets
--------------------------------------------------------------------
European Pacific Emerging U.S.
Market(*) Market(*) Markets(*) Markets
--------------------------------------------------------------------
1990
1991
1992
1993
1994
1995 .%+
1996
1997
1998
--------------------------------------------------------------------
*European market returns are measured by the MSCI Europe Index;
Pacific market returns are measured by the MSCI Pacific Free Index;
Emerging markets returns are measured by the MSCI Select Emerging
Markets Index; and U.S. market returns are measured by the Standard &
Poor's 500 Composite Stock Price Index.
+The inception date of the MSCI Select Emerging Markets Index was May
4, 1994; returns shown for 1990-1994 are measured by the MSCI Emerging
Markets Free Index.
--------------------------------------------------------------------

PLAIN TALK ABOUT
Regional Versus Broad
International Investing

European Stock Index Fund. Stocks from the United Kingdom, Germany, and
France comprised .%, .%, and .% of the MSCI Europe Index, respectively, as of
December 31, 1998; stocks from the remaining 12 countries in the Index have much
less significant market capitalization weightings in the Index and thus much
less impact on its total return. As a result, the total return of the European
Stock Index Fund, which seeks to track the Index, will be most impacted by
stocks from the United Kingdom, Germany, and France.

Emerging Markets Stock Index Fund. As discussed above, emerging markets can
be substantially more volatile than both U.S and more developed foreign markets.
Therefore, the Emerging Markets Stock Index Fund may expose investors to a
higher degree of volatility than funds that invest in more developed markets.

Foreign investing generally gives rise to other risks as well.

[GRAPHIC APPEARS HERE]

Each Fund is subject to currency risk, which is the possibility that a
stronger U.S. dollar will reduce returns for Americans investing overseas.
Generally, when the dollar rises in value against another country's
currency, your investment in that country loses value because its currency
is worth fewer U.S. dollars. On the other hand, a weaker U.S. dollar
generally leads to higher returns for Americans holding foreign
investments.

Each Fund is also subject to country risk, which is the possibility
that political events (a war, national elections), financial problems
(rising inflation, government default), or natural disasters (an
earthquake, a flood) will weaken a country's economy and cause investments
in that country to lose money.

<PAGE>

PLAIN TALK ABOUT
Vanguard's Transaction Fees

Some of Vanguard's index funds charge a transaction fee on purchases of fund
shares to offset the higher costs of trading certain securities,
particularly small-company and international stocks. The transaction fee
ensures that these higher costs are borne by the investors making the
transactions--and not by shareholders already in the fund. In addition, most
of Vanguard's index funds charge an account maintenance fee on accounts
under $10,000 to divide the costs of maintaining accounts equitably among
shareholders.

At Vanguard, all fees are paid directly to the fund itself (unlike a
sales charge or load, which--for many fund companies--ends up in the pocket
of the sponsor, adviser, or sales representative). Without transaction fees,
an index fund would have trouble tracking its target index.

Security Selection
In seeking to track its target index, each Fund invests in a portfolio of
foreign stocks selected through statistical methods.

European Stock Index Fund. The Fund invests in a statistically selected
sample of more than 550 common stocks included in the Morgan Stanley Capital
International (MSCI) Europe Index, which is made up of the stocks of companies
located in 15 European countries. Three countries--the United Kingdom, Germany,
and France-- dominate the Index, with .%, .%, .%, and .%, respectively, as of
December 31, 1998. The other 12 countries, which include Austria, Belgium,
Denmark, Finland, Ireland, Italy, the Netherlands, Norway, Portugal, Spain,
Sweden, and Switzerland, are much less significant to the Index and,
consequently, the Fund.

Emerging Markets Stock Index Fund. The Fund invests in a statistically
selected sample of the approximately 600 common stocks included in the Morgan
Stanley Capital International Select Emerging Markets Free Index, which is made
up of the stocks of companies located in 15 emerging markets of Europe. Four
countries--Brazil, Hong Kong, Mexico, and South Africa--represent a majority of
the Index, with .%, .%, .%, and .% of the market capitalization of the Index,
respectively, as of December 31, 1998. The other 11 countries include Argentina,
the Czech Republic, Greece, Hungary, Indonesia, Israel, Philippines, Poland,
Singapore, Thailand, and Turkey.

Each Fund is generally managed without regard to tax ramifications.

Costs and Market-Timing
Some investors try to profit from a strategy called market-timing--switching
money into investments when they expect prices to rise, and taking money out
when they expect prices to fall. As money is shifted in and out, a fund incurs
expenses for buying and selling securities. These costs are borne by all fund
shareholders, including the
<PAGE>

. Each Fund reserves the right to reject any purchase request--including
exchanges from other Vanguard funds--that it regards as disruptive to the
efficient management of the Fund. This could be because of the timing of
the investment or because of a history of excessive trading by the
investor.
. Each Fund charges a transaction fee on purchases. In addition, the Emerging
Markets Stock Index Fund charges a transaction fee on redemptions.
. Telephone exchanges are not accepted for non-IRAs.
. There is a limit on the number of times you can exchange into and out of a
Fund (see "Exchanges" in the Investing with Vanguard section).
. Each Fund reserves the right to stop offering shares at any time.

The Vanguard funds do not permit market-timing. Do not invest in these Funds
if you are a market-timer.

PLAIN TALK ABOUT
Turnover Rate

Before investing in a mutual fund, you should review its turnover rate.
This gives an indication of how transaction costs could affect the fund's
future returns. In general, the greater the volume of buying and selling by
the fund, the greater the impact that brokerage commissions and other
transaction costs will have on its return. Also, funds with high turnover
rates may be more likely to generate capital gains that must be distributed
to shareholders as income subject to taxes. The average turnover rate for
passively managed foreign stock index funds is roughly .%; for all foreign
stock funds, the average turnover is approximately .%.

Turnover Rate

Although each Fund seeks to invest for the long term, the Funds retain the right
to sell securities regardless of how long the securities have been held.
Generally, a passively-managed fund sells securities only to respond to
redemption requests or to adjust the number of shares held to reflect a change
in the fund's target index. Because of this, the turnover rate for each Fund has
been extremely low, with averages over the past five years (or since inception)
ranging from . % for the _______ Fund to . % for the _____ Fund. (A turnover
rate of 100% would occur, for example, if a Fund sold and replaced securities
valued at 100% of its net assets within a one-year period.)

PLAIN TALK ABOUT
Derivatives

A derivative is a financial contract whose value is based on (or "derived"
from) a traditional security (such as a stock or a bond), an asset (such as
a commodity like gold), or a market index (such as the S&P 500 Index).
Futures and options are derivatives that have been trading on regulated
exchanges for more than two decades. These "traditional" derivatives are
standardized contracts that can easily be bought and sold, and whose market
values are determined and published daily. It is these characteristics that
differentiate futures and options from the relatively new types of
derivatives. If used for speculation or as leveraged investments,
derivatives can carry considerable risks.

Other Investment Policies and Risks

Each Fund may enter into forward foreign currency contracts, in order to
maintain the same currency exposure as its respective Index. A forward foreign
currency contract is an agreement to buy or sell a country's currency at a
specific price on a specific date, usually 30, 60, or 90 days in the future. In
other words, the contract guarantees an exchange rate on a given date. Managers
of international stock funds often use these contracts to guard against sudden,
unfavorable changes in U.S. dollar/ foreign currency exchange rates. However,
the Funds will use these contracts for different reasons:

. To gain currency exposure when investing in stock index futures.

. To settle trades in a foreign currency.

substantial loss (or gain) for a fund. Similar risks exist for warrants
(securities that permit their owners to purchase a specific number of shares of
stock at a predetermined price), convertible securities (securities that may be
exchanged for another asset), and swap agreements (contracts between two parties
in which each agrees to make payments to the other based on the return of a
specified index or asset).

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

. To keep cash on hand to meet shareholder redemptions or other needs while
simulating full investment in stocks.
. To reduce the Fund's transaction costs or add value when these instruments
are favorably priced.

The Funds and Vanguard

Vanguard International Stock Index Funds are offered by The Vanguard Group, a
family of more than . investment companies with more than . distinct investment
portfolios and total net assets of more than $ . billion. All of the Vanguard
funds share in the expenses associated with business operations, such as
personnel, office space, equipment, and advertising.

PLAIN TALK ABOUT
Vanguard's Unique
Corporate Structure

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

As a result, the Fund is expected to operate at a very low or zero expense
ratio. Since its inception in 1996, the Fund in fact has incurred no direct
expenses.

Investment Adviser

Vanguard Core Management Group (the "Group"), P.O. Box 2600, Valley Forge, PA
19482, provides advisory services on an at-cost basis to the European, Pacific,
and Emerging Markets Stock Index Funds. The Total International Stock Index Fund
does not have its own investment adviser, but rather benefits from the advisory
services provided to the European, Pacific, and Emerging Markets Stock Index
Funds by the Group. For the fiscal year ended December 31, 1998, the advisory
and administrative fees represented an effective annual rate of __% for European
Stock Index Fund, .% for Pacific Stock Index Fund, and .% for Emerging Markets
Stock Index Fund.

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

PLAIN TALK ABOUT
The Funds' Adviser

Vanguard Core Management Group provides investment advisory services to many
Vanguard funds; as of December 31, 1998, the Group managed more than $ .
billion in total assets. The individual responsible for overseeing the
European, Pacific, and Emerging Markets Stock Index Funds' investments is:

George U. Sauter, Managing Director of Vanguard; has worked in investment
management since 1985; has managed portfolio investments since 19__; A.B.,
Dartmouth College; M.B.A., University of Chicago.

<PAGE>

Year 2000 Challenge

In addition to taking every reasonable step to secure our internal systems
and external relationships, Vanguard is further developing contingency plans
intended to assure that unexpected systems failures will not adversely affect
the Funds' operations. Vanguard intends to monitor these processes through the
rollover of 1999 into 2000 and to quickly implement alternate solutions if
necessary.

Dividends, Capital Gains, and Taxes

Dividend and capital gains distributions of Fund shares that are held as an
investment option in an employer-sponsored retirement or savings plan will be
reinvested in additional Fund shares and accumulate on a tax-deferred basis. You
will not owe taxes on these distributions until you begin withdrawals. You
should consult your plan administrator, your plan's Summary Plan Description, or
your tax adviser about the tax consequences of an investment in any of the Funds
and of any plan withdrawals.

PLAIN TALK ABOUT

Distributions

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

21
Share Price

Total Assets - Liabilities
Net Asset Value = --------------------------------
Number of Shares Outstanding

Knowing the daily net asset value is useful to you as a shareholder because
it indicates the current value of your investment. The Fund's NAV, multiplied by
the number of shares you own, gives you the dollar amount you would have
received had you sold all of your shares back to the Fund that day. Because
foreign securities markets may operate on days which are not business days in
the United States, the value of a Fund's holdings may change on days when
shareholders will not be able to purchase or redeem the Fund's shares.

Each Fund's share price can be found daily in the mutual fund listings of
most major newspapers under the heading "Vanguard Index Funds." Different
newspapers use different abbreviations for each Fund, but the most common are
Europe, Pacific, EmerMkt, and TotIntl.
<PAGE>

PLAIN TALK ABOUT

How to Read the Financial
Highlights Table

This explanation uses the European Stock Index Fund as an example. The Fund
began the fiscal year with a net asset value (price) of $ . per share.
During the year, the Fund earned $ . per share from investment income
(interest and dividends) and $ . per share from investments that had
appreciated in value or that were sold for higher prices than the Fund paid
for them.

Shareholders received $ . per share in the form of dividend and capital
gains distributions. A portion of each year's distributions may come from
the prior year's income or capital gains.

The earnings ($ . per share) minus the distributions ($ . per share)
resulted in a share price of $ . at the end of the year. This was an
increase of $ . per share (From $ . at the beginning of the year to $ . at
the end of the year). For a shareholder who reinvested the distributions in
the purchase of more shares, the total return from the Fund was .% for the
year.
As of December 31, 1998, the Fund had $ . billion in net assets. For the
year, its expense ratio was . % ($ . per $1,000 of net assets); and its net
investment income amounted to . % of its average net assets. It sold and
replaced securities valued at . % of its total net assets.

Financial Highlights

FINANCIAL HIGHLIGHTS TABLE TO COME

FINANCIAL HIGHLIGHTS TABLE TO COME
<PAGE>

FINANCIAL HIGHLIGHTS TABLE TO COME

25
Investing with Vanguard

One or more of the Funds is an investment option in your retirement or savings
plan. Your plan administrator or your employee benefits office can provide you
with detailed information on how to participate in your plan and how to elect
any of the Funds as an investment option.

. If you have any questions about a Fund or Vanguard, including the Fund's
investment objective, strategies, or risks, contact Vanguard's Participant
Services Center, toll-free, at 1-800-523-1188.

. If you have questions about your account, contact your plan administrator
or the organization that provides record-keeping services for your plan.

Investment Options and Allocations

Your plan's specific provisions may allow you to change your investment
selections, the amount of your contributions, or how your contributions are
allocated among the investment choices available to you. Contact your plan
administrator or employee benefits office for more details.

Transactions

Contributions, exchanges, or redemptions of a Fund's shares are processed as
soon as they have been received by Vanguard in good order. Good order means that
your request includes complete information on your contribution, exchange, or
redemption, and that Vanguard has received the appropriate assets.

Exchanges

The exchange privilege (your ability to redeem shares from one fund to purchase
shares of another fund) may be available to you through your plan. Although we
make every effort to maintain the exchange privilege, Vanguard re- serves the
right to revise or terminate this privilege, limit the amount of an exchange or
reject any exchange, at any time, without notice. Because excessive exchanges
can potentially disrupt the management of a Fund and increase its transaction
costs, Vanguard limits participant exchange activity to no more than four
substantive "round trips" through the Fund (at least 90 days apart) during any
12-month period. A "round trip" is a redemption from the Fund followed by a
purchase back into the Fund. "Substantive" means a dollar amount that Vanguard
determines, in its sole discretion, could adversely affect the management of the
Fund.

Before making an exchange to or from another fund available in your plan,
consider the following:

. Certain investment options, particularly funds made up of company stock or
investment contracts, may be subject to unique restrictions.

. Make sure to read that fund's prospectus. Contact Participant Services,
toll-free, at 1-800-523-1188 for a copy.

. Vanguard can accept exchanges only as permitted by your plan. Contact your
plan administrator for details on the exchange policies that apply to your
plan.

Accessing Fund Information by Computer

- --------------------------------------------------------------------------------
Vanguard on the World Wide Web www.vanguard.com

Use your personal computer to visit Vanguard's education-oriented website, which
provides timely news and information about Vanguard funds and services; an
online "university" that offers a variety of mutual fund classes; and
easy-to-use, interactive tools to help you create your own investment and
retirement strategies.
- --------------------------------------------------------------------------------
<PAGE>

(This page intentionally left blank.)
<PAGE>