Vanguard Specialized Funds
03/27/2026 | Press release | Distributed by Public on 03/27/2026 12:56
Annual Report by Investment Company (Form N-CSR)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT
OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-03916
| Name of Registrant: | Vanguard Specialized Funds |
| Address of Registrant: | P.O. Box 2600 |
| Valley Forge, PA 19482 |
| Name and address of agent for service: | Natalie Lamarque, Esquire |
| P.O. Box 876 | |
| Valley Forge, PA 19482 |
Registrant's telephone number, including area code: (610) 669-1000
Date of fiscal year end: January 31
Date of reporting period: February 1, 2025-January 31, 2026
Item 1: Reports to Shareholders.
TABLE OF CONTENTS
|
Vanguard Real Estate Index Fund |
|
|
Vanguard Real Estate Index Fund |
|
|
Vanguard Real Estate Index Fund |
|
|
Vanguard Real Estate Index Fund |
|
|
Vanguard Global Capital Cycles Fund |
|
|
Vanguard Global ESG Select Stock Fund |
|
|
Vanguard Global ESG Select Stock Fund |
|
Vanguard Real Estate Index Fund
Investor Shares (VGSIX)
Annual Shareholder Report | January 31, 2026
This annual shareholder report contains important information about Vanguard Real Estate Index Fund (the "Fund") for the period of February 1, 2025, to January 31, 2026. You can find additional information about the Fund at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature. You can also request this information by contacting us at 800-662-7447. The report describes changes to the Fund that occurred during the reporting period.
What were the Fund costs for the last year?
(based on a hypothetical $10,000 investment)
| Share Class Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| Investor Shares | $28 | 0.27% |
How did the Fund perform during the reporting period?
-
For the 12 months ended January 31, 2026, the Fund performed in line with its benchmark.
-
The first part of the period was marked by volatility in the financial markets amid fears that U.S. tariff announcements might spark trade wars and drag down global growth. Despite these concerns, markets posted solid gains for the 12 months, buoyed by optimism surrounding artificial intelligence, robust corporate earnings, and a more dovish monetary policy. The European Central Bank and the Federal Reserve each cut interest rates three times, while the Bank of England lowered rates four times.
-
Nine of the benchmark's 17 subsectors recorded positive returns for the 12-month period. Health care REITs-which returned just over 32%-contributed the most to performance. Retail REITs and industrial REITs were also top performers. Office REITs and multifamily residential REITs detracted the most.
How did the Fund perform over the past 10 years?
Keep in mind that the Fund's past performance does not indicate how the Fund will perform in the future. Updated performance information is available on our website at vanguard.com/performance or by calling Vanguard toll-free at 800-662-7447. The graph and returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Cumulative Performance: January 31, 2016, Through January 31, 2026
Initial Investment of $10,000
| Average Annual Total Returns | |||
| 1 Year | 5 Years | 10 Years | |
| Investor Shares | 4.04% | 5.03% | 5.63% |
| Real Estate Spliced Index | 4.31% | 5.31% | 5.89% |
| Dow Jones U.S. Total Stock Market Float Adjusted Index | 15.34% | 13.50% | 15.06% |
|
Fund Statistics (as of January 31, 2026) |
|
|
Fund Net Assets (in millions) |
$65,742 |
| Number of Portfolio Holdings | 159 |
| Portfolio Turnover Rate | 7% |
|
Total Investment Advisory Fees (in thousands) |
$1,208 |
|
Portfolio Composition % of Net Assets (as of January 31, 2026) |
|
| Data Center REITs | 7.8% |
| Health Care REITs | 13.1% |
| Industrial REITs | 9.8% |
| Multi-Family Residential REITs | 6.3% |
| Other Specialized REITs | 5.4% |
| Real Estate Services | 7.2% |
| Retail REITs | 12.0% |
| Self-Storage REITs | 4.8% |
| Single-Family Residential REITs | 3.1% |
| Telecom Tower REITs | 8.0% |
| Vanguard Real Estate II Index Fund1 | 14.5% |
| Other Assets and Liabilities-Net | 8.0% |
| This table reflects the Fund's investments, including short-term investments, derivatives and other assets and liabilities. | |
|
1 |
Vanguard Real Estate II Index Fund ("the Subsidiary") is the wholly owned subsidiary in which the Fund has invested a portion of its assets. |
How has the Fund changed?
Effective January 12, 2026, The Vanguard Group, Inc. exercises portfolio management responsibilities for the fund through its wholly-owned subsidiary, Vanguard Portfolio Management, LLC.
This is a summary of certain changes to the Fund since January 31, 2025. For more complete information, you may review the Fund's next prospectus, which we expect to be available by May 31, 2026, at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literatureor upon request at 800-662-7447.
Where can I find additional information about the Fund?
Additional information about the Fund and the Subsidiary, including their prospectuses, financial information, holdings, and proxy voting information is available at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature.
Connect with Vanguard ® • vanguard.com
Fund Information • 800-662-7447
Direct Investor Account Services • 800-662-2739
Text Telephone for People Who Are Deaf or Hard of Hearing • 800-749-7273
© 2026 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
AR123
Vanguard Real Estate Index Fund
ETF Shares (VNQ) NYSE Arca
Annual Shareholder Report | January 31, 2026
This annual shareholder report contains important information about Vanguard Real Estate Index Fund (the "Fund") for the period of February 1, 2025, to January 31, 2026. You can find additional information about the Fund at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature. You can also request this information by contacting us at 800-662-7447. The report describes changes to the Fund that occurred during the reporting period.
What were the Fund costs for the last year?
(based on a hypothetical $10,000 investment)
| Share Class Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| ETF Shares | $13 | 0.13% |
How did the Fund perform during the reporting period?
-
For the 12 months ended January 31, 2026, the Fund performed in line with its benchmark.
-
The first part of the period was marked by volatility in the financial markets amid fears that U.S. tariff announcements might spark trade wars and drag down global growth. Despite these concerns, markets posted solid gains for the 12 months, buoyed by optimism surrounding artificial intelligence, robust corporate earnings, and a more dovish monetary policy. The European Central Bank and the Federal Reserve each cut interest rates three times, while the Bank of England lowered rates four times.
-
Nine of the benchmark's 17 subsectors recorded positive returns for the 12-month period. Health care REITs-which returned just over 32%-contributed the most to performance. Retail REITs and industrial REITs were also top performers. Office REITs and multifamily residential REITs detracted the most.
How did the Fund perform over the past 10 years?
Keep in mind that the Fund's past performance does not indicate how the Fund will perform in the future. Updated performance information is available on our website at vanguard.com/performance or by calling Vanguard toll-free at 800-662-7447. The graph and returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Cumulative Performance: January 31, 2016, Through January 31, 2026
Initial Investment of $10,000
| Average Annual Total Returns | |||
| 1 Year | 5 Years | 10 Years | |
| ETF Shares Net Asset Value | 4.18% | 5.17% | 5.76% |
| ETF Shares Market Price | 4.24% | 5.17% | 5.77% |
| Real Estate Spliced Index | 4.31% | 5.31% | 5.89% |
| Dow Jones U.S. Total Stock Market Float Adjusted Index | 15.34% | 13.50% | 15.06% |
|
Fund Statistics (as of January 31, 2026) |
|
|
Fund Net Assets (in millions) |
$65,742 |
| Number of Portfolio Holdings | 159 |
| Portfolio Turnover Rate | 7% |
|
Total Investment Advisory Fees (in thousands) |
$1,208 |
|
Portfolio Composition % of Net Assets (as of January 31, 2026) |
|
| Data Center REITs | 7.8% |
| Health Care REITs | 13.1% |
| Industrial REITs | 9.8% |
| Multi-Family Residential REITs | 6.3% |
| Other Specialized REITs | 5.4% |
| Real Estate Services | 7.2% |
| Retail REITs | 12.0% |
| Self-Storage REITs | 4.8% |
| Single-Family Residential REITs | 3.1% |
| Telecom Tower REITs | 8.0% |
| Vanguard Real Estate II Index Fund1 | 14.5% |
| Other Assets and Liabilities-Net | 8.0% |
| This table reflects the Fund's investments, including short-term investments, derivatives and other assets and liabilities. | |
|
1 |
Vanguard Real Estate II Index Fund ("the Subsidiary") is the wholly owned subsidiary in which the Fund has invested a portion of its assets. |
How has the Fund changed?
Effective January 12, 2026, The Vanguard Group, Inc. exercises portfolio management responsibilities for the fund through its wholly-owned subsidiary, Vanguard Portfolio Management, LLC.
This is a summary of certain changes to the Fund since January 31, 2025. For more complete information, you may review the Fund's next prospectus, which we expect to be available by May 31, 2026, at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literatureor upon request at 800-662-7447.
Where can I find additional information about the Fund?
Additional information about the Fund and the Subsidiary, including their prospectuses, financial information, holdings, and proxy voting information is available at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature.
Connect with Vanguard ® • vanguard.com
Fund Information • 800-662-7447
Direct Investor Account Services • 800-662-2739
Text Telephone for People Who Are Deaf or Hard of Hearing • 800-749-7273
© 2026 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
AR986
Vanguard Real Estate Index Fund
Admiral™ Shares (VGSLX)
Annual Shareholder Report | January 31, 2026
This annual shareholder report contains important information about Vanguard Real Estate Index Fund (the "Fund") for the period of February 1, 2025, to January 31, 2026. You can find additional information about the Fund at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature. You can also request this information by contacting us at 800-662-7447. The report describes changes to the Fund that occurred during the reporting period.
What were the Fund costs for the last year?
(based on a hypothetical $10,000 investment)
| Share Class Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| Admiral Shares | $13 | 0.13% |
How did the Fund perform during the reporting period?
-
For the 12 months ended January 31, 2026, the Fund performed in line with its benchmark.
-
The first part of the period was marked by volatility in the financial markets amid fears that U.S. tariff announcements might spark trade wars and drag down global growth. Despite these concerns, markets posted solid gains for the 12 months, buoyed by optimism surrounding artificial intelligence, robust corporate earnings, and a more dovish monetary policy. The European Central Bank and the Federal Reserve each cut interest rates three times, while the Bank of England lowered rates four times.
-
Nine of the benchmark's 17 subsectors recorded positive returns for the 12-month period. Health care REITs-which returned just over 32%-contributed the most to performance. Retail REITs and industrial REITs were also top performers. Office REITs and multifamily residential REITs detracted the most.
How did the Fund perform over the past 10 years?
Keep in mind that the Fund's past performance does not indicate how the Fund will perform in the future. Updated performance information is available on our website at vanguard.com/performance or by calling Vanguard toll-free at 800-662-7447. The graph and returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Cumulative Performance: January 31, 2016, Through January 31, 2026
Initial Investment of $10,000
| Average Annual Total Returns | |||
| 1 Year | 5 Years | 10 Years | |
| Admiral Shares | 4.19% | 5.18% | 5.78% |
| Real Estate Spliced Index | 4.31% | 5.31% | 5.89% |
| Dow Jones U.S. Total Stock Market Float Adjusted Index | 15.34% | 13.50% | 15.06% |
|
Fund Statistics (as of January 31, 2026) |
|
|
Fund Net Assets (in millions) |
$65,742 |
| Number of Portfolio Holdings | 159 |
| Portfolio Turnover Rate | 7% |
|
Total Investment Advisory Fees (in thousands) |
$1,208 |
|
Portfolio Composition % of Net Assets (as of January 31, 2026) |
|
| Data Center REITs | 7.8% |
| Health Care REITs | 13.1% |
| Industrial REITs | 9.8% |
| Multi-Family Residential REITs | 6.3% |
| Other Specialized REITs | 5.4% |
| Real Estate Services | 7.2% |
| Retail REITs | 12.0% |
| Self-Storage REITs | 4.8% |
| Single-Family Residential REITs | 3.1% |
| Telecom Tower REITs | 8.0% |
| Vanguard Real Estate II Index Fund1 | 14.5% |
| Other Assets and Liabilities-Net | 8.0% |
| This table reflects the Fund's investments, including short-term investments, derivatives and other assets and liabilities. | |
|
1
|
Vanguard Real Estate II Index Fund ("the Subsidiary") is the wholly owned subsidiary in which the Fund has invested a portion of its assets.
|
How has the Fund changed?
Effective January 12, 2026, The Vanguard Group, Inc. exercises portfolio management responsibilities for the fund through its wholly-owned subsidiary, Vanguard Portfolio Management, LLC.
This is a summary of certain changes to the Fund since January 31, 2025. For more complete information, you may review the Fund's next prospectus, which we expect to be available by May 31, 2026, at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literatureor upon request at 800-662-7447.
Where can I find additional information about the Fund?
Additional information about the Fund and the Subsidiary, including their prospectuses, financial information, holdings, and proxy voting information is available at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature.
Connect with Vanguard ® • vanguard.com
Fund Information • 800-662-7447
Direct Investor Account Services • 800-662-2739
Text Telephone for People Who Are Deaf or Hard of Hearing • 800-749-7273
© 2026 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
AR5123
Vanguard Real Estate Index Fund
Institutional Shares (VGSNX)
Annual Shareholder Report | January 31, 2026
This annual shareholder report contains important information about Vanguard Real Estate Index Fund (the "Fund") for the period of February 1, 2025, to January 31, 2026. You can find additional information about the Fund at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature. You can also request this information by contacting us at 800-662-7447. The report describes changes to the Fund that occurred during the reporting period.
What were the Fund costs for the last year?
(based on a hypothetical $10,000 investment)
| Share Class Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| Institutional Shares | $11 | 0.11% |
How did the Fund perform during the reporting period?
-
For the 12 months ended January 31, 2026, the Fund performed in line with its benchmark.
-
The first part of the period was marked by volatility in the financial markets amid fears that U.S. tariff announcements might spark trade wars and drag down global growth. Despite these concerns, markets posted solid gains for the 12 months, buoyed by optimism surrounding artificial intelligence, robust corporate earnings, and a more dovish monetary policy. The European Central Bank and the Federal Reserve each cut interest rates three times, while the Bank of England lowered rates four times.
-
Nine of the benchmark's 17 subsectors recorded positive returns for the 12-month period. Health care REITs-which returned just over 32%-contributed the most to performance. Retail REITs and industrial REITs were also top performers. Office REITs and multifamily residential REITs detracted the most.
How did the Fund perform over the past 10 years?
Keep in mind that the Fund's past performance does not indicate how the Fund will perform in the future. Updated performance information is available on our website at vanguard.com/performance or by calling Vanguard toll-free at 800-662-7447. The graph and returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Cumulative Performance: January 31, 2016, Through January 31, 2026
Initial Investment of $5,000,000
| Average Annual Total Returns | |||
| 1 Year | 5 Years | 10 Years | |
| Institutional Shares | 4.18% | 5.19% | 5.80% |
| Real Estate Spliced Index | 4.31% | 5.31% | 5.89% |
| Dow Jones U.S. Total Stock Market Float Adjusted Index | 15.34% | 13.50% | 15.06% |
|
Fund Statistics (as of January 31, 2026) |
|
|
Fund Net Assets (in millions) |
$65,742 |
| Number of Portfolio Holdings | 159 |
| Portfolio Turnover Rate | 7% |
|
Total Investment Advisory Fees (in thousands) |
$1,208 |
|
Portfolio Composition % of Net Assets (as of January 31, 2026) |
|
| Data Center REITs | 7.8% |
| Health Care REITs | 13.1% |
| Industrial REITs | 9.8% |
| Multi-Family Residential REITs | 6.3% |
| Other Specialized REITs | 5.4% |
| Real Estate Services | 7.2% |
| Retail REITs | 12.0% |
| Self-Storage REITs | 4.8% |
| Single-Family Residential REITs | 3.1% |
| Telecom Tower REITs | 8.0% |
| Vanguard Real Estate II Index Fund1 | 14.5% |
| Other Assets and Liabilities-Net | 8.0% |
| This table reflects the Fund's investments, including short-term investments, derivatives and other assets and liabilities. | |
|
1 |
Vanguard Real Estate II Index Fund ("the Subsidiary") is the wholly owned subsidiary in which the Fund has invested a portion of its assets. |
How has the Fund changed?
Effective January 12, 2026, The Vanguard Group, Inc. exercises portfolio management responsibilities for the fund through its wholly-owned subsidiary, Vanguard Portfolio Management, LLC.
This is a summary of certain changes to the Fund since January 31, 2025. For more complete information, you may review the Fund's next prospectus, which we expect to be available by May 31, 2026, at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literatureor upon request at 800-662-7447.
Where can I find additional information about the Fund?
Additional information about the Fund and the Subsidiary, including their prospectuses, financial information, holdings, and proxy voting information is available at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature.
Connect with Vanguard ® • vanguard.com
Fund Information • 800-662-7447
Institutional Investor Services • 800-523-1036
Text Telephone for People Who Are Deaf or Hard of Hearing • 800-749-7273
© 2026 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
AR3123
Vanguard Global Capital Cycles Fund
Investor Shares (VGPMX)
Annual Shareholder Report | January 31, 2026
This annual shareholder report contains important information about Vanguard Global Capital Cycles Fund (the "Fund") for the period of February 1, 2025, to January 31, 2026. You can find additional information about the Fund at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature. You can also request this information by contacting us at 800-662-7447. The report describes changes to the Fund that occurred during the reporting period.
What were the Fund costs for the last year?
(based on a hypothetical $10,000 investment)
| Share Class Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| Investor Shares | $58 | 0.42% |
How did the Fund perform during the reporting period?
-
For the 12 months ended January 31, 2026, the Fund significantly outperformed its benchmark.
-
The first part of the period was marked by volatility in the financial markets amid fears that U.S. tariff announcements might spark trade wars and drag down global growth. Despite these concerns, markets posted solid gains for the 12 months, buoyed by optimism surrounding artificial intelligence, robust corporate earnings, and a more dovish monetary policy. The European Central Bank and the Federal Reserve each cut interest rates three times, while the Bank of England lowered rates four times.
-
By region, North America, Europe, the Pacific region, and emerging markets added to the Fund's performance. The Middle East, whose stocks make up a tiny portion of the Fund, was the only region that detracted.
-
Nine of the Fund's 11 industry sectors outperformed those of its benchmark on a relative basis. Information technology led gains through strong stock selection and favorable allocation, while materials and financials also added meaningfully through selection and underweight positions. Selection in energy, as well as an overweight allocation to consumer staples, detracted the most from relative performance.
How did the Fund perform over the past 10 years?
Keep in mind that the Fund's past performance does not indicate how the Fund will perform in the future. Updated performance information is available on our website at vanguard.com/performance or by calling Vanguard toll-free at 800-662-7447. The graph and returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Cumulative Performance: January 31, 2016, Through January 31, 2026
Initial Investment of $10,000
| Average Annual Total Returns | |||
| 1 Year | 5 Years | 10 Years | |
| Investor Shares | 75.37% | 22.14% | 16.40% |
| Spliced Global Capital Cycles Index | 40.10% | 13.43% | 16.69% |
| MSCI All Country World Index | 21.87% | 11.95% | 12.75% |
|
Fund Statistics (as of January 31, 2026) |
|
|
Fund Net Assets (in millions) |
$3,586 |
| Number of Portfolio Holdings | 85 |
| Portfolio Turnover Rate | 50% |
|
Total Investment Advisory Fees (in thousands) |
$3,978 |
|
Portfolio Composition % of Net Assets (as of January 31, 2026) |
|
| Africa | 2.5% |
| Asia | 13.8% |
| Europe | 35.6% |
| North America | 35.5% |
| Oceania | 1.7% |
| South America | 5.5% |
| Other Assets and Liabilities-Net | 5.4% |
| This table reflects the Fund's investments, including short-term investments and other assets and liabilities. | |
How has the Fund changed?
Effective January 12, 2026, The Vanguard Group, Inc. exercises portfolio management responsibilities through its wholly-owned subsidiaries, Vanguard Capital Management, LLC and Vanguard Portfolio Management, LLC.
This is a summary of certain changes to the Fund since January 31, 2025. For more complete information, you may review the Fund's next prospectus, which we expect to be available by May 31, 2026, at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literatureor upon request at 800-662-7447.
Where can I find additional information about the Fund?
Additional information about the Fund, including its prospectus, financial information, holdings, and proxy voting information is available at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature.
Connect with Vanguard ® • vanguard.com
Fund Information • 800-662-7447
Direct Investor Account Services • 800-662-2739
Text Telephone for People Who Are Deaf or Hard of Hearing • 800-749-7273
© 2026 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
AR53
Vanguard Global ESG Select Stock Fund
Investor Shares (VEIGX)
Annual Shareholder Report | January 31, 2026
This annual shareholder report contains important information about Vanguard Global ESG Select Stock Fund (the "Fund") for the period of February 1, 2025, to January 31, 2026. You can find additional information about the Fund at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature. You can also request this information by contacting us at 800-662-7447. The report describes changes to the Fund that occurred during the reporting period.
What were the Fund costs for the last year?
(based on a hypothetical $10,000 investment)
| Share Class Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| Investor Shares | $57 | 0.54% |
How did the Fund perform during the reporting period?
-
For the 12 months ended January 31, 2026, the Fund underperformed its benchmark.
-
The first part of the period was marked by volatility in the financial markets amid fears that U.S. tariff announcements might spark trade wars and drag down global growth. Despite these concerns, markets posted solid gains for the 12 months, buoyed by optimism surrounding artificial intelligence, robust corporate earnings, and a more dovish monetary policy. The European Central Bank and the Federal Reserve each cut interest rates three times, while the Bank of England lowered rates four times.
-
Nine of 11 industry sectors detracted from relative performance. Industrials and information technology hurt results most, primarily because of stock selection, while materials and health care also weighed heavily. Selection in financials and utilities contributed positively.
-
Regionally, North America and Europe detracted the most from relative performance, while emerging markets made the strongest positive contribution.
How did the Fund perform since inception?
Keep in mind that the Fund's past performance does not indicate how the Fund will perform in the future. Updated performance information is available on our website at vanguard.com/performance or by calling Vanguard toll-free at 800-662-7447. The graph and returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Cumulative Performance: June 5, 2019, Through January 31, 2026
Initial Investment of $10,000
| Average Annual Total Returns | |||
| 1 Year | 5 Years |
Since Inception (6/5/2019) |
|
| Investor Shares | 12.25% | 11.70% | 13.55% |
| FTSE All-World Index | 22.60% | 12.33% | 13.77% |
|
Fund Statistics (as of January 31, 2026) |
|
|
Fund Net Assets (in millions) |
$1,518 |
| Number of Portfolio Holdings | 39 |
| Portfolio Turnover Rate | 47% |
|
Total Investment Advisory Fees (in thousands) |
$3,107 |
|
Portfolio Composition % of Net Assets (as of January 31, 2026) |
|
| Asia | 15.5% |
| Europe | 25.5% |
| North America | 57.8% |
| Other Assets and Liabilities-Net | 1.2% |
| This table reflects the Fund's investments, including short-term investments and other assets and liabilities. | |
How has the Fund changed?
Effective January 12, 2026, The Vanguard Group, Inc. exercises portfolio management responsibilities through its wholly-owned subsidiaries, Vanguard Capital Management, LLC and Vanguard Portfolio Management, LLC.
This is a summary of certain changes to the Fund since January 31, 2025. For more complete information, you may review the Fund's next prospectus, which we expect to be available by May 31, 2026, at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literatureor upon request at 800-662-7447.
Where can I find additional information about the Fund?
Additional information about the Fund, including its prospectus, financial information, holdings, and proxy voting information is available at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature.
Connect with Vanguard ® • vanguard.com
Fund Information • 800-662-7447
Direct Investor Account Services • 800-662-2739
Text Telephone for People Who Are Deaf or Hard of Hearing • 800-749-7273
© 2026 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
AR2247
Vanguard Global ESG Select Stock Fund
Admiral™ Shares (VESGX)
Annual Shareholder Report | January 31, 2026
This annual shareholder report contains important information about Vanguard Global ESG Select Stock Fund (the "Fund") for the period of February 1, 2025, to January 31, 2026. You can find additional information about the Fund at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature. You can also request this information by contacting us at 800-662-7447. The report describes changes to the Fund that occurred during the reporting period.
What were the Fund costs for the last year?
(based on a hypothetical $10,000 investment)
| Share Class Name | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| Admiral Shares | $47 | 0.44% |
How did the Fund perform during the reporting period?
-
For the 12 months ended January 31, 2026, the Fund underperformed its benchmark.
-
The first part of the period was marked by volatility in the financial markets amid fears that U.S. tariff announcements might spark trade wars and drag down global growth. Despite these concerns, markets posted solid gains for the 12 months, buoyed by optimism surrounding artificial intelligence, robust corporate earnings, and a more dovish monetary policy. The European Central Bank and the Federal Reserve each cut interest rates three times, while the Bank of England lowered rates four times.
-
Nine of 11 industry sectors detracted from relative performance. Industrials and information technology hurt results most, primarily because of stock selection, while materials and health care also weighed heavily. Selection in financials and utilities contributed positively.
-
Regionally, North America and Europe detracted the most from relative performance, while emerging markets made the strongest positive contribution.
How did the Fund perform since inception?
Keep in mind that the Fund's past performance does not indicate how the Fund will perform in the future. Updated performance information is available on our website at vanguard.com/performance or by calling Vanguard toll-free at 800-662-7447. The graph and returns shown do not reflect taxes that a shareholder would pay on fund distributions or on the sale of fund shares.
Cumulative Performance: June 5, 2019, Through January 31, 2026
Initial Investment of $50,000
| Average Annual Total Returns | |||
| 1 Year | 5 Years |
Since Inception (6/5/2019) |
|
| Admiral Shares | 12.37% | 11.81% | 13.66% |
| FTSE All-World Index | 22.60% | 12.33% | 13.77% |
|
Fund Statistics (as of January 31, 2026) |
|
|
Fund Net Assets (in millions) |
$1,518 |
| Number of Portfolio Holdings | 39 |
| Portfolio Turnover Rate | 47% |
|
Total Investment Advisory Fees (in thousands) |
$3,107 |
|
Portfolio Composition % of Net Assets (as of January 31, 2026) |
|
| Asia | 15.5% |
| Europe | 25.5% |
| North America | 57.8% |
| Other Assets and Liabilities-Net | 1.2% |
| This table reflects the Fund's investments, including short-term investments and other assets and liabilities. | |
How has the Fund changed?
Effective January 12, 2026, The Vanguard Group, Inc. exercises portfolio management responsibilities through its wholly-owned subsidiaries, Vanguard Capital Management, LLC and Vanguard Portfolio Management, LLC.
This is a summary of certain changes to the Fund since January 31, 2025. For more complete information, you may review the Fund's next prospectus, which we expect to be available by May 31, 2026, at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literatureor upon request at 800-662-7447.
Where can I find additional information about the Fund?
Additional information about the Fund, including its prospectus, financial information, holdings, and proxy voting information is available at https://personal1.vanguard.com/ngf-next-gen-form-webapp/fund-literature.
Connect with Vanguard ® • vanguard.com
Fund Information • 800-662-7447
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Text Telephone for People Who Are Deaf or Hard of Hearing • 800-749-7273
© 2026 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
All rights reserved.
Vanguard Marketing Corporation, Distributor.
AR547
Item 2: Code of Ethics.
The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. The Code of Ethics was amended during the reporting period covered by this report to make certain technical, non-material changes.
Item 3: Audit Committee Financial Expert.
All members of the Audit and Risk Committee have been determined by the Registrant's Board of Trustees to be Audit Committee Financial Experts and to be independent: Sarah Bloom Raskin, Peter F. Volanakis, Tara Bunch, and Mark Loughridge.
Item 4: Principal Accountant Fees and Services.
Includes fees billed in connection with services to the Registrant only.
|
Fiscal Year Ended January 31, 2026 |
Fiscal Year Ended January 31, 2025 |
|||||||
| (a) Audit Fees. | $ | 232,000 | $ | 231,000 | ||||
| (b) Audit-Related Fees. | 0 | 0 | ||||||
| (c) Tax Fees. | 0 | 0 | ||||||
| (d) All Other Fees. | 0 | 0 | ||||||
| Total. | $ | 232,000 | $ | 231,000 | ||||
(e) (1) Pre-Approval Policies. The audit committee is responsible for pre-approving all audit and non-audit services provided by PwC to: (i) the Vanguard funds; and (ii) Vanguard, or any entity controlled by Vanguard that provides ongoing services to the Vanguard funds. All services provided to Vanguard entities by the independent auditor, whether or not they are subject to preapproval, must be disclosed to the audit committee. The audit committee chair may preapprove any permissible audit and non-audit services as long as any preapproval is brought to the attention of the full audit committee at the next scheduled meeting.
(2) No percentage of the principal accountant's fees or services were approved pursuant to the waiver provision of paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) For the most recent fiscal year, over 50% of the hours worked under the principal accountant's engagement were not performed by persons other than full-time, permanent employees of the principal accountant.
(g) Aggregate Non-Audit Fees.
Includes fees billed for non-audit services provided to the Registrant, other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation.
|
Fiscal Year Ended January 31, 2026 |
Fiscal Year Ended January 31, 2025 |
|||||||
| Non-audit fees to the Registrant only, listed as (b) through (d) above. | $ | 0 | $ | 0 | ||||
| Non-audit Fees to other registered investment companies in the Vanguard complex, The Vanguard Group, Inc., and Vanguard Marketing Corporation. | ||||||||
| Audit-Related Fees. | $ | 3,960,022 | $ | 3,664,500 | ||||
| Tax Fees. | $ | 1,772,928 | $ | 1,898,992 | ||||
| All Other Fees. | $ | 25,000 | $ | 25,000 | ||||
| Total. | $ | 5,757,950 | $ | 5,588,492 | ||||
(h) For the most recent fiscal year, the Audit and Risk Committee has determined that the provision of all non-audit services was consistent with maintaining the principal accountant's independence.
Item 5: Audit Committee of Listed Registrants.
The Registrant is a listed issuer as defined in rule 10A-3 under the Securities Exchange Act of 1934 ("Exchange Act"). The Registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Registrant's audit committee members are: Sarah Bloom Raskin, Peter F. Volanakis, Tara Bunch, and Mark Loughridge.
Item 6: Investments.
Not applicable. The complete schedule of investments is included in the financial statements filed under Item 7 of this Form.
Item 7: Financial Statements and Financial Highlights for Open-End Management Investment Companies.
Financial Statements
For the year ended January 31, 2026
Vanguard Real Estate Index Funds
| Vanguard Real Estate Index Fund |
| Vanguard Real Estate II Index Fund |
Contents
|
Real Estate Index Fund
|
1 |
|
Real Estate II Index Fund
|
17 |
|
Report of Independent Registered
Public Accounting Firm
|
29 |
|
Tax information
|
30 |
Real Estate Index Fund
Financial Statements
Schedule of Investments
As of January 31, 2026
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund's Form N-PORT reports are available on the SEC's website at www.sec.gov.
| Shares |
Market Value• ($000) |
|||||
| Equity Real Estate Investment Trusts (REITs) (92.0%) | ||||||
| Data Center REITs (7.8%) | ||||||
| Equinix Inc. | 3,651,762 | 2,997,841 | ||||
| Digital Realty Trust Inc. | 12,726,194 | 2,111,912 | ||||
| 5,109,753 | ||||||
| Diversified REITs (1.7%) | ||||||
| WP Carey Inc. | 8,171,683 | 569,975 | ||||
| Essential Properties Realty Trust Inc. | 7,392,423 | 224,434 | ||||
| Broadstone Net Lease Inc. | 7,056,295 | 130,612 | ||||
| Global Net Lease Inc. | 7,424,242 | 70,233 | ||||
| Alexander & Baldwin Inc. | 2,715,362 | 56,317 | ||||
| American Assets Trust Inc. | 1,825,952 | 32,977 | ||||
| CTO Realty Growth Inc. | 1,226,341 | 21,792 | ||||
| Armada Hoffler Properties Inc. | 2,997,626 | 20,893 | ||||
| Gladstone Commercial Corp. | 1,741,595 | 20,290 | ||||
| 1,147,523 | ||||||
| Health Care REITs (13.1%) | ||||||
| Welltower Inc. | 24,695,002 | 4,651,551 | ||||
| Ventas Inc. | 16,958,404 | 1,317,159 | ||||
| Omega Healthcare Investors Inc. | 11,007,991 | 483,031 | ||||
| Healthpeak Properties Inc. | 25,932,191 | 447,071 | ||||
| Alexandria Real Estate Equities Inc. | 5,809,455 | 317,429 | ||||
| CareTrust REIT Inc. | 8,333,014 | 311,155 | ||||
| American Healthcare REIT Inc. | 6,290,781 | 295,100 | ||||
| Healthcare Realty Trust Inc. Class A | 12,463,149 | 209,256 | ||||
| Sabra Health Care REIT Inc. | 8,946,602 | 167,570 | ||||
| National Health Investors Inc. | 1,771,007 | 145,435 | ||||
| 1 | Medical Properties Trust Inc. | 15,253,710 | 76,574 | |||
| LTC Properties Inc. | 1,720,038 | 62,730 | ||||
| Sila Realty Trust Inc. | 2,057,022 | 50,088 | ||||
| Diversified Healthcare Trust | 6,307,933 | 36,649 | ||||
| Universal Health Realty Income Trust | 491,810 | 19,540 | ||||
| Community Healthcare Trust Inc. | 1,059,811 | 18,313 | ||||
| Global Medical REIT Inc. | 473,993 | 16,372 | ||||
| 8,625,023 | ||||||
| Hotel & Resort REITs (1.8%) | ||||||
| Host Hotels & Resorts Inc. | 25,655,956 | 475,405 | ||||
| Ryman Hospitality Properties Inc. | 2,232,822 | 211,448 | ||||
| Apple Hospitality REIT Inc. | 8,399,518 | 97,770 | ||||
| Park Hotels & Resorts Inc. | 7,459,605 | 81,533 | ||||
| DiamondRock Hospitality Co. | 7,649,494 | 70,222 | ||||
| Sunstone Hotel Investors Inc. | 6,733,055 | 59,049 | ||||
| Xenia Hotels & Resorts Inc. | 3,573,815 | 52,714 | ||||
| Pebblebrook Hotel Trust | 4,422,765 | 50,508 | ||||
| RLJ Lodging Trust | 5,074,940 | 37,707 | ||||
| Summit Hotel Properties Inc. | 4,058,967 | 17,941 | ||||
| Chatham Lodging Trust | 1,740,788 | 12,377 | ||||
| Service Properties Trust | 5,900,454 | 11,742 | ||||
| 1,178,416 | ||||||
| Industrial REITs (9.8%) | ||||||
| Prologis Inc. | 34,652,779 | 4,524,267 | ||||
| EastGroup Properties Inc. | 1,990,337 | 361,525 | ||||
| Rexford Industrial Realty Inc. | 8,831,590 | 357,944 | ||||
| First Industrial Realty Trust Inc. | 4,940,527 | 286,699 | ||||
| STAG Industrial Inc. | 6,965,423 | 261,273 | ||||
| Terreno Realty Corp. | 3,853,966 | 237,173 | ||||
| Americold Realty Trust Inc. | 10,625,075 | 131,857 | ||||
| LXP Industrial Trust | 2,207,771 | 109,395 | ||||
| Lineage Inc. | 2,560,729 | 91,444 | ||||
| Innovative Industrial Properties Inc. | 1,044,810 | 50,485 | ||||
1
Real Estate Index Fund
| Shares |
Market Value• ($000) |
|||||
| One Liberty Properties Inc. | 602,767 | 12,990 | ||||
| 6,425,052 | ||||||
| Multi-Family Residential REITs (6.3%) | ||||||
| AvalonBay Communities Inc. | 5,313,104 | 943,979 | ||||
| Equity Residential | 13,538,230 | 843,703 | ||||
| Essex Property Trust Inc. | 2,403,282 | 605,315 | ||||
| Mid-America Apartment Communities Inc. | 4,368,591 | 586,702 | ||||
| UDR Inc. | 11,746,463 | 436,381 | ||||
| Camden Property Trust | 3,987,328 | 434,818 | ||||
| Independence Realty Trust Inc. | 8,724,450 | 145,698 | ||||
| Veris Residential Inc. | 3,135,573 | 47,629 | ||||
| Centerspace | 625,270 | 40,186 | ||||
| Apartment Investment & Management Co. Class A | 5,048,469 | 29,685 | ||||
| NexPoint Residential Trust Inc. | 805,552 | 24,344 | ||||
| 4,138,440 | ||||||
| Office REITs (2.3%) | ||||||
| BXP Inc. | 5,539,694 | 358,252 | ||||
| Vornado Realty Trust | 6,090,229 | 194,157 | ||||
| Cousins Properties Inc. | 6,269,352 | 158,238 | ||||
| Kilroy Realty Corp. | 4,193,024 | 144,575 | ||||
| COPT Defense Properties | 4,212,843 | 129,798 | ||||
| SL Green Realty Corp. | 2,649,690 | 118,653 | ||||
| Highwoods Properties Inc. | 4,032,130 | 104,231 | ||||
| Douglas Emmett Inc. | 6,250,022 | 66,000 | ||||
| Piedmont Realty Trust Inc. | 4,645,007 | 39,111 | ||||
| JBG SMITH Properties | 2,302,810 | 38,779 | ||||
| Easterly Government Properties Inc. Class A | 1,608,209 | 37,616 | ||||
| Empire State Realty Trust Inc. Class A | 5,349,679 | 35,468 | ||||
| Peakstone Realty Trust | 1,371,348 | 21,420 | ||||
| Brandywine Realty Trust | 6,464,879 | 18,296 | ||||
| * | Hudson Pacific Properties Inc. | 2,026,337 | 17,467 | |||
| NET Lease Office Properties | 523,654 | 10,217 | ||||
| *,2 | New York REIT Liquidating LLC | 1,208 | 3 | |||
| 1,492,281 | ||||||
| Other (14.5%)3 | ||||||
| 4,5 | Vanguard Real Estate II Index Fund | 436,700,972 | 9,546,283 | |||
| Other Specialized REITs (5.4%) | ||||||
| VICI Properties Inc. Class A | 37,152,416 | 1,043,240 | ||||
| Iron Mountain Inc. | 11,020,842 | 1,015,350 | ||||
| Gaming & Leisure Properties Inc. | 10,560,803 | 472,596 | ||||
| Lamar Advertising Co. Class A | 3,204,005 | 411,106 | ||||
| EPR Properties | 2,839,601 | 154,020 | ||||
| Millrose Properties Inc. | 4,601,808 | 137,134 | ||||
| Outfront Media Inc. | 5,614,555 | 136,546 | ||||
| Four Corners Property Trust Inc. | 3,896,234 | 96,042 | ||||
| Safehold Inc. | 1,742,587 | 24,588 | ||||
| Farmland Partners Inc. | 1,564,428 | 18,163 | ||||
| Gladstone Land Corp. | 1,279,074 | 14,261 | ||||
| 3,523,046 | ||||||
| Retail REITs (12.0%) | ||||||
| Simon Property Group Inc. | 12,182,677 | 2,330,668 | ||||
| Realty Income Corp. | 33,847,065 | 2,070,086 | ||||
| Kimco Realty Corp. | 25,270,260 | 532,697 | ||||
| Regency Centers Corp. | 6,436,158 | 469,003 | ||||
| Federal Realty Investment Trust | 3,057,527 | 309,299 | ||||
| Brixmor Property Group Inc. | 11,423,776 | 306,043 | ||||
| Agree Realty Corp. | 4,128,944 | 298,234 | ||||
| NNN REIT Inc. | 7,043,635 | 293,508 | ||||
| Kite Realty Group Trust | 8,203,974 | 192,711 | ||||
| Macerich Co. | 9,429,146 | 178,494 | ||||
| Phillips Edison & Co. Inc. | 4,686,718 | 169,800 | ||||
| Tanger Inc. | 4,222,452 | 138,159 | ||||
| Acadia Realty Trust | 4,887,962 | 97,808 | ||||
| Urban Edge Properties | 4,693,742 | 91,199 | ||||
| Curbline Properties Corp. | 3,533,519 | 85,688 | ||||
| InvenTrust Properties Corp. | 2,897,543 | 85,159 | ||||
| Getty Realty Corp. | 2,007,723 | 59,951 | ||||
2
Real Estate Index Fund
| Shares |
Market Value• ($000) |
|||||
| 1 | NETSTREIT Corp. | 3,117,204 | 58,728 | |||
| Whitestone REIT | 1,711,655 | 24,374 | ||||
| Alexander's Inc. | 85,941 | 21,047 | ||||
| CBL & Associates Properties Inc. | 578,308 | 20,703 | ||||
| Saul Centers Inc. | 499,650 | 15,854 | ||||
| SITE Centers Corp. | 1,853,569 | 11,344 | ||||
| 7,860,557 | ||||||
| Self-Storage REITs (4.8%) | ||||||
| Public Storage | 5,892,276 | 1,627,388 | ||||
| Extra Space Storage Inc. | 7,920,208 | 1,092,751 | ||||
| CubeSmart | 8,367,719 | 314,040 | ||||
| National Storage Affiliates Trust | 2,721,281 | 86,564 | ||||
| Smartstop Self Storage REIT Inc. | 1,158,737 | 36,431 | ||||
| 3,157,174 | ||||||
| Single-Family Residential REITs (3.1%) | ||||||
| Sun Communities Inc. | 4,670,184 | 595,121 | ||||
| Invitation Homes Inc. | 21,730,888 | 580,867 | ||||
| Equity LifeStyle Properties Inc. | 6,870,005 | 433,978 | ||||
| American Homes 4 Rent Class A | 12,435,906 | 389,493 | ||||
| UMH Properties Inc. | 3,007,524 | 47,008 | ||||
| 2,046,467 | ||||||
| Telecom Tower REITs (8.0%) | ||||||
| American Tower Corp. | 17,472,540 | 3,132,477 | ||||
| Crown Castle Inc. | 16,249,352 | 1,410,606 | ||||
| SBA Communications Corp. | 4,006,767 | 737,686 | ||||
| 5,280,769 | ||||||
| Timber REITs (1.4%) | ||||||
| Weyerhaeuser Co. | 26,923,064 | 694,077 | ||||
| Rayonier Inc. | 5,707,848 | 129,796 | ||||
| PotlatchDeltic Corp. | 2,741,683 | 114,410 | ||||
| 938,283 | ||||||
| Total Equity Real Estate Investment Trusts (REITs) (Cost $57,527,028) | 60,469,067 | |||||
| Real Estate Management & Development (7.7%) | ||||||
| Diversified Real Estate Activities (0.2%) | ||||||
| St. Joe Co. | 1,404,559 | 92,968 | ||||
| * | Tejon Ranch Co. | 750,306 | 12,072 | |||
| RMR Group Inc. Class A | 589,562 | 8,932 | ||||
| 113,972 | ||||||
| Real Estate Development (0.2%) | ||||||
| * | Howard Hughes Holdings Inc. | 1,219,483 | 99,583 | |||
| * | Forestar Group Inc. | 760,463 | 19,787 | |||
| 119,370 | ||||||
| Real Estate Operating Companies (0.1%) | ||||||
| 1 | Landbridge Co. LLC Class A | 709,224 | 40,752 | |||
| Kennedy-Wilson Holdings Inc. | 4,118,687 | 40,569 | ||||
| * | Seritage Growth Properties Class A | 1,376,364 | 4,542 | |||
| 85,863 | ||||||
| Real Estate Services (7.2%) | ||||||
| * | CBRE Group Inc. Class A | 11,102,994 | 1,891,173 | |||
| * | CoStar Group Inc. | 15,733,267 | 967,596 | |||
| * | Jones Lang LaSalle Inc. | 1,767,976 | 632,776 | |||
| * | Zillow Group Inc. Class C | 6,235,473 | 393,022 | |||
| * | Compass Inc. Class A | 23,789,226 | 297,841 | |||
| * | Opendoor Technologies Inc. | 33,793,916 | 174,039 | |||
| * | Cushman & Wakefield Ltd. | 8,637,532 | 142,001 | |||
| * | Zillow Group Inc. Class A | 1,785,473 | 111,128 | |||
| Newmark Group Inc. Class A | 5,509,060 | 98,226 | ||||
| 1 | eXp World Holdings Inc. | 2,954,714 | 26,711 | |||
| Marcus & Millichap Inc. | 946,805 | 25,753 | ||||
| 4,760,266 | ||||||
| Total Real Estate Management & Development (Cost $4,333,405) | 5,079,471 | |||||
3
Real Estate Index Fund
| Shares |
Market Value• ($000) |
|||||
| Temporary Cash Investments (0.3%) | ||||||
| Money Market Fund (0.3%) | ||||||
| 6,7 | Vanguard Market Liquidity Fund, 3.704% (Cost $221,804) | 2,218,376 | 221,837 | |||
| Total Investments (100.0%) (Cost $62,082,237) | 65,770,375 | |||||
| Other Assets and Liabilities-Net (0.0%) | (28,503) | |||||
| Net Assets (100%) | 65,741,872 | |||||
| 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 $76,781. |
| 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 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 $87,582 was received for securities on loan. |
| REIT-Real Estate Investment Trust. |
Derivative Financial Instruments Outstanding as of Period End
| Over-the-Counter Total Return Swaps | ||||||
| Reference Entity |
Termination Date |
Counterparty |
Notional Amount ($000) |
Floating Interest Rate Received (Paid)1 (%) |
Value and Unrealized Appreciation ($000) |
Value and Unrealized (Depreciation) ($000) |
| BXP Inc. | 8/31/2026 | BANA | 4,858 | (3.640) | 43 | - |
| CoStar Group Inc. | 8/31/2026 | BANA | 4,936 | (3.640) | - | (325) |
| CubeSmart | 2/1/2027 | GSI | 5,480 | (3.630) | - | (233) |
| eXp World Holdings Inc. | 2/1/2027 | GSI | 5,262 | (3.630) | - | (144) |
| Lamar Advertising Co. Class A | 2/1/2027 | GSI | 4,648 | (3.630) | - | (163) |
| Medical Properties Trust Inc. | 2/1/2027 | GSI | 19,660 | (3.630) | - | (561) |
| Realty Income Corp. | 8/31/2026 | BANA | 16,308 | (3.640) | 273 | - |
| VICI Properties Inc. Class A | 8/31/2026 | BANA | 75,248 | (4.340) | - | (1,162) |
| Welltower Inc. | 8/31/2026 | BANA | 48,111 | (3.640) | 1,225 | - |
| 1,541 | (2,588) | |||||
| 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. |
See accompanying Notes, which are an integral part of the Financial Statements.
4
Real Estate Index Fund
Statement of Assets and Liabilities
As of January 31, 2026
| ($000s, except shares and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value1 | |
| Unaffiliated Issuers (Cost $53,722,869) | 56,002,255 |
| Affiliated Issuers (Cost $221,804) | 221,837 |
| Vanguard Real Estate II Index Fund (Cost $8,137,564) | 9,546,283 |
| Total Investments in Securities | 65,770,375 |
| Investment in Vanguard | 1,286 |
| Cash | 2,897 |
| Cash Collateral Pledged-Over-the-Counter Swap Contracts | 1,930 |
| Receivables for Accrued Income | 57,881 |
| Receivables for Capital Shares Issued | 27,307 |
| Unrealized Appreciation-Over-the-Counter Swap Contracts | 1,541 |
| Total Assets | 65,863,217 |
| Liabilities | |
| Payables for Investment Securities Purchased | 11,034 |
| Collateral for Securities on Loan | 87,582 |
| Payables for Capital Shares Redeemed | 16,908 |
| Payables to Vanguard | 3,233 |
| Unrealized Depreciation-Over-the-Counter Swap Contracts | 2,588 |
| Total Liabilities | 121,345 |
| Net Assets | 65,741,872 |
| 1 Includes $76,781 of securities on loan. | |
|
At January 31, 2026, net assets consisted of: |
|
| Paid-in Capital | 67,906,043 |
| Total Distributable Earnings (Loss) | (2,164,171) |
| Net Assets | 65,741,872 |
| Investor Shares-Net Assets | |
|
Applicable to 2,106,336 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
63,572 |
| Net Asset Value Per Share-Investor Shares | $30.18 |
| ETF Shares-Net Assets | |
|
Applicable to 384,622,535 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
34,927,930 |
| Net Asset Value Per Share-ETF Shares | $90.81 |
| Admiral™ Shares-Net Assets | |
|
Applicable to 158,233,283 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
20,365,196 |
| Net Asset Value Per Share-Admiral Shares | $128.70 |
| Institutional Shares-Net Assets | |
|
Applicable to 521,346,944 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
10,385,174 |
| Net Asset Value Per Share-Institutional Shares | $19.92 |
See accompanying Notes, which are an integral part of the Financial Statements.
5
Real Estate Index Fund
Statement of Operations
|
Year Ended January 31, 2026 |
|
| ($000) | |
| Investment Income | |
| Income | |
| Dividends-Unaffiliated Issuers | 1,647,078 |
| Dividends-Vanguard Real Estate II Index Fund | 260,119 |
| Interest-Unaffiliated Issuers | 171 |
| Interest-Affiliated Issuers | 5,907 |
| Securities Lending-Net | 2,467 |
| Total Income | 1,915,742 |
| Expenses | |
| The Vanguard Group-Note C | |
| Investment Advisory Services | 1,208 |
| Management and Administrative-Investor Shares | 179 |
| Management and Administrative-ETF Shares | 35,319 |
| Management and Administrative-Admiral Shares | 21,611 |
| Management and Administrative-Institutional Shares | 8,791 |
| Marketing and Distribution-Investor Shares | 3 |
| Marketing and Distribution-ETF Shares | 1,422 |
| Marketing and Distribution-Admiral Shares | 979 |
| Marketing and Distribution-Institutional Shares | 339 |
| Custodian Fees | 78 |
| Auditing Fees | 39 |
| Shareholders' Reports and Proxy Fees-Investor Shares | 2 |
| Shareholders' Reports and Proxy Fees-ETF Shares | 1,623 |
| Shareholders' Reports and Proxy Fees-Admiral Shares | 359 |
| Shareholders' Reports and Proxy Fees-Institutional Shares | 306 |
| Trustees' Fees and Expenses | 38 |
| Other Expenses | 63 |
| Total Expenses | 72,359 |
| Net Investment Income | 1,843,383 |
| Realized Net Gain (Loss) | |
| Capital Gain Distributions Received-Unaffiliated Issuers | 251,490 |
| Capital Gain Distributions Received-Vanguard Real Estate II Index Fund | - |
| Investment Securities Sold-Unaffiliated Issuers1 | 453,464 |
| Investment Securities Sold-Affiliated Issuers | 34 |
| Investment Securities Sold-Vanguard Real Estate II Index Fund | - |
| Swap Contracts | 45,402 |
| Realized Net Gain (Loss) | 750,390 |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities-Unaffiliated Issuers | (107,672) |
| Investment Securities-Affiliated Issuers | 5 |
| Investment Securities-Vanguard Real Estate II Index Fund | 126,299 |
| Swap Contracts | (5,752) |
| Change in Unrealized Appreciation (Depreciation) | 12,880 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 2,606,653 |
| 1 | Includes $1,590,580 of net gain (loss) resulting from in-kind redemptions. |
See accompanying Notes, which are an integral part of the Financial Statements.
6
Real Estate Index Fund
Statement of Changes in Net Assets
| Year Ended January 31, | ||
|
2026 ($000) |
2025 ($000) |
|
| Increase (Decrease) in Net Assets | ||
| Operations | ||
| Net Investment Income | 1,843,383 | 1,819,064 |
| Realized Net Gain (Loss) | 750,390 | 931,611 |
| Change in Unrealized Appreciation (Depreciation) | 12,880 | 4,771,314 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 2,606,653 | 7,521,989 |
| Distributions | ||
| Net Investment Income and/or Realized Capital Gains | ||
| Investor Shares | (2,015) | (2,305) |
| ETF Shares | (994,642) | (1,010,254) |
| Admiral Shares | (588,176) | (601,430) |
| Institutional Shares | (295,796) | (303,772) |
| Return of Capital | ||
| Investor Shares | (687) | (723) |
| ETF Shares | (322,800) | (317,245) |
| Admiral Shares | (192,134) | (188,864) |
| Institutional Shares | (95,970) | (95,392) |
| Total Distributions | (2,492,220) | (2,519,985) |
| Capital Share Transactions | ||
| Investor Shares | (15,896) | (13,347) |
| ETF Shares | (239,183) | 217,195 |
| Admiral Shares | (195,796) | (947,161) |
| Institutional Shares | 232,526 | (621,858) |
| Net Increase (Decrease) from Capital Share Transactions | (218,349) | (1,365,171) |
| Total Increase (Decrease) | (103,916) | 3,636,833 |
| Net Assets | ||
| Beginning of Period | 65,845,788 | 62,208,955 |
| End of Period | 65,741,872 | 65,845,788 |
See accompanying Notes, which are an integral part of the Financial Statements.
7
Real Estate Index Fund
Financial Highlights
| Investor Shares | |||||
|
For a Share Outstanding Throughout Each Period |
Year Ended January 31, | ||||
| 2026 | 2025 | 2024 | 2023 | 2022 | |
| Net Asset Value, Beginning of Period | $30.11 | $27.89 | $30.26 | $35.37 | $28.23 |
| Investment Operations | |||||
| Net Investment Income1 | .813 | .774 | .787 | .684 | .602 |
| Net Realized and Unrealized Gain (Loss) on Investments | .368 | 2.544 | (2.036) | (4.766) | 7.475 |
| Total from Investment Operations | 1.181 | 3.318 | (1.249) | (4.082) | 8.077 |
| Distributions | |||||
| Dividends from Net Investment Income | (.838) | (.836) | (.833) | (.686) | (.620) |
| Distributions from Realized Capital Gains | - | - | - | - | - |
| Return of Capital | (.273) | (.262) | (.288) | (.342) | (.317) |
| Total Distributions | (1.111) | (1.098) | (1.121) | (1.028) | (.937) |
| Net Asset Value, End of Period | $30.18 | $30.11 | $27.89 | $30.26 | $35.37 |
| Total Return2 | 4.04% | 12.07% | -3.91% | -11.39% | 28.73% |
| Ratios/Supplemental Data | |||||
| Net Assets, End of Period (Millions) | $64 | $79 | $86 | $127 | $196 |
| Ratio of Total Expenses to Average Net Assets | 0.26% | 0.26% | 0.26% | 0.26%3 | 0.26% |
| Acquired Fund Fees and Expenses4 | 0.01% | 0.01% | 0.01% | - | - |
| Ratio of Net Investment Income to Average Net Assets | 2.72% | 2.62% | 2.87% | 2.18% | 1.77% |
| Portfolio Turnover Rate5 | 7% | 7% | 9% | 7% | 7% |
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.25%. |
| 4 | For the fiscal year ended January 31, 2023, and January 31, 2022, the acquired fund fees and expenses were less than 0.01%. |
| 5 | Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund's capital shares, including ETF Creation Units. |
See accompanying Notes, which are an integral part of the Financial Statements.
8
Real Estate Index Fund
Financial Highlights
| ETF Shares | |||||
|
For a Share Outstanding Throughout Each Period |
Year Ended January 31, | ||||
| 2026 | 2025 | 2024 | 2023 | 2022 | |
| Net Asset Value, Beginning of Period | $90.61 | $83.94 | $91.06 | $106.44 | $84.96 |
| Investment Operations | |||||
| Net Investment Income1 | 2.567 | 2.473 | 2.527 | 2.240 | 1.960 |
| Net Realized and Unrealized Gain (Loss) on Investments | 1.105 | 7.631 | (6.154) | (14.394) | 22.486 |
| Total from Investment Operations | 3.672 | 10.104 | (3.627) | (12.154) | 24.446 |
| Distributions | |||||
| Dividends from Net Investment Income | (2.620) | (2.613) | (2.595) | (2.152) | (1.943) |
| Distributions from Realized Capital Gains | - | - | - | - | - |
| Return of Capital | (.852) | (.821) | (.898) | (1.074) | (1.023) |
| Total Distributions | (3.472) | (3.434) | (3.493) | (3.226) | (2.966) |
| Net Asset Value, End of Period | $90.81 | $90.61 | $83.94 | $91.06 | $106.44 |
| Total Return | 4.18% | 12.22% | -3.81% | -11.25% | 28.88% |
| Ratios/Supplemental Data | |||||
| Net Assets, End of Period (Millions) | $34,928 | $35,127 | $32,359 | $36,825 | $46,673 |
| Ratio of Total Expenses to Average Net Assets | 0.12% | 0.12% | 0.12% | 0.12%2 | 0.12% |
| Acquired Fund Fees and Expenses3 | 0.01% | 0.01% | 0.01% | - | - |
| Ratio of Net Investment Income to Average Net Assets | 2.85% | 2.78% | 3.07% | 2.38% | 1.90% |
| Portfolio Turnover Rate4 | 7% | 7% | 9% | 7% | 7% |
| 1 | Calculated based on average shares outstanding. |
| 2 | The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.12%. |
| 3 | For the fiscal year ended January 31, 2023, and January 31, 2022, the acquired fund fees and expenses were less than 0.01%. |
| 4 | Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund's capital shares, including ETF Creation Units. |
See accompanying Notes, which are an integral part of the Financial Statements.
9
Real Estate Index Fund
Financial Highlights
| Admiral Shares | |||||
|
For a Share Outstanding Throughout Each Period |
Year Ended January 31, | ||||
| 2026 | 2025 | 2024 | 2023 | 2022 | |
| Net Asset Value, Beginning of Period | $128.41 | $118.96 | $129.05 | $150.85 | $120.40 |
| Investment Operations | |||||
| Net Investment Income1 | 3.630 | 3.495 | 3.613 | 3.201 | 2.761 |
| Net Realized and Unrealized Gain (Loss) on Investments | 1.580 | 10.820 | (8.752) | (20.428) | 31.890 |
| Total from Investment Operations | 5.210 | 14.315 | (5.139) | (17.227) | 34.651 |
| Distributions | |||||
| Dividends from Net Investment Income | (3.713) | (3.702) | (3.678) | (3.050) | (2.770) |
| Distributions from Realized Capital Gains | - | - | - | - | - |
| Return of Capital | (1.207) | (1.163) | (1.273) | (1.523) | (1.431) |
| Total Distributions | (4.920) | (4.865) | (4.951) | (4.573) | (4.201) |
| Net Asset Value, End of Period | $128.70 | $128.41 | $118.96 | $129.05 | $150.85 |
| Total Return2 | 4.19% | 12.22% | -3.75% | -11.26% | 28.91% |
| Ratios/Supplemental Data | |||||
| Net Assets, End of Period (Millions) | $20,365 | $20,511 | $19,879 | $22,110 | $25,764 |
| Ratio of Total Expenses to Average Net Assets | 0.12% | 0.12% | 0.12% | 0.12%3 | 0.12% |
| Acquired Fund Fees and Expenses4 | 0.01% | 0.01% | 0.01% | - | - |
| Ratio of Net Investment Income to Average Net Assets | 2.85% | 2.77% | 3.10% | 2.41% | 1.90% |
| Portfolio Turnover Rate5 | 7% | 7% | 9% | 7% | 7% |
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.12%. |
| 4 | For the fiscal year ended January 31, 2023, and January 31, 2022, the acquired fund fees and expenses were less than 0.01%. |
| 5 | Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund's capital shares, including ETF Creation Units. |
See accompanying Notes, which are an integral part of the Financial Statements.
10
Real Estate Index Fund
Financial Highlights
| Institutional Shares | |||||
|
For a Share Outstanding Throughout Each Period |
Year Ended January 31, | ||||
| 2026 | 2025 | 2024 | 2023 | 2022 | |
| Net Asset Value, Beginning of Period | $19.88 | $18.41 | $19.97 | $23.35 | $18.64 |
| Investment Operations | |||||
| Net Investment Income1 | .566 | .542 | .565 | .500 | .432 |
| Net Realized and Unrealized Gain (Loss) on Investments | .240 | 1.685 | (1.355) | (3.168) | 4.933 |
| Total from Investment Operations | .806 | 2.227 | (.790) | (2.668) | 5.365 |
| Distributions | |||||
| Dividends from Net Investment Income | (.578) | (.576) | (.572) | (.475) | (.432) |
| Distributions from Realized Capital Gains | - | - | - | - | - |
| Return of Capital | (.188) | (.181) | (.198) | (.237) | (.223) |
| Total Distributions | (.766) | (.757) | (.770) | (.712) | (.655) |
| Net Asset Value, End of Period | $19.92 | $19.88 | $18.41 | $19.97 | $23.35 |
| Total Return | 4.18% | 12.28% | -3.73% | -11.27% | 28.91% |
| Ratios/Supplemental Data | |||||
| Net Assets, End of Period (Millions) | $10,385 | $10,128 | $9,885 | $10,610 | $12,089 |
| Ratio of Total Expenses to Average Net Assets | 0.10% | 0.10% | 0.10% | 0.10%2 | 0.10% |
| Acquired Fund Fees and Expenses3 | 0.01% | 0.01% | 0.01% | - | - |
| Ratio of Net Investment Income to Average Net Assets | 2.87% | 2.78% | 3.13% | 2.43% | 1.92% |
| Portfolio Turnover Rate4 | 7% | 7% | 9% | 7% | 7% |
| 1 | Calculated based on average shares outstanding. |
| 2 | The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.10%. |
| 3 | For the fiscal year ended January 31, 2023, and January 31, 2022, the acquired fund fees and expenses were less than 0.01%. |
| 4 | Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund's capital shares, including ETF Creation Units. |
See accompanying Notes, which are an integral part of the Financial Statements.
11
Real Estate Index Fund
Notes to Financial Statements
Vanguard Real Estate Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers four classes of shares: Investor Shares, ETF Shares, Admiral Shares, and Institutional Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.
As a part of its principal investment strategy, the fund attempts to replicate its benchmark index by investing all, or substantially all, of its assets-either directly or indirectly through a wholly owned subsidiary-in the stocks that make up the index. Vanguard Real Estate II Index Fund ("the Subsidiary") is the wholly owned subsidiary in which the fund has invested a portion of its assets. Expenses of the Subsidiary are reflected in the Acquired Fund Fees and Expenses in the Financial Highlights. For additional financial information about the Subsidiary, refer to the accompanying financial statements.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund's pricing time but after the close of the securities' primary markets, are valued by methods deemed by the valuation designee to represent fair value and subject to oversight by the board of trustees.
Investments in affiliated Vanguard funds are valued at that fund's net asset value.
2. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks or indexes in the fund's target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.
A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund's maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty's default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund's net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Schedule of Investments. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
The notional amounts of swap contracts are not recorded in the Statement of Assets and Liabilities. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until periodic payments are made or the termination of the swap, at which time realized gain (loss) is recorded.
During the year ended January 31, 2026, the fund's average amounts of investments in total return swaps represented less than 1% of net assets, based on the average of notional amounts at each quarter-end during the period.
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute virtually all of its taxable income. The fund's tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund's tax positions taken for all open federal and state income tax years, and has concluded that no provision for income tax is required in the fund's financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. The portion of distributions that exceed a fund's current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.
5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty's default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the
12
Real Estate Index Fund
securities are on loan. Collateral investments in Vanguard Market Liquidity Fund are subject to market appreciation or depreciation. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
6. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group ("Vanguard") participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes and are subject to the fund's regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed amount of the facility, which are allocated to the funds based on a method approved by the fund's board of trustees and included in Management and Administrative expenses on the fund's Statement of Operations. Any borrowings under either facility bear interest at an agreed-upon spread plus the higher of the federal funds effective rate, the overnight bank funding rate, or the Daily Simple Secured Overnight Financing Rate inclusive of an additional agreed-upon spread. However, borrowings under the uncommitted credit facility may bear interest based upon an alternate rate agreed to by the fund and Vanguard.
In accordance with an exemptive order (the "Order") from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the "Interfund Lending Program"), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund's investment objective and investment policies. Interfund loans and borrowings normally extend overnight but can have a maximum duration of seven days. Loans may be called on one business day's notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.
For the year ended January 31, 2026, the fund did not utilize the credit facilities or the Interfund Lending Program.
7. Other: Distributions received from investment securities are recorded on the ex-dividend date. Non-cash dividends included in income, if any, are recorded at the fair value of the securities received. Each investment security reports annually the tax character of its distributions. Dividend income, capital gain distributions received, and unrealized appreciation (depreciation) reflect the amounts of taxable income, capital gain, and return of capital reported by the REITs, and management's estimates of such amounts for REIT distributions for which actual information has not been reported. Income, capital gain, and return of capital distributions received from affiliated Vanguard funds are recorded on ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses), shareholder reporting, and proxy fees. 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. Vanguard provides investment advisory services to the fund through its wholly owned subsidiary Vanguard Portfolio Management, LLC.
C. 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 January 31, 2026, the fund had contributed to Vanguard capital in the amount of $1,286,000, representing less than 0.01% of the fund's net assets and 0.51% of Vanguard's capital received pursuant to the FSA. The fund's trustees and officers are also directors and employees, respectively, of Vanguard.
D. Various inputs may be used to determine the value of the fund's investments and derivatives. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1-Quoted prices in active markets for identical securities.
Level 2-Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3-Significant unobservable inputs (including the fund's own assumptions used to determine the fair value of investments). Any investments and derivatives valued with significant unobservable inputs are noted on the Schedule of Investments.
13
Real Estate Index Fund
The following table summarizes the market value of the fund's investments and derivatives as of January 31, 2026, based on the inputs used to value them:
|
Level 1 ($000) |
Level 2 ($000) |
Level 3 ($000) |
Total ($000) |
|
| Investments | ||||
| Assets | ||||
| Common Stocks | 65,548,535 | - | 3 | 65,548,538 |
| Temporary Cash Investments | 221,837 | - | - | 221,837 |
| Total | 65,770,372 | - | 3 | 65,770,375 |
| Derivative Financial Instruments | ||||
| Assets | ||||
| Swap Contracts | - | 1,541 | - | 1,541 |
| Liabilities | ||||
| Swap Contracts | - | (2,588) | - | (2,588) |
E. Permanent differences between book-basis and tax-basis components of net assets are reclassified among capital accounts in the financial statements to reflect their tax character. These reclassifications have no effect on net assets or net asset value per share. Examples of permanent differences include, but are not limited to, the accounting for passive foreign investment companies, in-kind redemptions, swap agreements, and distributions in connection with fund share redemptions.
| Permanent differences were reclassified between the following accounts: |
Amount ($000) |
| Paid-in Capital | 1,594,318 |
| Total Distributable Earnings (Loss) | (1,594,318) |
Temporary differences between book-basis and tax-basis components of total distributable earnings (loss) arise when certain items of income, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Examples of temporary differences include, but are not limited to, capital loss carryforwards, the deferral of losses from wash sales, the recognition of unrealized gains or losses from certain derivative contracts, and the recognition of unrealized gains from passive foreign investment companies. As of period end, the tax-basis components of total distributable earnings (loss) are detailed in the table as follows:
|
Amount ($000) |
|
| Undistributed Ordinary Income | - |
| Undistributed Long-Term Gains | - |
| Net Unrealized Gains (Losses) | 3,277,789 |
| Capital Loss Carryforwards | (5,543,375) |
| Qualified Late-Year Losses | (6,052) |
| Other Temporary Differences | 107,467 |
| Total | (2,164,171) |
The tax character of distributions paid was as follows:
| Year Ended January 31, | ||
|
2026 Amount ($000) |
2025 Amount ($000) |
|
| Ordinary Income* | 1,880,629 | 1,917,761 |
| Long-Term Capital Gains | - | - |
| Return of Capital | 611,591 | 602,224 |
| Total | 2,492,220 | 2,519,985 |
| * | Includes short-term capital gains, if any. |
As of January 31, 2026, 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 | 62,492,586 |
| Gross Unrealized Appreciation | 11,116,314 |
| Gross Unrealized Depreciation | (7,838,525) |
| Net Unrealized Appreciation (Depreciation) | 3,277,789 |
14
Real Estate Index Fund
F. During the year ended January 31, 2026, the fund purchased $4,498,430,000 of investment securities and sold $4,320,290,000 of investment securities, other than temporary cash investments. In addition, the fund purchased and sold investment securities of $5,150,794,000 and $5,553,113,000, 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 year ended January 31, 2026, such purchases were $84,879,000 and sales were $5,970,000, resulting in net realized loss of $583,000; 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:
| Year Ended January 31, | |||||
| 2026 | 2025 | ||||
|
Amount ($000) |
Shares (000) |
Amount ($000) |
Shares (000) |
||
| Investor Shares | |||||
| Issued | 6,582 | 220 | 7,055 | 239 | |
| Issued in Lieu of Cash Distributions | 2,702 | 91 | 3,028 | 104 | |
| Redeemed | (25,180) | (843) | (23,430) | (805) | |
| Net Increase (Decrease)-Investor Shares | (15,896) | (532) | (13,347) | (462) | |
| ETF Shares | |||||
| Issued | 5,317,954 | 58,940 | 6,074,790 | 68,377 | |
| Issued in Lieu of Cash Distributions | - | - | - | - | |
| Redeemed | (5,557,137) | (62,000) | (5,857,595) | (66,200) | |
| Net Increase (Decrease)-ETF Shares | (239,183) | (3,060) | 217,195 | 2,177 | |
| Admiral Shares | |||||
| Issued | 2,513,223 | 19,732 | 2,272,459 | 18,159 | |
| Issued in Lieu of Cash Distributions | 689,253 | 5,454 | 699,132 | 5,607 | |
| Redeemed | (3,398,272) | (26,679) | (3,918,752) | (31,144) | |
| Net Increase (Decrease)-Admiral Shares | (195,796) | (1,493) | (947,161) | (7,378) | |
| Institutional Shares | |||||
| Issued | 1,564,689 | 79,308 | 1,697,501 | 88,687 | |
| Issued in Lieu of Cash Distributions | 380,478 | 19,453 | 383,313 | 19,892 | |
| Redeemed | (1,712,641) | (87,009) | (2,702,672) | (135,862) | |
| Net Increase (Decrease)-Institutional Shares | 232,526 | 11,752 | (621,858) | (27,283) | |
H. Transactions during the period in investments where the issuer is another member of The Vanguard Group were as follows:
| Current Period Transactions | ||||||||
|
Jan. 31, 2025 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) |
Jan. 31, 2026 Market Value ($000) |
|
| Vanguard Market Liquidity Fund | 403,298 | NA2 | NA2 | 34 | 5 | 5,907 | - | 221,837 |
| Vanguard Real Estate II Index Fund | 9,159,864 | 346,106 | - | - | 126,299 | 260,119 | - | 9,546,283 |
| Total | 9,563,162 | 346,106 | - | 34 | 126,304 | 266,026 | - | 9,768,120 |
| 1 | Does not include adjustments related to return of capital. |
| 2 | Not applicable-purchases and sales are for temporary cash investment purposes. |
I. Significant market disruptions, such as those caused by pandemics, natural or environmental disasters, war, acts of terrorism, political or regulatory conditions, 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.
15
Real Estate Index Fund
J. Operating segments are components of an entity that engage in business activities, have discrete financial information available, and have their operating results regularly reviewed by a chief operating decision maker ("CODM"). The fund is considered a single segment. Vanguard's chief executive officer, chief investment officer, and chief financial officer, who are also officers of the fund, as well as the fund's chief financial officer collectively act as the CODM. Vanguard has established various management committees to assist the CODM with overseeing aspects of the fund's daily operations. Through these committees, the CODM manages the fund's operations to achieve a single investment objective, as detailed in its prospectus, through the execution of the fund's investment strategies. When assessing segment performance and making decisions about segment resources, the CODM relies on the fund's portfolio composition, total returns, expense ratios and changes in net assets which are consistent with the information contained in the fund's financial statements. Segment assets, liabilities, income, and expenses are also detailed in the accompanying financial statements.
K. Management has determined that no subsequent events or transactions occurred through the date the financial statements were issued that would require recognition or disclosure in these financial statements.
16
Real Estate II Index Fund
Financial Statements
Schedule of Investments
As of January 31, 2026
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) (90.4%) | ||||||
| Data Center REITs (9.1%) | ||||||
| Equinix Inc. | 642,302 | 527,285 | ||||
| Digital Realty Trust Inc. | 2,238,435 | 371,468 | ||||
| 898,753 | ||||||
| Diversified REITs (2.0%) | ||||||
| WP Carey Inc. | 1,437,488 | 100,265 | ||||
| Essential Properties Realty Trust Inc. | 1,299,903 | 39,465 | ||||
| Broadstone Net Lease Inc. | 1,240,744 | 22,966 | ||||
| Global Net Lease Inc. | 1,304,003 | 12,336 | ||||
| Alexander & Baldwin Inc. | 477,263 | 9,898 | ||||
| American Assets Trust Inc. | 320,745 | 5,793 | ||||
| CTO Realty Growth Inc. | 215,921 | 3,837 | ||||
| Armada Hoffler Properties Inc. | 529,009 | 3,687 | ||||
| Gladstone Commercial Corp. | 305,771 | 3,562 | ||||
| 201,809 | ||||||
| Health Care REITs (15.5%) | ||||||
| Welltower Inc. | 4,389,616 | 826,828 | ||||
| Ventas Inc. | 2,982,855 | 231,678 | ||||
| Omega Healthcare Investors Inc. | 1,936,555 | 84,976 | ||||
| Healthpeak Properties Inc. | 4,561,858 | 78,646 | ||||
| Alexandria Real Estate Equities Inc. | 1,022,008 | 55,843 | ||||
| CareTrust REIT Inc. | 1,466,431 | 54,757 | ||||
| American Healthcare REIT Inc. | 1,106,038 | 51,884 | ||||
| Healthcare Realty Trust Inc. Class A | 2,191,204 | 36,790 | ||||
| Sabra Health Care REIT Inc. | 1,573,184 | 29,466 | ||||
| National Health Investors Inc. | 311,518 | 25,582 | ||||
| 1 | Medical Properties Trust Inc. | 3,352,071 | 16,827 | |||
| LTC Properties Inc. | 302,371 | 11,028 | ||||
| Sila Realty Trust Inc. | 361,705 | 8,808 | ||||
| Diversified Healthcare Trust | 1,106,873 | 6,431 | ||||
| Universal Health Realty Income Trust | 86,210 | 3,425 | ||||
| Community Healthcare Trust Inc. | 186,765 | 3,227 | ||||
| Global Medical REIT Inc. | 83,997 | 2,901 | ||||
| 1,529,097 | ||||||
| Hotel & Resort REITs (2.1%) | ||||||
| Host Hotels & Resorts Inc. | 4,513,292 | 83,631 | ||||
| Ryman Hospitality Properties Inc. | 392,605 | 37,180 | ||||
| Apple Hospitality REIT Inc. | 1,475,516 | 17,175 | ||||
| DiamondRock Hospitality Co. | 1,344,951 | 12,347 | ||||
| Sunstone Hotel Investors Inc. | 1,183,074 | 10,375 | ||||
| Park Hotels & Resorts Inc. | 913,682 | 9,986 | ||||
| Xenia Hotels & Resorts Inc. | 628,396 | 9,269 | ||||
| Pebblebrook Hotel Trust | 778,086 | 8,886 | ||||
| RLJ Lodging Trust | 891,863 | 6,626 | ||||
| Summit Hotel Properties Inc. | 713,955 | 3,156 | ||||
| Chatham Lodging Trust | 307,887 | 2,189 | ||||
| Service Properties Trust | 1,052,109 | 2,094 | ||||
| 202,914 | ||||||
| Industrial REITs (11.4%) | ||||||
| Prologis Inc. | 6,095,048 | 795,770 | ||||
| EastGroup Properties Inc. | 350,204 | 63,611 | ||||
| Rexford Industrial Realty Inc. | 1,553,926 | 62,981 | ||||
| First Industrial Realty Trust Inc. | 869,058 | 50,431 | ||||
| STAG Industrial Inc. | 1,224,859 | 45,945 | ||||
| Terreno Realty Corp. | 677,678 | 41,704 | ||||
| Americold Realty Trust Inc. | 1,868,071 | 23,183 | ||||
| LXP Industrial Trust | 388,075 | 19,229 | ||||
| Lineage Inc. | 450,298 | 16,080 | ||||
| Innovative Industrial Properties Inc. | 183,899 | 8,886 | ||||
17
Real Estate II Index Fund
| Shares |
Market Value• ($000) |
|||||
| One Liberty Properties Inc. | 106,089 | 2,286 | ||||
| 1,130,106 | ||||||
| Multi-Family Residential REITs (7.2%) | ||||||
| AvalonBay Communities Inc. | 934,625 | 166,055 | ||||
| Equity Residential | 2,381,590 | 148,421 | ||||
| Essex Property Trust Inc. | 422,755 | 106,479 | ||||
| Mid-America Apartment Communities Inc. | 626,471 | 84,135 | ||||
| UDR Inc. | 2,066,469 | 76,769 | ||||
| Camden Property Trust | 701,471 | 76,495 | ||||
| Independence Realty Trust Inc. | 1,533,694 | 25,613 | ||||
| Veris Residential Inc. | 550,816 | 8,367 | ||||
| Centerspace | 109,718 | 7,052 | ||||
| Apartment Investment & Management Co. Class A | 887,753 | 5,220 | ||||
| NexPoint Residential Trust Inc. | 141,962 | 4,290 | ||||
| 708,896 | ||||||
| Office REITs (2.7%) | ||||||
| BXP Inc. | 987,804 | 63,881 | ||||
| Vornado Realty Trust | 1,070,763 | 34,136 | ||||
| Cousins Properties Inc. | 1,101,646 | 27,806 | ||||
| Kilroy Realty Corp. | 737,112 | 25,416 | ||||
| COPT Defense Properties | 740,902 | 22,827 | ||||
| SL Green Realty Corp. | 465,806 | 20,859 | ||||
| Highwoods Properties Inc. | 708,955 | 18,326 | ||||
| Douglas Emmett Inc. | 1,098,133 | 11,596 | ||||
| Piedmont Realty Trust Inc. | 815,209 | 6,864 | ||||
| JBG SMITH Properties | 404,402 | 6,810 | ||||
| Easterly Government Properties Inc. Class A | 282,242 | 6,602 | ||||
| Empire State Realty Trust Inc. Class A | 940,488 | 6,235 | ||||
| Peakstone Realty Trust | 241,471 | 3,772 | ||||
| Brandywine Realty Trust | 1,150,129 | 3,255 | ||||
| * | Hudson Pacific Properties Inc. | 354,095 | 3,052 | |||
| NET Lease Office Properties | 92,266 | 1,800 | ||||
| 263,237 | ||||||
| Other Specialized REITs (6.3%) | ||||||
| VICI Properties Inc. Class A | 6,533,789 | 183,469 | ||||
| Iron Mountain Inc. | 1,938,544 | 178,598 | ||||
| Gaming & Leisure Properties Inc. | 1,857,749 | 83,134 | ||||
| Lamar Advertising Co. Class A | 569,815 | 73,113 | ||||
| EPR Properties | 499,323 | 27,083 | ||||
| Millrose Properties Inc. | 809,130 | 24,112 | ||||
| Outfront Media Inc. | 987,260 | 24,010 | ||||
| Four Corners Property Trust Inc. | 684,841 | 16,881 | ||||
| Safehold Inc. | 306,121 | 4,319 | ||||
| Farmland Partners Inc. | 274,291 | 3,185 | ||||
| Gladstone Land Corp. | 227,043 | 2,532 | ||||
| 620,436 | ||||||
| Retail REITs (14.0%) | ||||||
| Simon Property Group Inc. | 2,142,783 | 409,936 | ||||
| Realty Income Corp. | 6,000,925 | 367,017 | ||||
| Kimco Realty Corp. | 4,445,900 | 93,720 | ||||
| Regency Centers Corp. | 1,132,255 | 82,507 | ||||
| Federal Realty Investment Trust | 537,780 | 54,402 | ||||
| Brixmor Property Group Inc. | 2,008,250 | 53,801 | ||||
| Agree Realty Corp. | 726,144 | 52,449 | ||||
| NNN REIT Inc. | 1,238,583 | 51,612 | ||||
| Kite Realty Group Trust | 1,442,289 | 33,879 | ||||
| Macerich Co. | 1,657,886 | 31,384 | ||||
| Phillips Edison & Co. Inc. | 824,122 | 29,858 | ||||
| Tanger Inc. | 742,456 | 24,293 | ||||
| Acadia Realty Trust | 859,387 | 17,196 | ||||
| Urban Edge Properties | 824,562 | 16,021 | ||||
| Curbline Properties Corp. | 621,028 | 15,060 | ||||
| InvenTrust Properties Corp. | 509,031 | 14,960 | ||||
| Getty Realty Corp. | 352,904 | 10,538 | ||||
| 1 | NETSTREIT Corp. | 546,977 | 10,305 | |||
| Whitestone REIT | 301,293 | 4,290 | ||||
| Alexander's Inc. | 15,147 | 3,710 | ||||
| CBL & Associates Properties Inc. | 101,421 | 3,631 | ||||
18
Real Estate II Index Fund
| Shares |
Market Value• ($000) |
|||||
| Saul Centers Inc. | 87,893 | 2,789 | ||||
| SITE Centers Corp. | 330,318 | 2,022 | ||||
| 1,385,380 | ||||||
| Self-Storage REITs (5.6%) | ||||||
| Public Storage | 1,036,438 | 286,254 | ||||
| Extra Space Storage Inc. | 1,393,199 | 192,220 | ||||
| CubeSmart | 1,496,119 | 56,149 | ||||
| National Storage Affiliates Trust | 478,512 | 15,222 | ||||
| Smartstop Self Storage REIT Inc. | 203,538 | 6,399 | ||||
| 556,244 | ||||||
| Single-Family Residential REITs (3.6%) | ||||||
| Sun Communities Inc. | 821,516 | 104,686 | ||||
| Invitation Homes Inc. | 3,822,696 | 102,181 | ||||
| Equity LifeStyle Properties Inc. | 1,208,656 | 76,351 | ||||
| American Homes 4 Rent Class A | 2,187,835 | 68,523 | ||||
| UMH Properties Inc. | 528,504 | 8,260 | ||||
| 360,001 | ||||||
| Telecom Tower REITs (9.2%) | ||||||
| American Tower Corp. | 2,978,214 | 533,934 | ||||
| Crown Castle Inc. | 2,858,158 | 248,117 | ||||
| SBA Communications Corp. | 704,763 | 129,754 | ||||
| 911,805 | ||||||
| Timber REITs (1.7%) | ||||||
| Weyerhaeuser Co. | 4,736,047 | 122,095 | ||||
| Rayonier Inc. | 1,003,652 | 22,823 | ||||
| PotlatchDeltic Corp. | 481,619 | 20,098 | ||||
| 165,016 | ||||||
| Total Equity Real Estate Investment Trusts (REITs) (Cost $7,508,316) | 8,933,694 | |||||
| Real Estate Management & Development (9.1%) | ||||||
| Diversified Real Estate Activities (0.2%) | ||||||
| St. Joe Co. | 247,007 | 16,349 | ||||
| * | Tejon Ranch Co. | 132,308 | 2,129 | |||
| RMR Group Inc. Class A | 104,238 | 1,579 | ||||
| 20,057 | ||||||
| Real Estate Development (0.2%) | ||||||
| * | Howard Hughes Holdings Inc. | 214,417 | 17,509 | |||
| * | Forestar Group Inc. | 132,956 | 3,460 | |||
| 20,969 | ||||||
| Real Estate Operating Companies (0.2%) | ||||||
| 1 | Landbridge Co. LLC Class A | 124,614 | 7,160 | |||
| Kennedy-Wilson Holdings Inc. | 722,475 | 7,117 | ||||
| * | Seritage Growth Properties Class A | 243,102 | 802 | |||
| 15,079 | ||||||
| Real Estate Services (8.5%) | ||||||
| * | CBRE Group Inc. Class A | 1,953,153 | 332,681 | |||
| * | CoStar Group Inc. | 2,780,717 | 171,014 | |||
| * | Jones Lang LaSalle Inc. | 311,085 | 111,341 | |||
| * | Zillow Group Inc. Class C | 1,078,952 | 68,006 | |||
| * | Compass Inc. Class A | 4,182,041 | 52,359 | |||
| * | Opendoor Technologies Inc. | 5,942,188 | 30,602 | |||
| * | Cushman & Wakefield Ltd. | 1,518,925 | 24,971 | |||
| * | Zillow Group Inc. Class A | 332,392 | 20,688 | |||
| Newmark Group Inc. Class A | 967,968 | 17,259 | ||||
| eXp World Holdings Inc. | 617,827 | 5,585 | ||||
| Marcus & Millichap Inc. | 165,807 | 4,510 | ||||
| 839,016 | ||||||
| Total Real Estate Management & Development (Cost $705,521) | 895,121 | |||||
19
Real Estate II Index Fund
| Shares |
Market Value• ($000) |
|||||
| Temporary Cash Investments (0.6%) | ||||||
| Money Market Fund (0.6%) | ||||||
| 2,3 | Vanguard Market Liquidity Fund, 3.704% (Cost $59,301) | 593,040 | 59,304 | |||
| Total Investments (100.1%) (Cost $8,273,138) | 9,888,119 | |||||
| Other Assets and Liabilities-Net (-0.1%) | (5,848) | |||||
| Net Assets (100%) | 9,882,271 | |||||
| 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 $10,777. |
| 2 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
| 3 | Collateral of $11,995 was received for securities on loan. |
| REIT-Real Estate Investment Trust. |
Derivative Financial Instruments Outstanding as of Period End
| Over-the-Counter Total Return Swaps | ||||||
| Reference Entity |
Termination Date |
Counterparty |
Notional Amount ($000) |
Floating Interest Rate Received (Paid)1 (%) |
Value and Unrealized Appreciation ($000) |
Value and Unrealized (Depreciation) ($000) |
| American Tower Corp. | 8/31/2026 | BANA | 17,049 | (3.640) | 139 | - |
| Mid-America Apartment Communities Inc. | 8/31/2026 | BANA | 19,164 | (3.640) | 118 | - |
| Park Hotels & Resorts Inc. | 2/1/2027 | GSI | 4,596 | (3.630) | - | (231) |
| VICI Properties Inc. Class A | 8/31/2026 | BANA | 13,275 | (4.340) | - | (205) |
| 257 | (436) | |||||
| 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. |
See accompanying Notes, which are an integral part of the Financial Statements.
20
Real Estate II Index Fund
Statement of Assets and Liabilities
As of January 31, 2026
| ($000s, except shares and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value1 | |
| Unaffiliated Issuers (Cost $8,213,837) | 9,828,815 |
| Affiliated Issuers (Cost $59,301) | 59,304 |
| Total Investments in Securities | 9,888,119 |
| Investment in Vanguard | 228 |
| Cash | 460 |
| Cash Collateral Pledged-Over-the-Counter Swap Contracts | 260 |
| Receivables for Accrued Income | 10,092 |
| Unrealized Appreciation-Over-the-Counter Swap Contracts | 257 |
| Total Assets | 9,899,416 |
| Liabilities | |
| Payables for Investment Securities Purchased | 4,105 |
| Collateral for Securities on Loan | 11,995 |
| Payables for Capital Shares Redeemed | 262 |
| Payables to Vanguard | 347 |
| Unrealized Depreciation-Over-the-Counter Swap Contracts | 436 |
| Total Liabilities | 17,145 |
| Net Assets | 9,882,271 |
| 1 Includes $10,777 of securities on loan. | |
|
At January 31, 2026, net assets consisted of: |
|
| Paid-in Capital | 8,438,652 |
| Total Distributable Earnings (Loss) | 1,443,619 |
| Net Assets | 9,882,271 |
| Net Assets | |
|
Applicable to 452,033,504 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
9,882,271 |
| Net Asset Value Per Share | $21.86 |
See accompanying Notes, which are an integral part of the Financial Statements.
21
Real Estate II Index Fund
Statement of Operations
|
Year Ended January 31, 2026 |
|
| ($000) | |
| Investment Income | |
| Income | |
| Dividends | 285,015 |
| Interest1 | 861 |
| Securities Lending-Net | 406 |
| Total Income | 286,282 |
| Expenses | |
| The Vanguard Group-Note C | |
| Investment Advisory Services | 153 |
| Management and Administrative | 7,228 |
| Marketing and Distribution | 143 |
| Custodian Fees | 53 |
| Auditing Fees | 39 |
| Shareholders' Reports and Proxy Fees | 19 |
| Trustees' Fees and Expenses | 6 |
| Other Expenses | 19 |
| Total Expenses | 7,660 |
| Net Investment Income | 278,622 |
| Realized Net Gain (Loss) | |
| Capital Gain Distributions Received | 43,109 |
| Investment Securities Sold1 | (93,806) |
| Swap Contracts | (6,189) |
| Realized Net Gain (Loss) | (56,886) |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities1 | 180,510 |
| Swap Contracts | (570) |
| Change in Unrealized Appreciation (Depreciation) | 179,940 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 401,676 |
| 1 | Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $830, $4, and $1, respectively. Purchases and sales are for temporary cash investment purposes. |
See accompanying Notes, which are an integral part of the Financial Statements.
22
Real Estate II Index Fund
Statement of Changes in Net Assets
| Year Ended January 31, | ||
|
2026 ($000) |
2025 ($000) |
|
| Increase (Decrease) in Net Assets | ||
| Operations | ||
| Net Investment Income | 278,622 | 255,127 |
| Realized Net Gain (Loss) | (56,886) | (27,643) |
| Change in Unrealized Appreciation (Depreciation) | 179,940 | 810,997 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 401,676 | 1,038,481 |
| Distributions | ||
| Net Investment Income and/or Realized Capital Gains | (268,452) | (262,200) |
| Return of Capital | (88,975) | (83,536) |
| Total Distributions | (357,427) | (345,736) |
| Capital Share Transactions | ||
| Issued | 41,919 | 46,455 |
| Issued in Lieu of Cash Distributions | 357,427 | 345,736 |
| Redeemed | (6,572) | (65,552) |
| Net Increase (Decrease) from Capital Share Transactions | 392,774 | 326,639 |
| Total Increase (Decrease) | 437,023 | 1,019,384 |
| Net Assets | ||
| Beginning of Period | 9,445,248 | 8,425,864 |
| End of Period | 9,882,271 | 9,445,248 |
See accompanying Notes, which are an integral part of the Financial Statements.
23
Real Estate II Index Fund
Financial Highlights
|
For a Share Outstanding Throughout Each Period |
Year Ended January 31, | ||||
| 2026 | 2025 | 2024 | 2023 | 2022 | |
| Net Asset Value, Beginning of Period | $21.78 | $20.16 | $21.86 | $25.69 | $20.50 |
| Investment Operations | |||||
| Net Investment Income1 | .630 | .599 | .620 | .558 | .484 |
| Net Realized and Unrealized Gain (Loss) on Investments | .261 | 1.836 | (1.476) | (3.493) | 5.427 |
| Total from Investment Operations | .891 | 2.435 | (.856) | (2.935) | 5.911 |
| Distributions | |||||
| Dividends from Net Investment Income | (.609) | (.618) | (.625) | (.528) | (.477) |
| Distributions from Realized Capital Gains | - | - | - | (.238) | (.034) |
| Return of Capital | (.202) | (.197) | (.219) | (.129) | (.210) |
| Total Distributions | (.811) | (.815) | (.844) | (.895) | (.721) |
| Net Asset Value, End of Period | $21.86 | $21.78 | $20.16 | $21.86 | $25.69 |
| Total Return | 4.22% | 12.26% | -3.68% | -11.23% | 28.96% |
| Ratios/Supplemental Data | |||||
| Net Assets, End of Period (Millions) | $9,882 | $9,445 | $8,426 | $8,690 | $9,542 |
| Ratio of Total Expenses to Average Net Assets | 0.08% | 0.08% | 0.08% | 0.08%2 | 0.08% |
| Ratio of Net Investment Income to Average Net Assets | 2.91% | 2.80% | 3.14% | 2.47% | 1.95% |
| Portfolio Turnover Rate | 3% | 4% | 6% | 5%3 | 6% |
| 1 | Calculated based on average shares outstanding. |
| 2 | The ratio of expenses to average net assets for the period net of reduction from custody fee offset arrangements was 0.08%. |
| 3 | Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund's capital shares. |
See accompanying Notes, which are an integral part of the Financial Statements.
24
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 January 31, 2026, the Real Estate Index Fund was the record and beneficial owner of 96.6% of the fund's net assets. As part of the Real Estate Index Fund's principal investment strategy, it attempts to replicate the benchmark index by investing all, or substantially all, of its assets-either directly or indirectly through the fund-in the stocks that make up the index.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund's pricing time but after the close of the securities' primary markets, are valued by methods deemed by the valuation designee to represent fair value and subject to oversight by the board of trustees.
Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset value.
2. Swap Contracts: The fund has entered into equity swap contracts to earn the total return on selected reference stocks or indexes in the fund's target index. Under the terms of the swaps, the fund receives the total return on the referenced stock (i.e., receiving the increase or paying the decrease in value of the selected reference stock and receiving the equivalent of any dividends in respect of the selected referenced stock) over a specified period of time, applied to a notional amount that represents the value of a designated number of shares of the selected reference stock at the beginning of the equity swap contract. The fund also pays a floating rate that is based on short-term interest rates, applied to the notional amount. At the same time, the fund generally invests an amount approximating the notional amount of the swap in high-quality temporary cash investments.
A risk associated with all types of swaps is the possibility that a counterparty may default on its obligation to pay net amounts due to the fund. The fund's maximum amount subject to counterparty risk is the unrealized appreciation on the swap contract. The fund mitigates its counterparty risk by entering into swaps only with a diverse group of prequalified counterparties, monitoring their financial strength, entering into master netting arrangements with its counterparties, and requiring its counterparties to transfer collateral as security for their performance. In the absence of a default, the collateral pledged or received by the fund cannot be repledged, resold, or rehypothecated. In the event of a counterparty's default (including bankruptcy), the fund may terminate any swap contracts with that counterparty, determine the net amount owed by either party in accordance with its master netting arrangements, and sell or retain any collateral held up to the net amount owed to the fund under the master netting arrangements. The swap contracts contain provisions whereby a counterparty may terminate open contracts if the fund's net assets decline below a certain level, triggering a payment by the fund if the fund is in a net liability position at the time of the termination. The payment amount would be reduced by any collateral the fund has pledged. Any securities pledged as collateral for open contracts are noted in the Schedule of Investments. The value of collateral received or pledged is compared daily to the value of the swap contracts exposure with each counterparty, and any difference, if in excess of a specified minimum transfer amount, is adjusted and settled within two business days.
The notional amounts of swap contracts are not recorded in the Statement of Assets and Liabilities. Swaps are valued daily based on market quotations received from independent pricing services or recognized dealers and the change in value is recorded in the Statement of Assets and Liabilities as an asset (liability) and in the Statement of Operations as unrealized appreciation (depreciation) until periodic payments are made or the termination of the swap, at which time realized gain (loss) is recorded.
During the year ended January 31, 2026, the fund's average amounts of investments in total return swaps represented less than 1% of net assets, based on the average of notional amounts at each quarter-end during the period.
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute virtually all of its taxable income. The fund's tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund's tax positions taken for all open federal and state income tax years, and has concluded that no provision for income tax is required in the fund's financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. The portion of distributions that exceed a fund's current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.
5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty's default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Collateral investments in Vanguard Market Liquidity Fund are subject to market appreciation or depreciation. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
25
Real Estate II Index Fund
6. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group ("Vanguard") participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes and are subject to the fund's regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed amount of the facility, which are allocated to the funds based on a method approved by the fund's board of trustees and included in Management and Administrative expenses on the fund's Statement of Operations. Any borrowings under either facility bear interest at an agreed-upon spread plus the higher of the federal funds effective rate, the overnight bank funding rate, or the Daily Simple Secured Overnight Financing Rate inclusive of an additional agreed-upon spread. However, borrowings under the uncommitted credit facility may bear interest based upon an alternate rate agreed to by the fund and Vanguard.
In accordance with an exemptive order (the "Order") from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the "Interfund Lending Program"), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund's investment objective and investment policies. Interfund loans and borrowings normally extend overnight but can have a maximum duration of seven days. Loans may be called on one business day's notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.
For the year ended January 31, 2026, the fund did not utilize the credit facilities or the Interfund Lending Program.
7. Other: Distributions received from investment securities are recorded on the ex-dividend date. Non-cash dividends included in income, if any, are recorded at the fair value of the securities received. Each investment security reports annually the tax character of its distributions. Dividend income, capital gain distributions received, and unrealized appreciation (depreciation) reflect the amounts of taxable income, capital gain, and return of capital reported by the REITs, and management's estimates of such amounts for REIT distributions for which actual information has not been reported. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
B. Vanguard provides investment advisory services to the fund through its wholly owned subsidiary Vanguard Portfolio Management, LLC.
C. 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 January 31, 2026, the fund had contributed to Vanguard capital in the amount of $228,000, representing less than 0.01% of the fund's net assets and 0.09% of Vanguard's capital received pursuant to the FSA. The fund's trustees and officers are also directors and employees, respectively, of Vanguard.
D. Various inputs may be used to determine the value of the fund's investments 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 January 31, 2026, based on the inputs used to value them:
|
Level 1 ($000) |
Level 2 ($000) |
Level 3 ($000) |
Total ($000) |
|
| Investments | ||||
| Assets | ||||
| Common Stocks | 9,828,815 | - | - | 9,828,815 |
| Temporary Cash Investments | 59,304 | - | - | 59,304 |
| Total | 9,888,119 | - | - | 9,888,119 |
| Derivative Financial Instruments | ||||
| Assets | ||||
| Swap Contracts | - | 257 | - | 257 |
| Liabilities | ||||
| Swap Contracts | - | (436) | - | (436) |
26
Real Estate II Index Fund
E. Permanent differences between book-basis and tax-basis components of net assets are reclassified among capital accounts in the financial statements to reflect their tax character. These reclassifications have no effect on net assets or net asset value per share. Examples of permanent differences include, but are not limited to, the accounting for passive foreign investment companies, in-kind redemptions, swap agreements, and distributions in connection with fund share redemptions.
Temporary differences between book-basis and tax-basis components of total distributable earnings (loss) arise when certain items of income, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Examples of temporary differences include, but are not limited to, capital loss carryforwards, the deferral of losses from wash sales, the recognition of unrealized gains or losses from certain derivative contracts, and the recognition of unrealized gains from passive foreign investment companies. As of period end, the tax-basis components of total distributable earnings (loss) are detailed in the table as follows:
|
Amount ($000) |
|
| Undistributed Ordinary Income | - |
| Undistributed Long-Term Gains | - |
| Net Unrealized Gains (Losses) | 1,569,502 |
| Capital Loss Carryforwards | (145,048) |
| Qualified Late-Year Losses | - |
| Other Temporary Differences | 19,165 |
| Total | 1,443,619 |
The tax character of distributions paid was as follows:
| Year Ended January 31, | ||
|
2026 Amount ($000) |
2025 Amount ($000) |
|
| Ordinary Income* | 268,452 | 262,200 |
| Long-Term Capital Gains | - | - |
| Return of Capital | 88,975 | 83,536 |
| Total | 357,427 | 345,736 |
| * | Includes short-term capital gains, if any. |
As of January 31, 2026, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:
|
Amount ($000) |
|
| Tax Cost | 8,318,617 |
| Gross Unrealized Appreciation | 2,597,478 |
| Gross Unrealized Depreciation | (1,027,976) |
| Net Unrealized Appreciation (Depreciation) | 1,569,502 |
F. During the year ended January 31, 2026, the fund purchased $680,845,000 of investment securities and sold $330,408,000 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 year ended January 31, 2026, such purchases were $14,135,000 and sales were $1,107,000, resulting in net realized loss of $100,000; 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:
| Year Ended January 31, | ||
|
2026 Shares (000) |
2025 Shares (000) |
|
| Issued | 1,947 | 2,234 |
| Issued in Lieu of Cash Distributions | 16,666 | 16,360 |
| Redeemed | (303) | (2,889) |
| Net Increase (Decrease) in Shares Outstanding | 18,310 | 15,705 |
27
Real Estate II Index Fund
H. Significant market disruptions, such as those caused by pandemics, natural or environmental disasters, war, acts of terrorism, political or regulatory conditions, 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. Operating segments are components of an entity that engage in business activities, have discrete financial information available, and have their operating results regularly reviewed by a chief operating decision maker ("CODM"). The fund is considered a single segment. Vanguard's chief executive officer, chief investment officer, and chief financial officer, who are also officers of the fund, as well as the fund's chief financial officer collectively act as the CODM. Vanguard has established various management committees to assist the CODM with overseeing aspects of the fund's daily operations. Through these committees, the CODM manages the fund's operations to achieve a single investment objective, as detailed in its prospectus, through the execution of the fund's investment strategies. When assessing segment performance and making decisions about segment resources, the CODM relies on the fund's portfolio composition, total returns, expense ratios and changes in net assets which are consistent with the information contained in the fund's financial statements. Segment assets, liabilities, income, and expenses are also detailed in the accompanying financial statements.
J. Management has determined that no subsequent events or transactions occurred through the date the financial statements were issued that would require recognition or disclosure in these financial statements.
28
Report of Independent Registered
Public Accounting Firm
To the Board of Trustees of Vanguard Specialized Funds and Vanguard Fixed Income Securities Funds and Shareholders of Vanguard Real Estate Index Fund and Vanguard Real Estate II Index Fund
Opinions on the Financial Statements
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Vanguard Real Estate Index Fund (one of the funds constituting Vanguard Specialized Funds) and Vanguard Real Estate II Index Fund (one of the funds constituting Vanguard Fixed Income Securities Funds) (hereafter collectively referred to as the "Funds") as of January 31, 2026, the related statements of operations for the year ended January 31, 2026, the statements of changes in net assets for each of the two years in the period ended January 31, 2026, including the related notes, and the financial highlights for each of the five years in the period ended January 31, 2026 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of January 31, 2026, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period ended January 31, 2026 and each of the financial highlights for each of the five years in the period ended January 31, 2026 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinions
These financial statements are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds' financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of January 31, 2026 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinions.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 20, 2026
Philadelphia, Pennsylvania
March 20, 2026
We have served as the auditor of one or more investment companies in The Vanguard Group of Funds since 1975.
29
Tax information (unaudited)
The following amounts, or if subsequently determined to be different, the maximum amounts allowable by law, are hereby designated as qualified dividend income for purposes of the maximum rate under section 1(h)(11) for calendar year 2025.
| Fund | ($000) |
| Real Estate Index Fund | 42,571 |
| Real Estate II Index Fund | 6,328 |
The following amounts for the fiscal year, or if subsequently determined to be different, the maximum amounts allowable by law, are hereby designated as interest earned from obligations of the U.S. government which is generally exempt from state income tax.
| Fund | ($000) |
| Real Estate Index Fund | 3,231 |
| Real Estate II Index Fund | 458 |
The following amounts, or if subsequently determined to be different, the maximum amounts allowable by law, are hereby designated as qualified business income under section 199A for calendar year 2025.
| Fund | ($000) |
| Real Estate Index Fund | 1,764,430 |
| Real Estate II Index Fund | 262,124 |
Q1230 032026
30
Financial Statements
For the year ended January 31, 2026
Vanguard Global Capital Cycles Fund
Contents
|
Financial Statements
|
1 |
|
Report of Independent Registered
Public Accounting Firm
|
12 |
|
Tax information
|
13 |
Global Capital Cycles Fund
Financial Statements
Schedule of Investments
As of January 31, 2026
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 (94.3%) | ||||||
| Australia (1.7%) | ||||||
| BHP Group Ltd. | 732,384 | 25,225 | ||||
| * | Bellevue Gold Ltd. | 19,770,189 | 23,184 | |||
| 1 | BHP Group Ltd. ADR | 192,272 | 13,215 | |||
| 61,624 | ||||||
| Brazil (5.2%) | ||||||
| Banco Bradesco SA ADR | 17,751,996 | 71,895 | ||||
| Lojas Renner SA | 17,873,492 | 50,706 | ||||
| Ambev SA | 17,170,642 | 48,451 | ||||
| * | Natura Cosmeticos SA | 9,974,616 | 16,622 | |||
| 187,674 | ||||||
| Canada (14.3%) | ||||||
| Barrick Mining Corp. | 4,643,607 | 212,631 | ||||
| Teck Resources Ltd. Class B | 1,989,286 | 106,765 | ||||
| Nutrien Ltd. | 1,082,729 | 74,589 | ||||
| * | Foran Mining Corp. | 11,214,733 | 54,276 | |||
| Lundin Mining Corp. | 1,265,912 | 31,935 | ||||
| * | Abaxx Technologies Inc. | 637,763 | 19,578 | |||
| Intact Financial Corp. | 48,865 | 8,897 | ||||
| * | LunR Royalties Corp. | 375,341 | 4,962 | |||
| 513,633 | ||||||
| China (3.4%) | ||||||
| * | Baidu Inc. Class A | 3,012,921 | 57,750 | |||
| JD.com Inc. Class A | 2,790,095 | 39,789 | ||||
| Alibaba Group Holding Ltd. | 1,141,973 | 24,294 | ||||
| 121,833 | ||||||
| France (4.4%) | ||||||
| Societe Generale SA | 756,085 | 66,256 | ||||
| Engie SA | 1,311,251 | 39,149 | ||||
| Sanofi SA | 325,106 | 30,665 | ||||
| APERAM SA | 278,928 | 12,002 | ||||
| Arkema SA | 168,059 | 10,121 | ||||
| 158,193 | ||||||
| Germany (1.1%) | ||||||
| Brenntag SE | 406,442 | 24,728 | ||||
| *,2 | Zalando SE | 490,362 | 14,100 | |||
| 38,828 | ||||||
| Hong Kong (0.8%) | ||||||
| ASMPT Ltd. | 2,240,337 | 29,877 | ||||
| Indonesia (0.3%) | ||||||
| Bank Negara Indonesia Persero Tbk. PT | 33,178,781 | 8,905 | ||||
| Japan (0.8%) | ||||||
| SUMCO Corp. | 1,552,140 | 16,204 | ||||
| Mitsubishi Estate Co. Ltd. | 526,440 | 13,417 | ||||
| 29,621 | ||||||
| Mexico (2.4%) | ||||||
| Cemex SAB de CV ADR | 2,982,835 | 37,226 | ||||
| America Movil SAB de CV Class B | 30,764,032 | 31,704 | ||||
| * | Esentia Energy Development SAB de CV | 5,636,331 | 15,968 | |||
| 84,898 | ||||||
| Netherlands (2.1%) | ||||||
| Heineken NV | 884,960 | 73,053 | ||||
| * | Magnum Ice Cream Co. NV | 171,261 | 3,041 | |||
| 76,094 | ||||||
1
Global Capital Cycles Fund
| Shares |
Market Value• ($000) |
|||||
| South Africa (2.5%) | ||||||
| Valterra Platinum Ltd. | 663,943 | 59,654 | ||||
| Valterra Platinum Ltd. (XLON) | 320,867 | 28,938 | ||||
| 88,592 | ||||||
| South Korea (6.3%) | ||||||
| Samsung Electronics Co. Ltd. | 1,130,292 | 124,869 | ||||
| SK Telecom Co. Ltd. | 2,035,897 | 102,601 | ||||
| 227,470 | ||||||
| Switzerland (1.4%) | ||||||
| Swatch Group AG | 141,261 | 33,329 | ||||
| Adecco Group AG (Registered) | 543,184 | 15,962 | ||||
| 49,291 | ||||||
| Taiwan (2.2%) | ||||||
| Taiwan Semiconductor Manufacturing Co. Ltd. ADR | 238,211 | 78,743 | ||||
| United Kingdom (26.6%) | ||||||
| Anglo American plc | 3,235,288 | 150,013 | ||||
| Rio Tinto plc ADR | 1,044,770 | 95,105 | ||||
| Glencore plc | 13,558,898 | 92,436 | ||||
| GSK plc | 3,151,409 | 81,501 | ||||
| Prudential plc | 4,785,948 | 78,610 | ||||
| British American Tobacco plc | 947,003 | 57,212 | ||||
| Unilever plc | 761,160 | 51,781 | ||||
| Haleon plc | 9,152,077 | 47,864 | ||||
| Rio Tinto plc | 444,174 | 40,524 | ||||
| Derwent London plc | 1,314,574 | 34,819 | ||||
| Tate & Lyle plc | 6,514,650 | 33,705 | ||||
| Hammerson plc | 6,645,069 | 32,266 | ||||
| Serco Group plc | 7,755,674 | 31,844 | ||||
| Hikma Pharmaceuticals plc | 1,280,112 | 26,852 | ||||
| Shell plc | 549,283 | 21,114 | ||||
| Domino's Pizza Group plc | 6,473,380 | 16,153 | ||||
| Pagegroup plc | 4,709,971 | 13,309 | ||||
| Hays plc | 19,724,846 | 12,827 | ||||
| Travis Perkins plc | 1,418,842 | 12,145 | ||||
| Reckitt Benckiser Group plc | 135,850 | 11,334 | ||||
| UNITE Group plc | 1,439,021 | 11,192 | ||||
| 952,606 | ||||||
| United States (18.8%) | ||||||
| * | Molina Healthcare Inc. | 562,974 | 101,104 | |||
| Wells Fargo & Co. | 609,194 | 55,126 | ||||
| Westlake Corp. | 653,750 | 51,855 | ||||
| * | Intel Corp. | 1,061,129 | 49,311 | |||
| Pfizer Inc. | 1,516,450 | 40,095 | ||||
| Merck & Co. Inc. | 354,245 | 39,062 | ||||
| * | Centene Corp. | 884,132 | 38,301 | |||
| Diamondback Energy Inc. | 228,264 | 37,424 | ||||
| Archer-Daniels-Midland Co. | 534,676 | 35,989 | ||||
| Viper Energy Inc. Class A | 751,964 | 31,838 | ||||
| Royal Gold Inc. | 115,783 | 30,487 | ||||
| * | First Solar Inc. | 113,862 | 25,678 | |||
| American Electric Power Co. Inc. | 191,869 | 22,981 | ||||
| * | Antero Resources Corp. | 536,674 | 19,519 | |||
| Freeport-McMoRan Inc. | 294,200 | 17,720 | ||||
| Voya Financial Inc. | 204,517 | 15,678 | ||||
| Expand Energy Corp. | 136,809 | 15,379 | ||||
| * | Nextpower Inc. Class A | 117,856 | 13,800 | |||
| Universal Health Services Inc. Class B | 60,845 | 12,246 | ||||
| CVS Health Corp. | 159,892 | 11,915 | ||||
| * | Fluor Corp. | 205,400 | 9,487 | |||
| 674,995 | ||||||
| Total Common Stocks (Cost $2,381,874) | 3,382,877 | |||||
| Preferred Stocks (0.3%) | ||||||
| * | Raizen SA Preference Shares (Cost $28,287) | 58,756,300 | 11,500 | |||
2
Global Capital Cycles Fund
| Shares |
Market Value• ($000) |
|||||
| Temporary Cash Investments (6.6%) | ||||||
| Money Market Fund (6.6%) | ||||||
| 3,4 | Vanguard Market Liquidity Fund, 3.704% (Cost $235,474) | 2,354,744 | 235,474 | |||
| Total Investments (101.2%) (Cost $2,645,635) | 3,629,851 | |||||
| Other Assets and Liabilities-Net (-1.2%) | (43,433) | |||||
| Net Assets (100%) | 3,586,418 | |||||
| Cost is in $000. |
| • | See Note A in Notes to Financial Statements. |
| * | Non-income-producing security. |
| 1 | Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $7,732. |
| 2 | Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be sold in transactions exempt from registration, normally to qualified institutional buyers. At January 31, 2026, the aggregate value was $14,100, representing 0.4% of net assets. |
| 3 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
| 4 | Collateral of $8,325 was received for securities on loan. |
| ADR-American Depositary Receipt. |
See accompanying Notes, which are an integral part of the Financial Statements.
3
Global Capital Cycles Fund
Statement of Assets and Liabilities
As of January 31, 2026
| ($000s, except shares and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value1 | |
| Unaffiliated Issuers (Cost $2,410,161) | 3,394,377 |
| Affiliated Issuers (Cost $235,474) | 235,474 |
| Total Investments in Securities | 3,629,851 |
| Investment in Vanguard | 69 |
| Foreign Currency, at Value (Cost $1,610) | 1,599 |
| Receivables for Investment Securities Sold | 48 |
| Receivables for Accrued Income | 7,324 |
| Receivables for Capital Shares Issued | 44,989 |
| Total Assets | 3,683,880 |
| Liabilities | |
| Due to Custodian | 30,055 |
| Payables for Investment Securities Purchased | 52,713 |
| Collateral for Securities on Loan | 8,325 |
| Payables for Capital Shares Redeemed | 4,762 |
| Payables to Investment Advisor | 1,262 |
| Payables to Vanguard | 345 |
| Total Liabilities | 97,462 |
| Net Assets | 3,586,418 |
| 1 Includes $7,732 of securities on loan. | |
|
At January 31, 2026, net assets consisted of: |
|
| Paid-in Capital | 4,183,795 |
| Total Distributable Earnings (Loss) | (597,377) |
| Net Assets | 3,586,418 |
| Net Assets | |
|
Applicable to 159,943,618 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
3,586,418 |
| Net Asset Value Per Share | $22.42 |
See accompanying Notes, which are an integral part of the Financial Statements.
4
Global Capital Cycles Fund
Statement of Operations
|
Year Ended January 31, 2026 |
|
| ($000) | |
| Investment Income | |
| Income | |
| Dividends1 | 51,350 |
| Non-Cash Dividends | 8,985 |
| Interest2 | 3,009 |
| Securities Lending-Net | 331 |
| Total Income | 63,675 |
| Expenses | |
| Investment Advisory Fees-Note B | |
| Basic Fee | 2,935 |
| Performance Adjustment | 1,043 |
| The Vanguard Group-Note C | |
| Management and Administrative | 4,475 |
| Marketing and Distribution | 114 |
| Custodian Fees | 119 |
| Auditing Fees | 29 |
| Shareholders' Reports and Proxy Fees | 31 |
| Trustees' Fees and Expenses | 1 |
| Other Expenses | 38 |
| Total Expenses | 8,785 |
| Expenses Paid Indirectly | (6) |
| Net Expenses | 8,779 |
| Net Investment Income | 54,896 |
| Realized Net Gain (Loss) | |
| Investment Securities Sold2,3 | 350,758 |
| Foreign Currencies | 637 |
| Realized Net Gain (Loss) | 351,395 |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities2 | 840,287 |
| Foreign Currencies | 287 |
| Change in Unrealized Appreciation (Depreciation) | 840,574 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 1,246,865 |
| 1 | Dividends are net of foreign withholding taxes of $3,570. |
| 2 | Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $2,939, $3, and ($1), respectively. Purchases and sales are for temporary cash investment purposes. |
| 3 | Realized Gain (Loss) is net of foreign capital gains taxes of $3,079. |
See accompanying Notes, which are an integral part of the Financial Statements.
5
Global Capital Cycles Fund
Statement of Changes in Net Assets
| Year Ended January 31, | ||
|
2026 ($000) |
2025 ($000) |
|
| Increase (Decrease) in Net Assets | ||
| Operations | ||
| Net Investment Income | 54,896 | 31,111 |
| Realized Net Gain (Loss) | 351,395 | 99,106 |
| Change in Unrealized Appreciation (Depreciation) | 840,574 | 60,905 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 1,246,865 | 191,122 |
| Distributions | ||
| Total Distributions | (72,262) | (36,499) |
| Capital Share Transactions | ||
| Issued | 1,349,557 | 155,989 |
| Issued in Lieu of Cash Distributions | 61,185 | 30,828 |
| Redeemed | (430,134) | (237,009) |
| Net Increase (Decrease) from Capital Share Transactions | 980,608 | (50,192) |
| Total Increase (Decrease) | 2,155,211 | 104,431 |
| Net Assets | ||
| Beginning of Period | 1,431,207 | 1,326,776 |
| End of Period | 3,586,418 | 1,431,207 |
See accompanying Notes, which are an integral part of the Financial Statements.
6
Global Capital Cycles Fund
Financial Highlights
|
For a Share Outstanding Throughout Each Period |
Year Ended January 31, | ||||
| 2026 | 2025 | 2024 | 2023 | 2022 | |
| Net Asset Value, Beginning of Period | $13.12 | $11.74 | $12.43 | $11.28 | $9.57 |
| Investment Operations | |||||
| Net Investment Income1 | .447 | .284 | .377 | .392 | .356 |
| Net Realized and Unrealized Gain (Loss) on Investments | 9.383 | 1.435 | (.672) | 1.134 | 1.715 |
| Total from Investment Operations | 9.830 | 1.719 | (.295) | 1.526 | 2.071 |
| Distributions | |||||
| Dividends from Net Investment Income | (.530) | (.339) | (.395) | (.376) | (.361) |
| Distributions from Realized Capital Gains | - | - | - | - | - |
| Total Distributions | (.530) | (.339) | (.395) | (.376) | (.361) |
| Net Asset Value, End of Period | $22.42 | $13.12 | $11.74 | $12.43 | $11.28 |
| Total Return2 | 75.37% | 14.76% | -2.52% | 13.81% | 21.74% |
| Ratios/Supplemental Data | |||||
| Net Assets, End of Period (Millions) | $3,586 | $1,431 | $1,327 | $1,520 | $1,359 |
| Ratio of Total Expenses to Average Net Assets3 | 0.42%4 | 0.44% | 0.44% | 0.43%4 | 0.36% |
| Ratio of Net Investment Income to Average Net Assets | 2.62% | 2.16% | 3.14% | 3.45% | 3.28% |
| Portfolio Turnover Rate | 50% | 32% | 67% | 63% | 57% |
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | Includes performance-based investment advisory fee increases (decreases) of 0.05%, 0.07%, 0.06%, 0.05%, and (0.01%). |
| 4 | The ratio of expenses to average net assets for the period net of reduction from custody fee offset and/or broker commission abatement arrangements was 0.42% and 0.43%, respectively. |
See accompanying Notes, which are an integral part of the Financial Statements.
7
Global Capital Cycles Fund
Notes to Financial Statements
Vanguard Global Capital Cycles Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund's pricing time but after the close of the securities' primary markets, are valued by methods deemed by the valuation designee to represent fair value and subject to oversight by the board of trustees.
These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund's pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset value.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund's pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute virtually all of its taxable income. The fund's tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund's tax positions taken for all open federal and state income tax years, and has concluded that no provision for income tax is required in the fund's financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.
5. Securities Lending: To earn additional income, the fund lends its securities to qualified institutional borrowers. Security loans are subject to termination by the fund at any time, and are required to be secured at all times by collateral in an amount at least equal to the market value of securities loaned. Daily market fluctuations could cause the value of loaned securities to be more or less than the value of the collateral received. When this occurs, the collateral is adjusted and settled before the opening of the market on the next business day. The fund further mitigates its counterparty risk by entering into securities lending transactions only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master securities lending agreements with its counterparties. The master securities lending agreements provide that, in the event of a counterparty's default (including bankruptcy), the fund may terminate any loans with that borrower, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund; however, such actions may be subject to legal proceedings. While collateral mitigates counterparty risk, in the event of a default, the fund may experience delays and costs in recovering the securities loaned. The fund invests cash collateral received in Vanguard Market Liquidity Fund, and records a liability in the Statement of Assets and Liabilities for the return of the collateral, during the period the securities are on loan. Collateral investments in Vanguard Market Liquidity Fund are subject to market appreciation or depreciation. Securities lending income represents fees charged to borrowers plus income earned on invested cash collateral, less expenses associated with the loan. During the term of the loan, the fund is entitled to all distributions made on or in respect of the loaned securities.
6. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group ("Vanguard") participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes and are subject to the fund's regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed amount of the facility, which are allocated to the funds based on a method approved by the fund's board of trustees and included in Management and Administrative expenses on the fund's Statement of Operations. Any borrowings under either facility bear interest at an agreed-upon spread plus the higher of the federal funds effective rate, the overnight bank funding rate, or the Daily Simple Secured Overnight Financing Rate inclusive of an additional agreed-upon spread. However, borrowings under the uncommitted credit facility may bear interest based upon an alternate rate agreed to by the fund and Vanguard.
In accordance with an exemptive order (the "Order") from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the "Interfund Lending Program"), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund's investment objective and investment policies. Interfund loans and borrowings normally extend overnight but can have a maximum duration of seven days. Loans may be called on one business day's notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.
For the year ended January 31, 2026, the fund did not utilize the credit facilities or the Interfund Lending Program.
7. Other: Dividend income is recorded on the ex-dividend date. Non-cash dividends included in income, if any, are recorded at the fair value of the
8
Global Capital Cycles Fund
securities received. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Taxes on foreign dividends and capital gains have been provided for in accordance with the applicable countries' tax rules and rates. Deferred foreign capital gains tax, if any, is accrued daily based upon net unrealized gains. The fund has filed tax reclaims for previously withheld taxes on dividends earned in certain European Union countries. These filings are subject to various administrative and judicial proceedings within these countries. Amounts related to these reclaims are recorded when there are no significant uncertainties as to the ultimate resolution of proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment. Such tax reclaims and related professional fees, if any, are included in dividend income and other expenses, respectively.
B. Wellington Management Company llpprovides investment advisory services to the fund for a fee calculated at an annual percentage rate of average net assets. The basic fee is subject to quarterly adjustments based on the fund's performance relative to the Custom Global Capital Cycles Index for the preceding five years. For the year ended January 31, 2026, the investment advisory fee represented an effective annual basic rate of 0.14% of the fund's average net assets, before a net increase of $1,043,000 (0.05%) based on performance.
C. In accordance with the terms of a Funds' Service Agreement (the "FSA") between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, and distribution services at Vanguard's cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees and are generally settled twice a month.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At January 31, 2026, the fund had contributed to Vanguard capital in the amount of $69,000, representing less than 0.01% of the fund's net assets and 0.03% of Vanguard's capital received pursuant to the FSA. The fund's trustees and officers are also directors and employees, respectively, of Vanguard.
D. The fund has asked its investment advisor to direct certain security trades, subject to obtaining the best price and execution, to brokers who have agreed to rebate to the fund part of the commissions generated. Such rebates are used solely to reduce the fund's management and administrative expenses. For the year ended January 31, 2026, these arrangements reduced the fund's expenses by $6,000 (an annual rate of less than 0.01% of average net assets).
E. Various inputs may be used to determine the value of the fund's investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1-Quoted prices in active markets for identical securities.
Level 2-Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3-Significant unobservable inputs (including the fund's own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Schedule of Investments.
The following table summarizes the market value of the fund's investments as of January 31, 2026, based on the inputs used to value them:
|
Level 1 ($000) |
Level 2 ($000) |
Level 3 ($000) |
Total ($000) |
|
| Investments | ||||
| Assets | ||||
| Common Stocks-North and South America | 1,461,200 | - | - | 1,461,200 |
| Common Stocks-Other | 190,104 | 1,731,573 | - | 1,921,677 |
| Preferred Stocks | 11,500 | - | - | 11,500 |
| Temporary Cash Investments | 235,474 | - | - | 235,474 |
| Total | 1,898,278 | 1,731,573 | - | 3,629,851 |
F. Permanent differences between book-basis and tax-basis components of net assets are reclassified among capital accounts in the financial statements to reflect their tax character. These reclassifications have no effect on net assets or net asset value per share. Examples of permanent differences include, but are not limited to, the accounting for passive foreign investment companies, in-kind redemptions, swap agreements, and distributions in connection with fund share redemptions.
Temporary differences between book-basis and tax-basis components of total distributable earnings (loss) arise when certain items of income, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Examples of temporary differences include, but are not limited to, capital loss carryforwards, the deferral of losses from wash sales, the recognition of unrealized
9
Global Capital Cycles Fund
gains or losses from certain derivative contracts, and the recognition of unrealized gains from passive foreign investment companies. As of period end, the tax-basis components of total distributable earnings (loss) are detailed in the table as follows:
|
Amount ($000) |
|
| Undistributed Ordinary Income | 42,902 |
| Undistributed Long-Term Gains | - |
| Net Unrealized Gains (Losses) | 924,441 |
| Capital Loss Carryforwards | (1,564,720) |
| Qualified Late-Year Losses | - |
| Other Temporary Differences | - |
| Total | (597,377) |
The tax character of distributions paid was as follows:
| Year Ended January 31, | ||
|
2026 Amount ($000) |
2025 Amount ($000) |
|
| Ordinary Income* | 72,262 | 36,499 |
| Long-Term Capital Gains | - | - |
| Total | 72,262 | 36,499 |
| * | Includes short-term capital gains, if any. |
As of January 31, 2026, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:
|
Amount ($000) |
|
| Tax Cost | 2,705,628 |
| Gross Unrealized Appreciation | 988,381 |
| Gross Unrealized Depreciation | (64,158) |
| Net Unrealized Appreciation (Depreciation) | 924,223 |
G. During the year ended January 31, 2026, the fund purchased $1,838,657,000 of investment securities and sold $1,027,249,000 of investment securities, other than temporary cash investments.
H. Capital shares issued and redeemed were:
| Year Ended January 31, | ||
|
2026 Shares (000) |
2025 Shares (000) |
|
| Issued | 72,932 | 11,840 |
| Issued in Lieu of Cash Distributions | 3,027 | 2,441 |
| Redeemed | (25,089) | (18,185) |
| Net Increase (Decrease) in Shares Outstanding | 50,870 | (3,904) |
I. Significant market disruptions, such as those caused by pandemics, natural or environmental disasters, war, acts of terrorism, political or regulatory conditions, 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.
J. Operating segments are components of an entity that engage in business activities, have discrete financial information available, and have their operating results regularly reviewed by a chief operating decision maker ("CODM"). The fund is considered a single segment. Vanguard's chief executive officer, chief investment officer, and chief financial officer, who are also officers of the fund, as well as the fund's chief financial officer collectively act as the CODM. Vanguard has established various management committees to assist the CODM with overseeing aspects of the fund's daily operations. Through these committees, the CODM manages the fund's operations to achieve a single investment objective, as detailed in its prospectus, through the execution of the fund's investment strategies. When assessing segment performance and making decisions about segment resources, the CODM relies on the fund's portfolio composition, total returns, expense ratios and changes in net assets which are consistent with the information contained in the fund's financial statements. Segment assets, liabilities, income, and expenses are also detailed in the accompanying financial statements.
10
Global Capital Cycles Fund
K. Management has determined that no subsequent events or transactions occurred through the date the financial statements were issued that would require recognition or disclosure in these financial statements.
11
Report of Independent Registered
Public Accounting Firm
To the Board of Trustees of Vanguard Specialized Funds and Shareholders of Vanguard Global Capital Cycles Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Vanguard Global Capital Cycles Fund (one of the funds constituting Vanguard Specialized Funds, referred to hereafter as the "Fund") as of January 31, 2026, the related statement of operations for the year ended January 31, 2026, the statement of changes in net assets for each of the two years in the period ended January 31, 2026, including the related notes, and the financial highlights for each of the five years in the period ended January 31, 2026 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of January 31, 2026, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended January 31, 2026 and the financial highlights for each of the five years in the period ended January 31, 2026 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of January 31, 2026 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 20, 2026
Philadelphia, Pennsylvania
March 20, 2026
We have served as the auditor of one or more investment companies in The Vanguard Group of Funds since 1975.
12
Tax information (unaudited)
For corporate shareholders, 10.3%, or if subsequently determined to be different, the maximum percentage allowable by law, of ordinary income (dividend income plus short-term gains, if any) for the fiscal year qualified for the dividends-received deduction.
The fund hereby designates $54,324,000, or if subsequently determined to be different, the maximum amount allowable by law, as qualified dividend income for purposes of the maximum rate under section 1(h)(11) for calendar year 2025.
The fund hereby designates for the fiscal year $1,547,000, or if subsequently determined to be different, the maximum amount allowable by law, of interest earned from obligations of the U.S. government which is generally exempt from state income tax.
The fund designates to shareholders foreign source income of $56,015,000 and foreign taxes paid of $6,161,000, or if subsequently determined to be different, the maximum amounts allowable by law. Form 1099-DIV reports calendar-year amounts that can be included on the income tax return of shareholders.
Q530 032026
13
Financial Statements
For the year ended January 31, 2026
Vanguard Global ESG Select Stock Fund
Contents
|
Financial Statements
|
1 |
|
Report of Independent Registered
Public Accounting Firm
|
12 |
|
Tax information
|
13 |
Global ESG Select Stock Fund
Financial Statements
Schedule of Investments
As of January 31, 2026
The fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The fund's Form N-PORT reports are available on the SEC's website at www.sec.gov.
| Shares |
Market Value• ($000) |
|||||
| Common Stocks (98.8%) | ||||||
| France (7.7%) | ||||||
| Cie Generale des Etablissements Michelin SCA | 1,188,056 | 44,119 | ||||
| L'Oreal SA | 88,570 | 40,693 | ||||
| Schneider Electric SE | 109,476 | 31,387 | ||||
| 116,199 | ||||||
| Hong Kong (2.9%) | ||||||
| AIA Group Ltd. | 3,824,116 | 44,121 | ||||
| Japan (5.9%) | ||||||
| Recruit Holdings Co. Ltd. | 858,469 | 45,219 | ||||
| Mitsubishi UFJ Financial Group Inc. | 1,618,428 | 29,310 | ||||
| Nomura Research Institute Ltd. | 502,333 | 15,281 | ||||
| 89,810 | ||||||
| Netherlands (7.8%) | ||||||
| ASML Holding NV | 37,450 | 53,700 | ||||
| ING Groep NV | 1,164,245 | 34,335 | ||||
| DSM-Firmenich AG | 390,133 | 30,763 | ||||
| 118,798 | ||||||
| Singapore (2.6%) | ||||||
| DBS Group Holdings Ltd. | 839,884 | 39,040 | ||||
| Spain (3.3%) | ||||||
| Industria de Diseno Textil SA | 759,775 | 49,439 | ||||
| Taiwan (4.1%) | ||||||
| Taiwan Semiconductor Manufacturing Co. Ltd. | 1,134,316 | 62,723 | ||||
| United Kingdom (6.7%) | ||||||
| Compass Group plc | 1,248,937 | 37,450 | ||||
| National Grid plc | 2,022,047 | 34,354 | ||||
| Ferguson Enterprises Inc. | 121,277 | 30,617 | ||||
| 102,421 | ||||||
| United States (57.8%) | ||||||
| Microsoft Corp. | 208,078 | 89,534 | ||||
| Visa Inc. Class A | 168,308 | 54,167 | ||||
| Northern Trust Corp. | 356,178 | 53,224 | ||||
| Merck & Co. Inc. | 448,905 | 49,501 | ||||
| Texas Instruments Inc. | 227,207 | 48,975 | ||||
| Accenture plc Class A | 167,957 | 44,280 | ||||
| M&T Bank Corp. | 192,929 | 42,747 | ||||
| Deere & Co. | 76,486 | 40,385 | ||||
| Home Depot Inc. | 106,013 | 39,711 | ||||
| Procter & Gamble Co. | 257,523 | 39,084 | ||||
| Weyerhaeuser Co. | 1,514,013 | 39,031 | ||||
| Automatic Data Processing Inc. | 154,477 | 38,128 | ||||
| Prologis Inc. | 285,795 | 37,313 | ||||
| * | Edwards Lifesciences Corp. | 443,091 | 36,050 | |||
| * | Arista Networks Inc. | 250,255 | 35,471 | |||
| Marriott International Inc. Class A | 111,736 | 35,230 | ||||
| Danaher Corp. | 134,627 | 29,469 | ||||
| Amphenol Corp. Class A | 198,262 | 28,566 | ||||
| * | ServiceNow Inc. | 238,504 | 27,907 | |||
| * | Cadence Design Systems Inc. | 86,733 | 25,704 | |||
| Progressive Corp. | 121,507 | 25,273 | ||||
| Trane Technologies plc | 42,102 | 17,707 | ||||
| 877,457 | ||||||
| Total Common Stocks (Cost $1,087,548) | 1,500,008 | |||||
1
Global ESG Select Stock Fund
| Shares |
Market Value• ($000) |
|||||
| Temporary Cash Investments (0.9%) | ||||||
| Money Market Fund (0.9%) | ||||||
| 1 | Vanguard Market Liquidity Fund, 3.704% (Cost $14,127) | 141,272 | 14,127 | |||
| Total Investments (99.7%) (Cost $1,101,675) | 1,514,135 | |||||
| Other Assets and Liabilities-Net (0.3%) | 3,989 | |||||
| Net Assets (100%) | 1,518,124 | |||||
| Cost is in $000. |
| • | See Note A in Notes to Financial Statements. |
| * | Non-income-producing security. |
| 1 | Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield. |
See accompanying Notes, which are an integral part of the Financial Statements.
2
Global ESG Select Stock Fund
Statement of Assets and Liabilities
As of January 31, 2026
| ($000s, except shares and per-share amounts) | Amount |
| Assets | |
| Investments in Securities, at Value | |
| Unaffiliated Issuers (Cost $1,087,548) | 1,500,008 |
| Affiliated Issuers (Cost $14,127) | 14,127 |
| Total Investments in Securities | 1,514,135 |
| Investment in Vanguard | 35 |
| Foreign Currency, at Value (Cost $718) | 711 |
| Receivables for Accrued Income | 2,907 |
| Receivables for Capital Shares Issued | 1,910 |
| Total Assets | 1,519,698 |
| Liabilities | |
| Payables for Investment Securities Purchased | 292 |
| Payables for Capital Shares Redeemed | 391 |
| Payables to Investment Advisor | 729 |
| Payables to Vanguard | 162 |
| Total Liabilities | 1,574 |
| Net Assets | 1,518,124 |
|
At January 31, 2026, net assets consisted of: |
|
| Paid-in Capital | 1,078,522 |
| Total Distributable Earnings (Loss) | 439,602 |
| Net Assets | 1,518,124 |
| Investor Shares-Net Assets | |
|
Applicable to 6,333,260 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
252,622 |
| Net Asset Value Per Share-Investor Shares | $39.89 |
| Admiral™ Shares-Net Assets | |
|
Applicable to 25,371,489 outstanding $.001 par value shares of beneficial interest (unlimited authorization) |
1,265,502 |
| Net Asset Value Per Share-Admiral Shares | $49.88 |
See accompanying Notes, which are an integral part of the Financial Statements.
3
Global ESG Select Stock Fund
Statement of Operations
|
Year Ended January 31, 2026 |
|
| ($000) | |
| Investment Income | |
| Income | |
| Dividends1 | 31,950 |
| Interest2 | 612 |
| Total Income | 32,562 |
| Expenses | |
| Investment Advisory Fees-Note B | |
| Basic Fee | 3,138 |
| Performance Adjustment | (31) |
| The Vanguard Group-Note C | |
| Management and Administrative-Investor Shares | 788 |
| Management and Administrative-Admiral Shares | 2,511 |
| Marketing and Distribution-Investor Shares | 17 |
| Marketing and Distribution-Admiral Shares | 66 |
| Custodian Fees | 43 |
| Auditing Fees | 35 |
| Shareholders' Reports and Proxy Fees-Investor Shares | 14 |
| Shareholders' Reports and Proxy Fees-Admiral Shares | 11 |
| Trustees' Fees and Expenses | 1 |
| Other Expenses | 24 |
| Total Expenses | 6,617 |
| Expenses Paid Indirectly | (1) |
| Net Expenses | 6,616 |
| Net Investment Income | 25,946 |
| Realized Net Gain (Loss) | |
| Investment Securities Sold2 | 40,658 |
| Foreign Currencies | (145) |
| Realized Net Gain (Loss) | 40,513 |
| Change in Unrealized Appreciation (Depreciation) | |
| Investment Securities2 | 102,372 |
| Foreign Currencies | 190 |
| Change in Unrealized Appreciation (Depreciation) | 102,562 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 169,021 |
| 1 | Dividends are net of foreign withholding taxes of $1,441. |
| 2 | Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $594, $2, and less than $1, respectively. Purchases and sales are for temporary cash investment purposes. |
See accompanying Notes, which are an integral part of the Financial Statements.
4
Global ESG Select Stock Fund
Statement of Changes in Net Assets
| Year Ended January 31, | ||
|
2026 ($000) |
2025 ($000) |
|
| Increase (Decrease) in Net Assets | ||
| Operations | ||
| Net Investment Income | 25,946 | 23,799 |
| Realized Net Gain (Loss) | 40,513 | 58,700 |
| Change in Unrealized Appreciation (Depreciation) | 102,562 | 110,035 |
| Net Increase (Decrease) in Net Assets Resulting from Operations | 169,021 | 192,534 |
| Distributions | ||
| Investor Shares | (11,803) | (6,237) |
| Admiral Shares | (55,295) | (28,093) |
| Total Distributions | (67,098) | (34,330) |
| Capital Share Transactions | ||
| Investor Shares | (30,580) | 18,194 |
| Admiral Shares | 39,087 | 102,760 |
| Net Increase (Decrease) from Capital Share Transactions | 8,507 | 120,954 |
| Total Increase (Decrease) | 110,430 | 279,158 |
| Net Assets | ||
| Beginning of Period | 1,407,694 | 1,128,536 |
| End of Period | 1,518,124 | 1,407,694 |
See accompanying Notes, which are an integral part of the Financial Statements.
5
Global ESG Select Stock Fund
Financial Highlights
| Investor Shares | |||||
|
For a Share Outstanding Throughout Each Period |
Year Ended January 31, | ||||
| 2026 | 2025 | 2024 | 2023 | 2022 | |
| Net Asset Value, Beginning of Period | $37.26 | $32.76 | $29.61 | $30.97 | $26.32 |
| Investment Operations | |||||
| Net Investment Income1 | .647 | .639 | .598 | .524 | .487 |
| Net Realized and Unrealized Gain (Loss) on Investments | 3.734 | 4.765 | 3.111 | (1.298) | 5.004 |
| Total from Investment Operations | 4.381 | 5.404 | 3.709 | (.774) | 5.491 |
| Distributions | |||||
| Dividends from Net Investment Income | (.584) | (.605) | (.559) | (.467) | (.386) |
| Distributions from Realized Capital Gains | (1.167) | (.299) | - | (.119) | (.455) |
| Total Distributions | (1.751) | (.904) | (.559) | (.586) | (.841) |
| Net Asset Value, End of Period | $39.89 | $37.26 | $32.76 | $29.61 | $30.97 |
| Total Return2 | 12.25% | 16.60% | 12.59% | -2.39% | 20.86% |
| Ratios/Supplemental Data | |||||
| Net Assets, End of Period (Millions) | $253 | $267 | $218 | $178 | $169 |
| Ratio of Total Expenses to Average Net Assets3 | 0.54%4 | 0.58% | 0.58% | 0.57% | 0.56% |
| Ratio of Net Investment Income to Average Net Assets | 1.72% | 1.77% | 1.97% | 1.88% | 1.61% |
| Portfolio Turnover Rate | 47% | 33% | 25% | 38% | 19% |
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | Includes performance-based investment advisory fee increases (decreases) of (0.00%), 0.03%, 0.03%, 0.02%, and 0.01%. |
| 4 | The ratio of expenses to average net assets for the period net of reduction from broker commission abatement arrangements was 0.54%. |
See accompanying Notes, which are an integral part of the Financial Statements.
6
Global ESG Select Stock Fund
Financial Highlights
| Admiral Shares | |||||
|
For a Share Outstanding Throughout Each Period |
Year Ended January 31, | ||||
| 2026 | 2025 | 2024 | 2023 | 2022 | |
| Net Asset Value, Beginning of Period | $46.59 | $40.96 | $37.03 | $38.73 | $32.91 |
| Investment Operations | |||||
| Net Investment Income1 | .854 | .838 | .787 | .684 | .649 |
| Net Realized and Unrealized Gain (Loss) on Investments | 4.676 | 5.967 | 3.880 | (1.609) | 6.258 |
| Total from Investment Operations | 5.530 | 6.805 | 4.667 | (.925) | 6.907 |
| Distributions | |||||
| Dividends from Net Investment Income | (.780) | (.801) | (.737) | (.626) | (.517) |
| Distributions from Realized Capital Gains | (1.460) | (.374) | - | (.149) | (.570) |
| Total Distributions | (2.240) | (1.175) | (.737) | (.775) | (1.087) |
| Net Asset Value, End of Period | $49.88 | $46.59 | $40.96 | $37.03 | $38.73 |
| Total Return2 | 12.37% | 16.72% | 12.67% | -2.27% | 20.99% |
| Ratios/Supplemental Data | |||||
| Net Assets, End of Period (Millions) | $1,266 | $1,141 | $911 | $691 | $606 |
| Ratio of Total Expenses to Average Net Assets3 | 0.44%4 | 0.48% | 0.48% | 0.47% | 0.46% |
| Ratio of Net Investment Income to Average Net Assets | 1.81% | 1.86% | 2.07% | 1.97% | 1.71% |
| Portfolio Turnover Rate | 47% | 33% | 25% | 38% | 19% |
| 1 | Calculated based on average shares outstanding. |
| 2 | Total returns do not include account service fees that may have applied in the periods shown. Fund prospectuses provide information about any applicable account service fees. |
| 3 | Includes performance-based investment advisory fee increases (decreases) of (0.00%), 0.03%, 0.03%, 0.02%, and 0.01%. |
| 4 | The ratio of expenses to average net assets for the period net of reduction from broker commission abatement arrangements was 0.44%. |
See accompanying Notes, which are an integral part of the Financial Statements.
7
Global ESG Select Stock Fund
Notes to Financial Statements
Vanguard Global ESG Select Stock Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund.
The fund offers two classes of shares: Investor Shares and Admiral Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors.
A. The following significant accounting policies conform to generally accepted accounting principles for U.S. investment companies. The fund consistently follows such policies in preparing its financial statements.
1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund's pricing time but after the close of the securities' primary markets, are valued by methods deemed by the valuation designee to represent fair value and subject to oversight by the board of trustees.
These procedures include obtaining quotations from an independent pricing service, monitoring news to identify significant market- or security-specific events, and evaluating changes in the values of foreign market proxies (for example, ADRs, futures contracts, or exchange-traded funds), between the time the foreign markets close and the fund's pricing time. When fair-value pricing is employed, the prices of securities used by a fund to calculate its net asset value may differ from quoted or published prices for the same securities. Investments in Vanguard Market Liquidity Fund are valued at that fund's net asset value.
2. Foreign Currency: Securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars using exchange rates obtained from an independent third party as of the fund's pricing time on the valuation date. Realized gains (losses) and unrealized appreciation (depreciation) on investment securities include the effects of changes in exchange rates since the securities were purchased, combined with the effects of changes in security prices. Fluctuations in the value of other assets and liabilities resulting from changes in exchange rates are recorded as unrealized foreign currency gains (losses) until the assets or liabilities are settled in cash, at which time they are recorded as realized foreign currency gains (losses).
3. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute virtually all of its taxable income. The fund's tax returns are open to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return. Management has analyzed the fund's tax positions taken for all open federal and state income tax years, and has concluded that no provision for income tax is required in the fund's financial statements.
4. Distributions: Distributions to shareholders are recorded on the ex-dividend date. Distributions are determined on a tax basis at the fiscal year-end and may differ from net investment income and realized capital gains for financial reporting purposes.
5. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group ("Vanguard") participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes and are subject to the fund's regulatory and contractual borrowing restrictions. With respect to the committed credit facility, the participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn committed amount of the facility, which are allocated to the funds based on a method approved by the fund's board of trustees and included in Management and Administrative expenses on the fund's Statement of Operations. Any borrowings under either facility bear interest at an agreed-upon spread plus the higher of the federal funds effective rate, the overnight bank funding rate, or the Daily Simple Secured Overnight Financing Rate inclusive of an additional agreed-upon spread. However, borrowings under the uncommitted credit facility may bear interest based upon an alternate rate agreed to by the fund and Vanguard.
In accordance with an exemptive order (the "Order") from the SEC, the fund may participate in a joint lending and borrowing program that allows registered open-end Vanguard funds to borrow money from and lend money to each other for temporary or emergency purposes (the "Interfund Lending Program"), subject to compliance with the terms and conditions of the Order, and to the extent permitted by the fund's investment objective and investment policies. Interfund loans and borrowings normally extend overnight but can have a maximum duration of seven days. Loans may be called on one business day's notice. The interest rate to be charged is governed by the conditions of the Order and internal procedures adopted by the board of trustees. The board of trustees is responsible for overseeing the Interfund Lending Program.
For the year ended January 31, 2026, the fund did not utilize the credit facilities or the Interfund Lending Program.
6. Other: Dividend income is recorded on the ex-dividend date. Non-cash dividends included in income, if any, are recorded at the fair value of the securities received. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.
Taxes on foreign dividends and capital gains have been provided for in accordance with the applicable countries' tax rules and rates. Deferred foreign capital gains tax, if any, is accrued daily based upon net unrealized gains. The fund has filed tax reclaims for previously withheld taxes on dividends earned in certain European Union countries. These filings are subject to various administrative and judicial proceedings within these countries. Amounts related to these reclaims are recorded when there are no significant uncertainties as to the ultimate resolution of proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment. Such tax reclaims and related professional fees, if any, are included in dividend income and other expenses, respectively.
Each class of shares has equal rights as to assets and earnings, except that each class separately bears certain class-specific expenses related to maintenance of shareholder accounts (included in Management and Administrative expenses), shareholder reporting, and proxy fees. Marketing and
8
Global ESG Select Stock Fund
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. Wellington Management Company llpprovides investment advisory services to the fund for a fee calculated at an annual percentage rate of average net assets. The basic fee is subject to quarterly adjustments based on the fund's performance relative to the FTSE All-World Index for the preceding five years. For the year ended January 31, 2026, the investment advisory fee represented an effective annual basic rate of 0.22% of the fund's average net assets, before a net decrease of $31,000 (0.00%) based on performance.
C. In accordance with the terms of a Funds' Service Agreement (the "FSA") between Vanguard and the fund, Vanguard furnishes to the fund corporate management, administrative, marketing, and distribution services at Vanguard's cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees and are generally settled twice a month.
Upon the request of Vanguard, the fund may invest up to 0.40% of its net assets as capital in Vanguard. At January 31, 2026, the fund had contributed to Vanguard capital in the amount of $35,000, representing less than 0.01% of the fund's net assets and 0.01% of Vanguard's capital received pursuant to the FSA. The fund's trustees and officers are also directors and employees, respectively, of Vanguard.
D. The fund has asked its investment advisor to direct certain security trades, subject to obtaining the best price and execution, to brokers who have agreed to rebate to the fund part of the commissions generated. Such rebates are used solely to reduce the fund's management and administrative expenses. For the year ended January 31, 2026, these arrangements reduced the fund's expenses by $1,000 (an annual rate of less than 0.01% of average net assets).
E. Various inputs may be used to determine the value of the fund's investments. These inputs are summarized in three broad levels for financial statement purposes. The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.
Level 1-Quoted prices in active markets for identical securities.
Level 2-Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.).
Level 3-Significant unobservable inputs (including the fund's own assumptions used to determine the fair value of investments). Any investments valued with significant unobservable inputs are noted on the Schedule of Investments.
The following table summarizes the market value of the fund's investments as of January 31, 2026, based on the inputs used to value them:
|
Level 1 ($000) |
Level 2 ($000) |
Level 3 ($000) |
Total ($000) |
|
| Investments | ||||
| Assets | ||||
| Common Stocks-North and South America | 877,457 | - | - | 877,457 |
| Common Stocks-Other | 30,617 | 591,934 | - | 622,551 |
| Temporary Cash Investments | 14,127 | - | - | 14,127 |
| Total | 922,201 | 591,934 | - | 1,514,135 |
F. Permanent differences between book-basis and tax-basis components of net assets are reclassified among capital accounts in the financial statements to reflect their tax character. These reclassifications have no effect on net assets or net asset value per share. Examples of permanent differences include, but are not limited to, the accounting for passive foreign investment companies, in-kind redemptions, swap agreements, and distributions in connection with fund share redemptions.
| Permanent differences were reclassified between the following accounts: |
Amount ($000) |
| Paid-in Capital | 4,680 |
| Total Distributable Earnings (Loss) | (4,680) |
Temporary differences between book-basis and tax-basis components of total distributable earnings (loss) arise when certain items of income, gain, or loss are recognized in different periods for financial statement and tax purposes; these differences will reverse at some time in the future. Examples of temporary differences include, but are not limited to, capital loss carryforwards, the deferral of losses from wash sales, the recognition of unrealized
9
Global ESG Select Stock Fund
gains or losses from certain derivative contracts, and the recognition of unrealized gains from passive foreign investment companies. As of period end, the tax-basis components of total distributable earnings (loss) are detailed in the table as follows:
|
Amount ($000) |
|
| Undistributed Ordinary Income | 2,267 |
| Undistributed Long-Term Gains | 26,238 |
| Net Unrealized Gains (Losses) | 411,039 |
| Capital Loss Carryforwards | - |
| Qualified Late-Year Losses | - |
| Other Temporary Differences | 58 |
| Total | 439,602 |
The tax character of distributions paid was as follows:
| Year Ended January 31, | ||
|
2026 Amount ($000) |
2025 Amount ($000) |
|
| Ordinary Income* | 30,515 | 31,174 |
| Long-Term Capital Gains | 36,583 | 3,156 |
| Total | 67,098 | 34,330 |
| * | Includes short-term capital gains, if any. |
As of January 31, 2026, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:
|
Amount ($000) |
|
| Tax Cost | 1,103,265 |
| Gross Unrealized Appreciation | 457,734 |
| Gross Unrealized Depreciation | (46,864) |
| Net Unrealized Appreciation (Depreciation) | 410,870 |
G. During the year ended January 31, 2026, the fund purchased $665,050,000 of investment securities and sold $692,015,000 of investment securities, other than temporary cash investments.
H. Capital share transactions for each class of shares were:
| Year Ended January 31, | |||||
| 2026 | 2025 | ||||
|
Amount ($000) |
Shares (000) |
Amount ($000) |
Shares (000) |
||
| Investor Shares | |||||
| Issued | 57,450 | 1,534 | 79,800 | 2,219 | |
| Issued in Lieu of Cash Distributions | 10,471 | 288 | 5,508 | 153 | |
| Redeemed | (98,501) | (2,644) | (67,114) | (1,871) | |
| Net Increase (Decrease)-Investor Shares | (30,580) | (822) | 18,194 | 501 | |
| Admiral Shares | |||||
| Issued | 283,390 | 6,034 | 288,803 | 6,431 | |
| Issued in Lieu of Cash Distributions | 47,012 | 1,027 | 23,678 | 526 | |
| Redeemed | (291,315) | (6,182) | (209,721) | (4,696) | |
| Net Increase (Decrease)-Admiral Shares | 39,087 | 879 | 102,760 | 2,261 | |
I. Significant market disruptions, such as those caused by pandemics, natural or environmental disasters, war, acts of terrorism, political or regulatory conditions, 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.
10
Global ESG Select Stock Fund
J. Operating segments are components of an entity that engage in business activities, have discrete financial information available, and have their operating results regularly reviewed by a chief operating decision maker ("CODM"). The fund is considered a single segment. Vanguard's chief executive officer, chief investment officer, and chief financial officer, who are also officers of the fund, as well as the fund's chief financial officer collectively act as the CODM. Vanguard has established various management committees to assist the CODM with overseeing aspects of the fund's daily operations. Through these committees, the CODM manages the fund's operations to achieve a single investment objective, as detailed in its prospectus, through the execution of the fund's investment strategies. When assessing segment performance and making decisions about segment resources, the CODM relies on the fund's portfolio composition, total returns, expense ratios and changes in net assets which are consistent with the information contained in the fund's financial statements. Segment assets, liabilities, income, and expenses are also detailed in the accompanying financial statements.
K. Management has determined that no subsequent events or transactions occurred through the date the financial statements were issued that would require recognition or disclosure in these financial statements.
11
Report of Independent Registered
Public Accounting Firm
To the Board of Trustees of Vanguard Specialized Funds and Shareholders of Vanguard Global ESG Select Stock Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Vanguard Global ESG Select Stock Fund (one of the funds constituting Vanguard Specialized Funds, referred to hereafter as the "Fund") as of January 31, 2026, the related statement of operations for the year ended January 31, 2026, the statement of changes in net assets for each of the two years in the period ended January 31, 2026, including the related notes, and the financial highlights for each of the five years in the period ended January 31, 2026 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of January 31, 2026, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period ended January 31, 2026 and the financial highlights for each of the five years in the period ended January 31, 2026 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund's management. Our responsibility is to express an opinion on the Fund's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of January 31, 2026 by correspondence with the custodian, transfer agent and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 20, 2026
Philadelphia, Pennsylvania
March 20, 2026
We have served as the auditor of one or more investment companies in The Vanguard Group of Funds since 1975.
12
Tax information (unaudited)
For corporate shareholders, 36.5%, or if subsequently determined to be different, the maximum percentage allowable by law, of ordinary income (dividend income plus short-term gains, if any) for the fiscal year qualified for the dividends-received deduction.
The fund hereby designates $25,759,000, or if subsequently determined to be different, the maximum amount allowable by law, as qualified dividend income for purposes of the maximum rate under section 1(h)(11) for calendar year 2025.
The fund hereby designates for the fiscal year $257,000, or if subsequently determined to be different, the maximum amount allowable by law, of interest earned from obligations of the U.S. government which is generally exempt from state income tax.
For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the fund for the fiscal year are qualified short-term capital gains.
The fund distributed $39,445,000 as capital gain dividends (20% rate gain distributions) to shareholders during the fiscal year.
Q5470 032026
13
Item 8: Changes in and Disagreements with Accountants for Open-End Management Investment Companies.
Not applicable.
Item 9: Proxy Disclosures for Open-End Management Investment Companies.
Not applicable.
Item 10: Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies.
Not applicable. The Trustees' Fees and Expenses are included in the financial statements filed under Item 7 of this Form.
Item 11: Statement Regarding Basis for Approval of Investment Advisory Contracts.
Trustees Approve Advisory Arrangement - Global ESG Select Stock Fund
A majority of independent trustees of the board of Vanguard Global ESG Select Stock Fund have renewed the fund's investment advisory arrangement with Wellington Management Company LLP (Wellington Management). The trustees determined that renewing the fund's advisory arrangement was in the best interests of the fund and its shareholders.
The trustees based their decision upon an evaluation of the advisor's investment staff, portfolio management process, and performance. This evaluation included information provided to the trustees by Vanguard's Oversight and Manager Search team (OMS), which is responsible for fund and advisor oversight and product management. OMS met regularly with the advisor and made presentations to the trustees during the fiscal year that directed their focus to relevant information and topics.
The trustees also received information throughout the year during advisor presentations conducted by the Oversight and Manager Search team. For each advisor presentation, the trustees were 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 trustees received periodic reports throughout the year, which included information about each fund's performance relative to its peers and benchmark, as applicable, and updates, as needed, on the Oversight and Manager Search team'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 trustees approved the arrangement. Rather, it was the totality of the circumstances that drove the trustees' decision.
Nature, extent, and quality of services
The trustees reviewed the quality of the investment management services provided to the fund since its inception in 2019; it also took into account the organizational depth and stability of the advisor. The trustees considered that Wellington Management, founded in 1928, is among the nation's oldest and most respected institutional investment managers. Wellington Management seeks to invest in global mid- and large-capitalization companies with high financial productivity and leading environmental, social, and governance (ESG) practices. Wellington Management conducts proprietary investment and ESG research to construct a highly selective stock portfolio, representing 40 to 50 stocks that will be owned for an extended time period. Additionally, the advisor engages with company management and votes proxies.
The trustees concluded that the advisor's experience, stability, depth, and performance, among other factors, warranted continuation of the advisory arrangement.
Investment performance
The trustees considered the fund's performance since its inception in 2019, including any periods of outperformance or underperformance of a relevant benchmark. The trustees concluded the performance was such that the advisory arrangement should continue.
Cost
The trustees concluded that the fund's expense ratio was below the average expense ratio charged by funds in its peer group and that the fund's advisory fee rate was also below the peer-group average.
The trustees did not consider the profitability of Wellington Management in determining whether to approve the advisory fee, because Wellington Management is independent of Vanguard and the advisory fee is the result of arm's-length negotiations.
The benefit of economies of scale
The trustees concluded that the fund's shareholders benefit from economies of scale because of breakpoints in the fund's advisory fee schedule. The breakpoints reduce the effective rate of the fee as the fund's assets increase.
The trustees will consider whether to renew the advisory arrangement again after a one-year period.
Trustees Approve Advisory Arrangements - Real Estate Index Fund and Real Estate II Index Fund
A majority of independent trustees of the board of Vanguard Real Estate Index Fund and Vanguard Real Estate II Index Fund (Trustees) have approved a restructuring of each fund's management structure whereby the Vanguard Group, Inc. (Vanguard) will now provide investment advisory services to the funds through its subsidiary, Vanguard Portfolio Management LLC (VPM). The trustees determined that approving the advisory arrangements was in the best interests of each fund and its shareholders.
The Trustees based their decisions upon an evaluation of VPM's investment staff, portfolio management process, and performance. This evaluation included information provided by Vanguard's Oversight and Manager Search team, which is responsible for fund and advisor oversight and product management. The Trustees considered the factors discussed below, among others. However, no single factor determined whether to approve the arrangement. Rather, it was the totality of the circumstances that drove the Trustee's decisions.
Nature, extent, and quality of services
The Trustees considered the quality of the investment management services to be provided to the funds and took into account the organizational depth and stability of Vanguard and VPM. The Trustees considered that Vanguard has been managing investments for more than four decades. The Strategic Equity Index Management team (SE), now within VPM, adheres to the same sound, disciplined investment management process and has considerable experience, stability and depth. In its management of other Vanguard passive and active equity funds and portfolios, the team has a track record of consistent performance as a result of its disciplined investment processes. SE has specific expertise and experience managing U.S. style-box, sector, and smart-beta index strategies, effectively navigating index reconstitutions and mitigating transactions costs to deliver tight tracking error while opportunistically seeking to add excess returns through sophisticated trading strategies and superior access to corporate actions.
The Trustees concluded that VPM's experience, stability, depth, and performance, among other factors, warranted approval of the advisory arrangements.
Investment performance
The Trustees determined that VPM's SE, in its management of Vanguard funds, including the funds, has a track record of consistent performance and disciplined investment processes.
Cost
The Trustees concluded that each fund's expense ratio will remain below the average expense ratio charged by funds in its peer group and that each fund's advisory expenses will also continue to be below the peer-group average.
The Trustees do not conduct a profitability analysis of Vanguard in providing investment advisory services through VPM 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 Trustees concluded that each fund's arrangement with Vanguard, and services rendered through VPM, ensure that each fund will realize economies of scale as it grows, with the cost to shareholders declining as fund assets increase.
The Trustees will consider whether to renew the advisory arrangements after a one-year period.
Item 12: Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 13: Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 14: Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 15: Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 16: Controls and Procedures.
(a) Disclosure Controls and Procedures. The Principal Executive and Financial Officers concluded that the Registrant's Disclosure Controls and Procedures are effective based on their evaluation of the Disclosure Controls and Procedures as of a date within 90 days of the filing date of this report.
(b) Internal Control Over Financial Reporting. There were no changes in the Registrant's Internal Control Over Financial Reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting.
Item 17: Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 18: Recovery of Erroneously Awarded Compensation
Not applicable.
Item 19: Exhibits.
| (a)(1) | Code of Ethics filed herewith. |
| (a)(2) | Certifications filed herewith. |
| (a)(2) | Certifications filed herewith. |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
VANGUARD SPECIALIZED FUNDS |
||
| BY: | /s/ SALIM RAMJI* | |
| SALIM RAMJI | ||
| CHIEF EXECUTIVE OFFICER | ||
Date: March 24, 2026
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
|
VANGUARD SPECIALIZED FUNDS |
||
| BY: | /s/ SALIM RAMJI* | |
| SALIM RAMJI | ||
| CHIEF EXECUTIVE OFFICER | ||
Date:March 24, 2026
|
VANGUARD SPECIALIZED FUNDS |
||
| BY: | /s/ CHRISTINE BUCHANAN* | |
| CHRISTINE BUCHANAN | ||
| CHIEF FINANCIAL OFFICER | ||
Date: March 24, 2026
| * By: | /s/ Natalie Lamarque |
Natalie Lamarque, pursuant to a Power of Attorney filed on December 19, 2025 (see File Number 33-49023); and to a Power of Attorney filed on February 27, 2026 (see File Number 333-177613), Incorporated by Reference.
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