Contents

Your Fund’s Performance at a Glance	1
Advisor’s Report	2
About Your Fund’s Expenses	5
Performance Summary	7
Financial Statements	9

Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.

Your Fund’s Performance at a Glance

•	For the 12 months ended January 31, 2022, Vanguard Energy Fund returned more than 36% for both Investor and Admiral Shares. It outpaced its benchmark, which returned slightly more than 30%.
•	The fund invests in large- and mid-capitalization stocks of companies in traditional energy segments, such as oil and natural gas; newer segments, such as geothermal and solar power; and industries associated with energy and related products worldwide. It uses a bottom-up approach, in which stocks are chosen based on company fundamentals, management track record, and security valuation.
•	The fund benefited from an overweight to oil and gas exploration and production, selection in oil and gas refining and marketing, and selection in electric utilities. Performance was held back somewhat by selection in integrated oil and gas companies and multi-utilities, as well as an underweight position in oil and gas equipment services. Among markets, selection in Europe and an underweight to stocks in the Pacific region helped the most.
•	For the decade ended January 31, 2022, the fund produced an average annual return of –0.35% for Admiral Shares and –0.43% for Investor Shares, compared with the –1.60% return of its expense-free benchmark.

Market Barometer

	Average Annual Total Returns Periods Ended January 31, 2022
	One Year	Three Years	Five Years
Stocks
Russell 1000 Index (Large-caps)	20.32%	20.51%	16.59%
Russell 2000 Index (Small-caps)	-1.21	11.99	9.69
Russell 3000 Index (Broad U.S. market)	18.80	19.93	16.11
FTSE All-World ex US Index (International)	4.20	9.61	8.35
Bonds
Bloomberg U.S. Aggregate Bond Index (Broad taxable market)	-2.97%	3.67%	3.08%
Bloomberg Municipal Bond Index (Broad tax-exempt market)	-1.89	3.50	3.46
FTSE Three-Month U.S. Treasury Bill Index	0.04	0.89	1.10
CPI
Consumer Price Index	7.48%	3.76%	2.97%

1

Advisor’s Report

rose primarily because of strong oil prices. Overweights to ConocoPhillips and Pioneer Natural Resources added the most value, while not owning Exxon or Chevron detracted the most. Strong stock selection in utilities also helped.

ConocoPhillips is a large-capitalization U.S. E&P company with an enhanced focus on returning cash to shareholders. Shares rose in the third quarter of 2021 on news that the firm had purchased all of Royal Dutch Shell’s Permian Basin assets at a favorable price. The all-cash acquisition makes ConocoPhillips the second-largest producer in the world’s top shale basin, after having also purchased Concho Resources earlier in 2021. In addition to its focus on returning capital to shareholders, ConocoPhillips’s strong decarbonization plans make it perhaps the most credible U.S. exploration and production company in addressing carbon emissions.

Pioneer Natural Resources, also one of the largest Permian Basin oil and gas producers, continues to look relatively inexpensive on earnings and free cash flow, and we expect augmented capital returns in the current oil and gas price environment. Pioneer also retains its strong balance sheet and possesses a lower breakeven, along with a robust growth portfolio compared to its peers.

Not owning Exxon and Chevron weighed on relative performance over the period as both stocks surged because of higher oil prices. Nevertheless, we still prefer the European majors (Total, Shell, and BP) to the U.S. leaders (Exxon and Chevron) for three reasons: The European firms

currently offer more attractive valuations, lower dividend payout ratios, and more explicit strategies attempting to address the energy transition.

We are particularly bullish on Shell because of its leadership position in liquefied natural gas and strong customer-facing businesses. Currently, Shell offers superior valuation coupled with the lowest forward-looking dividend payout ratio and the highest free cash flow yield after dividends. Because Shell’s balance sheet is in a relatively strong position, we expect significant share buybacks in 2022.

The fund’s positioning

We are cautiously optimistic about energy equities in the short to medium term. While the pace and shape of the global economic recovery are still uncertain, we believe that oil fundamentals will be quite strong through 2022, offering a supportive backdrop for energy equities.

This optimism is fueled by our belief that oil supply will remain constrained over the next six months, assuming ongoing discipline from OPEC and producers driven by environmental, social, and governance considerations and the push for shareholder returns. We believe this muted supply response raises the probability that the equilibrium oil price may be higher than previously anticipated, even if prices come down from their elevated levels.

For these reasons, we have overweight positions in the European oil majors. We also see value in some of the gas-heavy

North American E&Ps, notably Chesapeake Energy, Coterra Energy, and ARC Resources.

Utilities underperformed other parts of the energy value chain over the course of 2021. This created attractive entry points to add to integrated utility companies that will benefit from demand growth for renewables and the push toward electrification. These opportunities exist globally, and our exposures come in decreasing order of importance from the U.S., Europe, and emerging-market utilities.

We continue to believe that the portfolio’s broad energy exposure can deliver the most favorable long-term risk-reward by capturing both the cyclical benefits in oil and gas supply-demand and exposure to the increasingly decarbonized and electrified energy system of the future.

G. Thomas Levering,

Senior Managing Director,

Global Industry Analyst

Wellington Management Company llp

February 13, 2022

4

About Your Fund’s Expenses

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

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

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

•

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

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

•

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

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

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

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

5

Six Months Ended January 31, 2022
	Beginning Account Value 7/31/2021	Ending Account Value 1/31/2022	Expenses Paid During Period
Based on Actual Fund Return
Energy Fund
Investor Shares	$1,000.00	$1,203.40	$2.39
Admiral™ Shares	1,000.00	1,203.90	1.94
Based on Hypothetical 5% Yearly Return
Energy Fund
Investor Shares	$1,000.00	$1,023.04	$2.19
Admiral Shares	1,000.00	1,023.44	1.79

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.43% for Investor Shares and 0.35% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (184/365).

6

Energy Fund

Performance Summary

All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The 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, 2012, Through January 31, 2022

Initial Investment of $10,000

		Average Annual Total Returns Periods Ended January 31, 2022
		One Year	Five Years	Ten Years	Final Value of a $10,000 Investment
	Energy Fund Investor Shares	36.33%	-1.28%	-0.43%	$9,583
	Spliced Energy Index	30.08	-1.90	-1.60	8,511
	Dow Jones U.S. Total Stock Market Float Adjusted Index	18.50	16.02	14.96	40,306

Spliced Energy Index: S&P 500 Index through November 30, 2000; S&P Energy Sector Index through May 31, 2010; MSCI All Country World Energy Index through October 20, 2020; MSCI All Country World Energy + Utilities Index thereafter.

		One Year	Five Years	Ten Years	Final Value of a $50,000 Investment
Energy Fund Admiral Shares		36.43%	-1.20%	-0.35%	$48,257
Spliced Energy Index		30.08	-1.90	-1.60	42,556
Dow Jones U.S. Total Stock Market Float Adjusted Index		18.50	16.02	14.96	201,531

See Financial Highlights for dividend and capital gains information.

7

Energy Fund

Fund Allocation

As of January 31, 2022

United States	50.0%
United Kingdom	16.4
France	10.2
Canada	5.5
Italy	3.7
Norway	3.0
Spain	2.5
Russia	2.5
India	2.0
Germany	1.5
China	1.4
Brazil	1.3

The table reflects the fund’s investments, except for short-term investments.

8

Energy Fund

Financial Statements

Schedule of Investments

As of January 31, 2022

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

		Shares	Market Value• ($000)
Common Stocks (98.4%)
Brazil (1.3%)
	Petroleo Brasileiro SA	10,656,462	70,781
Canada (5.4%)
	Enbridge Inc.	3,560,761	150,537
	TC Energy Corp. (XTSE)	1,124,291	58,070
	TC Energy Corp.	815,801	42,126
	ARC Resources Ltd.	1,723,311	20,186
	Cenovus Energy Inc.	1,238,390	18,019
			288,938
China (1.4%)
1	China Yangtze Power Co. Ltd. GDR	1,341,436	46,282
	China Gas Holdings Ltd.	17,743,118	30,145
			76,427
France (10.0%)
	TotalEnergies SE	3,977,502	226,190
	Engie SA (XPAR)	12,817,112	197,150
	TotalEnergies SE ADR	2,042,263	116,001
			539,341
Germany (1.4%)
	RWE AG	1,827,322	77,081
India (2.0%)
	Power Grid Corp. of India Ltd.	36,955,535	107,108
Italy (3.6%)
	Enel SpA	15,667,258	120,585
	Tenaris SA	6,185,173	75,502
			196,087
Norway (2.9%)
	Equinor ASA	5,452,142	150,304
	Equinor ASA ADR	293,643	8,090
			158,394
Russia (2.5%)
	LUKOIL PJSC ADR	1,472,435	131,857
Spain (2.5%)
	Iberdrola SA (XMAD)	11,428,189	131,025
*	Iberdrola SA	190,469	2,174
			133,199

		Shares	Market Value• ($000)
United Kingdom (16.2%)
	Shell plc (XLON)	11,592,210	297,789
	BP plc	39,741,896	206,019
	Royal Dutch Shell plc Class A ADR	3,474,862	178,608
	National Grid plc	8,628,490	126,260
	BP plc ADR	1,414,614	43,740
	Royal Dutch Shell plc Class B ADR	361,331	18,572
			870,988
United States (49.2%)
	ConocoPhillips	4,306,591	381,650
	Marathon Petroleum Corp.	3,783,358	271,456
	Pioneer Natural Resources Co.	1,183,637	259,086
	Exelon Corp.	3,741,324	216,810
	Duke Energy Corp.	1,739,083	182,708
	NextEra Energy Inc.	1,988,805	155,366
	Southern Co.	2,072,745	144,035
	Coterra Energy Inc.	6,544,697	143,329
	FirstEnergy Corp.	3,310,844	138,923
	American Electric Power Co. Inc.	1,304,569	117,933
	Sempra Energy (XNYS)	793,662	109,652
	Edison International	1,734,019	108,879
	Hess Corp.	1,033,009	95,336
	Williams Cos. Inc.	3,130,409	93,725
	Chesapeake Energy Corp.	1,129,631	77,007
	CenterPoint Energy Inc.	2,509,983	71,183
	Avangrid Inc.	1,098,809	51,336
	Schlumberger NV	676,292	26,423
			2,644,837
Total Common Stocks (Cost $3,969,800)			5,295,038
Temporary Cash Investments (1.6%)
Money Market Fund (0.0%)
2	Vanguard Market Liquidity Fund 0.120%	862	86

9

Energy Fund

		Face Amount ($000)	Market Value• ($000)
Repurchase Agreement (1.6%)
	RBS Securities Inc., 0.050%, 2/1/22 (Dated 1/31/22, Repurchase Value $86,100,000, collateralized by U.S. Treasury Note/Bond 0.750%, 11/15/24, with a value of $87,822,000)	86,100	86,100
Total Temporary Cash Investments (Cost $86,186)			86,186
Total Investments (100.0%) (Cost $4,055,986)			5,381,224
Other Assets and Liabilities—Net (0.0%)			(2,172)
Net Assets (100%)			5,379,052
Cost is in $000.

•	See Note A in Notes to Financial Statements.
*	Non-income-producing security.
1	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, 2022, the aggregate value was $46,282,000, representing 0.9% of net assets.
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.
	ADR—American Depositary Receipt.
	GDR—Global Depositary Receipt.

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

10

Energy Fund

Statement of Assets and Liabilities

As of January 31, 2022

($000s, except shares and per-share amounts)	Amount
Assets
Investments in Securities, at Value
Unaffiliated Issuers (Cost $4,055,900)	5,381,138
Affiliated Issuers (Cost $86)	86
Total Investments in Securities	5,381,224
Investment in Vanguard	158
Foreign Currency, at Value (Cost $190)	188
Receivables for Accrued Income	1,100
Receivables for Capital Shares Issued	10,776
Total Assets	5,393,446
Liabilities
Due to Custodian	1,164
Payables to Investment Advisor	2,554
Payables for Capital Shares Redeemed	6,024
Payables to Vanguard	432
Deferred Foreign Capital Gains Taxes	4,220
Total Liabilities	14,394
Net Assets	5,379,052
At January 31, 2022, net assets consisted of:
Paid-in Capital	4,741,455
Total Distributable Earnings (Loss)	637,597
Net Assets	5,379,052
Investor Shares—Net Assets
Applicable to 42,533,793 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	1,771,003
Net Asset Value Per Share—Investor Shares	$41.64
Admiral Shares—Net Assets
Applicable to 46,185,650 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	3,608,049
Net Asset Value Per Share—Admiral Shares	$78.12

  

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

11

Energy Fund

Statement of Operations

	Year Ended January 31, 2022
	($000)
Investment Income
Income
Dividends1	193,465
Interest2	16
Securities Lending—Net	393
Total Income	193,874
Expenses
Investment Advisory Fees—Note B
Basic Fee	7,205
Performance Adjustment	820
The Vanguard Group—Note C
Management and Administrative—Investor Shares	3,520
Management and Administrative—Admiral Shares	4,687
Marketing and Distribution—Investor Shares	131
Marketing and Distribution—Admiral Shares	156
Custodian Fees	190
Auditing Fees	32
Shareholders’ Reports—Investor Shares	65
Shareholders’ Reports—Admiral Shares	47
Trustees’ Fees and Expenses	6
Total Expenses	16,859
Net Investment Income	177,015
Realized Net Gain (Loss)
Investment Securities Sold2,3	116,458
Foreign Currencies	(188)
Realized Net Gain (Loss)	116,270
Change in Unrealized Appreciation (Depreciation)
Investment Securities2,4	1,155,642
Foreign Currencies	(55)
Change in Unrealized Appreciation (Depreciation)	1,155,587
Net Increase (Decrease) in Net Assets Resulting from Operations	1,448,872

1	Dividends are net of foreign withholding taxes of $13,445,000.
2	Interest income, realized net gain (loss), and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $0, $9,000, and ($10,000), respectively. Purchases and sales are for temporary cash investment purposes.
3	Realized gain (loss) is net of foreign capital gain taxes of $3,000.
4	The change in unrealized appreciation (depreciation) is net of the change in deferred foreign capital gains taxes of $3,986,000.

  

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

12

Energy Fund

Statement of Changes in Net Assets

	Year Ended January 31,
	2022 ($000)	2021 ($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	177,015	206,416
Realized Net Gain (Loss)	116,270	(760,369)
Change in Unrealized Appreciation (Depreciation)	1,155,587	(860,242)
Net Increase (Decrease) in Net Assets Resulting from Operations	1,448,872	(1,414,195)
Distributions
Investor Shares	(57,404)	(58,294)
Admiral Shares	(119,222)	(124,849)
Total Distributions	(176,626)	(183,143)
Capital Share Transactions
Investor Shares	(14,569)	29,241
Admiral Shares	7,935	(498,823)
Net Increase (Decrease) from Capital Share Transactions	(6,634)	(469,582)
Total Increase (Decrease)	1,265,612	(2,066,920)
Net Assets
Beginning of Period	4,113,440	6,180,360
End of Period	5,379,052	4,113,440

  

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

13

Energy Fund

Financial Highlights

Investor Shares
For a Share Outstanding Throughout Each Period	Year Ended January 31,
	2022	2021	2020	2019	2018
Net Asset Value, Beginning of Period	$31.66	$43.28	$47.85	$55.62	$52.70
Investment Operations
Net Investment Income1	1.364	1.449	1.519	1.300	1.4772
Net Realized and Unrealized Gain (Loss) on Investments	10.019	(11.669)	(4.524)	(7.788)	3.035
Total from Investment Operations	11.383	(10.220)	(3.005)	(6.488)	4.512
Distributions
Dividends from Net Investment Income	(1.403)	(1.400)	(1.565)	(1.282)	(1.592)
Distributions from Realized Capital Gains	—	—	—	—	—
Total Distributions	(1.403)	(1.400)	(1.565)	(1.282)	(1.592)
Net Asset Value, End of Period	$41.64	$31.66	$43.28	$47.85	$55.62
Total Return3	36.33%	-23.55%	-6.55%	-11.48%	8.75%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$1,771	$1,363	$1,793	$2,265	$2,968
Ratio of Total Expenses to Average Net Assets4	0.41%	0.37%	0.32%	0.37%	0.38%
Ratio of Net Investment Income to Average Net Assets	3.68%	4.49%	3.20%	2.42%	2.86%2
Portfolio Turnover Rate	14%	55%	48%	31%	24%

1	Calculated based on average shares outstanding.
2	Net investment income per share and the ratio of net investment income to average net assets include $.342 and 0.67%, respectively, resulting from a cash payment received in connection with the merger of General Electric Co. and Baker Hughes Inc. in July 2017.
3	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.
4	Includes performance-based investment advisory fee increases (decreases) of 0.02%, (0.02%), (0.06%), (0.01%), and 0.00%.

  

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

14

Energy Fund

Financial Highlights

Admiral Shares
For a Share Outstanding Throughout Each Period	Year Ended January 31,
	2022	2021	2020	2019	2018
Net Asset Value, Beginning of Period	$59.39	$81.18	$89.77	$104.35	$98.88
Investment Operations
Net Investment Income1	2.615	2.787	2.926	2.511	2.8152
Net Realized and Unrealized Gain (Loss) on Investments	18.794	(21.903)	(8.512)	(14.600)	5.730
Total from Investment Operations	21.409	(19.116)	(5.586)	(12.089)	8.545
Distributions
Dividends from Net Investment Income	(2.679)	(2.674)	(3.004)	(2.491)	(3.075)
Distributions from Realized Capital Gains	—	—	—	—	—
Total Distributions	(2.679)	(2.674)	(3.004)	(2.491)	(3.075)
Net Asset Value, End of Period	$78.12	$59.39	$81.18	$89.77	$104.35
Total Return3	36.43%	-23.47%	-6.50%	-11.40%	8.84%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$3,608	$2,751	$4,388	$5,606	$6,796
Ratio of Total Expenses to Average Net Assets4	0.33%	0.29%	0.24%	0.29%	0.30%
Ratio of Net Investment Income to Average Net Assets	3.76%	4.60%	3.28%	2.50%	2.94%2
Portfolio Turnover Rate	14%	55%	48%	31%	24%

1	Calculated based on average shares outstanding.
2	Net investment income per share and the ratio of net investment income to average net assets include $.643 and 0.67%, respectively, resulting from a cash payment received in connection with the merger of General Electric Co. and Baker Hughes Inc. in July 2017.
3	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.
4	Includes performance-based investment advisory fee increases (decreases) of 0.02%, (0.02%), (0.06%), (0.01%), and 0.00%.

  

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

15

Energy Fund

Notes to Financial Statements

Vanguard Energy 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.

The fund invests in securities of foreign issuers, which may subject it to investment risks not normally associated with investing in securities of U.S. corporations. Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance.

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

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted 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.

Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

2. 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. Repurchase Agreements: The fund enters into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature, and in the absence of a default, such collateral cannot be repledged, resold, or rehypothecated. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that,

16

Energy Fund

in the event of a counterparty's default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral.

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

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

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

7. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group ("Vanguard") participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes, 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; these fees 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 a rate based upon the higher of the one-month London Interbank Offered Rate (or an acceptable alternate rate, if necessary), federal funds

17

Energy Fund

effective rate, or overnight bank funding rate plus an agreed-upon spread, except that 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, 2022, the fund did not utilize the credit facilities or the Interfund Lending Program.

8. Other: Dividend income is recorded on the ex-dividend date. Non-cash dividends included in income, if any, are recorded at the fair value of the securities received. Interest income includes income distributions received from Vanguard Market Liquidity Fund 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 fund's understanding of 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. Such tax reclaims received during the year, if any, are included in dividend income. No other amounts for additional tax reclaims are reflected in the financial statements due to the uncertainty as to the ultimate resolution of proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment.

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

B.

Wellington Management Company llp provides 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 MSCI ACWI Energy Index for periods prior to October 21, 2020, and to the fund’s current benchmark MSCI ACWI Energy + Utilities Index, beginning October 21, 2020, for the preceding three years. The benchmark change will be fully phased in by October 2023. For the year ended January 31, 2022, the investment advisory fee paid represented an effective annual basic rate of 0.15% of the fund’s average net assets, before an increase of of $820,000 (0.02%) based on performance.

18

Energy Fund

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, 2022, the fund had contributed to Vanguard capital in the amount of $158,000, representing less than 0.01% of the fund’s net assets and 0.06% 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. 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, 2022, 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	3,004,556	—	—	3,004,556
Common Stocks—Other	346,439	1,944,043	—	2,290,482
Temporary Cash Investments	86	86,100	—	86,186
Total	3,351,081	2,030,143	—	5,381,224

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. As of period end, permanent differences primarily attributable to the accounting for foreign currency transactions and tax expense on capital gains were reclassified between the individual components of total distributable earnings (loss).

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.

19

Energy Fund

The differences are primarily related to the deferral of losses from wash sales. 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	9,351
Undistributed Long-Term Gains	—
Capital Loss Carryforwards	(690,633)
Qualified Late-Year Losses	—
Net Unrealized Gains (Losses)	1,318,879

The tax character of distributions paid was as follows:

	Year Ended January 31,
	2022 Amount ($000)	2021 Amount ($000)
Ordinary Income*	176,626	183,143
Long-Term Capital Gains	—	—
Total	176,626	183,143

*	Includes short-term capital gains, if any.

As of January 31, 2022, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

	Amount ($000)
Tax Cost	4,058,117
Gross Unrealized Appreciation	1,419,873
Gross Unrealized Depreciation	(96,766)
Net Unrealized Appreciation (Depreciation)	1,323,107

F.	During the year ended January 31, 2022, the fund purchased $646,080,000 of investment securities and sold $679,456,000 of investment securities, other than temporary cash investments.
G.	Capital share transactions for each class of shares were:

    

	Year Ended January 31,
	2022			2021
	Amount ($000)	Shares (000)		Amount ($000)	Shares (000)
Investor Shares
Issued	433,225	11,662		535,390	17,354
Issued in Lieu of Cash Distributions	53,100	1,381		54,076	1,741
Redeemed	(500,894)	(13,551)		(560,225)	(17,474)
Net Increase (Decrease)—Investor Shares	(14,569)	(508)		29,241	1,621

20

Energy Fund

	Year Ended January 31,
	2022			2021
	Amount ($000)	Shares (000)		Amount ($000)	Shares (000)
Admiral Shares
Issued	851,809	12,163		1,087,853	18,878
Issued in Lieu of Cash Distributions	105,042	1,455		110,803	1,906
Redeemed	(948,916)	(13,745)		(1,697,479)	(28,520)
Net Increase (Decrease)—Admiral Shares	7,935	(127)		(498,823)	(7,736)

H.

Market disruptions associated with current geopolitical events have had a global impact, and uncertainty exists as to their implications. Such disruptions can adversely affect assets and thus performance of the fund; at this time, an aggregate effect on assets and performance cannot be reasonably estimated. Management is continuing to monitor these developments and evaluate impacts they may have on the fund.

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

21

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Vanguard Specialized Funds and Shareholders of Vanguard Energy Fund

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Vanguard Energy Fund (one of the funds constituting Vanguard Specialized Funds, referred to hereafter as the "Fund") as of January 31, 2022, the related statement of operations for the year ended January 31, 2022, the statement of changes in net assets for each of the two years in the period ended January 31, 2022, including the related notes, and the financial highlights for each of the five years in the period ended January 31, 2022 (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, 2022, 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, 2022 and the financial highlights for each of the five years in the period ended January 31, 2022 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, 2022 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 23, 2022

We have served as the auditor of one or more investment companies in The Vanguard Group of Funds since 1975.

22

Special 2021 tax information (unaudited) for Vanguard Energy Fund

This information for the fiscal year ended January 31, 2022, is included pursuant to provisions of the Internal Revenue Code.

For corporate shareholders, 47.2% of investment income (dividend income plus short-term gains, if any) qualifies for the dividends-received deduction.

The fund distributed $176,627,000 of qualified dividend income to shareholders during the fiscal year.

23

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The People Who Govern Your Fund

The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them.

A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 217 Vanguard funds.

Information for each trustee and executive officer of the fund appears below. That information, as well as the Vanguard fund count, is as of the date on the cover of this fund report. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.

Graduate School of Education, University of Pennsylvania.

F. Joseph Loughrey

Born in 1949. Trustee since October 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2009) and vice chairman of the board (2008–2009) of Cummins Inc. (industrial machinery). Chairman of the board of Hillenbrand, Inc. (specialized consumer services). Director of the V Foundation. Member of the advisory council for the College of Arts and Letters at the University of Notre Dame. Chairman of the board of Saint Anselm College.

Mark Loughridge

Born in 1953. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: senior vice president and chief financial officer (retired 2013) of IBM (information technology services). Fiduciary member of IBM’s Retirement Plan Committee (2004–2013), senior vice president and general manager (2002–2004) of IBM Global Financing, vice president and controller (1998–2002) of IBM, and a variety of other prior management roles at IBM. Member of the Council on Chicago Booth.

Scott C. Malpass

Born in 1962. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: adjunct professor of finance at the University of Notre Dame (2020–present). Chief investment officer (retired 2020) and vice president (retired 2020) of the University of Notre Dame. Assistant professor (retired June 2020) of finance at the Mendoza College of Business, University of Notre Dame, and member of the Notre Dame 403(b) Investment Committee. Member of the board of Catholic Investment Services, Inc. (investment advisors), the board of superintendence of the Institute for the Works of Religion, and the board of directors of Paxos Trust Company (finance).

Deanna Mulligan

Born in 1963. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: chief executive officer of Purposeful (advisory firm for CEOs and C-level executives; 2021–present). Board chair (2020), chief executive officer (2011–2020), and president (2010–2019) of The Guardian Life Insurance Company of America. Chief operating officer (2010–2011) and executive vice president (2008–2010) of Individual Life and Disability of the Guardian Life Insurance Company of America. Member of the board of the Economic Club of New York. Trustee of the Partnership for New York City

(business leadership), Chief Executives for Corporate Purpose, and the NewYork-Presbyterian Hospital.

André F. Perold

Born in 1952. Trustee since December 2004. Principal occupation(s) during the past five years and other experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011). Chief investment officer and co-managing partner of HighVista Strategies (private investment firm). Member of the board (2018–present) of RIT Capital Partners (investment firm). Member of the investment committee of Partners Health Care System.

Sarah Bloom Raskin

Born in 1961. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: deputy secretary (2014–2017) of the United States Department of the Treasury. Governor (2010–2014) of the Federal Reserve Board. Commissioner (2007–2010) of financial regulation for the State of Maryland. Colin W. Brown Distinguished Professor of the Practice of Law (2021–present), professor (2020–present), Distinguished Fellow of the Global Financial Markets Center (2020–present), and Rubenstein Fellow (2017–2020) at Duke University. Trustee (2017–present) of Amherst College and member of Amherst College Investment Committee (2019–present). Member of the Regenerative Crisis Response Committee (2020–present).

David A. Thomas

Born in 1956. Trustee since July 2021. Principal occupation(s) during the past five years and other experience: president of Morehouse College (2018–present). Professor of business administration, emeritus at Harvard University (2017–2018). Dean (2011–2016) and professor of management (2016–2017) at the Georgetown University McDonough School of Business. Director of DTE Energy Company (2013–present). Trustee of Common Fund (2019–present).

Peter F. Volanakis

Born in 1955. Trustee since July 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2010) of Corning Incorporated (communications equipment) and director of Corning Incorporated (2000–2010) and Dow Corning (2001–2010). Director (2012) of SPX Corporation (multi-industry manufacturing). Overseer of the Amos Tuck School of Business Administration, Dartmouth College (2001–2013). Member of the BMW Group Mobility Council.

Executive Officers

Christine M. Buchanan

Born in 1970. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief financial officer (2021–present) and treasurer (2017–present) of each of the investment companies served by Vanguard. Partner (2005–2017) at KPMG (audit, tax, and advisory services).

David Cermak

Born in 1960. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Finance director (2019–present) of each of the investment companies served by Vanguard. Managing director and head (2017–present) of Vanguard Investments Singapore. Managing director and head (2017–2019) of Vanguard Investments Hong Kong. Representative director and head (2014–2017) of Vanguard Investments Japan.

John Galloway

Born in 1973. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Investment stewardship officer (September 2020–present) of each of the investment companies served by Vanguard. Head of Investor Advocacy (February 2020–present) and head of Marketing Strategy and Planning (2017–2020) at Vanguard. Special assistant to the President of the United States (2015).

Peter Mahoney

Born in 1974. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Controller (2015–present) of each of the investment companies served by Vanguard. Head of International Fund Services (2008–2014) at Vanguard.

Anne E. Robinson

Born in 1970. Principal occupation(s) during the past five years and other experience: general counsel (2016–present) of Vanguard. Secretary (2016–present) of Vanguard and of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Managing director and general counsel of Global Cards and Consumer Services (2014–2016) at Citigroup. Counsel (2003–2014) at American Express. Nonexecutive director of the board of National Grid (energy).

Michael Rollings

Born in 1963. Principal occupation(s) during the past five years and other experience: finance director (2017–present) and treasurer (2017) of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Chief financial officer (2016–present) of Vanguard. Director (2016–present) of Vanguard Marketing Corporation. Executive vice president and chief financial officer (2006–2016) of MassMutual Financial Group.

John E. Schadl

Born in 1972. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief compliance officer (2019–present) of Vanguard and of each of the investment companies served by Vanguard. Assistant vice president (2019–present) of Vanguard Marketing Corporation.

Vanguard Senior Management Team

Matthew Benchener	Thomas M. Rampulla
Joseph Brennan	Karin A. Risi
Mortimer J. Buckley	Anne E. Robinson
Gregory Davis	Michael Rollings
John James	Nitin Tandon
John T. Marcante	Lauren Valente
Chris D. Mclsaac

Fund Information > 800-662-7447

Direct Investor Account Services > 800-662-2739

Institutional Investor Services > 800-523-1036

Text Telephone for People Who Are Deaf or Hard of Hearing > 800-749-7273

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

All comparative mutual fund data are from Morningstar, Inc., unless otherwise noted.

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

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

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

© 2022 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.

Q510 032022

Contents

Your Fund’s Performance at a Glance	1
Advisor’s Report	2
About Your Fund's Expenses	6
Performance Summary	8
Financial Statements	10

Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.

Your Fund’s Performance at a Glance

•	Vanguard Global Capital Cycles Fund returned 21.74% for the 12 months ended January 31, 2022, outpacing its performance benchmark, the S&P Global BMI Metals & Mining 25% Weighted Index, which returned 11.68%.
•	The global economy continued to heal over the period. Vaccination rates rose, economies reopened, and more workers returned to the labor force. The investment environment grew a little more challenging, however, as COVID-19 variants emerged, inflation surged, and many central banks adopted less accommodative monetary stances. Stocks finished the period up significantly, with the United States and Europe outpacing the Pacific region and emerging markets.
•	Returns were positive in nine of the 11 sectors the portfolio invests in. Strong selection in materials and a favorable allocation to energy contributed most to returns compared with the benchmark. Information technology holdings were the biggest net detractors.
•	Stocks of companies in Europe and emerging markets, notably those in the United Kingdom and India, contributed most. North American and Pacific region stocks also added to returns.
•	Over the decade ended January 31, 2022, the fund’s average annual return lagged that of its spliced benchmark index by more than 3.5 percentage points.

Market Barometer

	Average Annual Total Returns Periods Ended January 31, 2022
	One Year	Three Years	Five Years
Stocks
Russell 1000 Index (Large-caps)	20.32%	20.51%	16.59%
Russell 2000 Index (Small-caps)	-1.21	11.99	9.69
Russell 3000 Index (Broad U.S. market)	18.80	19.93	16.11
FTSE All-World ex US Index (International)	4.20	9.61	8.35
Bonds
Bloomberg U.S. Aggregate Bond Index (Broad taxable market)	-2.97%	3.67%	3.08%
Bloomberg Municipal Bond Index (Broad tax-exempt market)	-1.89	3.50	3.46
FTSE Three-Month U.S. Treasury Bill Index	0.04	0.89	1.10
CPI
Consumer Price Index	7.48%	3.76%	2.97%

1

Advisor’s Report

cash-generative, as its growth plans align with regulators’ desire to build out electrical transmission, and it has the scale to do so. More broadly, we believe electric network utilities are an underappreciated beneficiary of the energy transition.

The fund’s shortfalls

Although security selection and sector allocation effects contributed to relative performance in aggregate, selection within consumer discretionary and information technology detracted. The fund’s underweight to information technology and an overweight to utilities also detracted.

The fund’s largest relative detractors included Rubis (utilities) and Barrick Gold (materials).

An out-of-benchmark allocation to Rubis, a downstream oil and gas company, was the largest relative detractor from performance. Shares fell after the company reported earnings for the first half of 2021 that came in under consensus expectations. Earnings were dampened by the pandemic’s persisting impact on tourism-related activities, especially in the Caribbean region, as well as higher holding costs. We continue to like Rubis because of its attractive free cash flow, low debt levels, and high dividend yield. The company has been out of favor with the market but has maintained strong fundamentals and relatively stable cash flows.

An overweight to Barrick Gold, a global gold mining company, also detracted. Its

shares fell with the price of gold over the period. Demand for gold dropped as investors shifted away from safe-haven assets with the gradual reopening of economies following pandemic-era lockdown measures. The company executed on all fronts, by divesting noncore assets and optimizing existing assets and cost structures. In addition, it demonstrates a continued focus on executing on environmental, social, and governance (ESG) issues such as local employment, environmental stewardship, and improving relations with host countries. We view Barrick’s high-quality gold portfolio and best-in-class management, particularly from an ESG standpoint, as underappreciated and undervalued.

The fund’s positioning and investment strategy

The fund invests in opportunities resulting from cycles of under- and overinvestment and/or extreme dislocations in valuations. At least 25% of the fund will be invested in metals and mining securities, where these capital cycles have been historically robust. The remainder of the fund focuses on industries and companies with scarce, high-quality assets that are not easily replicable. As capital flows out of areas that we believe will endure beyond any temporary negative sentiment, we will look for opportunities to invest at attractive valuations.

Our framework continues to identify several compelling dislocations and areas of opportunity, including the electric vehicle (EV) value chain—a key part of the

energy transition—as well as traditional energy and metal producers.

The adoption curve for EVs is increasing rapidly but remains below our estimates, which should lead to further bottlenecks in battery capacity and equipment. With regard to energy and metal producers, we believe the transition to a low-carbon economy will require substantial capital spending and infrastructure development through mid-century, dwarfing previous landmark economic stimulus plans.

We expect that the combination of outsized spending, policy tailwinds, and shifting consumer and investor attitudes will kick-start this new capital cycle. In the first stages, renewable energy, EVs, and battery storage all use large volumes of raw materials and base metals. Therefore, we believe that the demand for these raw materials is set to grow commensurately and will be met by limited supply.

Indeed, project pipelines are thin for most base metals following years of underinvestment, and as such we expect market tightness, for example in lithium. The metals complex overall has been navigating increased scrutiny from stakeholders on ESG issues, as well as shifting investor preference for sustainable returns, as opposed to growth at any cost. These dynamics have hampered a traditional supply response, pointing to structurally higher margins from metals producers.

The last quarter of 2021 saw a shift in market sentiment. The key drivers of the past decade’s strong equity market

performance have started to fade. This is most evident in the acknowledgment that low rates and a benign inflation environment are not sustainable over the long term.

The level of nominal rates has started to reverse course from an era of largely sub-zero rates and access to abundant “free money” fueled by central banks. As for the inflation environment, we believe that several of the driving forces behind higher levels of inflation are long-lasting, not transitory. This includes increased environmental regulation and the recent efforts of reshoring as opposed to offshoring. Two key drivers of higher inflation will have particularly strong implications for margins and valuations: higher commodity and input prices, and higher levels of wages, boosted by political decisions.

More broadly, we believe that the environment of low rates and low inflation is at a turning point as governments turn to a new regime, given the need to inflate away high debt levels. This will be achieved by seeking higher nominal GDP and inflation levels, while containing interest rates. Together with less abundant liquidity, in the form of bank credit growth rather than central bank balance sheet expansion, this regime shift will favor a better allocation of capital.

We believe shorter-duration equities and those with demonstrated pricing power in a rising cost environment will emerge as clear winners of this shift.

Keith E. White

Senior Managing Director and
Equity Portfolio Manager

Wellington Management Company llp

February 14, 2022

5

About Your Fund’s Expenses

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

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

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

•

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

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

•

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

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

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

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

6

Six Months Ended January 31, 2022
Global Capital Cycles Fund	Beginning Account Value 7/31/2021	Ending Account Value 1/31/2022	Expenses Paid During Period
Based on Actual Fund Return	$1,000.00	$1,075.40	$1.99
Based on Hypothetical 5% Yearly Return	1,000.00	1,023.29	1.94

The calculations are based on expenses incurred in the most recent six-month period. The fund's annualized six-month expense ratio for that period is 0.38%. The dollar amounts shown as ”Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (184/365).

7

Global Capital Cycles Fund

Performance Summary

All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The 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, 2012, Through January 31, 2022

Initial Investment of $10,000

			Average Annual Total Returns Periods Ended January 31, 2022
		One Year	Five Years	Ten Years	Final Value of a $10,000 Investment
	Global Capital Cycles Fund	21.74%	3.05%	-4.69%	$6,182
	Spliced Global Capital Cycles Index	11.68	7.38	-1.14	8,917
	MSCI All Country World Index	13.23	12.64	10.66	27,542

Spliced Global Capital Cycles Index: S&P Global Custom Metals and Mining Index through September 25, 2018; S&P Global BMI Metals & Mining 25% Weighted Index thereafter.

See Financial Highlights for dividend and capital gains information.

8

Global Capital Cycles Fund

Fund Allocation

As of January 31, 2022

United States	22.0%
United Kingdom	18.4
Canada	15.9
India	9.3
Australia	7.2
France	7.0
Switzerland	6.1
South Africa	4.2
Germany	2.7
Japan	2.5
Norway	1.6
Italy	1.1
China	1.1
Other	0.9

The table reflects the fund's investments, except for short-term investments.

9

Global Capital Cycles Fund

Financial Statements

Schedule of Investments

As of January 31, 2022

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

					Shares	Market Value• ($000)
Common Stocks (96.8%)
Australia (7.0%)
1	BHP Group Ltd. ADR				600,720	38,206
1	Rio Tinto plc ADR				490,390	35,014
	BHP Group Ltd.				677,588	21,730
						94,950
Austria (0.9%)
*,2	BAWAG Group AG				200,181	12,014
Canada (15.4%)
	Barrick Gold Corp.				5,047,189	96,654
	Intact Financial Corp.				607,196	82,270
	Agnico Eagle Mines Ltd.				243,910	11,655
*	Turquoise Hill Resources Ltd.				375,500	6,571
	Endeavour Mining plc				293,241	6,533
	Kinross Gold Corp.				910,399	4,916
						208,599
China (1.0%)
*	XPeng Inc. Class A ADR				296,216	10,394
*	Baidu Inc. Class A				182,950	3,624
						14,018
France (6.8%)
	Engie SA				4,228,942	65,048
	Rubis SCA				830,232	26,877
						91,925
Germany (2.7%)
	Brenntag SE				292,611	25,070
2	Covestro AG				186,339	11,179
						36,249
India (9.0%)
	Power Grid Corp. of India Ltd.				24,170,822	70,054
	Reliance Industries Ltd.				1,636,969	52,755
						122,809
Italy (1.0%)
	UniCredit SpA				884,626	14,060

					Shares	Market Value• ($000)
Japan (2.4%)
	Mitsubishi UFJ Financial Group Inc.				2,247,800	13,625
	T&D Holdings Inc.				711,540	10,515
	Panasonic Corp.				793,400	8,735
						32,875
Norway (1.6%)
	Norsk Hydro ASA				2,772,805	21,310
South Africa (4.0%)
1	Gold Fields Ltd. ADR				5,172,058	54,824
Switzerland (5.9%)
	STMicroelectronics NV				1,016,089	47,777
	Novartis AG (Registered)				373,666	32,468
						80,245
United Kingdom (17.8%)
*	Glencore plc				15,621,324	81,381
	Anglo American plc				1,303,992	57,487
	Shell plc				1,468,731	37,730
	Standard Chartered plc				2,917,552	21,248
	Serco Group plc				10,766,538	19,476
*	Babcock International Group plc				4,009,566	16,424
*	National Express Group plc				2,596,484	8,805
						242,551
United States (21.3%)
	Medical Properties Trust Inc.				2,496,769	56,826
*	Enstar Group Ltd.				175,285	46,465
	Viper Energy Partners LP				1,284,676	34,738
	Archer-Daniels-Midland Co.				433,808	32,536
	BWX Technologies Inc.				606,806	27,009
*	Fluor Corp.				1,085,118	22,831
	American Electric Power Co. Inc.				240,214	21,715
*	Livent Corp.				852,382	19,613
	Schlumberger NV				345,767	13,509

10

Global Capital Cycles Fund

					Shares	Market Value• ($000)
	Mosaic Co.				337,114	13,468
*	Metals Acquisition Corp. Warrants Exp. 7/12/23				330,300	155
						288,865
Total Common Stocks (Cost $1,089,683)						1,315,294
Temporary Cash Investments (6.5%)
Money Market Fund (6.5%)
3,4	Vanguard Market Liquidity Fund, 0.120%(Cost $88,545)				885,559	88,547
Total Investments (103.3%) (Cost $1,178,228)						1,403,841
Other Assets and Liabilities—Net (-3.3%)						(44,343)
Net Assets (100%)						1,359,498

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 $46,780,000.
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, 2022, the aggregate value was $23,193,000, representing 1.7% 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 $48,966,000 was received for securities on loan, of which $43,058,000 is held in Vanguard Market Liquidity Fund and $5,908,000 is held in cash.

ADR—American Depositary Receipt.

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

11

Global Capital Cycles Fund

Statement of Assets and Liabilities

As of January 31, 2022

($000s, except shares and per-share amounts)	Amount
Assets
Investments in Securities, at Value
Unaffiliated Issuers (Cost $1,089,683)	1,315,294
Affiliated Issuers (Cost $88,545)	88,547
Total Investments in Securities	1,403,841
Investment in Vanguard	43
Cash	4,727
Foreign Currency, at Value (Cost $7,064)	7,088
Receivables for Investment Securities Sold	7,397
Receivables for Accrued Income	564
Receivables for Capital Shares Issued	1,797
Total Assets	1,425,457
Liabilities
Payables for Investment Securities Purchased	11,612
Collateral for Securities on Loan	48,966
Payables for Capital Shares Redeemed	1,565
Payables to Investment Advisor	573
Payables to Vanguard	138
Deferred Foreign Capital Gains Taxes	3,105
Total Liabilities	65,959
Net Assets	1,359,498
At January 31, 2022, net assets consisted of:
Paid-in Capital	3,328,722
Total Distributable Earnings (Loss)	(1,969,224)
Net Assets	1,359,498
Net Assets
Applicable to 120,526,525 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	1,359,498
Net Asset Value Per Share	$11.28

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

12

Global Capital Cycles Fund

Statement of Operations

	Year Ended January 31, 2022
	($000)
Investment Income
Income
Dividends1	48,100
Interest2	32
Securities Lending—Net	83
Total Income	48,215
Expenses
Investment Advisory Fees—Note B
Basic Fee	1,919
Performance Adjustment	(153)
The Vanguard Group—Note C
Management and Administrative	2,838
Marketing and Distribution	87
Custodian Fees	63
Auditing Fees	28
Shareholders’ Reports	41
Trustees’ Fees and Expenses	2
Total Expenses	4,825
Net Investment Income	43,390
Realized Net Gain (Loss)
Investment Securities Sold2	166,925
Foreign Currencies	(409)
Realized Net Gain (Loss)	166,516
Change in Unrealized Appreciation (Depreciation)
Investment Securities2,3	41,472
Foreign Currencies	(19)
Change in Unrealized Appreciation (Depreciation)	41,453
Net Increase (Decrease) in Net Assets Resulting from Operations	251,359

1	Dividends include foreign tax reclaims of $2,527,000 and are net of foreign withholding taxes of $3,251,000.
2	Interest income, realized net gain (loss), capital gain distributions received, and change in unrealized appreciation (depreciation) from an affiliated company of the fund were $32,000, ($10,000), $2,000, and $2,000, respectively. Purchases and sales are for temporary cash investment purposes.
3	The change in unrealized appreciation (depreciation) is net of the change in deferred foreign capital gains taxes of $3,105,000.

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

13

Global Capital Cycles Fund

Statement of Changes in Net Assets

	Year Ended January 31,
	2022 ($000)	2021 ($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	43,390	26,031
Realized Net Gain (Loss)	166,516	39,168
Change in Unrealized Appreciation (Depreciation)	41,453	140,251
Net Increase (Decrease) in Net Assets Resulting from Operations	251,359	205,450
Distributions
Total Distributions	(42,400)	(23,982)
Capital Share Transactions
Issued	228,666	177,189
Issued in Lieu of Cash Distributions	36,640	21,201
Redeemed	(296,930)	(410,113)
Net Increase (Decrease) from Capital Share Transactions	(31,624)	(211,723)
Total Increase (Decrease)	177,335	(30,255)
Net Assets
Beginning of Period	1,182,163	1,212,418
End of Period	1,359,498	1,182,163

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

14

Global Capital Cycles Fund

Financial Highlights

For a Share Outstanding Throughout Each Period	Year Ended January 31,
	2022	2021	2020	2019	2018
Net Asset Value, Beginning of Period	$9.57	$7.97	$7.62	$10.57	$10.74
Investment Operations
Net Investment Income1	.356	.197	.212	.122	.049
Net Realized and Unrealized Gain (Loss) on Investments	1.715	1.597	.337	(2.858)	(.217)
Total from Investment Operations	2.071	1.794	.549	(2.736)	(.168)
Distributions
Dividends from Net Investment Income	(.361)	(.194)	(.199)	(.214)	(.002)
Distributions from Realized Capital Gains	—	—	—	—	—
Total Distributions	(.361)	(.194)	(.199)	(.214)	(.002)
Net Asset Value, End of Period	$11.28	$9.57	$7.97	$7.62	$10.57
Total Return2	21.74%	22.63%	7.11%	-26.17%	-1.56%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$1,359	$1,182	$1,212	$1,399	$2,568
Ratio of Total Expenses to Average Net Assets3	0.36%	0.35%	0.38%	0.33%	0.36%
Ratio of Net Investment Income to Average Net Assets	3.28%	2.43%	2.68%	1.38%	0.47%
Portfolio Turnover Rate	57%	70%	56%	110%	35%

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 (0.01%), (0.03%), 0.00%, (0.04%), and 0.00%.

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

15

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. The fund invests in securities of foreign issuers, which may subject it to investment risks not normally associated with investing in securities of U.S. corporations. Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance.

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

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted 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 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

16

Global Capital Cycles Fund

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, 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; these fees 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 a rate based upon the higher of the one-month London Interbank Offered Rate (or an acceptable alternate rate, if necessary), federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread, except that borrowings under the uncommitted credit facility may bear interest based upon an alternative 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, 2022, 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 securities received. Interest income includes

17

Global Capital Cycles Fund

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 fund’s understanding of the applicable countries’ tax rules and rates. Deferred foreign capital gains tax, if any, is accrued daily based upon applicable 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. Such tax reclaims received during the year, if any, are included in dividend income. No other amounts for additional tax reclaims are reflected in the financial statements due to the uncertainty as to the ultimate resolution of proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment.

B.  Wellington Management Company llp provides 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 since January 31, 2019. For the year ended January 31, 2022, the investment advisory fee represented an effective annual basic rate of 0.14% of the fund’s average net assets, before a net decrease of $153,000 (0.01%) 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, 2022, the fund had contributed to Vanguard capital in the amount of $43,000, representing less than 0.01% of the fund’s net assets and 0.02% 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. 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.

18

Global Capital Cycles Fund

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

	Level 1 ($000)	Level 2 ($000)	Level 3 ($000)	Total ($000)
Investments
Assets
Common Stocks—North and South America	497,464	—	—	497,464
Common Stocks—Other	138,438	679,392	—	817,830
Temporary Cash Investments	88,547	—	—	88,547
Total	724,449	679,392	—	1,403,841

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. As of period end, permanent differences primarily attributable to the accounting for foreign currency transactions were reclassified between the individual components of total distributable earnings (loss).

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. 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	2,060
Undistributed Long-Term Gains	—
Capital Loss Carryforwards	(2,193,799)
Qualified Late-Year Losses	—
Net Unrealized Gains (Losses)	222,515

The tax character of distributions paid was as follows:

	Year Ended January 31,
	2022 Amount ($000)	2021 Amount ($000)
Ordinary Income	42,400	23,982
Long-Term Capital Gains	—	—
Total	42,400	23,982

19

Global Capital Cycles Fund

As of January 31, 2022, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

	Amount ($000)
Tax Cost	1,178,228
Gross Unrealized Appreciation	274,302
Gross Unrealized Depreciation	(48,689)
Net Unrealized Appreciation (Depreciation)	225,613

F.  During the year ended January 31, 2022, the fund purchased $720,223,000 of investment securities and sold $795,357,000 of investment securities, other than temporary cash investments.

G.  Capital shares issued and redeemed were:

	Year Ended January 31,
	2022 Shares (000)		2021 Shares (000)
Issued	21,067		21,854
Issued in Lieu of Cash Distributions	3,333		2,335
Redeemed	(27,397)		(52,703)
Net Increase (Decrease) in Shares Outstanding	(2,997)		(28,514)

H.  Market disruptions associated with current geopolitical events have had a global impact, and uncertainty exists as to their implications. Such disruptions can adversely affect assets and thus performance of the fund; at this time, an aggregate effect on assets and performance cannot be reasonably estimated. Management is continuing to monitor these developments and evaluate impacts they may have on the fund.

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

20

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, 2022, the related statement of operations for the year ended January 31, 2022, the statement of changes in net assets for each of the two years in the period ended January 31, 2022, including the related notes, and the financial highlights for each of the five years in the period ended January 31, 2022 (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, 2022, 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, 2022 and the financial highlights for each of the five years in the period ended January 31, 2022 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, 2022 by correspondence with the custodian, transfer agent and brokers; when replies were not received from the transfer agent or brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 23, 2022

We have served as the auditor of one or more investment companies in The Vanguard Group of Funds since 1975.

21

Special 2021 tax information (unaudited) for Vanguard Global Capital Cycles Fund

This information for the fiscal year ended January 31, 2022, is included pursuant to provisions of the Internal Revenue Code.

The fund distributed $39,296,000 of qualified dividend income to shareholders during the fiscal year.

For corporate shareholders, 12.5% of investment income (dividend income plus short-term gains, if any) qualifies for the dividends-received deduction.

The fund distributed $114,000 of qualified business income to shareholders during the fiscal year.

The fund designates to shareholders foreign source income of $40,646,000 and foreign taxes paid of $878,000. Shareholders received more detailed information with their Form 1099-DIV in January 2022 to determine the calendar-year amounts to be included on their 2021 tax returns.

22

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The People Who Govern Your Fund

The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them.

A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 217 Vanguard funds.

Information for each trustee and executive officer of the fund appears below. That information, as well as the Vanguard fund count, is as of the date on the cover of this fund report. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.

Amy Gutmann

Born in 1949. Trustee since June 2006. Principal occupation(s) during the past five years and other experience: president (2004–present) of the University of Pennsylvania. Christopher H. Browne Distinguished Professor of Political Science, School of Arts and Sciences, and professor of communication, Annenberg School for Communication, with secondary faculty appointments in the Department of Philosophy, School of Arts and Sciences, and at the Graduate School of Education, University of Pennsylvania.

F. Joseph Loughrey

Born in 1949. Trustee since October 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2009) and vice chairman of the board (2008–2009) of Cummins Inc. (industrial machinery). Chairman of the board of Hillenbrand, Inc. (specialized consumer services). Director of the V Foundation. Member of the advisory council for the College of Arts and Letters at the University of Notre Dame. Chairman of the board of Saint Anselm College.

Mark Loughridge

Born in 1953. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: senior vice president and chief financial officer (retired 2013) of IBM (information technology services). Fiduciary member of IBM’s Retirement Plan Committee (2004–2013), senior vice president and general manager (2002–2004) of IBM Global Financing, vice president and controller (1998–2002) of IBM, and a variety of other prior management roles at IBM. Member of the Council on Chicago Booth.

Scott C. Malpass

Born in 1962. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: adjunct professor of finance at the University of Notre Dame (2020–present). Chief investment officer (retired 2020) and vice president (retired 2020) of the University of Notre Dame. Assistant professor (retired June 2020) of finance at the Mendoza College of Business, University of Notre Dame, and member of the Notre Dame 403(b) Investment Committee. Member of the board of Catholic Investment Services, Inc. (investment advisors), the board of superintendence of the Institute for the Works of Religion, and the board of directors of Paxos Trust Company (finance).

Deanna Mulligan

Born in 1963. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: chief executive officer of Purposeful (advisory firm for CEOs and C-level executives; 2021–present). Board chair (2020), chief executive officer (2011–2020), and president (2010–2019) of The Guardian Life Insurance Company of America. Chief operating officer (2010–2011) and executive vice president (2008–2010) of Individual Life and Disability of the Guardian Life Insurance Company of America. Member of the board of the Economic Club of New York. Trustee of the Partnership for New York City (business leadership), Chief Executives for Corporate Purpose, and the NewYork-Presbyterian Hospital.

André F. Perold

Born in 1952. Trustee since December 2004. Principal occupation(s) during the past five years and other experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011). Chief investment officer and co-managing partner of HighVista Strategies (private investment firm). Member of the board (2018–present) of RIT Capital Partners (investment firm). Member of the investment committee of Partners Health Care System.

Sarah Bloom Raskin

Born in 1961. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: deputy secretary (2014–2017) of the United States Department of the Treasury. Governor (2010–2014) of the Federal Reserve Board. Commissioner (2007–2010) of financial regulation for the State of Maryland. Colin W. Brown Distinguished Professor of the Practice of Law (2021–present), professor (2020–present), Distinguished Fellow of the Global Financial Markets Center (2020–present), and Rubenstein Fellow (2017–2020) at Duke University. Trustee (2017–present) of Amherst College and member of Amherst College Investment Committee (2019–present). Member of the Regenerative Crisis Response Committee (2020–present).

David A. Thomas

Born in 1956. Trustee since July 2021. Principal occupation(s) during the past five years and other experience: president of Morehouse College (2018–present). Professor of business administration, emeritus at Harvard University (2017–2018). Dean (2011–2016) and professor of management (2016–2017) at the Georgetown University McDonough School of Business. Director of DTE Energy Company (2013–present). Trustee of Common Fund (2019–present).

Peter F. Volanakis

Born in 1955. Trustee since July 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2010) of Corning Incorporated (communications equipment) and director of Corning Incorporated (2000–2010) and Dow Corning (2001–2010). Director (2012) of SPX Corporation (multi-industry manufacturing). Overseer of the Amos Tuck School of Business Administration, Dartmouth College (2001–2013). Member of the BMW Group Mobility Council.

Executive Officers

Christine M. Buchanan

Born in 1970. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief financial officer (2021–present) and treasurer (2017–present) of each of the investment companies served by Vanguard. Partner (2005–2017) at KPMG (audit, tax, and advisory services).

David Cermak

Born in 1960. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Finance director (2019–present) of each of the investment companies served by Vanguard. Managing director and head (2017–present) of Vanguard Investments Singapore. Managing director and head (2017–2019) of Vanguard Investments Hong Kong. Representative director and head (2014–2017) of Vanguard Investments Japan.

John Galloway

Born in 1973. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Investment stewardship officer (September 2020–present) of each of the investment companies served by Vanguard. Head of Investor Advocacy (February 2020–present) and head of Marketing Strategy and Planning (2017–2020) at Vanguard. Special assistant to the President of the United States (2015).

Peter Mahoney

Born in 1974. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Controller (2015–present) of each of the investment companies served by Vanguard. Head of International Fund Services (2008–2014) at Vanguard.

Anne E. Robinson

Born in 1970. Principal occupation(s) during the past five years and other experience: general counsel (2016–present) of Vanguard. Secretary (2016–present) of Vanguard and of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Managing director and general counsel of Global Cards and Consumer Services (2014–2016) at Citigroup. Counsel (2003–2014) at American Express. Nonexecutive director of the board of National Grid (energy).

Michael Rollings

Born in 1963. Principal occupation(s) during the past five years and other experience: finance director (2017–present) and treasurer (2017) of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Chief financial officer (2016–present) of Vanguard. Director (2016–present) of Vanguard Marketing Corporation. Executive vice president and chief financial officer (2006–2016) of MassMutual Financial Group.

John E. Schadl

Born in 1972. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief compliance officer (2019–present) of Vanguard and of each of the investment companies served by Vanguard. Assistant vice president (2019–present) of Vanguard Marketing Corporation.

Vanguard Senior Management Team

Matthew Benchener	Thomas M. Rampulla
Joseph Brennan	Karin A. Risi
Mortimer J. Buckley	Anne E. Robinson
Gregory Davis	Michael Rollings
John James	Nitin Tandon
John T. Marcante	Lauren Valente
Chris D. McIsaac

Fund Information > 800-662-7447

Direct Investor Account Services > 800-662-2739

Institutional Investor Services > 800-523-1036

Text Telephone for People
Who Are Deaf or Hard of Hearing > 800-749-7273

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

All comparative mutual fund data are from Morningstar, Inc., unless otherwise noted

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

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

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

© 2022 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.

Q530 032022

Contents

Your Fund’s Performance at a Glance	1
Advisor’s Report	2
About Your Fund’s Expenses	6
Performance Summary	8
Financial Statements	10

Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.

Your Fund’s Performance at a Glance

•	For the 12 months ended January 31, 2022, Vanguard Health Care Fund returned 4.48% for Investor Shares and 4.53% for Admiral Shares. These results trailed the 7.46% return of the fund’s benchmark, the MSCI All Country World Health Care Index.
•	The U.S. and global economies continued to heal over the 12 months. Vaccination rates rose, the economy reopened, and more workers returned to the labor force. The investment environment grew a little more challenging, however, as COVID-19 variants emerged, inflation surged to levels not seen in decades, and the monetary stance of the Federal Reserve turned less accommodative. U.S. stocks nevertheless finished the period significantly higher.
•	Globally, many central banks adopted less accommodative monetary stances. Stocks as a whole finished the period up significantly, with the United States and Europe outpacing Asia-Pacific and emerging markets.
•	Biotechnology and pharmaceutical stocks hindered the fund’s performance the most. Selection in managed health care and health care contributed most.
•	For the 10 years ended January 31, 2022, the fund returned an annualized average of 14.15% for Investor Shares and 14.21% for Admiral Shares. Its benchmark recorded an average annual return of 13.07%.

Market Barometer

	Average Annual Total Returns Periods Ended January 31, 2022
	One Year	Three Years	Five Years
Stocks
Russell 1000 Index (Large-caps)	20.32%	20.51%	16.59%
Russell 2000 Index (Small-caps)	-1.21	11.99	9.69
Russell 3000 Index (Broad U.S. market)	18.80	19.93	16.11
FTSE All-World ex US Index (International)	4.20	9.61	8.35
Bonds
Bloomberg U.S. Aggregate Bond Index (Broad taxable market)	-2.97%	3.67%	3.08%
Bloomberg Municipal Bond Index (Broad tax-exempt market)	-1.89	3.50	3.46
FTSE Three-Month U.S. Treasury Bill Index	0.04	0.89	1.10
CPI
Consumer Price Index	7.48%	3.76%	2.97%

1

Advisor’s Report

company’s continued strong demonstration of operating excellence and share gains in its core markets.

Our shortfalls

Stock selection detracted from the fund’s performance, particularly within the biopharma large-cap subsector. From an allocation perspective, our overweight to the biopharma mid-cap space detracted.

Biopharma mid-cap company Eisai and biopharma large-cap company Biogen were among the largest detractors. Both rose sharply in the middle of the year after the U.S. Food and Drug Administration granted accelerated approval to their Alzheimer’s disease drug, Aduhelm. However, the approval resulted in significant controversy, which subsequently contributed to delayed approvals in Europe and Japan, as well as reimbursement difficulties. Although the drug’s commercial success is currently limited, we believe the approval is a milestone for the treatment of Alzheimer’s disease, and additional data from anti-Abeta antibodies will help the potential to be realized in the medium term.

Not owning biopharma large-cap company AbbVie was another top detractor. The company’s recent launches have done well in the marketplace, allaying some concerns about the upcoming biosimilar competition for its largest franchise, Humira, which we still feel will be daunting.

Our additions and eliminations

We initiated a position in Insulet, a medical technology company that specializes in insulin pumps for treating diabetes. Insulet’s technology offers several attractive features, including its patch profile and continuous glucose monitoring integration capabilities, which we believe will provide competitive advantages to the company over the next few years.

We also initiated a position in Agilon health, a health care services company. The company partners with primary-care physician groups to provide capitated care for Medicare Advantage patients, with a focus on keeping costs low while maintaining quality care. Agilon is enabling the transition from fee-for-service health care in the United States to a model that emphasizes value-based care. This change is an important shift in how health care is managed, and we believe Agilon health is well-positioned to help curb costs and implement change over time.

We eliminated our position in Abbott Laboratories, a diversified medical technology company, after shares reached our target price. The stock performed well over the last several years, with strong fundamentals driven by consistent organic revenue growth and stable operating margins. We also eliminated Cerner, a provider of health care IT, devices, hardware, and content solutions to health care organizations and consumers. In December, the company announced its intent to be acquired by Oracle in an all-cash deal for $28.3 billion, at a 20%

premium to the unaffected closing price of Cerner’s common stock prior to the announcement.

The fund’s characteristics

At the end of the fiscal year, we held about 27% of the fund’s assets in non-U.S. investments, a level that has remained fairly stable over recent years. Our non-U.S. holdings were primarily companies that are domiciled in Japan, the United Kingdom, Switzerland, Belgium, and Denmark—many of which operate globally. We believe this strategy provides diversification for shareholders over the long term.

The fund held 108 companies across all subsectors of health care at the end of the period, a slight increase from the 95 equity names we held a year ago. This increase reflects the addition of biopharma mid-cap and medical technology stocks into the portfolio. The fund’s 10 largest holdings represented a significant 43% of total assets.

The fund’s positioning and outlook

COVID-19 disruptions will likely continue for many months, yet we are encouraged by strong fundamentals across the health care industry, supported by the likely transition to the endemic phase. This should lead to a more normalized operating environment and investment backdrop. Within the biopharma industry, valuations of large-cap biopharma companies in aggregate undervalue the significant change in the innovation cycle of the industry, which has been building for many years and should lead to more

steady revenue growth over the next decade. Drug-pricing discussions in the U.S., the most profitable market, continue to be an overhang, but may see some relief if President Joe Biden’s “Build Back Better” legislation is enacted.

Either way, the level of groundbreaking innovation and improved R&D productivity should become a larger part of the investment story in the years to come. Within small- and mid-cap biopharma, the significant pullback that started in February 2021 and continued through the year has left valuations more compelling than a year ago, especially in the context of larger companies flush with cash for a “tuck-in” acquisition, in which the organization being acquired is absorbed into the acquiring company.

Innovation is occurring in other parts of health care as well, with many strong product introductions in medical devices; a resurgence in diagnostics, including a new category in early cancer screening; a thriving life sciences industry providing products and services that enable the advancement of biology; and new health delivery models that help lower cost trends. Significant company creation is occurring in these areas of health care.

These tailwinds across the various subsectors, coupled with strong valuation support, leave us with a positive outlook for the health care sector in 2022.

Over the long term, the tailwinds of innovation, an aging population, and the globalization of demand should continue to drive growth. We seek companies that

are favorably positioned to provide solutions to the challenges facing human health and health care delivery. A core tenet of our philosophy is the importance of using a longer-term horizon to evaluate secular themes and health care trends, as well as individual companies, on a global scale. This should enable our team to identify pockets of opportunity that are best-positioned to create value and generate sustainable, innovation-driven, differentiated growth. We will remain diversified across subsectors and regions, focused on the long haul, and positioned in what we believe to be the most attractive stocks as we seek to generate strong, risk-adjusted returns.

Jean M. Hynes, CFA

Senior Managing Director and

Portfolio Manager

Wellington Management Company llp

February 16, 2022

5

About Your Fund’s Expenses

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

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

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

•

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

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

•

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

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

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

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

6

Six Months Ended January 31, 2022
	Beginning Account Value 7/31/2021	Ending Account Value 1/31/2022	Expenses Paid During Period
Based on Actual Fund Return
Health Care Fund
Investor Shares	$1,000.00	$952.70	$1.43
Admiral™ Shares	1,000.00	952.90	1.18
Based on Hypothetical 5% Yearly Return
Health Care Fund
Investor Shares	$1,000.00	$1,023.74	$1.48
Admiral Shares	1,000.00	1,024.00	1.22

The calculations are based on expenses incurred in the most recent six-month period. The fund’s annualized six-month expense ratios for that period are 0.29% for Investor Shares and 0.24% for Admiral Shares. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (184/365).

7

Health Care Fund

Performance Summary

All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The 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, 2012, Through January 31, 2022

Initial Investment of $10,000

		Average Annual Total Returns Periods Ended January 31, 2022
		One Year	Five Years	Ten Years	Final Value of a $10,000 Investment
	Health Care Fund Investor Shares	4.48%	11.53%	14.15%	$37,576
	MSCI All Country World Health Care Index	7.46	12.84	13.07	34,159
	Dow Jones U.S. Total Stock Market Float Adjusted Index	18.50	16.02	14.96	40,306

		One Year	Five Years	Ten Years	Final Value of a $50,000 Investment
Health Care Fund Admiral Shares		4.53%	11.58%	14.21%	$188,793
MSCI All Country World Health Care Index		7.46	12.84	13.07	170,795
Dow Jones U.S. Total Stock Market Float Adjusted Index		18.50	16.02	14.96	201,531

See Financial Highlights for dividend and capital gains information.

8

Health Care Fund

Fund Allocation

As of January 31, 2022

United States	73.0%
Japan	8.4
United Kingdom	6.3
Switzerland	4.6
Belgium	3.2
Denmark	1.9
China	1.5
Other	1.1

The table reflects the fund’s investments, except for short-term investments.

9

Health Care Fund

Financial Statements

Schedule of Investments

As of January 31, 2022

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

		Shares	Market Value• ($000)
Common Stocks (98.1%)
Belgium (3.1%)
1	UCB SA	10,238,136	1,018,749
*	Argenx SE	1,377,888	368,712
*	Galapagos NV	1,175,458	79,208
			1,466,669
Brazil (0.0%)
	Notre Dame Intermedica Participacoes SA	1,699,100	22,782
China (1.5%)
*,2	Wuxi Biologics Cayman Inc.	18,337,200	183,789
2	WuXi AppTec Co. Ltd. Class H	9,838,416	141,115
*	BeiGene Ltd. ADR	424,716	103,028
	Yifeng Pharmacy Chain Co. Ltd. Class A	6,945,794	54,421
*	Zai Lab Ltd. ADR	1,085,794	53,931
*	Zai Lab Ltd.	1,048,200	49,512
*	Hutchmed China Ltd. ADR	1,231,096	33,535
	Shandong Weigao Group Medical Polymer Co. Ltd. Class H	24,872,000	30,652
	Shenzhen Mindray Bio-Medical Electronics Co. Ltd. Class A (XSHE)	452,517	23,092
*,2	Remegen Co. Ltd. Class H	1,964,500	12,970
*,2	Akeso Inc.	4,541,000	12,335
*	HUTCHMED China Ltd.	1,480,723	7,773
*,2	Everest Medicines Ltd.	2,139,500	7,126
			713,279
Denmark (1.9%)
*	Genmab A/S	1,953,376	665,183
*	Ascendis Pharma A/S ADR	942,809	114,683
*	Genmab A/S ADR	3,150,246	107,360
			887,226
Germany (0.1%)
*	MorphoSys AG	943,340	30,209

		Shares	Market Value• ($000)
Italy (0.2%)
	DiaSorin SpA	552,359	85,153
Japan (8.2%)
	Astellas Pharma Inc.	59,120,200	954,234
1	Eisai Co. Ltd.	17,856,177	894,327
	Daiichi Sankyo Co. Ltd.	33,303,190	748,323
	Ono Pharmaceutical Co. Ltd.	19,628,460	476,024
	Chugai Pharmaceutical Co. Ltd.	11,038,000	358,512
	Terumo Corp.	8,498,900	310,243
	Nippon Shinyaku Co. Ltd.	1,977,800	129,290
	Asahi Intecc Co. Ltd.	2,023,500	34,523
			3,905,476
Netherlands (0.7%)
	Koninklijke Philips NV	10,091,245	335,668
Spain (0.1%)
	Almirall SA	3,095,158	39,838
Switzerland (4.5%)
	Novartis AG (Registered)	21,001,073	1,824,774
	Alcon Inc.	2,412,628	186,034
	Lonza Group AG (Registered)	135,804	93,629
	Tecan Group AG (Registered)	70,000	34,035
			2,138,472
United Kingdom (6.2%)
	AstraZeneca plc	22,354,231	2,600,423
	Hikma Pharmaceuticals plc	6,910,934	194,150
*	Abcam plc ADR	5,880,982	105,328
*	Abcam plc	1,281,015	23,074
			2,922,975
United States (71.6%)
	UnitedHealth Group Inc.	6,837,450	3,231,174
	Pfizer Inc.	56,494,752	2,976,708
	Eli Lilly & Co.	10,213,125	2,506,199
	Bristol-Myers Squibb Co.	29,304,461	1,901,566
	Anthem Inc.	3,626,240	1,599,136
*	Boston Scientific Corp.	34,378,611	1,474,842
	Stryker Corp.	5,108,172	1,267,082

10

Health Care Fund

11

Health Care Fund

12

Health Care Fund

		Face Amount ($000)	Market Value• ($000)
	Nomura International plc, 0.050%, 2/1/22 (Dated 1/31/22, Repurchase Value $22,800,000, collateralized by U.S. Treasury Bill 0.000%, 7/14/22, and U.S. Treasury Note/Bond 0.625%– 2.750%, 2/15/24–1/31/27, with a value of $23,256,000)	22,800	22,800
	RBC Capital Markets LLC, 0.050%, 2/1/22 (Dated 1/31/22, Repurchase Value $2,900,000, collateralized by Fannie Mae 3.000%–4.500%, 6/1/44–11/1/50, with a value of $2,958,000)	2,900	2,900
			833,100
Total Temporary Cash Investments (Cost $837,810)			837,811
Total Investments (99.8%) (Cost $29,947,019)			47,354,438
Other Assets and Liabilities—Net (0.2%)			72,788
Net Assets (100%)			47,427,226
Cost is in $000.

•	See Note A in Notes to Financial Statements.
*	Non-income-producing security.
1	Considered an affiliated company of the fund as the fund owns more than 5% of the outstanding voting securities of such company.
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, 2022, the aggregate value was $357,335,000, representing 0.8% of net assets.
3	Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $4,767,000.
4	Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.
5	Collateral of $4,616,000 was received for securities on loan.
	ADR—American Depositary Receipt.

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

13

Health Care Fund

Statement of Assets and Liabilities

As of January 31, 2022

($000s, except shares and per-share amounts)	Amount
Assets
Investments in Securities, at Value
Unaffiliated Issuers (Cost $26,895,915)	44,641,733
Affiliated Issuers (Cost $3,051,104)	2,712,705
Total Investments in Securities	47,354,438
Investment in Vanguard	1,656
Cash	281
Foreign Currency, at Value (Cost $0)	1
Receivables for Investment Securities Sold	86,080
Receivables for Accrued Income	84,968
Receivables for Capital Shares Issued	7,490
Total Assets	47,534,914
Liabilities
Payables for Investment Securities Purchased	62,645
Collateral for Securities on Loan	4,616
Payables to Investment Advisor	12,364
Payables for Capital Shares Redeemed	24,985
Payables to Vanguard	3,078
Total Liabilities	107,688
Net Assets	47,427,226
At January 31, 2022, net assets consisted of:
Paid-in Capital	28,410,283
Total Distributable Earnings (Loss)	19,016,943
Net Assets	47,427,226
Investor Shares—Net Assets
Applicable to 35,592,335 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	7,493,449
Net Asset Value Per Share—Investor Shares	$210.54
Admiral Shares—Net Assets
Applicable to 449,837,226 outstanding $.001 par value shares of beneficial interest (unlimited authorization)	39,933,777
Net Asset Value Per Share—Admiral Shares	$88.77

  

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

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Health Care Fund

Statement of Operations

	Year Ended January 31, 2022
	($000)
Investment Income
Income
Dividends—Unaffiliated Issuers1	522,606
Dividends—Affiliated Issuers2	34,090
Interest—Unaffiliated Issuers	365
Securities Lending—Net	1,268
Total Income	558,329
Expenses
Investment Advisory Fees—Note B
Basic Fee	72,269
Performance Adjustment	(18,830)
The Vanguard Group—Note C
Management and Administrative—Investor Shares	14,894
Management and Administrative—Admiral Shares	56,756
Marketing and Distribution—Investor Shares	528
Marketing and Distribution—Admiral Shares	1,105
Custodian Fees	829
Auditing Fees	31
Shareholders’ Reports—Investor Shares	174
Shareholders’ Reports—Admiral Shares	171
Trustees’ Fees and Expenses	38
Total Expenses	127,965
Net Investment Income	430,364
Realized Net Gain (Loss)
Investment Securities Sold—Unaffiliated Issuers	4,739,930
Investment Securities Sold—Affiliated Issuers	99,997
Foreign Currencies	(1,922)
Realized Net Gain (Loss)	4,838,005
Change in Unrealized Appreciation (Depreciation)
Investment Securities—Unaffiliated Issuers	(2,186,085)
Investment Securities—Affiliated Issuers	(796,567)
Foreign Currencies	(2,581)
Change in Unrealized Appreciation (Depreciation)	(2,985,233)
Net Increase (Decrease) in Net Assets Resulting from Operations	2,283,136

1	Dividends are net of foreign withholding taxes of $18,947,000.
2	Dividends are net of foreign withholding taxes of $5,198,000.

  

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

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Health Care Fund

Statement of Changes in Net Assets

	Year Ended January 31,
	2022 ($000)	2021 ($000)
Increase (Decrease) in Net Assets
Operations
Net Investment Income	430,364	468,625
Realized Net Gain (Loss)	4,838,005	3,076,612
Change in Unrealized Appreciation (Depreciation)	(2,985,233)	3,557,011
Net Increase (Decrease) in Net Assets Resulting from Operations	2,283,136	7,102,248
Distributions
Investor Shares	(650,696)	(659,397)
Admiral Shares	(3,443,247)	(3,142,312)
Total Distributions	(4,093,943)	(3,801,709)
Capital Share Transactions
Investor Shares	(610,620)	(1,001,082)
Admiral Shares	737,980	(44,287)
Net Increase (Decrease) from Capital Share Transactions	127,360	(1,045,369)
Total Increase (Decrease)	(1,683,447)	2,255,170
Net Assets
Beginning of Period	49,110,673	46,855,503
End of Period	47,427,226	49,110,673

  

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

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Health Care Fund

Financial Highlights

Investor Shares
For a Share Outstanding Throughout Each Period	Year Ended January 31,
	2022	2021	2020	2019	2018
Net Asset Value, Beginning of Period	$218.60	$204.57	$203.34	$215.96	$189.88
Investment Operations
Net Investment Income1	1.869	2.005	2.506	2.375	2.162
Net Realized and Unrealized Gain (Loss) on Investments	8.949	29.203	23.326	2.489	38.929
Total from Investment Operations	10.818	31.208	25.832	4.864	41.091
Distributions
Dividends from Net Investment Income	(1.951)	(1.886)	(2.428)	(2.323)	(2.059)
Distributions from Realized Capital Gains	(16.927)	(15.292)	(22.174)	(15.161)	(12.952)
Total Distributions	(18.878)	(17.178)	(24.602)	(17.484)	(15.011)
Net Asset Value, End of Period	$210.54	$218.60	$204.57	$203.34	$215.96
Total Return2	4.48%	16.16%	13.16%	2.76%	22.29%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$7,493	$8,342	$8,729	$8,850	$9,853
Ratio of Total Expenses to Average Net Assets3	0.30%	0.32%	0.32%	0.34%	0.38%
Ratio of Net Investment Income to Average Net Assets	0.82%	0.95%	1.25%	1.12%	1.02%
Portfolio Turnover Rate	15%	18%	18%	16%	11%

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 (0.04%), (0.01%), (0.02%), 0.00%, and 0.04%.

  

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

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Health Care Fund

Financial Highlights

Admiral Shares
For a Share Outstanding Throughout Each Period	Year Ended January 31,
	2022	2021	2020	2019	2018
Net Asset Value, Beginning of Period	$92.17	$86.27	$85.75	$91.08	$80.09
Investment Operations
Net Investment Income1	.830	.883	1.097	1.036	.938
Net Realized and Unrealized Gain (Loss) on Investments	3.780	12.316	9.844	1.057	16.436
Total from Investment Operations	4.610	13.199	10.941	2.093	17.374
Distributions
Dividends from Net Investment Income	(.870)	(.849)	(1.068)	(1.027)	(.920)
Distributions from Realized Capital Gains	(7.140)	(6.450)	(9.353)	(6.396)	(5.464)
Total Distributions	(8.010)	(7.299)	(10.421)	(7.423)	(6.384)
Net Asset Value, End of Period	$88.77	$92.17	$86.27	$85.75	$91.08
Total Return2	4.53%	16.21%	13.22%	2.81%	22.35%
Ratios/Supplemental Data
Net Assets, End of Period (Millions)	$39,934	$40,769	$38,126	$37,888	$39,214
Ratio of Total Expenses to Average Net Assets3	0.25%	0.27%	0.27%	0.28%	0.33%
Ratio of Net Investment Income to Average Net Assets	0.86%	0.99%	1.30%	1.18%	1.07%
Portfolio Turnover Rate	15%	18%	18%	16%	11%

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 (0.04%), (0.01%), (0.02%), 0.00%, and 0.04%.

  

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

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Health Care Fund

Notes to Financial Statements

Vanguard Health Care 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.

The fund invests in securities of foreign issuers, which may subject it to investment risks not normally associated with investing in securities of U.S. corporations. Market disruptions associated with the COVID-19 pandemic have had a global impact, and uncertainty exists as to the long-term implications. Such disruptions can adversely affect assets of the fund and thus fund performance.

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

1. Security Valuation: Securities are valued as of the close of trading on the New York Stock Exchange (generally 4 p.m., Eastern time) on the valuation date. Equity securities are valued at the latest quoted sales prices or official closing prices taken from the primary market in which each security trades; such securities not traded on the valuation date are valued at the mean of the latest quoted bid and asked prices. Securities for which market quotations are not readily available, or whose values have been affected by events occurring before the fund’s pricing time but after the close of the securities’ primary markets, are valued at their fair values calculated according to procedures adopted 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.

Temporary cash investments are valued using the latest bid prices or using valuations based on a matrix system (which considers such factors as security prices, yields, maturities, and ratings), both as furnished by independent pricing services.

2. 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. Repurchase Agreements: The fund enters into repurchase agreements with institutional counterparties. Securities pledged as collateral to the fund under repurchase agreements are held by a custodian bank until the agreements mature, and in the absence of a default, such collateral cannot be repledged, resold, or rehypothecated. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal. The fund further mitigates its counterparty risk by entering into repurchase agreements only with a diverse group of prequalified counterparties, monitoring their financial strength, and entering into master repurchase agreements with its counterparties. The master repurchase agreements provide that,

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Health Care Fund

in the event of a counterparty's default (including bankruptcy), the fund may terminate any repurchase agreements with that counterparty, determine the net amount owed, and sell or retain the collateral up to the net amount owed to the fund. Such action may be subject to legal proceedings, which may delay or limit the disposition of collateral.

4. Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its 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.

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

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

7. Credit Facilities and Interfund Lending Program: The fund and certain other funds managed by The Vanguard Group ("Vanguard") participate in a $4.3 billion committed credit facility provided by a syndicate of lenders pursuant to a credit agreement and an uncommitted credit facility provided by Vanguard. Both facilities may be renewed annually. Each fund is individually liable for its borrowings, if any, under the credit facilities. Borrowings may be utilized for temporary or emergency purposes, 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; these fees 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 a rate based upon the higher of the one-month London Interbank Offered Rate (or an acceptable alternate rate, if necessary), federal funds

20

Health Care Fund

effective rate, or overnight bank funding rate plus an agreed-upon spread, except that 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, 2022, the fund did not utilize the credit facilities or the Interfund Lending Program.

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

Taxes on foreign dividends and capital gains have been provided for in accordance with the fund's understanding of 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. Such tax reclaims received during the year, if any, are included in dividend income. No other amounts for additional tax reclaims are reflected in the financial statements due to the uncertainty as to the ultimate resolution of proceedings, the likelihood of receipt of these reclaims, and the potential timing of payment.

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

B.

Wellington Management Company llp provides 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 MSCI All Country World Health Care Index for the preceding three years. For the year ended January 31, 2022, the investment advisory fee represented an effective annual basic rate of 0.14% of the fund’s average net assets, before a net decrease of $18,830,000 (0.04%) based on performance.

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Health Care Fund

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, 2022, the fund had contributed to Vanguard capital in the amount of $1,656,000, representing less than 0.01% of the fund’s net assets and 0.66% 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. 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, 2022, 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	33,991,662	—	—	33,991,662
Common Stocks—Other	517,865	12,007,100	—	12,524,965
Temporary Cash Investments	4,711	833,100	—	837,811
Total	34,514,238	12,840,200	—	47,354,438

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. As of period end, permanent differences primarily attributable to the accounting for foreign currency transactions and distributions in connection with fund share redemptions were reclassified between the following accounts:

	Amount ($000)
Paid-in Capital	164,670
Total Distributable Earnings (Loss)	(164,670)

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Health Care Fund

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. The differences are primarily related to the deferral of losses from wash sales 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	30,853
Undistributed Long-Term Gains	1,694,867
Capital Loss Carryforwards	—
Qualified Late-Year Losses	—
Net Unrealized Gains (Losses)	17,291,223

The tax character of distributions paid was as follows:

	Year Ended January 31,
	2022 Amount ($000)	2021 Amount ($000)
Ordinary Income*	966,751	693,669
Long-Term Capital Gains	3,127,192	3,108,040
Total	4,093,943	3,801,709

*	Includes short-term capital gains, if any.

As of January 31, 2022, gross unrealized appreciation and depreciation for investments based on cost for U.S. federal income tax purposes were as follows:

	Amount ($000)
Tax Cost	30,064,845
Gross Unrealized Appreciation	20,731,697
Gross Unrealized Depreciation	(3,442,104)
Net Unrealized Appreciation (Depreciation)	17,289,593

F.	During the year ended January 31, 2022, the fund purchased $7,283,517,000 of investment securities and sold $10,372,457,000 of investment securities, other than temporary cash investments.

The fund purchased securities from and sold securities to other funds or accounts managed by its investment advisor or their 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, 2022, such purchases were $6,585,000 and sales were $2,729,000, resulting in net realized gain of $558,000; these amounts, other than temporary cash investments, are included in the purchases and sales of investment securities noted above.

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Health Care Fund

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

    

	Year Ended January 31,
	2022			2021
	Amount ($000)	Shares (000)		Amount ($000)	Shares (000)
Investor Shares
Issued	629,952	2,783		973,375	4,703
Issued in Lieu of Cash Distributions	609,552	2,709		619,156	3,096
Redeemed	(1,850,124)	(8,061)		(2,593,613)	(12,311)
Net Increase (Decrease)—Investor Shares	(610,620)	(2,569)		(1,001,082)	(4,512)
Admiral Shares
Issued	1,787,859	18,432		2,668,213	30,075
Issued in Lieu of Cash Distributions	3,027,419	31,867		2,766,485	32,638
Redeemed	(4,077,298)	(42,774)		(5,478,985)	(62,362)
Net Increase (Decrease)—Admiral Shares	737,980	7,525		(44,287)	351

H.

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

		Current Period Transactions
	Jan. 31, 2021 Market Value ($000)	Purchases at Cost ($000)	Proceeds from Securities Sold ($000)	Realized Net Gain (Loss) ($000)	Change in Unrealized App. (Dep.) ($000)	Income ($000)	Capital Gain Distributions Received ($000)	Jan. 31, 2022 Market Value ($000)
2seventy bio Inc.	—	175,131	—	—	(136,920)	—	—	38,211
Agios Pharmaceuticals Inc.	302,276	—	67,191	(67,299)	(8,752)	—	—	159,034
Alkermes plc	285,577	—	51,446	(62,048)	129,000	—	—	301,083
Allscripts Healthcare Solutions Inc.	162,446	—	156,920	41,976	(47,502)	—	—	—
Alnylam Pharmaceuticals Inc.	1,178,188	—	495,563	290,875	(259,686)	—	—	NA1
Bluebird Bio Inc.	237,840	24,820	175,131	—	(39,084)	—	—	48,445
Eisai Co. Ltd.	1,303,206	—	—	—	(408,879)	23,134	—	894,327
Ironwood Pharmaceuticals Inc. Class A	111,419	—	—	—	10,139	—	—	121,558
Nektar Therapeutics Class A	257,000	—	33,455	(103,507)	6,549	—	—	126,587
UCB SA	1,060,182	—	—	—	(41,433)	10,956	—	1,018,749
Vanguard Market Liquidity Fund	96	NA2	NA2	—	1	—	—	4,711
Total	4,898,230			99,997	(796,567)	34,090	—	2,712,705

    

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Health Care Fund

1	Not applicable—at January 31, 2022, the security was still held, but the issuer was no longer an affiliated company of the fund.
2	Not applicable—purchases and sales are for temporary cash investment purposes.

I.

Market disruptions associated with current geopolitical events have had a global impact, and uncertainty exists as to their implications. Such disruptions can adversely affect assets and thus performance of the fund; at this time, an aggregate effect on assets and performance cannot be reasonably estimated. Management is continuing to monitor these developments and evaluate impacts they may have on the fund.

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

25

Report of Independent Registered Public Accounting Firm

To the Board of Trustees of Vanguard Specialized Funds and Shareholders of Vanguard Health Care Fund

Opinion on the Financial Statements

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Vanguard Health Care Fund (one of the funds constituting Vanguard Specialized Funds, referred to hereafter as the "Fund") as of January 31, 2022, the related statement of operations for the year ended January 31, 2022, the statement of changes in net assets for each of the two years in the period ended January 31, 2022, including the related notes, and the financial highlights for each of the five years in the period ended January 31, 2022 (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, 2022, 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, 2022 and the financial highlights for each of the five years in the period ended January 31, 2022 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, 2022 by correspondence with the custodian, transfer agent and brokers; when replies were not received from the transfer agent or brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

/s/PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
March 23, 2022

We have served as the auditor of one or more investment companies in The Vanguard Group of Funds since 1975.

26

Special 2021 tax information (unaudited) for Vanguard Health Care Fund

This information for the fiscal year ended January 31, 2022, is included pursuant to provisions of the Internal Revenue Code.

For corporate shareholders, 49.6% of investment income (dividend income plus short-term gains, if any) qualifies for the dividends-received deduction.

The fund distributed $565,234,000 of qualified dividend income to shareholders during the fiscal year.

For nonresident alien shareholders, 100% of short-term capital gain dividends distributed by the fund are qualified short-term capital gains.

The fund distributed $3,279,088,000 as capital gain dividends (20% rate gain distributions) to shareholders during the fiscal year.

27

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The People Who Govern Your Fund

The trustees of your mutual fund are there to see that the fund is operated and managed in your best interests since, as a shareholder, you are a part owner of the fund. Your fund’s trustees also serve on the board of directors of The Vanguard Group, Inc., which is owned by the Vanguard funds and provides services to them.

A majority of Vanguard’s board members are independent, meaning that they have no affiliation with Vanguard or the funds they oversee, apart from the sizable personal investments they have made as private individuals. The independent board members have distinguished backgrounds in business, academia, and public service. Each of the trustees and executive officers oversees 217 Vanguard funds.

Information for each trustee and executive officer of the fund appears below. That information, as well as the Vanguard fund count, is as of the date on the cover of this fund report. The mailing address of the trustees and officers is P.O. Box 876, Valley Forge, PA 19482. More information about the trustees is in the Statement of Additional Information, which can be obtained, without charge, by contacting Vanguard at 800-662-7447, or online at vanguard.com.

Graduate School of Education, University of Pennsylvania.

F. Joseph Loughrey

Born in 1949. Trustee since October 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2009) and vice chairman of the board (2008–2009) of Cummins Inc. (industrial machinery). Chairman of the board of Hillenbrand, Inc. (specialized consumer services). Director of the V Foundation. Member of the advisory council for the College of Arts and Letters at the University of Notre Dame. Chairman of the board of Saint Anselm College.

Mark Loughridge

Born in 1953. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: senior vice president and chief financial officer (retired 2013) of IBM (information technology services). Fiduciary member of IBM’s Retirement Plan Committee (2004–2013), senior vice president and general manager (2002–2004) of IBM Global Financing, vice president and controller (1998–2002) of IBM, and a variety of other prior management roles at IBM. Member of the Council on Chicago Booth.

Scott C. Malpass

Born in 1962. Trustee since March 2012. Principal occupation(s) during the past five years and other experience: adjunct professor of finance at the University of Notre Dame (2020–present). Chief investment officer (retired 2020) and vice president (retired 2020) of the University of Notre Dame. Assistant professor (retired June 2020) of finance at the Mendoza College of Business, University of Notre Dame, and member of the Notre Dame 403(b) Investment Committee. Member of the board of Catholic Investment Services, Inc. (investment advisors), the board of superintendence of the Institute for the Works of Religion, and the board of directors of Paxos Trust Company (finance).

Deanna Mulligan

Born in 1963. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: chief executive officer of Purposeful (advisory firm for CEOs and C-level executives; 2021–present). Board chair (2020), chief executive officer (2011–2020), and president (2010–2019) of The Guardian Life Insurance Company of America. Chief operating officer (2010–2011) and executive vice president (2008–2010) of Individual Life and Disability of the Guardian Life Insurance Company of America. Member of the board of the Economic Club of New York. Trustee of the Partnership for New York City

(business leadership), Chief Executives for Corporate Purpose, and the NewYork-Presbyterian Hospital.

André F. Perold

Born in 1952. Trustee since December 2004. Principal occupation(s) during the past five years and other experience: George Gund Professor of Finance and Banking, Emeritus at the Harvard Business School (retired 2011). Chief investment officer and co-managing partner of HighVista Strategies (private investment firm). Member of the board (2018–present) of RIT Capital Partners (investment firm). Member of the investment committee of Partners Health Care System.

Sarah Bloom Raskin

Born in 1961. Trustee since January 2018. Principal occupation(s) during the past five years and other experience: deputy secretary (2014–2017) of the United States Department of the Treasury. Governor (2010–2014) of the Federal Reserve Board. Commissioner (2007–2010) of financial regulation for the State of Maryland. Colin W. Brown Distinguished Professor of the Practice of Law (2021–present), professor (2020–present), Distinguished Fellow of the Global Financial Markets Center (2020–present), and Rubenstein Fellow (2017–2020) at Duke University. Trustee (2017–present) of Amherst College and member of Amherst College Investment Committee (2019–present). Member of the Regenerative Crisis Response Committee (2020–present).

David A. Thomas

Born in 1956. Trustee since July 2021. Principal occupation(s) during the past five years and other experience: president of Morehouse College (2018–present). Professor of business administration, emeritus at Harvard University (2017–2018). Dean (2011–2016) and professor of management (2016–2017) at the Georgetown University McDonough School of Business. Director of DTE Energy Company (2013–present). Trustee of Common Fund (2019–present).

Peter F. Volanakis

Born in 1955. Trustee since July 2009. Principal occupation(s) during the past five years and other experience: president and chief operating officer (retired 2010) of Corning Incorporated (communications equipment) and director of Corning Incorporated (2000–2010) and Dow Corning (2001–2010). Director (2012) of SPX Corporation (multi-industry manufacturing). Overseer of the Amos Tuck School of Business Administration, Dartmouth College (2001–2013). Member of the BMW Group Mobility Council.

Executive Officers

Christine M. Buchanan

Born in 1970. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief financial officer (2021–present) and treasurer (2017–present) of each of the investment companies served by Vanguard. Partner (2005–2017) at KPMG (audit, tax, and advisory services).

David Cermak

Born in 1960. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Finance director (2019–present) of each of the investment companies served by Vanguard. Managing director and head (2017–present) of Vanguard Investments Singapore. Managing director and head (2017–2019) of Vanguard Investments Hong Kong. Representative director and head (2014–2017) of Vanguard Investments Japan.

John Galloway

Born in 1973. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Investment stewardship officer (September 2020–present) of each of the investment companies served by Vanguard. Head of Investor Advocacy (February 2020–present) and head of Marketing Strategy and Planning (2017–2020) at Vanguard. Special assistant to the President of the United States (2015).

Peter Mahoney

Born in 1974. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Controller (2015–present) of each of the investment companies served by Vanguard. Head of International Fund Services (2008–2014) at Vanguard.

Anne E. Robinson

Born in 1970. Principal occupation(s) during the past five years and other experience: general counsel (2016–present) of Vanguard. Secretary (2016–present) of Vanguard and of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Managing director and general counsel of Global Cards and Consumer Services (2014–2016) at Citigroup. Counsel (2003–2014) at American Express. Nonexecutive director of the board of National Grid (energy).

Michael Rollings

Born in 1963. Principal occupation(s) during the past five years and other experience: finance director (2017–present) and treasurer (2017) of each of the investment companies served by Vanguard. Managing director (2016–present) of Vanguard. Chief financial officer (2016–present) of Vanguard. Director (2016–present) of Vanguard Marketing Corporation. Executive vice president and chief financial officer (2006–2016) of MassMutual Financial Group.

John E. Schadl

Born in 1972. Principal occupation(s) during the past five years and other experience: principal of Vanguard. Chief compliance officer (2019–present) of Vanguard and of each of the investment companies served by Vanguard. Assistant vice president (2019–present) of Vanguard Marketing Corporation.

Vanguard Senior Management Team

Matthew Benchener	Thomas M. Rampulla
Joseph Brennan	Karin A. Risi
Mortimer J. Buckley	Anne E. Robinson
Gregory Davis	Michael Rollings
John James	Nitin Tandon
John T. Marcante	Lauren Valente
Chris D. Mclsaac

Fund Information > 800-662-7447

Direct Investor Account Services > 800-662-2739

Institutional Investor Services > 800-523-1036

Text Telephone for People Who Are Deaf or Hard of Hearing > 800-749-7273

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

All comparative mutual fund data are from Morningstar, Inc., unless otherwise noted.

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

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

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

CFA^® is a registered trademark owned by CFA Institute.

© 2022 The Vanguard Group, Inc.
All rights reserved.
Vanguard Marketing Corporation, Distributor.

Q520 032022

Contents

Your Fund’s Performance at a Glance	1
About Your Fund's Expenses	2
Real Estate Index Fund	4
Real Estate II Index Fund	28

Please note: The opinions expressed in this report are just that—informed opinions. They should not be considered promises or advice. Also, please keep in mind that the information and opinions cover the period through the date on the front of this report. Of course, the risks of investing in your fund are spelled out in the prospectus.

Your Fund’s Performance at a Glance

•	For the 12 months ended January 31, 2022, returns for Vanguard Real Estate Index Fund ranged from 28.91% for both Admiral and Institutional Shares to 28.88% for the Real Estate ETF (based on net asset value) and 28.73% for Investor Shares. Vanguard Real Estate II Index Fund returned 28.96%. The results were in line with those of the funds’ benchmark index.
•	The U.S. economy continued to heal over the 12 months ended January 31, 2022. Vaccination rates rose, the economy reopened, and more workers returned to the labor force. The investment environment grew a little more challenging, however, as COVID-19 variants emerged, inflation surged to levels not seen in decades, and the monetary stance of the Federal Reserve turned less accommodative. U.S. stocks nevertheless finished the period significantly higher.
•	Specialized real estate investment trusts (REITs), the funds’ largest holding, contributed most to their returns. Retail, residential, and industrial REITs also added to performance.
•	For the 10 years ended January 31, 2022, average annual returns for the Real Estate Index Fund ranged from 9.72% for Investor Shares to 9.86% for the Real Estate ETF, 9.87% for Admiral Shares, and 9.89% for Institutional Shares. Vanguard Real Estate II Index Fund launched in September 2017: its average annual return since inception was 9.99%.

Market Barometer

	Average Annual Total Returns Periods Ended January 31, 2022
	One Year	Three Years	Five Years
Stocks
Russell 1000 Index (Large-caps)	20.32%	20.51%	16.59%
Russell 2000 Index (Small-caps)	-1.21	11.99	9.69
Russell 3000 Index (Broad U.S. market)	18.80	19.93	16.11
FTSE All-World ex US Index (International)	4.20	9.61	8.35
Bonds
Bloomberg U.S. Aggregate Bond Index (Broad taxable market)	-2.97%	3.67%	3.08%
Bloomberg Municipal Bond Index (Broad tax-exempt market)	-1.89	3.50	3.46
FTSE Three-Month U.S. Treasury Bill Index	0.04	0.89	1.10
CPI
Consumer Price Index	7.48%	3.76%	2.97%

1

About Your Fund’s Expenses

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

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

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

•

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

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

•

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

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

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

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

2

Six Months Ended January 31, 2022
	Beginning Account Value 7/31/2021	Ending Account Value 1/31/2022	Expenses Paid During Period
Based on Actual Fund Return
Real Estate Index Fund
Investor Shares	$1,000.00	$1,016.40	$1.27
ETF Shares	1,000.00	1,016.80	0.61
Admiral™ Shares	1,000.00	1,016.90	0.61
Institutional Shares	1,000.00	1,017.10	0.51
Real Estate II Index Fund	$1,000.00	$1,017.00	$0.41
Based on Hypothetical 5% Yearly Return
Real Estate Index Fund
Investor Shares	$1,000.00	$1,023.94	$1.28
ETF Shares	1,000.00	1,024.60	0.61
Admiral Shares	1,000.00	1,024.60	0.61
Institutional Shares	1,000.00	1,024.70	0.51
Real Estate II Index Fund	$1,000.00	$1,024.80	$0.41

The calculations are based on expenses incurred in the most recent six-month period. The funds’ annualized six-month expense ratios for that period are: for the Real Estate Index Fund, 0.25% for Investor Shares, 0.12% for ETF Shares, 0.12% for Admiral Shares, and 0.10% for Institutional Shares; and for the Real Estate II Index Fund, 0.08%. The dollar amounts shown as “Expenses Paid” are equal to the annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent six-month period, then divided by the number of days in the most recent 12-month period (184/365).

3

Real Estate Index Fund

Performance Summary

All of the returns in this report represent past performance, which is not a guarantee of future results that may be achieved by the fund. (Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, visit our website at vanguard.com/performance.) Note, too, that both investment returns and principal value can fluctuate widely, so an investor’s shares, when sold, could be worth more or less than their original cost. The 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, 2012, Through January 31, 2022

Initial Investment of $10,000

			Average Annual Total Returns Periods Ended January 31, 2022
		One Year	Five Years	Ten Years	Final Value of a $10,000 Investment
	Real Estate Index Fund Investor Shares	28.73%	9.22%	9.72%	$25,280
	Real Estate Spliced Index	29.05	9.47	9.97	25,864
	Dow Jones U.S. Total Stock Market Float Adjusted Index	18.50	16.02	14.96	40,306

Real Estate Spliced Index: MSCI US REIT Index through February 1, 2018; MSCI US Investable Market Real Estate 25/50 Transition Index through July 24, 2018; MSCI US Investable Market Real Estate 25/50 Index thereafter.

		One Year	Five Years	Ten Years	Final Value of a $10,000 Investment
Real Estate Index Fund ETF Shares Net Asset Value		28.88%	9.35%	9.86%	$25,606
Real Estate Index Fund Market Price		28.93	9.36	9.86	25,611
Real Estate Spliced Index		29.05	9.47	9.97	25,864
Dow Jones U.S. Total Stock Market Float Adjusted Index		18.50	16.02	14.96	40,306

    

See Financial Highlights for dividend and capital gains information.

4

Real Estate Index Fund

			Average Annual Total Returns Periods Ended January 31, 2022
		One Year	Five Years	Ten Years	Final Value of a $10,000 Investment
Real Estate Index Fund Admiral Shares		28.91%	9.37%	9.87%	$25,635
Real Estate Spliced Index		29.05	9.47	9.97	25,864
Dow Jones U.S. Total Stock Market Float Adjusted Index		18.50	16.02	14.96	40,306

		One Year	Five Years	Ten Years	Final Value of a $5,000,000 Investment
Real Estate Index Fund Institutional Shares		28.91%	9.40%	9.89%	$12,842,995
Real Estate Spliced Index		29.05	9.47	9.97	12,931,931
Dow Jones U.S. Total Stock Market Float Adjusted Index		18.50	16.02	14.96	20,153,115

Cumulative Returns of ETF Shares: January 31, 2012, Through January 31, 2022
	One Year	Five Years	Ten Years
Real Estate Index Fund Market Price	28.93%	56.41%	156.11%
Real Estate Index Fund ETF Shares Net Asset Value	28.88	56.34	156.06
Real Estate Spliced Index	29.05	57.23	158.64

For the ETF Shares, the market price is determined by the midpoint of the bid-offer spread as of the closing time of the New York Stock Exchange (generally 4 p.m., Eastern time). The net asset value is also determined as of the NYSE closing time. For more information about how the ETF Shares' market prices have compared with their net asset value, visit vanguard.com, select your ETF, and then select the Price and Performance tab. The ETF premium/discount analysis there shows the percentages of days on which the ETF Shares' market price was above or below the NAV.

5

Real Estate Index Fund

Fund Allocation

As of January 31, 2022

Diversified Real Estate Activities	0.1%
Diversified REITs	3.1
Health Care REITs	8.0
Hotel & Resort REITs	2.5
Industrial REITs	12.5
Office REITs	6.6
Real Estate Development	0.3
Real Estate Operating Companies	0.2
Real Estate Services	4.7
Residential REITs	15.2
Retail REITs	10.8
Specialized REITs	36.0

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

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

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

6

Real Estate Index Fund

Financial Statements

Schedule of Investments

As of January 31, 2022

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

					Shares	Market Value• ($000)
Equity Real Estate Investment Trusts (REITs) (95.2%)
Diversified REITs (2.7%)
	WP Carey Inc.				8,831,811	685,349
	STORE Capital Corp.				11,677,776	370,302
	Broadstone Net Lease Inc.				7,584,955	175,288
*	DigitalBridge Group Inc.				23,522,395	171,713
	PS Business Parks Inc.				986,743	164,747
	Essential Properties Realty Trust Inc.				5,646,127	149,905
	Washington REIT				4,038,644	99,431
	American Assets Trust Inc.				2,453,690	88,259
	Alexander & Baldwin Inc.				3,462,222	79,458
1	iStar Inc.				3,422,613	73,484
	Global Net Lease Inc.				4,789,046	68,675
	Empire State Realty Trust Inc. Class A				6,997,963	62,422
	Armada Hoffler Properties Inc.				2,910,862	40,839
	Gladstone Commercial Corp.				1,755,966	40,721
	One Liberty Properties Inc.				795,092	24,250
						2,294,843
Health Care REITs (7.1%)
	Welltower Inc.				20,179,080	1,748,114
	Ventas Inc.				18,790,171	996,255
	Healthpeak Properties Inc.				25,737,920	910,350
	Medical Properties Trust Inc.				28,447,561	647,466
	Omega Healthcare Investors Inc.				11,407,691	359,114
	Healthcare Trust of America Inc. Class A				10,450,666	340,169
	Healthcare Realty Trust Inc.				6,950,075	215,591
	Physicians Realty Trust				10,382,471	189,584
	Sabra Health Care REIT Inc.				10,544,010	143,504

					Shares	Market Value• ($000)
	National Health Investors Inc.				2,080,369	120,308
	CareTrust REIT Inc.				4,631,734	98,239
	LTC Properties Inc.				1,880,274	67,821
	Community Healthcare Trust Inc.				1,120,704	50,813
	Global Medical REIT Inc.				2,912,511	49,251
	Universal Health Realty Income Trust				658,271	38,377
	Diversified Healthcare Trust				11,389,165	34,737
						6,009,693
Hotel & Resort REITs (2.2%)
*	Host Hotels & Resorts Inc.				34,096,212	591,228
*	Ryman Hospitality Properties Inc.				2,497,719	220,798
*	Park Hotels & Resorts Inc.				11,291,151	205,499
	Apple Hospitality REIT Inc.				10,362,373	167,145
	Pebblebrook Hotel Trust				6,273,889	135,830
*	Sunstone Hotel Investors Inc.				10,462,522	118,331
	RLJ Lodging Trust				7,955,143	110,179
*	Xenia Hotels & Resorts Inc.				5,451,905	94,536
*	DiamondRock Hospitality Co.				10,054,280	94,008
	Service Properties Trust				7,872,833	67,313
*	Summit Hotel Properties Inc.				5,087,829	47,927
*	Chatham Lodging Trust				2,329,927	30,918
*	CorePoint Lodging Inc.				1,955,947	30,728
						1,914,440
Industrial REITs (11.1%)
	Prologis Inc.				35,302,084	5,536,073
	Duke Realty Corp.				18,067,120	1,043,918
	Rexford Industrial Realty Inc.				6,577,602	481,283
	EastGroup Properties Inc.				1,929,552	385,737