<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

         ===========================================================
                                   FORM 10-K
               Annual Report Pursuant To Section 13 or 15 (d) of
                     The Securities Exchange Act of 1934

<TABLE>
<S>                                                      <C>
For the Fiscal Year Ended                                Commission File Number
December 31, 1995                                                 0-16785
</TABLE>

                            ======================

VANGUARD REAL ESTATE FUND I, A Sales-Commission-Free Income Properties Fund
---------------------------
(Exact Name of Registrant as specified in its charter)

<TABLE>
<S>                                                         <C>
Massachusetts                                                        23-6861048
-------------                                                        ----------
(State or other jurisdiction of                                   (IRS Employer
 incorporation or organization)                             Identification No.)

Vanguard Financial Center, Malvern, PA                                    19355
--------------------------------------                                    -----
(Address of principal executive offices)                             (Zip Code)
</TABLE>

                                  610-669-1000
                                  ------------
              (Registrant's telephone number, including area code)

<TABLE>
<S>                                                           <C>
Securities registered pursuant to Section 12(b) of the Act:   None

Securities registered pursuant to Section 12(g) of the Act:   Shares of Beneficial Interest, no par value
</TABLE>

                            ======================

        Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days   YES   X   NO     .
                                                ---      ---

        Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / X/

        The aggregate market value of the registrant's outstanding shares of
beneficial interest held by non-affiliates on February 29, 1996 was $30,259,565
based upon the last sale price of the shares on February 29, 1996.

        As of February 29, 1996, 11,019,978 shares of beneficial interest were
outstanding.

                            ======================

                      DOCUMENTS INCORPORATED BY REFERENCE

<TABLE>
<S>                                                                         <C>
Annual Report to Shareholders for fiscal year ended December 31, 1995       Part II (Items 6-8)

Portions of the definitive Proxy Statement, filed pursuant to               
Regulation 14A, to be issued in connection with the Annual Meeting of       
Shareholders to be held on April 24, 1996                                   Part III (Items 10-13)
</TABLE>
<PAGE>   2

                                     INDEX



<TABLE>
<CAPTION>
ITEM NO.                                                                                              PAGE NO.

<S>                                                                                                         <C>
Cover Page  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  -
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  1

PART I

1.       Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2
2.       Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  4
3.       Legal Proceedings  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7
4.       Submission of Matters to a Vote of Security Holders  . . . . . . . . . . . . . . . . . . . . . . .  7

PART II

5.       Market for Registrant's Common Equity and Related
         Shareholder Matters  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  8
6.       Selected Financial Data  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9
7.       Management's Discussion and Analysis of Financial
         Condition and Results of Operations  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  9
8.       Financial Statements and Supplementary Data  . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
9.       Changes in and Disagreements with Accountants on
         Accounting and Financial Disclosure  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10

PART III

10.      Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . .  10
11.      Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
12.      Security Ownership of Certain Beneficial Owners
         and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
13.      Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . .  10

PART IV

14.      Exhibits, Financial Statement Schedules and Reports
         on Form 8-K  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
         Exhibit Index  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  20
         Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  21

SIGNATURES  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  19
</TABLE>



                                      1
<PAGE>   3


                                     PART I

Item 1. Business

        Vanguard Real Estate Fund I, A Sales-Commission-Free Income Properties
Fund (the "Fund"), was organized on September 10, 1986 as a Massachusetts
business trust and is a qualified finite-life real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended.  The Fund has no
employees.  The Fund's Declaration of Trust precludes the Fund from reinvesting
net proceeds from the sale or repayment of its real estate investments after
December 31, 1993 and contemplates the liquidation of all the Fund's
investments after a period of approximately seven to twelve years following the
completion of its initial public offering, or between June 30, 1994 and 1999,
respectively.

        On December 12, 1994, the Fund's Board of Trustees adopted a Plan of
Liquidation and Termination (the "Liquidation Plan").  The Trustee's decision
to then adopt the Liquidation Plan was driven by several factors, including
real estate market conditions affecting each investment in the Fund's portfolio
and tax considerations affecting real estate investment trusts.  The
Liquidation Plan provides that the Fund will dispose of all of its assets, wind
up its affairs, pay or adequately provide for the payment of all of its
liabilities and distribute for the benefit of its shareholders all of the
Fund's assets over 24 months, in complete cancellation and redemption of all
issued and outstanding shares of beneficial interest.  Under the Liquidation
Plan, the Fund's Adviser (Aldrich, Eastman and Waltch, L.P.), Trustees and
officers are authorized and directed to take any and all actions as may be
necessary or convenient to market the assets of the Fund and convert them into
a form that may be distributed to shareholders.  The Liquidation Plan provides
that the Fund's assets may be sold, conveyed, transferred or otherwise disposed
of when and on such terms and conditions as are deemed by the Trustees to be in
the best interests of the Fund and the shareholders.
        
        The Fund is currently in the process of liquidating its real estate
investments with the intention of distributing the net proceeds to its
shareholders in accordance with the Liquidation Plan.  At December 31, 1995,
the Fund held investments in two commercial properties consisting of shopping
centers located in Torrance, California and Durham, North Carolina.  It is
contemplated that the Fund will be completely liquidated and dissolved by
December 12, 1996.  To the extent that the Fund has not disposed of all of its
assets or made provision for all of its liabilities on December 12, 1996, the
Fund intends to form a liquidating trust, the beneficiaries of which will be
the shareholders of the Fund.  All assets and liabilities of the Fund not
previously disposed of and discharged will be transferred to the liquidating
trust. Shares of the Fund would no longer be traded and the beneficial
interests in the liquidating trust would not be readily transferable.

        Pursuant to the Liquidation Plan, in disposing of real estate
investments, the Fund is in competition with other domestic institutional
investors, including commercial banks and other financial institutions,
insurance companies, pensions and other retirement funds, mortgage bankers,
other real estate investment trusts, real estate brokers, developers and
various types of foreign investors who may be seeking to dispose of real estate
investments. In the case of leased properties which the Fund owns or which
secure Fund investments, the marketability of the investments is also affected
by how rental rates, lease terms, free rent concessions and tenant improvement
allowances compare with those in local markets.

        As of February 29, 1996, approximately $22 million was invested in the
Fund's two remaining directly-owned real estate investments.  Subsequently, on
March 22, 1996, the Fund completed the sale of its Plaza del Amo Shopping
Center ("Plaza") in Torrance, California for net proceeds of approximately $9.4
million, after satisfaction of a $2.3 million mortgage loan secured by the
property, representing a gain to the Fund of approximately $0.7 million.  On
March 27, 1996, the Fund completed the sale of its Oakcreek Village Shopping
Center ("Oakcreek") in Durham, North Carolina for net proceeds of approximately
$9.0 million, generating a loss to the Fund of approximately $.8 million (of
which $.7 million was recognized for financial reporting purposes in periods
prior to 1996 by charges to the Fund's provision for possible losses).
        
        Prior to disposition of the Fund's real estate investments pursuant to
the Liquidation Plan, the Fund's real estate investments were subject to
competition from existing commercial, industrial, and residential properties. 
The REIT provisions of the Code impose certain financial, investment and
operational restrictions that are not applicable to competing entities that are
not REITs.
        
        Since the Fund's remaining properties have now been sold, the Fund's
Trustees and management intend to complete the Fund's Liquidation Plan as soon
as practicable.  In addition to liquidating the Fund's assets, settling all of
the Fund's liabilities, making a final distribution(s) to shareholders
        




                                       2
<PAGE>   4
and dissolving the Fund, such activities are expected to include, but not
necessarily be limited to, (i) delisting the Fund's shares from trading on the
American Stock exchange, (ii) deregistering the Fund's shares under the
Securities Exchange Act of 1934, (iii) making provision for contingent
liabilities of the Fund, if any, and (iv) obtaining any necessary insurance
coverages.

        Pursuant to a Services Agreement dated December 23, 1986 (the "Services
Agreement") between the Fund and The Vanguard Group, Inc. (the "Sponsor"), the
Sponsor has been retained to provide administrative services for the Fund,
including the maintenance of financial records, oversight of the performance of
outside service providers and the preparation and distribution of
communications to shareholders, etc., and to supervise its day-to-day business
affairs.  Pursuant to an Advisory Agreement dated December 23, 1986 (as
amended, the "Advisory Agreement") between the Fund and Aldrich, Eastman &
Waltch, Inc. (the "Adviser"), the Adviser has been retained to advise the Fund
in connection with the evaluation, selection, management and disposition of its
real estate investments.  For additional information concerning the Sponsor,
the Adviser, the Services Agreement and the Advisory Agreement, see Item 8,
Financial Statements and Supplementary Data - Notes to Financial Statements,
and Item 13, Certain Relationships and Related Transactions.

        The Fund has elected to be treated as a REIT under the Code.  The Fund
intends to operate in a manner that will continue to maintain its qualification
as a REIT during its liquidation period.

        For additional information regarding the Fund's Liquidation Plan,
investments, operations, and other significant events, see Item 2, Properties,
Item 7, Management's Discussion and Analysis of Financial Condition and Results
of Operations, and Item 8, Financial Statements and Supplementary Data.

        The following table sets forth the names and positions with the Fund of
the executive officers of the Fund:

<TABLE>
<CAPTION>
                                NAME                     AGE                      POSITIONS
                    ----------------------------        -----        -----------------------------------
                    <S>                                   <C>        <C>
                    John C. Bogle                         66         Trustee and Chairman of the Board
                    John J. Brennan                       41         President
                    Ralph K. Packard                      51         Vice President and Controller
                    Richard F. Hyland                     58         Treasurer
                    Raymond J. Klapinsky                  57         Secretary
</TABLE>

        All executive officers of the Fund also serve as executive officers of
Vanguard Real Estate Fund II, A Sales-Commission-Free Income Properties Fund
("VREFII").  All executive officers of the Fund, with the exceptions of Mr.
Packard, who was elected as an officer of the Fund in May 1988, and Mr.
Klapinsky, who was elected as an officer of the Fund in May 1989, have served
since the Fund's inception.  Under the Fund's Declaration of Trust, the
officers of the Fund serve at the pleasure of the Trustees.  There are no
family relationships between any Trustee or executive officer.

        Mr. Bogle is Chairman of the Fund, The Vanguard Group, Inc. (the
Sponsor of the Fund) and each of the investment companies in The Vanguard
Group.  Mr. Bogle has served in such capacity during each of the past five
years.  Mr. Bogle also serves as a Director of The Mead Corporation and General
Accident Insurance Companies.

        Mr. Brennan is President of The Vanguard Group, Inc. and has served in
such capacity during each of the past five years.  On January 31, 1996, Mr.
Brennan assumed the title of Chief Executive Officer of the Fund, The Vanguard
Group, Inc. and each of the investment companies in the Vanguard group.  Mr.
Brennan also serves as a Director (Trustee) of The Vanguard Group, Inc., and
each of the investment companies in The Vanguard Group.
        
        Mr. Packard is Senior Vice President and Chief Financial Officer of The
Vanguard Group, Inc. and has served in such capacity during each of the past
five years.

        Mr. Hyland is, and has served for each of the past five years as,
Treasurer of The Vanguard Group, Inc. and each of the investment companies in
The Vanguard Group.





                                       3
<PAGE>   5
        Mr. Klapinsky is, and has served for each of the past five years as,
Senior Vice President and Secretary of The Vanguard Group, Inc. and each of the
investment companies in The Vanguard Group.

Item 2. Properties

As of December 31, 1995, the Fund held the following real estate investments:

                               EQUITY INVESTMENTS
<TABLE>
<CAPTION>
                                          Nature of                                                        Initial
                                          Title                                            Total         Acquisition
                                          to/Interest                         Date         Square           Cost
        Property & Location               in Property    Description        Acquired    Footage/Units       (000)
        -------------------               -----------    -----------        --------    -------------       -----
        <S>                               <C>            <C>                 <C>          <C>                <C>

        Durham, North Carolina
        ----------------------
          Oakcreek Village                Direct         Community           11-25-87         116,195        $10,592
                                          Ownership      Shopping                         square feet
                                                         Center
        Torrance, California
        --------------------
        Plaza del Amo *                   Direct         Community             8-1-95          91,609         11,067
                                          Ownership      Shopping                         square feet
                                                         Center
        
        Total Equity Investments                                                                             $21,659
                                                                                                             =======
        
        Total Square Feet                                                                     207,804
                                                                                          ===========
</TABLE>

*  In late September 1994, the Fund exercised its call right with respect to
its Plaza del Amo ("Plaza") shared-appreciation, wrap-around mortgage loan
investment.  As a result, the entire balance of the loan, less the unpaid
balance of the senior mortgage on the Plaza property, was due and payable in
late March 1995.  The borrower failed to tender payment of the outstanding loan
balance on the due date, resulting in a default under the terms of the loan. On
August 1, 1995, the borrower transferred title to the property, in lieu of
foreclosure, to the Fund with the borrower retaining a residual interest in the
shared-appreciation feature of the mortgage.  Under the original loan terms,
upon repayment of the loan, both the borrower and the Fund were entitled to a
share of the property's appreciation, if any, equal to 50% of Plaza's fair
market value in excess of the original wrap-around loan balance of $10,646,000.
In consideration for the borrower agreeing to transfer title to the Fund in
lieu of foreclosure, the transfer agreement provides that, upon the Fund's
ultimate sale of Plaza, the Fund will pay the borrower the greater of 2% of
Plaza's net sales proceeds, as defined, or a share of Plaza's net sales
proceeds in excess of the original wrap-around mortgage loan balance such that
the borrower and the Fund share in the Property's appreciation equally as
contemplated in the original mortgage loan agreement.  Upon transfer of title,
the Fund recorded the property at its estimated fair market value less selling
costs. Such costs included the estimated minimum shared-appreciation obligation
of $230,000 guaranteed the borrower pursuant to the transfer agreement, such
amount determined based on the property's then estimated fair market value. Of
this amount, $110,000 was paid to the borrower on the transfer date.
         
        Set forth below is a summary of the general competitive conditions for
those properties held at December 31, 1995 whose book value is ten percent or
more of the Fund's total assets as of such date, or whose gross revenues are
ten percent or more of the aggregate gross revenues of the Fund for the year
ended December 31, 1995.
        
Plaza del Amo

        Plaza del Amo is a neighborhood shopping center located in Torrance,
California.  There are approximately 85,000 households (average household
income of $70,000) and 210,000 people within a three-mile radius of the
shopping center.  Southern California's economy and, in particular, the South
Bay market, have been seriously undermined by the recent recession prompted in
part by difficulties in the defense and aerospace industries.  As a result, the
retail property market has suffered for several years from weak demand growth.
Current market vacancy has remained relatively unchanged at approximately
10-12% and estimated effective rents at comparable properties is between $1.00
and $2.50 per month, depending on the age of centers and location as well as
size of space within each particular center.





                                       4
<PAGE>   6

Oakcreek Village

        Oakcreek Village is a neighborhood shopping center in Durham, North
Carolina.  There are approximately 16,600 households (average household income
of $60,000) and 37,000 people within a three-mile radius of the center.
Estimated market rents for comparable properties are approximately
$12.00-$15.00 per square foot per annum.  Positive market conditions, primarily
low vacancy rates and strong rent growth, have resulted in the development of
New Hope Commons, a 450,000 square foot power center within two miles of
Oakcreek Village.  At this time, the competitive pressure of New Hope Commons
has not reduced rent growth or increased vacancy in the submarket, but
prolonged positive market conditions may eventually result in additional new
development which, if built, will suppress rent growth and increase vacancy in
the sub-market.
        
         Occupancy Rates at December 31:

<TABLE>
<CAPTION>
                          Plaza del            Oakcreek
                          Amo                  Village
                          ---                  -------

         <S>             <C>                   <C>
         1995             95%                   100%
         1994             99%                    96%
         1993             98%                    96%
         1992             94%                    95%
         1991             92%                    94%
</TABLE>

         Avg. Effective Rental/Sq.Ft./Year:

<TABLE>
<CAPTION>
                          Plaza del            Oakcreek
                          Amo                  Village
                          ---                  -------

         <S>              <C>                  <C>
         1995             $13.40               $10.28
         1994             $13.28               $ 9.94
         1993             $13.23               $ 9.07
         1992             $13.06               $ 9.11
         1991             $13.72               $ 9.47
</TABLE>


         Real Estate Tax/Fiscal Year:
         (Effective Rate Per $1000 of Assessed Value)
<TABLE>
         <S>              <C>                  <C>
                          $11.57               $15.90
         Annual
         Taxes            $87,922              $101,106
</TABLE>

         Tenants occupying 10% or more of rentable square footage:

<TABLE>
<CAPTION>
                                                                Rental
         Property     Major Tenants    Sq.Ft.  Principal Bus.   Sq.Ft./Yr.       Expiration Date  Renewal Options
         --------     -------------    ------  --------------   ----------       ---------------  ---------------

         <S>          <C>              <C>     <C>                <C>                <C>          <C>
         Plaza del    Albertsons       39,852  Supermarket        $6.36              10/29/06     4, 5 year Options
         Amo          Oshman's          9,930  Sporting Goods     $9.03              9/23/01      None

         Oakcreek     T.J. Maxx        31,303  Clothing Retail.   $7.62              4/30/03      None
         Village      Durham S.G.      16,034  Sporting Goods     $5.25              8/31/02      None
</TABLE>





                                       5
<PAGE>   7
Lease Expirations during the next ten years:

                                 By Square Foot

<TABLE>
<CAPTION>
               Total Sq.Ft.
 Property        Expiring      1996     1997       1998     1999      2000    2001      2002      2003    2004     2005+
 --------      ------------    ----     ----       ----     ----      ----    ----      ----      ----    ----     -----
 Plaza del
 <S>                <C>       <C>       <C>       <C>        <C>      <C>     <C>      <C>       <C>          <C>  <C>
 Amo                 89,241    2,896    10,913     5,057     6,586    1,303   22,634        0         0       0    39,852
 Oakcreek
 Village            116,195   19,063    12,800    13,360     1,600    4,800    7,200   16,034    31,303       0    10,035
</TABLE>


                                By Annual Rental


<TABLE>
<CAPTION>
                   Total
 Property       Expirations     1996      1997       1998      1999    2000      2001       2002    2003        2004     2005+
 --------       -----------     ----      ----       ----      ----    ----      ----       ----    ----        ----     -----
                                                                       
 <S>             <C>          <C>        <C>        <C>       <C>      <C>      <C>        <C>       <C>           <C>  <C>
 Plaza del Amo                                                         
   # of leases          23          4          6          3         4       1         4        0           0       0          1
   annual $      1,195,733     77,299    258,358    111,591   146,940  31,272   316,793        0           0       0    253,480
   annual %          100.0        6.5       21.6        9.3      12.3     2.6      26.5        0           0       0       21.2
                                                                       
 Oakcreek Vlg.                                                         
   # of leases          23          6          3          5         1       3         1         1          1       0          2
   annual $      1,194,050    220,317    151,160    150,088    20,800  64,320    91,200    84,179    238,529       0    173,457
   annual %          100.0       18.5       12.6       12.6       1.7     5.4       7.7       7.0       20.0       0       14.5
</TABLE>


        A mortgage loan payable, secured by the Plaza del Amo property, is
outstanding at December 31, 1995.  Information concerning its principal,
interest rate, amortization and maturity provisions is included in Note H to
the Fund's financial statements, incorporated by reference in Item 8, Financial
Statements and Supplementary Data.

        Information concerning the Fund's previously held mortgage loan
receivable investment is included in Note F to the Fund's Financial Statements,
and included in Item 8, Financial Statements and Supplementary Data.

        The Fund believes that its direct ownership properties are well
maintained, in good repair, suitable for their intended uses and adequately
covered by insurance.  For additional information regarding the Fund's real
estate investments see Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, Item 8, Financial Statements and
Supplementary Data, and Schedule XI to Item 14.

        The Fund has no other significant renovation, improvement or
development plans for its properties.





                                       6
<PAGE>   8
        Information concerning the Federal tax basis and depreciation method
and lives of the Fund's properties and components thereof and on which
depreciation is taken is included in Notes A and E to the Fund's Financial
Statements, included in Item 8, Financial Statements and Supplementary Data,
and in Schedule XI to Item 14.  All real estate owned has been depreciated over
40 years for both financial and tax reporting purposes on a straight-line basis
except for leasehold improvements, which are depreciated over the term of the
respective lease for financial reporting purposes.


Item 3. Legal Proceedings

        None

Item 4. Submission of Matters to a Vote of Security Holders

        None


                                    PART II


Item 5. Market for Registrant's Common Equity and Related Shareholder Matters

        The Fund's shares of beneficial interest ("Shares") are traded on the
American Stock Exchange (AMEX) under the symbol "VRO".  The Shares have been
traded on the AMEX since August 20, 1991.  From July 24, 1989 to August 19,
1991, the Fund's shares were traded on the over the counter market and were
quoted by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ").  Prior to July 24, 1989, there was no trading market for the
Shares.  As of February 29, 1996, there were approximately 15,161 holders of
record of the Fund's Shares.

        Set forth below is certain information regarding the Fund's Shares for
each of the eight fiscal quarters in the two-year period ended December 31,
1995:

<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                      ---------------------------------------------------------
                                                              1995                                1994
                                                              ----                                ----
                                                          Share Prices                       Share Prices
                                                      ---------------------            ------------------------
                                                        High          Low                High             Low  
                                                      --------      -------            --------         -------

                   <S>                                <C>          <C>                  <C>            <C>
                   For the Quarter Ended:
                   March 31                            $4.25        $3.4375**            $8.00          $7.375
                   June 30                             $3.9375      $2.8125**            $7.25          $6.25
                   September 30                        $3.25        $2.5625**            $6.625         $5.75
                   December 31 *                       $3.50        $2.875               $7.626         $3.50
</TABLE>

        *  Liquidating dividends of $.50 and $3.69 per share were paid on
           December 28, 1995 and December 29, 1994, respectively.

       **  Liquidating dividends of $.05 per share were paid on April 28,
           July 28, and October 31, 1995.



                                       7
<PAGE>   9
        The tables below indicate the amount of cash dividends per share
declared and paid during the years ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
                                      Record                    Distribution
                                       Date                       Per Share
                            --------------------------         ----------------
                            <S>                                          <C>
                                     03-31-95                            $.05
                                     06-30-95                             .05
                                     09-29-95                             .05
                                     12-26-95                             .50
                                                                          ---

                            Total Distributions - 1995                   $.65
                                                                         ====
</TABLE>


<TABLE>
<CAPTION>
                                      Record                    Distribution
                                       Date                       Per Share
                            --------------------------         ----------------
                            <S>                                         <C>
                                     03-31-94                            $.15
                                     06-30-94                             .15
                                     09-30-94                             .15
                                     12-27-94                            3.69
                                                                         ----

                            Total Distributions - 1994                  $4.14
                                                                        =====
</TABLE>
<TABLE>
<CAPTION>
                 Status of Distributions                         1995              1994
                 -----------------------                         ----              ----
                 <S>                                            <C>               <C>
                 Ordinary Income                                $ .00             $ .01
                 Return of Capital                                .00               .35
                 Long-term Capital Gain                           .00               .09
                 Liquidating                                      .65              3.69
                                                                  ---              ----
                                                                 $.65             $4.14
                                                                 ====             =====
                      Total
</TABLE>


        Except during its offering period, the Fund has historically paid
distributions on a quarterly basis and there are currently no contractual
restrictions on the Fund's present or future ability to make distributions to
shareholders.  For additional information regarding the Fund's distributions
and its ability and intent to pay distributions during the liquidation period,
see Item 7, Management's Discussion and Analysis of Financial Condition and
Results of Operations.

Item 6. Selected Financial Data

        The information required by this Item is included on page 19 of the
Fund's 1995 Annual Report to Shareholders and is incorporated herein by
reference thereto.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

        The information required by this Item is included on pages 20 through
27 of the Fund's 1995 Annual Report to Shareholders and is incorporated herein
by reference thereto.





                                       8
<PAGE>   10
Item 8. Financial Statements and Supplementary Data

        The Fund's financial statements at December 31, 1995 and 1994, and for
each of the three years in the period ended December 31, 1995 are included on
pages 5-17 of the Fund's 1995 Annual Report to Shareholders and are
incorporated herein by reference thereto.

Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

        None




                                    PART III


Item 10. Directors and Executive Officers of the Registrant

        The information required by this Item with respect to Trustees is
included in the Fund's definitive Proxy Statement filed with the Securities and
Exchange Commission on March 15, 1996, for its Annual Meeting of Shareholders
to be held on April 24, 1996, which is incorporated herein by reference
thereto.  (Information with respect to executive officers of the Fund is
included in Item 1.)

Item 11. Executive Compensation

        The information required by this Item is included in the Fund's
definitive Proxy Statement filed with the Securities and Exchange Commission on
March 15, 1996 for its Annual Meeting of Shareholders to be held on April 24,
1996, which is incorporated herein by reference thereto.

Item 12. Security Ownership of Certain Beneficial Owners and Management

        The information required by this Item is included in the Fund's
definitive Proxy Statement filed with the Securities and Exchange Commission on
March 15, 1996 for its Annual Meeting of Shareholders to be held on April 24,
1996, which is incorporated herein by reference thereto.


Item 13. Certain Relationships and Related Transactions

        The information required by this Item is included in the Fund's
definitive Proxy Statement filed with the Securities and Exchange Commission on
March 15, 1996 for its Annual Meeting of Shareholders to be held on April 24,
1996, which is incorporated herein by reference thereto.





                                       9
<PAGE>   11
                                    PART IV



Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)     1. Financial Statements:

                 The following financial statements as of, and for the years
        ended, December 31, 1995, 1994 and 1993 are incorporated in Item 8
        herein by reference from the following pages of the Fund's 1995 Annual
        Report to Shareholders, which is filed as an Exhibit hereto.

<TABLE>
<CAPTION>
                                                                                                 ANNUAL REPORT
                                                                                                      PAGE NO.

         <S>                                                                                             <C>
         Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5
         Income Statements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  6
         Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  7-8
         Statements of Changes in Shareholders' Equity  . . . . . . . . . . . . . . . . . . . . . . . . . .  9
         Notes to Financial Statements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10-17
         Report of Independent Accountants  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>


        2. Financial Statement Schedules:

                 The financial statement schedules included in Part IV of this
        report should be read in conjunction with the Fund's financial
        statements incorporated by reference in Item 8 of this report.
<TABLE>
<CAPTION>
                                                                                                     FORM 10-K
         SCHEDULE                                                                                     PAGE NO.


          <S>             <C>                                                                            <C>
          XI              Real Estate and Accumulated Depreciation  . . . . . . . . . . . . . . . . . .  16-17
                          Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>

                 All other schedules have been omitted since the required
        information is presented in the financial statements, the related
        notes, or is not applicable.





                                       10
<PAGE>   12
3. Exhibits:

Exhibit No.                            Description
-----------                            -----------

   2            Plan of Liquidation and Termination, dated December 12, 1994,
                filed as exhibit 2 to the Fund's Annual Report on Form 10-K for 
                the fiscal year ended December 31, 1994, and incorporated
                herein by reference.

   3.1          Amended and Restated Declaration of Trust, dated December 9,
                1986, filed as exhibit 3 to the Fund's Registration Statement
                on Form S-11, SEC Registration #33-8649, and incorporated
                herein by reference.

   3.2          Amendment #1 to Amended and Restated Declaration of Trust,
                dated January 10, 1987, filed as exhibit 3(b) to the Fund's
                Registration Statement on Form S-11, SEC Registration
                #33-15040, and incorporated herein by reference.

   3.3          Amendment #2 to Amended and Restated Declaration of Trust,
                dated May 31, 1988, filed as exhibit 3 to the Fund's Quarterly
                Report on Form 10-Q for the quarter ended June 30, 1988, and
                incorporated herein by reference.

   3.4          By-laws, filed as exhibit 3 to the Fund's Registration
                Statement on Form S-11, SEC Registration #33-8649, and
                incorporated herein by reference.

   10.1         Advisory Agreement between the Fund and Aldrich, Eastman &
                Waltch, Inc. dated December 23, 1986, filed as exhibit 10.1 to
                the Fund's Annual Report on Form 10-K for the fiscal year ended
                December 31, 1987, and incorporated herein by reference.

   10.2         Services Agreement between the Fund and The Vanguard Group,
                Inc. dated December 23, 1986, filed as exhibit 10.2 to the
                Fund's Annual Report on Form 10-K for the fiscal year ended
                December 31, 1987, and incorporated herein by reference.

   10.3(a)      Loan Agreement by and between Plaza Del Amo and Lawrence W.
                Doyle, J. Grant Monahon and Richard F. Burns, Trustees of AEW
                #82 Trust, established by Declaration of Trust dated August 14,
                1987, dated September 16, 1987, filed as exhibit 10.3(a) to the
                Fund's Annual Report on Form 10-K for the fiscal year ended
                December 31, 1987, and incorporated herein by reference.

   10.3(b)      Declaration of Trust, AEW #82 Trust and Schedule of Beneficial
                Interest dated August 14, 1987, filed as exhibit 10.3(b) to the
                Fund's Annual Report on Form 10-K for the fiscal year ended
                December 31, 1987, and incorporated herein by reference.

   10.3(c)      All-Inclusive Promissory Note from Plaza Del Amo in favor of
                Lawrence W. Doyle, J. Grant Monahon and Richard F.  Burns,
                Trustees of AEW #82, established by Declaration of Trust dated
                August 14, 1987, dated September 16, 1987, filed as exhibit
                10.3(c) to the Fund's Annual Report on Form 10-K for the fiscal
                year ended December 31, 1987 and incorporated herein by
                reference.

   10.4(a)      Purchase and Sale Agreement of Oakcreek Village Shopping
                Center, between Pacific Guaranty Retail Development Corporation
                and Michael O. Craig, Richard F. Burns and J. Grant Monahon as
                Trustees of AEW #96 Trust, under Declaration of Trust dated
                November 6, 1987, dated October 31, 1987, filed as exhibit
                10.4(a) to the Fund's Annual Report on Form 10-K for the fiscal
                year ended December 31, 1987, and incorporated herein by
                reference.





                                       11
<PAGE>   13
   10.4(b)      Declaration of Trust, AEW #96 Trust and Schedule of Beneficial
                Interest, dated November 6, 1987, filed as exhibit 10.4(b) to
                the Fund's Annual Report on Form 10-K for the fiscal year ended
                December 31, 1987, and incorporated herein by reference.

   10.4(c)      First Amendment to Purchase and Sale Agreement of Oakcreek
                Village Shopping Center between Pacific Guaranty Retail
                Development Corporation and Michael O. Craig, Richard F. Burns
                and J. Grant Monahon as Trustees of AEW #96 Trust, under
                Declaration of Trust dated November 6, 1987, dated November 24,
                1987, filed as exhibit 10.4(c) to the Fund's Annual Report on
                Form 10-K for the fiscal year ended December 31, 1987, and
                incorporated herein by reference.

   10.5(a)      Purchase and Sale Agreement of Valley Industrial Park and
                Sea-Tac Industrial Park between Prudential Insurance Company of
                America and Joseph F. Azrack, Richard F. Burns and J. Grant
                Monahon as Trustees of AEW #105 Trust, under Declaration of
                Trust dated December 23, 1987, dated January 8, 1988, filed as
                exhibit 10.5(a) to the Fund's Annual Report on Form 10-K for
                the fiscal year ended December 31, 1987, and incorporated
                herein by reference.

   10.5(b)      Declaration of Trust, AEW #105 Trust and Schedule of Beneficial
                Interest, dated December 23, 1987, filed as exhibit 10.5(b) to
                the Fund's Annual Report on Form 10-K for the fiscal year ended
                December 31, 1987, and incorporated herein by reference.

   10.6(a)      Purchase and Sale Agreement of Vita-Fresh Vitamin Facility,
                dated January 10, 1988, between Vita-Fresh Vitamin Company,
                Inc. and Lawrence W. Doyle, Richard F. Burns and J. Grant
                Monahon as Trustees of AEW #113 Trust, under Declaration of
                Trust dated January 10, 1988, filed as exhibit 10.6(a) to the
                Fund's Annual Report on Form 10-K for the fiscal year ended
                December 31, 1987, and incorporated herein by reference.

   10.6(b)      Declaration of Trust, AEW #113 Trust and Schedule of Beneficial
                Interest, dated January 19, 1988, filed as exhibit 10.6(b) to
                the Fund's Annual Report on Form 10-K for the fiscal year ended
                December 31, 1987, and incorporated herein by reference.

   10.7(a)      Purchase and Sale Agreement of Everest I, Everest II, Fairview
                Industrial Building and Shoreview Professional Building between
                Everest Development ltd. and Michael O. Craig, Richard F. Burns
                and J. Grant Monahon as Trustees of AEW #106 Trust, under
                Declaration of Trust dated December 17, 1987, dated February 8,
                1988, filed as exhibit 10.7(a) to the Fund's Annual Report on
                Form 10-K for the fiscal year ended December 31, 1987, and
                incorporated herein by reference.

   10.7(b)      Declaration of Trust, AEW #106 Trust and Schedule of Beneficial
                Interest, dated December 17, 1987, filed as exhibit 10.7(b) to
                the Fund's Annual Report on Form 10-K for the fiscal year ended
                December 31, 1987, and incorporated herein by reference.

   10.8         All-Inclusive Promissory Note (Wraparound note) dated May 11,
                1988, Escrow Agreement dated May 27, 1988 and Option Agreement
                dated May 11, 1988, all relating to the Fund's mortgage
                investment in the Carmel Executive Park, filed as exhibit 10 to
                the Fund's Quarterly Report on Form 10-Q Report for the quarter
                ended June 30, 1988, and incorporated herein by reference.

   10.9(a)      Purchase and Sale Agreement of Citadel II office building,
                between Crow Vista #1 and Aldrich, Eastman & Waltch, Inc., a
                Massachusetts Corporation  acting as agent for the Fund, filed
                as exhibit 10(a) to the Fund's Quarterly Report on Form 10-Q
                for the quarter ended September 30, 1988, and incorporated
                herein by reference.





                                       12
<PAGE>   14
   10.9(b)      Citadel II Escrow Agreement, filed as exhibit 10(b) to the
                Fund's Quarterly Report on Form 10-Q for the quarter ended
                September 30, 1988, and incorporated herein by reference.

   10.10(a)     Loan Agreement for Sheffield Forest Apartments by and between
                Lincoln Park Place II Limited Partnership and J. Grant Monahon,
                Richard F. Burns and Marvin M. Franklin, Trustees of AEW #145
                Trust, established by Declaration of Trust dated October 14,
                1988, dated December 7, 1988, filed as exhibit 10.10(a) to the
                Fund's Annual Report on Form 10-K for the fiscal year ended
                December 31, 1988, and incorporated herein by reference.

   10.10(b)     Second Amended and Restated Promissory Note for Sheffield
                Forest Apartments from Lincoln Park Place II Limited
                Partnership in favor of J. Grant Monahon, Richard F. Burns and
                Marvin M. Franklin, Trustees of AEW #145 Trust, established by
                Declaration of Trust dated October 14, 1988, dated December 7,
                1988, filed as exhibit 10.10(b) to the Fund's Annual Report on
                Form 10-K for the fiscal year ended December 31, 1988 and
                incorporated herein by reference.

   10.10(c)     Amended and Restated Deed of Trust for Sheffield Forest
                Apartments by and between Lincoln Park Place II Limited
                Partnership and J. Grant Monahon, Richard F. Burns and Marvin
                M. Franklin, Trustees of AEW #145 Trust, established by
                Declaration of Trust dated October 14, 1988, dated December 7,
                1988, filed as exhibit 10.10(c) to the Fund's Annual Report on
                Form 10-K for the fiscal year ended December 31, 1988, and
                incorporated herein by reference.

   10.10(d)     Declaration of Trust, AEW #145 Trust and Schedule of Beneficial
                Interest dated October 14, 1988, filed as exhibit 10.10(d) to
                the Fund's Annual Report on Form 10-K for the fiscal year ended
                December 31, 1988, and incorporated herein by reference.

   10.11(a)     Promissory note of Citadel II by and between the Variable
                Annuity Life Insurance Company and J. Grant Monahon, Richard F.
                Burns, and Lee H. Sandwen, Trustees of AEW #131 Trust,
                established by Declaration of Trust dated June 7, 1988, dated
                October 9, 1990, filed as exhibit 10.1(a) to the Fund's
                Quarterly Report on Form 10-Q for the quarter ended September
                30, 1990, and incorporated herein by reference.

   10.11(b)     Mortgage and Security Agreement of Citadel II by and between
                the Variable Annuity Life Insurance Company and J.  Grant
                Monahon, Richard F. Burns, and Lee H. Sandwen, Trustees of AEW
                #131 Trust, established by Declaration of Trust dated June 7,
                1988, dated October 9, 1990, filed as exhibit 10.1(b) to the
                Fund's Quarterly Report on Form 10-Q for the quarter ended
                September 30, 1990, and incorporated herein by reference.

   10.11(c)     Assignment of Lessor's Interest in Leases of Citadel II by and
                between the Variable Annuity Life Insurance Company and J.
                Grant Monahon, Richard F. Burns, and Lee H. Sandwen, Trustees
                of AEW #131 Trust, established by Declaration of Trust dated
                June 7, 1988, dated October 9, 1990, filed as exhibit 10.1(c)
                to the Fund's Quarterly Report on Form 10-Q for the quarter
                ended September 30, 1990, and incorporated herein by reference.

   10.12        Standard Offer, Agreement and Escrow Instructions for Purchase
                of Real Estate by and between the Fujita Corporation USA, a
                California Corporation, and Richard F. Burns, J. Grant Monahon,
                Lawrence W. Doyle, Trustees of AEW #113 Trust, established by
                Declaration of Trust dated January 19, 1988, filed as exhibit
                10.12 to the Fund's Annual Report on Form 10-K for the fiscal
                year ended December 31, 1990 and incorporated herein by
                reference.

   10.13        Purchase and Sale Agreement of the Everest I ("Zycad") Building
                by and between Richard F Burns, J. Grant Monahon, and Bruce H.
                Freedman as Trustees of AEW #106, under Declaration of Trust
                dated December 17,





                                       13
<PAGE>   15
                1987 and JLS and L.P., dated April 23, 1991, filed as exhibit
                10.13 to the Fund's Quarterly Report on Form 10-Q for the
                quarter ended March 31, 1991 and incorporated herein by
                reference.

   10.14        Settlement Agreement and Mutual Release from mortgage by and
                among J. Grant Monahon, Richard F Burns and Lee. H.  Sandwen,
                Trustees of AEW #155 Trust under Declaration of Trust dated
                January 11, 1989, Mark C. Dickinson, Dickinson Development
                Corp. and Citadel III Partners, Ltd., a Florida limited
                partnership, dated December 30, 1991, filed as exhibit 10.14 to
                the Fund's Annual Report on Form 10-K for the fiscal year ended
                December 31, 1991 and incorporated herein by reference.

   10.15        First Amendment to Second Amended and Restated Promissory Note
                by and between Lincoln Park Place II Limited Partnership, a
                Maryland limited partnership and J. Grant Monahon, Richard F.
                Burns and Devin McCall, Trustees of AEW #145 Trust under
                Declaration of Trust dated October 14, 1988 dated April 30,
                1992, filed as exhibit 10.15 to the Fund's Quarterly Report on
                Form 10-Q for the quarter ended March 31, 1992 and incorporated
                herein by reference.

   10.16        Amendment No.1 to Loan Agreement by and between Lincoln Park
                Place II Limited Partnership, a Maryland limited partnership
                and J. Grant Monahon, Richard F. Burns and Kevin McCall,
                Trustees of AEW #145 Trust under Declaration of Trust dated
                October 14, 1988, dated April 30. 1992, filed as exhibit 10.16
                to the Fund's Quarterly Report on Form 10-Q for the quarter
                ended March 31, 1992 and incorporated herein by reference.

   10.17        Amendment No.1 to All-Inclusive Promissory Note by and between
                Piazzagalli Development Company, a Vermont General Partnership
                and J. Grant Monahon, Richard F. Burns and Lee H. Andwen,
                Trustees of AEW #127 Trust, under Declaration of Trust dated
                May 3, 1988, dated December 23, 1991 for purposes of reference,
                filed as exhibit 10.17 to the Fund's Quarterly Report on Form
                10-Q for the quarter ended March 31, 1992 and incorporated
                herein by reference.

   10.18        Amendment No.1 to Loan Agreement by and between Piazzagalli
                Development Company, a Vermont General Partnership and J. Grant
                Monahon, Richard F. Burns and Lee H. Sandwen, Trustees of AEW
                #127 Trust, under Declaration of Trust dated May 3, 1988, dated
                December 23, 1991 for purposes of reference, filed as exhibit
                10.18 to the Fund's Quarterly Report on Form 10-Q for the
                quarter ended March 31, 1992 and incorporated herein by
                reference.

   10.19        Purchase and Sale Agreement of the Seattle Industrial Parks, by
                and between AEW #105 Trust and Spieker Properties, Inc., dated
                September 21, 1994, filed as exhibit 10.19 to the Fund's Report
                on Form 10-K for the fiscal year ended December 31, 1994 and
                incorporated herein by reference.

   13           1995 Annual Report to Shareholders.  (With the exception of the
                information and data incorporated by reference in Items 6, 7,
                and 8 of this Annual Report on Form 10-K, no other information
                or data appearing in the 1995 Annual Report to Shareholders is
                to be deemed filed as part of this report.)

   27           Financial Data Schedule.  A Financial Data Schedule for the
                year ended December 31, 1995, was submitted in electronic
                format only.

(b)           Reports on Form 8-K

                During the fourth quarter ended December 31, 1995, the Fund
              filed a Report on Form 8-K, dated December 15, 1995, reporting,
              in Item 5, the sale of its Sheffield Forest Apartment Complex
              investment.





                                       14
<PAGE>   16
                                                                     SCHEDULE XI

                          VANGUARD REAL ESTATE FUND I,
                 A SALES-COMMISSION-FREE INCOME PROPERTIES FUND
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                               DECEMBER 31, 1995


<TABLE>
<CAPTION>
Description                            Oakcreek Village        Plaza del Amo
                                       ----------------        -------------
                                       Shopping Center,        Shopping Center,
                                       Durham, NC              Torrance, CA (f)                  TOTAL
                                                                                                 -----

 <S>                                          <C>                       <C>                      <C>
 Encumbrances                                     None                    $2,281                  $2,281
 Initial Cost to Fund
 --------------------
 Land (000)                                     $3,100                    $6,600                  $9,700
 Buildings and Improvements (000)                7,492                     4,467                  11,959
                                               -------                   -------                 -------
 Total Acquisition Costs                       $10,592                   $11,067                 $21,659
 Costs Capitalized Subsequent to
 -------------------------------
  Acquisition
 ------------
 Improvements (000)                                588                         4                    $592
 Write-downs (a)                                  (700)                        0                    (700)
 Gross Amount at which Carried 
 ------------------------------
 at Close of Period (b)
 ------------------    
 Land (000)                                      2,885                     6,600                  $9,485
 Building and Improvements (000)                 7,595                     4,471                 $12,066
                                               -------                   -------                 -------
 Total (000) (c)                               $10,480                   $11,071                 $21,551
                                               =======                   =======                 =======

 Accumulated Depreciation (000) (d)             $1,492                        $0                  $1,492
 Date of Construction                             1986                      1975                       -
 Date Acquired                                   11/87                      8/95                       -
 Depreciable Life (e)                         40 years                  40 years                       -
</TABLE>



(a)  A $150,000 write down in the carrying value of the Fund's Oakcreek direct
ownership investment was recorded, upon adoption of the Liquidation Plan in
December 1994, to reflect the effect of its held for sale status on
management's assessment of the investment's recoverability.  In December 1995,
a write down in the amount of $550,000 was recorded to reflect a decline in the
independent appraised value of the Oakcreek property, primarily resulting from
increased retail compition in its market.

(b)  The aggregate cost of real estate for federal income tax purposes at
December 31, 1995 was $20,284,100.





                                       15
<PAGE>   17
                                                         SCHEDULE XI (Continued)
 

(c)  The activity in real estate is summarized as follows: 




<TABLE>
<CAPTION>
                                   --------------------------------------------------------------------------------------------
 Year ended December 31,           1995      1994       1993       1992      1991       1990       1989       1988      1987
                                   (000)     (000)      (000)      (000)     (000)      (000)      (000)     (000)      (000)
                                   --------------------------------------------------------------------------------------------
 <S>                               <C>        <C>       <C>        <C>        <C>       <C>        <C>        <C>       <C>
 Balance at beginning of year      $28,287    $44,222   $63,622    $63,192    $71,561   $71,304    $71,422    $10,574        $0
 Additions during the year:        
   Transfers                        11,067     15,500         0          0          0         0          0          0         0
   Property purchases                    0          0         0          0          0         0          0     61,108    10,574
   Property improvements                57         14       360        430        613       257        160         60         0
 Deletions during the year:        
  Sales of properties, net of      (17,304)   (30,528)  (19,704)         0     (8,962)        0          0          0         0
 write-downs                       
  Citadel II contingent purchase
    price refund*                        0          0         0          0        (20)        0       (278)      (320)        0

 Write-downs                          (550)      (850)        0          0          0         0          0          0         0
 Write-off of tenant improvements       (6)       (71)      (56)         0          0         0          0          0         0
                                   --------------------------------------------------------------------------------------------
 Balance at end of year            $21,551    $28,287   $44,222    $63,622    $63,192   $71,561    $71,304    $71,422   $10,574
                                   ============================================================================================
</TABLE>

* The Fund purchased the Citadel II office building ("Citadel II") for a
  contract price of $19,500,000. Included in the contract price was a
  $1,000,000 contingent purchase price payment placed in escrow for the
  Fund, of which an aggregate of $618,000 was returned to the Fund by the
  seller at the expiration of the escrow period pursuant to the terms of
  the purchase and sale agreement.

(d)  Reconciliation of accumulated depreciation is summarized as follows:

<TABLE>
<CAPTION>
     Year ended December 31,
                                      ----------------------------------------------------------------------------------------
                                      1995       1994       1993     1992      1991      1990      1989      1988       1987
                                      (000)      (000)      (000)    (000)     (000)     (000)     (000)     (000)      (000)
                                      ----------------------------------------------------------------------------------------
 <S>                                   <C>        <C>      <C>       <C>       <C>       <C>       <C>        <C>          <C>

 Balance at beginning of year          $2,069     $4,789   $5,862    $4,557    $3,792    $2,413    $1,087        $23        $0
 Add:
  Depreciation for the year                 0        941    1,217     1,305     1,231     1,379     1,326      1,064        23
 Deduct:
  Accumulated depreciation of
   real estate sold                      (571)    (3,597)  (2,234)        0      (466)        0         0          0         0
 Write-off of tenant improvements          (6)       (64)     (56)        0         0         0         0          0         0
                                      ----------------------------------------------------------------------------------------
 Balance at end of year                $1,492     $2,069   $4,789    $5,862    $4,557    $3,792    $2,413     $1,087       $23
                                      ========================================================================================
</TABLE>

(e)  Prior to the adoption of the Liquidation Plan, depreciation on real estate
owned was computed using the straight-line method over 40 years for buildings
and costs incurred in conjunction with the acquisition of real estate
investments were deferred and amortized on a straight-line basis over the life
of the loan for mortgage loan investments and the life of the property for
equity investments.  Subsequent to adoption of the Liquidation Plan, no
depreciation or amortization expense related to the Fund's owned real estate
and acquisition costs is recognized since the Fund's real estate investments
are considered to be held for sale.

(f)  The Fund obtained Plaza del Amo on August 1, 1995, in lieu of foreclosure
on the shared-appreciation wrap-around mortgage loan secured by the Plaza del
Amo property, the Fund with the borrower retaining a residual interest in the
shared appreciation feature of the mortgage, and recorded it at its
then-estimated net realizable value.  Information concerning the transfer is
included in Note F to the Fund's Financial Statements.
     




                                       16
<PAGE>   18





                      REPORT OF INDEPENDENT ACCOUNTANTS ON
                         FINANCIAL STATEMENT SCHEDULES




To the Board of Trustees of
Vanguard Real Estate Fund I


Our audits of the financial statements referred to in our report dated March 8,
1996 appearing on page 18 of the 1995 Annual Report to Shareholders of Vanguard
Real Estate Fund I (which report and financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included audits of the
Financial Statement Schedules listed in Item 14(a) of this Form 10-K.  In our
opinion, these Financial Statement Schedules present fairly, in all material
respects, the information set forth therein when read in conjunction with the
related financial statements.




PRICE WATERHOUSE LLP

Philadelphia, Pennsylvania
March 8, 1996





                                       17
<PAGE>   19

                                   SIGNATURES




        Pursuant to the requirements of Section 13 or 15(d) of the Securities
        Exchange Act of 1934, the registrant has duly caused this report to be
        signed on its behalf by the undersigned thereunto duly authorized.

                          VANGUARD REAL ESTATE FUND I,
                 A Sales-Commission-Free Income Properties Fund


 March 29, 1996                                  /s/ John J. Brennan
------------------------                         ----------------------------
         DATE                                    John J. Brennan
                                                 President


        Pursuant to the requirements of the Securities Exchange Act of 1934,
        this report has been signed below by the following persons on behalf
        of the Registrant and in the capacities on the dates indicated.



<TABLE>
<S>                                              <C>
 March 29, 1996                                  /s/ J. Mahlon Buck, Jr.
------------------------                         ----------------------------
         DATE                                    J. Mahlon Buck, Jr.
                                                 Trustee


 March 29, 1996                                  /s/ William S. Cashel, Jr.
------------------------                         ----------------------------
         DATE                                    William S. Cashel, Jr.
                                                 Trustee


 March 29, 1996                                  /s/ David C. Melnicoff
------------------------                         ----------------------------
         DATE                                    David C. Melnicoff
                                                 Trustee


 March 29, 1996                                  /s/ J. Lawrence Wilson
------------------------                         ----------------------------
         DATE                                    J. Lawrence Wilson
                                                 Trustee


 March 29, 1996                                  /s/ Ralph K. Packard
------------------------                         ----------------------------
         DATE                                    Ralph K. Packard
                                                 Vice President & Controller
</TABLE>





                                       18
<PAGE>   20


                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
EXHIBIT NO.                       DESCRIPTION                                                         PAGE NO.
-----------                       -----------                                                         --------


<S>                       <C>                                                                                <C>
13                        1995 Annual Report to Shareholders  . . . . . . . . . . . . . . . . . . . . . . .  21
</TABLE>





                                       20