The FTSE® EPRA®/NAREIT® Global Index returned -7.99% during the second quarter of 2010. The Index outperformed the broader market, as measured by the MSCI ACWI EX-U.S., by 4.35%. The Global Real Estate Index Fund posted a return of -8.56% during the quarter. Despite the recent weakness in the real estate sector, the Fund's one-year return remained robust at 22.59%.

Similar to the previous quarter, Greece was the worst performing country in the Index with a loss of 39.22%. In June, the ratings agency Moody's downgraded Greece sovereign debt to "junk" status. U.S. stocks—which represent 37.84% of the Index—finished the quarter in negative territory with a return of -4.32% but outperformed the broader Index. The Case-Shiller Home Price Index showed a 3.8% gain in home prices for April. Hong Kong, the second-largest country weighting in the Index, lost 9.40%, while China's market fell 15.0%. Both markets were hurt by the efforts of China's government to curb real estate prices and keep the country's economy from overheating.

The performance of the U.S. dollar was mixed during the quarter. The dollar strengthened relative to the euro, but it was flat against the pound and it lost ground versus the Japanese yen. The dollar produced a net gain overall, weighing on the returns of international equities for U.S.-based investors.

• Seek to duplicate the investment composition and overall performance of the stocks included in the FTSE®EPRA®/NAREIT® Global Real Estate Index.
• Invest at least 80% of its net assets in equity securities in the Index, in weightings that approximate the relative composition of the Index.
• Use proprietary quantitative techniques designed to minimize trading costs.