SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K
Annual Report Pursuant To Section 13 or 15 (d) of
The Securities Exchange Act of 1934

For the Fiscal Year Ended Commission File Number
December 31, 1995 0-16785

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VANGUARD REAL ESTATE FUND I, A Sales-Commission-Free Income Properties Fund
- ---------------------------
(Exact Name of Registrant as specified in its charter)

Massachusetts 23-6861048
- ------------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

Vanguard Financial Center, Malvern, PA 19355
- -------------------------------------- -----
(Address of principal executive offices) (Zip Code)

610-669-1000
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(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Shares of Beneficial Interest, no par value

======================

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days YES X NO .
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / X/

The aggregate market value of the registrant's outstanding shares of
beneficial interest held by non-affiliates on February 29, 1996 was $30,259,565
based upon the last sale price of the shares on February 29, 1996.

As of February 29, 1996, 11,019,978 shares of beneficial interest were
outstanding.

======================

DOCUMENTS INCORPORATED BY REFERENCE

Annual Report to Shareholders for fiscal year ended December 31, 1995 Part II (Items 6-8)

Portions of the definitive Proxy Statement, filed pursuant to
Regulation 14A, to be issued in connection with the Annual Meeting of
Shareholders to be held on April 24, 1996 Part III (Items 10-13)

INDEX

ITEM NO. PAGE NO.

Cover Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

PART I

1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . 7

PART II

5. Market for Registrant's Common Equity and Related
Shareholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

PART III

10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . 10
11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
12. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . 10

PART IV

14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

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PART I

Item 1. Business

Vanguard Real Estate Fund I, A Sales-Commission-Free Income Properties
Fund (the "Fund"), was organized on September 10, 1986 as a Massachusetts
business trust and is a qualified finite-life real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended. The Fund has no
employees. The Fund's Declaration of Trust precludes the Fund from reinvesting
net proceeds from the sale or repayment of its real estate investments after
December 31, 1993 and contemplates the liquidation of all the Fund's
investments after a period of approximately seven to twelve years following the
completion of its initial public offering, or between June 30, 1994 and 1999,
respectively.

On December 12, 1994, the Fund's Board of Trustees adopted a Plan of
Liquidation and Termination (the "Liquidation Plan"). The Trustee's decision
to then adopt the Liquidation Plan was driven by several factors, including
real estate market conditions affecting each investment in the Fund's portfolio
and tax considerations affecting real estate investment trusts. The
Liquidation Plan provides that the Fund will dispose of all of its assets, wind
up its affairs, pay or adequately provide for the payment of all of its
liabilities and distribute for the benefit of its shareholders all of the
Fund's assets over 24 months, in complete cancellation and redemption of all
issued and outstanding shares of beneficial interest. Under the Liquidation
Plan, the Fund's Adviser (Aldrich, Eastman and Waltch, L.P.), Trustees and
officers are authorized and directed to take any and all actions as may be
necessary or convenient to market the assets of the Fund and convert them into
a form that may be distributed to shareholders. The Liquidation Plan provides
that the Fund's assets may be sold, conveyed, transferred or otherwise disposed
of when and on such terms and conditions as are deemed by the Trustees to be in
the best interests of the Fund and the shareholders.

The Fund is currently in the process of liquidating its real estate
investments with the intention of distributing the net proceeds to its
shareholders in accordance with the Liquidation Plan. At December 31, 1995,
the Fund held investments in two commercial properties consisting of shopping
centers located in Torrance, California and Durham, North Carolina. It is
contemplated that the Fund will be completely liquidated and dissolved by
December 12, 1996. To the extent that the Fund has not disposed of all of its
assets or made provision for all of its liabilities on December 12, 1996, the
Fund intends to form a liquidating trust, the beneficiaries of which will be
the shareholders of the Fund. All assets and liabilities of the Fund not
previously disposed of and discharged will be transferred to the liquidating
trust. Shares of the Fund would no longer be traded and the beneficial
interests in the liquidating trust would not be readily transferable.

Pursuant to the Liquidation Plan, in disposing of real estate
investments, the Fund is in competition with other domestic institutional
investors, including commercial banks and other financial institutions,
insurance companies, pensions and other retirement funds, mortgage bankers,
other real estate investment trusts, real estate brokers, developers and
various types of foreign investors who may be seeking to dispose of real estate
investments. In the case of leased properties which the Fund owns or which
secure Fund investments, the marketability of the investments is also affected
by how rental rates, lease terms, free rent concessions and tenant improvement
allowances compare with those in local markets.

As of February 29, 1996, approximately $22 million was invested in the
Fund's two remaining directly-owned real estate investments. Subsequently, on
March 22, 1996, the Fund completed the sale of its Plaza del Amo Shopping
Center ("Plaza") in Torrance, California for net proceeds of approximately $9.4
million, after satisfaction of a $2.3 million mortgage loan secured by the
property, representing a gain to the Fund of approximately $0.7 million. On
March 27, 1996, the Fund completed the sale of its Oakcreek Village Shopping
Center ("Oakcreek") in Durham, North Carolina for net proceeds of approximately
$9.0 million, generating a loss to the Fund of approximately $.8 million (of
which $.7 million was recognized for financial reporting purposes in periods
prior to 1996 by charges to the Fund's provision for possible losses).

Prior to disposition of the Fund's real estate investments pursuant to
the Liquidation Plan, the Fund's real estate investments were subject to
competition from existing commercial, industrial, and residential properties.
The REIT provisions of the Code impose certain financial, investment and
operational restrictions that are not applicable to competing entities that are
not REITs.

Since the Fund's remaining properties have now been sold, the Fund's
Trustees and management intend to complete the Fund's Liquidation Plan as soon
as practicable. In addition to liquidating the Fund's assets, settling all of
the Fund's liabilities, making a final distribution(s) to shareholders

2
4
and dissolving the Fund, such activities are expected to include, but not
necessarily be limited to, (i) delisting the Fund's shares from trading on the
American Stock exchange, (ii) deregistering the Fund's shares under the
Securities Exchange Act of 1934, (iii) making provision for contingent
liabilities of the Fund, if any, and (iv) obtaining any necessary insurance
coverages.

Pursuant to a Services Agreement dated December 23, 1986 (the "Services
Agreement") between the Fund and The Vanguard Group, Inc. (the "Sponsor"), the
Sponsor has been retained to provide administrative services for the Fund,
including the maintenance of financial records, oversight of the performance of
outside service providers and the preparation and distribution of
communications to shareholders, etc., and to supervise its day-to-day business
affairs. Pursuant to an Advisory Agreement dated December 23, 1986 (as
amended, the "Advisory Agreement") between the Fund and Aldrich, Eastman &
Waltch, Inc. (the "Adviser"), the Adviser has been retained to advise the Fund
in connection with the evaluation, selection, management and disposition of its
real estate investments. For additional information concerning the Sponsor,
the Adviser, the Services Agreement and the Advisory Agreement, see Item 8,
Financial Statements and Supplementary Data - Notes to Financial Statements,
and Item 13, Certain Relationships and Related Transactions.

The Fund has elected to be treated as a REIT under the Code. The Fund
intends to operate in a manner that will continue to maintain its qualification
as a REIT during its liquidation period.

For additional information regarding the Fund's Liquidation Plan,
investments, operations, and other significant events, see Item 2, Properties,
Item 7, Management's Discussion and Analysis of Financial Condition and Results
of Operations, and Item 8, Financial Statements and Supplementary Data.

The following table sets forth the names and positions with the Fund of
the executive officers of the Fund:

NAME AGE POSITIONS
---------------------------- ----- -----------------------------------

John C. Bogle 66 Trustee and Chairman of the Board
John J. Brennan 41 President
Ralph K. Packard 51 Vice President and Controller
Richard F. Hyland 58 Treasurer
Raymond J. Klapinsky 57 Secretary

All executive officers of the Fund also serve as executive officers of
Vanguard Real Estate Fund II, A Sales-Commission-Free Income Properties Fund
("VREFII"). All executive officers of the Fund, with the exceptions of Mr.
Packard, who was elected as an officer of the Fund in May 1988, and Mr.
Klapinsky, who was elected as an officer of the Fund in May 1989, have served
since the Fund's inception. Under the Fund's Declaration of Trust, the
officers of the Fund serve at the pleasure of the Trustees. There are no
family relationships between any Trustee or executive officer.

Mr. Bogle is Chairman of the Fund, The Vanguard Group, Inc. (the
Sponsor of the Fund) and each of the investment companies in The Vanguard
Group. Mr. Bogle has served in such capacity during each of the past five
years. Mr. Bogle also serves as a Director of The Mead Corporation and General
Accident Insurance Companies.

Mr. Brennan is President of The Vanguard Group, Inc. and has served in
such capacity during each of the past five years. On January 31, 1996, Mr.
Brennan assumed the title of Chief Executive Officer of the Fund, The Vanguard
Group, Inc. and each of the investment companies in the Vanguard group. Mr.
Brennan also serves as a Director (Trustee) of The Vanguard Group, Inc., and
each of the investment companies in The Vanguard Group.

Mr. Packard is Senior Vice President and Chief Financial Officer of The
Vanguard Group, Inc. and has served in such capacity during each of the past
five years.

Mr. Hyland is, and has served for each of the past five years as,
Treasurer of The Vanguard Group, Inc. and each of the investment companies in
The Vanguard Group.

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5
Mr. Klapinsky is, and has served for each of the past five years as,
Senior Vice President and Secretary of The Vanguard Group, Inc. and each of the
investment companies in The Vanguard Group.

Item 2. Properties

As of December 31, 1995, the Fund held the following real estate investments:

EQUITY INVESTMENTS

Nature of Initial
Title Total Acquisition
to/Interest Date Square Cost
Property & Location in Property Description Acquired Footage/Units (000)
------------------- ----------- ----------- -------- ------------- -----

Durham, North Carolina
----------------------
Oakcreek Village Direct Community 11-25-87 116,195 $10,592
Ownership Shopping square feet
Center
Torrance, California
--------------------
Plaza del Amo * Direct Community 8-1-95 91,609 11,067
Ownership Shopping square feet
Center

Total Equity Investments $21,659
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Total Square Feet 207,804
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* In late September 1994, the Fund exercised its call right with respect to
its Plaza del Amo ("Plaza") shared-appreciation, wrap-around mortgage loan
investment. As a result, the entire balance of the loan, less the unpaid
balance of the senior mortgage on the Plaza property, was due and payable in
late March 1995. The borrower failed to tender payment of the outstanding loan
balance on the due date, resulting in a default under the terms of the loan. On
August 1, 1995, the borrower transferred title to the property, in lieu of
foreclosure, to the Fund with the borrower retaining a residual interest in the
shared-appreciation feature of the mortgage. Under the original loan terms,
upon repayment of the loan, both the borrower and the Fund were entitled to a
share of the property's appreciation, if any, equal to 50% of Plaza's fair
market value in excess of the original wrap-around loan balance of $10,646,000.
In consideration for the borrower agreeing to transfer title to the Fund in
lieu of foreclosure, the transfer agreement provides that, upon the Fund's
ultimate sale of Plaza, the Fund will pay the borrower the greater of 2% of
Plaza's net sales proceeds, as defined, or a share of Plaza's net sales
proceeds in excess of the original wrap-around mortgage loan balance such that
the borrower and the Fund share in the Property's appreciation equally as
contemplated in the original mortgage loan agreement. Upon transfer of title,
the Fund recorded the property at its estimated fair market value less selling
costs. Such costs included the estimated minimum shared-appreciation obligation
of $230,000 guaranteed the borrower pursuant to the transfer agreement, such
amount determined based on the property's then estimated fair market value. Of
this amount, $110,000 was paid to the borrower on the transfer date.

Set forth below is a summary of the general competitive conditions for
those properties held at December 31, 1995 whose book value is ten percent or
more of the Fund's total assets as of such date, or whose gross revenues are
ten percent or more of the aggregate gross revenues of the Fund for the year
ended December 31, 1995.

Plaza del Amo

Plaza del Amo is a neighborhood shopping center located in Torrance,
California. There are approximately 85,000 households (average household
income of $70,000) and 210,000 people within a three-mile radius of the
shopping center. Southern California's economy and, in particular, the South
Bay market, have been seriously undermined by the recent recession prompted in
part by difficulties in the defense and aerospace industries. As a result, the
retail property market has suffered for several years from weak demand growth.
Current market vacancy has remained relatively unchanged at approximately
10-12% and estimated effective rents at comparable properties is between $1.00
and $2.50 per month, depending on the age of centers and location as well as
size of space within each particular center.

4
6

Oakcreek Village

Oakcreek Village is a neighborhood shopping center in Durham, North
Carolina. There are approximately 16,600 households (average household income
of $60,000) and 37,000 people within a three-mile radius of the center.
Estimated market rents for comparable properties are approximately
$12.00-$15.00 per square foot per annum. Positive market conditions, primarily
low vacancy rates and strong rent growth, have resulted in the development of
New Hope Commons, a 450,000 square foot power center within two miles of
Oakcreek Village. At this time, the competitive pressure of New Hope Commons
has not reduced rent growth or increased vacancy in the submarket, but
prolonged positive market conditions may eventually result in additional new
development which, if built, will suppress rent growth and increase vacancy in
the sub-market.

Occupancy Rates at December 31:

Plaza del Oakcreek
Amo Village
--- -------

1995 95% 100%
1994 99% 96%
1993 98% 96%
1992 94% 95%
1991 92% 94%

Avg. Effective Rental/Sq.Ft./Year:

Plaza del Oakcreek
Amo Village
--- -------

1995 $13.40 $10.28
1994 $13.28 $ 9.94
1993 $13.23 $ 9.07
1992 $13.06 $ 9.11
1991 $13.72 $ 9.47

Real Estate Tax/Fiscal Year:
(Effective Rate Per $1000 of Assessed Value)

$11.57 $15.90
Annual
Taxes $87,922 $101,106

Tenants occupying 10% or more of rentable square footage:

Rental
Property Major Tenants Sq.Ft. Principal Bus. Sq.Ft./Yr. Expiration Date Renewal Options
-------- ------------- ------ -------------- ---------- --------------- ---------------

Plaza del Albertsons 39,852 Supermarket $6.36 10/29/06 4, 5 year Options
Amo Oshman's 9,930 Sporting Goods $9.03 9/23/01 None

Oakcreek T.J. Maxx 31,303 Clothing Retail. $7.62 4/30/03 None
Village Durham S.G. 16,034 Sporting Goods $5.25 8/31/02 None

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Lease Expirations during the next ten years:

By Square Foot

Total Sq.Ft.
Property Expiring 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005+
-------- ------------ ---- ---- ---- ---- ---- ---- ---- ---- ---- -----
Plaza del

Amo 89,241 2,896 10,913 5,057 6,586 1,303 22,634 0 0 0 39,852
Oakcreek
Village 116,195 19,063 12,800 13,360 1,600 4,800 7,200 16,034 31,303 0 10,035

By Annual Rental

Total
Property Expirations 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005+
-------- ----------- ---- ---- ---- ---- ---- ---- ---- ---- ---- -----

Plaza del Amo
# of leases 23 4 6 3 4 1 4 0 0 0 1
annual $ 1,195,733 77,299 258,358 111,591 146,940 31,272 316,793 0 0 0 253,480
annual % 100.0 6.5 21.6 9.3 12.3 2.6 26.5 0 0 0 21.2

Oakcreek Vlg.
# of leases 23 6 3 5 1 3 1 1 1 0 2
annual $ 1,194,050 220,317 151,160 150,088 20,800 64,320 91,200 84,179 238,529 0 173,457
annual % 100.0 18.5 12.6 12.6 1.7 5.4 7.7 7.0 20.0 0 14.5

A mortgage loan payable, secured by the Plaza del Amo property, is
outstanding at December 31, 1995. Information concerning its principal,
interest rate, amortization and maturity provisions is included in Note H to
the Fund's financial statements, incorporated by reference in Item 8, Financial
Statements and Supplementary Data.

Information concerning the Fund's previously held mortgage loan
receivable investment is included in Note F to the Fund's Financial Statements,
and included in Item 8, Financial Statements and Supplementary Data.

The Fund believes that its direct ownership properties are well
maintained, in good repair, suitable for their intended uses and adequately
covered by insurance. For additional information regarding the Fund's real
estate investments see Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, Item 8, Financial Statements and
Supplementary Data, and Schedule XI to Item 14.

The Fund has no other significant renovation, improvement or
development plans for its properties.

6
8
Information concerning the Federal tax basis and depreciation method
and lives of the Fund's properties and components thereof and on which
depreciation is taken is included in Notes A and E to the Fund's Financial
Statements, included in Item 8, Financial Statements and Supplementary Data,
and in Schedule XI to Item 14. All real estate owned has been depreciated over
40 years for both financial and tax reporting purposes on a straight-line basis
except for leasehold improvements, which are depreciated over the term of the
respective lease for financial reporting purposes.

Item 3. Legal Proceedings

None

Item 4. Submission of Matters to a Vote of Security Holders

None

PART II

Item 5. Market for Registrant's Common Equity and Related Shareholder Matters

The Fund's shares of beneficial interest ("Shares") are traded on the
American Stock Exchange (AMEX) under the symbol "VRO". The Shares have been
traded on the AMEX since August 20, 1991. From July 24, 1989 to August 19,
1991, the Fund's shares were traded on the over the counter market and were
quoted by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"). Prior to July 24, 1989, there was no trading market for the
Shares. As of February 29, 1996, there were approximately 15,161 holders of
record of the Fund's Shares.

Set forth below is certain information regarding the Fund's Shares for
each of the eight fiscal quarters in the two-year period ended December 31,
1995:

Year Ended December 31,
---------------------------------------------------------
1995 1994
---- ----
Share Prices Share Prices
--------------------- ------------------------
High Low High Low
-------- ------- -------- -------

For the Quarter Ended:
March 31 $4.25 $3.4375** $8.00 $7.375
June 30 $3.9375 $2.8125** $7.25 $6.25
September 30 $3.25 $2.5625** $6.625 $5.75
December 31 * $3.50 $2.875 $7.626 $3.50

* Liquidating dividends of $.50 and $3.69 per share were paid on
December 28, 1995 and December 29, 1994, respectively.

** Liquidating dividends of $.05 per share were paid on April 28,
July 28, and October 31, 1995.

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The tables below indicate the amount of cash dividends per share
declared and paid during the years ended December 31, 1995 and 1994.

Record Distribution
Date Per Share
-------------------------- ----------------

03-31-95 $.05
06-30-95 .05
09-29-95 .05
12-26-95 .50
---

Total Distributions - 1995 $.65
====

Record Distribution
Date Per Share
-------------------------- ----------------

03-31-94 $.15
06-30-94 .15
09-30-94 .15
12-27-94 3.69
----

Total Distributions - 1994 $4.14
=====

Status of Distributions 1995 1994
----------------------- ---- ----

Ordinary Income $ .00 $ .01
Return of Capital .00 .35
Long-term Capital Gain .00 .09
Liquidating .65 3.69
--- ----
$.65 $4.14
==== =====
Total

Except during its offering period, the Fund has historically paid
distributions on a quarterly basis and there are currently no contractual
restrictions on the Fund's present or future ability to make distributions to
shareholders. For additional information regarding the Fund's distributions
and its ability and intent to pay distributions during the liquidation period,
see Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations.

Item 6. Selected Financial Data

The information required by this Item is included on page 19 of the
Fund's 1995 Annual Report to Shareholders and is incorporated herein by
reference thereto.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations

The information required by this Item is included on pages 20 through
27 of the Fund's 1995 Annual Report to Shareholders and is incorporated herein
by reference thereto.

8
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Item 8. Financial Statements and Supplementary Data

The Fund's financial statements at December 31, 1995 and 1994, and for
each of the three years in the period ended December 31, 1995 are included on
pages 5-17 of the Fund's 1995 Annual Report to Shareholders and are
incorporated herein by reference thereto.

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

None

PART III

Item 10. Directors and Executive Officers of the Registrant

The information required by this Item with respect to Trustees is
included in the Fund's definitive Proxy Statement filed with the Securities and
Exchange Commission on March 15, 1996, for its Annual Meeting of Shareholders
to be held on April 24, 1996, which is incorporated herein by reference
thereto. (Information with respect to executive officers of the Fund is
included in Item 1.)

Item 11. Executive Compensation

The information required by this Item is included in the Fund's
definitive Proxy Statement filed with the Securities and Exchange Commission on
March 15, 1996 for its Annual Meeting of Shareholders to be held on April 24,
1996, which is incorporated herein by reference thereto.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Item 13. Certain Relationships and Related Transactions

9
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PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) 1. Financial Statements:

The following financial statements as of, and for the years
ended, December 31, 1995, 1994 and 1993 are incorporated in Item 8
herein by reference from the following pages of the Fund's 1995 Annual
Report to Shareholders, which is filed as an Exhibit hereto.

ANNUAL REPORT
PAGE NO.

Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Income Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7-8
Statements of Changes in Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10-17
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

2. Financial Statement Schedules:

The financial statement schedules included in Part IV of this
report should be read in conjunction with the Fund's financial
statements incorporated by reference in Item 8 of this report.

FORM 10-K
SCHEDULE PAGE NO.

XI Real Estate and Accumulated Depreciation . . . . . . . . . . . . . . . . . . 16-17
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . 18

All other schedules have been omitted since the required
information is presented in the financial statements, the related
notes, or is not applicable.

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3. Exhibits:

Exhibit No. Description
- ----------- -----------

2 Plan of Liquidation and Termination, dated December 12, 1994,
filed as exhibit 2 to the Fund's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, and incorporated
herein by reference.

3.1 Amended and Restated Declaration of Trust, dated December 9,
1986, filed as exhibit 3 to the Fund's Registration Statement
on Form S-11, SEC Registration #33-8649, and incorporated
herein by reference.

3.2 Amendment #1 to Amended and Restated Declaration of Trust,
dated January 10, 1987, filed as exhibit 3(b) to the Fund's
Registration Statement on Form S-11, SEC Registration
#33-15040, and incorporated herein by reference.

3.3 Amendment #2 to Amended and Restated Declaration of Trust,
dated May 31, 1988, filed as exhibit 3 to the Fund's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1988, and
incorporated herein by reference.

3.4 By-laws, filed as exhibit 3 to the Fund's Registration
Statement on Form S-11, SEC Registration #33-8649, and
incorporated herein by reference.

10.1 Advisory Agreement between the Fund and Aldrich, Eastman &
Waltch, Inc. dated December 23, 1986, filed as exhibit 10.1 to
the Fund's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987, and incorporated herein by reference.

10.2 Services Agreement between the Fund and The Vanguard Group,
Inc. dated December 23, 1986, filed as exhibit 10.2 to the
Fund's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987, and incorporated herein by reference.

10.3(a) Loan Agreement by and between Plaza Del Amo and Lawrence W.
Doyle, J. Grant Monahon and Richard F. Burns, Trustees of AEW
#82 Trust, established by Declaration of Trust dated August 14,
1987, dated September 16, 1987, filed as exhibit 10.3(a) to the
Fund's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987, and incorporated herein by reference.

10.3(b) Declaration of Trust, AEW #82 Trust and Schedule of Beneficial
Interest dated August 14, 1987, filed as exhibit 10.3(b) to the
Fund's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987, and incorporated herein by reference.

10.3(c) All-Inclusive Promissory Note from Plaza Del Amo in favor of
Lawrence W. Doyle, J. Grant Monahon and Richard F. Burns,
Trustees of AEW #82, established by Declaration of Trust dated
August 14, 1987, dated September 16, 1987, filed as exhibit
10.3(c) to the Fund's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987 and incorporated herein by
reference.

10.4(a) Purchase and Sale Agreement of Oakcreek Village Shopping
Center, between Pacific Guaranty Retail Development Corporation
and Michael O. Craig, Richard F. Burns and J. Grant Monahon as
Trustees of AEW #96 Trust, under Declaration of Trust dated
November 6, 1987, dated October 31, 1987, filed as exhibit
10.4(a) to the Fund's Annual Report on Form 10-K for the fiscal
year ended December 31, 1987, and incorporated herein by
reference.

11
13
10.4(b) Declaration of Trust, AEW #96 Trust and Schedule of Beneficial
Interest, dated November 6, 1987, filed as exhibit 10.4(b) to
the Fund's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987, and incorporated herein by reference.

10.4(c) First Amendment to Purchase and Sale Agreement of Oakcreek
Village Shopping Center between Pacific Guaranty Retail
Development Corporation and Michael O. Craig, Richard F. Burns
and J. Grant Monahon as Trustees of AEW #96 Trust, under
Declaration of Trust dated November 6, 1987, dated November 24,
1987, filed as exhibit 10.4(c) to the Fund's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987, and
incorporated herein by reference.

10.5(a) Purchase and Sale Agreement of Valley Industrial Park and
Sea-Tac Industrial Park between Prudential Insurance Company of
America and Joseph F. Azrack, Richard F. Burns and J. Grant
Monahon as Trustees of AEW #105 Trust, under Declaration of
Trust dated December 23, 1987, dated January 8, 1988, filed as
exhibit 10.5(a) to the Fund's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987, and incorporated
herein by reference.

10.5(b) Declaration of Trust, AEW #105 Trust and Schedule of Beneficial
Interest, dated December 23, 1987, filed as exhibit 10.5(b) to
the Fund's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987, and incorporated herein by reference.

10.6(a) Purchase and Sale Agreement of Vita-Fresh Vitamin Facility,
dated January 10, 1988, between Vita-Fresh Vitamin Company,
Inc. and Lawrence W. Doyle, Richard F. Burns and J. Grant
Monahon as Trustees of AEW #113 Trust, under Declaration of
Trust dated January 10, 1988, filed as exhibit 10.6(a) to the
Fund's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987, and incorporated herein by reference.

10.6(b) Declaration of Trust, AEW #113 Trust and Schedule of Beneficial
Interest, dated January 19, 1988, filed as exhibit 10.6(b) to
the Fund's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987, and incorporated herein by reference.

10.7(a) Purchase and Sale Agreement of Everest I, Everest II, Fairview
Industrial Building and Shoreview Professional Building between
Everest Development ltd. and Michael O. Craig, Richard F. Burns
and J. Grant Monahon as Trustees of AEW #106 Trust, under
Declaration of Trust dated December 17, 1987, dated February 8,
1988, filed as exhibit 10.7(a) to the Fund's Annual Report on
Form 10-K for the fiscal year ended December 31, 1987, and
incorporated herein by reference.

10.7(b) Declaration of Trust, AEW #106 Trust and Schedule of Beneficial
Interest, dated December 17, 1987, filed as exhibit 10.7(b) to
the Fund's Annual Report on Form 10-K for the fiscal year ended
December 31, 1987, and incorporated herein by reference.

10.8 All-Inclusive Promissory Note (Wraparound note) dated May 11,
1988, Escrow Agreement dated May 27, 1988 and Option Agreement
dated May 11, 1988, all relating to the Fund's mortgage
investment in the Carmel Executive Park, filed as exhibit 10 to
the Fund's Quarterly Report on Form 10-Q Report for the quarter
ended June 30, 1988, and incorporated herein by reference.

10.9(a) Purchase and Sale Agreement of Citadel II office building,
between Crow Vista #1 and Aldrich, Eastman & Waltch, Inc., a
Massachusetts Corporation acting as agent for the Fund, filed
as exhibit 10(a) to the Fund's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1988, and incorporated
herein by reference.

12
14
10.9(b) Citadel II Escrow Agreement, filed as exhibit 10(b) to the
Fund's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1988, and incorporated herein by reference.

10.10(a) Loan Agreement for Sheffield Forest Apartments by and between
Lincoln Park Place II Limited Partnership and J. Grant Monahon,
Richard F. Burns and Marvin M. Franklin, Trustees of AEW #145
Trust, established by Declaration of Trust dated October 14,
1988, dated December 7, 1988, filed as exhibit 10.10(a) to the
Fund's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988, and incorporated herein by reference.

10.10(b) Second Amended and Restated Promissory Note for Sheffield
Forest Apartments from Lincoln Park Place II Limited
Partnership in favor of J. Grant Monahon, Richard F. Burns and
Marvin M. Franklin, Trustees of AEW #145 Trust, established by
Declaration of Trust dated October 14, 1988, dated December 7,
1988, filed as exhibit 10.10(b) to the Fund's Annual Report on
Form 10-K for the fiscal year ended December 31, 1988 and
incorporated herein by reference.

10.10(c) Amended and Restated Deed of Trust for Sheffield Forest
Apartments by and between Lincoln Park Place II Limited
Partnership and J. Grant Monahon, Richard F. Burns and Marvin
M. Franklin, Trustees of AEW #145 Trust, established by
Declaration of Trust dated October 14, 1988, dated December 7,
1988, filed as exhibit 10.10(c) to the Fund's Annual Report on
Form 10-K for the fiscal year ended December 31, 1988, and
incorporated herein by reference.

10.10(d) Declaration of Trust, AEW #145 Trust and Schedule of Beneficial
Interest dated October 14, 1988, filed as exhibit 10.10(d) to
the Fund's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988, and incorporated herein by reference.

10.11(a) Promissory note of Citadel II by and between the Variable
Annuity Life Insurance Company and J. Grant Monahon, Richard F.
Burns, and Lee H. Sandwen, Trustees of AEW #131 Trust,
established by Declaration of Trust dated June 7, 1988, dated
October 9, 1990, filed as exhibit 10.1(a) to the Fund's
Quarterly Report on Form 10-Q for the quarter ended September
30, 1990, and incorporated herein by reference.

10.11(b) Mortgage and Security Agreement of Citadel II by and between
the Variable Annuity Life Insurance Company and J. Grant
Monahon, Richard F. Burns, and Lee H. Sandwen, Trustees of AEW
#131 Trust, established by Declaration of Trust dated June 7,
1988, dated October 9, 1990, filed as exhibit 10.1(b) to the
Fund's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1990, and incorporated herein by reference.

10.11(c) Assignment of Lessor's Interest in Leases of Citadel II by and
between the Variable Annuity Life Insurance Company and J.
Grant Monahon, Richard F. Burns, and Lee H. Sandwen, Trustees
of AEW #131 Trust, established by Declaration of Trust dated
June 7, 1988, dated October 9, 1990, filed as exhibit 10.1(c)
to the Fund's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1990, and incorporated herein by reference.

10.12 Standard Offer, Agreement and Escrow Instructions for Purchase
of Real Estate by and between the Fujita Corporation USA, a
California Corporation, and Richard F. Burns, J. Grant Monahon,
Lawrence W. Doyle, Trustees of AEW #113 Trust, established by
Declaration of Trust dated January 19, 1988, filed as exhibit
10.12 to the Fund's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990 and incorporated herein by
reference.

10.13 Purchase and Sale Agreement of the Everest I ("Zycad") Building
by and between Richard F Burns, J. Grant Monahon, and Bruce H.
Freedman as Trustees of AEW #106, under Declaration of Trust
dated December 17,

13
15
1987 and JLS and L.P., dated April 23, 1991, filed as exhibit
10.13 to the Fund's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1991 and incorporated herein by
reference.

10.14 Settlement Agreement and Mutual Release from mortgage by and
among J. Grant Monahon, Richard F Burns and Lee. H. Sandwen,
Trustees of AEW #155 Trust under Declaration of Trust dated
January 11, 1989, Mark C. Dickinson, Dickinson Development
Corp. and Citadel III Partners, Ltd., a Florida limited
partnership, dated December 30, 1991, filed as exhibit 10.14 to
the Fund's Annual Report on Form 10-K for the fiscal year ended
December 31, 1991 and incorporated herein by reference.

10.15 First Amendment to Second Amended and Restated Promissory Note
by and between Lincoln Park Place II Limited Partnership, a
Maryland limited partnership and J. Grant Monahon, Richard F.
Burns and Devin McCall, Trustees of AEW #145 Trust under
Declaration of Trust dated October 14, 1988 dated April 30,
1992, filed as exhibit 10.15 to the Fund's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1992 and incorporated
herein by reference.

10.16 Amendment No.1 to Loan Agreement by and between Lincoln Park
Place II Limited Partnership, a Maryland limited partnership
and J. Grant Monahon, Richard F. Burns and Kevin McCall,
Trustees of AEW #145 Trust under Declaration of Trust dated
October 14, 1988, dated April 30. 1992, filed as exhibit 10.16
to the Fund's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1992 and incorporated herein by reference.

10.17 Amendment No.1 to All-Inclusive Promissory Note by and between
Piazzagalli Development Company, a Vermont General Partnership
and J. Grant Monahon, Richard F. Burns and Lee H. Andwen,
Trustees of AEW #127 Trust, under Declaration of Trust dated
May 3, 1988, dated December 23, 1991 for purposes of reference,
filed as exhibit 10.17 to the Fund's Quarterly Report on Form
10-Q for the quarter ended March 31, 1992 and incorporated
herein by reference.

10.18 Amendment No.1 to Loan Agreement by and between Piazzagalli
Development Company, a Vermont General Partnership and J. Grant
Monahon, Richard F. Burns and Lee H. Sandwen, Trustees of AEW
#127 Trust, under Declaration of Trust dated May 3, 1988, dated
December 23, 1991 for purposes of reference, filed as exhibit
10.18 to the Fund's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1992 and incorporated herein by
reference.

10.19 Purchase and Sale Agreement of the Seattle Industrial Parks, by
and between AEW #105 Trust and Spieker Properties, Inc., dated
September 21, 1994, filed as exhibit 10.19 to the Fund's Report
on Form 10-K for the fiscal year ended December 31, 1994 and
incorporated herein by reference.

13 1995 Annual Report to Shareholders. (With the exception of the
information and data incorporated by reference in Items 6, 7,
and 8 of this Annual Report on Form 10-K, no other information
or data appearing in the 1995 Annual Report to Shareholders is
to be deemed filed as part of this report.)

27 Financial Data Schedule. A Financial Data Schedule for the
year ended December 31, 1995, was submitted in electronic
format only.

(b) Reports on Form 8-K

During the fourth quarter ended December 31, 1995, the Fund
filed a Report on Form 8-K, dated December 15, 1995, reporting,
in Item 5, the sale of its Sheffield Forest Apartment Complex
investment.

14
16
SCHEDULE XI

VANGUARD REAL ESTATE FUND I,
A SALES-COMMISSION-FREE INCOME PROPERTIES FUND
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995

Description Oakcreek Village Plaza del Amo
---------------- -------------
Shopping Center, Shopping Center,
Durham, NC Torrance, CA (f) TOTAL
-----

Encumbrances None $2,281 $2,281
Initial Cost to Fund
--------------------
Land (000) $3,100 $6,600 $9,700
Buildings and Improvements (000) 7,492 4,467 11,959
------- ------- -------
Total Acquisition Costs $10,592 $11,067 $21,659
Costs Capitalized Subsequent to
-------------------------------
Acquisition
------------
Improvements (000) 588 4 $592
Write-downs (a) (700) 0 (700)
Gross Amount at which Carried
------------------------------
at Close of Period (b)
------------------
Land (000) 2,885 6,600 $9,485
Building and Improvements (000) 7,595 4,471 $12,066
------- ------- -------
Total (000) (c) $10,480 $11,071 $21,551
======= ======= =======

Accumulated Depreciation (000) (d) $1,492 $0 $1,492
Date of Construction 1986 1975 -
Date Acquired 11/87 8/95 -
Depreciable Life (e) 40 years 40 years -

(a) A $150,000 write down in the carrying value of the Fund's Oakcreek direct
ownership investment was recorded, upon adoption of the Liquidation Plan in
December 1994, to reflect the effect of its held for sale status on
management's assessment of the investment's recoverability. In December 1995,
a write down in the amount of $550,000 was recorded to reflect a decline in the
independent appraised value of the Oakcreek property, primarily resulting from
increased retail compition in its market.

(b) The aggregate cost of real estate for federal income tax purposes at
December 31, 1995 was $20,284,100.

15
17
SCHEDULE XI (Continued)

--------------------------------------------------------------------------------------------
Year ended December 31, 1995 1994 1993 1992 1991 1990 1989 1988 1987
(000) (000) (000) (000) (000) (000) (000) (000) (000)
--------------------------------------------------------------------------------------------

Balance at beginning of year $28,287 $44,222 $63,622 $63,192 $71,561 $71,304 $71,422 $10,574 $0
Additions during the year:
Transfers 11,067 15,500 0 0 0 0 0 0 0
Property purchases 0 0 0 0 0 0 0 61,108 10,574
Property improvements 57 14 360 430 613 257 160 60 0
Deletions during the year:
Sales of properties, net of (17,304) (30,528) (19,704) 0 (8,962) 0 0 0 0
write-downs
Citadel II contingent purchase
price refund* 0 0 0 0 (20) 0 (278) (320) 0

Write-downs (550) (850) 0 0 0 0 0 0 0
Write-off of tenant improvements (6) (71) (56) 0 0 0 0 0 0
--------------------------------------------------------------------------------------------
Balance at end of year $21,551 $28,287 $44,222 $63,622 $63,192 $71,561 $71,304 $71,422 $10,574
============================================================================================

* The Fund purchased the Citadel II office building ("Citadel II") for a
contract price of $19,500,000. Included in the contract price was a
$1,000,000 contingent purchase price payment placed in escrow for the
Fund, of which an aggregate of $618,000 was returned to the Fund by the
seller at the expiration of the escrow period pursuant to the terms of
the purchase and sale agreement.

(d) Reconciliation of accumulated depreciation is summarized as follows:

Year ended December 31,
----------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987
(000) (000) (000) (000) (000) (000) (000) (000) (000)
----------------------------------------------------------------------------------------

Balance at beginning of year $2,069 $4,789 $5,862 $4,557 $3,792 $2,413 $1,087 $23 $0
Add:
Depreciation for the year 0 941 1,217 1,305 1,231 1,379 1,326 1,064 23
Deduct:
Accumulated depreciation of
real estate sold (571) (3,597) (2,234) 0 (466) 0 0 0 0
Write-off of tenant improvements (6) (64) (56) 0 0 0 0 0 0
----------------------------------------------------------------------------------------
Balance at end of year $1,492 $2,069 $4,789 $5,862 $4,557 $3,792 $2,413 $1,087 $23
========================================================================================

(e) Prior to the adoption of the Liquidation Plan, depreciation on real estate
owned was computed using the straight-line method over 40 years for buildings
and costs incurred in conjunction with the acquisition of real estate
investments were deferred and amortized on a straight-line basis over the life
of the loan for mortgage loan investments and the life of the property for
equity investments. Subsequent to adoption of the Liquidation Plan, no
depreciation or amortization expense related to the Fund's owned real estate
and acquisition costs is recognized since the Fund's real estate investments
are considered to be held for sale.

(f) The Fund obtained Plaza del Amo on August 1, 1995, in lieu of foreclosure
on the shared-appreciation wrap-around mortgage loan secured by the Plaza del
Amo property, the Fund with the borrower retaining a residual interest in the
shared appreciation feature of the mortgage, and recorded it at its
then-estimated net realizable value. Information concerning the transfer is
included in Note F to the Fund's Financial Statements.

16
18

REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES

To the Board of Trustees of
Vanguard Real Estate Fund I

Our audits of the financial statements referred to in our report dated March 8,
1996 appearing on page 18 of the 1995 Annual Report to Shareholders of Vanguard
Real Estate Fund I (which report and financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included audits of the
Financial Statement Schedules listed in Item 14(a) of this Form 10-K. In our
opinion, these Financial Statement Schedules present fairly, in all material
respects, the information set forth therein when read in conjunction with the
related financial statements.

PRICE WATERHOUSE LLP

Philadelphia, Pennsylvania
March 8, 1996

17
19

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.

VANGUARD REAL ESTATE FUND I,
A Sales-Commission-Free Income Properties Fund

March 29, 1996 /s/ John J. Brennan
- ------------------------ ----------------------------
DATE John J. Brennan
President

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the Registrant and in the capacities on the dates indicated.

March 29, 1996 /s/ J. Mahlon Buck, Jr.
- ------------------------ ----------------------------
DATE J. Mahlon Buck, Jr.
Trustee

March 29, 1996 /s/ William S. Cashel, Jr.
- ------------------------ ----------------------------
DATE William S. Cashel, Jr.
Trustee

March 29, 1996 /s/ David C. Melnicoff
- ------------------------ ----------------------------
DATE David C. Melnicoff
Trustee

March 29, 1996 /s/ J. Lawrence Wilson
- ------------------------ ----------------------------
DATE J. Lawrence Wilson
Trustee

March 29, 1996 /s/ Ralph K. Packard
- ------------------------ ----------------------------
DATE Ralph K. Packard
Vice President & Controller

18
20

EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------

13 1995 Annual Report to Shareholders . . . . . . . . . . . . . . . . . . . . . . . 21