Form 10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

(X) QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarter ended: June 30, 1995

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

Commission File number: 0-16785

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 (I.R.S. Employer
incorporation or organization) Identification No.)

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

Registrant's telephone number (610)669-1000

Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 12 or 15(d) of the Securities and 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

11,019,978 shares of beneficial interest outstanding as of July 31, 1995.
PAGE

INDEX

ITEM Page
No. No.

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

PART I FINANCIAL INFORMATION

ITEM 1. Financial Statements

Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Income Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 3-4
Statements of Cash Flows. . . . . . . . . . . . . . . . . . . . . . . 5-6
Statements of Changes in Shareholders' Equity . . . . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . 7-8

ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . .9-13

PART II OTHER INFORMATION

ITEM 1. Legal Proceedings. . . . . . . . . . . . . . . . . . . .14
ITEM 2. Changes in Securities. . . . . . . . . . . . . . . . . .14
ITEM 3. Defaults Upon Senior Securities. . . . . . . . . . . . .14
ITEM 4. Submission of Matters to a Vote of Security Holders. . .14
ITEM 5. Other Information. . . . . . . . . . . . . . . . . . . .14
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . .14

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

BALANCE SHEETS
(unaudited)

June 30, 1995 December 31, 1994
ASSETS ($ in 000s) ($ in 000s)
_____________ _____________
Investments in Real Estate:
Direct Ownership Investments:
Land $ 6,477 $ 6,570
Buildings and Improvements 21,413 21,717
_____________ _____________
27,890 28,287
Less Accumulated Depreciation 2,064 2,069
_____________ _____________
25,826 26,218
Mortgage Loan Receivable 10,646 10,646
_____________ _____________
Net Investment Portfolio 36,472 36,864
Marketable Securities REMICs 1,874 1,992
Short-Term Investments:
Vanguard Money Market Reserves
Prime Portfolio
(1,317,329 and 1,478,147 shares,
respectively) 1,317 1,478
Temporary Cash Investments 3,496 2,000
Other Assets 630 945
_____________ _____________
TOTAL ASSETS $43,789 $43,279
_____________ _____________
_____________ _____________

LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage Loans (including current
portion of $108 and $102,
respectively) $ 2,332 $ 2,383
Due to Affiliates 91 98
Dividend Payable 551 --
Other Liabilities 314 297
_____________ _____________
TOTAL LIABILITIES 3,288 2,778
_____________ _____________
Shares of Beneficial Interest,
without par value, unlimited
shares authorized 34,945 36,047
Undistributed Net Income 5,556 4,454
_____________ _____________
TOTAL SHAREHOLDERS' EQUITY 40,501 40,501
_____________ _____________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $43,789 $43,279
_____________ _____________
_____________ _____________

The accompanying notes are an integral part of these statements.

INCOME STATEMENTS
(unaudited)

Three Months Ended June 30,
1995 1994
REAL ESTATE INCOME (000) (000)
_____________ _____________
Rental Income $1,052 $2,015
Mortgage Interest Income 304 221
_____________ _____________
1,356 2,236
_____________ _____________
REAL ESTATE EXPENSES
Mortgage Interest Expense 59 61
Real Estate Taxes 101 199
Property Operating Expenses 300 316
Depreciation and Amortization -- 320
Provision for Possible Losses -- 780
_____________ _____________
460 1,676
_____________ _____________
INCOME FROM REAL ESTATE 896 560
INVESTMENT INCOME FROM SHORT-TERM
INVESTMENTS 65 87
_____________ _____________
961 647
_____________ _____________
ADMINISTRATIVE EXPENSES
Investment Advisory Fee 47 87
Administrative Fee 43 74
Other Administrative Expenses 102 87
_____________ _____________
192 248
_____________ _____________
NET INCOME $ 769 $ 399
_____________ _____________
_____________ _____________
Net Income Per Share $.07 $.04
_____________ _____________
_____________ _____________
Weighted Average Number of
Shares Outstanding 11,019,978 11,019,978
_____________ _____________
_____________ _____________
The accompanying notes are an integral part of these statements.

3
INCOME STATEMENTS
(unaudited)

Six Months Ended June 30,
1995 1994
REAL ESTATE INCOME (000) (000)
_____________ _____________
Rental Income $2,077 $3,638
Mortgage Interest Income 610 521
Net Income from In-Substance
Foreclosed Assets -- 341
_____________ _____________
2,687 4,500
_____________ _____________
REAL ESTATE EXPENSES
Mortgage Interest Expense 118 123
Real Estate Taxes 203 368
Property Operating Expenses 594 485
Depreciation and Amortization -- 597
Provision for Possible Losses 400 780
_____________ _____________
1,315 2,353
_____________ _____________
INCOME FROM REAL ESTATE 1,372 2,147
INVESTMENT INCOME FROM SHORT-TERM
INVESTMENTS 121 157
_____________ _____________
1,493 2,304
_____________ _____________
ADMINISTRATIVE EXPENSES
Investment Advisory Fee 94 173
Administrative Fee 86 149
Other Administrative Expenses 211 163
_____________ _____________
391 485
_____________ _____________
NET INCOME $1,102 $1,819
_____________ _____________
_____________ _____________
Net Income Per Share $.10 $.17
_____________ _____________
_____________ _____________
Weighted Average Number of Shares
Outstanding 11,019,978 11,019,978
_____________ _____________
_____________ _____________
The accompanying notes are an integral part of these statements.

STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES (000) (000)
_____________ _____________
Net Income $ 769 $ 399
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Depreciation and
Amortization -- 320
Provision for Possible
Losses -- 780
Valuation Allowance on
Marketable Securities -- 56
Changes in Other Assets
and Liabilities (34) (40)
_____________ _____________
Net Cash Provided by
Operating Activities 735 1,515
_____________ _____________
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in Real Estate:
Building Improvements (5) --
Principal Repayments on
Marketable Securities REMICs 55 65
Marketable Securities Acquired -- (715)
_____________ _____________
Net Cash Provided by
(Used In) Investing
Activities 50 (650)
_____________ _____________
CASH FLOWS FROM FINANCING ACTIVITIES
Mortgage Principal Payments (26) (23)
Dividends Paid (551) (1,653)
_____________ _____________
Net Cash Used In Financing
Activities (577) (1,676)
_____________ _____________
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 208 (811)
CASH AND CASH EQUIVALENTS Beginning
of Period 4,605 10,289
_____________ _____________
CASH AND CASH EQUIVALENTS End of
Period $4,813 $ 9,478
_____________ _____________
_____________ _____________
The accompanying notes are an integral part of these statements.

STATEMENTS OF CASH FLOWS
(unaudited)

Six Months Ended June 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES (000) (000)
_____________ _____________
Net Income $1,102 $ 1,819
Adjustments to Reconcile Net
Income to Net Cash
Provided by Operating
Activities:
Depreciation and Amortization -- 597
Provision for Possible Losses 400 780
Valuation Allowance on
Marketable Securities -- 60
Changes in Other Assets and
Liabilities 334 16
_____________ _____________
Net Cash Provided by
Operating Activities 1,836 3,272
_____________ _____________
CASH FLOWS FROM INVESTING ACTIVITIES
Investments in Real Estate:
Building Improvements (9) --
Principal Repayments on
Marketable Securities REMICs 110 137
Marketable Securities Acquired -- (715)
_____________ _____________
Net Cash Provided by
(Used In) Investing
Activities 101 (578)
_____________ _____________
CASH FLOWS FROM FINANCING ACTIVITIES
Mortgage Principal Payments (51) (46)
Dividends Paid (551) (1,653)
_____________ _____________
Net Cash Used In
Financing Activities (602) (1,699)
_____________ _____________
NET INCREASE IN CASH AND CASH
EQUIVALENTS 1,335 995
CASH AND CASH EQUIVALENTS Beginning
of Period 3,478 8,483
_____________ _____________
CASH AND CASH EQUIVALENTS End
of Period $4,813 $ 9,478
_____________ _____________
_____________ _____________

STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(unaudited)

Shares of
Beneficial Interest Undistributed Total Shareholders'
Number Amount Net Income Equity
(000) (000) (000)
_____________________________________________________________

Balance: January 1, 1995 11,019,978 $36,047 $4,454 $40,501
Net Income for the Period 1,102 1,102
Liquidating Distributions (1,102) (1,102)
_____________________________________________________________
Balance: June 30, 1995 11,019,978 $34,945 $5,556 $40,501
_____________________________________________________________
_____________________________________________________________

The accompanying notes are an integral part of these statements.

NOTES TO FINANCIAL STATEMENTS
(unaudited)

1. These financial statements should be read in conjunction with the
financial statements and notes thereto contained in the Fund's Annual
Report to Shareholders for the year ended December 31, 1994. The results of
operations for the three and six months ended June 30, 1995, are not
necessarily indicative of the results for the entire year ending December
31, 1995.
2. On December 12, 1994, the Fund's Board of Trustees adopted a Plan of
Liquidation and Termination (the "Liquidation Plan"). The Fund's
Declaration of Trust initially contemplated the liquidation of all of the
Fund s investments after a period of approximately seven to twelve years
following completion of its initial public offering, or between June 30,
1994, and 1999, respectively. The Trustees' decision to adopt the
Liquidation Plan at this point in the Fund's initially contemplated
liquidation period 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 & 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 and distributing the net proceeds to its shareholders in
accordance with the Liquidation Plan. At June 30, 1995, the Fund held
investments in four income-producing properties or portfolios, including
three commercial properties (consisting of one office complex located
outside of Minneapolis, Minnesota, and shopping centers located in
Torrance, California, and Durham, North Carolina) and one residential
apartment complex located in Montgomery County, Maryland. 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.
3. The Fund's financial statements have been prepared on the basis of a
going concern using historical cost. In December 1994, upon adoption of the
Liquidation Plan, the Fund considered all of its remaining investments as
held for sale and reduced the carrying value of such investments to the
extent that each investment's then-current carrying value exceeded its
estimated net realizable value, defined as estimated fair market value less
selling costs. 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 assets.

4. In late September 1994, the Fund exercised its call right with
respect to its Plaza del Amo 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. The Fund and the
borrower have tentatively reached resolution to the default which is
expected to result in a transfer of title of the property, in lieu of
foreclosure, to the Fund with the borrower retaining a residual interest in
the shared-appreciation feature of the mortgage. Such transfer is expected
to occur early in the third quarter. Since, as of the exercise of the
call right and as of June 30, 1995, the appraised value of the Plaza
property securing the loan was in excess of the mortgage loan's current
carrying value, no loss is currently expected to be incurred by the Fund as
a result of the default and, accordingly, no provision for possible losses
has been recorded. The borrower has also paid, and is expected to continue
to pay, all interest due pursuant to the original terms of the loan
agreement until transfer of the property to the Fund.
5. During the quarter ended March 31, 1995, $400,000 was charged to the
provision for possible losses to write down the carrying value of the
Minnesota Portfolio to its estimated fair market value less selling costs.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

BUSINESS

Vanguard Real Estate Fund I, A Sales-Commission-Free Income Properties Fund
(the "Fund"), a Massachusetts business trust established in 1987, is a
qualified finite-life real estate investment trust ("REIT") under the
Internal Revenue Code of 1986. At June 30, 1995, the Fund's real estate
investments include both direct ownership properties and a shared
appreciation mortgage and consist of three commercial properties (comprised
of one office building and two shopping centers) and one residential
apartment complex. Geographically, the Fund's investments are located in
each of the North Central, Pacific Southwest and Mideast regions. The
Fund's Declaration of Trust precludes the Fund from reinvesting net
proceeds from the sale or repayment of its real estate investments in
additional real estate investments after December 31, 1993 and contemplates
the liquidation of all of the Fund s investments after a period of
approximately seven to twelve years following completion of its initial
public offering or between June 30, 1994 and 1999, respectively.

On December 12, 1994, the Fund's Board of Trustees approved a Plan of
Liquidation and Termination (the "Liquidation Plan"). The Trustee's
decision to adopt the Liquidation Plan at this point in the Fund's
initially contemplated liquidation period 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 and distributing the net proceeds to its shareholders in
accordance with the Liquidation Plan. 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 and the shares of the Fund would no longer be traded.
The beneficial interests in the liquidating trust would not be readily
transferable.

All Fund distributions paid subsequent to December 31, 1994 will be
liquidating distributions and will be non-taxable to a shareholder to the
extent the shareholder has remaining tax cost basis in the Fund's shares.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1995 VS. SIX MONTHS ENDED JUNE 30, 1994

The Fund had net income of $1,102,000, or $.10 per share, for the six
months ended June 30, 1995, as compared to net income of $1,819,000, or
$.17 per share for the six months ended June 30, 1994. This decrease in
net income, as more fully described below, reflects (i) decreases in net
rental income, net income from in-substance foreclosed assets, and income
from short-term investments, partially offset by an increase in mortgage
interest income and decreases in administrative expenses and depreciation
and amortization expense, in each case as compared to such items in 1994;
and (ii) a provision for possible
9

losses of $400,000 for the six months ended June 30, 1995, as compared to
$780,000 for the comparable period in 1994.

Net rental income (rental income less real estate taxes and property
operating expenses) decreased by $1,505,000, or 54%, from $2,785,000 for
the six months ended June 30, 1994 to $1,280,000 for the six months ended
June 30, 1995. This decrease was primarily due to the disposition of the
Seattle Industrial Portfolio and the Deluxe Check Building (part of the
Minnesota Portfolio) in the latter half of 1994, which generated for the
Fund net rental income of $1,600,000 and $310,000, respectively, for the
six months ended June 30, 1994. This decline was partially offset by an
increase of $436,000 in net rental income generated for the Fund in the six
months ended June 30, 1995 as compared to the similar 1994 period from the
Sheffield Forest Apartment Complex ("Sheffield"). As more fully described
below, this investment was classified as an in-substance foreclosed asset
from January 1, 1994 until the Fund obtained title to the property in
April 1994.

At June 30, 1995, and June 30, 1994, the overall occupancy rate of the
Fund s direct real estate investments, excluding Sheffield, was 99% and
97%, respectively. The occupancy rate of Sheffield was 96% and 91% at June
30, 1995 and June 30, 1994, respectively. The occupancy rate of the
property underlying the Fund's Plaza del Amo mortgage loan investment was
95% and 99% at June 30, 1995 and June 30, 1994, respectively. Leases for
3% of the rentable space of the properties directly owned by the Fund,
excluding Sheffield, and none of the rentable space at the property
underlying the Plaza del Amo mortgage investment, expire over the remainder
of 1995, respectively. Leases for units at Sheffield are generally for
one-year terms as is customary for apartment leases. The Fund's Adviser is
currently working to renew leases and to identify new tenants for space
covered by leases that have expired or are expiring. However, there can be
no assurance that the Fund will be able to maintain its current occupancy
and level of income.

For the six months ended June 30, 1994, net income from in-substance
foreclosed assets was $341,000. No such income was generated for the same
period in 1995. In January 1994, the borrower under the Sheffield mortgage
loan investment (a limited partnership whose sole asset was the Sheffield
property) defaulted on the loan by making only a partial payment on the
then-due interest installment. The Fund and the borrower remedied the
default on April 13, 1994, at which time the Fund received title to the
underlying property by means of a transfer of all of the partnership
interests of the borrower in full satisfaction of the mortgage loan
outstanding. During the period of default, the borrower remitted the net
cash flow generated by the property to the Fund.

Investment income from short-term investments decreased by $36,000, or 23%,
from $157,000 for the six months ended June 30, 1994 to $121,000 for the
six months ended June 30, 1995. This decrease was primarily due to a
decrease in the average short-term investment balance for the six months
ended June 30, 1995, as compared to the same period of 1994, which decrease
was partially offset by an increase in prevailing short-term interest rates
in 1995 as compared to 1994.

Mortgage interest income increased by $89,000, from $521,000 for the six-
months ended June 30, 1994 to $610,000 for the comparable period of 1995.
This increase in mortgage interest income was primarily due to a higher
investment balance in REMIC securities in 1995 as compared to the same
period of 1994.

The Fund's financial statements have been prepared on the basis of a going
concern using historical cost. In December 1994, upon adoption of the
Liquidation Plan, the Fund classified all of its remaining investments as
"held for sale" and reduced the carrying value of such investments to the
extent that each investment's then-current carrying value exceeded its
estimated "net realizable value," defined as estimated fair market value
less selling costs. 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 has been
recognized, since the Fund's real estate investments are considered to be
"held-for-sale" assets.

Administrative expenses decreased by $94,000, or 19%, from $485,000 for the
six months ended June 30, 1994 to $391,000 for the six months ended June
30, 1995. This decrease was primarily due to lower advisory and
administrative fees payable in the 1995 period, which fees are based on
average invested real estate assets. The Fund's average assets invested in
real estate decreased during 1995 due to the sale of the Seattle and Deluxe
Check investments in the latter half of 1994 and the subsequent
distribution to shareholders of the majority of the net proceeds from such
dispositions.

The provision for possible losses is based upon management's regular
evaluation of the recoverability of each investment in the portfolio.
During the quarter ended March 31, 1995, the Fund charged $400,000 to its
provision for possible losses to write down the carrying value of the two
remaining buildings in the Minnesota Portfolio to their then-estimated fair
market value less selling costs.

On June 13, 1995, the Fund declared a second quarter liquidating
distribution of $.05 per share, payable on July 28, 1995 to shareholders of
record as of June 30, 1995.

THREE MONTHS ENDED JUNE 30, 1995 VS. THREE MONTHS ENDED JUNE 30, 1994

The Fund had net income of $769,000, or $.07 per share for the three months
ended June 30, 1995, as compared to net income of $399,000, or $.04 per
share for the same period of 1994. This increase, as more fully described
below, was primarily due to (i) a decrease in the provision for possible
losses; (ii) an increase in mortgage interest income; (iii) a decrease in
depreciation and amortization expenses, and (iv) a decrease in
administrative expenses, partially offset by a decrease in both net rental
income and investment income.

Net rental income decreased by $849,000, or 57%, from $1,500,000 for the
three-month period ended June 30, 1994 to $651,000 for the three-month
period ended June 30, 1995. This decease was primarily due to the sale of
the Seattle investment in October 1994, which generated for the Fund
$800,000 of net rental income for the three months ended June 30, 1994, and
the sale of the Deluxe Check Building of the Minnesota investment, which
generated for the Fund $155,000 for the same period. This decline was
partially offset by an increase of $67,000 in net rental income generated
for the Fund in the three-months ended June 30, 1995 as compared to the
same period in 1994 by the Fund's Sheffield investment, to which the Fund
obtained title on April 13, 1994.

A provision for possible losses for the three-months ended June 30, 1994 in
the amount of $780,000 ($1,070,000, net of charge-offs of $290,000) was
recorded to write-down the carrying value of the Fund's Deluxe Check
Building which was subsequently sold in August 1994. No provision for
possible losses was recorded for the three-months ended June 30, 1995.

Mortgage interest income increased by $83,000, or 38%, from $221,000 for
the three-month period ended June 30, 1994 to $304,000 for the three-month
period ended June 30, 1995. This increase was primarily due to a higher
investment balance in REMIC securities in 1995 as compared to the same
period of 1994.

Administrative expenses decreased by $56,000, or 23%, from $248,000 for the
three months ended June 30, 1994 to $192,000 for the comparable period of
1995. This decrease was primarily due to lower advisory and administrative
fees payable in the 1995 period, which fees are based on average invested
real estate assets. The Fund's assets invested in real estate decreased
during the 1995 period due to the sale of the Seattle and Deluxe Check
investments in the latter half of 1994 and the subsequent distribution to
shareholders of the majority of the net proceeds from such dispositions.

Short-term investment income decreased by $22,000, or 25%, from $87,000 for
the three-months ended June 30, 1994 to $65,000 for the comparable period
of 1995. This decrease was primarily due to a lower average short-term
investment balance for the three months ended June 30, 1995 as compared to
the three months ended June 30, 1994. This decrease was partially offset
by an increase in prevailing short-term interest rates in 1995 as compared
to 1994.

As described above in the comparison of results for the six months ended
June 30, 1995 vs. June 30, 1994, the Fund, currently liquidating its real
estate investments consistent with its Plan of Liquidation adopted December
12, 1994, considers its assets to be held for sale. Accordingly, no
depreciation or amortization expense has been recorded in 1995.

LIQUIDITY AND CAPITAL RESOURCES

On July 28, 1995, the Fund sold the two remaining buildings in the
Minnesota Portfolio for a combined contract price of $1,780,000. In
connection with the sale, and in accordance with the terms of the Fund's
amended advisory agreement, the Fund incurred a disposition fee of $25,000,
payable to its Adviser. The Fund also, at closing, paid brokerage
commissions of $66,000.

In September 1994, the Fund exercised its call right with respect to its
Plaza del Amo 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 default under the terms of the loan. Since, as of the exercise of the
call right and as of June 30, 1995, the appraised value of the Plaza
property securing the loan was in excess of the mortgage loan's current
carrying value, no loss is currently expected to be incurred by the Fund as
a result of the default and, accordingly, no provision for possible losses
has been recorded. During the period of default, the borrower paid all
interest due pursuant to the original terms of the loan agreement. On
August 2, 1995, to resolve the default, the borrower agreed to transfer
title of the property to the Fund in lieu of foreclosure, while retaining a
residual interest in the shared-appreciation feature of the loan. The
Fund's Adviser plans to promptly market the property for sale.

During the Fund's liquidation period, its ability to make quarterly
distributions will be dependent upon its financial condition, earnings and
cash flow, cash position and future working capital requirements. As a
result of 1994 property sales, and the subsequent year-end liquidating
distribution of the proceeds from such sales, the book value of the Fund's
shares has been significantly reduced. Accordingly, the amount of future
income the Fund may be expected to generate will also be reduced. Further,
as a result of the adoption of the Liquidation Plan, the Fund's remaining
investments are being held for sale, rather than the production of income;
and accordingly, income from real estate can be expected to continue to
decline throughout the Fund's liquidation period as the Fund's remaining
properties are sold.

Future quarterly liquidating distributions to shareholders, excluding any
amounts distributed from net proceeds from property sales, will be largely
dependent upon the amount of funds from operations generated by the Fund
during its liquidation period. For the six months ended June 30, 1995,
funds from operations (defined as net income plus depreciation and
amortization, and provision for possible losses) in the amount of
$1,502,000, or $.14 per share, exceeded by $400,000 the amount of paid and
accrued distributions to shareholders ($.10 per share) for the period.
Funds from operations are generated from the ongoing operations of the
Fund's direct real estate investments and interest income on short-term
investments and mortgage loans. Accordingly, unfavorable economic
conditions, vacancies, environmental requirements, reductions in prevailing
short-term interest rates or increases in major expenses such as energy,
insurance, and real estate taxes during the liquidation period could have
an adverse impact upon the Fund's future funds from operations and
distributions to shareholders.

As a matter of policy the Fund seeks to maintain working capital reserves
in an amount not less than $2,300,000, which amount constitutes 2% of the
gross proceeds of the Fund's initial offering. Working capital reserves
are defined as cash and cash equivalents, including the Fund's investment
in marketable securities, and other assets expected to be realized over the
next year, less liabilities expected to be paid over the next year.
Working capital reserves at June 30, 1995 aggregated approximately $6.0
million, representing 5.2% of the initial public offering proceeds,
compared to working capital reserves of $5.7 million at December 31, 1994,
which represented 5.0% of the Fund's initial offering proceeds.

During the fourth quarter of 1990, the Fund instituted a share repurchase
program. Under the program, the Fund is authorized to repurchase in the
open market from time to time up to 500,000 of the Fund's outstanding
shares. As of June 30, 1995, 413,725 shares have been repurchased at an
aggregate cost of $3,134,000. No shares have been repurchased since
September 1993 and the Fund's management, in light of adoption of the
Liquidation Plan, does not expect the Fund to repurchase any additional
shares.

The Fund intends to continue to qualify as a real estate investment trust
under the Internal Revenue Code and distribute all of its taxable income,
if any. The Fund's management considers the Fund's liquidity, as well as
its ability to generate cash, as adequate to meet its presently foreseeable
operating requirements.

PART II
OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 2. Changes in Securities.

None

Item 3. Defaults Upon Senior Securities.

None

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

None

Item 5. Other Information.

None

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits

27. Financial Data Schedule
A Financial Data Schedule for the six months
ended June 30, 1995, was submitted in
electronic format only.

(b) Reports on Form 8-K

The Fund filed no reports on Form 8-K during the second quarter
ended June 30, 1995.

Pursuant to the requirements 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

August 10, 1995
John J. Brennan
President

August 10, 1995
Ralph K. Packard
Vice President & Controller