Contents

AboutYour Fund's Expenses	1
Real Estate Index Fund	3
Real Estate II Index Fund	25
Trustees Approve Advisory Arrangements	39
Liquidity Risk Management	41

About Your Fund’s Expenses

As a shareholder of the fund, you incur ongoing costs, which include costs for portfolio management, administrative services, and shareholder reports (like this one), among others. Operating expenses, which are deducted from a fund’s gross income, directly reduce the investment return of the fund.

A fund‘s expenses are expressed as a percentage of its average net assets. This figure is known as the expense ratio. The following examples are intended to help you understand the ongoing costs (in dollars) of investing in your fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period.

The accompanying table illustrates your fund’s costs in two ways:

•

Based on actual fund return. This section helps you to estimate the actual expenses that you paid over the period. The ”Ending Account Value“ shown is derived from the fund’s actual return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the fund. You may use the information here, together with the amount you invested, to estimate the expenses that you paid over the period.

To do so, simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number given for your fund under the heading ”Expenses Paid During Period.“

•

Based on hypothetical 5% yearly return. This section is intended to help you compare your fund‘s costs with those of other mutual funds. It assumes that the fund had a yearly return of 5% before expenses, but that the expense ratio is unchanged. In this case—because the return used is not the fund’s actual return—the results do not apply to your investment. The example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to calculate expenses based on a 5% return. You can assess your fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder reports of other funds.

Note that the expenses shown in the table are meant to highlight and help you compare ongoing costs only and do not reflect transaction costs incurred by the fund for buying and selling securities. Further, the expenses do not include any purchase, redemption, or account service fees described in the fund prospectus. If such fees were applied to your account, your costs would be higher. Your fund does not carry a “sales load.”

The calculations assume no shares were bought or sold during the period. Your actual costs may have been higher or lower, depending on the amount of your investment and the timing of any purchases or redemptions.

You can find more information about the fund’s expenses, including annual expense ratios, in the Financial Statements section of this report. For additional information on operating expenses and other shareholder costs, please refer to your fund’s current prospectus.

1

Six Months Ended July 31, 2022
	Beginning Account Value 1/31/2022	Ending Account Value 7/31/2022	Expenses Paid During Period
Based on Actual Fund Return
Real Estate Index Fund
Investor Shares	$1,000.00	$ 939.70	$1.20
ETF Shares	1,000.00	940.50	0.58
Admiral™ Shares	1,000.00	940.60	0.58
Institutional Shares	1,000.00	940.50	0.48
Real Estate II Index Fund	$1,000.00	$ 940.70	$0.38
Based on Hypothetical 5% Yearly Return
Real Estate Index Fund
Investor Shares	$1,000.00	$1,023.56	$1.25
ETF Shares	1,000.00	1,024.20	0.60
Admiral Shares	1,000.00	1,024.20	0.60
Institutional Shares	1,000.00	1,024.30	0.50
Real Estate II Index Fund	$1,000.00	$1,024.40	$0.40

The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that period are: for the Real Estate Index Fund, 0.25% for Investor Shares, 0.12% for ETF Shares, 0.12% for Admiral Shares, and 0.10% for Institutional Shares; and for the Real Estate II Index Fund, 0.08%. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (181/365).

2

Real Estate Index Fund

Fund Allocation

As of July 31, 2022

Diversified Real Estate Activities	0.1%
Diversified REITs	2.7
Health Care REITs	8.1
Hotel & Resort REITs	2.6
Industrial REITs	11.8
Office REITs	5.9
Real Estate Development	0.2
Real Estate Operating Companies	0.5
Real Estate Services	4.0
Residential REITs	15.1
Retail REITs	11.3
Specialized REITs	37.7

The table reflects the fund’s investments, except for short-term investments and derivatives. Sector categories are based on the Global Industry Classification Standard (“GICS”), except for the “Other” category (if applicable), which includes securities that have not been provided a GICS classification as of the effective reporting period.

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking its target index as closely as possible.

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

3

Real Estate Index Fund

Financial Statements (unaudited)

Schedule of Investments

As of July 31, 2022

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) (95.2%)
Diversified REITs (2.4%)
	WP Carey Inc.				8,743,103	780,759
	STORE Capital Corp.				11,303,279	328,021
	Broadstone Net Lease Inc.				7,497,078	169,959
	Essential Properties Realty Trust Inc.				5,761,575	138,969
	Global Net Lease Inc.				4,765,303	71,908
	American Assets Trust Inc.				2,359,709	71,334
	Alexander & Baldwin Inc.				3,326,594	66,233
	Empire State Realty Trust Inc. Class A				6,595,841	56,263
	iStar Inc.				3,167,456	52,928
	Armada Hoffler Properties Inc.				3,084,492	43,738
	Gladstone Commercial Corp.				1,731,930	36,284
	One Liberty Properties Inc.				768,149	21,316
						1,837,712
Health Care REITs (7.1%)
	Welltower Inc.				19,766,417	1,706,632
	Ventas Inc.				18,324,532	985,493
	Healthpeak Properties Inc.				24,737,357	683,493
	Medical Properties Trust Inc.				27,375,325	471,951
1	Healthcare Realty Trust Inc. Class A				17,462,874	458,400
	Omega Healthcare Investors Inc.				10,967,903	340,005
	Physicians Realty Trust				10,318,085	183,352
	Sabra Health Care REIT Inc.				10,591,234	162,999
	National Health Investors Inc.				2,103,159	136,369
	CareTrust REIT Inc.				4,451,645	91,927
	LTC Properties Inc.				1,811,743	75,912
	Community Healthcare Trust Inc.				1,091,309	42,507

					Shares	Market Value• ($000)
	Global Medical REIT Inc.				2,797,902	34,079
	Universal Health Realty Income Trust				599,909	32,335
	Diversified Healthcare Trust				10,977,598	18,991
						5,424,445
Hotel & Resort REITs (2.3%)
	Host Hotels & Resorts Inc.				32,757,517	583,411
*	Ryman Hospitality Properties Inc.				2,399,581	212,459
	Park Hotels & Resorts Inc.				10,846,779	169,101
	Apple Hospitality REIT Inc.				9,946,332	165,905
	Pebblebrook Hotel Trust				6,031,229	117,971
*	Sunstone Hotel Investors Inc.				10,060,581	113,986
	RLJ Lodging Trust				7,640,761	95,433
*	DiamondRock Hospitality Co.				9,666,781	89,708
*	Xenia Hotels & Resorts Inc.				5,238,792	86,021
	Service Properties Trust				7,578,116	49,561
*	Summit Hotel Properties Inc.				4,873,237	38,255
*	Chatham Lodging Trust				2,123,237	25,819
						1,747,630
Industrial REITs (10.3%)
	Prologis Inc.				33,943,300	4,499,524
	Duke Realty Corp.				17,557,346	1,098,387
	Rexford Industrial Realty Inc.				7,363,812	481,667
	Americold Realty Trust Inc.				12,305,953	403,020
	EastGroup Properties Inc.				1,892,111	322,680
	First Industrial Realty Trust Inc.				6,044,767	314,026
	STAG Industrial Inc.				8,162,623	267,571
	Terreno Realty Corp.				3,462,935	216,953
	LXP Industrial Trust				13,102,576	143,735

4

Real Estate Index Fund

5

Real Estate Index Fund

6

Real Estate Index Fund

					Shares	Market Value• ($000)
Temporary Cash Investments (0.6%)
Money Market Fund (0.6%)
6,7	Vanguard Market Liquidity Fund, 1.903% (Cost $482,230)				4,824,316	482,239
Total Investments (100.0%) (Cost $66,280,672)						76,718,222
Other Assets and Liabilities—Net (0.0%)						(9,314)
Net Assets (100%)						76,708,908

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 $84,190,000.
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 $88,289,000 was received for securities on loan, of which $84,183,000 is held in Vanguard Market Liquidity Fund and $4,106,000 is held in cash.

REIT—Real Estate Investment Trust.

7

Real Estate Index Fund

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)
American Homes 4 Rent Class A	8/31/22	BANA	37,212	(1.809)	2,511	—
Digital Realty Trust Inc.	1/31/23	GSI	30,245	(2.153)	2,853	—
Digital Realty Trust Inc.	8/31/22	BANA	48,687	(1.797)	915	—
Equity Residential	8/31/22	BANA	14,444	(1.836)	1,339	—
Equity Residential	8/31/22	BANA	28,888	(1.813)	2,678	—
Redfin Corp.	1/31/23	GSI	3,059	(2.144)	—	(15)
Seritage Growth Properties Class A	1/31/23	GSI	4,312	(2.129)	446	—
Simon Property Group Inc.	1/31/23	GSI	38,544	(2.165)	4,894	—
VICI Properties Inc.	8/31/22	BANA	160,866	(2.234)	25,436	—
Welltower Inc.	8/31/22	BANA	61,764	(1.804)	2,910	—
					43,982	(15)

1	Based on USD Overnight Bank Funding Rate as of the most recent payment date. Floating interest payment received/paid monthly.
	BANA—Bank of America, N.A.
	GSI—Goldman Sachs International.

At July 31, 2022, the counterparties had deposited in segregated accounts securities with a value of $17,357,000 in connection with open over-the-counter swap contracts.

See accompanying Notes, which are an integral part of the Financial Statements.

8

Real Estate Index Fund

Statement of Assets and Liabilities

As of July 31, 2022

($000s, except shares and per-share amounts)	Amount
Assets
Investments in Securities, at Value1
Unaffiliated Issuers (Cost $58,590,407)	67,257,782
Affiliated Issuers (Cost $482,230)	482,239
Vanguard Real Estate II Index Fund (Cost $7,208,035)	8,978,201
Total Investments in Securities	76,718,222
Investment in Vanguard	2,409
Cash	4,106
Receivables for Investment Securities Sold	20,197
Receivables for Accrued Income	128,280
Receivables for Capital Shares Issued	18,678
Unrealized Appreciation—Over-the-Counter Swap Contracts	43,982
Total Assets	76,935,874
Liabilities
Due to Custodian	9,652
Payables for Investment Securities Purchased	102,763
Collateral for Securities on Loan	88,289
Payables for Capital Shares Redeemed	22,634
Payables to Vanguard	3,613
Unrealized Depreciation—Over-the-Counter Swap Contracts	15
Total Liabilities	226,966
Net Assets	76,708,908
1 Includes $84,190 of securities on loan.

9

Real Estate Index Fund

Statement of Assets and Liabilities (continued)
At July 31, 2022, net assets consisted of:
($000s, except shares and per-share amounts)	Amount
Paid-in Capital	66,875,970
Total Distributable Earnings (Loss)	9,832,938
Net Assets	76,708,908
Investor Shares—Net Assets
Applicable to 4,475,070 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	147,117
Net Asset Value Per Share—Investor Shares	$32.87
ETF Shares—Net Assets
Applicable to 413,914,080 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	40,954,284
Net Asset Value Per Share—ETF Shares	$98.94
Admiral Shares—Net Assets
Applicable to 170,284,766 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	23,878,936
Net Asset Value Per Share—Admiral Shares	$140.23
Institutional Shares—Net Assets
Applicable to 540,393,314 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	11,728,571
Net Asset Value Per Share—Institutional Shares	$21.70

See accompanying Notes, which are an integral part of the Financial Statements.

10

Real Estate Index Fund

Statement of Operations

	Six Months Ended July 31, 2022
	($000)
Investment Income
Income
Dividends—Unaffiliated Issuers	1,063,139
Dividends—Affiliated Issuers	30,576
Dividends—Vanguard Real Estate II Index Fund	117,477
Interest—Affiliated Issuers	645
Securities Lending—Net	660
Total Income	1,212,497
Expenses
The Vanguard Group—Note B
Investment Advisory Services	887
Management and Administrative—Investor Shares	213
Management and Administrative—ETF Shares	22,748
Management and Administrative—Admiral Shares	12,902
Management and Administrative—Institutional Shares	5,143
Marketing and Distribution—Investor Shares	6
Marketing and Distribution—ETF Shares	722
Marketing and Distribution—Admiral Shares	459
Marketing and Distribution—Institutional Shares	186
Custodian Fees	98
Shareholders’ Reports—Investor Shares	1
Shareholders’ Reports—ETF Shares	675
Shareholders’ Reports—Admiral Shares	173
Shareholders’ Reports—Institutional Shares	64
Trustees’ Fees and Expenses	20
Other Expenses	6
Total Expenses	44,303
Expenses Paid Indirectly	(23)
Net Expenses	44,280
Net Investment Income	1,168,217
Realized Net Gain (Loss)
Capital Gain Distributions Received—Unaffiliated Issuers	45,697
Capital Gain Distributions Received—Vanguard Real Estate II Index Fund	—
Investment Securities Sold—Unaffiliated Issuers1	1,688,874
Investment Securities Sold—Affiliated Issuers2	21,399
Investment Securities Sold—Vanguard Real Estate II Index Fund	—
Swap Contracts	(39,546)
Realized Net Gain (Loss)	1,716,424

11

Real Estate Index Fund

Statement of Operations (continued)
	Six Months Ended July 31, 2022
	($000)
Change in Unrealized Appreciation (Depreciation)
Investment Securities—Unaffiliated Issuers	(7,655,293)
Investment Securities—Affiliated Issuers	204,832
Investment Securities—Vanguard Real Estate II Index Fund	(683,638)
Swap Contracts	43,967
Change in Unrealized Appreciation (Depreciation)	(8,090,132)
Net Increase (Decrease) in Net Assets Resulting from Operations	(5,205,491)

1	Includes $1,805,234,000 of net gain (loss) resulting from in-kind redemptions.
2	Includes $32,314,000 of net gain (loss) resulting from in-kind redemptions.

See accompanying Notes, which are an integral part of the Financial Statements.

12

Real Estate Index Fund

Statement of Changes in Net Assets

	Six Months Ended July 31, 2022		Year Ended January 31, 2022
	($000)		($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	1,168,217		1,487,532
Realized Net Gain (Loss)	1,716,424		2,507,302
Change in Unrealized Appreciation (Depreciation)	(8,090,132)		14,077,791
Net Increase (Decrease) in Net Assets Resulting from Operations	(5,205,491)		18,072,625
Distributions
Investor Shares	(1,879)		(3,637)
ETF Shares	(490,481)		(811,715)
Admiral Shares	(276,428)		(463,925)
Institutional Shares	(135,640)		(220,900)
Return of Capital
Investor Shares	—		(1,874)
ETF Shares	—		(418,428)
Admiral Shares	—		(239,147)
Institutional Shares	—		(113,871)
Total Distributions	(904,428)		(2,273,497)
Capital Share Transactions
Investor Shares	(33,562)		(35,113)
ETF Shares	(2,289,715)		6,252,486
Admiral Shares	(70,519)		1,052,588
Institutional Shares	490,722		221,639
Net Increase (Decrease) from Capital Share Transactions	(1,903,074)		7,491,600
Total Increase (Decrease)	(8,012,993)		23,290,728
Net Assets
Beginning of Period	84,721,901		61,431,173
End of Period	76,708,908		84,721,901

See accompanying Notes, which are an integral part of the Financial Statements.

13

Real Estate Index Fund

Financial Highlights

Investor Shares
For a Share Outstanding Throughout Each Period	Six Months Ended July 31, 2022	Year Ended January 31,
		2022	2021	2020	2019	2018
Net Asset Value, Beginning of Period	$35.37	$28.23	$31.21	$27.69	$26.40	$27.38
Investment Operations
Net Investment Income1	.459	.602	.586	.719	.787	.761
Net Realized and Unrealized Gain (Loss) on Investments	(2.600)	7.475	(2.498)	3.801	1.639	(.614)
Total from Investment Operations	(2.141)	8.077	(1.912)	4.520	2.426	.147
Distributions
Dividends from Net Investment Income	(.359)	(.620)	(.624)	(.752)	(.851)	(.788)
Distributions from Realized Capital Gains	—	—	—	—	—	(.011)
Return of Capital	—	(.317)	(.444)	(.248)	(.285)	(.328)
Total Distributions	(.359)	(.937)	(1.068)	(1.000)	(1.136)	(1.127)
Net Asset Value, End of Period	$32.87	$35.37	$28.23	$31.21	$27.69	$26.40
Total Return2	-6.03%	28.73%	-5.88%	16.59%	9.53%	0.45%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$147	$196	$188	$243	$1,871	$2,143
Ratio of Total Expenses to Average Net Assets	0.25% 3	0.26%	0.26%	0.26%	0.25%	0.26%
Ratio of Net Investment Income to Average Net Assets	2.58%	1.77%	2.18%	2.48%	3.02%	2.87%
Portfolio Turnover Rate4	4%	7%	8%	6%	24%	6%
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	The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.25%.
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.

14

Real Estate Index Fund

Financial Highlights

ETF Shares
For a Share Outstanding Throughout Each Period	Six Months Ended July 31, 2022	Year Ended January 31,
		2022	2021	2020	2019	2018
Net Asset Value, Beginning of Period	$106.44	$84.96	$93.93	$83.36	$79.47	$82.43
Investment Operations
Net Investment Income1	1.470	1.960	1.889	2.335	2.487	2.499
Net Realized and Unrealized Gain (Loss) on Investments	(7.824)	22.486	(7.525)	11.379	4.934	(1.945)
Total from Investment Operations	(6.354)	24.446	(5.636)	13.714	7.421	.554
Distributions
Dividends from Net Investment Income	(1.146)	(1.943)	(1.947)	(2.364)	(2.646)	(2.458)
Distributions from Realized Capital Gains	—	—	—	—	—	(.034)
Return of Capital	—	(1.023)	(1.387)	(.780)	(.885)	(1.022)
Total Distributions	(1.146)	(2.966)	(3.334)	(3.144)	(3.531)	(3.514)
Net Asset Value, End of Period	$98.94	$106.44	$84.96	$93.93	$83.36	$79.47
Total Return	-5.95%	28.88%	-5.80%	16.70%	9.70%	0.59%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$40,954	$46,673	$32,064	$37,682	$30,857	$32,377
Ratio of Total Expenses to Average Net Assets	0.12% 2	0.12%	0.12%	0.12%	0.12%	0.12%
Ratio of Net Investment Income to Average Net Assets	2.76%	1.90%	2.33%	2.60%	3.15%	3.01%
Portfolio Turnover Rate3	4%	7%	8%	6%	24%	6%
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 0.12%.
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, including ETF Creation Units.

See accompanying Notes, which are an integral part of the Financial Statements.

15

Real Estate Index Fund

Financial Highlights

Admiral Shares
For a Share Outstanding Throughout Each Period	Six Months Ended July 31, 2022	Year Ended January 31,
		2022	2021	2020	2019	2018
Net Asset Value, Beginning of Period	$150.85	$120.40	$133.12	$118.14	$112.63	$116.83
Investment Operations
Net Investment Income1	2.096	2.761	2.677	3.315	3.507	3.538
Net Realized and Unrealized Gain (Loss) on Investments	(11.091)	31.890	(10.672)	16.121	7.008	(2.761)
Total from Investment Operations	(8.995)	34.651	(7.995)	19.436	10.515	.777
Distributions
Dividends from Net Investment Income	(1.625)	(2.770)	(2.759)	(3.350)	(3.751)	(3.483)
Distributions from Realized Capital Gains	—	—	—	—	—	(.048)
Return of Capital	—	(1.431)	(1.966)	(1.106)	(1.254)	(1.447)
Total Distributions	(1.625)	(4.201)	(4.725)	(4.456)	(5.005)	(4.978)
Net Asset Value, End of Period	$140.23	$150.85	$120.40	$133.12	$118.14	$112.63
Total Return2	-5.94%	28.91%	-5.74%	16.73%	9.69%	0.58%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$23,879	$25,764	$19,702	$23,274	$18,223	$17,757
Ratio of Total Expenses to Average Net Assets	0.12% 3	0.12%	0.12%	0.12%	0.11%	0.12%
Ratio of Net Investment Income to Average Net Assets	2.78%	1.90%	2.33%	2.60%	3.16%	3.01%
Portfolio Turnover Rate4	4%	7%	8%	6%	24%	6%
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	The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.12%.
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.

16

Real Estate Index Fund

Financial Highlights

Institutional Shares
For a Share Outstanding Throughout Each Period	Six Months Ended July 31, 2022	Year Ended January 31,
		2022	2021	2020	2019	2018
Net Asset Value, Beginning of Period	$23.35	$18.64	$20.60	$18.28	$17.43	$18.08
Investment Operations
Net Investment Income1	.328	.432	.421	.518	.543	.568
Net Realized and Unrealized Gain (Loss) on Investments	(1.724)	4.933	(1.646)	2.496	1.085	(.444)
Total from Investment Operations	(1.396)	5.365	(1.225)	3.014	1.628	.124
Distributions
Dividends from Net Investment Income	(.254)	(.432)	(.429)	(.522)	(.583)	(.542)
Distributions from Realized Capital Gains	—	—	—	—	—	(.007)
Return of Capital	—	(.223)	(.306)	(.172)	(.195)	(.225)
Total Distributions	(.254)	(.655)	(.735)	(.694)	(.778)	(.774)
Net Asset Value, End of Period	$21.70	$23.35	$18.64	$20.60	$18.28	$17.43
Total Return	-5.95%	28.91%	-5.68%	16.77%	9.70%	0.60%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$11,729	$12,089	$9,478	$10,027	$8,206	$8,176
Ratio of Total Expenses to Average Net Assets	0.10% 2	0.10%	0.10%	0.10%	0.09%	0.10%
Ratio of Net Investment Income to Average Net Assets	2.81%	1.92%	2.37%	2.63%	3.18%	3.03%
Portfolio Turnover Rate3	4%	7%	8%	6%	24%	6%
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 0.10%.
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, including ETF Creation Units.

See accompanying Notes, which are an integral part of the Financial Statements.

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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 is the wholly owned subsidiary in which the fund has invested a portion of its assets. For additional financial information about the Real Estate II Index Fund, refer to the accompanying financial statements.

Significant market disruptions, such as those caused by pandemics (e.g., COVID-19 pandemic), natural or environmental disasters, war (e.g., Russia’s invasion of Ukraine), 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 investments and fund performance.

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 materially 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 board of trustees to represent fair value. 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 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

18

Real Estate Index Fund

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, 2022, 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 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.

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Real Estate Index Fund

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 $4.4 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, 2022, 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 investment securities, and management’s estimates of such amounts for investment security 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.

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Real Estate Index Fund

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, 2022, the fund had contributed to Vanguard capital in the amount of $2,409,000, representing less than 0.01% of the fund’s net assets and 0.96% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

C.	The fund’s custodian bank has agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing custody account. For the six months ended July 31, 2022, custodian fee offset arrangements reduced the fund’s expenses by $23,000 (an annual rate of less than 0.01% of average net assets).
D.	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.

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Real Estate Index Fund

The following table summarizes the market value of the fund's investments and derivatives as of July 31, 2022, based on the inputs used to value them:

	Level 1 ($000)	Level 2 ($000)	Level 3 ($000)	Total ($000)
Investments
Assets
Common Stocks	76,235,969	—	14	76,235,983
Temporary Cash Investments	482,239	—	—	482,239
Total	76,718,208	—	14	76,718,222
Derivative Financial Instruments
Assets
Swap Contracts	—	43,982	—	43,982
Liabilities
Swap Contracts	—	15	—	15

E.	As of July 31, 2022, 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	66,532,469
Gross Unrealized Appreciation	16,444,842
Gross Unrealized Depreciation	(6,215,122)
Net Unrealized Appreciation (Depreciation)	10,229,720

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, 2022, the fund had available capital losses totaling $2,552,105,000 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, 2023; 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, 2022, the fund purchased $6,666,599,000 of investment securities and sold $8,517,790,000 of investment securities, other than temporary cash investments. Purchases and sales include $2,716,008,000 and $5,022,320,000, 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, 2022, such purchases were $11,282,000 and sales were $2,771,000, resulting in net realized loss of $235,000; these amounts, other than temporary cash investments, are included in the purchases and sales of investment securities noted above.

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Real Estate Index Fund

G.	Capital share transactions for each class of shares were:

    

	Six Months Ended July 31, 2022			Year Ended January 31, 2022
	Amount ($000)	Shares (000)		Amount ($000)	Shares (000)
Investor Shares
Issued	8,183	239		40,853	1,192
Issued in Lieu of Cash Distributions	1,879	58		5,511	161
Redeemed	(43,624)	(1,361)		(81,477)	(2,463)
Net Increase (Decrease)—Investor Shares	(33,562)	(1,064)		(35,113)	(1,110)
ETF Shares
Issued	2,739,304	26,810		12,323,320	119,786
Issued in Lieu of Cash Distributions	—	—		—	—
Redeemed	(5,029,019)	(51,400)		(6,070,834)	(58,700)
Net Increase (Decrease)—ETF Shares	(2,289,715)	(24,590)		6,252,486	61,086
Admiral Shares
Issued	1,491,343	10,427		4,265,102	29,377
Issued in Lieu of Cash Distributions	242,660	1,768		616,726	4,188
Redeemed	(1,804,522)	(12,701)		(3,829,240)	(26,405)
Net Increase (Decrease)—Admiral Shares	(70,519)	(506)		1,052,588	7,160
Institutional Shares
Issued	1,257,128	57,103		2,230,405	98,845
Issued in Lieu of Cash Distributions	125,971	5,933		311,998	13,695
Redeemed	(892,377)	(40,438)		(2,320,764)	(103,325)
Net Increase (Decrease)—Institutional Shares	490,722	22,598		221,639	9,215

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Real Estate Index Fund

H.Certain of the fund’s investments are in companies that are considered to be affiliated companies of the fund because the fund owns more than 5% of the outstanding voting securities of the company or the issuer is another member of The Vanguard Group. Transactions during the period in securities of these companies were as follows:

		Current Period Transactions
	Jan. 31, 2022 Market Value ($000)	Purchases at Cost ($000)	Proceeds from Securities Sold1 ($000)	Realized Net Gain (Loss) ($000)	Change in Unrealized App. (Dep.) ($000)	Income ($000)	Capital Gain Distributions Received ($000)	Jul. 31, 2022 Market Value ($000)
Easterly Government Properties Inc.	90,343	5,544	16,623	(251)	(2,921)	2,164	—	NA 2
Equity Commonwealth	NA 3	10,687	27,803	(1,498)	12,511	—	—	NA 2
Hudson Pacific Properties Inc.	NA 3	11,338	17,834	(4,079)	(57,207)	3,572	—	NA 2
Vanguard Market Liquidity Fund	147,613	NA 4	NA 4	(50)	(14)	645	—	482,239
Vanguard Real Estate II Index Fund	9,542,041	117,477	—	—	(683,638)	117,477	—	8,978,201
VICI Properties Inc.	NA 3,5	488,161	282,110	27,277	252,463	24,840	—	NA 2
Total	9,779,997	633,207	344,370	21,399	(478,806)	148,698	—	9,460,440

1	Does not include adjustments related to return of capital.
2	Not applicable—at July 31, 2022, the security was still held, but the issuer was no longer an affiliated company of the fund.
3	Not applicable—at January 31, 2022, the issuer was not an affiliated company of the fund.
4	Not applicable—purchases and sales are for temporary cash investment purposes.
5	Not applicable—in April 2022, VICI Properties Inc. acquired MGM Growth Properties LLC.

I.	Management has determined that no events or transactions occurred subsequent to July 31, 2022, that would require recognition or disclosure in these financial statements.

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Real Estate II Index Fund

Fund Allocation

As of July 31, 2022

Diversified Real Estate Activities	0.1%
Diversified REITs	2.7
Health Care REITs	8.1
Hotel & Resort REITs	2.5
Industrial REITs	11.6
Office REITs	5.9
Real Estate Development	0.2
Real Estate Operating Companies	0.5
Real Estate Services	4.0
Residential REITs	15.2
Retail REITs	11.3
Specialized REITs	37.9

The table reflects the fund’s investments, except for short-term investments and derivatives. Sector categories are based on the Global Industry Classification Standard (“GICS”), except for the “Other” category (if applicable), which includes securities that have not been provided a GICS classification as of the effective reporting period.

The fund may invest in derivatives (such as futures and swap contracts) for various reasons, including, but not limited to, attempting to remain fully invested and tracking its target index as closely as possible.

The Global Industry Classification Standard (“GICS”) was developed by and is the exclusive property and a service mark of MSCI Inc. (“MSCI”) and Standard and Poor’s, a division of McGraw-Hill Companies, Inc. (“S&P”), and is licensed for use by Vanguard. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classification makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of its affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

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Real Estate II Index Fund

Financial Statements (unaudited)

Schedule of Investments

As of July 31, 2022

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) (95.0%)
Diversified REITs (2.7%)
	WP Carey Inc.				1,158,931	103,493
	STORE Capital Corp.				1,498,233	43,479
	Broadstone Net Lease Inc.				993,672	22,527
	Essential Properties Realty Trust Inc.				763,637	18,419
	Global Net Lease Inc.				631,098	9,523
	American Assets Trust Inc.				312,892	9,459
	Alexander & Baldwin Inc.				440,954	8,779
	Empire State Realty Trust Inc. Class A				874,766	7,462
	iStar Inc.				420,079	7,019
	Armada Hoffler Properties Inc.				409,794	5,811
	Gladstone Commercial Corp.				229,328	4,804
	One Liberty Properties Inc.				101,863	2,827
						243,602
Health Care REITs (8.1%)
	Welltower Inc.				2,719,606	234,811
	Ventas Inc.				2,429,055	130,635
	Healthpeak Properties Inc.				3,279,150	90,603
	Medical Properties Trust Inc.				3,628,739	62,559
	Healthcare Realty Trust Inc. Class A				2,314,798	60,763
	Omega Healthcare Investors Inc.				1,453,889	45,071
	Physicians Realty Trust				1,367,537	24,301
	Sabra Health Care REIT Inc.				1,403,911	21,606
	National Health Investors Inc.				278,772	18,076
	CareTrust REIT Inc.				590,124	12,186
	LTC Properties Inc.				240,295	10,068
	Community Healthcare Trust Inc.				144,816	5,641
	Global Medical REIT Inc.				371,042	4,519

					Shares	Market Value• ($000)
	Universal Health Realty Income Trust				79,609	4,291
	Diversified Healthcare Trust				1,449,979	2,508
						727,638
Hotel & Resort REITs (2.5%)
	Host Hotels & Resorts Inc.				4,342,314	77,337
*	Ryman Hospitality Properties Inc.				318,097	28,164
	Apple Hospitality REIT Inc.				1,318,391	21,991
	Park Hotels & Resorts Inc.				1,037,833	16,180
	Pebblebrook Hotel Trust				799,484	15,638
*	Sunstone Hotel Investors Inc.				1,333,564	15,109
	RLJ Lodging Trust				1,012,853	12,650
*	DiamondRock Hospitality Co.				1,281,877	11,896
*	Xenia Hotels & Resorts Inc.				694,712	11,407
	Service Properties Trust				1,004,752	6,571
*	Summit Hotel Properties Inc.				647,605	5,084
*	Chatham Lodging Trust				280,859	3,415
						225,442
Industrial REITs (11.6%)
	Prologis Inc.				4,499,479	596,451
	Duke Realty Corp.				2,327,380	145,601
	Rexford Industrial Realty Inc.				976,154	63,850
	Americold Realty Trust Inc.				1,381,262	45,236
	EastGroup Properties Inc.				250,819	42,775
	First Industrial Realty Trust Inc.				801,263	41,625
	STAG Industrial Inc.				1,082,003	35,468
	Terreno Realty Corp.				459,057	28,760
	LXP Industrial Trust				1,736,639	19,051
	Innovative Industrial Properties Inc.				155,821	15,023
	Plymouth Industrial REIT Inc.				222,529	4,286
	Industrial Logistics Properties Trust				398,082	3,993
						1,042,119

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Real Estate II Index Fund

27

Real Estate II Index Fund

28

Real Estate II Index Fund

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)
Americold Realty Trust Inc.	1/31/23	GSI	7,788	(2.093)	396	—
Park Hotels & Resorts Inc.	1/31/23	GSI	5,544	(2.110)	690	—
					1,086	—

1	Based on USD Overnight Bank Funding Rate as of the most recent payment date. Floating interest payment received/paid monthly.
	GSI—Goldman Sachs International.

At July 31, 2022, the counterparties had deposited in segregated accounts securities with a value of $1,092,000 in connection with open over-the-counter swap contracts.

See accompanying Notes, which are an integral part of the Financial Statements.

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Real Estate II Index Fund

Statement of Assets and Liabilities

As of July 31, 2022

($000s, except shares and per-share amounts)	Amount
Assets
Investments in Securities, at Value1
Unaffiliated Issuers (Cost $7,229,000)	8,963,469
Affiliated Issuers (Cost $26,840)	26,840
Total Investments in Securities	8,990,309
Investment in Vanguard	316
Receivables for Investment Securities Sold	1,218
Receivables for Accrued Income	16,915
Unrealized Appreciation—Over-the-Counter Swap Contracts	1,086
Total Assets	9,009,844
Liabilities
Due to Custodian	1,218
Payables for Investment Securities Purchased	15,788
Collateral for Securities on Loan	14,336
Payables to Vanguard	301
Total Liabilities	31,643
Net Assets	8,978,201
1 Includes $13,847 of securities on loan.
At July 31, 2022, net assets consisted of:
Paid-in Capital	7,206,235
Total Distributable Earnings (Loss)	1,771,966
Net Assets	8,978,201
Net Assets
Applicable to 376,527,417 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	8,978,201
Net Asset Value Per Share	$23.84

See accompanying Notes, which are an integral part of the Financial Statements.

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Real Estate II Index Fund

Statement of Operations

	Six Months Ended July 31, 2022
	($000)
Investment Income
Income
Dividends	142,749
Interest 1	17
Securities Lending—Net	70
Total Income	142,836
Expenses
The Vanguard Group—Note B
Investment Advisory Services	618
Management and Administrative	2,872
Marketing and Distribution	79
Custodian Fees	13
Shareholders’ Reports	—
Trustees’ Fees and Expenses	2
Other Expenses	6
Total Expenses	3,590
Expenses Paid Indirectly	(1)
Net Expenses	3,589
Net Investment Income	139,247
Realized Net Gain (Loss)
Capital Gain Distributions Received	5,521
Investment Securities Sold1	14,480
Swap Contracts	(1,523)
Realized Net Gain (Loss)	18,478
Change in Unrealized Appreciation (Depreciation)
Investment Securities1	(722,651)
Swap Contracts	1,086
Change in Unrealized Appreciation (Depreciation)	(721,565)
Net Increase (Decrease) in Net Assets Resulting from Operations	(563,840)

1	Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $17,000, ($6,000), and less than $1,000, respectively. Purchases and sales are for temporary cash investment purposes.

See accompanying Notes, which are an integral part of the Financial Statements.

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Real Estate II Index Fund

Statement of Changes in Net Assets

	Six Months Ended July 31, 2022		Year Ended January 31, 2022
	($000)		($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	139,247		176,897
Realized Net Gain (Loss)	18,478		53,384
Change in Unrealized Appreciation (Depreciation)	(721,565)		1,912,230
Net Increase (Decrease) in Net Assets Resulting from Operations	(563,840)		2,142,511
Distributions
Net Investment Income and/or Realized Capital Gains	(117,477)		(186,333)
Return of Capital	—		(76,790)
Total Distributions	(117,477)		(263,123)
Capital Share Transactions
Issued	—		—
Issued in Lieu of Cash Distributions	117,477		263,123
Redeemed	—		—
Net Increase (Decrease) from Capital Share Transactions	117,477		263,123
Total Increase (Decrease)	(563,840)		2,142,511
Net Assets
Beginning of Period	9,542,041		7,399,530
End of Period	8,978,201		9,542,041

See accompanying Notes, which are an integral part of the Financial Statements.

32

Real Estate II Index Fund

Financial Highlights

For a Share Outstanding Throughout Each Period	Six Months Ended July 31, 2022		Year Ended January 31,			September 26, 20171 to January 31, 2018
		2022	2021	2020	2019
Net Asset Value, Beginning of Period	$25.69	$20.50	$22.64	$20.10	$19.17	$20.00
Investment Operations
Net Investment Income2	.373	.484	.471	.571	.611	.268
Net Realized and Unrealized Gain (Loss) on Investments	(1.908)	5.427	(1.808)	2.752	1.176	(.834)
Total from Investment Operations	(1.535)	5.911	(1.337)	3.323	1.787	(.566)
Distributions
Dividends from Net Investment Income	(.315)	(.477)	(.465)	(.590)	(.626)	(.225)
Distributions from Realized Capital Gains	—	(.034)	—	—	—	(.030)
Return of Capital	—	(.210)	(.338)	(.193)	(.231)	(.009)
Total Distributions	(.315)	(.721)	(.803)	(.783)	(.857)	(.264)
Net Asset Value, End of Period	$23.84	$25.69	$20.50	$22.64	$20.10	$19.17
Total Return	-5.93%	28.96%	-5.70%	16.78%	9.68%	-2.89%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$8,978	$9,542	$7,400	$7,848	$6,719	$6,126
Ratio of Total Expenses to Average Net Assets	0.08% 3	0.08%	0.08%	0.08%	0.08%	0.08% 4
Ratio of Net Investment Income to Average Net Assets	2.90%	1.95%	2.41%	2.63%	3.22%	3.84% 4
Portfolio Turnover Rate	3%	6%	4%	3%	23%	1%
The expense ratio and net investment income ratio for the current period have been annualized.

1	Inception.
2	Calculated based on average shares outstanding.
3	The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.08%.
4	Annualized.

See accompanying Notes, which are an integral part of the Financial Statements.

33

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, 2022, the Real Estate Index Fund was the record and beneficial owner of 100% 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.

Significant market disruptions, such as those caused by pandemics (e.g., COVID-19 pandemic), natural or environmental disasters, war (e.g., Russia’s invasion of Ukraine), 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 investments and fund performance.

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 materially 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 board of trustees to represent fair value. 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 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

34

Real Estate II Index Fund

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, 2022, 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 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

35

Real Estate II Index Fund

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 $4.4 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, 2022, 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 investment securities, and management’s estimates of such amounts for investment security 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.

36

Real Estate II Index Fund

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At July 31, 2022, the fund had contributed to Vanguard capital in the amount of $316,000, representing less than 0.01% of the fund’s net assets and 0.13% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

C.	The fund’s custodian bank has agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing custody account. For the six months ended July 31, 2022, custodian fee offset arrangements reduced the fund’s expenses by $1,000 (an annual rate of less than 0.01% of average net assets).
D.	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, 2022, based on the inputs used to value them:

	Level 1 ($000)	Level 2 ($000)	Level 3 ($000)	Total ($000)
Investments
Assets
Common Stocks	8,963,469	—	—	8,963,469
Temporary Cash Investments	26,840	—	—	26,840
Total	8,990,309	—	—	8,990,309
Derivative Financial Instruments
Assets
Swap Contracts	—	1,086	—	1,086

E.	As of July 31, 2022, 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	7,288,336
Gross Unrealized Appreciation	2,502,589
Gross Unrealized Depreciation	(799,530)
Net Unrealized Appreciation (Depreciation)	1,703,059

37

Real Estate II Index Fund

F.	During the six months ended July 31, 2022, the fund purchased $461,971,000 of investment securities and sold $306,012,000 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, 2022, such purchases were $1,390,000 and sales were $140,000, resulting in net realized loss of $19,000; 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, 2022		Year Ended January 31, 2022
	Shares (000)		Shares (000)
Issued	—		—
Issued in Lieu of Cash Distributions	5,076		10,506
Redeemed	—		—
Net Increase (Decrease) in Shares Outstanding	5,076		10,506

H.	Management has determined that no events or transactions occurred subsequent to July 31, 2022, that would require recognition or disclosure in these financial statements.

38

Trustees Approve Advisory Arrangements

The board of trustees of Vanguard Real Estate Index Fund and the board of trustees of Vanguard Real Estate II Index Fund have renewed their respective 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 monthly 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. 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; they 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 that 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 that 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.

39

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.

40

Liquidity Risk Management

Vanguard funds (except for the money market funds) have adopted and implemented a written liquidity risk management program (the “Program”) as required by Rule 22e-4 under the Investment Company Act of 1940. Rule 22e-4 requires that each fund adopt a program that is reasonably designed to assess and manage the fund’s liquidity risk, which is the risk that the fund could not meet redemption requests without significant dilution of remaining investors’ interests in the fund.

Assessment and management of a fund’s liquidity risk under the Program take into consideration certain factors, such as the fund’s investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions, its short- and long-term cash-flow projections during both normal and reasonably foreseeable stressed conditions, and its cash and cash-equivalent holdings and access to other funding sources. As required by the rule, the Program includes policies and procedures for classification of fund portfolio holdings in four liquidity categories, maintaining certain levels of highly liquid investments, and limiting holdings of illiquid investments.

The board of trustees of Vanguard Real Estate Index Funds approved the appointment of liquidity risk management program administrators responsible for administering the Program for Vanguard Real Estate Index Fund and Vanguard Real Estate II Index Fund, and for carrying out the specific responsibilities set forth in the Program, including reporting to the board on at least an annual basis regarding the Program's operation, its adequacy, and the effectiveness of its implementation for the past year (the “Program Administrator Report”). The board has reviewed the Program Administrator Report covering the period from January 1, 2021, through December 31, 2021 (the “Review Period”). The Program Administrator Report stated that during the Review Period the Program operated and was implemented effectively to manage the funds' liquidity risk.

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This material may be used in conjunction with the offering of shares of any Vanguard fund only if preceded or accompanied by the fund’s current prospectus.

You can obtain a free copy of Vanguard’s proxy voting guidelines by visiting vanguard.com/proxyreporting or by calling Vanguard at 800-662-2739. The guidelines are also available from the SEC’s website, www.sec.gov. In addition, you may obtain a free report on how your fund voted the proxies for securities it owned during the 12 months ended June 30. To get the report, visit either vanguard.com/proxyreporting or www.sec.gov.

You can review information about your fund on the SEC’s website, and you can receive copies of this information, for a fee, by sending a request via email addressed to [email protected].

Source for Bloomberg indexes: Bloomberg Index Services Limited. Copyright 2022, Bloomberg. All rights reserved.

© 2022 The Vanguard Group, Inc.
All rights reserved.
U.S. Patent No. 6,879,964.
Vanguard Marketing Corporation, Distributor.

Q1232 092022