Vanguard
Real Estate ETF
Prospectus
May
27, 2022
Exchange-traded
fund shares that are not individually redeemable and are listed on NYSE
Arca
Vanguard
Real Estate Index Fund ETF Shares (VNQ)
This prospectus contains financial data for the Fund through the fiscal year ended January 31, 2022.
The
Securities and Exchange Commission (SEC) has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is
a
criminal offense.
(Fees paid directly from your investment)
|
| |
|
Transaction
Fee on Purchases and Sales |
|
|
Transaction
Fee on Reinvested Dividends |
|
|
Transaction
Fee on Conversion to ETF Shares |
|
*
(Expenses that you pay each year as a percentage of the value of your investment)
|
| |
|
Management
Fees |
|
|
12b-1
Distribution Fee |
|
|
Other
Expenses |
|
|
Total
Annual Fund Operating Expenses |
|
1
|
1
Year |
3
Years |
5
Years |
10
Years |
|
$ |
$ |
$ |
$ |
2
3
4
1 The year-to-date return as
of the most recent calendar quarter, which ended on March 31, 2022, was
-5.97%.
|
|
Total
Return |
Quarter |
|
|
|
|
|
|
- |
|
|
|
1
Year |
5
Years |
10
Years |
|
Vanguard
Real Estate Index Fund ETF Shares |
|
|
|
|
Based
on NAV |
|
|
|
|
Return Before
Taxes |
|
|
|
|
Return After
Taxes on Distributions |
|
|
|
|
Return After
Taxes on Distributions and Sale of Fund Shares |
|
|
|
|
Based
on Market Price |
|
|
|
|
Return Before
Taxes |
|
|
|
|
Real
Estate Spliced Index
(reflects no
deduction for fees, expenses, or taxes) |
|
|
|
|
MSCI
US Investable Market Real Estate 25/50 Index
(reflects no
deduction for fees, expenses, or taxes) |
|
|
|
|
Dow
Jones U.S. Total Stock Market Float Adjusted Index
(reflects no
deduction for fees, expenses, or taxes) |
|
|
|
5
Investment
Advisor
The Vanguard Group,
Inc. (Vanguard)
Portfolio
Managers
Walter Nejman,
Portfolio Manager at Vanguard. He has co-managed the Fund since
2016.
Gerard C. O’Reilly,
Principal of Vanguard. He has managed the Fund since its inception in 1996
(co-managed since 2016).
Purchase
and Sale of Fund Shares
ETF Shares may only
be bought and sold in the secondary market through a brokerage firm. The price
you pay or receive for ETF Shares will be the prevailing market price, which may
be more (premium) or less (discount) than the NAV of the shares. The brokerage
firm may charge you a commission to execute the transaction. Unless imposed by
your brokerage firm, there is no minimum dollar amount you must invest and no
minimum number of shares you must buy. ETF Shares of the Fund cannot be directly
purchased from or redeemed with the Fund, except by certain authorized
broker-dealers. These broker-dealers may purchase and redeem ETF Shares only in
large blocks (Creation Units), typically in exchange for baskets of
securities.
An investor may incur costs attributable to the difference between the highest price a buyer is willing to pay to purchase ETF Shares (bid) and the lowest price a seller is willing to accept for ETF Shares (ask) when buying or selling shares in the secondary market (bid-ask spread). Recent information, including information on the Fund's NAV, market price, premiums and discounts, and bid-ask spreads, is available online at vanguard.com.
An investor may incur costs attributable to the difference between the highest price a buyer is willing to pay to purchase ETF Shares (bid) and the lowest price a seller is willing to accept for ETF Shares (ask) when buying or selling shares in the secondary market (bid-ask spread). Recent information, including information on the Fund's NAV, market price, premiums and discounts, and bid-ask spreads, is available online at vanguard.com.
Tax
Information
The Fund’s distributions may be
taxable as ordinary income or capital gain or may constitute non-taxable return
of capital. If you are investing through a tax-advantaged account, such as an
IRA or an employer-sponsored retirement or savings plan, special tax rules
apply.
6
Payments
to Financial Intermediaries
The Fund and its
investment advisor do not pay financial intermediaries for sales of Fund
shares.
7
Investing
in Vanguard ETF®
Shares
What
Are Vanguard ETF Shares?
Vanguard ETF Shares are an
exchange-traded class of shares issued by certain Vanguard funds. ETF Shares
represent an interest in the portfolio of stocks or bonds held by the issuing
fund. This prospectus describes Vanguard Real Estate ETF, a class of shares
issued by Vanguard Real Estate Index Fund. In addition to ETF Shares, the Fund
offers three conventional (i.e., not exchange-traded) classes of shares. This
prospectus, however, relates only to ETF Shares.
How
Are Vanguard ETF Shares Different From Conventional Mutual Fund
Shares?
Conventional mutual
fund shares can be directly purchased from and redeemed with the issuing fund
for cash at the net asset value (NAV), typically calculated once a day. ETF
Shares, by contrast, cannot be purchased directly from or redeemed directly with
the issuing fund by an individual investor. Rather, ETF Shares can only be
purchased or redeemed directly from the issuing fund by certain authorized
broker-dealers. These broker-dealers may purchase and redeem ETF Shares only in
large blocks (Creation Units), usually in exchange for baskets of securities and
not for cash (although some funds issue and redeem Creation Units in exchange
for cash or a combination of cash and securities).
An organized
secondary trading market is expected to exist for ETF Shares, unlike
conventional mutual fund shares, because ETF Shares are listed for trading on a
national securities exchange. Individual investors can purchase and sell ETF
Shares on the secondary market through a broker. Secondary-market transactions
occur not at NAV, but at market prices that are subject to change throughout the
day based on the supply of and demand for ETF Shares, changes in the prices of
the fund’s portfolio holdings, and other factors.
The market price of
a fund's ETF Shares typically will differ somewhat from the NAV of those shares.
The difference between market price and NAV is expected to be small most of the
time, but in times of market disruption or extreme market volatility, the
difference may become significant.
How
Do I Buy and Sell Vanguard ETF Shares?
ETF Shares of the
Fund are listed for trading on NYSE Arca. You can buy and sell ETF Shares on the
secondary market in the same way you buy and sell any other exchange-traded
security—through a broker. Your broker may charge a commission to execute a
transaction. You will also incur the cost of the “bid-ask spread,” which is the
difference between the highest price a buyer is willing to pay to purchase ETF
Shares (bid) and the lowest price a seller is willing to accept for ETF Shares
(ask) when buying or selling shares in the secondary market. Because
secondary-market transactions occur at market prices, you may pay more (premium)
or less (discount) than NAV when you buy ETF Shares and
8
receive more or
less than NAV when you sell those shares. In times of severe market disruption,
the bid-ask spread and premiums/discounts can increase significantly. Unless
imposed by your broker, there is no minimum dollar amount you must invest and no
minimum number of ETF Shares you must buy.
Your ownership of
ETF Shares will be shown on the records of the broker through which you hold the
shares. Vanguard will not have any record of your ownership. Your account
information will be maintained by your broker, which will provide you with
account statements, confirmations of your purchases and sales of ETF Shares, and
tax information. Your broker also will be responsible for ensuring that you
receive income and capital gains distributions, as well as shareholder reports
and other communications from the fund whose ETF Shares you own. You will
receive other services (e.g., dividend reinvestment and average cost
information) only if your broker offers these services.
9
Investing
in Index Funds
What
Is Indexing?
Indexing is an
investment strategy for tracking the performance of a specified market
benchmark, or “index.” An index is a group of securities whose overall
performance is used as a standard to measure the investment performance of a
particular market. There are many types of indexes. Some represent entire
markets—such as the U.S. stock market or the U.S. bond market. Other indexes
cover market segments—such as small-capitalization stocks or short-term bonds.
One cannot invest directly in an index.
The index sponsor
determines the securities to include in the index and the weighting of each
security in the index. Under normal circumstances, the index sponsor will
rebalance an index on a regular schedule. An index sponsor may carry out
additional ad hoc index rebalances or delay or cancel a scheduled rebalance.
Generally, the index sponsor does not provide any warranty, or accept any
liability, with respect to the quality, accuracy, or completeness of either the
target index or its related data. Errors made by the index sponsor may occur
from time to time and may not be identified by the index sponsor for a period of
time or at all. Vanguard does not provide any warranty or guarantee against such
errors. Therefore, the gains, losses, or costs associated with the index
sponsor’s errors will generally be borne by the index fund and its
shareholders.
An index fund seeks to hold all, or
a representative sample, of the securities that make up its target index. Index
funds attempt to mirror the performance of the target index, for better or
worse. However, an index fund generally does not perform exactly like its target index. For
example, index funds have operating expenses and transaction costs. Market
indexes do not, and therefore they will usually have a slight performance
advantage over funds that track them. The ability of an index fund to match its
performance to that of its target index can also be impacted by, among other
things, the timing and size of cash flows, asset valuation differences, and the
size of the fund. Market disruptions and regulatory or policy restrictions could
also have an adverse effect on a fund’s ability to adjust its exposure to the
required levels in order to track the index. The risk that a fund may not track
the performance of its target index may be heightened during times of increased
market volatility or other unusual market conditions.
Index funds
typically have the following characteristics:
• Variety
of investments. Depending on a
fund’s benchmark index, the fund may invest in the securities of a variety of
companies, industries, and/or governments or government agencies.
• Relative
performance consistency. Because they seek
to track market benchmarks, index funds usually do not perform dramatically
better or worse than their benchmarks.
• Low
cost.
Index funds are generally inexpensive to run compared with actively managed
funds. They have low or no research costs and typically keep trading
activity—and thus brokerage commissions and other transaction costs—to a minimum
compared with actively managed funds.
10
More
on the Fund and ETF Shares
This prospectus
describes the principal risks you would face as a Fund shareholder. It is
important to keep in mind one of the main principles of investing: generally,
the higher the risk of losing money, the higher the potential reward. The
reverse, also, is generally true: the lower the risk, the lower the potential
reward. As you consider an investment in any fund, you should take into account
your personal tolerance for fluctuations in the securities markets. Look for
this 
symbol throughout
the prospectus. It is used to mark detailed information about the more
significant risks that you would confront as a Fund shareholder. To highlight
terms and concepts important to fund investors, we have provided Plain
Talk® explanations along
the way. Reading the prospectus will help you decide whether the Fund is the
right investment for you. We suggest that you keep this prospectus for future
reference.
symbol throughout
the prospectus. It is used to mark detailed information about the more
significant risks that you would confront as a Fund shareholder. To highlight
terms and concepts important to fund investors, we have provided Plain
Talk® explanations along
the way. Reading the prospectus will help you decide whether the Fund is the
right investment for you. We suggest that you keep this prospectus for future
reference.Share
Class Overview
This prospectus offers the Fund’s
ETF Shares, an exchange-traded class of shares. Separate prospectuses offer the
Fund's Admiral™ Shares, which generally have an investment minimum of $3,000,
and Investor Shares, which are generally available only to Vanguard funds that
operate as funds of funds and to certain retirement plan clients that receive
recordkeeping services from Vanguard. Another prospectus offers the Fund‘s
Institutional Shares, which are generally for investors who invest a minimum of
$5 million.
All share classes offered by the Fund have the same investment objective, strategies, and policies. However, different share classes have different expenses; as a result, their investment returns will differ.
All share classes offered by the Fund have the same investment objective, strategies, and policies. However, different share classes have different expenses; as a result, their investment returns will differ.
A
Similar but Different Fund
The Fund offered by
this prospectus should not be confused with Vanguard Real Estate II Index Fund,
a separate Vanguard fund that also seeks to track the performance of the MSCI US
Investable Market Real Estate 25/50 Index and is anticipated to be the
underlying fund in which this fund invests. Both funds seek to replicate the
stocks that make up the target index. This index replication strategy, combined
with differences in the funds’ respective cash flows and expenses, is expected
to produce slightly different investment returns by the funds. To obtain a
prospectus for Vanguard Real Estate II Index Fund, institutional investors may
call Vanguard’s Institutional Division at 888-809-8102 or may call their
relationship managers directly.
A
Note to Investors
Vanguard ETF Shares
can be purchased directly from the issuing Fund only by certain authorized
broker-dealers in exchange for a basket of securities (or, in some cases, for
cash or a combination of cash and securities). Individual
11
investors generally
will not be able to purchase ETF Shares directly from the Fund. Instead, these
investors will purchase ETF Shares on the secondary market through a
broker.
|
Plain
Talk About Fund Expenses |
|
All funds
have operating expenses. These expenses, which are deducted
from a
fund’s gross income, are expressed as a percentage of the net assets
of the
fund. Assuming that operating expenses remain as stated in the Fees
and
Expenses section, Vanguard Real Estate Index Fund ETF Shares’
expense
ratio would be 0.12%, or $1.20 per $1,000 of average net assets.
The
average expense ratio for real estate funds in 2021 was 1.16%, or
$11.60 per
$1,000 of average net assets (derived from data provided by
Lipper, a
Thomson Reuters Company, which reports on the fund
industry). |
|
Plain
Talk About Costs of Investing |
|
Costs
are an important consideration in choosing an ETF. That is because
you,
as a shareholder, pay a proportionate share of the costs of operating a
fund
and any transaction costs incurred when the fund buys or sells
securities.
These costs can erode a substantial portion of the gross income
or
the capital appreciation a fund achieves. Even seemingly small differences
in
expenses can, over time, have a dramatic effect on a fund’s
performance. |
The following
sections explain the principal investment strategies and policies that the Fund
uses in pursuit of its investment objective. The Fund's board of trustees, which
oversees the Fund's management, may change investment strategies or policies in
the interest of shareholders without a shareholder vote, unless those strategies
or policies are designated as fundamental. Under normal circumstances, the Fund
will invest at least 80% of its assets in the stocks that make up its target
index. The Fund may change its 80% policy only upon 60 days‘ notice to
shareholders.
Market
Exposure
The Fund invests in
stocks of publicly traded equity real estate investment trusts and other real
estate-related investments.
12
|
Plain
Talk About REITs |
|
Rather
than directly owning properties—which can be costly and difficult to
convert
into cash when needed—some investors buy shares in a company
that
owns and manages real estate. Such a company is known as a real
estate
investment trust, or REIT. Unlike corporations, REITs do not have to
pay
income taxes if they meet certain Internal Revenue Code requirements.
To
qualify, a REIT must distribute at least 90% of its taxable income to its
shareholders
and receive at least 75% of that income from rents,
mortgages,
and sales of property. REITs offer investors greater liquidity and
diversification
than direct ownership of a handful of properties. REITs also
offer
the potential for higher income than an investment in common stocks
would
provide. As with any investment in real estate, however, a REIT’s
performance
depends on specific factors, such as the company’s ability to
find
tenants for its properties, to renew leases, and to finance property
purchases
and renovations. That said, returns from REITs may not
correspond
to returns from direct property
ownership. |
The
Fund is subject to investment style risk, which is the chance that returns from
the stocks of REITs and other real estate-related investments—which typically
are small- or mid-capitalization stocks— will trail returns from the overall
stock market. Historically, these stocks have performed quite differently from
the overall market.
Stocks of publicly traded companies
are often classified according to market capitalization, which is the market
value of a company’s outstanding shares. These classifications typically include
small-cap, mid-cap, and large-cap. It is important to understand that there are
no “official” definitions of small-, mid-, and large-cap, even among Vanguard
fund advisors, and that market capitalization ranges can change over time.
Securities in the MSCI US Investable Market Real Estate 25/50 Index have
differing levels of capitalization. The asset-weighted median market
capitalization of the Fund’s stock holdings as of January 31, 2022, was $28.1
billion.
Small- and mid-cap
stocks tend to have greater volatility than large-cap stocks because, among
other things, smaller companies often have fewer customers, financial resources,
and products than larger firms. Such characteristics can make small and mid-size
companies more sensitive to changing economic conditions. REIT stocks tend to
have a significant amount of dividend income, which can reduce the impact of
this volatility. However, the Fund is subject to
13
additional risk
because of the concentration of its investments in the real estate sector. This
focus on a single sector may result in more risk than that for a more
diversified, multisector portfolio.
|
Plain
Talk About Types of REITs |
|
An
equity
REIT
generally owns properties directly. Equity REITs typically
generate
income from rental and lease payments, and they offer the
potential
for growth from property appreciation as well as occasional capital
gains
from the sale of property. A mortgage
REIT
makes loans to commercial
real
estate developers. Mortgage REITs earn interest income and are subject
to
credit risk (i.e., the chance that a developer will fail to repay a loan).
A
hybrid
REIT
holds both properties and mortgages. The Fund invests in equity
REITs
and other real estate-related
investments. |
The
Fund is subject to stock market risk, which is the chance that stock prices
overall will decline. Stock markets tend to move in cycles, with periods of
rising prices and periods of falling prices. The Fund‘s target index may, at
times, become focused in stocks of a limited number of companies, which could
cause the Fund to underperform the overall stock market.
The
Fund is subject to interest rate risk, which is the chance that REIT stock
prices overall will decline and that the cost of borrowing for REITs will
increase because of rising interest rates. Interest rate risk is high for the
Fund.
In general, during
periods of high interest rates, REITs may lose some of their appeal for
investors who may be able to obtain higher yields from other income-producing
investments, such as long-term bonds. Higher interest rates also mean that
financing for property purchases and improvements is more costly and difficult
to obtain.
The
Fund is subject to industry concentration risk, which is the chance that the
stocks of REITs and other real estate-related investments will decline because
of adverse developments affecting the real estate industry and real property
values. Because the Fund concentrates its assets in these stocks, industry
concentration risk is high.
Because of its
emphasis on REIT stocks, the Fund's performance may at times be linked to the
ups and downs of the real estate market. In general, real estate values can be
affected by a variety of factors, including, but not limited to, supply and
demand for properties, the economic health of the nation as well as different
regions, and the strength of specific industries that rent properties.
Ultimately, an individual REIT’s performance depends on the types and locations
of the
14
properties it owns
and on how well the REIT manages its properties. For instance, rental income
could decline because of extended vacancies, increased competition from nearby
properties, tenants’ failure to pay rent, regulatory limitations on rents,
fluctuations in rental income, variations in market rental rates, or incompetent
management. Property values could decrease because of overbuilding in the area,
environmental liabilities, uninsured damages caused by natural disasters, a
general decline in the neighborhood, losses because of casualty or condemnation,
increases in property taxes, or changes in zoning laws. Loss of IRS status as a
qualified REIT may also affect an individual REIT’s performance. In addition,
many real estate issuers, including REITs, utilize leverage (and some may be
highly leveraged), which increases investment risk and could adversely affect
the issuer’s operations and market value in periods of rising interest
rates.
Market disruptions can adversely
affect local and global markets as well as normal market conditions and
operations. Any such disruptions could have an adverse impact on the value of
the Fund’s investments and Fund performance.
Security
Selection
The Fund attempts
to track the investment performance of a benchmark index that measures the
performance of publicly traded equity REITs and other real estate-related
investments, including but not limited to specialized REITs, and real estate
management and development companies.
The Fund attempts
to hold each stock contained in the MSCI US Investable Market Real Estate 25/50
Index either directly or indirectly through the underlying fund in roughly the
same proportion as represented in the Index itself. For example, if 5% of the
MSCI US Investable Market Real Estate 25/50 Index were made up of the stock of a
specific REIT, the Fund would seek to invest approximately the same percentage
of its assets in that stock.
The MSCI US
Investable Market Real Estate 25/50 Index is a float-adjusted
market-capitalization-weighted index. It is made up of the stocks of publicly
traded equity REITs and other real estate-related investments that meet certain
criteria. For example, to be included initially in the Index, a REIT must meet a
minimum market capitalization threshold and have enough shares and trading
volume to be considered liquid. In line with the Index, the Fund invests in
equity REITs and other real estate-related investments, including but not
limited to specialized REITs, and real estate management and development
companies.
15
As of January 31, 2022, 165 equity
REITs were included in the Index. On a quarterly basis, the Index is rebalanced
and its current stocks are tested for continued compliance with the guidelines
of the Index. A REIT may be removed from the Index because of a decline in
market capitalization, because it becomes illiquid, or because of other changes
in its status.
The
Fund is subject to nondiversification risk, which is the chance that the Fund
may invest a greater percentage of its assets in a particular issuer or a group
of issuers or may own larger positions of an issuer’s voting stock than a
diversified fund.
Stocks in the MSCI US Investable
Market Real Estate 25/50 Index represent a broadly diversified range of property
types. The makeup of the Fund, as of January 31, 2022, was:
|
Fund
Allocation by
REIT
Type |
Percentage
of Fund |
|
Specialized |
36.0% |
|
Residential |
15.2 |
|
Industrial |
12.5 |
|
Retail |
10.8 |
|
Health
Care |
8.0 |
|
Office |
6.6 |
|
Real Estate
Services |
4.7 |
|
Diversified |
3.1 |
|
Hotel &
Resort |
2.5 |
|
Real Estate
Development |
0.3 |
|
Real Estate
Operating Companies |
0.2 |
|
Diversified
Real Estate Activities |
0.1 |
Other
Investment Policies and Risks
The Fund reserves
the right to substitute a different index for the index it currently tracks if
the current index is discontinued, if the Fund's agreement with the sponsor of
its target index is terminated, or for any other reason determined in good faith
by the Fund’s board of trustees. In any such instance, the substitute index
would represent the same market segment as the current index.
The
Fund is subject to REIT ownership limitation risk, which is the chance that the
Fund may be unable to purchase (or otherwise obtain economic exposure, including
through investing in the underlying fund, to) the desired amounts of certain
REITs included in its target index.
16
The Fund has
significant ownership positions in many REITs included in its target index. For
tax and other reasons, a REIT imposes limits on how much of its securities
investors may own. If an ownership limit is reached, Vanguard may seek to obtain
an ownership waiver from the REIT to exceed the limit. If the Fund is unable to
obtain a waiver or an existing waiver is terminated, then the Fund may seek to
obtain economic exposure to the REIT through alternative means, such as through
a total return swap, which may be more costly than owning REIT shares directly.
If the Fund is unable to obtain either an ownership waiver or economic exposure
to the REIT through alternative means, the Fund may experience increased
tracking error. In addition, to maintain its qualification as a regulated
investment company for tax purposes, the Fund may be unable to obtain additional
economic exposure to certain REITs, which may increase tracking error.
Additional measures could be taken in the future in response to REIT ownership
limits, including changing the Fund’s investment strategy, limiting additional
purchases into the Fund, or any other appropriate action.
The Fund may invest
a portion of its assets in the underlying fund. The underlying fund will also
employ an indexing investment approach designed to track the performance of the
MSCI US Investable Market Real Estate 25/50 Index. The underlying fund’s
investments are subject to the same risks as if they were held directly by the
Fund. Because the strategy of the underlying fund will be substantially similar
to that of the Fund, the principal risks of the Fund’s investment in the
underlying fund will not be materially different from the risks associated with
the Fund’s other investments. However, the Fund’s investment in the underlying
fund is subject to the ongoing existence of the underlying fund and the
underlying fund’s ability to provide economic exposure to REITs included in the
Fund’s target index.
If the Fund is unable to invest
directly or through the underlying fund, or to obtain exposure to REITs through
alternative means, then the Fund may be unable to own the desired amount of
certain REITs, which may increase tracking error.
The Fund may invest
in foreign securities to the extent necessary to carry out its investment
strategy of holding all, or substantially all, of the stocks that make up the
index it tracks.
In addition to
investing in common stocks of REITs and other real estate-related investments,
the Fund may make other kinds of investments to achieve its investment
objective.
The
Fund may invest in derivatives. In general, investments in derivatives may
involve risks different from, and possibly greater than, those of investments
directly in the underlying securities or assets.
17
Generally speaking,
a derivative is a financial contract whose value is based on the value of a
financial asset (such as a stock, a bond, or a currency), a physical asset (such
as gold, oil, or wheat), a market index, or a reference rate. The Fund may
invest in derivatives only if the expected risks and rewards of the derivatives
are consistent with the investment objective, policies, strategies, and risks of
the Fund as disclosed in this prospectus. In particular, derivatives will be
used only when they may help the advisor to accomplish one or more of the
following:
• Invest in
eligible asset classes with greater efficiency and lower cost than is possible
through direct investment.
• Obtain economic
exposure to a stock, a basket of stocks, or an index when deemed desirable or
necessary.
• Add value when
these instruments are attractively priced.
The market for many
derivatives is, or suddenly can become, illiquid, which may result in
significant, rapid, and unpredictable changes in the prices for derivatives. The
Fund's use of a derivative subjects it to the risk of nonperformance by the
counterparty, potentially resulting in delayed or partial payment or even
nonpayment of amounts due under the derivative contract. The Fund attempts to
mitigate this risk by requiring the posting of collateral by its
counterparty.
The Fund's
derivative investments may include total return swaps or other
derivatives.
|
Plain
Talk About Derivatives |
|
Derivatives
can take many forms. Some forms of derivatives—such as
exchange-traded
futures and options on securities, commodities, or
indexes—have
been trading on regulated exchanges for decades. These
types
of derivatives are standardized contracts that can easily be bought and
sold
and whose market values are determined and published daily. On the
other
hand, non-exchange-traded derivatives—such as certain swap
agreements—tend
to be more specialized or complex and may be more
difficult
to accurately value.
|
18
Cash
Management
The Fund's daily
cash balance may be invested in Vanguard Market Liquidity Fund and/or Vanguard
Municipal Cash Management Fund (each, a CMT Fund), which are low-cost money
market funds. When investing in a CMT Fund, the Fund bears its proportionate
share of the expenses of the CMT Fund in which it invests. Vanguard receives no
additional revenue from Fund assets invested in a CMT Fund.
Methods
Used to Meet Redemption Requests
Redemptions of ETF
Shares are typically met through a combination of cash and securities held by
the Fund; see “How Are Vanguard ETF Shares Different From Conventional Mutual
Fund Shares?” If cash is used to meet redemptions, the Fund typically obtains
such cash through positive cash flows or the sale of Fund holdings consistent
with the Fund’s investment objective and strategy. Please consult the Fund's
Statement
of Additional Information for further
information on redemptions of ETF Shares.
Under certain
circumstances, the Fund may borrow money (subject to certain regulatory
conditions and if available under board-approved procedures) through an
interfund lending facility; through a bank line-of-credit, including a joint
committed credit facility; or through an uncommitted line-of-credit from
Vanguard in order to meet redemption requests.
Temporary
Investment Measures
The Fund may
temporarily depart from its normal investment policies and strategies when the
advisor believes that doing so is in the Fund's best interest, so long as the
strategy or policy employed is consistent with the Fund's investment objective.
For instance, the Fund may invest beyond its normal limits in derivatives or
exchange-traded funds that are consistent with the Fund's investment objective
when those instruments are more favorably priced or provide needed liquidity, as
might be the case when the Fund receives large cash flows that it cannot
prudently invest immediately.
Special
Risks of Exchange-Traded Shares
ETF
Shares are not individually redeemable. They
can be redeemed with the issuing Fund at NAV only by certain authorized
broker-dealers and only in large blocks known as Creation Units. Consequently,
if you want to liquidate some or all of your ETF Shares, you must sell them on
the secondary market at prevailing market prices.
19
The
market price of ETF Shares may differ from NAV. Although
it is expected that the market price of an ETF Share typically will approximate
its NAV, there may be times when the market price and the NAV differ
significantly. Thus, you may pay more (premium) or less (discount) than NAV when
you buy ETF Shares on the secondary market, and you may receive more or less
than NAV when you sell those shares. These discounts and premiums are likely to
be greatest during times of market disruption or extreme market
volatility.
Vanguard’s website
at vanguard.com shows the previous
day’s closing NAV and closing market price for the Fund's ETF Shares. The
website also discloses, in the Premium/
Discount Analysis section of the ETF
Shares' Price & Performance page, how frequently the Fund's ETF Shares
traded at a premium or discount to NAV (based on closing NAVs and market prices)
and the magnitudes of such premiums and discounts.
An
active trading market may not exist. Although
Vanguard ETF Shares are listed on a national securities exchange, it is possible
that an active trading market may not be maintained. Although this could happen
at any time, it is more likely to occur during times of severe market
disruption. If you attempt to sell your ETF Shares when an active trading market
is not functioning, you may have to sell at a significant discount to NAV. In
extreme cases, you may not be able to sell your shares at
all.
Trading
may be halted. Trading
of Vanguard ETF Shares on an exchange may be halted by the activation of
individual or marketwide trading halts (which halt trading for a specific period
of time when the price of a particular security or overall market prices decline
by a specified percentage). Trading of ETF Shares may also be halted if (1) the
shares are delisted from the listing exchange without first being listed on
another exchange or (2) exchange officials determine that such action is
appropriate in the interest of a fair and orderly market or for the protection
of investors.
Conversion
Privilege
Owners of
conventional shares issued by the Fund may convert those shares to ETF Shares of
equivalent value of the same fund. Please note that investors who own
conventional shares through a 401(k) plan or other employer-sponsored retirement
or benefit plan generally may not convert those shares to ETF Shares and should
check with their plan sponsor or recordkeeper. ETF Shares, whether acquired
through a conversion or purchased on the secondary market, cannot be converted
to conventional shares by a shareholder. Also, ETF Shares of one fund cannot be
exchanged for ETF Shares of another fund.
20
You must hold ETF
Shares in a brokerage account. Thus, before converting conventional shares to
ETF Shares, you must have an existing, or open a new, brokerage account. This
account may be with Vanguard Brokerage Services® or with any other
brokerage firm. To initiate a conversion of conventional shares to ETF Shares,
please contact your broker.
Vanguard Brokerage
Services does not impose a fee on conversions from Vanguard conventional shares
to Vanguard ETF Shares. However, other brokerage firms may charge a fee to
process a conversion. Vanguard reserves the right, in the future, to impose a
transaction fee on conversions or to limit, temporarily suspend, or terminate
the conversion privilege.
Converting
conventional shares to ETF Shares is generally accomplished as follows. First,
after your broker notifies Vanguard of your request to convert, Vanguard will
transfer your conventional shares from your account to the broker’s omnibus
account with Vanguard (an account maintained by the broker on behalf of all its
customers who hold conventional Vanguard fund shares through the broker). After
the transfer, Vanguard’s records will reflect your broker, not you, as the owner
of the shares. Next, your broker will instruct Vanguard to convert the
appropriate number or dollar amount of conventional shares in its omnibus
account to ETF Shares of equivalent value, based on the respective NAVs of the
two share classes.
Your Fund’s
transfer agent will reflect ownership of all ETF Shares in the name of the
Depository Trust Company (DTC). The DTC will keep track of which ETF Shares
belong to your broker, and your broker, in turn, will keep track of which ETF
Shares belong to you.
Because the DTC is
unable to handle fractional shares, only whole shares can be converted. For
example, if you owned 300.25 conventional shares, and this was equivalent in
value to 90.75 ETF Shares, the DTC account would receive 90 ETF Shares.
Conventional shares with a value equal to 0.75 ETF Shares (in this example, that
would be 2.481 conventional shares) would remain in the broker’s omnibus account
with Vanguard. Your broker then could either (1) credit your account with 0.75
ETF Shares or (2) redeem the 2.481 conventional shares for cash at NAV and
deliver that cash to your account. If your broker chose to redeem your
conventional shares, you would realize a gain or loss on the redemption that
must be reported on your tax return (unless you hold the shares in an IRA or
other tax-deferred account). Please consult your broker for information on how
it will handle the conversion process, including whether it will impose a fee to
process a conversion.
21
If you convert your
conventional shares to ETF Shares through Vanguard Brokerage Services,
all conventional
shares for which you request conversion will be converted to ETF Shares of
equivalent value. Because no fractional shares will have to be sold, the
transaction will not be taxable.
Here are some
important points to keep in mind when converting conventional shares of a
Vanguard fund to ETF Shares:
• The conversion
process can take anywhere from several days to several weeks, depending on your
broker. Vanguard generally will process conversion requests either on the day
they are received or on the next business day. Vanguard imposes conversion
blackout windows around the dates when a fund with ETF Shares declares
dividends. This is necessary to prevent a shareholder from collecting a dividend
from both the conventional share class currently held and also from the ETF
share class to which the shares will be converted.
• Until the
conversion process is complete, you will remain fully invested in a fund’s
conventional shares, and your investment will increase or decrease in value in
tandem with the NAV of those shares.
• The conversion
transaction is nontaxable except, if applicable, to the very limited extent
previously described.
A precautionary
note to investment companies: Vanguard ETF Shares are issued by
registered investment companies, and therefore the acquisition of such shares by
other investment companies is subject to the restrictions of Section 12(d)(1) of
the Investment Company Act of 1940. Vanguard has obtained SEC exemptive orders
that allow registered investment companies to invest in the issuing funds beyond
the limits of Section 12(d)(1), subject to certain terms and conditions,
including the requirement to enter into a participation agreement with Vanguard.
The SEC recently adopted changes to the regulatory framework for fund of funds
arrangements, and, as a result, Vanguard's exemptive orders were rescinded by
the SEC on January 19, 2022. However, effective January 19, 2022, new Rule
12d1-4 under the Investment Company Act of 1940 permits registered investment
companies to invest in other registered investment companies beyond the limits
in Section 12(d)(1), subject to certain conditions, including that the funds
enter into a fund of funds investment agreement. Neither the
exemptive orders nor reliance on Rule 12d1-4 are available to the Fund.
Accordingly, investment companies seeking to invest in the Fund must adhere to
the limits set forth in Section 12(d)(1) of the Investment Company Act of
1940.
22
Shareholder
Rights
The Fund's Agreement and
Declaration of Trust, as amended, requires a shareholder bringing a derivative
action on behalf of Vanguard Specialized Funds (the Trust) that is subject to a
pre-suit demand to collectively hold at least 10% of the outstanding shares of
the Trust or at least 10% of the outstanding shares of the series or class to
which the demand relates and to undertake to reimburse the Trust for the expense
of any counsel or advisors used when considering the merits of the demand in the
event that the board of trustees determines not to bring such action. In each
case, these requirements do not apply to claims arising under the federal
securities laws to the extent that any such federal securities laws, rules, or
regulations do not permit such application.
Frequent
Trading and Market-Timing
Unlike frequent
trading of a Vanguard fund’s conventional (i.e., not exchange-traded) classes of
shares, frequent trading of ETF Shares does not disrupt portfolio management or
otherwise harm fund shareholders. The vast majority of trading in ETF Shares
occurs on the secondary market. Because these trades do not involve the issuing
fund, they do not harm the fund or its shareholders. Certain broker-dealers are
authorized to purchase and redeem ETF Shares directly with the issuing fund.
Because these trades typically are effected in kind (i.e., for securities and
not for cash), or are assessed a transaction fee when effected in cash, they do
not cause any of the harmful effects to the issuing fund (as previously noted)
that may result from frequent trading. For these reasons, the board of trustees
of each fund that issues ETF Shares has determined that it is not necessary to
adopt policies and procedures to detect and deter frequent trading and
market-timing of ETF Shares.
Portfolio
Holdings
Please consult the
Fund's Statement
of Additional Information or our website for
a description of the policies and procedures that govern disclosure of the
Fund’s portfolio holdings.
Turnover
Rate
Although the Fund generally seeks
to invest for the long term, it may sell securities regardless of how long they
have been held. Generally, an index fund sells securities in response to
redemption requests from shareholders of conventional (i.e., not
exchange-traded) shares or to changes in the composition of its target index.
The Financial
Highlights section of
this prospectus shows historical turnover rates for the Fund. A turnover rate of
100%, for example, would mean that the Fund had sold and replaced securities
valued at 100% of its net assets within a one-year period. In general, the
greater the turnover rate, the greater the impact transaction costs will have on
a fund’s return. Also, funds
23
with high turnover
rates may be more likely to generate capital gains, including short-term capital
gains, that must be distributed to shareholders and will be taxable to
shareholders investing through a taxable account.
The
Fund and Vanguard
The Fund is a member of The
Vanguard Group, Inc. (Vanguard), a family of over 200 funds. All of the funds
that are members of Vanguard (other than funds of funds) share in the expenses
associated with administrative services and business operations, such as
personnel, office space, and equipment.
Vanguard Marketing
Corporation provides marketing services to the funds. Although fund shareholders
do not pay sales commissions or 12b-1 distribution fees, each fund (other than a
fund of funds) or each share class of a fund (in the case of a fund with
multiple share classes) pays its allocated share of the Vanguard funds’
marketing costs.
To the extent that
the Fund’s assets are invested in another Vanguard fund, including a wholly
owned subsidiary, such assets will be excluded when allocating to the Fund its
share of the costs of Vanguard’s operations.
|
Plain
Talk About Vanguard’s Unique Corporate Structure |
|
Vanguard
is owned jointly by the funds it oversees and thus indirectly by the
shareholders
in those funds. Most other mutual funds are operated by
management
companies that are owned by third parties—either public or
private
stockholders—and not by the funds they
serve. |
Investment
Advisor
The Vanguard Group, Inc., P.O. Box
2600, Valley Forge, PA 19482, which began operations in 1975, serves as advisor
to the Fund through its Equity Index Group. As of January 31, 2022, Vanguard
served as advisor for approximately $6.7 trillion in assets. Vanguard provides
investment advisory services to the Fund pursuant to the Funds’ Service
Agreement and subject to the supervision and oversight of the trustees and
officers of the Fund.
For the fiscal year ended January
31, 2022, the advisory expenses represented an effective annual rate of less
than 0.01% of the Fund’s average net assets.
24
Under the terms of
an SEC exemption, the Fund's board of trustees may, without prior approval from
shareholders, change the terms of an advisory agreement with a third-party
investment advisor or hire a new third-party investment advisor—either as a
replacement for an existing advisor or as an additional advisor. Any significant
change in the Fund's advisory arrangements will be communicated to shareholders
in writing. As the Fund's sponsor and overall manager, Vanguard may provide
investment advisory services to the Fund at any time. Vanguard may also
recommend to the board of trustees that an advisor be hired, terminated, or
replaced or that the terms of an existing advisory agreement be revised. The
Fund has filed an application seeking a similar SEC exemption with respect to
investment advisors that are wholly owned subsidiaries of Vanguard. If the
exemption is granted, the Fund may rely on the new SEC relief.
For a discussion of
why the board of trustees approved the Fund's investment advisory arrangement,
see the most recent semiannual report to shareholders covering the fiscal period
ended July 31.
The managers
primarily responsible for the day-to-day management of the Fund
are:
Walter
Nejman, Portfolio Manager
at Vanguard. He has been with Vanguard since 2005, has worked in investment
management since 2008, and has co-managed the Fund since 2016. Education: B.A.,
Arcadia University; M.B.A., Villanova University.
Gerard
C. O’Reilly, Principal of
Vanguard. He has been with Vanguard since 1992, has managed investment
portfolios since 1994, and has managed the Fund since its inception in 1996
(co-managed since 2016). Education: B.S., Villanova University.
The Fund's
Statement
of Additional Information provides
information about each portfolio manager’s compensation, other accounts under
management, and ownership of shares of the Fund.
Dividends,
Capital Gains, and Taxes
Fund
Distributions
Each March, June,
September, and December, the Fund pays out to shareholders virtually all of the
distributions it receives from its investments, less expenses. Distributions may
include income, return of capital, and capital gains.
25
The Fund may also
realize capital gains on the sale of its investments. Distributions of these
gains, if any, are included in the December distribution. In addition, the Fund
may occasionally make a supplemental distribution at some other time during the
year.
|
Plain
Talk About Distributions |
|
As
a shareholder, you are entitled to your portion of a fund’s income from
interest
and dividends as well as capital gains from the fund’s sale of
investments.
Income consists of both the dividends that the fund earns from
any
stock holdings and the interest it receives from any money market and
bond
investments. Capital gains are realized whenever the fund sells
securities
for higher prices than it paid for
them. |
|
Plain
Talk About Return of Capital |
|
The
Internal Revenue Code requires a REIT to distribute at least 90% of its
taxable
income to investors. In many cases, however, because of “noncash”
expenses
such as property depreciation, an equity REIT’s cash flow will
exceed
its taxable income. The REIT may distribute this excess cash to
investors.
Such a distribution is classified as a return
of capital. |
Reinvestment
of Distributions
In order to reinvest dividend and
capital gains distributions, investors in the Fund’s ETF Shares must hold their
shares at a broker that offers a reinvestment service. This can be the broker’s
own service or a service made available by a third party, such as the broker’s
outside clearing firm or the DTC. If a reinvestment service is available,
distributions of income and capital gains can automatically be reinvested in
additional whole and fractional ETF Shares of the Fund. If a reinvestment
service is not available, investors will receive their distributions in cash. To
determine whether a reinvestment service is available and whether there is a
commission or other charge for using this service, consult your
broker.
As with all
exchange-traded funds, reinvestment of dividend and capital gains distributions
in additional ETF Shares will occur four business days or more after the
ex-dividend date (the date when a distribution of dividends or capital gains is
deducted from the price of the Fund’s shares). The exact number of days
26
depends on your
broker. During that time, the amount of your distribution will not be invested
in the Fund and therefore will not share in the Fund’s income, gains, and
losses.
Basic
Tax Points
Vanguard (or your intermediary)
expects to send you a statement each February showing the tax status of all of
your distributions. (Other Vanguard funds mail their tax statements in January;
the Fund mails its statements later because REITs do not provide information on
the taxability of their distributions until after the calendar year-end.) In
addition, investors in taxable accounts should be aware of the following basic
federal income tax points:
• Distributions
(other than any return of capital) are taxable to you whether or not you
reinvest these amounts in additional ETF Shares.
• Distributions
declared in December—if paid to you by the end of January—are taxable as if
received in December.
• Any dividend
distribution or short-term capital gains distribution that you receive is
taxable to you as ordinary income. If you are an individual and meet certain
holding-period requirements with respect to your ETF Shares, you may be eligible
for reduced tax rates on “qualified dividend income,” if any, or a special tax
deduction on “qualified REIT dividends,” if any, distributed by the
Fund.
• Any distribution
of net long-term capital gains is taxable to you as long-term capital gains, no
matter how long you have owned ETF Shares.
• Capital gains
distributions may vary considerably from year to year as a result of the Fund's
normal investment activities and cash flows.
• Your cost basis
in the Fund will be decreased by the amount of any return of capital that you
receive. This, in turn, will affect the amount of any capital gain or loss that
you realize when selling your ETF Shares.
• Return of capital
distributions generally are not taxable to you until your cost basis has been
reduced to zero. If your cost basis is at zero, return of capital distributions
will be treated as capital gains.
• A sale of ETF
Shares is a taxable event. This means that you may have a capital gain to report
as income, or a capital loss to report as a deduction, when you complete your
tax return.
• Dividend
distributions attributable to the Fund’s REIT investments are generally not
eligible for the corporate dividends-received deduction.
27
Individuals,
trusts, and estates whose income exceeds certain threshold amounts are subject
to a 3.8% Medicare contribution tax on “net investment income.” Net investment
income takes into account distributions paid by the Fund and capital gains from
any sale of ETF Shares.
Dividend
distributions and capital gains distributions that you receive, as well as your
gains or losses from any sale of ETF Shares, may be subject to state and local
income taxes.
This prospectus
provides general tax information only. If you are investing through a
tax-advantaged account, such as an IRA or an employer-sponsored retirement or
savings plan, special tax rules apply. Please consult your tax advisor for
detailed information about any tax consequences for you.
Share
Price and Market Price
Share price, also
known as net
asset value (NAV), is
calculated as of the close of regular trading on the New York Stock Exchange
(NYSE), generally 4 p.m., Eastern time, on each day that the NYSE is open for
business (a business day). In the rare event the NYSE experiences unanticipated
disruptions and is unavailable at the close of the trading day, NAVs will be
calculated as of the close of regular trading on the Nasdaq (or another
alternate exchange if the Nasdaq is unavailable, as determined at Vanguard’s
discretion), generally 4 p.m., Eastern time. Each share class has its own NAV,
which is computed by dividing the total assets, minus liabilities, allocated to
the share class by the number of Fund shares outstanding for that class. On U.S.
holidays or other days when the NYSE is closed, the NAV is not calculated, and
the Fund does not sell or redeem shares. However, on those days the value of the
Fund’s assets may be affected to the extent that the Fund holds securities that
change in value on those days (such as foreign securities that trade on foreign
markets that are open).
Remember: If you
buy or sell ETF Shares on the secondary market, you will pay or receive the
market price, which may be higher or lower than NAV. Your transaction will be
priced at NAV only if you purchase or redeem your ETF Shares in Creation Unit
blocks (an option available only to certain authorized broker-dealers) or if you
convert your conventional fund shares to ETF Shares.
Stocks held by a
Vanguard fund are valued at their market
value
when reliable market quotations are readily available from the principal
exchange or market on which they are traded. Such securities are generally
valued at their official closing price, the last reported sales price, or if
there were no sales that day, the mean between the closing bid and asking
prices. When a fund determines that market
28
quotations either
are not readily available or do not accurately reflect the value of a security,
the security is priced at its fair
value
(the amount that the owner might reasonably expect to receive upon the current
sale of the security).
The values of any
foreign securities held by a fund are converted into U.S. dollars using an
exchange rate obtained from an independent third party as of the close of
regular trading on the NYSE. The values of any mutual fund shares, including
institutional money market fund shares, held by a fund are based on the NAVs of
the shares. The values of any ETF shares or closed-end fund shares held by a
fund are based on the market value of the shares.
A fund also will
use fair-value pricing if the value of a security it holds has been materially
affected by events occurring before the fund's pricing time but after the close
of the principal exchange or market on which the security is traded. This most
commonly occurs with foreign securities, which may trade on foreign exchanges
that close many hours before the fund's pricing time. Intervening events might
be company-specific (e.g., earnings report, merger announcement) or
country-specific or regional/global (e.g., natural disaster, economic or
political news, act of terrorism, interest rate change). Intervening events
include price movements in U.S. markets that exceed a specified threshold or
that are otherwise deemed to affect the value of foreign
securities.
Fair-value pricing
may be used for domestic securities—for example, if (1) trading in a security is
halted and does not resume before the fund's pricing time or a security does not
trade in the course of a day and (2) the fund holds enough of the security that
its price could affect the NAV.
Fair-value prices
are determined by Vanguard according to procedures adopted by the board of
trustees. When fair-value pricing is employed, the prices of securities used by
a fund to calculate the NAV may differ from quoted or published prices for the
same securities.
Vanguard’s website
will show the previous day’s closing NAV and closing market price for the Fund’s
ETF Shares.
29
Additional
Information
The Fund's Bylaws require, unless
the Trust otherwise consents in writing, that the U.S. Federal District Courts
be the sole and exclusive forum for the resolution of complaints under the
Securities Act of 1933. This provision may limit a shareholder’s ability to
bring a claim in a different forum and may result in increased shareholder costs
in pursuing such a claim.
|
|
Inception
Date |
Vanguard
Fund
Number |
CUSIP
Number |
|
Real
Estate Index Fund |
|
|
|
|
ETF
Shares |
9/23/2004
(Investor
Shares
5/13/1996) |
986 |
922908553 |
Certain affiliates
of the Fund and the advisor may purchase and resell ETF Shares pursuant to the
prospectus.
CGS identifiers have been provided by CUSIP Global Services, managed on behalf of the American Bankers Association by Standard & Poor’s Financial Services, LLC, and are not for use or dissemination in a manner that would serve as a substitute for any CUSIP service. The CUSIP Database, ©2022 American Bankers Association. “CUSIP” is a registered trademark of the American Bankers Association.
30
Financial
Highlights
Financial
highlights information is intended to help you understand a fund’s performance
for the past five years (or, if shorter, its period of operations). Certain
information reflects financial results for a single fund share. Total return
represents the rate that an investor would have earned or lost each period on an
investment in a fund or share class (assuming reinvestment of all
distributions). This information has been obtained from the financial statements
audited by PricewaterhouseCoopers LLP, an independent registered public
accounting firm, whose report, along with fund financial statements, is included
in a fund’s most recent annual report to shareholders. You may obtain a free
copy of a fund’s latest annual or semiannual report, which is available upon
request.
|
Vanguard
Real Estate Index Fund ETF Shares |
|
|
|
|
|
|
|
Year Ended January
31, | ||||
|
For a
Share Outstanding Throughout Each Period |
2022 |
2021 |
2020 |
2019 |
2018 |
|
Net
Asset Value, Beginning of Period |
$84.96 |
$93.93 |
$83.36 |
$79.47 |
$82.43 |
|
Investment
Operations |
|
|
|
|
|
|
Net
Investment Income1 |
1.960 |
1.889 |
2.335 |
2.487 |
2.499 |
|
Net
Realized and Unrealized Gain (Loss) on Investments |
22.486 |
(7.525) |
11.379 |
4.934 |
(1.945) |
|
Total from
Investment Operations |
24.446 |
(5.636) |
13.714 |
7.421 |
.554 |
|
Distributions |
|
|
|
|
|
|
Dividends
from Net Investment Income |
(1.943) |
(1.947) |
(2.364) |
(2.646) |
(2.458) |
|
Distributions
from Realized Capital Gains |
— |
— |
— |
— |
(.034) |
|
Return of
Capital |
(1.023) |
(1.387) |
(.780) |
(.885) |
(1.022) |
|
Total
Distributions |
(2.966) |
(3.334) |
(3.144) |
(3.531) |
(3.514) |
|
Net
Asset Value, End of Period |
$106.44 |
$84.96 |
$93.93 |
$83.36 |
$79.47 |
|
Total
Return |
28.88% |
-5.80% |
16.70% |
9.70% |
0.59% |
|
Ratios/Supplemental
Data |
|
|
|
|
|
|
Net
Assets, End of Period (Millions) |
$46,673 |
$32,064 |
$37,682 |
$30,857 |
$32,377 |
|
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 |
1.90% |
2.33% |
2.60% |
3.15% |
3.01% |
|
Portfolio
Turnover Rate2 |
7% |
8% |
6% |
24% |
6% |
|
|
|
|
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. |
31
THIS FUND IS NOT SPONSORED,
ENDORSED, SOLD OR PROMOTED BY MSCI INC. (“MSCI”), ANY OF ITS AFFILIATES, ANY OF
ITS DIRECT OR INDIRECT INFORMATION PROVIDERS OR ANY OTHER THIRD PARTY INVOLVED
IN, OR RELATED TO, COMPILING, COMPUTING OR CREATING ANY MSCI INDEX
(COLLECTIVELY, THE “MSCI PARTIES”). THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY
OF MSCI. MSCI AND THE MSCI INDEX NAMES ARE SERVICE MARK(S) OF MSCI OR ITS
AFFILIATES AND HAVE BEEN LICENSED FOR USE FOR CERTAIN PURPOSES BY VANGUARD. NONE
OF THE MSCI PARTIES MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO
THE OWNERS OF THIS FUND OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY
OF INVESTING IN FUNDS GENERALLY OR IN THIS FUND PARTICULARLY OR THE ABILITY OF
ANY MSCI INDEX TO TRACK CORRESPONDING STOCK MARKET PERFORMANCE. MSCI OR ITS
AFFILIATES ARE THE LICENSORS OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE
NAMES AND OF THE MSCI INDEXES WHICH ARE DETERMINED, COMPOSED AND CALCULATED BY
MSCI WITHOUT REGARD TO THIS FUND OR THE ISSUER OR OWNER OF THIS FUND. NONE OF
THE MSCI PARTIES HAS ANY OBLIGATION TO TAKE THE NEEDS OF THE ISSUERS OR OWNERS
OF THIS FUND INTO CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE
MSCI INDEXES. NONE OF THE MSCI PARTIES IS RESPONSIBLE FOR OR HAS PARTICIPATED IN
THE DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES OF THIS FUND TO BE
ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE CONSIDERATION INTO WHICH
THIS FUND IS REDEEMABLE. NONE OF THE MSCI PARTIES HAS ANY OBLIGATION OR
LIABILITY TO THE OWNERS OF THIS FUND IN CONNECTION WITH THE ADMINISTRATION,
MARKETING OR OFFERING OF THIS FUND.
ALTHOUGH MSCI SHALL OBTAIN
INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE MSCI INDEXES
FROM SOURCES WHICH MSCI CONSIDERS RELIABLE, NONE OF THE MSCI PARTIES WARRANTS OR
GUARANTEES THE ORIGINALITY, ACCURACY AND/OR THE COMPLETENESS OF ANY MSCI INDEX
OR ANY DATA INCLUDED THEREIN. NONE OF THE MSCI PARTIES MAKES ANY WARRANTY,
EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE’S
CUSTOMERS OR COUNTERPARTIES, ISSUERS OF THIS FUND, OWNERS OF THIS FUND, OR ANY
OTHER PERSON OR ENTITY, FROM THE USE OF ANY MSCI INDEX OR ANY DATA INCLUDED
THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE.
NONE OF THE MSCI PARTIES SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS OR
INTERRUPTIONS OF OR IN CONNECTION WITH ANY MSCI INDEX OR ANY DATA INCLUDED
THEREIN. FURTHER, NONE OF THE MSCI PARTIES MAKES ANY EXPRESS OR IMPLIED
WARRANTIES OF ANY KIND, AND THE MSCI PARTIES HEREBY EXPRESSLY DISCLAIM ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT
TO ANY MSCI INDEX AND ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE
FOREGOING, IN NO EVENT SHALL ANY OF THE MSCI PARTIES HAVE ANY LIABILITY FOR ANY
DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES
(INCLUDING WITHOUT LIMITATION LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY
OF SUCH DAMAGES.
32
Glossary
of Investment Terms
Authorized
Participant. Institutional
investors that are permitted to purchase Creation Units directly from, and
redeem Creation Units directly with, the issuing fund. To be an Authorized
Participant, an entity must be a participant in the Depository Trust Company and
must enter into an agreement with the fund’s Distributor.
Bid-Ask
Spread. The difference
between the highest price a buyer is willing to pay to purchase ETF Shares (bid)
and the lowest price a seller is willing to accept for ETF Shares (ask) when
buying or selling shares in the secondary market.
Capital
Gains Distributions. Payments to fund
shareholders of gains realized on securities that a fund has sold at a profit,
minus any realized losses.
Common
Stock.
A security representing ownership rights in a corporation.
Cost
Basis.
The adjusted cost of an investment, used to determine a capital gain or loss for
tax purposes.
Creation
Unit.
A large block of a specified number of ETF Shares. Certain broker-dealers known
as “Authorized Participants” may purchase and redeem ETF Shares from the issuing
fund in Creation Unit size blocks.
Distributions. Payments to fund
shareholders of dividend income, capital gains, and return of capital generated
by the fund's investment activities and distribution policies, after
expenses.
Dividend
Distributions. Payments to fund
shareholders of income from interest or dividends generated by a fund's
investments.
Dow Jones U.S.
Total Stock Market Float Adjusted Index. An index that represents the
entire U.S. stock market and tracks more than 5,000 stocks, excluding shares of
securities not available for public trading.
Ex-Dividend
Date.
The date when a distribution of dividends and/or capital gains is deducted from
the share price of a mutual fund, ETF, or stock. On the ex-dividend date, the
share price drops by the amount of the distribution per share (plus or minus any
market activity).
Expense
Ratio.
A fund's total annual operating expenses expressed as a percentage of the fund's
average net assets. The expense ratio includes management and administrative
expenses, but it does not include the transaction costs of buying and selling
portfolio securities.
33
Inception
Date.
The date on which the assets of a fund (or one of its share classes) are first
invested in accordance with the fund's investment objective. For funds with a
subscription period, the inception date is the day after that period ends.
Investment performance is generally measured from the inception
date.
Indexing. A low-cost
investment strategy in which a fund attempts to track—rather than outperform—a
specified market benchmark, or “index.”
Joint
Committed Credit Facility. The Fund
participates, along with other funds managed by Vanguard, in a committed credit
facility provided by a syndicate of lenders pursuant to a credit agreement that
may be renewed annually; each Vanguard fund is individually liable for its
borrowings, if any, under the credit facility. The amount and terms of the
committed credit facility are subject to approval by the Fund's board of
trustees and renegotiation with the lender syndicate on an annual
basis.
Liquidity. The degree of a
security’s marketability (i.e., how quickly the security can be sold at a fair
price and converted to cash).
Median
Market Capitalization. An indicator of
the size of companies in which a fund invests; the midpoint of market
capitalization (market price x shares outstanding) of a fund's stocks, weighted
by the proportion of the fund's assets invested in each stock. Stocks
representing half of the fund's assets have market capitalizations above the
median, and the rest are below it.
Mutual
Fund.
An investment company that pools the money of many people and invests it in a
variety of securities in an effort to achieve a specific objective over
time.
New
York Stock Exchange (NYSE). A stock exchange
based in New York City that is open for regular trading on business days, Monday
through Friday, from 9:30 a.m. to 4 p.m., Eastern time.
Return
of Capital. A return of
capital occurs when a fund's distributions exceed its earnings in a fiscal year.
A return of capital is a return of all or part of your original investment or
amounts paid in excess of your original investment in a fund. In general, a
return of capital reduces your cost basis in a fund's shares and is not taxable
to you until your cost basis has been reduced to zero.
Securities. Stocks, bonds,
money market instruments, and other investments.
34
Total
Return. A percentage
change, over a specified time period, in a fund's net asset value, assuming the
reinvestment of all distributions of dividends and capital gains.
Tracking
Error.
A measure of the difference between the performance of a fund or portfolio and
that of its benchmark index.
Volatility. The fluctuations
in value of a mutual fund or other security. The greater a fund's volatility,
the wider the fluctuations in its returns.
Wholly
Owned Subsidiary. A company of which
95% or more of the outstanding voting securities are owned by another company,
as defined by the Investment Company Act of 1940.
Yield. Income (interest
or dividends) earned by an investment, expressed as a percentage of the
investment’s price.
35
Connect
with Vanguard®˃
vanguard.com
For
More Information
If you would
like more information about Vanguard Real Estate ETF, the following documents
are available free upon request:
Annual/Semiannual
Reports to Shareholders
Additional
information about the Fund's investments is available in the Fund's annual and
semiannual reports to shareholders. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
Statement
of Additional Information (SAI)
The SAI
provides more detailed information about the Fund's ETF Shares and is
incorporated by reference into (and thus legally a part of) this
prospectus.
To receive a
free copy of the latest annual or semiannual report or the SAI, or to request
additional information about Vanguard ETF Shares, please visit vanguard.com
or contact us
as follows:
Telephone:
866-499-8473; Text telephone for people with hearing impairment:
800-749-7273
Information
Provided by the SEC
Reports and other information
about the Fund are available in the EDGAR database on the SEC’s website at
sec.gov, or you can receive copies of this information, for a fee, by electronic
request at the following email address: [email protected].
Fund's
Investment Company Act file number: 811-03916
© 2022 The
Vanguard Group, Inc. All rights reserved.
U.S. Patent No6,879,964
Vanguard Marketing Corporation, Distributor.
P 986 052022
U.S. Patent No6,879,964
Vanguard Marketing Corporation, Distributor.
P 986 052022