Annual Report | January 31, 2020

 

 

Vanguard Real Estate Index Funds

 

 

 

 

 

 

 

 

 

 

 

Vanguard Real Estate Index Fund

 

Vanguard Real Estate II Index Fund

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See the inside front cover for important information about access to your fund’s annual and semiannual shareholder reports.

 

 

 

 

Important information about access to shareholder reports

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of your fund’s annual and semiannual shareholder reports will no longer be sent to you by mail, unless you specifically request them. Instead, you will be notified by mail each time a report is posted on the website and will be provided with a link to access the report.

 

If you have already elected to receive shareholder reports electronically, you will not be affected by this change and do not need to take any action. You may elect to receive shareholder reports and other communications from the fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you invest directly with the fund, by calling Vanguard at one of the phone numbers on the back cover of this report or by logging on to vanguard.com.

 

You may elect to receive paper copies of all future shareholder reports free of charge. If you invest through a financial intermediary, you can contact the intermediary to request that you continue to receive paper copies. If you invest directly with the fund, you can call Vanguard at one of the phone numbers on the back cover of this report or log on to vanguard.com. Your election to receive paper copies will apply to all the funds you hold through an intermediary or directly with Vanguard.

 

 

 

Contents  

 

A Note From Our Chairman 1
   
Your Fund’s Performance at a Glance 2
   
About Your Fund’s Expenses 3
   
Real Estate Index Fund 5
   
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.

 

 

 

A Note From Our Chairman

 

 

 

 

 

Tim Buckley

Chairman and Chief Executive Officer

 

 

 

Dear Shareholder,

 

These are challenging times. The markets plummet one day and bounce back the next as investors process the uncertainty surrounding the coronavirus outbreak.

 

At Vanguard, we tell investors to “stay the course” in good times and bad. This means focusing on your investment goals, keeping a long-term perspective, being balanced across and diversified within asset classes, and limiting cost.

 

Vanguard investors have proven time and again that they know how to stay calm in a market downturn—an attribute that has served them well. But for those who are weathering their first bout of market volatility or could just use a friendly reminder, let me offer three points.

 

First, we stand by our counsel—“stay the course.”

 

Don’t be tempted to time the markets. It’s a losing strategy. An investment plan established during calmer times should not be abandoned in the midst of a market downturn. Although having exposure to different asset classes does not eliminate the risk of loss, we believe investors should let the potential benefits of diversification play out.

 

Second, whether you’re new to investing or a seasoned financial advisor, don’t feel that you need to go it alone. Our mission is to help you succeed, so reach out if we can be of help.

 

Our websites are constantly refreshed with our latest thinking on the markets and economy. And our experts offer practical advice on how to put this perspective to work in your portfolios.

 

And, finally, thank you.

 

Thank you for entrusting us with your financial success. It’s a tremendous responsibility that we take very seriously. No matter the market conditions, we look forward to partnering with you and helping you reach your investment goals.

 

Sincerely,

 

 

 

Mortimer J. Buckley

Chairman and Chief Executive Officer

March 3, 2020

 

  1  

 

 

Your Fund’s Performance at a Glance

 

 

·   For the 12 months ended January 31, 2020, Vanguard Real Estate Index Fund returned 16.59% for Investor Shares. Returns were a bit higher for Institutional, Admiral, and ETF Shares as well as for Vanguard Real Estate II Index Fund. The results were in line with those of the funds’ benchmark index but more than 3 percentage points behind the broad U.S. stock market.

 

·   The Federal Reserve reduced its target for short-term interest rates three times in 2019. Real estate investment trusts (REITs), which are particularly sensitive to rate changes, attracted investors searching for more solid sources of income in the low-rate environment.

 

·   Specialized REITs, the funds’ largest holding, contributed most to their returns. Residential, industrial, office, diversified, and health care REITs noticeably boosted results, as did real estate services. Retail REITs and hotel and resort REITs were the main detractors.

 

·   For the ten years ended January 31, 2020, the Real Estate Index Fund posted an average annual return of 12.56% for Investor Shares, in line with its benchmark index. The Real Estate Index II Fund launched in 2017 and doesn’t yet have a ten-year record.

 

 

 

Market Barometer

 

    Average Annual Total Returns  
    Periods Ended January 31, 2020  
    One Year   Three Years   Five Years  
Stocks              
Russell 1000 Index (Large-caps)   21.39%   14.33%   12.13%  
Russell 2000 Index (Small-caps)   9.21   7.28   8.23  
Russell 3000 Index (Broad U.S. market)   20.53   13.82   11.85  
FTSE All-World ex US Index (International)   10.28   7.74   5.24  
               
Bonds              
Bloomberg Barclays U.S. Aggregate Bond Index (Broad taxable market)   9.64%   4.62%   3.01%  
Bloomberg Barclays Municipal Bond Index (Broad tax-exempt market)   8.65   5.12   3.53  
FTSE Three-Month U.S. Treasury Bill Index   2.18   1.68   1.07  
               
CPI              
Consumer Price Index   2.49%   2.04%   2.00%  

 

  2  

 

 

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.

 

  3  

 

 

Six Months Ended January 31, 2020

 

    Beginning   Ending   Expenses  
    Account Value   Account Value   Paid During  
    7/31/2019   1/31/2020   Period  
Based on Actual Fund Return              
Real Estate Index Fund              
Investor Shares   $1,000.00   $1,075.70   $1.31  
ETF Shares   1,000.00   1,076.11   0.63  
Admiral™ Shares   1,000.00   1,076.14   0.63  
Institutional Shares   1,000.00   1,075.86   0.52  
Real Estate II Index Fund   $1,000.00   $1,076.11   $0.42  
Based on Hypothetical 5% Yearly Return              
Real Estate Index Fund              
Investor Shares   $1,000.00   $1,023.95   $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).

 

  4  

 

 

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, 2010, Through January 31, 2020

Initial Investment of $10,000

 

 

    Average Annual Total Returns
Periods Ended January 31, 2020
 
    One
Year
Five
Years
Ten
Years
Final Value
of a $10,000
Investment
Real Estate Index Fund Investor Shares 16.59% 5.88% 12.56% $32,660
Real Estate Spliced Index 16.82 6.13 12.80 33,364
Dow Jones U.S. Total Stock Market Float Adjusted Index 20.37 11.79 13.80 36,436

 

Real Estate Spliced Index: MSCI US REIT Index adjusted to include a 2% cash position (Lipper Money Market Average) through April 30, 2009; 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.

 

 

 

        Final Value
  One Five Ten of a $10,000
  Year Years Years Investment
Real Estate Index Fund ETF Shares Net Asset Value 16.70% 6.03% 12.71% $33,099
Real Estate Index Fund ETF Shares Market Price 16.61 6.01 12.72 33,124
Real Estate Spliced Index 16.82 6.13 12.80 33,364
Dow Jones U.S. Total Stock Market Float Adjusted Index 20.37 11.79 13.80 36,436

 

See Financial Highlights for dividend and capital gains information.

 

  5  

 

 

Real Estate Index Fund

 

 

 

 

    Average Annual Total Returns
Periods Ended January 31, 2020
     
                Final Value  
    One   Five   Ten   of a $10,000  
    Year   Years   Years   Investment  
Real Estate Index Fund Admiral Shares   16.73%   6.03%   12.72%   $33,119  
Real Estate Spliced Index   16.82   6.13   12.80   33,364  
Dow Jones U.S. Total Stock Market Float Adjusted Index   20.37   11.79   13.80   36,436  

 

    One   Five   Ten   Final Value
of a $5,000,000
 
    Year   Years   Years   Investment  
Real Estate Index Fund Institutional Shares   16.77%   6.05%   12.74%   $16,593,174  
Real Estate Spliced Index   16.82   6.13   12.80   16,682,097  
Dow Jones U.S. Total Stock Market Float Adjusted Index   20.37   11.79   13.80   18,217,755  

 

 

Cumulative Returns of ETF Shares: January 31, 2010, Through January 31, 2020

 

    One
Year
  Five
Years
  Ten
Years
 
Real Estate Index Fund ETF Shares Market Price   16.61%   33.89%   231.24%  
Real Estate Index Fund ETF Shares Net Asset Value   16.70   33.98   230.99  
Real Estate Spliced Index   16.82   34.65   233.64  

 

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.

 

  6  

 

 

Real Estate Index Fund

 

 

Sector Diversification

As of January 31, 2020

 

Diversified Real Estate Activities   0.2 %
Diversified REITs   4.9  
Health Care REITs   9.8  
Hotel & Resort REITs   3.7  
Industrial REITs   8.6  
Office REITs   9.5  
Real Estate Development   0.4  
Real Estate Operating Companies   0.2  
Real Estate Services   2.9  
Residential REITs   15.0  
Retail REITs   11.3  
Specialized REITs   33.5  

 

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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 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.

 

  7  

 

 

Real Estate Index Fund

 

 

Financial Statements

 

 

Statement of Net Assets

As of January 31, 2020

 

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.

 

          Market
          Value
      Shares   ($000)
Equity Real Estate Investment Trusts (REITs) (96.4%)1        
Diversified REITs (4.4%)        
  WP Carey Inc.   8,396,869   706,344
  Liberty Property Trust   7,690,817   481,830
  VEREIT Inc.   47,491,709   463,519
  STORE Capital Corp.   10,788,044   423,431
  PS Business Parks Inc.   1,011,572   169,499
  Washington REIT   3,936,264   119,820
  American Assets Trust Inc.   2,494,598   113,654
  Colony Capital Inc.   22,736,642   106,180
  Essential Properties Realty Trust Inc.   3,750,730   103,558
  Empire State Realty Trust Inc.   7,432,377   100,783
  Global Net Lease Inc.   4,152,743   86,086
  Alexander & Baldwin Inc.   3,373,369   73,742
  Armada Hoffler Properties Inc.   2,606,873   47,810
  iStar Inc.   3,057,834   44,522
  Gladstone Commercial Corp.   1,526,251   32,540
  One Liberty Properties Inc.   732,234   20,019
§,*,2 Winthrop Realty Trust   1,892,511  
          3,093,337
Health Care REITs (8.7%)        
  Welltower Inc.   19,923,625   1,691,715
  Ventas Inc.   18,318,016   1,059,880
  Healthpeak Properties Inc.   24,145,203   868,986
  Medical Properties Trust Inc.   25,071,978   555,344
^ Omega Healthcare Investors Inc.   10,731,271   450,177
  Healthcare Trust of America Inc.   10,087,688   323,109
  Healthcare Realty Trust Inc.   6,353,875   229,121
  Sabra Health Care REIT Inc.   9,319,268   200,364
  National Health Investors Inc.   2,132,039   179,901
  Physicians Realty Trust   9,112,120   176,320
  CareTrust REIT Inc.   4,696,506   104,168
  Diversified Healthcare Trust   11,694,167   90,279
  LTC Properties Inc.   1,954,178   90,205
  Universal Health Realty Income Trust   642,248   79,221
  Community Healthcare Trust Inc.   907,172   42,791
  New Senior Investment Group Inc.   4,082,909   31,112
  Global Medical REIT Inc.   2,001,972   29,229
          6,201,922
Hotel & Resort REITs (3.3%)        
2 Host Hotels & Resorts Inc.   35,887,078   586,395
  Park Hotels & Resorts Inc.   11,787,567   258,619
  Ryman Hospitality Properties Inc.   2,402,643   204,297
  MGM Growth Properties LLC   5,594,172   178,678
  Service Properties Trust   8,087,091   174,519
  Apple Hospitality REIT Inc.   10,454,218   157,022
  Pebblebrook Hotel Trust   6,421,319   152,314
  Sunstone Hotel Investors Inc.   11,054,466   140,171
  RLJ Lodging Trust   8,462,772   131,681
  Xenia Hotels & Resorts Inc.   5,537,181   103,490
  DiamondRock Hospitality Co.   9,843,048   95,182
  Summit Hotel Properties Inc.   5,171,452   57,351
  Chatham Lodging Trust   2,304,535   37,679
  Hersha Hospitality Trust Class A   1,836,015   23,813

 

  8  

 

 

Real Estate Index Fund

 

          Market
          Value·
      Shares   ($000)
  CorePoint Lodging Inc.   1,986,855   18,180
  Ashford Hospitality Trust Inc.   4,764,644   11,721
  Braemar Hotels & Resorts Inc.   1,376,279   10,983
          2,342,095
Industrial REITs (7.6%)        
  Prologis Inc.   31,029,133   2,881,986
  Duke Realty Corp.   17,770,014   645,229
  Americold Realty Trust   8,944,275   308,309
  First Industrial Realty Trust Inc.   6,217,404   265,483
  Rexford Industrial Realty Inc.   5,394,998   259,985
  EastGroup Properties Inc.   1,846,398   251,239
  STAG Industrial Inc.   6,249,799   201,494
  Terreno Realty Corp.   3,222,593   184,526
  Lexington Realty Trust Class B   10,387,528   114,990
  Hannon Armstrong Sustainable Infrastructure Capital Inc.   3,228,363   110,055
  Industrial Logistics Properties Trust   3,199,430   73,235
^ Innovative Industrial Properties Inc.   815,274   72,967
  Monmouth Real Estate Investment Corp.   4,458,462   65,227
          5,434,725
Office REITs (8.4%)        
  Boston Properties Inc.   7,599,362   1,089,369
  Alexandria Real Estate Equities Inc.   5,576,140   910,026
  Vornado Realty Trust   8,443,345   555,319
  Kilroy Realty Corp.   4,964,327   409,905
  SL Green Realty Corp.   4,052,234   372,968
  Douglas Emmett Inc.   8,184,615   339,662
  Cousins Properties Inc.   7,145,693   292,473
  Hudson Pacific Properties Inc.   7,590,140   275,826
  Highwoods Properties Inc.   5,099,509   255,536
  JBG SMITH Properties   6,263,717   253,994
  Equity Commonwealth   5,995,435   196,590
  Corporate Office Properties Trust   5,503,451   163,838
  Piedmont Office Realty Trust Inc.   6,184,088   143,409
  Brandywine Realty Trust   8,663,015   135,316
  Paramount Group Inc.   9,205,345   129,427
  Columbia Property Trust Inc.   5,748,488   121,293
  Mack-Cali Realty Corp.   4,451,557   97,756
  Easterly Government Properties Inc.   3,501,335   84,767
  Office Properties Income Trust   2,364,599   80,467
  Franklin Street Properties Corp.   5,268,341   40,039
  City Office REIT Inc.   2,681,237   36,250
§ New York REIT Liquidating LLC   1,208   16
          5,984,246
Other (11.0%)3        
4,5 Vanguard Real Estate II Index Fund   346,574,081   7,847,621
           
Residential REITs (13.3%)        
  Equity Residential   18,232,144   1,514,727
  AvalonBay Communities Inc.   6,866,058   1,487,806
  Essex Property Trust Inc.   3,231,440   1,000,971
  Invitation Homes Inc.   26,435,080   831,912
  Mid-America Apartment Communities Inc.   5,606,759   769,303
  Sun Communities Inc.   4,457,735   722,911
  UDR Inc.   14,397,229   689,771
  Equity LifeStyle Properties Inc.   8,504,105   618,674
  Camden Property Trust   4,760,679   535,243
  Apartment Investment & Management Co.   7,318,976   385,783
  American Homes 4 Rent   13,267,509   362,601
  American Campus Communities Inc.   6,756,262   309,910
  Independence Realty Trust Inc.   4,433,719   65,043
  NexPoint Residential Trust Inc.   940,589   45,901
  Investors Real Estate Trust   570,721   42,062
  UMH Properties Inc.   1,786,776   28,231
  Front Yard Residential Corp.   2,511,323   26,946
  Preferred Apartment Communities Inc.   2,183,851   25,726
          9,463,521
Retail REITs (10.0%)        
  Simon Property Group Inc.   15,143,494   2,016,356
  Realty Income Corp.   15,645,528   1,226,766
  Regency Centers Corp.   7,818,290   485,047
  National Retail Properties Inc.   8,038,349   450,148

 

  9  

 

 

Real Estate Index Fund

 

 

          Market
          Value•
      Shares   ($000)
  Federal Realty Investment Trust   3,425,464   428,251
  Kimco Realty Corp.   20,753,165   395,348
  Brixmor Property Group Inc.   14,645,681   292,328
  Spirit Realty Capital Inc.   4,429,808   233,805
  Weingarten Realty Investors   6,010,466   174,905
  Agree Realty Corp.   2,063,532   156,684
  Retail Properties of America Inc.   10,503,617   127,619
^ Macerich Co.   5,555,588   123,945
  Urban Edge Properties   5,954,974   109,512
  Acadia Realty Trust   4,151,250   103,034
  SITE Centers Corp.   7,101,747   90,263
  Retail Opportunity Investments Corp.   5,090,196   84,345
  Taubman Centers Inc.   3,010,815   79,546
  Kite Realty Group Trust   4,129,613   71,029
^ American Finance Trust Inc.   5,225,102   67,770
^ Tanger Factory Outlet Centers Inc.   4,598,167   67,271
  RPT Realty   3,947,000   55,061
  Getty Realty Corp.   1,718,852   54,178
^ Seritage Growth Properties   1,420,676   52,167
  Alexander’s Inc.   112,933   36,441
  Saul Centers Inc.   679,162   33,537
  Urstadt Biddle Properties Inc. Class A   1,469,778   33,320
^ Washington Prime Group Inc.   9,171,898   27,607
  Retail Value Inc.   783,684   25,760
  Whitestone REIT   1,776,868   23,277
^ Pennsylvania REIT   3,616,615   14,249
  Cedar Realty Trust Inc.   4,374,363   11,373
§ Spirit MTA REIT   2,071,263   1,590
  Urstadt Biddle Properties Inc.   20,899   366
          7,152,898
Specialized REITs (29.7%)        
  American Tower Corp.   21,764,202   5,043,636
  Crown Castle International Corp.   20,440,318   3,062,777
  Equinix Inc.   4,170,071   2,459,216
  Public Storage   7,725,412   1,728,638
  SBA Communications Corp.   5,560,758   1,387,743
^ Digital Realty Trust Inc.   10,009,156   1,231,026
  Weyerhaeuser Co.   36,625,089   1,060,296
  Extra Space Storage Inc.   6,318,295   699,309
  VICI Properties Inc.   19,665,350   527,031
  Gaming and Leisure Properties Inc.   10,027,548   473,852
  Iron Mountain Inc.   14,115,925   446,204
  Lamar Advertising Co.   4,226,119   392,226
  CyrusOne Inc.   5,565,209   338,643
  CUBESMART   9,463,079   299,696
  EPR Properties   3,812,764   272,117
  Life Storage Inc.   2,293,211   259,546
  CoreSite Realty Corp.   1,813,609   213,008
  Outfront Media Inc.   7,046,974   209,577
  Rayonier Inc.   6,372,943   193,610
  QTS Realty Trust Inc.   2,719,248   154,671
  PotlatchDeltic Corp.   3,303,958   142,070
  Four Corners Property Trust Inc.   3,362,599   101,853
  National Storage Affiliates Trust   2,914,477   99,530
  GEO Group Inc.   5,962,460   94,207
  CoreCivic Inc.   5,854,253   93,375
^ Uniti Group Inc.   9,496,104   60,110
  CorEnergy Infrastructure Trust Inc.   665,562   30,350
  CatchMark Timber Trust Inc.   2,407,704   24,703
^ Safehold Inc.   497,860   22,384
  Jernigan Capital Inc.   1,090,687   21,803
          21,143,207
Total Equity Real Estate Investment Trusts (REITs) (Cost $56,490,070)       68,663,572
Real Estate Management & Development (3.3%)1        
Diversified Real Estate Activities (0.2%)        
* St. Joe Co.   1,774,598   37,284
  RMR Group Inc.   750,135   34,559
* Five Point Holdings LLC   2,535,556   20,563
* Tejon Ranch Co.   1,083,413   17,443
          109,849
Real Estate Development (0.4%)        
* Howard Hughes Corp.   2,014,856   245,168
* Forestar Group Inc.   810,918   16,437
          261,605
Real Estate Operating Companies (0.2%)        
  Kennedy-Wilson Holdings Inc.   6,308,380   136,009
* FRP Holdings Inc.   338,898   16,043
          152,052
Real Estate Services (2.5%)        
* CBRE Group Inc.   15,709,840   959,086
  Jones Lang LaSalle Inc.   2,533,397   430,222
  Cushman & Wakefield plc   4,800,530   92,266
*,^ Redfin Corp.   3,611,601   87,870
  Newmark Group Inc.   7,301,467   85,938

 

  10  

 

 

Real Estate Index Fund

 

 

          Market
          Value•
      Shares   ($000)
^ Realogy Holdings Corp.   5,619,905   59,515
* Marcus & Millichap Inc.   1,152,522   40,799
  RE/MAX Holdings Inc.   876,557   33,555
^ eXp World Holdings Inc.   1,072,458   11,840
*,^ Altisource Portfolio Solutions SA   318,938   5,932
          1,807,023
Total Real Estate Management & Development (Cost $2,210,826)       2,330,529
Temporary Cash Investment (0.8%)1        
Money Market Fund (0.8%)        
6,7 Vanguard Market Liquidity Fund, 1.730%
(Cost $561,225)
  5,611,811   561,293
Total Investments (100.5%)
(Cost $59,262,121)
      71,555,394
Other Assets and Liabilities (-0.5%)        
Other Assets       77,402
Liabilities7       (406,517)
          (329,115)
Net Assets (100%)       71,226,279
           
          Amount
          ($000)
Statement of Assets and Liabilities        
Assets        
Investments in Securities, at Value        
Unaffiliated Issuers       62,560,085
Affiliated Issuers       1,147,688
Vanguard Real Estate II Index Fund       7,847,621
Total Investments in Securities       71,555,394
Investment in Vanguard       2,738
Receivables for Accrued Income       37,704
Receivables for Capital Shares Issued       34,134
Other Assets       2,826
Total Assets       71,632,796
Liabilities        
Payables for Investment Securities Purchased       11,509
Collateral for Securities on Loan       335,671
Payables for Capital Shares Redeemed       26,934
Payables to Vanguard       17,817
Unrealized Depreciation—OTC Swap Contracts       1,451
Other Liabilities       13,135
Total Liabilities       406,517
Net Assets (100%)       71,226,279

 

  11  

 

 

Real Estate Index Fund

 

 

At January 31, 2020, net assets consisted of:

          Amount
          ($000)
Paid-in Capital       60,358,012
Total Distributable Earnings (Loss)       10,868,267
Net Assets       71,226,279
         
Investor Shares–Net Assets        
Applicable to 7,793,923 outstanding $.001 par value shares of beneficial interest (unlimited authorization)       243,222
Net Asset Value Per Share–Investor Shares       $31.21
         
ETF Shares–Net Assets        
Applicable to 401,174,872 outstanding $.001 par value shares of beneficial interest (unlimited authorization)       37,681,748
Net Asset Value Per Share–ETF Shares       $93.93
         
Admiral Shares–Net Assets        
Applicable to 174,831,681 outstanding $.001 par value shares of beneficial interest (unlimited authorization)       23,274,094
Net Asset Value Per Share–Admiral Shares       $133.12
         
Institutional Shares–Net Assets        
Applicable to 486,657,445 outstanding $.001 par value shares of beneficial interest (unlimited authorization)       10,027,215
Net Asset Value Per Share–Institutional Shares       $20.60

 

· See Note A in Notes to Financial Statements.

 

§ Security value determined using significant unobservable inputs.

 

* Non-income-producing security.

 

^ Includes partial security positions on loan to broker-dealers. The total value of securities on loan is $308,329,000.

 

1 The fund invests a portion of its assets in investment securities through the use of swap contracts. After giving effect to swap investments, the fund’s effective investment securities and temporary cash investment positions represent 100.0% and 0.5%, respectively, of net assets.

 

2 Considered an affiliated company of the fund as the fund owns more than 5% of the outstanding voting securities of such company. The total value of affiliated companies is $586,395,000.

 

3 “Other” represents securities that are not classified by the fund’s benchmark index.

 

4 Considered an affiliated company of the fund as the issuer is another member of The Vanguard Group.

 

5 Represents a wholly owned subsidiary of the fund. See accompanying financial statements for Vanguard Real Estate II Index Fund’s Statement of Net Assets.

 

6 Affiliated money market fund available only to Vanguard funds and certain trusts and accounts managed by Vanguard. Rate shown is the 7-day yield.

 

7 Collateral of $335,671,000 was received for securities on loan.

 

REIT—Real Estate Investment Trust.

 

OTC—Over-the-Counter.

 

  12  

 

 

Real Estate Index Fund

 

 

Derivative Financial Instruments Outstanding as of Period End

 

Over-the-Counter Total Return Swaps

                Floating          
                Interest          
                Rate   Value and   Value and  
            Notional   Received   Unrealized   Unrealized  
    Termination       Amount   (Paid) 1 Appreciation   (Depreciation )
Reference Entity   Date   Counterparty   ($000 ) (% ) ($000 ) ($000 )
Digital Realty Trust Inc.   2/2/21   GSI   29,423   (1.655 )   (644 )
Federal Realty Investment Trust   2/2/21   GSI   32,614   (1.655 )   (109 )
Regency Centers Corp.   2/2/21   GSI   26,204   (1.655 )   (147 )
Retail Opportunity Investments Corp.   2/2/21   GSI   8,819   (1.655 )   (37 )
Seritage Growth Properties   2/2/21   GSI   11,352   (1.655 )   (336 )
VEREIT Inc.   2/2/21   GSI   43,032   (1.655 )   (88 )
VICI Properties Inc.   2/2/21   GSI   80,490   (1.655 )   (90 )
                      (1,451 )

 

1 Payment received/paid monthly.

GSI—Goldman Sachs International.

 

At January 31, 2020, a counterparty had deposited in a segregated account securities with a value of $3,153,000 in connection with open over-the-counter swap contracts.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

  13  

 

 

Real Estate Index Fund

 

 

Statement of Operations

 

 

    Year Ended  
    January 31, 2020  
    ($000 )
Investment Income      
Income      
Dividends—Unaffiliated Issuers   1,541,260  
Dividends—Affiliated Issuers   51,302  
Dividends—Vanguard Real Estate II Index Fund   199,690  
Interest—Unaffiliated Issuers   4  
Interest—Affiliated Issuers   5,704  
Securities Lending—Net   4,165  
Total Income   1,802,125  
Expenses      
The Vanguard Group—Note B      
Investment Advisory Services   4,147  
Management and Administrative—Investor Shares   2,296  
Management and Administrative—ETF Shares   35,158  
Management and Administrative—Admiral Shares   21,415  
Management and Administrative—Institutional Shares   7,776  
Marketing and Distribution—Investor Shares   85  
Marketing and Distribution—ETF Shares   1,802  
Marketing and Distribution—Admiral Shares   1,126  
Marketing and Distribution—Institutional Shares   317  
Custodian Fees   107  
Auditing Fees   38  
Shareholders’ Reports—Investor Shares   13  
Shareholders’ Reports—ETF Shares   1,190  
Shareholders’ Reports—Admiral Shares   292  
Shareholders’ Reports—Institutional Shares   77  
Trustees’ Fees and Expenses   29  
Total Expenses   75,868  
Expenses Paid Indirectly   (134 )
Net Expenses   75,734  
Net Investment Income   1,726,391  
Realized Net Gain (Loss)      
Capital Gain Distributions Received—Unaffiliated Issuers   283,714  
Capital Gain Distributions Received—Affiliated Issuers   2,665  
Capital Gain Distributions Received—Vanguard Real Estate II Index Fund    
Investment Securities Sold—Unaffiliated Issuers1   2,130,323  
Investment Securities Sold—Affiliated Issuers1   14,533  
Investment Securities Sold—Vanguard Real Estate II Index Fund    

 

  14  

 

 

Real Estate Index Fund

 

 

 

 

Statement of Operations (continued)

    Year Ended  
    January 31, 2020  
    ($000 )
Futures Contracts   340  
Swap Contracts   26,816  
Realized Net Gain (Loss)   2,458,391  
Change in Unrealized Appreciation (Depreciation)      
Investment Securities—Unaffiliated Issuers   5,005,277  
Investment Securities—Affiliated Issuers   (20,621 )
Investment Securities—Vanguard Real Estate II Index Fund   928,467  
Swap Contracts   (1,451 )
Change in Unrealized Appreciation (Depreciation)   5,911,672  
Net Increase (Decrease) in Net Assets Resulting from Operations   10,096,454  

 

1 Includes $2,366,459,000 of net gain (loss) resulting from in-kind redemptions; such gain (loss) is not taxable to the fund.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

  15  

 

 

Real Estate Index Fund

 

Statement of Changes in Net Assets

 

 

    Year Ended January 31,  
    2020   2019  
    ($000 ) ($000 )
Increase (Decrease) in Net Assets          
Operations          
Net Investment Income   1,726,391   1,817,544  
Realized Net Gain (Loss)   2,458,391   924,880  
Change in Unrealized Appreciation (Depreciation)   5,911,672   2,345,988  
Net Increase (Decrease) in Net Assets Resulting from Operations   10,096,454   5,088,412  
Distributions          
Net Investment Income          
Investor Shares   (22,650 ) (62,454 )
ETF Shares   (921,879 ) (1,028,975 )
Admiral Shares   (554,006 ) (579,344 )
Institutional Shares   (244,373 ) (269,632 )
Realized Capital Gain          
Investor Shares      
ETF Shares      
Admiral Shares      
Institutional Shares      
Return of Capital          
Investor Shares   (7,475 ) (20,882 )
ETF Shares   (304,249 ) (344,053 )
Admiral Shares   (182,839 ) (193,713 )
Institutional Shares   (80,651 ) (90,156 )
Total Distributions   (2,318,122 ) (2,589,209 )
Capital Share Transactions          
Investor Shares   (1,748,144 ) (355,274 )
ETF Shares   2,721,882   (2,701,593 )
Admiral Shares   2,583,346   (367,595 )
Institutional Shares   734,197   (371,447 )
Net Increase (Decrease) from Capital Share Transactions   4,291,281   (3,795,909 )
Total Increase (Decrease)   12,069,613   (1,296,706 )
Net Assets          
Beginning of Period   59,156,666   60,453,372  
End of Period   71,226,279   59,156,666  

 

 

 

 

 

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

 

  16  

 

 

Real Estate Index Fund

 

 

Financial Highlights

 

 

Investor Shares

 

For a Share Outstanding Year Ended January 31,  
Throughout Each Period 2020   2019   2018   2017   2016  
Net Asset Value, Beginning of Period $27.69   $26.40   $27.38   $25.59   $28.73  
Investment Operations                    
Net Investment Income .719 1  .787 1  .761 1  .746   .711  
Net Realized and Unrealized Gain (Loss) on Investments 3.801   1.639   (.614 ) 2.324   (2.851 )
Total from Investment Operations 4.520   2.426   .147   3.070   (2.140 )
Distributions                    
Dividends from Net Investment Income (.752 ) (.851 ) (.788 ) (.752 ) (.695 )
Distributions from Realized Capital Gains     (.011 ) (.187 )  
Return of Capital (.248 ) (.285 ) (.328 ) (.341 ) (.305 )
Total Distributions (1.000 ) (1.136 ) (1.127 ) (1.280 ) (1.000 )
Net Asset Value, End of Period $31.21   $27.69   $26.40   $27.38   $25.59  
                     
Total Return2 16.59%   9.53%   0.45%   12.07%   -7.44%  
                     
Ratios/Supplemental Data                    
Net Assets, End of Period (Millions) $243   $1,871   $2,143   $2,603   $2,621  
Ratio of Total Expenses to Average Net Assets 0.26%   0.25%   0.26%   0.26%   0.26%  
Ratio of Net Investment Income to Average Net Assets 2.48%   3.02%   2.87%   2.60%   2.66%  
Portfolio Turnover Rate3 6%   24%   6%   7%   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 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

  17  

 

 

Real Estate Index Fund

 

 

Financial Highlights

 

 

ETF Shares

 

For a Share Outstanding     Year Ended January 31,  
Throughout Each Period 2020   2019   2018   2017   2016  
Net Asset Value, Beginning of Period $83.36   $79.47   $82.43   $77.05   $86.49  
Investment Operations                    
Net Investment Income 2.335 1 2.487 1 2.499 1 2.334   2.217  
Net Realized and Unrealized Gain (Loss) on Investments 11.379   4.934   (1.945 ) 7.022   (8.533 )
Total from Investment Operations 13.714   7.421   .554   9.356   (6.316 )
Distributions                    
Dividends from Net Investment Income (2.364 ) (2.646 ) (2.458 ) (2.353 ) (2.170 )
Distributions from Realized Capital Gains     (.034 ) (.563 )  
Return of Capital (.780 ) (.885 ) (1.022 ) (1.060 ) (.954 )
Total Distributions (3.144 ) (3.531 ) (3.514 ) (3.976 ) (3.124 )
Net Asset Value, End of Period $93.93   $83.36   $79.47   $82.43   $77.05  
                     
Total Return 16.70%   9.70%   0.59%   12.25%   -7.31%  
                     
Ratios/Supplemental Data                    
Net Assets, End of Period (Millions) $37,682   $30,857   $32,377   $33,527   $27,007  
Ratio of Total Expenses to Average Net Assets 0.12%   0.12%   0.12%   0.12%   0.12%  
Ratio of Net Investment Income to Average Net Assets 2.60%   3.15%   3.01%   2.74%   2.80%  
Portfolio Turnover Rate2 6%   24%   6%   7%   11%  

 

1 Calculated based on average shares outstanding.

 

2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

  18  

 

 

Real Estate Index Fund

 

 

Financial Highlights

 

 

Admiral Shares

 

For a Share Outstanding         Year Ended January 31,  
Throughout Each Period 2020   2019   2018   2017   2016  
Net Asset Value, Beginning of Period $118.14   $112.63   $116.83   $109.19   $122.58  
Investment Operations                    
Net Investment Income 3.315 1 3.507 1 3.538 1 3.306   3.142  
Net Realized and Unrealized Gain (Loss) on Investments 16.121   7.008   (2.761 ) 9.966   (12.105 )
Total from Investment Operations 19.436   10.515   .777   13.272   (8.963 )
Distributions                    
Dividends from Net Investment Income (3.350 ) (3.751 ) (3.483 ) (3.333 ) (3.076 )
Distributions from Realized Capital Gains     (.048 ) (.798 )  
Return of Capital (1.106 ) (1.254 ) (1.447 ) (1.501 ) (1.351 )
Total Distributions (4.456 ) (5.005 ) (4.978 ) (5.632 ) (4.427 )
Net Asset Value, End of Period $133.12   $118.14   $112.63   $116.83   $109.19  
                     
Total Return2 16.73%   9.69%   0.58%   12.23%   -7.30%  
                     
Ratios/Supplemental Data                    
Net Assets, End of Period (Millions) $23,274   $18,223   $17,757   $18,337   $15,029  
Ratio of Total Expenses to Average Net Assets 0.12%   0.11%   0.12%   0.12%   0.12%  
Ratio of Net Investment Income to Average Net Assets 2.60%   3.16%   3.01%   2.74%   2.80%  
Portfolio Turnover Rate3 6%   24%   6%   7%   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 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

  19  

 

 

Real Estate Index Fund

 

 

Financial Highlights

 

 

Institutional Shares

 

For a Share Outstanding         Year Ended January 31,  
Throughout Each Period 2020   2019   2018   2017   2016  
Net Asset Value, Beginning of Period $18.28   $17.43   $18.08   $16.90   $18.97  
Investment Operations                    
Net Investment Income .518 1 .543 1 .568 1 .515   .489  
Net Realized and Unrealized Gain (Loss) on Investments 2.496   1.085   (.444 ) 1.540   (1.870 )
Total from Investment Operations 3.014   1.628   .124   2.055   (1.381 )
Distributions                    
Dividends from Net Investment Income (.522 ) (.583 ) (.542 ) (.519 ) (.479 )
Distributions from Realized Capital Gains     (.007 ) (.123 )  
Return of Capital (.172 ) (.195 ) (.225 ) (.233 ) (.210 )
Total Distributions (.694 ) (.778 ) (.774 ) (.875 ) (.689 )
Net Asset Value, End of Period $20.60   $18.28   $17.43   $18.08   $16.90  
                     
Total Return 16.77%   9.70%   0.60%   12.23%   -7.27%  
                     
Ratios/Supplemental Data                    
Net Assets, End of Period (Millions) $10,027   $8,206   $8,176   $7,799   $6,785  
Ratio of Total Expenses to Average Net Assets 0.10%   0.09%   0.10%   0.10%   0.10%  
Ratio of Net Investment Income to Average Net Assets 2.63%   3.18%   3.03%   2.76%   2.82%  
Portfolio Turnover Rate2 6%   24%   6%   7%   11%  

 

1 Calculated based on average shares outstanding.

 

2 Excludes the value of portfolio securities received or delivered as a result of in-kind purchases or redemptions of the fund’s capital shares, including ETF Creation Units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

  20  

 

 

Real Estate Index Fund

 

 

Notes to Financial Statements

 

 

Vanguard Real Estate Index Fund is registered under the Investment Company Act of 1940 as an open-end investment company, or mutual fund. The fund offers four classes of shares: Investor Shares, ETF Shares, Admiral Shares, and Institutional Shares. Each of the share classes has different eligibility and minimum purchase requirements, and is designed for different types of investors. ETF Shares are listed for trading on NYSE Arca; they can be purchased and sold through a broker.

 

As a part of its principal investment strategy, the fund attempts to replicate its benchmark index by investing all, or substantially all, of its assets—either directly or indirectly through a wholly owned subsidiary—in the stocks that make up the index. Vanguard Real Estate II Index Fund is the wholly owned subsidiary in which the fund has invested a portion of its assets. For additional financial information about the Real Estate II Index Fund, refer to the accompanying financial statements.

 

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

 

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

 

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

 

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

 

  21  

 

 

Real Estate Index Fund

 

 

 

 

 

During the year ended January 31, 2020, the fund’s average investments in long and short futures contracts represented less than 1% and 0% of net assets, respectively, based on the average of the notional amounts at each quarter-end during the period. The fund had no open futures contracts at January 31, 2020.

 

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

 

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

 

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

 

During the year ended January 31, 2020, the fund’s average amounts of investments in total return swaps represented less than 1% of net assets, based on the average of notional amounts at each quarter-end during the period.

 

4.  Federal Income Taxes: The fund intends to continue to qualify as a regulated investment company and distribute all of its taxable income. Management has analyzed the fund’s tax positions taken for all open federal income tax years (January 31, 2017–2020), and has concluded that no provision for federal income tax is required in the fund’s financial statements.

 

  22  

 

 

Real Estate Index Fund

 

 

 

 

 

5.  Distributions: Distributions to shareholders are recorded on the ex-dividend date. The portion of distributions that exceeds a fund’s current and accumulated earnings and profits, as measured on a tax basis, constitute a non-taxable return of capital. Distributions are determined on a tax basis 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. 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 Facility: 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 that may be renewed annually; each fund is individually liable for its borrowings, if any, under the credit facility. Borrowings may be utilized for temporary and emergency purposes, and are subject to the fund’s regulatory and contractual borrowing restrictions. The participating funds are charged administrative fees and an annual commitment fee of 0.10% of the undrawn 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 this facility bear interest at a rate based upon the higher of the one-month London Interbank Offered Rate, federal funds effective rate, or overnight bank funding rate plus an agreed-upon spread.

 

The fund had no borrowings outstanding at January 31, 2020, or at any time during the period then ended.

 

8. Other: Distributions received from investment securities are recorded on the ex-dividend date. Each investment security reports annually the tax character of its distributions. Dividend income, capital gain distributions received, and unrealized appreciation (depreciation) reflect the amounts of taxable income, capital gain, and return of capital reported by the investment securities, and management’s estimates of such amounts for investment security distributions for which actual information has not been reported. Income, capital gain, and return of capital distributions received from affiliated Vanguard funds are recorded on ex-dividend date. Interest income includes income distributions received from Vanguard Market Liquidity Fund and is accrued daily. Premiums and discounts on debt securities are amortized and accreted, respectively, to interest income over the

 

  23  

 

 

Real Estate Index Fund

 

 

 

 

 

lives of the respective securities, except for premiums on certain callable debt securities that are amortized to the earliest call date. Security transactions are accounted for on the date securities are bought or sold. Costs used to determine realized gains (losses) on the sale of investment securities are those of the specific securities sold.

 

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

 

B.  In accordance with the terms of a Funds’ Service Agreement (the “FSA”) between Vanguard and the fund, Vanguard furnishes to the fund investment advisory, corporate management, administrative, marketing, and distribution services at Vanguard’s cost of operations (as defined by the FSA). These costs of operations are allocated to the fund based on methods and guidelines approved by the board of trustees. Vanguard does not require reimbursement in the current period for certain costs of operations (such as deferred compensation/benefits and risk/insurance costs); the fund’s liability for these costs of operations is included in Payables to Vanguard on the Statement of Assets and Liabilities. All other costs of operations payable to Vanguard 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, 2020, the fund had contributed to Vanguard capital in the amount of $2,738,000, representing less than 0.01% of the fund’s net assets and 1.10% of Vanguard’s capital received pursuant to the FSA. The fund’s trustees and officers are also directors and employees, respectively, of Vanguard.

 

C.  The fund’s custodian bank has agreed to reduce its fees when the fund maintains cash on deposit in the non-interest-bearing account. For the year ended January 31, 2020, custodian fee offset arrangements reduced the fund’s expenses by $134,000 (an annual rate of less than 0.01% of average net assets).

 

D.  Various inputs may be used to determine the value of the fund’s investments. 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 Statement of Net Assets.

 

 

  24  

 

 

Real Estate Index Fund

 

 

 

 

 

The following table summarizes the market value of the fund’s investments and derivatives as of January 31, 2020, based on the inputs used to value them:

 

  Level 1   Level 2   Level 3  
Investments ($000 ) ($000 ) ($000 )
Common Stocks 70,992,495     1,606  
Temporary Cash Investments 561,293      
Swap Contracts—Liabilities   (1,451 )  
Total 71,553,788   (1,451 ) 1,606  

 

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 in-kind redemptions and swap agreements were reclassified between the following accounts:

 

  Amount  
  ($000 )
Paid-in Capital 2,366,459  
Total Distributable Earnings (Loss) (2,366,459 )

 

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 tax deferral of losses on wash sales and the realization of unrealized gains or losses on certain swap agreements. As of period end, the tax-basis components of total distributable earnings (loss) are detailed in the table as follows:

 

  Amount  
  ($000 )
Undistributed Ordinary Income  
Undistributed Tax-Exempt Income  
Undistributed Long-Term Gains  
Capital Loss Carryforwards (Non-expiring)* (1,509,620 )
Net Unrealized Gains (Losses) 12,293,273  

 

* The fund used capital loss carryforwards of $40,084,000 to offset taxable capital gains realized during the year ended January 31, 2020.

 

As of January 31, 2020, gross unrealized appreciation and depreciation for investments and derivatives based on cost for U.S. federal income tax purposes were as follows:

 

  Amount  
  ($000 )
Tax Cost 59,262,121  
Gross Unrealized Appreciation 15,718,650  
Gross Unrealized Depreciation (3,425,377 )
Net Unrealized Appreciation (Depreciation) 12,293,273  

 

  25  

 

 

Real Estate Index Fund

 

 

 

 

 

F.  During the year ended January 31, 2020, the fund purchased $16,033,654,000 of investment securities and sold $11,579,557,000 of investment securities, other than temporary cash investments. Purchases and sales include $10,268,399,000 and $7,738,448,000, respectively, in connection with in-kind purchases and redemptions of the fund’s capital shares.

 

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

 

          Year Ended January 31,  
  2020   2019  
  Amount   Shares   Amount   Shares  
  ($000 ) (000 ) ($000 ) (000 )
Investor Shares                
Issued 395,906   13,631   202,254   7,803  
Issued in Lieu of Cash Distributions 28,280   981   77,560   2,978  
Redeemed1 (2,172,330 ) (74,391 ) (635,088 ) (24,392 )
Net Increase (Decrease)—Investor Shares (1,748,144 ) (59,779 ) (355,274 ) (13,611 )
ETF Shares                
Issued 10,501,566   118,494   8,087,624   102,051  
Issued in Lieu of Cash Distributions        
Redeemed (7,779,684 ) (87,500 ) (10,789,217 ) (139,300 )
Net Increase (Decrease)—ETF Shares 2,721,882   30,994   (2,701,593 ) (37,249 )
Admiral Shares                
Issued1 5,327,904   42,120   2,761,716   24,919  
Issued in Lieu of Cash Distributions 647,759   5,156   680,270   6,116  
Redeemed (3,392,317 ) (26,697 ) (3,809,581 ) (34,442 )
Net Increase (Decrease)—Admiral Shares 2,583,346   20,579   (367,595 ) (3,407 )
Institutional Shares                
Issued 2,004,257   102,367   1,757,587   102,091  
Issued in Lieu of Cash Distributions 306,680   15,790   338,704   19,682  
Redeemed (1,576,740 ) (80,293 ) (2,467,738 ) (142,026 )
Net Increase (Decrease)—Institutional Shares 734,197   37,864   (371,447 ) (20,253 )

 

1 In November 2018, the fund announced changes to the availability and minimum investment criteria of the Investor and Admiral share classes. As a result, all of the outstanding Investor Shares automatically converted to Admiral Shares beginning in April 2019, with the exception of those held by Vanguard funds and certain other institutional investors. Investor Shares—Redeemed and Admiral Shares—Issued include 57,968,000 and 13,589,000 shares, respectively, in the amount of $1,688,895,000 from the conversion during the year ended January 31, 2020.

 

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Real Estate Index Fund

 

 

 

 

 

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

 

      Current Period Transactions    
  Jan. 31,       Proceeds   Realized               Jan. 31,  
  2019       from   Net   Change in       Capital Gain   2020  
  Market   Purchases   Securities   Gain   Unrealized       Distributions   Market  
  Value   at Cost   Sold1   (Loss)   App. (Dep.)   Income   Received   Value  
  ($000 ) ($000 ) ($000 ) ($000 ) ($000 ) ($000 ) ($000 ) ($000 )
Brookfield Property REIT Inc. 137,387   1,249   149,263   (7,667 ) 21,133        
Host Hotels & Resorts Inc. NA2   152,118   140,437   3,615   (66,162 ) 29,894   616   586,395  
iStar Inc. NA3   7,960   10,326   497   15,443   64   1,214   NA3  
Omega Healthcare Investors Inc. NA3   203,469   75,247   18,019   10,368   21,344   835   NA3  
Vanguard Market Liquidity Fund 801,441   NA4   NA4   69   52   5,704     561,293  
Vanguard Real Estate II Index Fund 6,719,464   265,125       928,467   199,690     7,847,621  
Winthrop Realty Trust 2,061         (1,455 )      
Total 7,660,353   629,921   375,273   14,533   907,846   256,696   2,665   8,995,309  

 

1 Does not include adjustments to related return of capital.
2 Not applicable—at January 31, 2019, the issuer was not an affiliated company of the fund.
3 Not applicable—at January 31, 2019, and January 31, 2020, the issuer was not an affiliated company of the fund, but it was affiliated during the year.
4 Not applicable—purchases and sales are for temporary cash investment purposes.

 

I.  Management has determined that no events or transactions occurred subsequent to January 31, 2020, that would require recognition or disclosure in these financial statements.

 

  27  

 

 

  

Real Estate II 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: September 26, 2017, Through January 31, 2020

Initial Investment of $100,000,000

 

 

 

    Average Annual Total Returns
Periods Ended January 31, 2020
 
    One
Year
Since
Inception
(9/26/2017)
Final Value
of a $100,000,000
Investment
Real Estate II Index Fund 16.78% 9.74% $124,382,109
Real Estate Spliced Index 16.82 9.81 124,572,985
Dow Jones U.S. Total Stock Market Float Adjusted Index 20.37 12.93 133,035,562

Real Estate Spliced Index: MSCI US REIT Index adjusted to include a 2% cash position (Lipper Money Market Average) through April 30, 2009; 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.

 

“Since Inception” performance is calculated from the fund’s inception date for both the fund and its comparative standard(s).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Financial Highlights for dividend and capital gains information.

  

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Real Estate II Index Fund

 

 

Sector Diversification

As of January 31, 2020

  

Diversified Real Estate Activities 0.2%
Diversified REITs 4.6
Health Care REITs 9.8
Hotel & Resort REITs 3.7
Industrial REITs 8.6
Office REITs 9.5
Real Estate Development 0.4
Real Estate Operating Companies 0.2
Real Estate Services 2.9
Residential REITs 15.0
Retail REITs 11.4
Specialized REITs 33.7

The table reflects the fund’s equity exposure, based on its investments in stocks and stock index futures. Any holdings in short-term reserves are excluded. 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 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.

  

  29  

 

  

Real Estate II Index Fund

 

 

Financial Statements

 

 

Statement of Net Assets

As of January 31, 2020

 

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.

 

        Market  
        Value•  
    Shares   ($000 )
Equity Real Estate Investment Trusts (REITs) (95.9%)1  
Diversified REITs (4.6%)      
  WP Carey Inc. 1,039,250   87,422  
  Liberty Property Trust 951,956   59,640  
  STORE Capital Corp. 1,335,436   52,416  
  VEREIT Inc. 3,372,558   32,916  
  PS Business Parks Inc. 125,241   20,985  
  Washington REIT 487,923   14,852  
  American Assets Trust Inc. 308,856   14,072  
  Colony Capital Inc. 2,819,083   13,165  
  Essential Properties Realty Trust Inc. 464,351   12,821  
  Empire State Realty Trust Inc. 920,792   12,486  
  Global Net Lease Inc. 515,635   10,689  
  Alexander & Baldwin Inc. 417,544   9,128  
  Armada Hoffler Properties Inc. 323,727   5,937  
  iStar Inc. 378,171   5,506  
  Gladstone Commercial Corp. 188,378   4,016  
  One Liberty Properties Inc. 90,548   2,476  
        358,527  
Health Care REITs (9.8%)        
  Welltower Inc. 2,466,385   209,421  
  Ventas Inc. 2,267,555   131,201  
  Healthpeak Properties Inc. 2,988,885   107,570  
  Medical Properties Trust Inc. 3,103,093   68,734  
  Omega Healthcare Investors Inc. 1,328,425   55,727  
  Healthcare Trust of America Inc. 1,248,503   39,990  
  Healthcare Realty Trust Inc. 786,337   28,355  
  Sabra Health Care REIT Inc. 1,153,097   24,792  
  National Health Investors Inc. 263,913   22,269  
  Physicians Realty Trust 1,127,576   21,819  
  CareTrust REIT Inc. 581,375   12,895  
  Diversified Healthcare Trust 1,449,773   11,192  
  LTC Properties Inc. 241,711   11,157  
  Universal Health Realty Income Trust 79,428   9,797  
  Community Healthcare Trust Inc. 112,174   5,291  
  New Senior Investment Group Inc. 505,706   3,853  
  Global Medical REIT Inc. 248,538   3,629  
        767,692  
Hotel & Resort REITs (3.7%)        
  Host Hotels & Resorts Inc. 4,442,420   72,589  
  Park Hotels & Resorts Inc. 1,460,177   32,036  
  Ryman Hospitality Properties Inc. 297,395   25,287  
  MGM Growth Properties LLC 692,710   22,125  
  Service Properties Trust 1,000,632   21,594  
  Apple Hospitality REIT Inc. 1,293,947   19,435  
  Pebblebrook Hotel Trust 794,503   18,846  
  Sunstone Hotel Investors Inc. 1,367,608   17,341  
  RLJ Lodging Trust 1,047,702   16,302  
  Xenia Hotels & Resorts Inc. 685,474   12,812  
  DiamondRock Hospitality Co. 1,219,324   11,791  
  Summit Hotel Properties Inc. 639,604   7,093  
  Chatham Lodging Trust 285,002   4,660  
  Hersha Hospitality Trust Class A 225,730   2,928  
  CorePoint Lodging Inc. 244,420   2,236  

  

  30  

 

 

Real Estate II Index Fund

  

 

      Market  
        Value•  
    Shares   ($000 )
  Ashford Hospitality Trust Inc. 587,373   1,445  
  Braemar Hotels & Resorts Inc. 169,658   1,354  
        289,874  
Industrial REITs (8.6%)        
  Prologis Inc. 3,841,171   356,768  
  Duke Realty Corp. 2,199,732   79,872  
  Americold Realty Trust 1,108,140   38,198  
  First Industrial Realty Trust Inc. 769,931   32,876  
  Rexford Industrial Realty Inc. 668,005   32,191  
  EastGroup Properties Inc. 228,584   31,104  
  STAG Industrial Inc. 773,655   24,943  
  Terreno Realty Corp. 398,935   22,843  
  Lexington Realty Trust Class B 1,288,193   14,260  
  Hannon Armstrong Sustainable Infrastructure Capital Inc. 400,335   13,647  
  Industrial Logistics Properties Trust 396,036   9,065  
^ Innovative Industrial Properties Inc. 100,949   9,035  
  Monmouth Real Estate Investment Corp. 553,989   8,105  
        672,907  
Office REITs (9.4%)        
  Boston Properties Inc. 940,666   134,844  
  Alexandria Real Estate Equities Inc. 690,279   112,654  
  Vornado Realty Trust 1,045,205   68,743  
  Kilroy Realty Corp. 614,437   50,734  
  SL Green Realty Corp. 501,528   46,161  
  Douglas Emmett Inc. 1,013,220   42,049  
  Cousins Properties Inc. 884,853   36,217  
  Hudson Pacific Properties Inc. 939,578   34,144  
  Highwoods Properties Inc. 631,418   31,640  
  JBG SMITH Properties 775,330   31,440  
  Equity Commonwealth 742,744   24,355  
  Corporate Office Properties Trust 681,369   20,284  
  Piedmont Office Realty Trust Inc. 766,538   17,776  
  Brandywine Realty Trust 1,071,706   16,740  
  Paramount Group Inc. 1,140,943   16,042  
  Columbia Property Trust Inc. 711,804   15,019  
  Mack-Cali Realty Corp. 552,202   12,126  
  Easterly Government Properties Inc. 434,339   10,515  
  Office Properties Income Trust 292,668   9,959  
  Franklin Street Properties Corp. 653,021   4,963  
  City Office REIT Inc. 331,630   4,484  
        740,889  
Residential REITs (14.9%)        
  Equity Residential 2,256,977   187,510  
  AvalonBay Communities Inc. 849,945   184,174  
  Essex Property Trust Inc. 400,019   123,910  
  Invitation Homes Inc. 3,272,589   102,988  
  Mid-America Apartment Communities Inc. 694,096   95,237  
  Sun Communities Inc. 551,857   89,495  
  UDR Inc. 1,782,108   85,381  
  Equity LifeStyle Properties Inc. 1,052,748   76,587  
  Camden Property Trust 589,260   66,250  
  Apartment Investment & Management Co. 906,158   47,764  
  American Homes 4 Rent 1,642,722   44,896  
  American Campus Communities Inc. 836,145   38,354  
  Independence Realty Trust Inc. 548,637   8,048  
  NexPoint Residential Trust Inc. 116,318   5,676  
  Investors Real Estate Trust 70,683   5,209  
  UMH Properties Inc. 221,251   3,496  
  Front Yard Residential Corp. 311,169   3,339  
  Preferred Apartment Communities Inc. 269,596   3,176  
        1,171,490  
Retail REITs (11.4%)        
  Simon Property Group Inc. 1,874,568   249,599  
  Realty Income Corp. 1,936,724   151,859  
  Regency Centers Corp. 1,019,629   63,258  
  Federal Realty Investment Trust 456,143   57,027  
  National Retail Properties Inc. 995,022   55,721  
  Kimco Realty Corp. 2,568,841   48,936  
  Brixmor Property Group Inc. 1,812,773   36,183  
  Spirit Realty Capital Inc. 548,308   28,940  
  Weingarten Realty Investors 743,347   21,631  
  Agree Realty Corp. 255,379   19,391  
  

  31  

 

  

Real Estate II Index Fund

 

 

 

      Market  
        Value•  
    Shares   ($000 )

  Retail Properties of America Inc. 1,301,343   15,811  
^ Macerich Co. 687,708   15,343  
  Urban Edge Properties 737,692   13,566  
  Acadia Realty Trust 514,080   12,759  
  Retail Opportunity Investments Corp. 695,808   11,530  
  SITE Centers Corp. 878,528   11,166  
  Taubman Centers Inc. 373,171   9,859  
  Kite Realty Group Trust 512,552   8,816  
  American Finance Trust Inc. 646,364   8,383  
^ Tanger Factory Outlet Centers Inc. 571,081   8,355  
^ Seritage Growth Properties 213,305   7,833  
  RPT Realty 487,993   6,807  
  Getty Realty Corp. 212,341   6,693  
  Alexander’s Inc. 14,006   4,519  
  Saul Centers Inc. 83,911   4,144  
  Urstadt Biddle Properties Inc. 182,306   4,133  
^ Washington Prime Group Inc. 1,134,262   3,414  
  Retail Value Inc. 97,024   3,189  
  Whitestone REIT 219,605   2,877  
^ Pennsylvania REIT 445,913   1,757  
  Cedar Realty Trust Inc. 539,698   1,403  
§ Spirit MTA REIT 257,871   198  
        895,100  
Specialized REITs (33.5%)        
  American Tower Corp. 2,694,308   624,379  
  Crown Castle International Corp. 2,530,386   379,153  
  Equinix Inc. 516,235   304,439  
  Public Storage 956,363   213,996  
  SBA Communications Corp. 688,398   171,797  
  Digital Realty Trust Inc. 1,267,998   155,951  
  Weyerhaeuser Co. 4,533,588   131,247  
  Extra Space Storage Inc. 782,162   86,570  
  VICI Properties Inc. 2,805,681   75,192  
  Gaming and Leisure Properties Inc. 1,241,375   58,661  
  Iron Mountain Inc. 1,747,311   55,233  
  Lamar Advertising Co. 523,092   48,548  
  CyrusOne Inc. 688,905   41,920  
  CubeSmart 1,171,255   37,094  
  EPR Properties 472,174   33,699  
  Life Storage Inc. 283,888   32,130  
  CoreSite Realty Corp. 224,506   26,368  
  Outfront Media Inc. 872,293   25,942  
  Rayonier Inc. 788,861   23,966  
  QTS Realty Trust Inc. 336,609   19,146  
  PotlatchDeltic Corp. 408,805   17,579  
  Four Corners Property Trust Inc. 416,766   12,624  
  National Storage Affiliates Trust 361,451   12,344  
  GEO Group Inc. 739,245   11,680  
  CoreCivic Inc. 725,712   11,575  
  Uniti Group Inc. 1,175,312   7,440  
  CorEnergy Infrastructure Trust Inc.