Read file contents permission within folder hierarchy

Let's say I have a folder C:\vault\folder 1\folder 2.

I want to set permissions so that a group doesn't have read access to folder 1, but does have read access to folder 2.  Currently, I have "read file contents" and "show working versions of files" checked for folder 2, but no folder permissions checked for folder 1.  With these settings, when I open the vault, I don't see any folders, presumably because nothing is checked for folder 1.  Is there some setting I can set somewhere such that folder 1 is still visible so users can navigate within the folder structure to folder 2, but still not have access to files within folder 1?  The folder 2 files can still be located through the search tool, but there are many people within my company who still prefer to browse through the folders instead.

I know that I can work around this by checking "read file contents" for folder 1 (assuming that I don't have any revision-controlled documents in folder 1 that might still be visible), but it's still quite a bit of work to have to do this for every single lower level folder.