UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-03916
| Name of Registrant: | Vanguard Specialized Funds |
| Address of Registrant: | P.O. Box 2600 |
| Valley Forge, PA 19482 |
| Name and address of agent for service: | John E. Schadl, Esquire |
| P.O. Box 876 | |
| Valley Forge, PA 19482 |
Registrant’s telephone number, including area code: (610) 669-1000
Date of fiscal year end: January 31
Date of reporting period: February 1, 2024—July 31, 2024
Item 1: Reports to Shareholders.
Vanguard Global ESG Select Stock Fund | |
Vanguard Global ESG Select Stock Fund | |
Vanguard Real Estate Index Fund
Investor Shares (VGSIX)
Semi-Annual Shareholder Report | July 31, 2024
This semi-annual shareholder report contains important information about Vanguard Real Estate Index Fund (the "Fund") for the period of February 1, 2024, to July 31, 2024. You can find additional information about the Fund at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature. You can also request this information by contacting us at 800-662-7447.
What were the Fund costs for the last six months?
(based on a hypothetical $10,000 investment)
| Share Class Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| Investor Shares | $14 | 0.27%1 |
1 | Annualized. |
This table reflects the Fund’s investments, including short-term investments, derivatives and other assets and liabilities.
| Fund Statistics (as of July 31, 2024) | |
| Fund Net Assets (in millions) | $66,670% |
| Number of Portfolio Holdings | $161% |
| Portfolio Turnover Rate | $3% |
| Portfolio Composition % of Net Assets (as of July 31, 2024) | |
| Data Center REITs | 7.2% |
| Health Care REITs | 9.1% |
| Industrial REITs | 10.4% |
| Multi-Family Residential REITs | 7.3% |
| Other Specialized REITs | 5.7% |
| Real Estate Services | 6.0% |
| Retail REITs | 11.4% |
| Self-Storage REITs | 5.7% |
| Single-Family Residential REITs | 3.8% |
| Telecom Tower REITs | 10.5% |
| Vanguard Real Estate II Index Fund1 | 13.4% |
| Other Assets and Liabilities—Net | 9.5% |
1 | Vanguard Real Estate II Index Fund ("the Subsidiary") is the wholly owned subsidiary in which the Fund has invested a portion of its assets. |
Where can I find additional information about the Fund?
Additional information about the Fund and the Subsidiary, including their prospectuses, financial information, holdings, and proxy voting information is available at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature.
Connect with Vanguard® • vanguard.com
Fund Information • 800-662-7447
Direct Investor Account Services • 800-662-2739
Text Telephone for People Who Are Deaf or Hard of Hearing • 800-749-7273
© 2024 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
SR123
Vanguard Real Estate Index Fund
ETF Shares (VNQ) NYSE Arca
Semi-Annual Shareholder Report | July 31, 2024
This semi-annual shareholder report contains important information about Vanguard Real Estate Index Fund (the "Fund") for the period of February 1, 2024, to July 31, 2024. You can find additional information about the Fund at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature. You can also request this information by contacting us at 800-662-7447.
What were the Fund costs for the last six months?
(based on a hypothetical $10,000 investment)
| Share Class Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| ETF Shares | $7 | 0.13%1 |
1 | Annualized. |
This table reflects the Fund’s investments, including short-term investments, derivatives and other assets and liabilities.
| Fund Statistics (as of July 31, 2024) | |
| Fund Net Assets (in millions) | $66,670% |
| Number of Portfolio Holdings | $161% |
| Portfolio Turnover Rate | $3% |
| Portfolio Composition % of Net Assets (as of July 31, 2024) | |
| Data Center REITs | 7.2% |
| Health Care REITs | 9.1% |
| Industrial REITs | 10.4% |
| Multi-Family Residential REITs | 7.3% |
| Other Specialized REITs | 5.7% |
| Real Estate Services | 6.0% |
| Retail REITs | 11.4% |
| Self-Storage REITs | 5.7% |
| Single-Family Residential REITs | 3.8% |
| Telecom Tower REITs | 10.5% |
| Vanguard Real Estate II Index Fund1 | 13.4% |
| Other Assets and Liabilities—Net | 9.5% |
1 | Vanguard Real Estate II Index Fund ("the Subsidiary") is the wholly owned subsidiary in which the Fund has invested a portion of its assets. |
Where can I find additional information about the Fund?
Additional information about the Fund and the Subsidiary, including their prospectuses, financial information, holdings, and proxy voting information is available at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature.
Connect with Vanguard® • vanguard.com
Fund Information • 800-662-7447
Direct Investor Account Services • 800-662-2739
Text Telephone for People Who Are Deaf or Hard of Hearing • 800-749-7273
© 2024 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
SR986
Vanguard Real Estate Index Fund
Admiral™ Shares (VGSLX)
Semi-Annual Shareholder Report | July 31, 2024
This semi-annual shareholder report contains important information about Vanguard Real Estate Index Fund (the "Fund") for the period of February 1, 2024, to July 31, 2024. You can find additional information about the Fund at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature. You can also request this information by contacting us at 800-662-7447.
What were the Fund costs for the last six months?
(based on a hypothetical $10,000 investment)
| Share Class Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| Admiral Shares | $7 | 0.13%1 |
1 | Annualized. |
This table reflects the Fund’s investments, including short-term investments, derivatives and other assets and liabilities.
| Fund Statistics (as of July 31, 2024) | |
| Fund Net Assets (in millions) | $66,670% |
| Number of Portfolio Holdings | $161% |
| Portfolio Turnover Rate | $3% |
| Portfolio Composition % of Net Assets (as of July 31, 2024) | |
| Data Center REITs | 7.2% |
| Health Care REITs | 9.1% |
| Industrial REITs | 10.4% |
| Multi-Family Residential REITs | 7.3% |
| Other Specialized REITs | 5.7% |
| Real Estate Services | 6.0% |
| Retail REITs | 11.4% |
| Self-Storage REITs | 5.7% |
| Single-Family Residential REITs | 3.8% |
| Telecom Tower REITs | 10.5% |
| Vanguard Real Estate II Index Fund1 | 13.4% |
| Other Assets and Liabilities—Net | 9.5% |
1 | Vanguard Real Estate II Index Fund ("the Subsidiary") is the wholly owned subsidiary in which the Fund has invested a portion of its assets. |
Where can I find additional information about the Fund?
Additional information about the Fund and the Subsidiary, including their prospectuses, financial information, holdings, and proxy voting information is available at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature.
Connect with Vanguard® • vanguard.com
Fund Information • 800-662-7447
Direct Investor Account Services • 800-662-2739
Text Telephone for People Who Are Deaf or Hard of Hearing • 800-749-7273
© 2024 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
SR5123
Vanguard Real Estate Index Fund
Institutional Shares (VGSNX)
Semi-Annual Shareholder Report | July 31, 2024
This semi-annual shareholder report contains important information about Vanguard Real Estate Index Fund (the "Fund") for the period of February 1, 2024, to July 31, 2024. You can find additional information about the Fund at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature. You can also request this information by contacting us at 800-662-7447.
What were the Fund costs for the last six months?
(based on a hypothetical $10,000 investment)
| Share Class Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| Institutional Shares | $6 | 0.11%1 |
1 | Annualized. |
This table reflects the Fund’s investments, including short-term investments, derivatives and other assets and liabilities.
| Fund Statistics (as of July 31, 2024) | |
| Fund Net Assets (in millions) | $66,670% |
| Number of Portfolio Holdings | $161% |
| Portfolio Turnover Rate | $3% |
| Portfolio Composition % of Net Assets (as of July 31, 2024) | |
| Data Center REITs | 7.2% |
| Health Care REITs | 9.1% |
| Industrial REITs | 10.4% |
| Multi-Family Residential REITs | 7.3% |
| Other Specialized REITs | 5.7% |
| Real Estate Services | 6.0% |
| Retail REITs | 11.4% |
| Self-Storage REITs | 5.7% |
| Single-Family Residential REITs | 3.8% |
| Telecom Tower REITs | 10.5% |
| Vanguard Real Estate II Index Fund1 | 13.4% |
| Other Assets and Liabilities—Net | 9.5% |
1 | Vanguard Real Estate II Index Fund ("the Subsidiary") is the wholly owned subsidiary in which the Fund has invested a portion of its assets. |
Where can I find additional information about the Fund?
Additional information about the Fund and the Subsidiary, including their prospectuses, financial information, holdings, and proxy voting information is available at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature.
Connect with Vanguard® • vanguard.com
Fund Information • 800-662-7447
Institutional Investor Services • 800-523-1036
Text Telephone for People Who Are Deaf or Hard of Hearing • 800-749-7273
© 2024 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
SR3123
Vanguard Global Capital Cycles Fund
Investor Shares (VGPMX)
Semi-Annual Shareholder Report | July 31, 2024
This semi-annual shareholder report contains important information about Vanguard Global Capital Cycles Fund (the "Fund") for the period of February 1, 2024, to July 31, 2024. You can find additional information about the Fund at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature. You can also request this information by contacting us at 800-662-7447.
What were the Fund costs for the last six months?
(based on a hypothetical $10,000 investment)
| Share Class Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| Investor Shares | $24 | 0.44%1 |
1 | Annualized. |
This table reflects the Fund’s investments, including short-term investments and other assets and liabilities.
| Fund Statistics (as of July 31, 2024) | |
| Fund Net Assets (in millions) | $1,485% |
| Number of Portfolio Holdings | $54% |
| Portfolio Turnover Rate | $13% |
| Portfolio Composition % of Net Assets (as of July 31, 2024) | |
| Africa | 0.3% |
| Asia | 17.3% |
| Australia | 2.5% |
| Europe | 36.6% |
| North America | 37.4% |
| South America | 2.7% |
| Other Assets and Liabilities—Net | 3.2% |
Where can I find additional information about the Fund?
Additional information about the Fund, including its prospectus, financial information, holdings, and proxy voting information is available at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature.
Connect with Vanguard® • vanguard.com
Fund Information • 800-662-7447
Direct Investor Account Services • 800-662-2739
Text Telephone for People Who Are Deaf or Hard of Hearing • 800-749-7273
© 2024 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
SR53
Vanguard Global ESG Select Stock Fund
Investor Shares (VEIGX)
Semi-Annual Shareholder Report | July 31, 2024
This semi-annual shareholder report contains important information about Vanguard Global ESG Select Stock Fund (the "Fund") for the period of February 1, 2024, to July 31, 2024. You can find additional information about the Fund at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature. You can also request this information by contacting us at 800-662-7447.
What were the Fund costs for the last six months?
(based on a hypothetical $10,000 investment)
| Share Class Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| Investor Shares | $30 | 0.58%1 |
1 | Annualized. |
This table reflects the Fund’s investments, including short-term investments and other assets and liabilities.
| Fund Statistics (as of July 31, 2024) | |
| Fund Net Assets (in millions) | $1,293% |
| Number of Portfolio Holdings | $39% |
| Portfolio Turnover Rate | $14% |
| Portfolio Composition % of Net Assets (as of July 31, 2024) | |
| Asia | 13.3% |
| Europe | 32.1% |
| North America | 52.7% |
| Other Assets and Liabilities—Net | 1.9% |
Where can I find additional information about the Fund?
Additional information about the Fund, including its prospectus, financial information, holdings, and proxy voting information is available at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature.
Connect with Vanguard® • vanguard.com
Fund Information • 800-662-7447
Direct Investor Account Services • 800-662-2739
Text Telephone for People Who Are Deaf or Hard of Hearing • 800-749-7273
© 2024 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
SR2247
Vanguard Global ESG Select Stock Fund
Admiral™ Shares (VESGX)
Semi-Annual Shareholder Report | July 31, 2024
This semi-annual shareholder report contains important information about Vanguard Global ESG Select Stock Fund (the "Fund") for the period of February 1, 2024, to July 31, 2024. You can find additional information about the Fund at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature. You can also request this information by contacting us at 800-662-7447.
What were the Fund costs for the last six months?
(based on a hypothetical $10,000 investment)
| Share Class Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| Admiral Shares | $25 | 0.48%1 |
1 | Annualized. |
This table reflects the Fund’s investments, including short-term investments and other assets and liabilities.
| Fund Statistics (as of July 31, 2024) | |
| Fund Net Assets (in millions) | $1,293% |
| Number of Portfolio Holdings | $39% |
| Portfolio Turnover Rate | $14% |
| Portfolio Composition % of Net Assets (as of July 31, 2024) | |
| Asia | 13.3% |
| Europe | 32.1% |
| North America | 52.7% |
| Other Assets and Liabilities—Net | 1.9% |
Where can I find additional information about the Fund?
Additional information about the Fund, including its prospectus, financial information, holdings, and proxy voting information is available at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature.
Connect with Vanguard® • vanguard.com
Fund Information • 800-662-7447
Direct Investor Account Services • 800-662-2739
Text Telephone for People Who Are Deaf or Hard of Hearing • 800-749-7273
© 2024 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
SR547
Item 2: Code of Ethics.
Not applicable.
Item 3: Audit Committee Financial Expert.
Not applicable.
Item 4: Principal Accountant Fees and Services.
Not applicable.
Item 5: Audit Committee of Listed Registrants.
Not applicable.
Item 6: Investments.
Not applicable. The complete schedule of investments is included in the financial statements filed under Item 7 of this Form.
Item 7: Financial Statements and Financial Highlights for Open-End Management Investment Companies.
Financial Statements
For the six-months ended July 31, 2024
Vanguard Real Estate Index Funds
| Vanguard Real Estate Index Fund |
| Vanguard Real Estate II Index Fund |
Contents
Real Estate Index Fund | 1 |
Real Estate II Index Fund | 16 |
Real Estate Index Fund
Financial Statements (unaudited)
Schedule of Investments
As of July 31, 2024
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.
| Shares | Market Value• ($000) | |||||
| Equity Real Estate Investment Trusts (REITs) (93.0%) | ||||||
| Data Center REITs (7.2%) | ||||||
| Equinix Inc. | 3,704,058 | 2,927,095 | ||||
| Digital Realty Trust Inc. | 12,517,842 | 1,871,292 | ||||
| 4,798,387 | ||||||
| Diversified REITs (1.7%) | ||||||
| WP Carey Inc. | 8,763,660 | 506,627 | ||||
| Essential Properties Realty Trust Inc. | 6,787,350 | 200,838 | ||||
| Broadstone Net Lease Inc. | 7,522,804 | 130,972 | ||||
| Global Net Lease Inc. | 7,850,266 | 68,297 | ||||
| Empire State Realty Trust Inc. Class A | 5,555,141 | 59,829 | ||||
| Alexander & Baldwin Inc. | 2,912,424 | 57,404 | ||||
| American Assets Trust Inc. | 1,954,928 | 51,845 | ||||
| Armada Hoffler Properties Inc. | 2,677,452 | 31,808 | ||||
| Gladstone Commercial Corp. | 1,605,487 | 24,163 | ||||
| One Liberty Properties Inc. | 683,731 | 18,044 | ||||
| NexPoint Diversified Real Estate Trust | 1,351,587 | 8,555 | ||||
| 1,158,382 | ||||||
| Health Care REITs (9.1%) | ||||||
| Welltower Inc. | 22,303,324 | 2,481,245 | ||||
| Ventas Inc. | 16,129,371 | 878,083 | ||||
| Alexandria Real Estate Equities Inc. | 6,310,375 | 740,144 | ||||
| Healthpeak Properties Inc. | 28,437,400 | 620,504 | ||||
| Omega Healthcare Investors Inc. | 9,831,086 | 357,851 | ||||
| Healthcare Realty Trust Inc. Class A | 15,277,898 | 270,266 | ||||
| Sabra Health Care REIT Inc. | 9,270,252 | 150,456 | ||||
| CareTrust REIT Inc. | 5,410,654 | 145,871 | ||||
| National Health Investors Inc. | 1,738,475 | 130,142 | ||||
| 1 | Medical Properties Trust Inc. | 24,007,858 | 115,478 | |||
| LTC Properties Inc. | 1,739,334 | 62,112 | ||||
| Community Healthcare Trust Inc. | 1,109,373 | 24,140 | ||||
| Global Medical REIT Inc. | 2,492,969 | 23,808 | ||||
| Diversified Healthcare Trust | 6,751,527 | 22,550 | ||||
| Universal Health Realty Income Trust | 525,707 | 22,474 | ||||
| 6,045,124 | ||||||
| Hotel & Resort REITs (2.1%) | ||||||
| Host Hotels & Resorts Inc. | 28,199,166 | 493,767 | ||||
| Ryman Hospitality Properties Inc. | 2,273,442 | 228,504 | ||||
| Apple Hospitality REIT Inc. | 9,227,206 | 136,470 | ||||
| Park Hotels & Resorts Inc. | 8,437,596 | 127,070 | ||||
| Sunstone Hotel Investors Inc. | 7,760,962 | 80,404 | ||||
| DiamondRock Hospitality Co. | 8,406,153 | 69,183 | ||||
| Pebblebrook Hotel Trust | 4,822,961 | 66,026 | ||||
| RLJ Lodging Trust | 6,242,405 | 58,928 | ||||
| Xenia Hotels & Resorts Inc. | 4,083,901 | 56,685 | ||||
| Service Properties Trust | 6,648,666 | 37,698 | ||||
| Summit Hotel Properties Inc. | 4,310,625 | 27,329 | ||||
| Chatham Lodging Trust | 1,958,231 | 17,213 | ||||
| 1,399,277 | ||||||
| Industrial REITs (10.4%) | ||||||
| Prologis Inc. | 37,078,334 | 4,673,724 | ||||
| Rexford Industrial Realty Inc. | 8,729,473 | 437,434 | ||||
| EastGroup Properties Inc. | 1,921,896 | 359,375 | ||||
| Americold Realty Trust Inc. | 10,812,340 | 323,181 | ||||
| STAG Industrial Inc. | 7,288,241 | 297,433 | ||||
| First Industrial Realty Trust Inc. | 5,304,060 | 290,238 | ||||
| Terreno Realty Corp. | 3,850,594 | 263,419 | ||||
| Innovative Industrial Properties Inc. | 1,130,408 | 138,825 | ||||
| LXP Industrial Trust | 11,793,858 | 121,477 | ||||
| Plymouth Industrial REIT Inc. | 1,638,242 | 39,187 | ||||
1
Real Estate Index Fund
| Shares | Market Value• ($000) | |||||
| *,1 | Lineage Inc. | 75,797 | 6,661 | |||
| 6,950,954 | ||||||
| Multi-Family Residential REITs (7.3%) | ||||||
| AvalonBay Communities Inc. | 5,694,087 | 1,166,832 | ||||
| Equity Residential | 13,668,216 | 951,718 | ||||
| Essex Property Trust Inc. | 2,573,099 | 716,248 | ||||
| Mid-America Apartment Communities Inc. | 4,677,610 | 653,790 | ||||
| UDR Inc. | 12,534,718 | 502,266 | ||||
| Camden Property Trust | 4,286,978 | 474,783 | ||||
| Independence Realty Trust Inc. | 9,020,500 | 168,232 | ||||
| Elme Communities | 3,521,041 | 57,956 | ||||
| Veris Residential Inc. | 2,954,718 | 46,419 | ||||
| * | Apartment Investment & Management Co. Class A | 5,221,819 | 46,265 | |||
| Centerspace | 597,272 | 41,708 | ||||
| NexPoint Residential Trust Inc. | 930,589 | 40,657 | ||||
| 4,866,874 | ||||||
| Office REITs (2.8%) | ||||||
| BXP Inc. | 5,978,667 | 426,339 | ||||
| Vornado Realty Trust | 6,488,567 | 194,592 | ||||
| 1 | SL Green Realty Corp. | 2,596,844 | 173,054 | |||
| Cousins Properties Inc. | 6,099,820 | 167,806 | ||||
| Kilroy Realty Corp. | 4,470,565 | 165,277 | ||||
| Highwoods Properties Inc. | 4,236,334 | 131,199 | ||||
| COPT Defense Properties | 4,510,509 | 130,669 | ||||
| Douglas Emmett Inc. | 6,714,572 | 108,038 | ||||
| * | Equity Commonwealth | 4,290,133 | 87,390 | |||
| JBG SMITH Properties | 3,488,913 | 57,044 | ||||
| Easterly Government Properties Inc. Class A | 3,895,146 | 54,259 | ||||
| Piedmont Office Realty Trust Inc. Class A | 4,971,551 | 43,004 | ||||
| Paramount Group Inc. | 6,973,050 | 36,539 | ||||
| Brandywine Realty Trust | 6,909,576 | 34,824 | ||||
| Hudson Pacific Properties Inc. | 5,090,564 | 30,493 | ||||
| 1 | Peakstone Realty Trust | 1,458,861 | 19,811 | |||
| NET Lease Office Properties | 593,098 | 17,502 | ||||
| City Office REIT Inc. | 1,610,577 | 9,744 | ||||
| Orion Office REIT Inc. | 2,124,184 | 8,603 | ||||
| 1 | Office Properties Income Trust | 1,955,566 | 4,869 | |||
| *,2 | New York REIT Liquidating LLC | 1,208 | 9 | |||
| 1,901,065 | ||||||
| Other (13.4%)3 | ||||||
| 4,5 | Vanguard Real Estate II Index Fund | 413,268,092 | 8,967,918 | |||
| Other Specialized REITs (5.7%) | ||||||
| Iron Mountain Inc. | 11,749,290 | 1,205,007 | ||||
| VICI Properties Inc. Class A | 38,400,362 | 1,200,395 | ||||
| Gaming & Leisure Properties Inc. | 10,881,125 | 546,233 | ||||
| Lamar Advertising Co. Class A | 3,512,626 | 421,023 | ||||
| EPR Properties | 3,033,210 | 136,494 | ||||
| Four Corners Property Trust Inc. | 3,686,926 | 100,063 | ||||
| Outfront Media Inc. | 5,317,737 | 86,254 | ||||
| Safehold Inc. | 1,849,672 | 42,801 | ||||
| Uniti Group Inc. | 9,572,178 | 36,757 | ||||
| Gladstone Land Corp. | 1,363,606 | 20,250 | ||||
| 1 | Farmland Partners Inc. | 1,837,432 | 19,514 | |||
| 3,814,791 | ||||||
| Retail REITs (11.4%) | ||||||
| Simon Property Group Inc. | 13,063,064 | 2,004,396 | ||||
| Realty Income Corp. | 34,520,536 | 1,982,514 | ||||
| Kimco Realty Corp. | 27,017,368 | 587,087 | ||||
| Regency Centers Corp. | 7,035,114 | 473,745 | ||||
| Federal Realty Investment Trust | 2,993,101 | 334,180 | ||||
| NNN REIT Inc. | 7,312,621 | 328,263 | ||||
| Brixmor Property Group Inc. | 12,076,505 | 307,589 | ||||
| Agree Realty Corp. | 4,033,269 | 278,175 | ||||
| Kite Realty Group Trust | 8,798,886 | 216,980 | ||||
| Phillips Edison & Co. Inc. | 4,897,130 | 171,889 | ||||
| Macerich Co. | 8,644,845 | 138,404 | ||||
| Tanger Inc. | 4,364,540 | 126,135 | ||||
2
Real Estate Index Fund
| Shares | Market Value• ($000) | |||||
| SITE Centers Corp. | 7,549,961 | 116,647 | ||||
| Urban Edge Properties | 4,718,011 | 95,776 | ||||
| Acadia Realty Trust | 4,126,060 | 89,288 | ||||
| InvenTrust Properties Corp. | 2,718,169 | 76,571 | ||||
| Retail Opportunity Investments Corp. | 5,091,745 | 76,122 | ||||
| Getty Realty Corp. | 2,054,313 | 60,849 | ||||
| NETSTREIT Corp. | 2,931,835 | 48,287 | ||||
| Whitestone REIT | 1,803,375 | 24,887 | ||||
| Alexander's Inc. | 92,035 | 22,300 | ||||
| Saul Centers Inc. | 528,344 | 20,896 | ||||
| CBL & Associates Properties Inc. | 516,180 | 13,302 | ||||
| *,2 | Spirit MTA REIT | 2,071,263 | 186 | |||
| 7,594,468 | ||||||
| Self-Storage REITs (5.7%) | ||||||
| Public Storage | 6,338,395 | 1,875,658 | ||||
| Extra Space Storage Inc. | 8,480,999 | 1,353,737 | ||||
| CubeSmart | 9,015,448 | 428,955 | ||||
| National Storage Affiliates Trust | 2,974,510 | 126,625 | ||||
| 3,784,975 | ||||||
| Single-Family Residential REITs (3.8%) | ||||||
| Invitation Homes Inc. | 24,525,741 | 865,023 | ||||
| Sun Communities Inc. | 4,986,085 | 631,887 | ||||
| Equity LifeStyle Properties Inc. | 7,100,440 | 487,658 | ||||
| American Homes 4 Rent Class A | 13,183,286 | 475,785 | ||||
| UMH Properties Inc. | 2,643,773 | 46,953 | ||||
| 2,507,306 | ||||||
| Telecom Tower REITs (10.5%) | ||||||
| American Tower Corp. | 18,717,014 | 4,125,231 | ||||
| Crown Castle Inc. | 17,417,452 | 1,917,313 | ||||
| SBA Communications Corp. | 4,332,628 | 951,185 | ||||
| 6,993,729 | ||||||
| Timber REITs (1.9%) | ||||||
| Weyerhaeuser Co. | 29,237,289 | 928,576 | ||||
| Rayonier Inc. | 5,657,110 | 171,580 | ||||
| PotlatchDeltic Corp. | 3,186,084 | 141,335 | ||||
| 1,241,491 | ||||||
| Total Equity Real Estate Investment Trusts (REITs) (Cost $58,185,657) | 62,024,741 | |||||
| Real Estate Management & Development (6.6%) | ||||||
| Diversified Real Estate Activities (0.2%) | ||||||
| St. Joe Co. | 1,404,311 | 86,618 | ||||
| RMR Group Inc. Class A | 628,198 | 16,295 | ||||
| * | Tejon Ranch Co. | 805,978 | 15,314 | |||
| 118,227 | ||||||
| Real Estate Development (0.2%) | ||||||
| * | Howard Hughes Holdings Inc. | 1,308,444 | 97,047 | |||
| * | Forestar Group Inc. | 801,560 | 25,353 | |||
| 122,400 | ||||||
| Real Estate Operating Companies (0.2%) | ||||||
| DigitalBridge Group Inc. | 6,543,679 | 92,462 | ||||
| Kennedy-Wilson Holdings Inc. | 4,459,918 | 46,428 | ||||
| *,1 | Seritage Growth Properties Class A | 1,353,742 | 6,904 | |||
| 145,794 | ||||||
| Real Estate Services (6.0%) | ||||||
| * | CBRE Group Inc. Class A | 12,253,677 | 1,381,112 | |||
| * | CoStar Group Inc. | 16,371,176 | 1,277,279 | |||
| * | Jones Lang LaSalle Inc. | 1,901,493 | 477,085 | |||
| * | Zillow Group Inc. Class C | 6,276,285 | 305,655 | |||
| * | Cushman & Wakefield plc | 9,133,836 | 119,744 | |||
| * | Zillow Group Inc. Class A | 2,239,683 | 106,161 | |||
| Newmark Group Inc. Class A | 5,762,406 | 74,796 | ||||
| * | Compass Inc. Class A | 15,227,103 | 66,847 | |||
| * | Opendoor Technologies Inc. | 23,142,933 | 53,692 | |||
| 1 | eXp World Holdings Inc. | 3,101,722 | 44,541 | |||
| Marcus & Millichap Inc. | 1,000,865 | 39,644 | ||||
| * | Redfin Corp. | 4,433,052 | 36,085 | |||
3
Real Estate Index Fund
| Shares | Market Value• ($000) | |||||
| * | Anywhere Real Estate Inc. | 4,011,839 | 18,936 | |||
| 4,001,577 | ||||||
| Total Real Estate Management & Development (Cost $4,780,514) | 4,387,998 | |||||
| Temporary Cash Investments (0.7%) | ||||||
| Money Market Fund (0.7%) | ||||||
| 6,7 | Vanguard Market Liquidity Fund, 5.390% (Cost $489,227) | 4,893,087 | 489,260 | |||
| Total Investments (100.3%) (Cost $63,455,398) | 66,901,999 | |||||
| Other Assets and Liabilities—Net (-0.3%) | (231,587) | |||||
| Net Assets (100%) | 66,670,412 | |||||
| Cost is in $000. |
| • | See Note A in Notes to Financial Statements. |
| * | Non-income-producing security. |
| 1 | Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $231,480,000. |
| 2 | Security value determined using significant unobservable inputs. |
| 3 | “Other” represents securities that are not classified by the fund’s benchmark index. |
| 4 | Considered an affiliated company of the fund as the issuer is another member of The Vanguard Group. |
| 5 | Represents a wholly owned subsidiary of the fund. See accompanying financial statements for Vanguard Real Estate II Index Fund's Schedule of Investments. |
| 6 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
| 7 | Collateral of $261,849,000 was received for securities on loan. |
| REIT—Real Estate Investment Trust. |
Derivative Financial Instruments Outstanding as of Period End
| Over-the-Counter Total Return Swaps | ||||||
| Reference Entity | Termination Date | Counterparty | Notional Amount ($000) | Floating Interest Rate Received (Paid)1 (%) | Value and Unrealized Appreciation ($000) | Value and Unrealized (Depreciation) ($000) |
| Equinix Inc. | 8/29/25 | BANA | 75,660 | (5.431) | 3,022 | — |
| Redfin Corp. | 1/31/25 | GSI | 2,895 | (5.331) | — | (52) |
| VICI Properties Inc. Class A | 8/30/24 | BANA | 97,376 | (5.981) | 9,833 | — |
| Welltower Inc. | 8/30/24 | BANA | 52,125 | (5.481) | 3,262 | — |
| 16,117 | (52) | |||||
| 1 | Based on USD Overnight Bank Funding Rate as of the most recent reset date. Floating interest payment received/paid monthly. |
| BANA—Bank of America, N.A. | |
| GSI—Goldman Sachs International. |
At July 31, 2024, the counterparties had deposited in segregated accounts securities with a value of $15,607,000 in connection with open over-the-counter swap contracts.
See accompanying Notes, which are an integral part of the Financial Statements.
4
Real Estate Index Fund
Statement of Assets and Liabilities
As of July 31, 2024
| ($000s, except shares, footnotes, and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value1 | |
| Unaffiliated Issuers (Cost $55,169,799) | 57,444,821 |
| Affiliated Issuers (Cost $489,227) | 489,260 |
| Vanguard Real Estate II Index Fund (Cost $7,796,372) | 8,967,918 |
| Total Investments in Securities | 66,901,999 |
| Investment in Vanguard | 1,546 |
| Cash | 4,669 |
| Receivables for Accrued Income | 15,967 |
| Receivables for Capital Shares Issued | 22,200 |
| Unrealized Appreciation—Over-the-Counter Swap Contracts | 16,117 |
| Total Assets | 66,962,498 |
| Liabilities | |
| Payables for Investment Securities Purchased | 9,920 |
| Collateral for Securities on Loan | 261,849 |
| Payables for Capital Shares Redeemed | 17,047 |
| Payables to Vanguard | 3,218 |
| Unrealized Depreciation—Over-the-Counter Swap Contracts | 52 |
| Total Liabilities | 292,086 |
| Net Assets | 66,670,412 |
| 1 Includes $231,480,000 of securities on loan. | |
At July 31, 2024, net assets consisted of: | |
| Paid-in Capital | 67,145,781 |
| Total Distributable Earnings (Loss) | (475,369) |
| Net Assets | 66,670,412 |
| Investor Shares—Net Assets | |
| Applicable to 2,781,051 outstanding $.001 par value shares of beneficial interest (unlimited authorization) | 83,501 |
| Net Asset Value Per Share—Investor Shares | $30.02 |
| ETF Shares—Net Assets | |
| Applicable to 383,616,431 outstanding $.001 par value shares of beneficial interest (unlimited authorization) | 34,656,728 |
| Net Asset Value Per Share—ETF Shares | $90.34 |
| Admiral Shares—Net Assets | |
| Applicable to 163,767,917 outstanding $.001 par value shares of beneficial interest (unlimited authorization) | 20,968,578 |
| Net Asset Value Per Share—Admiral Shares | $128.04 |
| Institutional Shares—Net Assets | |
| Applicable to 553,144,054 outstanding $.001 par value shares of beneficial interest (unlimited authorization) | 10,961,605 |
| Net Asset Value Per Share—Institutional Shares | $19.82 |
See accompanying Notes, which are an integral part of the Financial Statements.
5
Real Estate Index Fund
Statement of Operations
| Six Months Ended July 31, 2024 | |
| ($000) | |
| Investment Income | |
| Income | |
| Dividends—Unaffiliated Issuers | 814,449 |
| Dividends—Vanguard Real Estate II Index Fund | 172,480 |
| Interest—Affiliated Issuers | 3,709 |
| Securities Lending—Net | 1,818 |
| Total Income | 992,456 |
| Expenses | |
| The Vanguard Group—Note B | |
| Investment Advisory Services | 561 |
| Management and Administrative—Investor Shares | 99 |
| Management and Administrative—ETF Shares | 16,972 |
| Management and Administrative—Admiral Shares | 10,449 |
| Management and Administrative—Institutional Shares | 4,395 |
| Marketing and Distribution—Investor Shares | 2 |
| Marketing and Distribution—ETF Shares | 682 |
| Marketing and Distribution—Admiral Shares | 441 |
| Marketing and Distribution—Institutional Shares | 181 |
| Custodian Fees | 38 |
| Shareholders’ Reports—Investor Shares | — |
| Shareholders’ Reports—ETF Shares | 643 |
| Shareholders’ Reports—Admiral Shares | 201 |
| Shareholders’ Reports—Institutional Shares | 101 |
| Trustees’ Fees and Expenses | 17 |
| Other Expenses | 8 |
| Total Expenses | 34,790 |
| Net Investment Income | 957,666 |
| Realized Net Gain (Loss) | |
| Capital Gain Distributions Received—Unaffiliated Issuers | 132,292 |
| Capital Gain Distributions Received—Vanguard Real Estate II Index Fund | — |
| Investment Securities Sold—Unaffiliated Issuers1 | 358,108 |
| Investment Securities Sold—Affiliated Issuers | 15 |
| Investment Securities Sold—Vanguard Real Estate II Index Fund | — |
| Swap Contracts | (1,997) |
| Realized Net Gain (Loss) | 488,418 |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities—Unaffiliated Issuers | 3,902,007 |
| Investment Securities—Affiliated Issuers | (36) |
| Investment Securities—Vanguard Real Estate II Index Fund | 636,035 |
| Swap Contracts | 21,763 |
| Change in Unrealized Appreciation (Depreciation) | 4,559,769 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 6,005,853 |
| 1 | Includes $722,736,000 of net gain (loss) resulting from in-kind redemptions. |
See accompanying Notes, which are an integral part of the Financial Statements.
6
Real Estate Index Fund
Statement of Changes in Net Assets
| Six Months Ended July 31, 2024 | Year Ended January 31, 2024 | ||
| ($000) | ($000) | ||
| Increase (Decrease) in Net Assets | |||
| Operations | |||
| Net Investment Income | 957,666 | 1,899,119 | |
| Realized Net Gain (Loss) | 488,418 | 277,070 | |
| Change in Unrealized Appreciation (Depreciation) | 4,559,769 | (5,161,675) | |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 6,005,853 | (2,985,486) | |
| Distributions | |||
| Net Investment Income and/or Realized Capital Gains | |||
| Investor Shares | (1,602) | (2,871) | |
| ETF Shares | (682,482) | (1,004,365) | |
| Admiral Shares | (410,595) | (620,267) | |
| Institutional Shares | (212,767) | (301,203) | |
| Return of Capital | |||
| Investor Shares | — | (994) | |
| ETF Shares | — | (347,576) | |
| Admiral Shares | — | (214,652) | |
| Institutional Shares | — | (104,235) | |
| Total Distributions | (1,307,446) | (2,596,163) | |
| Capital Share Transactions | |||
| Investor Shares | (8,852) | (30,815) | |
| ETF Shares | (124,168) | (1,415,940) | |
| Admiral Shares | (400,524) | (516,200) | |
| Institutional Shares | 296,594 | 80,493 | |
| Net Increase (Decrease) from Capital Share Transactions | (236,950) | (1,882,462) | |
| Total Increase (Decrease) | 4,461,457 | (7,464,111) | |
| Net Assets | |||
| Beginning of Period | 62,208,955 | 69,673,066 | |
| End of Period | 66,670,412 | 62,208,955 | |
See accompanying Notes, which are an integral part of the Financial Statements.
7
Real Estate Index Fund
Financial Highlights
| Investor Shares | ||||||
| For a Share Outstanding Throughout Each Period | Six Months Ended July 31, 2024 | Year Ended January 31, | ||||
| 2024 | 2023 | 2022 | 2021 | 2020 | ||
| Net Asset Value, Beginning of Period | $27.89 | $30.26 | $35.37 | $28.23 | $31.21 | $27.69 |
| Investment Operations | ||||||
| Net Investment Income1 | .404 | .787 | .684 | .602 | .586 | .719 |
| Net Realized and Unrealized Gain (Loss) on Investments | 2.291 | (2.036) | (4.766) | 7.475 | (2.498) | 3.801 |
| Total from Investment Operations | 2.695 | (1.249) | (4.082) | 8.077 | (1.912) | 4.520 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.565) | (.833) | (.686) | (.620) | (.624) | (.752) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Return of Capital | — | (.288) | (.342) | (.317) | (.444) | (.248) |
| Total Distributions | (.565) | (1.121) | (1.028) | (.937) | (1.068) | (1.000) |
| Net Asset Value, End of Period | $30.02 | $27.89 | $30.26 | $35.37 | $28.23 | $31.21 |
| Total Return2 | 9.82% | -3.91% | -11.39% | 28.73% | -5.88% | 16.59% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $84 | $86 | $127 | $196 | $188 | $243 |
| Ratio of Total Expenses to Average Net Assets | 0.26% | 0.26% | 0.26%3 | 0.26% | 0.26% | 0.26% |
| Acquired Fund Fees and Expenses4 | 0.01% | 0.01% | — | — | — | — |
| Ratio of Net Investment Income to Average Net Assets | 2.90% | 2.87% | 2.18% | 1.77% | 2.18% | 2.48% |
| Portfolio Turnover Rate5 | 3% | 9% | 7% | 7% | 8% | 6% |
| The expense ratio, acquired fund fees and expenses, and net investment income ratio for the current period have been annualized. | ||||||
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.25%. |
| 4 | For the fiscal year ended January 31, 2023, and for each prior period, the acquired fund fees and expenses were less than 0.01%. |
| 5 | Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units. |
See accompanying Notes, which are an integral part of the Financial Statements.
8
Real Estate Index Fund
Financial Highlights
| ETF Shares | ||||||
| For a Share Outstanding Throughout Each Period | Six Months Ended July 31, 2024 | Year Ended January 31, | ||||
| 2024 | 2023 | 2022 | 2021 | 2020 | ||
| Net Asset Value, Beginning of Period | $83.94 | $91.06 | $106.44 | $84.96 | $93.93 | $83.36 |
| Investment Operations | ||||||
| Net Investment Income1 | 1.290 | 2.527 | 2.240 | 1.960 | 1.889 | 2.335 |
| Net Realized and Unrealized Gain (Loss) on Investments | 6.875 | (6.154) | (14.394) | 22.486 | (7.525) | 11.379 |
| Total from Investment Operations | 8.165 | (3.627) | (12.154) | 24.446 | (5.636) | 13.714 |
| Distributions | ||||||
| Dividends from Net Investment Income | (1.765) | (2.595) | (2.152) | (1.943) | (1.947) | (2.364) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Return of Capital | — | (.898) | (1.074) | (1.023) | (1.387) | (.780) |
| Total Distributions | (1.765) | (3.493) | (3.226) | (2.966) | (3.334) | (3.144) |
| Net Asset Value, End of Period | $90.34 | $83.94 | $91.06 | $106.44 | $84.96 | $93.93 |
| Total Return | 9.89% | -3.81% | -11.25% | 28.88% | -5.80% | 16.70% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $34,657 | $32,359 | $36,825 | $46,673 | $32,064 | $37,682 |
| Ratio of Total Expenses to Average Net Assets | 0.12% | 0.12% | 0.12%2 | 0.12% | 0.12% | 0.12% |
| Acquired Fund Fees and Expenses3 | 0.01% | 0.01% | — | — | — | — |
| Ratio of Net Investment Income to Average Net Assets | 3.08% | 3.07% | 2.38% | 1.90% | 2.33% | 2.60% |
| Portfolio Turnover Rate4 | 3% | 9% | 7% | 7% | 8% | 6% |
| The expense ratio, acquired fund fees and expenses, and net investment income ratio for the current period have been annualized. | ||||||
| 1 | Calculated based on average shares outstanding. |
| 2 | The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.12%. |
| 3 | For the fiscal year ended January 31, 2023, and for each prior period, the acquired fund fees and expenses were less than 0.01%. |
| 4 | Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units. |
See accompanying Notes, which are an integral part of the Financial Statements.
9
Real Estate Index Fund
Financial Highlights
| Admiral Shares | ||||||
| For a Share Outstanding Throughout Each Period | Six Months Ended July 31, 2024 | Year Ended January 31, | ||||
| 2024 | 2023 | 2022 | 2021 | 2020 | ||
| Net Asset Value, Beginning of Period | $118.96 | $129.05 | $150.85 | $120.40 | $133.12 | $118.14 |
| Investment Operations | ||||||
| Net Investment Income1 | 1.823 | 3.613 | 3.201 | 2.761 | 2.677 | 3.315 |
| Net Realized and Unrealized Gain (Loss) on Investments | 9.758 | (8.752) | (20.428) | 31.890 | (10.672) | 16.121 |
| Total from Investment Operations | 11.581 | (5.139) | (17.227) | 34.651 | (7.995) | 19.436 |
| Distributions | ||||||
| Dividends from Net Investment Income | (2.501) | (3.678) | (3.050) | (2.770) | (2.759) | (3.350) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Return of Capital | — | (1.273) | (1.523) | (1.431) | (1.966) | (1.106) |
| Total Distributions | (2.501) | (4.951) | (4.573) | (4.201) | (4.725) | (4.456) |
| Net Asset Value, End of Period | $128.04 | $118.96 | $129.05 | $150.85 | $120.40 | $133.12 |
| Total Return2 | 9.90% | -3.75% | -11.26% | 28.91% | -5.74% | 16.73% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $20,969 | $19,879 | $22,110 | $25,764 | $19,702 | $23,274 |
| Ratio of Total Expenses to Average Net Assets | 0.12% | 0.12% | 0.12%3 | 0.12% | 0.12% | 0.12% |
| Acquired Fund Fees and Expenses4 | 0.01% | 0.01% | — | — | — | — |
| Ratio of Net Investment Income to Average Net Assets | 3.07% | 3.10% | 2.41% | 1.90% | 2.33% | 2.60% |
| Portfolio Turnover Rate5 | 3% | 9% | 7% | 7% | 8% | 6% |
| The expense ratio, acquired fund fees and expenses, and net investment income ratio for the current period have been annualized. | ||||||
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.12%. |
| 4 | For the fiscal year ended January 31, 2023, and for each prior period, the acquired fund fees and expenses were less than 0.01%. |
| 5 | Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units. |
See accompanying Notes, which are an integral part of the Financial Statements.
10
Real Estate Index Fund
Financial Highlights
| Institutional Shares | ||||||
| For a Share Outstanding Throughout Each Period | Six Months Ended July 31, 2024 | Year Ended January 31, | ||||
| 2024 | 2023 | 2022 | 2021 | 2020 | ||
| Net Asset Value, Beginning of Period | $18.41 | $19.97 | $23.35 | $18.64 | $20.60 | $18.28 |
| Investment Operations | ||||||
| Net Investment Income1 | .285 | .565 | .500 | .432 | .421 | .518 |
| Net Realized and Unrealized Gain (Loss) on Investments | 1.514 | (1.355) | (3.168) | 4.933 | (1.646) | 2.496 |
| Total from Investment Operations | 1.799 | (.790) | (2.668) | 5.365 | (1.225) | 3.014 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.389) | (.572) | (.475) | (.432) | (.429) | (.522) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Return of Capital | — | (.198) | (.237) | (.223) | (.306) | (.172) |
| Total Distributions | (.389) | (.770) | (.712) | (.655) | (.735) | (.694) |
| Net Asset Value, End of Period | $19.82 | $18.41 | $19.97 | $23.35 | $18.64 | $20.60 |
| Total Return | 9.94% | -3.73% | -11.27% | 28.91% | -5.68% | 16.77% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $10,962 | $9,885 | $10,610 | $12,089 | $9,478 | $10,027 |
| Ratio of Total Expenses to Average Net Assets | 0.10% | 0.10% | 0.10%2 | 0.10% | 0.10% | 0.10% |
| Acquired Fund Fees and Expenses3 | 0.01% | 0.01% | — | — | — | — |
| Ratio of Net Investment Income to Average Net Assets | 3.10% | 3.13% | 2.43% | 1.92% | 2.37% | 2.63% |
| Portfolio Turnover Rate4 | 3% | 9% | 7% | 7% | 8% | 6% |
| The expense ratio, acquired fund fees and expenses, and net investment income ratio for the current period have been annualized. | ||||||
| 1 | Calculated based on average shares outstanding. |
| 2 | The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.10%. |
| 3 | For the fiscal year ended January 31, 2023, and for each prior period, the acquired fund fees and expenses were less than 0.01%. |
| 4 | Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units. |
See accompanying Notes, which are an integral part of the Financial Statements.
11
Real Estate Index Fund
Notes to Financial Statements
Vanguard Real Estate Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers four classes of shares: Investor Shares, ETF Shares, Admiral Shares, and Institutional Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.
As a part of its principal investment strategy, the fund attempts to replicate its benchmark index by investing all, or substantially all, of its assets—either directly or indirectly through a wholly owned subsidiary—in the stocks that make up the index. Vanguard Real Estate II Index Fund (“the Subsidiary”) is the wholly owned subsidiary in which the fund has invested a portion of its assets. Expenses of the Subsidiary are reflected in the Acquired Fund Fees and Expenses in the Financial Highlights. For additional financial information about the Subsidiary, refer to the accompanying financial statements.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund's pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the valuation designee to represent fair value and subject to oversight by the board of trustees.
Investments in affiliated Vanguard funds are valued at that fund's net asset value.
2. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks or indexes in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.
A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund's net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Schedule of Investments. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
The notional amounts of swap contracts are not recorded in the Statement of Assets and Liabilities. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until periodic payments are made or the termination of the swap, at which time realized gain (loss) is recorded.
During the six months ended July 31, 2024, the fund’s average amounts of investments in total return swaps represented less than 1% of net assets, based on the average of notional amounts at each quarter-end during the period.
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute virtually all of its taxable income. The fund’s tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund’s tax positions taken for all open federal and state income tax years, and has concluded that no provision for income tax is required in the fund’s financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. The portion of distributions that exceed a fund's current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.
5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the
12
Real Estate Index Fund
securities are on loan. Collateral investments in Vanguard Market Liquidity Fund are subject to market appreciation or depreciation. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
6. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group ("Vanguard") participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes and are subject to the fund’s regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed amount of the facility, which are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under either facility bear interest at an agreed-upon spread plus the higher of the federal funds effective rate, the overnight bank funding rate, or the Daily Simple Secured Overnight Financing Rate inclusive of an additional agreed-upon spread. However, borrowings under the uncommitted credit facility may bear interest based upon an alternate rate agreed to by the fund and Vanguard.
In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.
For the six months ended July 31, 2024, the fund did not utilize the credit facilities or the Interfund Lending Program.
7. Other: Distributions received from investment securities are recorded on the ex-dividend date. Non-cash dividends included in income, if any, are recorded at the fair value of the securities received. Each investment security reports annually the tax character of its distributions. Dividend income, capital gain distributions received, and unrealized appreciation (depreciation) reflect the amounts of taxable income, capital gain, and return of capital reported by the REITs, and management’s estimates of such amounts for REIT distributions for which actual information has not been reported. Income, capital gain, and return of capital distributions received from affiliated Vanguard funds are recorded on ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees and are generally settled twice a month.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At July 31, 2024, the fund had contributed to Vanguard capital in the amount of $1,546,000, representing less than 0.01% of the fund’s net assets and 0.62% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
C. Various inputs may be used to determine the value of the fund’s investments and derivatives. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments and derivatives valued with significant unobservable inputs are noted on the Schedule of Investments.
13
Real Estate Index Fund
The following table summarizes the market value of the fund's investments and derivatives as of July 31, 2024, based on the inputs used to value them:
| Level 1 ($000) | Level 2 ($000) | Level 3 ($000) | Total ($000) | |
| Investments | ||||
| Assets | ||||
| Common Stocks | 66,412,544 | — | 195 | 66,412,739 |
| Temporary Cash Investments | 489,260 | — | — | 489,260 |
| Total | 66,901,804 | — | 195 | 66,901,999 |
| Derivative Financial Instruments | ||||
| Assets | ||||
| Swap Contracts | — | 16,117 | — | 16,117 |
| Liabilities | ||||
| Swap Contracts | — | 52 | — | 52 |
D. As of July 31, 2024, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| Amount ($000) | |
| Tax Cost | 63,842,452 |
| Gross Unrealized Appreciation | 9,983,122 |
| Gross Unrealized Depreciation | (6,907,510) |
| Net Unrealized Appreciation (Depreciation) | 3,075,612 |
The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at January 31, 2024, the fund had available capital losses totaling $3,972,566,000 that may be carried forward indefinitely to offset future net capital gains. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending January 31, 2025; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
E. During the six months ended July 31, 2024, the fund purchased $2,067,111,000 of investment securities and sold $2,257,401,000 of investment securities, other than temporary cash investments. In addition, the fund purchased and sold investment securities of $2,575,128,000 and $2,752,595,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.
The fund purchased securities from and sold securities to other Vanguard funds or accounts managed by Vanguard or its affiliates, in accordance with procedures adopted by the board of trustees in compliance with Rule 17a-7 of the Investment Company Act of 1940. For the six months ended July 31, 2024, such purchases were $0 and sales were $5,189,000, resulting in net realized loss of $673,000; these amounts, other than temporary cash investments, are included in the purchases and sales of investment securities noted above.
14
Real Estate Index Fund
F. Capital share transactions for each class of shares were:
| Six Months Ended July 31, 2024 | Year Ended January 31, 2024 | ||||
| Amount ($000) | Shares (000) | Amount ($000) | Shares (000) | ||
| Investor Shares | |||||
| Issued | 3,817 | 135 | 7,901 | 286 | |
| Issued in Lieu of Cash Distributions | 1,602 | 57 | 3,865 | 145 | |
| Redeemed | (14,271) | (511) | (42,581) | (1,536) | |
| Net Increase (Decrease)—Investor Shares | (8,852) | (319) | (30,815) | (1,105) | |
| ETF Shares | |||||
| Issued | 2,631,449 | 31,110 | 5,219,768 | 62,577 | |
| Issued in Lieu of Cash Distributions | — | — | — | — | |
| Redeemed | (2,755,617) | (33,000) | (6,635,708) | (81,500) | |
| Net Increase (Decrease)—ETF Shares | (124,168) | (1,890) | (1,415,940) | (18,923) | |
| Admiral Shares | |||||
| Issued | 1,127,309 | 9,459 | 2,321,785 | 19,988 | |
| Issued in Lieu of Cash Distributions | 363,027 | 3,045 | 735,078 | 6,445 | |
| Redeemed | (1,890,860) | (15,840) | (3,573,063) | (30,661) | |
| Net Increase (Decrease)—Admiral Shares | (400,524) | (3,336) | (516,200) | (4,228) | |
| Institutional Shares | |||||
| Issued | 989,114 | 53,823 | 1,713,612 | 95,042 | |
| Issued in Lieu of Cash Distributions | 204,152 | 11,064 | 384,847 | 21,798 | |
| Redeemed | (896,672) | (48,621) | (2,017,966) | (111,179) | |
| Net Increase (Decrease)—Institutional Shares | 296,594 | 16,266 | 80,493 | 5,661 | |
G. Transactions during the period in investments where the issuer is another member of The Vanguard Group were as follows:
| Current Period Transactions | ||||||||
| Jan. 31, 2024 Market Value ($000) | Purchases at Cost ($000) | Proceeds from Securities Sold ($000) | Realized Net Gain (Loss) ($000) | Change in Unrealized App. (Dep.) ($000) | Income ($000) | Capital Gain Distributions Received ($000) | Jul. 31, 2024 Market Value ($000) | |
| Vanguard Market Liquidity Fund | 488,498 | NA1 | NA1 | 15 | (36) | 3,709 | — | 489,260 |
| Vanguard Real Estate II Index Fund | 8,159,403 | 172,480 | — | — | 636,035 | 172,480 | — | 8,967,918 |
| Total | 8,647,901 | 172,480 | — | 15 | 635,999 | 176,189 | — | 9,457,178 |
| 1 | Not applicable—purchases and sales are for temporary cash investment purposes. |
H. Significant market disruptions, such as those caused by pandemics, natural or environmental disasters, war, acts of terrorism, or other events, can adversely affect local and global markets and normal market operations. Any such disruptions could have an adverse impact on the value of the fund’s investments and fund performance.
To the extent the fund’s investment portfolio reflects concentration in a particular market, industry, sector, country or asset class, the fund may be adversely affected by the performance of these concentrations and may be subject to increased price volatility and other risks.
The use of derivatives may expose the fund to various risks. Derivatives can be highly volatile, and any initial investment is generally small relative to the notional amount so that transactions may be leveraged in terms of market exposure. A relatively small market movement may have a potentially larger impact on derivatives than on standard securities. Leveraged derivatives positions can, therefore, increase volatility. Additional information regarding the fund’s use of derivative(s) and the specific risks associated is described under significant accounting policies.
I. Management has determined that no events or transactions occurred subsequent to July 31, 2024, that would require recognition or disclosure in these financial statements.
15
Real Estate II Index Fund
Financial Statements (unaudited)
Schedule of Investments
As of July 31, 2024
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.
| Shares | Market Value• ($000) | |||||
| Equity Real Estate Investment Trusts (REITs) (92.0%) | ||||||
| Data Center REITs (8.5%) | ||||||
| Equinix Inc. | 611,792 | 483,462 | ||||
| Digital Realty Trust Inc. | 2,013,155 | 300,947 | ||||
| 784,409 | ||||||
| Diversified REITs (2.0%) | ||||||
| WP Carey Inc. | 1,409,685 | 81,494 | ||||
| Essential Properties Realty Trust Inc. | 1,091,948 | 32,311 | ||||
| Broadstone Net Lease Inc. | 1,210,443 | 21,074 | ||||
| Global Net Lease Inc. | 1,265,015 | 11,006 | ||||
| Empire State Realty Trust Inc. Class A | 892,309 | 9,610 | ||||
| Alexander & Baldwin Inc. | 467,550 | 9,215 | ||||
| American Assets Trust Inc. | 314,424 | 8,338 | ||||
| Armada Hoffler Properties Inc. | 430,210 | 5,111 | ||||
| Gladstone Commercial Corp. | 259,238 | 3,902 | ||||
| One Liberty Properties Inc. | 110,423 | 2,914 | ||||
| NexPoint Diversified Real Estate Trust | 215,916 | 1,367 | ||||
| 186,342 | ||||||
| Health Care REITs (10.5%) | ||||||
| Welltower Inc. | 3,667,237 | 407,980 | ||||
| Ventas Inc. | 2,594,589 | 141,249 | ||||
| Alexandria Real Estate Equities Inc. | 916,921 | 107,546 | ||||
| Healthpeak Properties Inc. | 4,573,672 | 99,798 | ||||
| Omega Healthcare Investors Inc. | 1,581,038 | 57,550 | ||||
| Healthcare Realty Trust Inc. Class A | 2,457,029 | 43,465 | ||||
| Sabra Health Care REIT Inc. | 1,492,113 | 24,217 | ||||
| CareTrust REIT Inc. | 870,348 | 23,465 | ||||
| National Health Investors Inc. | 279,979 | 20,959 | ||||
| 1 | Medical Properties Trust Inc. | 3,863,016 | 18,581 | |||
| LTC Properties Inc. | 279,484 | 9,980 | ||||
| Community Healthcare Trust Inc. | 179,148 | 3,898 | ||||
| Global Medical REIT Inc. | 403,948 | 3,858 | ||||
| Diversified Healthcare Trust | 1,089,801 | 3,640 | ||||
| Universal Health Realty Income Trust | 84,196 | 3,599 | ||||
| 969,785 | ||||||
| Hotel & Resort REITs (2.4%) | ||||||
| Host Hotels & Resorts Inc. | 4,534,859 | 79,405 | ||||
| Ryman Hospitality Properties Inc. | 365,631 | 36,749 | ||||
| Apple Hospitality REIT Inc. | 1,484,163 | 21,951 | ||||
| Park Hotels & Resorts Inc. | 957,283 | 14,417 | ||||
| Sunstone Hotel Investors Inc. | 1,249,303 | 12,943 | ||||
| DiamondRock Hospitality Co. | 1,353,764 | 11,141 | ||||
| Pebblebrook Hotel Trust | 777,112 | 10,639 | ||||
| RLJ Lodging Trust | 1,003,347 | 9,471 | ||||
| Xenia Hotels & Resorts Inc. | 658,642 | 9,142 | ||||
| Service Properties Trust | 1,068,926 | 6,061 | ||||
| Summit Hotel Properties Inc. | 690,792 | 4,380 | ||||
| Chatham Lodging Trust | 314,329 | 2,763 | ||||
| 219,062 | ||||||
| Industrial REITs (12.0%) | ||||||
| Prologis Inc. | 5,963,231 | 751,665 | ||||
| Rexford Industrial Realty Inc. | 1,404,074 | 70,358 | ||||
| EastGroup Properties Inc. | 309,132 | 57,805 | ||||
| Americold Realty Trust Inc. | 1,739,442 | 51,992 | ||||
| STAG Industrial Inc. | 1,172,107 | 47,834 | ||||
| First Industrial Realty Trust Inc. | 853,098 | 46,682 | ||||
| Terreno Realty Corp. | 619,331 | 42,368 | ||||
| Innovative Industrial Properties Inc. | 181,854 | 22,333 | ||||
| LXP Industrial Trust | 1,897,879 | 19,548 | ||||
| Plymouth Industrial REIT Inc. | 263,818 | 6,311 | ||||
16
Real Estate II Index Fund
| Shares | Market Value• ($000) | |||||
| * | Lineage Inc. | 12,272 | 1,078 | |||
| 1,117,974 | ||||||
| Multi-Family Residential REITs (8.4%) | ||||||
| AvalonBay Communities Inc. | 915,436 | 187,591 | ||||
| Equity Residential | 2,198,779 | 153,101 | ||||
| Essex Property Trust Inc. | 413,890 | 115,211 | ||||
| Mid-America Apartment Communities Inc. | 752,330 | 105,153 | ||||
| UDR Inc. | 2,015,849 | 80,775 | ||||
| Camden Property Trust | 689,492 | 76,361 | ||||
| Independence Realty Trust Inc. | 1,450,732 | 27,056 | ||||
| Elme Communities | 565,269 | 9,304 | ||||
| Veris Residential Inc. | 475,659 | 7,473 | ||||
| * | Apartment Investment & Management Co. Class A | 838,892 | 7,433 | |||
| Centerspace | 96,153 | 6,714 | ||||
| NexPoint Residential Trust Inc. | 149,603 | 6,536 | ||||
| 782,708 | ||||||
| Office REITs (3.3%) | ||||||
| BXP Inc. | 961,380 | 68,556 | ||||
| Vornado Realty Trust | 1,043,719 | 31,301 | ||||
| 1 | SL Green Realty Corp. | 417,680 | 27,834 | |||
| Cousins Properties Inc. | 980,189 | 26,965 | ||||
| Kilroy Realty Corp. | 718,564 | 26,565 | ||||
| Highwoods Properties Inc. | 681,654 | 21,111 | ||||
| COPT Defense Properties | 725,802 | 21,026 | ||||
| Douglas Emmett Inc. | 1,079,731 | 17,373 | ||||
| * | Equity Commonwealth | 690,725 | 14,070 | |||
| JBG SMITH Properties | 560,681 | 9,167 | ||||
| Easterly Government Properties Inc. Class A | 626,750 | 8,731 | ||||
| Piedmont Office Realty Trust Inc. Class A | 801,008 | 6,929 | ||||
| Paramount Group Inc. | 1,120,249 | 5,870 | ||||
| Brandywine Realty Trust | 1,109,033 | 5,590 | ||||
| Hudson Pacific Properties Inc. | 820,387 | 4,914 | ||||
| Peakstone Realty Trust | 233,650 | 3,173 | ||||
| NET Lease Office Properties | 94,583 | 2,791 | ||||
| City Office REIT Inc. | 256,722 | 1,553 | ||||
| Orion Office REIT Inc. | 341,390 | 1,383 | ||||
| Office Properties Income Trust | 314,543 | 783 | ||||
| 305,685 | ||||||
| Other Specialized REITs (6.8%) | ||||||
| VICI Properties Inc. Class A | 6,722,407 | 210,142 | ||||
| Iron Mountain Inc. | 1,889,257 | 193,762 | ||||
| Gaming & Leisure Properties Inc. | 1,750,177 | 87,859 | ||||
| Lamar Advertising Co. Class A | 564,924 | 67,712 | ||||
| EPR Properties | 487,926 | 21,957 | ||||
| Four Corners Property Trust Inc. | 593,700 | 16,113 | ||||
| Outfront Media Inc. | 856,574 | 13,894 | ||||
| Safehold Inc. | 298,486 | 6,907 | ||||
| Uniti Group Inc. | 1,543,690 | 5,928 | ||||
| Gladstone Land Corp. | 218,706 | 3,248 | ||||
| Farmland Partners Inc. | 293,253 | 3,114 | ||||
| 630,636 | ||||||
| Retail REITs (13.0%) | ||||||
| Simon Property Group Inc. | 2,100,779 | 322,344 | ||||
| Realty Income Corp. | 5,251,132 | 301,573 | ||||
| Kimco Realty Corp. | 4,346,092 | 94,441 | ||||
| Regency Centers Corp. | 1,131,324 | 76,183 | ||||
| Federal Realty Investment Trust | 481,417 | 53,750 | ||||
| NNN REIT Inc. | 1,175,833 | 52,783 | ||||
| Brixmor Property Group Inc. | 1,941,974 | 49,462 | ||||
| Agree Realty Corp. | 648,621 | 44,735 | ||||
| Kite Realty Group Trust | 1,415,579 | 34,908 | ||||
| Phillips Edison & Co. Inc. | 788,019 | 27,660 | ||||
| Macerich Co. | 1,390,509 | 22,262 | ||||
| Tanger Inc. | 702,355 | 20,298 | ||||
| SITE Centers Corp. | 1,215,234 | 18,775 | ||||
| Urban Edge Properties | 759,826 | 15,425 | ||||
| Acadia Realty Trust | 665,077 | 14,392 | ||||
| InvenTrust Properties Corp. | 437,594 | 12,327 | ||||
17
Real Estate II Index Fund
| Shares | Market Value• ($000) | |||||
| Retail Opportunity Investments Corp. | 817,084 | 12,216 | ||||
| Getty Realty Corp. | 330,077 | 9,777 | ||||
| NETSTREIT Corp. | 471,479 | 7,765 | ||||
| Whitestone REIT | 291,251 | 4,019 | ||||
| Alexander's Inc. | 14,892 | 3,608 | ||||
| Saul Centers Inc. | 84,612 | 3,346 | ||||
| CBL & Associates Properties Inc. | 83,181 | 2,144 | ||||
| *,2 | Spirit MTA REIT | 257,871 | 23 | |||
| 1,204,216 | ||||||
| Self-Storage REITs (6.6%) | ||||||
| Public Storage | 1,019,293 | 301,629 | ||||
| Extra Space Storage Inc. | 1,363,868 | 217,701 | ||||
| CubeSmart | 1,450,002 | 68,991 | ||||
| National Storage Affiliates Trust | 478,515 | 20,370 | ||||
| 608,691 | ||||||
| Single-Family Residential REITs (4.3%) | ||||||
| Invitation Homes Inc. | 3,945,411 | 139,155 | ||||
| Sun Communities Inc. | 801,964 | 101,633 | ||||
| Equity LifeStyle Properties Inc. | 1,141,919 | 78,427 | ||||
| American Homes 4 Rent Class A | 2,120,136 | 76,516 | ||||
| UMH Properties Inc. | 425,414 | 7,555 | ||||
| 403,286 | ||||||
| Telecom Tower REITs (12.1%) | ||||||
| American Tower Corp. | 3,010,228 | 663,454 | ||||
| Crown Castle Inc. | 2,800,993 | 308,334 | ||||
| SBA Communications Corp. | 696,894 | 152,996 | ||||
| 1,124,784 | ||||||
| Timber REITs (2.1%) | ||||||
| Weyerhaeuser Co. | 4,703,215 | 149,374 | ||||
| Rayonier Inc. | 910,178 | 27,606 | ||||
| PotlatchDeltic Corp. | 512,521 | 22,735 | ||||
| 199,715 | ||||||
| Total Equity Real Estate Investment Trusts (REITs) (Cost $7,188,981) | 8,537,293 | |||||
| Real Estate Management & Development (7.6%) | ||||||
| Diversified Real Estate Activities (0.2%) | ||||||
| St. Joe Co. | 226,117 | 13,947 | ||||
| RMR Group Inc. Class A | 102,107 | 2,649 | ||||
| * | Tejon Ranch Co. | 129,289 | 2,456 | |||
| 19,052 | ||||||
| Real Estate Development (0.2%) | ||||||
| * | Howard Hughes Holdings Inc. | 210,702 | 15,627 | |||
| * | Forestar Group Inc. | 129,207 | 4,087 | |||
| 19,714 | ||||||
| Real Estate Operating Companies (0.3%) | ||||||
| DigitalBridge Group Inc. | 1,054,077 | 14,894 | ||||
| Kennedy-Wilson Holdings Inc. | 716,911 | 7,463 | ||||
| * | Seritage Growth Properties Class A | 215,101 | 1,097 | |||
| 23,454 | ||||||
| Real Estate Services (6.9%) | ||||||
| * | CBRE Group Inc. Class A | 1,970,586 | 222,105 | |||
| * | CoStar Group Inc. | 2,632,507 | 205,388 | |||
| * | Jones Lang LaSalle Inc. | 305,811 | 76,728 | |||
| * | Zillow Group Inc. Class C | 1,011,895 | 49,279 | |||
| * | Cushman & Wakefield plc | 1,470,279 | 19,275 | |||
| * | Zillow Group Inc. Class A | 357,751 | 16,957 | |||
| Newmark Group Inc. Class A | 925,493 | 12,013 | ||||
| * | Compass Inc. Class A | 2,445,682 | 10,737 | |||
| * | Opendoor Technologies Inc. | 3,722,448 | 8,636 | |||
| 1 | eXp World Holdings Inc. | 498,449 | 7,158 | |||
| Marcus & Millichap Inc. | 160,851 | 6,371 | ||||
| * | Redfin Corp. | 770,074 | 6,269 | |||
| * | Anywhere Real Estate Inc. | 640,222 | 3,022 | |||
| 643,938 | ||||||
| Total Real Estate Management & Development (Cost $713,681) | 706,158 | |||||
18
Real Estate II Index Fund
| Shares | Market Value• ($000) | |||||
| Temporary Cash Investments (0.6%) | ||||||
| Money Market Fund (0.6%) | ||||||
| 3,4 | Vanguard Market Liquidity Fund, 5.390% (Cost $52,720) | 527,275 | 52,722 | |||
| Total Investments (100.2%) (Cost $7,955,382) | 9,296,173 | |||||
| Other Assets and Liabilities—Net (-0.2%) | (18,310) | |||||
| Net Assets (100%) | 9,277,863 | |||||
| Cost is in $000. |
| • | See Note A in Notes to Financial Statements. |
| * | Non-income-producing security. |
| 1 | Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $18,364,000. |
| 2 | Security value determined using significant unobservable inputs. |
| 3 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
| 4 | Collateral of $21,710,000 was received for securities on loan. |
| REIT—Real Estate Investment Trust. |
Derivative Financial Instruments Outstanding as of Period End
| Over-the-Counter Total Return Swaps | ||||||
| Reference Entity | Termination Date | Counterparty | Notional Amount ($000) | Floating Interest Rate Received (Paid)1 (%) | Value and Unrealized Appreciation ($000) | Value and Unrealized (Depreciation) ($000) |
| Alexandria Real Estate Equities Inc. | 1/31/25 | CITNA | 11,463 | (5.331) | 108 | — |
| Park Hotels & Resorts Inc. | 1/31/25 | GSI | 5,932 | (5.332) | 79 | — |
| Realty Income Corp. | 8/30/24 | BANA | 15,846 | (5.431) | 1,390 | — |
| 1,577 | — | |||||
| 1 | Based on USD Overnight Bank Funding Rate as of the most recent reset date. Floating interest payment received/paid monthly. |
| BANA—Bank of America, N.A. | |
| CITNA—Citibank, N.A. | |
| GSI—Goldman Sachs International. |
At July 31, 2024, the counterparties had deposited in segregated accounts securities with a value of $1,845,000 in connection with open over-the-counter swap contracts.
See accompanying Notes, which are an integral part of the Financial Statements.
19
Real Estate II Index Fund
Statement of Assets and Liabilities
As of July 31, 2024
| ($000s, except shares, footnotes, and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value1 | |
| Unaffiliated Issuers (Cost $7,902,662) | 9,243,451 |
| Affiliated Issuers (Cost $52,720) | 52,722 |
| Total Investments in Securities | 9,296,173 |
| Investment in Vanguard | 249 |
| Cash | 2,620 |
| Receivables for Accrued Income | 2,541 |
| Unrealized Appreciation—Over-the-Counter Swap Contracts | 1,577 |
| Total Assets | 9,303,160 |
| Liabilities | |
| Payables for Investment Securities Purchased | 2,388 |
| Collateral for Securities on Loan | 21,710 |
| Payables for Capital Shares Redeemed | 878 |
| Payables to Vanguard | 321 |
| Total Liabilities | 25,297 |
| Net Assets | 9,277,863 |
| 1 Includes $18,364,000 of securities on loan. | |
At July 31, 2024, net assets consisted of: | |
| Paid-in Capital | 8,083,550 |
| Total Distributable Earnings (Loss) | 1,194,313 |
| Net Assets | 9,277,863 |
| Net Assets | |
| Applicable to 427,561,715 outstanding $.001 par value shares of beneficial interest (unlimited authorization) | 9,277,863 |
| Net Asset Value Per Share | $21.70 |
See accompanying Notes, which are an integral part of the Financial Statements.
20
Real Estate II Index Fund
Statement of Operations
| Six Months Ended July 31, 2024 | |
| ($000) | |
| Investment Income | |
| Income | |
| Dividends | 125,869 |
| Interest1 | 458 |
| Securities Lending—Net | 224 |
| Total Income | 126,551 |
| Expenses | |
| The Vanguard Group—Note B | |
| Investment Advisory Services | 70 |
| Management and Administrative | 3,196 |
| Marketing and Distribution | 69 |
| Custodian Fees | 44 |
| Shareholders’ Reports | 8 |
| Trustees’ Fees and Expenses | 2 |
| Other Expenses | 8 |
| Total Expenses | 3,397 |
| Net Investment Income | 123,154 |
| Realized Net Gain (Loss) | |
| Capital Gain Distributions Received | 20,253 |
| Investment Securities Sold1 | (20,990) |
| Swap Contracts | (2,224) |
| Realized Net Gain (Loss) | (2,961) |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities1 | 716,096 |
| Swap Contracts | 2,407 |
| Change in Unrealized Appreciation (Depreciation) | 718,503 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 838,696 |
| 1 | Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $458,000, $3,000, and ($2,000), respectively. Purchases and sales are for temporary cash investment purposes. |
See accompanying Notes, which are an integral part of the Financial Statements.
21
Real Estate II Index Fund
Statement of Changes in Net Assets
| Six Months Ended July 31, 2024 | Year Ended January 31, 2024 | ||
| ($000) | ($000) | ||
| Increase (Decrease) in Net Assets | |||
| Operations | |||
| Net Investment Income | 123,154 | 253,107 | |
| Realized Net Gain (Loss) | (2,961) | (75,054) | |
| Change in Unrealized Appreciation (Depreciation) | 718,503 | (496,890) | |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 838,696 | (318,837) | |
| Distributions | |||
| Net Investment Income and/or Realized Capital Gains | (178,497) | (254,199) | |
| Return of Capital | — | (88,901) | |
| Total Distributions | (178,497) | (343,100) | |
| Capital Share Transactions | |||
| Issued | 25,513 | 70,851 | |
| Issued in Lieu of Cash Distributions | 178,497 | 343,100 | |
| Redeemed | (12,210) | (15,985) | |
| Net Increase (Decrease) from Capital Share Transactions | 191,800 | 397,966 | |
| Total Increase (Decrease) | 851,999 | (263,971) | |
| Net Assets | |||
| Beginning of Period | 8,425,864 | 8,689,835 | |
| End of Period | 9,277,863 | 8,425,864 | |
See accompanying Notes, which are an integral part of the Financial Statements.
22
Real Estate II Index Fund
Financial Highlights
| For a Share Outstanding Throughout Each Period | Six Months Ended July 31, 2024 | Year Ended January 31, | ||||
| 2024 | 2023 | 2022 | 2021 | 2020 | ||
| Net Asset Value, Beginning of Period | $20.16 | $21.86 | $25.69 | $20.50 | $22.64 | $20.10 |
| Investment Operations | ||||||
| Net Investment Income1 | .292 | .620 | .558 | .484 | .471 | .571 |
| Net Realized and Unrealized Gain (Loss) on Investments | 1.672 | (1.476) | (3.493) | 5.427 | (1.808) | 2.752 |
| Total from Investment Operations | 1.964 | (.856) | (2.935) | 5.911 | (1.337) | 3.323 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.424) | (.625) | (.528) | (.477) | (.465) | (.590) |
| Distributions from Realized Capital Gains | — | — | (.238) | (.034) | — | — |
| Return of Capital | — | (.219) | (.129) | (.210) | (.338) | (.193) |
| Total Distributions | (.424) | (.844) | (.895) | (.721) | (.803) | (.783) |
| Net Asset Value, End of Period | $21.70 | $20.16 | $21.86 | $25.69 | $20.50 | $22.64 |
| Total Return | 9.91% | -3.68% | -11.23% | 28.96% | -5.70% | 16.78% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $9,278 | $8,426 | $8,690 | $9,542 | $7,400 | $7,848 |
| Ratio of Total Expenses to Average Net Assets | 0.08% | 0.08% | 0.08%2 | 0.08% | 0.08% | 0.08% |
| Ratio of Net Investment Income to Average Net Assets | 2.90% | 3.14% | 2.47% | 1.95% | 2.41% | 2.63% |
| Portfolio Turnover Rate | 2% | 6% | 5%3 | 6% | 4% | 3% |
| The expense ratio and net investment income ratio for the current period have been annualized. | ||||||
| 1 | Calculated based on average shares outstanding. |
| 2 | The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.08%. |
| 3 | Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares. |
See accompanying Notes, which are an integral part of the Financial Statements.
23
Real Estate II Index Fund
Notes to Financial Statements
Vanguard Real Estate II Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund is a wholly owned subsidiary of Vanguard Real Estate Index Fund (“Real Estate Index Fund”), and at July 31, 2024, the Real Estate Index Fund was the record and beneficial owner of 96.7% of the fund’s net assets. As part of the Real Estate Index Fund’s principal investment strategy, it attempts to replicate the benchmark index by investing all, or substantially all, of its assets—either directly or indirectly through the fund—in the stocks that make up the index.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund's pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the valuation designee to represent fair value and subject to oversight by the board of trustees.
Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset value.
2. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks or indexes in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.
A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund's net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Schedule of Investments. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
The notional amounts of swap contracts are not recorded in the Statement of Assets and Liabilities. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until periodic payments are made or the termination of the swap, at which time realized gain (loss) is recorded.
During the six months ended July 31, 2024, the fund’s average amounts of investments in total return swaps represented less than 1% of net assets, based on the average of notional amounts at each quarter-end during the period.
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute virtually all of its taxable income. The fund’s tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund’s tax positions taken for all open federal and state income tax years, and has concluded that no provision for income tax is required in the fund’s financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. The portion of distributions that exceed a fund's current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.
5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Collateral investments in Vanguard Market Liquidity Fund are subject to market appreciation or depreciation. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
24
Real Estate II Index Fund
6. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group ("Vanguard") participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes and are subject to the fund’s regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed amount of the facility, which are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under either facility bear interest at an agreed-upon spread plus the higher of the federal funds effective rate, the overnight bank funding rate, or the Daily Simple Secured Overnight Financing Rate inclusive of an additional agreed-upon spread. However, borrowings under the uncommitted credit facility may bear interest based upon an alternate rate agreed to by the fund and Vanguard.
In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.
For the six months ended July 31, 2024, the fund did not utilize the credit facilities or the Interfund Lending Program.
7. Other: Distributions received from investment securities are recorded on the ex-dividend date. Non-cash dividends included in income, if any, are recorded at the fair value of the securities received. Each investment security reports annually the tax character of its distributions. Dividend income, capital gain distributions received, and unrealized appreciation (depreciation) reflect the amounts of taxable income, capital gain, and return of capital reported by the REITs, and management’s estimates of such amounts for REIT distributions for which actual information has not been reported. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
B. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees and are generally settled twice a month.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At July 31, 2024, the fund had contributed to Vanguard capital in the amount of $249,000, representing less than 0.01% of the fund’s net assets and 0.10% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
C. Various inputs may be used to determine the value of the fund’s investments and derivatives. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments and derivatives valued with significant unobservable inputs are noted on the Schedule of Investments.
The following table summarizes the market value of the fund's investments and derivatives as of July 31, 2024, based on the inputs used to value them:
| Level 1 ($000) | Level 2 ($000) | Level 3 ($000) | Total ($000) | |
| Investments | ||||
| Assets | ||||
| Common Stocks | 9,243,428 | — | 23 | 9,243,451 |
| Temporary Cash Investments | 52,722 | — | — | 52,722 |
| Total | 9,296,150 | — | 23 | 9,296,173 |
| Derivative Financial Instruments | ||||
| Assets | ||||
| Swap Contracts | — | 1,577 | — | 1,577 |
25
Real Estate II Index Fund
D. As of July 31, 2024, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
| Amount ($000) | |
| Tax Cost | 8,011,698 |
| Gross Unrealized Appreciation | 2,199,668 |
| Gross Unrealized Depreciation | (913,616) |
| Net Unrealized Appreciation (Depreciation) | 1,286,052 |
The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at January 31, 2024, the fund had available capital losses totaling $59,114,000 that may be carried forward indefinitely to offset future net capital gains. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending January 31, 2025; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
E. During the six months ended July 31, 2024, the fund purchased $309,856,000 of investment securities and sold $148,549,000 of investment securities, other than temporary cash investments.
The fund purchased securities from and sold securities to other Vanguard funds or accounts managed by Vanguard or its affiliates, in accordance with procedures adopted by the board of trustees in compliance with Rule 17a-7 of the Investment Company Act of 1940. For the six months ended July 31, 2024, such purchases were $0 and sales were $824,000, resulting in net realized loss of $12,000; these amounts, other than temporary cash investments, are included in the purchases and sales of investment securities noted above.
F. Capital shares issued and redeemed were:
| Six Months Ended July 31, 2024 | Year Ended January 31, 2024 | ||
| Shares (000) | Shares (000) | ||
| Issued | 1,282 | 3,562 | |
| Issued in Lieu of Cash Distributions | 8,834 | 17,762 | |
| Redeemed | (573) | (786) | |
| Net Increase (Decrease) in Shares Outstanding | 9,543 | 20,538 |
G. Significant market disruptions, such as those caused by pandemics, natural or environmental disasters, war, acts of terrorism, or other events, can adversely affect local and global markets and normal market operations. Any such disruptions could have an adverse impact on the value of the fund’s investments and fund performance.
To the extent the fund’s investment portfolio reflects concentration in a particular market, industry, sector, country or asset class, the fund may be adversely affected by the performance of these concentrations and may be subject to increased price volatility and other risks.
The use of derivatives may expose the fund to various risks. Derivatives can be highly volatile, and any initial investment is generally small relative to the notional amount so that transactions may be leveraged in terms of market exposure. A relatively small market movement may have a potentially larger impact on derivatives than on standard securities. Leveraged derivatives positions can, therefore, increase volatility. Additional information regarding the fund’s use of derivative(s) and the specific risks associated is described under significant accounting policies.
H. Management has determined that no events or transactions occurred subsequent to July 31, 2024, that would require recognition or disclosure in these financial statements.
Q1232 092024
26
Financial Statements
For the six-months ended July 31, 2024
Vanguard Global Capital Cycles Fund
Contents
Financial Statements | 1 |
Global Capital Cycles Fund
Financial Statements (unaudited)
Schedule of Investments
As of July 31, 2024
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.
| Shares | Market Value• ($000) | |||||
| Common Stocks (95.9%) | ||||||
| Australia (2.5%) | ||||||
| BHP Group Ltd. | 694,144 | 19,280 | ||||
| 1 | BHP Group Ltd. ADR | 293,870 | 16,319 | |||
| *,1 | Metals Acquisition Ltd. Class A | 101,170 | 1,305 | |||
| 36,904 | ||||||
| Brazil (1.8%) | ||||||
| Banco Bradesco SA ADR | 8,951,414 | 19,872 | ||||
| Vale SA Class B ADR | 577,448 | 6,266 | ||||
| 26,138 | ||||||
| Canada (14.6%) | ||||||
| Barrick Gold Corp. | 7,078,175 | 131,017 | ||||
| Intact Financial Corp. | 123,228 | 22,394 | ||||
| Agnico Eagle Mines Ltd. | 286,965 | 22,145 | ||||
| * | Foran Mining Corp. | 7,674,073 | 21,566 | |||
| First Quantum Minerals Ltd. | 1,066,516 | 13,055 | ||||
| * | Abaxx Technologies Inc. | 799,752 | 6,546 | |||
| 216,723 | ||||||
| China (4.5%) | ||||||
| Alibaba Group Holding Ltd. | 5,471,902 | 53,845 | ||||
| Contemporary Amperex Technology Co. Ltd. Class A | 502,650 | 12,950 | ||||
| 66,795 | ||||||
| France (2.8%) | ||||||
| Societe Generale SA | 840,361 | 21,796 | ||||
| Engie SA | 1,242,788 | 19,537 | ||||
| 41,333 | ||||||
| Germany (3.4%) | ||||||
| Rheinmetall AG | 48,285 | 26,299 | ||||
| RWE AG | 397,353 | 14,829 | ||||
| Hensoldt AG | 269,986 | 9,990 | ||||
| 51,118 | ||||||
| India (3.5%) | ||||||
| Reliance Industries Ltd. | 1,447,928 | 52,201 | ||||
| Japan (2.0%) | ||||||
| SUMCO Corp. | 1,114,500 | 18,323 | ||||
| Panasonic Holdings Corp. | 1,311,920 | 10,746 | ||||
| 29,069 | ||||||
| Norway (0.5%) | ||||||
| * | Seadrill Ltd. | 147,139 | 8,094 | |||
| South Africa (0.3%) | ||||||
| Anglo American Platinum Ltd. | 114,424 | 4,441 | ||||
| South Korea (4.9%) | ||||||
| Samsung Electronics Co. Ltd. | 1,175,204 | 72,466 | ||||
| Sweden (0.8%) | ||||||
| Boliden AB | 363,059 | 11,103 | ||||
| Switzerland (4.3%) | ||||||
| Novartis AG (Registered) | 373,666 | 41,712 | ||||
| Swatch Group AG | 105,802 | 21,790 | ||||
| 63,502 | ||||||
| Taiwan (2.4%) | ||||||
| Taiwan Semiconductor Manufacturing Co. Ltd. ADR | 216,660 | 35,922 | ||||
| United Kingdom (24.8%) | ||||||
| Glencore plc | 13,182,846 | 73,150 | ||||
1
Global Capital Cycles Fund
| Shares | Market Value• ($000) | |||||
| Anglo American plc | 2,271,225 | 68,855 | ||||
| Unilever plc | 811,595 | 49,876 | ||||
| Rio Tinto plc ADR | 567,573 | 36,983 | ||||
| Haleon plc | 6,026,994 | 27,034 | ||||
| Prudential plc | 2,695,646 | 24,327 | ||||
| Fresnillo plc | 2,831,265 | 21,455 | ||||
| Shell plc | 520,603 | 18,983 | ||||
| Hammerson plc | 50,967,151 | 18,918 | ||||
| Babcock International Group plc | 2,626,926 | 17,969 | ||||
| Reckitt Benckiser Group plc | 128,757 | 6,926 | ||||
| Travis Perkins plc | 365,436 | 4,491 | ||||
| 368,967 | ||||||
| United States (22.8%) | ||||||
| Viper Energy Inc. Class A | 1,327,015 | 56,624 | ||||
| Wells Fargo & Co. | 833,409 | 49,454 | ||||
| BWX Technologies Inc. | 420,559 | 41,841 | ||||
| Pfizer Inc. | 1,183,962 | 36,158 | ||||
| Marvell Technology Inc. | 371,178 | 24,861 | ||||
| * | Fluor Corp. | 515,046 | 24,774 | |||
| Intel Corp. | 803,630 | 24,704 | ||||
| American Electric Power Co. Inc. | 242,224 | 23,767 | ||||
| 1 | Chesapeake Energy Corp. | 259,332 | 19,795 | |||
| Texas Instruments Inc. | 73,450 | 14,970 | ||||
| * | Antero Resources Corp. | 511,377 | 14,840 | |||
| Archer-Daniels-Midland Co. | 116,864 | 7,247 | ||||
| 339,035 | ||||||
| Total Common Stocks (Cost $1,204,660) | 1,423,811 | |||||
| Preferred Stocks (0.9%) | ||||||
| Raizen SA Preference Shares (Cost $14,864) | 26,671,600 | 14,099 | ||||
| Temporary Cash Investments (3.6%) | ||||||
| Money Market Fund (3.6%) | ||||||
| 2,3 | Vanguard Market Liquidity Fund, 5.390% (Cost $52,804) | 528,128 | 52,807 | |||
| Total Investments (100.4%) (Cost $1,272,328) | 1,490,717 | |||||
| Other Assets and Liabilities—Net (-0.4%) | (5,420) | |||||
| Net Assets (100%) | 1,485,297 | |||||
| Cost is in $000. |
| • | See Note A in Notes to Financial Statements. |
| * | Non-income-producing security. |
| 1 | Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $7,662,000. |
| 2 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
| 3 | Collateral of $7,817,000 was received for securities on loan. |
| ADR—American Depositary Receipt. |
See accompanying Notes, which are an integral part of the Financial Statements.
2
Global Capital Cycles Fund
Statement of Assets and Liabilities
As of July 31, 2024
| ($000s, except shares, footnotes, and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value1 | |
| Unaffiliated Issuers (Cost $1,219,524) | 1,437,910 |
| Affiliated Issuers (Cost $52,804) | 52,807 |
| Total Investments in Securities | 1,490,717 |
| Investment in Vanguard | 42 |
| Foreign Currency, at Value (Cost $1,487) | 1,493 |
| Receivables for Investment Securities Sold | 5,892 |
| Receivables for Accrued Income | 2,738 |
| Receivables for Capital Shares Issued | 899 |
| Total Assets | 1,501,781 |
| Liabilities | |
| Due to Custodian | 5,815 |
| Payables for Investment Securities Purchased | 174 |
| Collateral for Securities on Loan | 7,817 |
| Payables for Capital Shares Redeemed | 757 |
| Payables to Investment Advisor | 766 |
| Payables to Vanguard | 184 |
| Deferred Foreign Capital Gains Taxes | 971 |
| Total Liabilities | 16,484 |
| Net Assets | 1,485,297 |
| 1 Includes $7,662,000 of securities on loan. | |
At July 31, 2024, net assets consisted of: | |
| Paid-in Capital | 3,216,892 |
| Total Distributable Earnings (Loss) | (1,731,595) |
| Net Assets | 1,485,297 |
| Net Assets | |
| Applicable to 109,999,032 outstanding $.001 par value shares of beneficial interest (unlimited authorization) | 1,485,297 |
| Net Asset Value Per Share | $13.50 |
See accompanying Notes, which are an integral part of the Financial Statements.
3
Global Capital Cycles Fund
Statement of Operations
| Six Months Ended July 31, 2024 | |
| ($000) | |
| Investment Income | |
| Income | |
| Dividends1 | 20,424 |
| Interest2 | 1,379 |
| Securities Lending—Net | 66 |
| Total Income | 21,869 |
| Expenses | |
| Investment Advisory Fees—Note B | |
| Basic Fee | 1,028 |
| Performance Adjustment | 473 |
| The Vanguard Group—Note C | |
| Management and Administrative | 1,530 |
| Marketing and Distribution | 33 |
| Custodian Fees | 29 |
| Shareholders’ Reports | 24 |
| Trustees’ Fees and Expenses | — |
| Other Expenses | 14 |
| Total Expenses | 3,131 |
| Net Investment Income | 18,738 |
| Realized Net Gain (Loss) | |
| Investment Securities Sold2 | 45,218 |
| Foreign Currencies | (139) |
| Realized Net Gain (Loss) | 45,079 |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities2,3 | 134,482 |
| Foreign Currencies | (10) |
| Change in Unrealized Appreciation (Depreciation) | 134,472 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 198,289 |
| 1 | Dividends are net of foreign withholding taxes of $825,000. |
| 2 | Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $1,379,000, less than $1,000, and ($2,000), respectively. Purchases and sales are for temporary cash investment purposes. |
| 3 | The change in unrealized appreciation (depreciation) is net of the change in deferred foreign capital gains taxes of $418,000. |
See accompanying Notes, which are an integral part of the Financial Statements.
4
Global Capital Cycles Fund
Statement of Changes in Net Assets
| Six Months Ended July 31, 2024 | Year Ended January 31, 2024 | ||
| ($000) | ($000) | ||
| Increase (Decrease) in Net Assets | |||
| Operations | |||
| Net Investment Income | 18,738 | 44,454 | |
| Realized Net Gain (Loss) | 45,079 | 74,334 | |
| Change in Unrealized Appreciation (Depreciation) | 134,472 | (157,388) | |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 198,289 | (38,600) | |
| Distributions | |||
| Total Distributions | (3,281) | (44,372) | |
| Capital Share Transactions | |||
| Issued | 78,882 | 135,868 | |
| Issued in Lieu of Cash Distributions | 2,806 | 37,890 | |
| Redeemed | (118,175) | (284,023) | |
| Net Increase (Decrease) from Capital Share Transactions | (36,487) | (110,265) | |
| Total Increase (Decrease) | 158,521 | (193,237) | |
| Net Assets | |||
| Beginning of Period | 1,326,776 | 1,520,013 | |
| End of Period | 1,485,297 | 1,326,776 | |
See accompanying Notes, which are an integral part of the Financial Statements.
5
Global Capital Cycles Fund
Financial Highlights
| For a Share Outstanding Throughout Each Period | Six Months Ended July 31, 2024 | Year Ended January 31, | ||||
| 2024 | 2023 | 2022 | 2021 | 2020 | ||
| Net Asset Value, Beginning of Period | $11.74 | $12.43 | $11.28 | $9.57 | $7.97 | $7.62 |
| Investment Operations | ||||||
| Net Investment Income1 | .170 | .377 | .392 | .356 | .197 | .212 |
| Net Realized and Unrealized Gain (Loss) on Investments | 1.620 | (.672) | 1.134 | 1.715 | 1.597 | .337 |
| Total from Investment Operations | 1.790 | (.295) | 1.526 | 2.071 | 1.794 | .549 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.030) | (.395) | (.376) | (.361) | (.194) | (.199) |
| Distributions from Realized Capital Gains | — | — | — | — | — | — |
| Total Distributions | (.030) | (.395) | (.376) | (.361) | (.194) | (.199) |
| Net Asset Value, End of Period | $13.50 | $11.74 | $12.43 | $11.28 | $9.57 | $7.97 |
| Total Return2 | 15.26% | -2.52% | 13.81% | 21.74% | 22.63% | 7.11% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $1,485 | $1,327 | $1,520 | $1,359 | $1,182 | $1,212 |
| Ratio of Total Expenses to Average Net Assets3 | 0.44% | 0.44% | 0.43%4 | 0.36% | 0.35% | 0.38% |
| Ratio of Net Investment Income to Average Net Assets | 2.63% | 3.14% | 3.45% | 3.28% | 2.43% | 2.68% |
| Portfolio Turnover Rate | 13% | 67% | 63% | 57% | 70% | 56% |
| The expense ratio and net investment income ratio for the current period have been annualized. | ||||||
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | Includes performance-based investment advisory fee increases (decreases) of 0.07%, 0.06%, 0.05%, (0.01%), (0.03%), and 0.00%. |
| 4 | The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.43%. |
See accompanying Notes, which are an integral part of the Financial Statements.
6
Global Capital Cycles Fund
Notes to Financial Statements
Vanguard Global Capital Cycles Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the valuation designee to represent fair value and subject to oversight by the board of trustees.
These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset value.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute virtually all of its taxable income. The fund’s tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund’s tax positions taken for all open federal and state income tax years, and has concluded that no provision for income tax is required in the fund’s financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.
5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Collateral investments in Vanguard Market Liquidity Fund are subject to market appreciation or depreciation. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
6. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group ("Vanguard") participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes and are subject to the fund’s regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed amount of the facility, which are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under either facility bear interest at an agreed-upon spread plus the higher of the federal funds effective rate, the overnight bank funding rate, or the Daily Simple Secured Overnight Financing Rate inclusive of an additional agreed-upon spread. However, borrowings under the uncommitted credit facility may bear interest based upon an alternate rate agreed to by the fund and Vanguard.
In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.
For the six months ended July 31, 2024, the fund did not utilize the credit facilities or the Interfund Lending Program.
7. Other: Dividend income is recorded on the ex-dividend date. Non-cash dividends included in income, if any, are recorded at the fair value of the
7
Global Capital Cycles Fund
securities received. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Taxes on foreign dividends and capital gains have been provided for in accordance with the applicable countries’ tax rules and rates. Deferred foreign capital gains tax, if any, is accrued daily based upon net unrealized gains. The fund has filed tax reclaims for previously withheld taxes on dividends earned in certain European Union countries. These filings are subject to various administrative and judicial proceedings within these countries. Amounts related to these reclaims are recorded when there are no significant uncertainties as to the ultimate resolution of proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment. Such tax reclaims and related professional fees, if any, are included in dividend income and other expenses, respectively.
B. Wellington Management Company llp provides investment advisory services to the fund for a fee calculated at an annual percentage rate of average net assets. The basic fee is subject to quarterly adjustments based on the fund's performance relative to the Custom Global Capital Cycles Index for the preceding five years. For the six months ended July 31, 2024, the investment advisory fee represented an effective annual basic rate of 0.15% of the fund’s average net assets, before a net increase of $473,000 (0.07%) based on performance.
C. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees and are generally settled twice a month.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At July 31, 2024, the fund had contributed to Vanguard capital in the amount of $42,000, representing less than 0.01% of the fund’s net assets and 0.02% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
D. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Schedule of Investments.
The following table summarizes the market value of the fund's investments as of July 31, 2024, based on the inputs used to value them:
| Level 1 ($000) | Level 2 ($000) | Level 3 ($000) | Total ($000) | |
| Investments | ||||
| Assets | ||||
| Common Stocks—North and South America | 581,896 | — | — | 581,896 |
| Common Stocks—Other | 98,623 | 743,292 | — | 841,915 |
| Preferred Stocks | 14,099 | — | — | 14,099 |
| Temporary Cash Investments | 52,807 | — | — | 52,807 |
| Total | 747,425 | 743,292 | — | 1,490,717 |
E. As of July 31, 2024, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:
| Amount ($000) | |
| Tax Cost | 1,273,380 |
| Gross Unrealized Appreciation | 268,565 |
| Gross Unrealized Depreciation | (51,228) |
| Net Unrealized Appreciation (Depreciation) | 217,337 |
The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at January 31, 2024, the fund had available capital losses totaling $2,010,957,000 that may be carried forward indefinitely to offset future net capital gains. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending January 31, 2025; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
F. During the six months ended July 31, 2024, the fund purchased $182,327,000 of investment securities and sold $191,914,000 of investment securities, other than temporary cash investments.
The fund purchased securities from and sold securities to other funds or accounts managed by its investment advisor or their affiliates, in accordance with procedures adopted by the board of trustees in compliance with Rule 17a-7 of the Investment Company Act of 1940. For the six months ended
8
Global Capital Cycles Fund
July 31, 2024, such purchases were $7,181,000 and sales were $0; these amounts, other than temporary cash investments, are included in the purchases and sales of investment securities noted above.
G. Capital shares issued and redeemed were:
| Six Months Ended July 31, 2024 | Year Ended January 31, 2024 | ||
| Shares (000) | Shares (000) | ||
| Issued | 6,086 | 11,289 | |
| Issued in Lieu of Cash Distributions | 221 | 3,076 | |
| Redeemed | (9,286) | (23,661) | |
| Net Increase (Decrease) in Shares Outstanding | (2,979) | (9,296) |
H. Significant market disruptions, such as those caused by pandemics, natural or environmental disasters, war, acts of terrorism, or other events, can adversely affect local and global markets and normal market operations. Any such disruptions could have an adverse impact on the value of the fund’s investments and fund performance.
To the extent the fund’s investment portfolio reflects concentration in a particular market, industry, sector, country or asset class, the fund may be adversely affected by the performance of these concentrations and may be subject to increased price volatility and other risks.
I. Management has determined that no events or transactions occurred subsequent to July 31, 2024, that would require recognition or disclosure in these financial statements.
Q532 092024
9
Financial Statements
For the six-months ended July 31, 2024
Vanguard Global ESG Select Stock Fund
Contents
Financial Statements | 1 |
Global ESG Select Stock Fund
Financial Statements (unaudited)
Schedule of Investments
As of July 31, 2024
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.
| Shares | Market Value• ($000) | |||||
| Common Stocks (98.1%) | ||||||
| France (6.2%) | ||||||
| Cie Generale des Etablissements Michelin SCA | 852,722 | 33,759 | ||||
| L'Oreal SA | 55,887 | 24,168 | ||||
| Schneider Electric SE | 90,788 | 21,883 | ||||
| 79,810 | ||||||
| Hong Kong (2.7%) | ||||||
| AIA Group Ltd. | 5,297,319 | 35,433 | ||||
| Japan (5.0%) | ||||||
| Recruit Holdings Co. Ltd. | 636,400 | 36,493 | ||||
| Mitsubishi UFJ Financial Group Inc. | 2,429,200 | 28,058 | ||||
| 64,551 | ||||||
| Netherlands (10.4%) | ||||||
| DSM-Firmenich AG | 367,230 | 46,884 | ||||
| ING Groep NV | 2,173,066 | 39,443 | ||||
| ASML Holding NV | 28,181 | 26,241 | ||||
| Wolters Kluwer NV | 133,092 | 22,281 | ||||
| 134,849 | ||||||
| Singapore (3.4%) | ||||||
| DBS Group Holdings Ltd. | 1,585,079 | 43,437 | ||||
| Spain (5.4%) | ||||||
| Industria de Diseno Textil SA | 738,172 | 35,867 | ||||
| Iberdrola SA | 2,595,846 | 34,287 | ||||
| 70,154 | ||||||
| Switzerland (2.2%) | ||||||
| Novartis AG (Registered) | 258,226 | 28,825 | ||||
| Taiwan (2.2%) | ||||||
| Taiwan Semiconductor Manufacturing Co. Ltd. | 961,163 | 28,038 | ||||
| United Kingdom (7.9%) | ||||||
| National Grid plc | 3,485,149 | 44,220 | ||||
| Diageo plc | 1,049,860 | 32,666 | ||||
| Compass Group plc | 805,124 | 24,794 | ||||
| 101,680 | ||||||
| United States (52.7%) | ||||||
| Microsoft Corp. | 175,340 | 73,354 | ||||
| Deere & Co. | 135,446 | 50,383 | ||||
| Texas Instruments Inc. | 232,214 | 47,328 | ||||
| Cisco Systems Inc. | 962,289 | 46,623 | ||||
| Visa Inc. Class A | 152,762 | 40,584 | ||||
| Northern Trust Corp. | 396,429 | 35,143 | ||||
| Prologis Inc. | 272,139 | 34,303 | ||||
| Colgate-Palmolive Co. | 341,367 | 33,860 | ||||
| Procter & Gamble Co. | 204,509 | 32,877 | ||||
| Home Depot Inc. | 87,081 | 32,060 | ||||
| Accenture plc Class A | 93,564 | 30,934 | ||||
| Automatic Data Processing Inc. | 111,157 | 29,192 | ||||
| Danaher Corp. | 102,045 | 28,275 | ||||
| * | Edwards Lifesciences Corp. | 424,336 | 26,754 | |||
| Marriott International Inc. Class A | 112,845 | 25,650 | ||||
| Weyerhaeuser Co. | 783,385 | 24,880 | ||||
| Merck & Co. Inc. | 203,702 | 23,045 | ||||
| Progressive Corp. | 105,111 | 22,506 | ||||
| Trane Technologies plc | 66,338 | 22,176 | ||||
1
Global ESG Select Stock Fund
| Shares | Market Value• ($000) | |||||
| * | ServiceNow Inc. | 26,397 | 21,497 | |||
| 681,424 | ||||||
| Total Common Stocks (Cost $982,845) | 1,268,201 | |||||
| Temporary Cash Investments (1.8%) | ||||||
| Money Market Fund (1.8%) | ||||||
| 1 | Vanguard Market Liquidity Fund, 5.390% (Cost $23,853) | 238,568 | 23,854 | |||
| Total Investments (99.9%) (Cost $1,006,698) | 1,292,055 | |||||
| Other Assets and Liabilities—Net (0.1%) | 755 | |||||
| Net Assets (100%) | 1,292,810 | |||||
| Cost is in $000. |
| • | See Note A in Notes to Financial Statements. |
| * | Non-income-producing security. |
| 1 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
See accompanying Notes, which are an integral part of the Financial Statements.
2
Global ESG Select Stock Fund
Statement of Assets and Liabilities
As of July 31, 2024
| ($000s, except shares, footnotes, and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value | |
| Unaffiliated Issuers (Cost $982,845) | 1,268,201 |
| Affiliated Issuers (Cost $23,853) | 23,854 |
| Total Investments in Securities | 1,292,055 |
| Investment in Vanguard | 37 |
| Cash | 16 |
| Foreign Currency, at Value (Cost $238) | 238 |
| Receivables for Accrued Income | 1,889 |
| Receivables for Capital Shares Issued | 549 |
| Total Assets | 1,294,784 |
| Liabilities | |
| Payables for Investment Securities Purchased | 84 |
| Payables for Capital Shares Redeemed | 940 |
| Payables to Investment Advisor | 798 |
| Payables to Vanguard | 152 |
| Total Liabilities | 1,974 |
| Net Assets | 1,292,810 |
At July 31, 2024, net assets consisted of: | |
| Paid-in Capital | 989,667 |
| Total Distributable Earnings (Loss) | 303,143 |
| Net Assets | 1,292,810 |
| Investor Shares—Net Assets | |
| Applicable to 6,623,624 outstanding $.001 par value shares of beneficial interest (unlimited authorization) | 239,076 |
| Net Asset Value Per Share—Investor Shares | $36.09 |
| Admiral Shares—Net Assets | |
| Applicable to 23,339,787 outstanding $.001 par value shares of beneficial interest (unlimited authorization) | 1,053,734 |
| Net Asset Value Per Share—Admiral Shares | $45.15 |
See accompanying Notes, which are an integral part of the Financial Statements.
3
Global ESG Select Stock Fund
Statement of Operations
| Six Months Ended July 31, 2024 | |
| ($000) | |
| Investment Income | |
| Income | |
| Dividends1 | 16,332 |
| Non-Cash Dividends | 946 |
| Interest2 | 533 |
| Total Income | 17,811 |
| Expenses | |
| Investment Advisory Fees—Note B | |
| Basic Fee | 1,340 |
| Performance Adjustment | 204 |
| The Vanguard Group—Note C | |
| Management and Administrative—Investor Shares | 355 |
| Management and Administrative—Admiral Shares | 1,050 |
| Marketing and Distribution—Investor Shares | 7 |
| Marketing and Distribution—Admiral Shares | 25 |
| Custodian Fees | 17 |
| Shareholders’ Reports—Investor Shares | 10 |
| Shareholders’ Reports—Admiral Shares | 5 |
| Trustees’ Fees and Expenses | — |
| Other Expenses | 7 |
| Total Expenses | 3,020 |
| Net Investment Income | 14,791 |
| Realized Net Gain (Loss) | |
| Investment Securities Sold2 | 18,414 |
| Foreign Currencies | 16 |
| Realized Net Gain (Loss) | 18,430 |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities2 | 85,360 |
| Foreign Currencies | (11) |
| Change in Unrealized Appreciation (Depreciation) | 85,349 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 118,570 |
| 1 | Dividends are net of foreign withholding taxes of $739,000. |
| 2 | Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $533,000, $2,000, and ($1,000), respectively. Purchases and sales are for temporary cash investment purposes. |
See accompanying Notes, which are an integral part of the Financial Statements.
4
Global ESG Select Stock Fund
Statement of Changes in Net Assets
| Six Months Ended July 31, 2024 | Year Ended January 31, 2024 | ||
| ($000) | ($000) | ||
| Increase (Decrease) in Net Assets | |||
| Operations | |||
| Net Investment Income | 14,791 | 20,074 | |
| Realized Net Gain (Loss) | 18,430 | (1,452) | |
| Change in Unrealized Appreciation (Depreciation) | 85,349 | 106,421 | |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 118,570 | 125,043 | |
| Distributions | |||
| Investor Shares | (357) | (3,546) | |
| Admiral Shares | (1,666) | (15,880) | |
| Total Distributions | (2,023) | (19,426) | |
| Capital Share Transactions | |||
| Investor Shares | (1,382) | 20,350 | |
| Admiral Shares | 49,109 | 133,624 | |
| Net Increase (Decrease) from Capital Share Transactions | 47,727 | 153,974 | |
| Total Increase (Decrease) | 164,274 | 259,591 | |
| Net Assets | |||
| Beginning of Period | 1,128,536 | 868,945 | |
| End of Period | 1,292,810 | 1,128,536 | |
See accompanying Notes, which are an integral part of the Financial Statements.
5
Global ESG Select Stock Fund
Financial Highlights
| Investor Shares | ||||||
| For a Share Outstanding Throughout Each Period | Six Months Ended July 31, 2024 | May 21, 20191 to January 31, 2020 | Year Ended January 31, | |||
| 2024 | 2023 | 2022 | 2021 | |||
| Net Asset Value, Beginning of Period | $32.76 | $29.61 | $30.97 | $26.32 | $22.34 | $20.00 |
| Investment Operations | ||||||
| Net Investment Income2 | .411 | .598 | .524 | .487 | .378 | .258 |
| Net Realized and Unrealized Gain (Loss) on Investments | 2.971 | 3.111 | (1.298) | 5.004 | 3.866 | 2.257 |
| Total from Investment Operations | 3.382 | 3.709 | (.774) | 5.491 | 4.244 | 2.515 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.052) | (.559) | (.467) | (.386) | (.229) | (.167) |
| Distributions from Realized Capital Gains | — | — | (.119) | (.455) | (.035) | (.008) |
| Total Distributions | (.052) | (.559) | (.586) | (.841) | (.264) | (.175) |
| Net Asset Value, End of Period | $36.09 | $32.76 | $29.61 | $30.97 | $26.32 | $22.34 |
| Total Return3 | 10.33% | 12.59% | -2.39% | 20.86% | 19.06% | 12.57% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $239 | $218 | $178 | $169 | $86 | $34 |
| Ratio of Total Expenses to Average Net Assets | 0.58%4 | 0.58%4 | 0.57%4 | 0.56%4 | 0.55%4 | 0.58%5,6 |
| Ratio of Net Investment Income to Average Net Assets | 2.41% | 1.97% | 1.88% | 1.61% | 1.62% | 1.81%5 |
| Portfolio Turnover Rate | 14% | 25% | 38% | 19% | 21% | 15% |
| The expense ratio and net investment income ratio for the current period have been annualized. | ||||||
| 1 | The subscription period for the fund was May 21, 2019, to June 4, 2019, during which time all assets were held in cash. Performance measurement began June 5, 2019, the first business day after the subscription period, at a net asset value of $20.00. |
| 2 | Calculated based on average shares outstanding. |
| 3 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 4 | Includes performance-based investment advisory fee increases (decreases) of 0.03%, 0.03%, 0.02%, 0.01%, and 0.00%. |
| 5 | Annualized. |
| 6 | The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.55%. |
See accompanying Notes, which are an integral part of the Financial Statements.
6
Global ESG Select Stock Fund
Financial Highlights
| Admiral Shares | ||||||
| For a Share Outstanding Throughout Each Period | Six Months Ended July 31, 2024 | May 21, 20191 to January 31, 2020 | Year Ended January 31, | |||
| 2024 | 2023 | 2022 | 2021 | |||
| Net Asset Value, Beginning of Period | $40.96 | $37.03 | $38.73 | $32.91 | $27.93 | $25.00 |
| Investment Operations | ||||||
| Net Investment Income2 | .533 | .787 | .684 | .649 | .504 | .338 |
| Net Realized and Unrealized Gain (Loss) on Investments | 3.733 | 3.880 | (1.609) | 6.258 | 4.830 | 2.823 |
| Total from Investment Operations | 4.266 | 4.667 | (.925) | 6.907 | 5.334 | 3.161 |
| Distributions | ||||||
| Dividends from Net Investment Income | (.076) | (.737) | (.626) | (.517) | (.310) | (.221) |
| Distributions from Realized Capital Gains | — | — | (.149) | (.570) | (.044) | (.010) |
| Total Distributions | (.076) | (.737) | (.775) | (1.087) | (.354) | (.231) |
| Net Asset Value, End of Period | $45.15 | $40.96 | $37.03 | $38.73 | $32.91 | $27.93 |
| Total Return3 | 10.42% | 12.67% | -2.27% | 20.99% | 19.17% | 12.64% |
| Ratios/Supplemental Data | ||||||
| Net Assets, End of Period (Millions) | $1,054 | $911 | $691 | $606 | $247 | $74 |
| Ratio of Total Expenses to Average Net Assets | 0.48%4 | 0.48%4 | 0.47%4 | 0.46%4 | 0.45%4 | 0.48%5,6 |
| Ratio of Net Investment Income to Average Net Assets | 2.49% | 2.07% | 1.97% | 1.71% | 1.71% | 1.89%5 |
| Portfolio Turnover Rate | 14% | 25% | 38% | 19% | 21% | 15% |
| The expense ratio and net investment income ratio for the current period have been annualized. | ||||||
| 1 | The subscription period for the fund was May 21, 2019, to June 4, 2019, during which time all assets were held in cash. Performance measurement began June 5, 2019, the first business day after the subscription period, at a net asset value of $25.00. |
| 2 | Calculated based on average shares outstanding. |
| 3 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 4 | Includes performance-based investment advisory fee increases (decreases) of 0.03%, 0.03%, 0.02%, 0.01%, and 0.00%. |
| 5 | Annualized. |
| 6 | The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.45%. |
See accompanying Notes, which are an integral part of the Financial Statements.
7
Global ESG Select Stock Fund
Notes to Financial Statements
Vanguard Global ESG Select Stock Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund.
The fund offers two classes of shares: Investor Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund's pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the valuation designee to represent fair value and subject to oversight by the board of trustees.
These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund’s pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset value.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund’s pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute virtually all of its taxable income. The fund’s tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund’s tax positions taken for all open federal and state income tax years, and has concluded that no provision for income tax is required in the fund’s financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.
5. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group ("Vanguard") participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes and are subject to the fund’s regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed amount of the facility, which are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under either facility bear interest at an agreed-upon spread plus the higher of the federal funds effective rate, the overnight bank funding rate, or the Daily Simple Secured Overnight Financing Rate inclusive of an additional agreed-upon spread. However, borrowings under the uncommitted credit facility may bear interest based upon an alternate rate agreed to by the fund and Vanguard.
In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.
For the six months ended July 31, 2024, the fund did not utilize the credit facilities or the Interfund Lending Program.
6. Other: Dividend income is recorded on the ex-dividend date. Non-cash dividends included in income, if any, are recorded at the fair value of the securities received. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Taxes on foreign dividends and capital gains have been provided for in accordance with the applicable countries’ tax rules and rates. Deferred foreign capital gains tax, if any, is accrued daily based upon net unrealized gains. The fund has filed tax reclaims for previously withheld taxes on dividends earned in certain European Union countries. These filings are subject to various administrative and judicial proceedings within these countries. Amounts related to these reclaims are recorded when there are no significant uncertainties as to the ultimate resolution of proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment. Such tax reclaims and related professional fees, if any, are included in dividend income and other expenses, respectively.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution
8
Global ESG Select Stock Fund
expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.
B. Wellington Management Company llp provides investment advisory services to the fund for a fee calculated at an annual percentage rate of average net assets. The basic fee is subject to quarterly adjustments based on the fund's performance relative to the FTSE All-World Index since July 31, 2019. For the six months ended July 31, 2024, the investment advisory fee represented an effective annual basic rate of 0.22% of the fund’s average net assets, before a net increase of $204,000 (0.03%) based on performance.
C. In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees and are generally settled twice a month.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At July 31, 2024, the fund had contributed to Vanguard capital in the amount of $37,000, representing less than 0.01% of the fund’s net assets and 0.01% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.
D. Various inputs may be used to determine the value of the fund’s investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1—Quoted prices in active markets for identical securities.
Level 2—Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3—Significant unobservable inputs (including the fund’s own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Schedule of Investments.
The following table summarizes the market value of the fund's investments as of July 31, 2024, based on the inputs used to value them:
| Level 1 ($000) | Level 2 ($000) | Level 3 ($000) | Total ($000) | |
| Investments | ||||
| Assets | ||||
| Common Stocks—North and South America | 681,424 | — | — | 681,424 |
| Common Stocks—Other | — | 586,777 | — | 586,777 |
| Temporary Cash Investments | 23,854 | — | — | 23,854 |
| Total | 705,278 | 586,777 | — | 1,292,055 |
E. As of July 31, 2024, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:
| Amount ($000) | |
| Tax Cost | 1,008,195 |
| Gross Unrealized Appreciation | 314,060 |
| Gross Unrealized Depreciation | (30,200) |
| Net Unrealized Appreciation (Depreciation) | 283,860 |
The fund’s tax-basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at January 31, 2024, the fund had available capital losses totaling $12,708,000 that may be carried forward indefinitely to offset future net capital gains. The fund will use these capital losses to offset net taxable capital gains, if any, realized during the year ending January 31, 2025; should the fund realize net capital losses for the year, the losses will be added to the loss carryforward balance above.
F. During the six months ended July 31, 2024, the fund purchased $221,402,000 of investment securities and sold $163,958,000 of investment securities, other than temporary cash investments.
The fund purchased securities from and sold securities to other funds or accounts managed by its investment advisors or their affiliates, in accordance with procedures adopted by the board of trustees in compliance with Rule 17a-7 of the Investment Company Act of 1940. For the six months ended July 31, 2024, such purchases were $6,604,000 and sales were $0; these amounts, other than temporary cash investments, are included in the purchases and sales of investment securities noted above.
9
Global ESG Select Stock Fund
G. Capital share transactions for each class of shares were:
| Six Months Ended July 31, 2024 | Year Ended January 31, 2024 | ||||
| Amount ($000) | Shares (000) | Amount ($000) | Shares (000) | ||
| Investor Shares | |||||
| Issued | 38,266 | 1,104 | 65,110 | 2,135 | |
| Issued in Lieu of Cash Distributions | 315 | 9 | 3,106 | 98 | |
| Redeemed | (39,963) | (1,143) | (47,866) | (1,584) | |
| Net Increase (Decrease)—Investor Shares | (1,382) | (30) | 20,350 | 649 | |
| Admiral Shares | |||||
| Issued | 158,915 | 3,658 | 284,051 | 7,546 | |
| Issued in Lieu of Cash Distributions | 1,408 | 32 | 13,478 | 340 | |
| Redeemed | (111,214) | (2,581) | (163,905) | (4,321) | |
| Net Increase (Decrease)—Admiral Shares | 49,109 | 1,109 | 133,624 | 3,565 | |
H. Significant market disruptions, such as those caused by pandemics, natural or environmental disasters, war, acts of terrorism, or other events, can adversely affect local and global markets and normal market operations. Any such disruptions could have an adverse impact on the value of the fund’s investments and fund performance.
To the extent the fund’s investment portfolio reflects concentration in a particular market, industry, sector, country or asset class, the fund may be adversely affected by the performance of these concentrations and may be subject to increased price volatility and other risks.
I. Management has determined that no events or transactions occurred subsequent to July 31, 2024, that would require recognition or disclosure in these financial statements.
Q5472 092024
10
Item 8: Changes in and Disagreements with Accountants for Open-End Management Investment Companies.
Not applicable.
Item 9: Proxy Disclosures for Open-End Management Investment Companies.
Not applicable.
Item 10: Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies.
Not applicable.
Item 11: Statement Regarding Basis for Approval of Investment Advisory Contracts.
Trustees Approve Advisory Arrangements – Real Estate Index Fund
The board of trustees of Vanguard Real Estate Index Fund and the board of trustees of Vanguard Real Estate II Index Fund have renewed each fund’s investment advisory arrangement with The Vanguard Group, Inc. (Vanguard), through its Equity Index Group. Each board determined that continuing the respective fund’s internalized management structure was in the best interests of the fund and its shareholders.
Each board based its decision upon an evaluation of the advisor’s investment staff, portfolio management process, and performance. This evaluation included information provided to the board by Vanguard’s Portfolio Review Department, which is responsible for fund and advisor oversight and product management. The Portfolio Review Department met regularly with the advisor and made presentations to the board during the fiscal year that directed the board’s focus to relevant information and topics.
Each board, or an investment committee made up of board members, also received information throughout the year during advisor presentations conducted by the Portfolio Review Department. For each advisor presentation, the board was provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s assessment of the investment environment, portfolio performance, and portfolio characteristics.
In addition, each board received periodic reports throughout the year, which included information about the respective fund’s performance relative to its peers and benchmark, as applicable, and updates, as needed, on the Portfolio Review Department’s ongoing assessment of the advisor.
Prior to their meeting, the trustees of each board were provided with a memo and materials that summarized the information they received over the course of the year. They also considered the factors discussed below, among others. However, no single factor determined whether either board approved its respective fund’s arrangement. Rather, it was the totality of the circumstances that drove each board’s decision.
Nature, extent, and quality of services
The board of the Real Estate Index Fund reviewed the quality of that fund’s investment management services over both the short and long term, while the board of the Real Estate II Index Fund reviewed the quality of that fund’s investment management services since its inception in 2017; each took into account the organizational depth and stability of the advisor. Each board considered that Vanguard has been managing investments for more than four decades. The Equity Index Group adheres to a sound, disciplined investment management process; the team has considerable experience, stability, and depth.
Each board concluded that Vanguard’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangement with its respective fund.
Investment performance
The board of the Real Estate Index Fund considered the short- and long-term performance of the fund, including any periods of outperformance or underperformance compared with its target index and peer group, while the board of the Real Estate II Index Fund considered the short-term and since inception performance of the fund compared with its target index and peer group. Each board concluded that the performance of its respective fund was such that its advisory arrangement should continue.
Cost
Each board concluded that the respective fund’s expense ratio was below the average expense ratio charged by funds in its peer group and that the respective fund’s advisory expenses were also below the peer-group average.
Neither board conducts a profitability analysis of Vanguard because of Vanguard’s unique structure. Unlike most other mutual fund management companies, Vanguard is owned by the funds it oversees.
The benefit of economies of scale
Each board concluded that its respective fund’s arrangement with Vanguard ensures that the fund will realize economies of scale as it grows, with the cost to shareholders declining as fund assets increase.
Each board will consider whether to renew its respective advisory arrangement again after a one-year period.
Trustees Approve Advisory Arrangement – Global Capital Cycles Fund
The board of trustees of Vanguard Global Capital Cycles Fund (formerly known as Vanguard Precious Metals and Mining Fund) has renewed the fund’s investment advisory arrangement with Wellington Management Company, LLP (Wellington Management). The board determined that renewing the fund’s investment advisory arrangement was in the best interests of the fund and its shareholders.
The board based its decision upon an evaluation of the advisor’s investment staff, portfolio management process, and performance. This evaluation included information provided to the board by Vanguard’s Portfolio Review Department, which is responsible for fund and advisor oversight and product management. The Portfolio Review Department met regularly with the advisor and made presentations to the board during the fiscal year that directed the board’s focus to relevant information and topics.
The board, or an investment committee made up of board members, also received information throughout the year during advisor presentations conducted by the Portfolio Review Department. For each advisor presentation, the board was provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s assessment of the investment environment, portfolio performance, and portfolio characteristics.
In addition, the board received periodic reports throughout the year, which included information about the fund’s performance relative to its peers and benchmark, as applicable, and updates, as needed, on the Portfolio Review Department’s ongoing assessment of the advisor.
Prior to their meeting, the trustees were provided with a memo and materials that summarized the information they received over the course of the year. They also considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.
Nature, extent, and quality of services
The board reviewed the quality of the investment management services provided to the fund since Wellington Management began managing the fund in September 2018; it also took into account the organizational depth and stability of the advisor. The board considered that Wellington Management, founded in 1928, is among the nation’s oldest and most respected institutional investment managers. The advisor follows a global equity strategy that seeks to provide investors with uncorrelated returns to other asset classes through a blend of capital cycle and enduring assets. Identification of potential investments begins with the capital cycles framework, which seeks companies that are positioned to succeed through unique and superior business models and healthy balance sheets in sectors and industries where there is capital destruction, consolidation, or retrenchment of investment. Valuation and quality factors such as discount to intrinsic value, cash generation, capital expenditure, and future capital deployment opportunities are considered.
The board concluded that the advisor’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangement.
Investment performance
The board considered the short- and long-term performance of Wellington Management since it began managing the fund in 2018, including any periods of outperformance or underperformance compared with a relevant benchmark index and peer group. The board concluded that the performance was such that the advisory arrangement should continue.
Cost
The board concluded that the fund’s expense ratio was below the average expense ratio charged by funds in its peer group and that the fund’s advisory fee rate was also below the peer-group average.
The board did not consider the profitability of Wellington Management in determining whether to approve the advisory fee because Wellington Management is independent of Vanguard and the advisory fee is the result of arm’s-length negotiations.
The benefit of economies of scale
The board concluded that the fund’s shareholders benefit from economies of scale because of the breakpoints in the fund’s advisory fee schedule with Wellington Management. The breakpoints reduce the effective rate of the fee as the fund’s assets managed by Wellington Management increase.
The board will consider whether to renew the advisory arrangement again after a one-year period.
Item 12: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 13: Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 14: Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 15: Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 16: Controls and Procedures.
(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.
(b) Internal Control Over Financial Reporting. In February 2024, a third-party service provider began performing security pricing services for the Registrant. There were no other changes in the Registrant’s Internal Control Over Financial Reporting or in other factors that could significantly affect this control during the period covered by this report, including any corrective actions with regard to significant deficiencies and material weaknesses.
Item 17: Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 18: Recovery of Erroneously Awarded Compensation.
Not applicable.
Item 19: Exhibits.
| (a)(1) | Not applicable. |
| (a)(2) | Certifications filed herewith. |
| (a)(2) | Certifications filed herewith. |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| VANGUARD SPECIALIZED FUNDS | ||
| BY: | /s/ SALIM RAMJI* | |
| SALIM RAMJI | ||
| CHIEF EXECUTIVE OFFICER |
Date: September 20, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| VANGUARD SPECIALIZED FUNDS | ||
| BY: | /s/ SALIM RAMJI* | |
| SALIM RAMJI | ||
| CHIEF EXECUTIVE OFFICER |
Date: September 20, 2024
| VANGUARD SPECIALIZED FUNDS | ||
| BY: | /s/ CHRISTINE BUCHANAN* | |
| CHRISTINE BUCHANAN | ||
| CHIEF FINANCIAL OFFICER |
Date: September 20, 2024
| * By: | /s/ John E. Schadl |
John E. Schadl, pursuant to a Power of Attorney filed on July 25, 2024 (see File Number 33-48863), Incorporated by Reference.