Contents

About Your Fund’s Expenses	1
Financial Statements	4
Trustees Approve Advisory Arrangement	20
Liquidity Risk Management	22

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, 2023
	Beginning Account Value 1/31/2023	Ending Account Value 7/31/2023	Expenses Paid During Period
Based on Actual Fund Return
Dividend Appreciation Index Fund
ETF Shares	$1,000.00	$1,074.30	$0.31
Admiral™ Shares	1,000.00	1,074.10	0.41
Based on Hypothetical 5% Yearly Return
Dividend Appreciation Index Fund
ETF Shares	$1,000.00	$1,024.50	$0.30
Admiral Shares	1,000.00	1,024.40	0.40

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.06% for ETF Shares and 0.08% for Admiral Shares. 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

Dividend Appreciation Index Fund

Fund Allocation

As of July 31, 2023

Communication Services	1.3%
Consumer Discretionary	7.2
Consumer Staples	12.0
Energy	3.0
Financials	18.0
Health Care	15.4
Industrials	13.1
Information Technology	22.5
Materials	4.5
Utilities	3.0

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.

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

Dividend Appreciation Index Fund

Financial Statements (unaudited)

Schedule of Investments

As of July 31, 2023

The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund’s Form N-PORT reports are available on the SEC’s website at www.sec.gov.

		Shares	Market Value• ($000)
Common Stocks (99.6%)
Communication Services (1.3%)
	Comcast Corp. Class A	24,081,195	1,089,915
	John Wiley & Sons Inc. Class A	239,789	8,208
			1,098,123
Consumer Discretionary (7.2%)
	Home Depot Inc.	5,743,449	1,917,393
	McDonald's Corp.	4,121,905	1,208,542
	Lowe's Cos. Inc.	3,456,037	809,646
	NIKE Inc. Class B	7,034,749	776,566
	Starbucks Corp.	6,464,753	656,625
	Tractor Supply Co.	618,168	138,463
	Genuine Parts Co.	793,752	123,603
	Pool Corp.	220,523	84,844
	Service Corp. International	853,794	56,905
	Williams-Sonoma Inc.	371,610	51,520
	Lithia Motors Inc. Class A	155,317	48,231
	Churchill Downs Inc.	372,443	43,147
	Polaris Inc.	302,036	41,029
	Thor Industries Inc.	302,294	34,912
	Brunswick Corp.	397,681	34,324
1	Dillard's Inc. Class A	19,195	6,585
	Monro Inc.	175,800	6,443
	Aaron's Co. Inc.	178,828	2,829
	Haverty Furniture Cos. Inc.	75,331	2,682
	Shoe Carnival Inc.	98,135	2,611
			6,046,900
Consumer Staples (11.9%)
	Procter & Gamble Co.	13,367,448	2,089,332
	PepsiCo Inc.	7,781,472	1,458,715
	Costco Wholesale Corp.	2,497,811	1,400,448
	Coca-Cola Co.	21,973,660	1,360,829
	Walmart Inc.	7,969,920	1,274,071
	Colgate-Palmolive Co.	4,683,628	357,173
	Target Corp.	2,605,993	355,640
	Archer-Daniels-Midland Co.	3,088,342	262,385
	Sysco Corp.	2,857,119	218,027
	Hershey Co.	831,664	192,372
	Church & Dwight Co. Inc.	1,378,551	131,886
	Kroger Co.	2,684,669	130,582
	McCormick & Co. Inc.	1,414,403	126,561
	Clorox Co.	696,871	105,562

		Shares	Market Value• ($000)
	Tyson Foods Inc. Class A	1,635,042	91,104
	J M Smucker Co.	601,605	90,632
	Brown-Forman Corp. Class B	1,033,433	72,960
	Hormel Foods Corp.	1,636,292	66,892
	Casey's General Stores Inc.	210,028	53,066
	Ingredion Inc.	372,285	41,420
	Flowers Foods Inc.	1,089,584	26,924
	Lancaster Colony Corp.	112,295	21,631
	WD-40 Co.	76,243	17,498
	J & J Snack Foods Corp.	84,061	13,477
	Andersons Inc.	176,027	8,594
	SpartanNash Co.	200,473	4,499
	Tootsie Roll Industries Inc.	103,851	3,620
			9,975,900
Energy (3.0%)
	Exxon Mobil Corp.	22,829,584	2,448,245
	Texas Pacific Land Corp.	34,711	52,285
			2,500,530
Financials (17.9%)
	JPMorgan Chase & Co.	16,500,256	2,606,380
	Visa Inc. Class A	8,748,437	2,079,766
	Mastercard Inc. Class A	4,753,098	1,874,051
	S&P Global Inc.	1,873,909	739,276
	Goldman Sachs Group Inc.	1,877,583	668,175
	BlackRock Inc.	848,275	626,748
	Marsh & McLennan Cos. Inc.	2,799,905	527,558
	Chubb Ltd.	2,337,922	477,895
	CME Group Inc.	2,030,731	404,034
	Aon plc Class A (XNYS)	1,161,117	369,816
	Moody's Corp.	891,209	314,374
	PNC Financial Services Group Inc.	2,265,616	310,140
	Arthur J Gallagher & Co.	1,202,525	258,302
	MetLife Inc.	3,635,680	228,939
	Travelers Cos. Inc.	1,321,524	228,108
	Aflac Inc.	3,135,371	226,813
	Ameriprise Financial Inc.	594,766	207,246
	Bank of New York Mellon Corp.	4,052,049	183,801
	Allstate Corp.	1,495,586	168,523

4

Dividend Appreciation Index Fund

5

Dividend Appreciation Index Fund

6

Dividend Appreciation Index Fund

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7

Dividend Appreciation Index Fund

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)
Kroger Co.	1/31/24	GSI	46,540	(5.164)	2,007	—
Visa Inc. Class A	8/31/23	BANA	105,790	(5.023)	—	(428)
					2,007	(428)

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

At July 31, 2023, the counterparties had deposited in segregated accounts securities with a value of $1,588,000 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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Dividend Appreciation Index Fund

Statement of Assets and Liabilities

As of July 31, 2023

($000s, except shares, footnotes, and per-share amounts)	Amount
Assets
Investments in Securities, at Value1
Unaffiliated Issuers (Cost $60,408,645)	83,498,485
Affiliated Issuers (Cost $246,181)	246,191
Total Investments in Securities	83,744,676
Investment in Vanguard	2,791
Cash	5,841
Cash Collateral Pledged—Futures Contracts	8,060
Cash Collateral Pledged—Over-the-Counter Swap Contracts	1,170
Receivables for Investment Securities Sold	111
Receivables for Accrued Income	67,264
Receivables for Capital Shares Issued	9,655
Variation Margin Receivable—Futures Contracts	288
Unrealized Appreciation—Over-the-Counter Swap Contracts	2,007
Total Assets	83,841,863
Liabilities
Payables for Investment Securities Purchased	6,804
Collateral for Securities on Loan	5,940
Payables for Capital Shares Redeemed	10,162
Payables to Vanguard	2,310
Unrealized Depreciation—Over-the-Counter Swap Contracts	428
Total Liabilities	25,644
Net Assets	83,816,219
1 Includes $5,598,000 of securities on loan.
At July 31, 2023, net assets consisted of:
Paid-in Capital	62,775,761
Total Distributable Earnings (Loss)	21,040,458
Net Assets	83,816,219
ETF Shares—Net Assets
Applicable to 424,004,260 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	70,482,017
Net Asset Value Per Share—ETF Shares	$166.23
Admiral Shares—Net Assets
Applicable to 295,582,027 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	13,334,202
Net Asset Value Per Share—Admiral Shares	$45.11

  

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

9

Dividend Appreciation Index Fund

Statement of Operations

	Six Months Ended July 31, 2023
	($000)
Investment Income
Income
Dividends	780,701
Interest1	5,524
Securities Lending—Net	2
Total Income	786,227
Expenses
The Vanguard Group—Note B
Investment Advisory Services	886
Management and Administrative—ETF Shares	16,827
Management and Administrative—Admiral Shares	4,428
Marketing and Distribution—ETF Shares	1,434
Marketing and Distribution—Admiral Shares	300
Custodian Fees	165
Shareholders’ Reports—ETF Shares	603
Shareholders’ Reports—Admiral Shares	71
Trustees’ Fees and Expenses	21
Other Expenses	29
Total Expenses	24,764
Expenses Paid Indirectly	(20)
Net Expenses	24,744
Net Investment Income	761,483
Realized Net Gain (Loss)
Investment Securities Sold1,2	343,527
Futures Contracts	9,389
Swap Contracts	2,787
Realized Net Gain (Loss)	355,703
Change in Unrealized Appreciation (Depreciation)
Investment Securities1	4,711,721
Futures Contracts	429
Swap Contracts	1,894
Change in Unrealized Appreciation (Depreciation)	4,714,044
Net Increase (Decrease) in Net Assets Resulting from Operations	5,831,230

1	Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $5,342,000, $20,000, and ($13,000), respectively. Purchases and sales are for temporary cash investment purposes.
2	Includes $1,528,510,000 of net gain (loss) resulting from in-kind redemptions.

  

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

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Dividend Appreciation Index Fund

Statement of Changes in Net Assets

	Six Months Ended July 31, 2023		Year Ended January 31, 2023
	($000)		($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	761,483		1,480,125
Realized Net Gain (Loss)	355,703		2,757,929
Change in Unrealized Appreciation (Depreciation)	4,714,044		(5,746,536)
Net Increase (Decrease) in Net Assets Resulting from Operations	5,831,230		(1,508,482)
Distributions
ETF Shares	(647,058)		(1,250,613)
Admiral Shares	(120,292)		(233,770)
Total Distributions	(767,350)		(1,484,383)
Capital Share Transactions
ETF Shares	154,117		2,946,879
Admiral Shares	64,988		87,399
Net Increase (Decrease) from Capital Share Transactions	219,105		3,034,278
Total Increase (Decrease)	5,282,985		41,413
Net Assets
Beginning of Period	78,533,234		78,491,821
End of Period	83,816,219		78,533,234

  

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

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Dividend Appreciation Index Fund

Financial Highlights

ETF Shares
For a Share Outstanding Throughout Each Period	Six Months Ended July 31, 2023	Year Ended January 31,
		2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$156.26	$162.69	$137.11	$125.38	$104.09	$107.10
Investment Operations
Net Investment Income1	1.510	2.982	2.736	2.299	2.214	2.084
Net Realized and Unrealized Gain (Loss) on Investments	9.982	(6.439)	25.504	11.728	21.210	(3.056)
Total from Investment Operations	11.492	(3.457)	28.240	14.027	23.424	(.972)
Distributions
Dividends from Net Investment Income	(1.522)	(2.973)	(2.660)	(2.297)	(2.134)	(2.038)
Distributions from Realized Capital Gains	—	—	—	—	—	—
Total Distributions	(1.522)	(2.973)	(2.660)	(2.297)	(2.134)	(2.038)
Net Asset Value, End of Period	$166.23	$156.26	$162.69	$137.11	$125.38	$104.09
Total Return	7.43%	-2.02%	20.71%	11.44%	22.68%	-0.87%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$70,482	$66,062	$65,589	$51,842	$42,217	$30,969
Ratio of Total Expenses to Average Net Assets	0.06%2	0.06%2	0.06%	0.06%	0.06%	0.06%
Ratio of Net Investment Income to Average Net Assets	1.94%	1.96%	1.74%	1.84%	1.90%	2.01%
Portfolio Turnover Rate3	13%	12%	26%	25%	14%	16%
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 0.06%.
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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Dividend Appreciation Index Fund

Financial Highlights

Admiral Shares
For a Share Outstanding Throughout Each Period	Six Months Ended July 31, 2023	Year Ended January 31,
		2023	2022	2021	2020	2019
Net Asset Value, Beginning of Period	$42.41	$44.15	$37.21	$34.03	$28.25	$29.07
Investment Operations
Net Investment Income1	.406	.801	.734	.617	.594	.560
Net Realized and Unrealized Gain (Loss) on Investments	2.703	(1.743)	6.920	3.179	5.757	(.830)
Total from Investment Operations	3.109	(.942)	7.654	3.796	6.351	(.270)
Distributions
Dividends from Net Investment Income	(.409)	(.798)	(.714)	(.616)	(.571)	(.550)
Distributions from Realized Capital Gains	—	—	—	—	—	—
Total Distributions	(.409)	(.798)	(.714)	(.616)	(.571)	(.550)
Net Asset Value, End of Period	$45.11	$42.41	$44.15	$37.21	$34.03	$28.25
Total Return2	7.41%	-2.02%	20.67%	11.44%	22.65%	-0.89%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$13,334	$12,471	$12,903	$10,685	$9,955	$6,755
Ratio of Total Expenses to Average Net Assets	0.08%3	0.08%3	0.08%	0.08%	0.08%	0.08%
Ratio of Net Investment Income to Average Net Assets	1.92%	1.94%	1.72%	1.82%	1.87%	1.99%
Portfolio Turnover Rate4	13%	12%	26%	25%	14%	16%
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 0.08%.
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.

13

Dividend Appreciation Index Fund

Notes to Financial Statements

Vanguard Dividend Appreciation Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers two classes of shares: ETF Shares and Admiral 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, Inc.; they can be purchased and sold through a broker.

A.	The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued by methods deemed by the valuation designee to represent fair value and subject to oversight by the board of trustees. Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset value. Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

2. Futures Contracts: The fund uses index futures contracts to a limited extent, with the objectives of maintaining full exposure to the stock market, maintaining liquidity, and minimizing transaction costs. The fund may purchase futures contracts to immediately invest incoming cash in the market, or sell futures in response to cash outflows, thereby simulating a fully invested position in the underlying index while maintaining a cash balance for liquidity. The primary risks associated with the use of futures contracts are imperfect correlation between changes in market values of stocks held by the fund and the prices of futures contracts, and the possibility of an illiquid market. Counterparty risk involving futures is mitigated because a regulated clearinghouse is the counterparty instead of the clearing broker. To further mitigate counterparty risk, the fund trades futures contracts on an exchange, monitors the financial strength of its clearing brokers and clearinghouse, and has entered into clearing agreements with its clearing brokers. The clearinghouse imposes initial margin requirements to secure the fund’s performance and requires daily settlement of variation margin representing changes in the market value of each contract. Any securities pledged as initial margin for open contracts are noted in the Schedule of Investments.

Futures contracts are valued at their quoted daily settlement prices. The notional amounts of the contracts are not recorded in the Statement of Assets and Liabilities. Fluctuations in the value of the contracts are recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until the contracts are closed, when they are recorded as realized gains (losses) on futures contracts.

During the six months ended July 31, 2023, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period.

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Dividend Appreciation Index Fund

3.  Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks or indexes in the fund’s target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.

A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund’s maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty’s default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund’s net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Schedule of Investments. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.

The notional amounts of swap contracts are not recorded in the Statement of Assets and Liabilities. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until periodic payments are made or the termination of the swap, at which time realized gain (loss) is recorded.

During the six months ended July 31, 2023, 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.

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute virtually all of its taxable income. The fund’s tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund’s tax positions taken for all open federal and state income tax years, and has concluded that no provision for income tax is required in the fund’s financial statements.

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Dividend Appreciation Index Fund

5. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.

6. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty’s default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Collateral investments in Vanguard Market Liquidity Fund are subject to market appreciation or depreciation. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.

7. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group ("Vanguard") participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes and are subject to the fund’s regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed amount of the facility, which are allocated to the funds based on a method approved by the fund’s board of trustees and included in Management and Administrative expenses on the fund’s Statement of Operations. Any borrowings under either facility bear interest at an agreed-upon spread plus the higher of the federal funds effective rate, the overnight bank funding rate, or the Daily Simple Secured Overnight Financing Rate inclusive of an additional agreed-upon spread. However, borrowings under the uncommitted credit facility may bear interest based upon an alternate rate agreed to by the fund and Vanguard.

In accordance with an exemptive order (the “Order”) from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the “Interfund Lending Program”), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund’s investment objective and investment policies. Interfund loans and borrowings normally extend overnight but can have a maximum duration of seven days. Loans may be called on one business day’s notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program. 

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Dividend Appreciation Index Fund

For the six months ended July 31, 2023, the fund did not utilize the credit facilities or the Interfund Lending Program.

8. Other: Dividend income is recorded on the ex-dividend date. Non-cash dividends included in income, if any, are recorded at the fair value of the securities received. Interest income includes income distributions received from Vanguard Market Liquidity Fund is accrued daily. Premiums and discounts on debt securities are amortized and accreted, respectively, to interest income over the lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses) and shareholder reporting. Marketing and distribution expenses are allocated to each class of shares based on a method approved by the board of trustees. Income, other non-class-specific expenses, and gains and losses on investments are allocated to each class of shares based on its relative net assets.

B.

In accordance with the terms of a Funds' Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees and are generally settled twice a month.

Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At July 31, 2023, the fund had contributed to Vanguard capital in the amount of $2,791,000, representing less than 0.01% of the fund’s net assets and 1.12% 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, 2023, custodian fee offset arrangements reduced the fund’s expenses by $20,000 (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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Dividend Appreciation Index Fund

The following table summarizes the market value of the fund’s investments and derivatives as of July 31, 2023, based on the inputs used to value them:

	Level 1 ($000)	Level 2 ($000)	Level 3 ($000)	Total ($000)
Investments
Assets
Common Stocks	83,498,485	—	—	83,498,485
Temporary Cash Investments	246,191	—	—	246,191
Total	83,744,676	—	—	83,744,676
Derivative Financial Instruments
Assets
Futures Contracts1	3,879	—	—	3,879
Swap Contracts	—	2,007	—	2,007
Total	3,879	2,007	—	5,886
Liabilities
Swap Contracts	—	428	—	428

1	Includes cumulative appreciation (depreciation) on futures contracts and centrally cleared swaps, if any, as reported in the Schedule of Investments. Only current day’s variation margin is reported within the Statement of Assets and Liabilities.

E.	As of July 31, 2023, 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	60,669,610
Gross Unrealized Appreciation	23,788,732
Gross Unrealized Depreciation	(709,787)
Net Unrealized Appreciation (Depreciation)	23,078,945

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, 2023, the fund had available capital losses totaling $2,492,949,000 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, 2024; 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, 2023, the fund purchased $13,942,405,000 of investment securities and sold $13,784,002,000 of investment securities, other than temporary cash investments. Purchases and sales include $3,812,772,000 and $3,861,077,000, 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, 2023, such purchases were $977,543,000 and sales were $785,932,000,

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Dividend Appreciation Index Fund

resulting in net realized loss of $143,782,000; these amounts, other than temporary cash investments, are included in the purchases and sales of investment securities noted above.

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

    

	Six Months Ended July 31, 2023			Year Ended January 31, 2023
	Amount ($000)	Shares (000)		Amount ($000)	Shares (000)
ETF Shares
Issued	4,024,724	26,539		9,908,220	64,894
Issued in Lieu of Cash Distributions	—	—		—	—
Redeemed	(3,870,607)	(25,300)		(6,961,341)	(45,275)
Net Increase (Decrease)—ETF Shares	154,117	1,239		2,946,879	19,619
Admiral Shares
Issued	817,983	19,198		1,662,170	40,062
Issued in Lieu of Cash Distributions	102,678	2,462		199,774	4,966
Redeemed	(855,673)	(20,165)		(1,774,545)	(43,189)
Net Increase (Decrease)—Admiral Shares	64,988	1,495		87,399	1,839

H.

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’s investments and fund performance.

To the extent the fund’s investment portfolio reflects concentration in a particular market, industry, sector, country or asset class, the fund may be adversely affected by the performance of these concentrations and may be subject to increased price volatility and other risks.

The use of derivatives may expose the fund to various risks. Derivatives can be highly volatile, and any initial investment is generally small relative to the notional amount so that transactions may be leveraged in terms of market exposure. A relatively small market movement may have a potentially larger impact on derivatives than on standard securities. Leveraged derivatives positions can, therefore, increase volatility. Additional information regarding the fund’s use of derivative(s) and the specific risks associated is described under significant accounting policies.

I.	Management has determined that no events or transactions occurred subsequent to July 31, 2023, that would require recognition or disclosure in these financial statements.

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Trustees Approve Advisory Arrangement

The board of trustees of Vanguard Dividend Appreciation Index Fund has renewed the fund’s investment advisory arrangement with The Vanguard Group, Inc. (Vanguard), through its Equity Index Group. The board determined that continuing the fund’s internalized management structure was in the best interests of the fund and its shareholders.

The board based its decision upon an evaluation of the advisor’s investment staff, portfolio management process, and performance. This evaluation included information provided to the board by Vanguard’s Portfolio Review Department, which is responsible for fund and advisor oversight and product management. The Portfolio Review Department met regularly with the advisor and made presentations to the board during the fiscal year that directed the board’s focus to relevant information and topics.

The board, or an investment committee made up of board members, also received information throughout the year during advisor presentations. For each advisor presentation, the board was provided with letters and reports that included information about, among other things, the advisory firm and the advisor’s assessment of the investment environment, portfolio performance, and portfolio characteristics.

In addition, the board received periodic reports throughout the year, which included information about the fund’s performance relative to its peers and benchmark, as applicable, and updates, as needed, on the Portfolio Review Department’s ongoing assessment of the advisor.

Prior to their meeting, the trustees were provided with a memo and materials that summarized the information they received over the course of the year. They also considered the factors discussed below, among others. However, no single factor determined whether the board approved the arrangement. Rather, it was the totality of the circumstances that drove the board’s decision.

Nature, extent, and quality of services

The board reviewed the quality of the fund’s investment management services over both the short and long term and took into account the organizational depth and stability of the advisor. The 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.

The board concluded that Vanguard’s experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangement.

Investment performance

The board considered the short- and long-term performance of the fund, including any periods of outperformance or underperformance compared with its target index and peer group. The board concluded that the performance was such that the advisory arrangement should continue.

Cost

The board concluded that the fund’s expense ratio was below the average expense ratio charged by funds in its peer group and that the fund’s advisory expenses were also below the peer-group average.

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The board does not conduct 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

The board concluded that the 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.

The board will consider whether to renew the advisory arrangement again after a one-year period.

21

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 Specialized Funds approved the appointment of liquidity risk management program administrators responsible for administering Vanguard Dividend Appreciation Index Fund's Program 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, 2022, through December 31, 2022 (the “Review Period”). The Program Administrator Report stated that during the Review Period the Program operated and was implemented effectively to manage the fund’s liquidity risk.

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All rights reserved.
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Q6022 092023