Canada Product Guide ETFs - Vanguard Canada - Low … · Q 4 Q1 Q2 Q3 Vanguard Quarterly A guide to...

Q1Q2

Q3Q4Vanguard Quarterly

A guide to our ETFs and model portfolios in Canada

April 2018

For financial advisor use only. Not for public distribution.

Contents

1 Introduction

12 Vanguard ETF strategies overview

14 Model portfolios

30 Vanguard asset allocation ETFs

35 Vanguard equity index ETFs

57 Vanguard fixed income index ETFs

68 Vanguard active equity ETFs

“ You can’t control market performance, but you can control how much you

pay for your investments. All else being equal, investments with consistently

low MERs can give you a head start in achieving competitive returns.”

— Atul Tiwari, managing director of Vanguard Investments Canada Inc.

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ETFs and the changing advice landscapeThe investment environment in Canada presents both challenges and opportunities for advisors. Competition has grown keener. Regulators are requiring greater fee transparency. Technology is reshaping how clients interact with their advisors. And investment products are proliferating.

Among the newer products are exchange-traded funds (ETFs), which have become an increasingly popular choice for both investors and advisors.

One reason for ETFs’ popularity is that their ongoing ownership costs tend to be lower than mutual funds. ETFs are benefiting from investors’ heightened focus on cost and transparency as well as the growing acceptance of ETFs among advisors who are moving toward a fee-based practice model.

New regulations designed to benefit investors have also provided momentum

for ETFs. Client Relationship Model (CRM) reforms in Canada require advisors to provide greater fee-transparency to clients.

Beyond CRM, regulators are mulling possible limitations on commissions paid to advisors, especially trailer fees. Such a move would likely prompt more advisors to switch their practice model to a fee-based approach.

Our own global survey of advisors found 83% of Canadian advisors surveyed indicated a fee-based model was better for their practices than a commission-based model.1 Figure 1 shows the gap between commission-based and fee-based assets has narrowed significantly since 2004.

This quarterly guide is designed to help you learn more about the features of ETFs, our model portfolios and our lineup of Vanguard ETFs®.

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1 Source: Ipsos survey of more than 900 advisors around the world, including 164 in Canada, on behalf of The Vanguard Group, Inc., and Vanguard Investments Canada Inc. Online quantitative surveys were conducted from July 16 to September 1, 2015.

Source: Strategic Insight as of December 31, 2016.

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Figure 1: Practice models convergePercentage of commission-based assets and fee-based brokerage assets in Canada

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2 Diversification doesn’t ensure a profit or protect against a loss in a declining market, and it’s not possible to invest directly in an index.

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Explaining ETFs and how they work

What is an ETF?An ETF is an investment that’s built like a mutual fund—potentially holding hundreds, sometimes thousands of individual securities—but trades on an exchange throughout the day like a stock.

What are the features of ETFs?

ETFs are pooled investments that trade on an exchange throughout the day. They either track an index or execute an active strategy. Vanguard active ETFs do not track benchmark indexes. Rather, they use a transparent, rules-based approach. Still, both index and active ETFs share certain characteristics:

Low costs. ETFs generally have lower management expense ratios (annual operating costs as a percentage of average net assets) than actively managed mutual funds. In many cases, they have lower MERs than index mutual funds.

Trading flexibility. ETFs are traded on a stock exchange, so they can be bought and sold through an advisor or brokerage account any time the exchange is open. Investors can use stock-trading techniques, such as stop and limit orders and short-selling, and ETFs can be bought on margin. Like stocks, ETFs are subject to the traditional risks and potential rewards of

the markets. The value of ETF units will rise and fall as markets fluctuate, so an ETF can gain or lose value over short or long periods.

The following are characteristics of index ETFs only:

Diversification. A broad-based index ETF might contain hundreds or thousands of securities—more than many actively managed funds. Vanguard index ETFs are designed to be as diversified as the original indexes they seek to track and can provide greater diversification than an individual investor may achieve independently, but any given ETF may not be a diversified investment.2

Potential for tax efficiency. Index ETFs can provide tax advantages relative to actively managed funds over longer holding periods because they tend to involve less portfolio turnover.

Transparency. Index ETFs hold the same securities as, or a representative sample of, their benchmark indexes, so you’ll always know what you’re investing in.

Low manager risk. Index ETFs virtually eliminate exposure to manager risk. That’s because they seek to track, not outperform, a market index. They may underperform their benchmarks, but typically by narrow margins once operating costs are factored in.

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How do ETFs work?

ETFs gather money from many investors and use it to acquire stocks, bonds or other assets. Most ETFs use an indexing approach. They’re built so that their value can be expected to move in line with the index they seek to track. For example, a 2% rise or fall in the index should result in approximately a 2% rise or fall for an ETF that tracks that index (before fees and expenses).

Investors and their financial advisors must trade ETFs through a brokerage firm. ETFs can be bought and sold at the current market price whenever the stock exchange is open. Unit prices typically reflect the approximate value of an ETF’s underlying securities at any given point in the day.

How are ETFs regulated?

Like mutual funds and other investments, ETFs in Canada are regulated by the securities commissions within each province or territory. Securities commissions regulate the sale and distribution of ETFs in line with the investor protections set out in the various National Instruments, including National Instrument 81-102, and those within the broader provincial Securities Act. These protections include requirements for disclosing investment information and pricing, ethical standards for investment professionals, and other regulations that help ensure fair and transparent access to Canadian financial markets.

In addition to governmental oversight, dealers who sell ETFs are regulated by the Investment Industry Regulatory Organization of Canada (IIROC). As a self-regulatory organization, IIROC is subject to oversight and regular operational reviews by the securities commission in each province or territory. IIROC regulates its member dealers by setting education standards, investigating complaints, auditing for compliance and taking enforcement action when necessary. The Mutual Fund Dealers Association of Canada

(MFDA) granted its licensed advisors permission to sell ETFs in 2016. However, because of the absence of a technological platform to trade ETFs and ensure advisors fulfill certain proficiency requirements, adoption has been limited. A number of initiatives are under way that may prompt an increase in ETF adoption in this channel over the next couple of years, enabling greater access to ETFs.

What are the costs of ETFs?

Operating expenses. ETFs charge fees to cover ongoing operating expenses, such as advisory services, administration and recordkeeping, among other things. These fees are expressed as a percentage of fund assets and are commonly known as the management expense ratio.

Commissions and trading fees. When ETFs are bought and sold there are charges in the form of a flat transaction fee or a fee assessed on an investor’s total account balance. Some mutual funds charge sales loads, which are similar to brokerage commissions in that they compensate the broker who sold the fund.

Bid-ask spread. When buying or selling ETF units on an exchange, there’s a difference between the price a dealer is willing to pay for an ETF unit (the “bid”) and the somewhat higher price the dealer will accept to sell that ETF unit (the “ask”). As a result, an investor will typically buy ETF units for slightly more than “market” price and sell for slightly less. Bid-ask spreads are typically lower for ETFs that are heavily traded or that own securities that are highly liquid.

Trading expense ratio. This measures portfolio commissions and trading expenses that aren’t shown in the MER.

Foreign withholding taxes. These are taxes paid on the underlying international equities in the portfolio.

Understanding the liquidity of ETFsETFs get most of their liquidity from sources other than their trading activity on a stock exchange. The most important of these is the liquidity from an ETF’s underlying portfolio of securities.

The key to ETF liquidity lies in ETFs’ open-ended structure. Unlike single stocks, which have a fixed supply of shares, new ETF units can be created and existing units redeemed based on investor demand. This unique process allows ETFs to access the liquidity of their underlying securities. As a result, investors can often trade ETFs in amounts that far exceed an ETF’s average daily volume (ADV), without significantly affecting the ETF’s price.

ETFs have a dual existence in the marketplace. They live in both what is known as the primary market, where certain institutional investors create and redeem them, and in the secondary market, where individual investors buy and sell them.

Most ETF investors will likely trade only in the secondary market. However, the primary market can play a critical role in providing investors the best possible price for an ETF trade, especially for large orders.

Participants in the primary market create ETFs to trade on a stock exchange.

As shown in Figure 2, primary-market participants include:

• ETF sponsors (fund managers such as Vanguard).

• Dealers, which are brokerage houses or other institutions authorized to create and redeem ETFs.

• Market makers, which provide liquidity and may also function as dealers.

ETFsponsor

Individualinvestors

Trade on Toronto Stock

Exchange

Hold units

Dealer (Certain institutional investors, such as brokerage houses)

Basket of securities

One creation unit(e.g. 50,000 units of ETF)

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Figure 2: The creation and redemption process

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Stockexchange

Places “buy” order for ETF unitson behalf of Investor A.

Initiates transaction with stock exchange.

Initiates transaction with stock exchange.

Completes transaction with brokers. Unit

ownership changes from Investor B to Investor A.

Places “sell” order for ETF unitson behalf of Investor B.

BrokerB

AdvisorB

Works with advisor to create an investment mix that’s right

for him or her.

InvestorB

BrokerA

AdvisorA

Works with advisor to create an investment mix that’s right

for him or her.

InvestorA

To create new units of an ETF, a dealer typically gives the ETF sponsor specific quantities of the securities that make up the ETF and, in return, receives ETF units. Similarly, when these institutions redeem their ETF units, the ETF sponsor provides them with securities, not cash. Through these

“in-kind” creation and redemption transactions, the ETF incurs minimal transaction costs and doesn’t realize capital gains.

Information about the securities “basket” is published each day and reflects the value of cash or the securities that the dealer will need to provide to the ETF sponsor in exchange for ETF units. Once dealers create ETF units, they sell them to individual investors in the secondary market—the stock exchange. These individual investors may then sell their units to other investors.

As shown in Figure 3, investors and advisors buy and sell ETFs through a brokerage firm or discount brokerage account. ETFs can be bought and sold at the current market price whenever the stock exchange is open. Prices typically reflect the approximate value of an ETF’s underlying securities at any given point in the day.

These market trades, however, have little effect on the ETF itself—no cash flows into or out of the ETF that would require it to buy or sell portfolio securities, pay brokerage commissions or realize capital gains.

Of course, individual unitholders are subject to any brokerage commissions and capital gains triggered by their own trades.

The secondary-market price of ETF units may be more or less than the net asset value (NAV) of the underlying securities. Several factors influence an ETF’s price in the secondary market, including the share-price movement of the underlying securities, currency exchange rate movements (for international investments)and investors’ demand for the ETF.

Market makers provide liquidity by facilitating trades in the secondary market. Through adjusting for continuous market movements in the ETF’s underlying securities, market makers set intra-day bid and ask prices for the ETF.

Figure 3: Trading ETFs in the secondary market

Before executing an ETF transaction, we recommend advisors remember to “limit, block and call”—the financial version of

“stop, drop and roll.” Here’s what we mean:

• Use limit orders, not market orders. A limit order lets you set the price at which you buy or sell an ETF. If you use a market order instead, you may pay more or receive less than you would have liked. If execution is a priority, use a marketable limit order.

• Engage the services of your block desk when your trade size is greater than an ETF’s posted liquidity.

• Call your Vanguard sales executive or capital markets professional with any questions before or after your ETF trade.

To be sure you get an accurate quote for your trade, there are other considerations. Avoid trading early in the trading day because some of an ETF’s underlying securities may not have begun trading, which means a market maker can’t price the ETF with certainty.

Similarly, avoid trading near the market close because fewer firms may make markets in an ETF and thus fewer units may be listed for purchase and sale than at other times of the day.

Exercise caution when the market for underlying securities is closed when trading fixed income, international or wrapped ETFs. For example, when the bond market is closed and the stock market is open, spreads on bond ETFs tend to be wider.

Finally, always ask your trader to confirm the bid-ask spread for your ETF transaction. Market conditions can affect bid-ask spreads. During volatile periods, fewer units may be listed at best-bid and best-ask prices, increasing the importance of using the appropriate order type and monitoring your trades.

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ETF trading best practices

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Why low costs should matter to you and clientsAt Vanguard, we believe in a fee-based model of advisor pay. When you use low-cost Vanguard ETFs in clients’ portfolios, everyone wins.

You get flexibility in how you set your fees. Your clients get to keep more of their investment returns.

Figure 4 illustrates the difference in the average client all-in costs between the traditional F Class mutual fund fee model and a fee-based model using Vanguard ETFs.

3 Source: Strategic Insight. Series F asset-weighted average management expense ratio (MER) for Canadian Investment Funds Standards Committee (CIFSC) categories as of December 31, 2016. Calculation excludes ETFs, funds with performance fees, money market funds, funds with management fees charged at account level, hedge funds, index funds and LSVCC funds.

4 Assumed advisory program fee for illustrative purposes only.

5 Source: Vanguard. Asset-weighted average MER as of December 31, 2016, using data compiled from management reports of fund performance. Without waivers and absorptions, the average MER would have been higher. Vanguard Investments Canada Inc. expects to continue absorbing or waiving certain fees indefinitely but may, in its discretion, discontinue this practice at any time.

Figure 4: Fee flexibility

Traditional mutual fund fee model

0.98%

1.25% Advisory program4

Industry fund MER average3

Average client all-in cost

2.23%

Fee-based model

Advisory program4

Vanguard ETF MER average5

Average client all-in cost

1.40%

1.25%

0.15%

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Lower costs, greater returnsEverything else being equal, a lower-cost investment will outperform a higher-cost investment.

Figure 5 provides an idea of how much more money your clients could have over 30 years.

As Figure 5 shows, a lower-cost investment can make a big difference for your clients over time.

Figure 5: The low-cost effect

Note: This hypothetical example does not represent the return of any particular investment. Assumptions include a 6% compound annual return and an initial investment of $250,000. Distributions are included, but transaction costs, bid-ask spreads, inflation and income taxes payable by any unitholder, are not included. Actual investment results will vary upward or downward, and the example does not factor risks associated with market volatility or short-term events.

0

500,000

1,000,000

$1,500,000

0 10 3020

Fund A (management expense ratio 0.30%)

Fund B (management expense ratio 0.90%)

After 30 years, low-cost Fund A provides $215,025 more than Fund B.

$1,312,465

$1,097,440

Portfolio analytics

Build, analyze and compare portfolios to see how ETFs can fill gaps and add diversification. View a portfolio’s sector breakdown, weighting by world regions, credit quality, degree of correlation and risk exposure. Generate and save custom reports.

Return probabilities

See return projections for Vanguard model portfolios. Customize asset allocations, anticipated all-in costs and holding periods. Set reasonable return expectations for your clients.

Cost simulation

Compare the costs of thousands of Canadian mutual funds and ETFs. You can view and compare investments side by side to see the benefit that low-cost investments can provide over time.

Fund comparison

View a side-by-side comparison of returns, top 10 holdings, expenses and more about funds from Vanguard and other fund families.

Investor questionnaire

Start a conversation about asset allocation by having your clients answer some simple questions. Review our sample asset allocation results.

Practice management centre

Define and articulate your value, build a thriving fee-based practice and establish enduring client relationships with the help of our guides and sample materials.

ETF education centre

Find information on exchange-traded funds, whether you’re brushing up on the basics or researching strategic and tactical portfolio options.

Updates via social media

Follow us on LinkedIn and Twitter and keep current with Vanguard research, our insights into market and economic trends as well as upcoming events.

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Our tools and resources

ETF

Indexfund

Stock

Milestones for The Vanguard Group, Inc.

1975Founded in the United States with a lineup of 11 actively managed funds

1976Launches first index mutual fund for individual investors in the U.S.

1986Creates the first bond index fund for individual investors in the U.S.

1990Creates the first international stock index mutual funds in the U.S.

1996Opens its first office outside the U.S., in Australia

1998Launches its European business

2000Opens office in Japan

2003Opens office in Singapore

Launches Vanguard Target Retirement Funds in the U.S.

2006Global AUM surpasses $1 trillion*

2009Opens office in London

2011Opens offices in Toronto and Hong Kong


2014Opens office in Beijing

Global AUM surpasses $3 trillion*


Opens office in Shanghai


ETF industry milestones

1990World’s first ETF introduced in Canada

1993First ETF in the United States launched

2001Vanguard launches its first ETFs in the United States

2009Global ETF assets surpass $1 trillion*


2016Global ETF assets surpass $3 trillion*/Canadian ETF assets surpass $100 billion**

2017Global ETFassets surpass$4 trillion*

Milestones for Vanguard Canada

December 2011Lists its first six index ETFs on TSX

July 2013ETF AUM surpasses $1 billion**

July 2014Launches the first all-world ex-Canada ETF

May 2015ETF AUM surpasses $5 billion**

March 2016Launches six pooled index funds

January 2017ETF AUM surpasses $10 billion**

February 2018Launches three asset allocation ETFs

ETF launches in Canada

VCE VUS VEF

VEE VAB VSB

VDY VRE VFV

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VGH VDU

VXC VE VA

VBU VBG

VIU VI VVO VVL VEH

VMO VLQ VAH

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VCNS VBAL

VGRO

70s 80s 90s 2000s 2011 2012 2013 2014 2015 2016 2017 2018

Vanguard and ETFs through the years

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* Figures in U.S. dollars ** Figures in Canadian dollars

Milestones for The Vanguard Group, Inc.

1975Founded in the United States with a lineup of 11 actively managed funds

1976Launches first index mutual fund for individual investors in the U.S.

1986Creates the first bond index fund for individual investors in the U.S.

1990Creates the first international stock index mutual funds in the U.S.

1996Opens its first office outside the U.S., in Australia

1998Launches its European business

2000Opens office in Japan

2003Opens office in Singapore

Launches Vanguard Target Retirement Funds in the U.S.


2009Opens office in London

2011Opens offices in Toronto and Hong Kong


2014Opens office in Beijing

Global AUM surpasses $3 trillion*


Opens office in Shanghai


ETF industry milestones

1990World’s first ETF introduced in Canada

1993First ETF in the United States launched

2001Vanguard launches its first ETFs in the United States



2016Global ETF assets surpass $3 trillion*/Canadian ETF assets surpass $100 billion**

2017Global ETFassets surpass$4 trillion*

Milestones for Vanguard Canada

December 2011Lists its first six index ETFs on TSX

July 2013ETF AUM surpasses $1 billion**

July 2014Launches the first all-world ex-Canada ETF

May 2015ETF AUM surpasses $5 billion**

March 2016Launches six pooled index funds

January 2017ETF AUM surpasses $10 billion**

February 2018Launches three asset allocation ETFs

ETF launches in Canada

VCE VUS VEF

VEE VAB VSB

VDY VRE VFV

VSP VSC

VCN VUN VGG

VGH VDU

VXC VE VA

VBU VBG

VIU VI VVO VVL VEH

VMO VLQ VAH

VGV VCB

VSG VLB

VCNS VBAL

VGRO

70s 80s 90s 2000s 2011 2012 2013 2014 2015 2016 2017 2018

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Why Vanguard?We believe investment companies should make money for investors, not from them. We’re committed to keeping costs low, and since we’re not publicly traded or owned by a small circle of individuals focused on their own interests, we’re in a position to do just that. And the more returns investors keep, the more they can earn over time.

One of the world’s largest investment companies, Vanguard entered the Canadian market in December 2011. Vanguard Investments Canada Inc., a wholly owned subsidiary of The Vanguard Group, Inc., offered 36 ETFs in Canada with assets under management of $15 billion as of March 31, 2018.

Active equity ETFs Fixed income index ETFs Equity index ETFs Asset allocation ETFs

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Using Vanguard ETFs in portfoliosWhen it comes to constructing and maintaining clients’ investment portfolios, flexibility and choice are key.

Low-cost strategies using ETFs not only offer flexibility and choice, but also help streamline traditional portfolio construction efforts and free up your time to focus on value-added activities such as financial planning, behavioural coaching and tax planning for investors.

This guide provides three different ways to effectively implement Vanguard ETFs into portfolios. Each method or strategy is designed with a different focus in mind.

Vanguard model portfolios

Vanguard model portfolios provide you with a strategic asset allocation framework to help build diversified portfolios that suit a range of investor profiles.

Our model portfolios allow you to build a diversified exposure to the constituent asset classes using three to seven Vanguard ETFs. Strategic and index-centric by nature, our model portfolios are weighted by market capitalization. Mindful of investors’ preference in Canada for domestic investments, we overweight Canadian securities relative to global market-cap-weighted benchmarks. In addition, our models incorporate CAD-hedged and unhedged equity ETFs.

Choose this method if you want control over asset allocation and are happy to rebalance the portfolio when needed.

Vanguard asset allocation ETFs

Intended as all-in-one, diversified portfolios, Vanguard asset allocation ETFs are designed to simplify investment management and mitigate risk through asset allocation.

Each portfolio is a single-fund solution providing broad global diversification using different blends of seven core Vanguard ETFs—many of the same ETFs we use in our model portfolios—offering exposure to a wide range of equity and fixed income markets.

Our asset allocation ETFs are simple and straightforward. Regular rebalancing helps maintain exposure across key sub-asset classes at levels appropriate for investors’ goals and risk tolerance. Our focus on low costs helps investors keep more of the portfolios’ potential returns.

Creating a portfolio using Vanguard asset allocation ETFs can be an attractive option for clients who seek the benefits of a diversified low-cost portfolio that delivers competitive returns over the long term.

Vanguard ETFs

We offer a diverse range of index and actively managed ETFs that allow you to design and build an entire portfolio. Vanguard ETFs have no minimum investment amount, so no matter how small or large the allocation to a particular ETF, they’re an attractive, low-cost way for clients to gain broad market exposure.

1 Portfolios are market-capitalization weighted.2 Asset-weighted management expense ratio is calculated using the management expense ratio (MER) of each ETF multiplied by the

weight of each ETF in the model portfolio.Please see page 30 for other important information about Vanguard model portfolios.Data as of March 31, 2018

Vanguard

model portfolios1

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Asset-weighted management expense ratio2

Asset allocation

All-cap core Traditional core

Traditional core (hedged equity) Page

100% equity 0.21% 0.15% 0.15% 17

90% equity

10% fixed income

0.21% 0.16% 0.16% 18

80% equity

20% fixed income

0.21% 0.16% 0.16% 19

70% equity

30% fixed income

0.21% 0.17% 0.17% 20

60% equity

40% fixed income

0.21% 0.17% 0.17% 21

50% equity

50% fixed income

0.21% 0.18% 0.18% 22

40% equity

60% fixed income

0.21% 0.18% 0.18% 23

30% equity

70% fixed income

0.21% 0.19% 0.19% 24

20% equity

80% fixed income

0.21% 0.19% 0.19% 25

10% equity

90% fixed income

0.21% 0.20% 0.20% 26

100% fixed income

0.21% — — 27

Vanguard

model portfolios1

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About our model portfoliosAt Vanguard, we believe investors have the best chance for investment success when they’re mindful of four fundamental principles.

We believe investors should:

• Create clear, appropriate investment goals.• Develop a suitable asset allocation using

broadly diversified funds.• Minimize cost.• Maintain perspective and long-term discipline.

By following these four principles, financial advisors and their clients can focus on what they can control, which can be an effective way to achieve long-term results.

As a champion of low-cost investing, The Vanguard Group, Inc., has conducted research that shows that well-managed index ETFs have generally offered long-term outperformance relative to higher-cost investments.3 By seeking to track benchmarks that mirror broad stock and bond markets, index ETFs can provide diversification, a valuable risk management tool.

To help advisors present the option best-suited for a particular client, The Vanguard Group, Inc.’s Investment Strategy Group (ISG) has developed model portfolios that illustrate how our ETFs might form the core of a client’s investment portfolio.

ISG is led by Vanguard Chief Economist Joseph H. Davis, PhD, and includes more than 30 strategists and analysts who develop and maintain our

investment methodology, including our model portfolios. Every Vanguard model portfolio reflects our conviction that investment success hinges on asset allocation, broad diversification and low costs.

Our model portfolios seek to provide broad exposure to Canadian, U.S. and international equities and Canadian and global investment-grade taxable bonds in an asset allocation framework.

Vanguard’s model portfolios are strategic and index-centric by nature. Within the broad asset classes (Canadian, U.S. and international equities as well as fixed income), the portfolios are weighted by market capitalization and will reflect the investment styles and security size exposures of their benchmarks.

Research shows that investors across the globe tend to overweight domestic securities at the expense of international securities. We recognize that Canadian investors have historically demonstrated a significant “home bias” when investing in stocks and bonds.4

Consider that Canadian investors, on average, collectively held 54% of their equity portfolio in Canadian stocks at the end of 2015 compared with a 3% allocation suggested by global market-cap weighting. Similarly, Canadians tend to favour domestic fixed income in percentages well in excess of the 3.2% weighting for Canadian bonds in the global fixed income market as of June 30, 2016.5

Although historical analysis strongly supports the benefits of increasing global diversification, it also demonstrates that the theoretically optimal portfolio

3 The case for low-cost index-fund investing, a Vanguard research paper by Garrett L. Harbron et al. (April 2017).

4 The global case for strategic asset allocation and an examination of home bias, a Vanguard research paper by Brian J. Scott et al. (January 2017).

5 Vanguard’s framework for constructing globally diversified portfolios, a Vanguard research paper by Scott J. Donaldson et al. (April 2017).


often was not the actual optimal portfolio over a given period. Therefore, we also take into consideration other factors such as investors’ home-country preference, costs, liquidity, concentration and regulatory constraints. While these factors can be reasonably balanced against greater diversification, we believe further movement toward market-cap weights may be prudent.6

Our model portfolios use a 30%/70% ratio of Canadian and non-Canadian equities, as well as a 60%/40% ratio of Canadian and non-Canadian fixed income, representing a conscious home bias relative to global market-cap-weighted benchmarks. There are no intentional tactical overlays or factor bets (size or style) within the asset classes of the portfolios.

Some of our models use multiple ETFs to capture the beta of a single asset class (for example, non-Canadian equities as represented by Vanguard U.S. Total Market Index ETF, Vanguard FTSE Developed All Cap ex North America Index ETF and Vanguard FTSE Emerging Markets All Cap Index ETF). However, the risk and return characteristics should not meaningfully deviate from those of the asset-class benchmarks.

We offer three types of model portfolios, which we describe as:

• All-cap core—Using five ETFs to provide global diversification.

• Traditional core—Using seven ETFs to offer more flexibility with the same global reach.

• Traditional core (hedged equity)—Using seven ETFs, including two equity ETFs that are CAD hedged.

We believe advisors can help clients determine whether hedged or unhedged equity ETFs are most appropriate based on their investment profiles.

Vanguard offers only currency-hedged versions of its U.S. and international fixed income ETFs. Hedged ETFs reflect more closely the performance of international bonds in their local currencies, without the daily ups and downs of exchange rates that would be associated with converting that performance into Canadian dollars.

In our model portfolios, risk is primarily determined and managed through asset allocation and extremely broad diversification. There is no active management or security selection involved.

As the underlying ETFs are index ETFs and the portfolios do not incorporate active or tactical allocation shifts, the returns from each portfolio should very closely approximate those for the benchmarks.

Index-oriented, strategically allocated strategies historically have been very tax-efficient, which may enhance a taxable investor’s after-tax returns. These strategies have also tended to be lower-cost, relative to comparable actively managed investment alternatives. Research has shown a negative correlation between cost and returns, whereby lower-cost funds have tended to deliver higher longer-term returns relative to higher-cost funds.7

This potential for higher returns due to the models’ low relative cost may benefit both taxable and tax-exempt investors.

We provide a single asset-weighted management expense ratio for each of these model portfolios so that you can show clients the low cost associated with achieving broad diversification.8

Data for each model portfolio will be updated monthly at vanguardcanada.ca. All data shown here are as of March 31, 2018, unless otherwise noted. ETF allocations in these model portfolios may not equal 100% due to rounding.

6 Vanguard’s approach to Canadian target-date funds, a Vanguard research paper by Scott J. Donaldson et al. (November 2015).

7 Vanguard’s Principles for Investing Success, a Vanguard research paper. (2017).

8 Please see page 30 for other important information about Vanguard model portfolios.

16


Traditional core (hedged equity)Asset-weighted management expense ratio 0.15%

Ticker symbol

Asset allocation

Equity ETFs

Vanguard FTSE Canada All Cap Index ETF VCN 30.0%

Vanguard U.S. Total Market Index ETF (CAD-hedged) VUS 37.5%

Vanguard FTSE Developed All Cap ex North America Index ETF (CAD-hedged) VI 24.7%

Vanguard FTSE Emerging Markets All Cap Index ETF VEE 7.8%

Total 100%

Traditional coreAsset-weighted management expense ratio 0.15%

Ticker symbol

Asset allocation

Equity ETFs


Vanguard U.S. Total Market Index ETF VUN 37.5%

Vanguard FTSE Developed All Cap ex North America Index ETF VIU 24.7%


Total 100%

All-cap coreAsset-weighted management expense ratio 0.21%

Ticker symbol

Asset allocation

Equity ETFs


Vanguard FTSE Global All Cap ex Canada Index ETF VXC 70.0%

Total 100%

1717


100% equity / 0% fixed income

Please see page 30 for other important information about Vanguard model portfolios including the asset-weighted management expense ratio.

Data as of March 31, 2018

This model portfolio holds 100% of its assets in stocks, a portion of which may be allocated to international stocks.


Ticker symbol

Asset allocation

Equity ETFs



Fixed income ETFs

Vanguard Canadian Aggregate Bond Index ETF VAB 5.9%

Vanguard U.S. Aggregate Bond Index ETF (CAD-hedged) VBU 1.8%

Vanguard Global ex-U.S. Aggregate Bond Index ETF (CAD-hedged) VBG 2.3%

Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%


90% equity / 10% fixed incomeThis model portfolio holds 90% of its assets in stocks, a portion of which may be allocated to international stocks, and 10% in bonds, a portion of which may be allocated to international bonds.

18

Note: Canadian bonds are included in Vanguard Global ex-U.S. Aggregate Bond Index ETF (CAD-hedged) at their current global market-cap weighting.




Ticker symbol

Asset allocation

Equity ETFs



Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%

19







Ticker symbol

Asset allocation

Equity ETFs



Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%



20





Ticker symbol

Asset allocation

Equity ETFs



Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%

21


60% equity / 40% fixed incomeThis model portfolio holds 60% in stocks, a portion of which may be allocated to international stocks and 40% of its assets in bonds, a portion of which may be allocated to international bonds.





Ticker symbol

Asset allocation

Equity ETFs



Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%


50% equity / 50% fixed incomeThis model portfolio holds 50% of its assets in bonds, a portion of which may be allocated to international bonds, and 50% in stocks, a portion of which may be allocated to international stocks.

22





Ticker symbol

Asset allocation

Equity ETFs



Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%

23


40% equity / 60% fixed incomeThis model portfolio holds 60% in bonds, a portion of which may be allocated to international bonds and 40% of its assets in stocks, a portion of which may be allocated to international stocks.





Ticker symbol

Asset allocation

Equity ETFs



Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%


30% equity / 70% fixed incomeThis model portfolio holds 70% in bonds, a portion of which may be allocated to international bonds and 30% of its assets in stocks, a portion of which may be allocated to international stocks.

24





Ticker symbol

Asset allocation

Equity ETFs



Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%

25







Ticker symbol

Asset allocation

Equity ETFs



Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%


Ticker symbol

Asset allocation

Equity ETFs





Fixed income ETFs




Total 100%



26





Ticker symbol

Asset allocation

Fixed income ETFs




Total 100%

27


0% equity / 100% fixed incomeThis model portfolio holds 100% of its assets in bonds, a portion of which may be allocated to international bonds.




Vanguard’s Model Portfolios are provided to investment advisors by Vanguard Investments Canada Inc., the manager of the Vanguard ETFs, to illustrate generally the ways in which the Vanguard ETFs can be used to comprise an investment portfolio for different investment objectives, risk profiles and time horizons. These model portfolios are not provided as a recommendation or solicitation to buy or sell any security, including any security of a Vanguard ETF. The information provided is not investment advice and is not tailored to the needs or circumstances of any particular investors. Vanguard’s Model Portfolios may change from time to time without notice. Vanguard shall not have any liability, contingent or otherwise, to any person for the quality, currency or completeness of the sample portfolio strategies.

Investment advisors should work with their clients to ensure that they select appropriate investments, and appropriate investment allocations, for their clients’ individual circumstances.

The asset-weighted management expense ratio is calculated using the management expense ratio (MER) of each ETF as of December 31, 2017 multiplied by the weight of each ETF in the model portfolio. The MERs used include waivers and absorptions. Without waivers and absorptions, the asset-weighted MERs would have been higher. Vanguard Investments Canada Inc. expects to continue absorbing or waiving certain fees indefinitely but may, in its discretion, discontinue this practice at any time.

See pages 76 and 77 for additional important disclosures.

Important information about Vanguard’s Model Portfolios:

28

Vanguard

asset allocation ETFs

1 The fund is not managed relative to the composition of any widely recognized index. It uses an internally derived benchmark for reference purposesonly.

2 The management fee is equal to the fee paid by the Vanguard ETF to Vanguard Investments Canada Inc. and does not include applicable taxes orother fees and expenses of the Vanguard ETF. For any Vanguard ETF which invests in underlying Vanguard fund(s), there shall be no duplication ofmanagement fees chargeable in connection with the Vanguard ETF and its investment in the Vanguard fund(s).

3 The inception date for VCNS, VBAL and VGRO was January 25, 2018; MER information is not available.

Tickersymbol Vanguard ETF® Benchmark1

Managementfee2

Managementexpense ratio3 Page

VCNS Vanguard Conservative ETF Portfolio Internal Composite Benchmark 0.22% — 31

VBAL Vanguard Balanced ETF Portfolio Internal Composite Benchmark 0.22% — 32

VGRO Vanguard Growth ETF Portfolio Internal Composite Benchmark 0.22% — 33

30


ETF facts

Inception date January 25, 2018

Benchmark1 Internal Composite Benchmark

Management fee** 0.22%

Management expense ratio*** —

Net assets $27 million

Vanguard Conservative ETF Portfolio VCNSCanadian law does not allow the display of performance datafor ETFs less than one year old.

1The fund is not managed relative to the composition of any widely recognized index. It uses an internally derived

benchmark for reference purposes only.

Allocation to the underlying funds

Vanguard Canadian Aggregate Bond Index ETF 35.6%Vanguard US Total Market Index ETF 14.8Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged 14.4Vanguard FTSE Canada All Cap Index ETF 11.9Vanguard US Aggregate Bond Index ETF CAD-hedged 10.5Vanguard FTSE Developed All Cap ex-North America Index ETF 9.8Vanguard FTSE Emerging Markets All Cap Index ETF 3.0


Endnotes for symbols can be found on pages 76 and 77.

31


ETF facts






Vanguard Balanced ETF Portfolio VBALCanadian law does not allow the display of performance datafor ETFs less than one year old.




Vanguard Canadian Aggregate Bond Index ETF 23.8%Vanguard US Total Market Index ETF 22.4Vanguard FTSE Canada All Cap Index ETF 17.8Vanguard FTSE Developed All Cap ex-North America Index ETF 14.8Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged 9.6Vanguard US Aggregate Bond Index ETF CAD-hedged 7.0Vanguard FTSE Emerging Markets All Cap Index ETF 4.6



32


ETF facts






Vanguard Growth ETF Portfolio VGROCanadian law does not allow the display of performance datafor ETFs less than one year old.




Vanguard US Total Market Index ETF 30.1%Vanguard FTSE Canada All Cap Index ETF 23.8Vanguard FTSE Developed All Cap ex-North America Index ETF 19.8Vanguard Canadian Aggregate Bond Index ETF 11.9Vanguard FTSE Emerging Markets All Cap Index ETF 6.1Vanguard Global ex-US Aggregate Bond Index ETF CAD-hedged 4.8Vanguard US Aggregate Bond Index ETF CAD-hedged 3.5



33

Vanguard

equity index ETFs

1 The management fee is equal to the fee paid by the Vanguard ETF to Vanguard Investments Canada Inc. and does not include applicable taxes orother fees and expenses of the Vanguard ETF. For any Vanguard ETF which invests in underlying Vanguard fund(s), there shall be no duplication ofmanagement fees chargeable in connection with the Vanguard ETF and its investment in the Vanguard fund(s).

2 The management expense ratio (MER) is the audited MER as of December 31, 2017, including waivers and absorptions and is expressed as anannualized percentage of the daily average net asset value. The MER without any absorptions or waivers would have been 0.06% for VCE, 0.06%for VCN, 0.22% for VDY, 0.39% for VRE, 0.16% for VUN, 0.16% for VUS, 0.08% for VFV, 0.09% for VSP, 0.30% for VGG, 0.30% for VGH, 0.27%for VXC, 0.23% for VIU, 0.23% for VI, 0.21% for VDU, 0.22% for VEF, 0.22% for VE, 0.25% for VEH, 0.23% for VA, 0.26% for VAH, and 0.24% forVEE. Vanguard Investments Canada Inc. expects to continue absorbing or waiving certain fees indefinitely but may, in its discretion, discontinue thispractice at any time.

Tickersymbol Vanguard ETF® Benchmark

Managementfee1


VCE Vanguard FTSE Canada Index ETF FTSE Canada Index 0.05% 0.06% 36

VCN Vanguard FTSE Canada All CapIndex ETF

FTSE Canada All Cap Index 0.05% 0.06% 37

VDY Vanguard FTSE Canadian High DividendYield Index ETF

FTSE Canada High Dividend Yield Index 0.20% 0.22% 38

VRE Vanguard FTSE Canadian CappedREIT Index ETF

FTSE Canada All Cap Real EstateCapped 25% Index

0.35% 0.39% 39

VUN Vanguard U.S. Total Market Index ETF CRSP US Total Market Index 0.15% 0.16% 40

VUS Vanguard U.S. Total Market Index ETF(CAD-hedged)

CRSP US Total Market Index(CAD-hedged)

0.15% 0.16% 41

VFV Vanguard S&P 500 Index ETF S&P 500 Index 0.08% 0.08% 42

VSP Vanguard S&P 500 Index ETF(CAD-hedged)

S&P 500 Index (CAD-Hedged) 0.08% 0.08% 43

VGG Vanguard U.S. Dividend AppreciationIndex ETF

NASDAQ US Dividend AchieversSelect Index

0.28% 0.30% 44

VGH Vanguard U.S. Dividend AppreciationIndex ETF (CAD-hedged)

NASDAQ US Dividend AchieversSelect Index (CAD-hedged)

0.28% 0.30% 45

VXC Vanguard FTSE Global All Cap ex CanadaIndex ETF

FTSE Global All Cap ex Canada China AInclusion Index

0.25% 0.27% 46

VIU Vanguard FTSE Developed All Cap exNorth America Index ETF

FTSE Developed All Cap ex North AmericaIndex

0.20% 0.23% 47

VI Vanguard FTSE Developed All Cap exNorth America Index ETF (CAD-hedged)

FTSE Developed All Cap ex North AmericaHedged to CAD Index

0.20% 0.23% 48

VDU Vanguard FTSE Developed All Cap ex U.S.Index ETF

FTSE Developed All Cap ex US Index 0.20% 0.21% 49

VEF Vanguard FTSE Developed All Cap ex U.S.Index ETF (CAD-hedged)

FTSE Developed All Cap ex US Hedged toCAD Index

0.20% 0.22% 50

VE Vanguard FTSE Developed Europe All CapIndex ETF

FTSE Developed Europe All Cap Index 0.20% 0.22% 51

VEH Vanguard FTSE Developed Europe All CapIndex ETF (CAD-hedged)

FTSE Developed Europe All Cap Hedged toCAD Index

0.20% 0.23% 52

VA Vanguard FTSE Developed Asia PacificAll Cap Index ETF

FTSE Developed Asia Pacific All Cap Index 0.20% 0.22% 53

VAH Vanguard FTSE Developed Asia PacificAll Cap Index ETF (CAD-hedged)

FTSE Developed Asia Pacific All Cap Hedgedto CAD Index

0.20% 0.23% 54

VEE Vanguard FTSE Emerging Markets All CapIndex ETF

FTSE Emerging Markets All Cap China AInclusion Index

0.23% 0.24% 55

35

Vanguard equity index ETFs

Top 10 holdings†

Royal Bank of Canada 9.2%Toronto-Dominion Bank 8.6Bank of Nova Scotia 6.1Suncor Energy Inc. 4.6Canadian National Railway Co. 4.5Enbridge Inc. 4.2Bank of Montreal 4.0Canadian Imperial Bank of Commerce 3.2Canadian Natural Resources Ltd. 3.0Manulife Financial Corp. 3.0Total 50.4%

ETF facts

Inception date November 30, 2011

Benchmark FTSE Canada Index


Management expense ratio*** 0.06%


Sector weighting††

Financials 45.0%Oil & Gas 19.0Industrials 8.7Basic Materials 8.4Consumer Services 7.6Utilities 3.1Telecommunications 2.9Technology 2.8Consumer Goods 2.1Health Care 0.4Other 0.0

3 month YTD 1 year 3 years 5 yearsSince

Inception

Market price -4.67% -4.67% 1.67% 3.75% 7.09% 6.91%

NAV -4.81% -4.81% 1.65% 3.75% 7.07% 6.88%

Benchmark -4.81% -4.81% 1.74% 3.83% 7.17% 7.00%

-8

0

8

Perc

ent (

%)

Vanguard FTSE Canada Index ETF VCE

ETF characteristics

Number of stocks 64Median market cap $48.1BPrice/Earnings ratio 14.5xPrice/Book ratio 1.8xReturn on equity 12.6%Earnings growth rate 9.2%

Total returns for the period ending March 31, 2018 *

Volatility

Beta 1.00R-squared 100.00%


See pages 76 and 77 for important performance informationand endnotes for symbols.

36


Top 10 holdings†

Royal Bank of Canada 7.3%Toronto-Dominion Bank 6.8Bank of Nova Scotia 4.8Suncor Energy Inc. 3.7Canadian National Railway Co. 3.5Enbridge Inc. 3.4Bank of Montreal 3.2Canadian Imperial Bank of Commerce 2.5Canadian Natural Resources Ltd. 2.4Manulife Financial Corp. 2.4Total 40.0%

ETF facts

Inception date August 02, 2013

Benchmark FTSE Canada All Cap Index



Net assets $1,242 million


Financials 39.2%Oil & Gas 18.2Basic Materials 11.3Industrials 11.3Consumer Services 7.5Utilities 3.5Consumer Goods 3.2Technology 3.1Telecommunications 2.3Health Care 0.4Other 0.0


Inception

Market price -4.43% -4.43% 1.20% 3.76% — 7.14%

NAV -4.57% -4.57% 1.20% 3.76% — 7.11%

Benchmark -4.57% -4.57% 1.27% 3.85% — 7.20%

-8

0

8

Perc

ent (

%)

Vanguard FTSE Canada All Cap IndexETF VCN

ETF characteristics



Volatility




37


Top 10 holdings†

Royal Bank of Canada 15.5%Toronto-Dominion Bank 14.5Bank of Nova Scotia 10.2Enbridge Inc. 7.1Bank of Montreal 6.8Canadian Imperial Bank of Commerce 5.3Manulife Financial Corp. 5.0TransCanada Corp. 5.0Sun Life Financial Inc. 3.5National Bank of Canada 2.2Total 75.1%

ETF facts


Benchmark FTSE Canada High Dividend YieldIndex





Financials 68.0%Oil & Gas 17.1Utilities 7.2Consumer Services 3.7Telecommunications 2.7Industrials 1.0Basic Materials 0.2Consumer Goods 0.1Other 0.0


Inception

Market price -5.15% -5.15% 0.59% 6.03% 7.63% 8.59%

NAV -5.32% -5.32% 0.59% 6.01% 7.63% 8.56%

Benchmark -5.28% -5.28% 0.81% 6.28% 7.94% 8.87%

-9

0

9

Perc

ent (

%)

Vanguard FTSE Canadian High DividendYield Index ETF VDY

ETF characteristics



Volatility




38


Top 10 holdings†

RioCan REIT 13.5%H&R REIT 10.8Canadian Apartment Properties REIT 9.0Allied Properties REIT 6.6Canadian REIT 6.4SmartCentres REIT 6.0Chartwell Retirement Residences 5.8Colliers International Group Inc. 5.4First Capital Realty Inc. 5.3FirstService Corp. 5.1Total 73.9%

ETF facts


Benchmark FTSE Canada All Cap Real EstateCapped 25% Index





Industrial & Office REITs 32.3%Retail REITs 20.2Residential REITs 20.1Real Estate Services 10.5Diversified REITs 10.3Real Estate Holding & Development 6.6Other 0.0


Inception

Market price 1.15% 1.15% 6.30% 5.69% 6.57% 6.98%

NAV 0.97% 0.97% 6.21% 5.63% 6.54% 6.96%

Benchmark 1.08% 1.08% 6.69% 6.08% 6.98% 7.39%

0

4

8

Perc

ent (

%)

Vanguard FTSE Canadian Capped REITIndex ETF VRE

ETF characteristics



Volatility




39


Top 10 holdings†

Apple Inc. 2.8%Microsoft Corp. 2.6Alphabet Inc. 2.3Amazon.com Inc. 2.2Berkshire Hathaway Inc. 1.4Facebook Inc. 1.4JPMorgan Chase & Co. 1.4Johnson & Johnson 1.3Exxon Mobil Corp. 1.2Bank of America Corp. 1.1Total 17.7%

ETF facts


Benchmark CRSP US Total Market Index





Financials 20.5%Technology 19.4Industrials 13.4Consumer Services 13.1Health Care 12.5Consumer Goods 8.5Oil & Gas 5.5Utilities 2.8Basic Materials 2.5Telecommunications 1.8Other 0.0


Inception

Market price 1.76% 1.76% 9.89% 10.36% — 16.56%

NAV 1.68% 1.68% 9.90% 10.43% — 16.54%

Benchmark 1.88% 1.88% 10.31% 10.84% — 17.01%

0

10

20

Perc

ent (

%)

Vanguard U.S. Total Market Index ETF VUN

ETF characteristics

Number of stocks 3,637Median market cap $82.7BPrice/Earnings ratio 21.2xPrice/Book ratio 2.9xReturn on equity 15.0%Earnings growth rate 8.3%


Volatility




40


Top 10 holdings†


ETF facts


Benchmark CRSP US Total Market Index(CAD-hedged)





Financials 20.5%Technology 19.4Industrials 13.4Consumer Services 13.1Health Care 12.5Consumer Goods 8.5Oil & Gas 5.5Utilities 2.8Basic Materials 2.5Telecommunications 1.8Other 0.0


Inception

Market price -1.16% -1.16% 12.48% 9.14% 12.36% 14.16%

NAV -1.20% -1.20% 12.49% 9.23% 12.35% 14.14%

Benchmark -1.02% -1.02% 12.86% 9.57% 12.83% 14.77%

-20

0

20

Perc

ent (

%)

Vanguard U.S. Total Market Index ETF(CAD-hedged) VUS

ETF characteristics



Volatility




41


Top 10 holdings†


ETF facts


Benchmark S&P 500 Index





Information Technology 24.9%Financials 14.7Health Care 13.7Consumer Discretionary 12.7Industrials 10.2Consumer Staples 7.6Energy 5.7Materials 2.9Utilities 2.9Real Estate 2.8Telecommunication Services 1.9Other 0.0


Inception

Market price 1.62% 1.62% 10.05% 10.98% 18.38% 19.77%

NAV 1.52% 1.52% 10.09% 11.02% 18.39% 19.75%

Benchmark 1.57% 1.57% 9.79% 10.72% 18.08% 19.48%

0

10

20

Perc

ent (

%)

Vanguard S&P 500 Index ETF VFV

ETF characteristics



Volatility




42


Top 10 holdings†


ETF facts


Benchmark S&P 500 Index (CAD-Hedged)





Information Technology 24.9%Financials 14.7Health Care 13.7Consumer Discretionary 12.7Industrials 10.2Consumer Staples 7.6Energy 5.7Materials 2.9Utilities 2.9Real Estate 2.8Telecommunication Services 1.9Other 0.0


Inception

Market price -1.27% -1.27% 12.70% 9.77% 12.69% 14.06%

NAV -1.29% -1.29% 12.75% 9.83% 12.71% 14.05%

Benchmark -1.18% -1.18% 12.98% 10.15% 13.11% 14.52%

-20

0

20

Perc

ent (

%)

Vanguard S&P 500 Index ETF(CAD-hedged) VSP

ETF characteristics



Volatility




43


Top 10 holdings†

Walmart Inc. 4.0%Johnson & Johnson 4.0Microsoft Corp. 3.9PepsiCo Inc. 3.53M Co. 3.0McDonald's Corp. 2.8Medtronic plc 2.5Union Pacific Corp. 2.4Abbott Laboratories 2.4Texas Instruments Inc. 2.3Total 30.8%

ETF facts


Benchmark NASDAQ US Dividend AchieversSelect Index





Industrials 33.2%Consumer Services 19.0Health Care 12.0Consumer Goods 11.1Financials 8.7Technology 8.7Basic Materials 4.2Utilities 3.0Telecommunications 0.1Other 0.0


Inception

Market price 1.80% 1.80% 10.38% 10.12% — 14.99%

NAV 1.79% 1.79% 10.39% 10.24% — 14.97%

Benchmark 1.87% 1.87% 10.36% 10.40% — 15.21%

0

10

20

Perc

ent (

%)

Vanguard U.S. Dividend AppreciationIndex ETF VGG

ETF characteristics



Volatility




44


Top 10 holdings†

Walmart Inc. 4.0%Johnson & Johnson 4.0Microsoft Corp. 3.9PepsiCo Inc. 3.53M Co. 3.0McDonald's Corp. 2.8Medtronic plc 2.5Union Pacific Corp. 2.4Abbott Laboratories 2.4Texas Instruments Inc. 2.3Total 30.8%

ETF facts


Benchmark NASDAQ US Dividend AchieversSelect Index (CAD-hedged)





Industrials 33.2%Consumer Services 19.0Health Care 12.0Consumer Goods 11.1Technology 8.7Financials 8.7Basic Materials 4.2Utilities 3.0Telecommunications 0.1Other 0.0


Inception

Market price -1.13% -1.13% 12.97% 8.96% — 9.54%

NAV -1.10% -1.10% 12.99% 9.09% — 9.53%

Benchmark -0.90% -0.90% 13.63% 9.60% — 10.18%

-20

0

20

Perc

ent (

%)

Vanguard U.S. Dividend AppreciationIndex ETF (CAD-hedged) VGH

ETF characteristics



Volatility




45


Top 10 holdings†

Apple Inc. 1.5%Microsoft Corp. 1.4Alphabet Inc. 1.2Amazon.com Inc. 1.2Berkshire Hathaway Inc. 0.8Facebook Inc. 0.8JPMorgan Chase & Co. 0.8Johnson & Johnson 0.7Exxon Mobil Corp. 0.6Tencent Holdings Ltd. 0.6Total 9.6%

ETF facts

Inception date June 30, 2014

Benchmark FTSE Global All Cap ex Canada ChinaA Inclusion Index





Financials 22.3%Industrials 14.3Technology 13.8Consumer Goods 12.4Consumer Services 11.1Health Care 10.3Oil & Gas 5.5Basic Materials 4.7Utilities 3.0Telecommunications 2.6Other 0.0


Inception

Market price 2.11% 2.11% 11.53% 8.95% — 12.39%

NAV 2.08% 2.08% 11.52% 8.96% — 12.37%

Benchmark 2.15% 2.15% 11.32% 9.08% — 12.63%

0

10

20

Perc

ent (

%)

Vanguard FTSE Global All Cap ex CanadaIndex ETF VXC

Top country diversification

United States 53.0%Japan 8.6United Kingdom 6.0China 3.9France 3.2Germany 3.1Switzerland 2.5Australia 2.3Korea 1.9Taiwan 1.7Total 86.2%

ETF characteristics



Volatility




46


Top 10 holdings†

Royal Dutch Shell plc 1.5%Samsung Electronics Co. Ltd. 1.4Nestle SA 1.3HSBC Holdings plc 1.0Novartis AG 1.0Toyota Motor Corp. 0.9Roche Holding AG 0.9Unilever 0.8British American Tobacco plc 0.7BP plc 0.7Total 10.2%

ETF facts

Inception date December 01, 2015

Benchmark FTSE Developed All Cap ex NorthAmerica Index





Financials 23.4%Consumer Goods 19.2Industrials 16.7Health Care 9.7Consumer Services 8.1Basic Materials 7.2Technology 4.7Oil & Gas 4.7Telecommunications 3.2Utilities 3.1Other 0.0


Inception

Market price 1.80% 1.80% 13.20% — — 8.49%

NAV 1.32% 1.32% 12.24% — — 8.09%

Benchmark 1.53% 1.53% 12.59% — — 8.15%

0

10

20

Perc

ent (

%)

Vanguard FTSE Developed All Cap exNorth America Index ETF VIU


Japan 24.2%United Kingdom 16.7France 8.8Germany 8.8Switzerland 7.0Australia 6.4Korea 5.3Hong Kong 3.6Netherlands 3.2Spain 3.0Total 87.0%

ETF characteristics





47


Top 10 holdings†


ETF facts

Inception date December 01, 2015

Benchmark FTSE Developed All Cap ex NorthAmerica Hedged to CAD Index





Financials 23.4%Consumer Goods 19.2Industrials 16.7Health Care 9.7Consumer Services 8.1Basic Materials 7.2Oil & Gas 4.7Technology 4.7Telecommunications 3.2Utilities 3.1Other 0.0


Inception

Market price -3.41% -3.41% 8.28% — — 7.11%

NAV -3.60% -3.60% 8.95% — — 7.15%

Benchmark -3.82% -3.82% 8.16% — — 6.86%

-9

0

9

Perc

ent (

%)

Vanguard FTSE Developed All Cap exNorth America Index ETF (CAD-hedged) VI


Japan 24.2%United Kingdom 16.7France 8.8Germany 8.8Switzerland 7.0Australia 6.4Korea 5.3Hong Kong 3.6Netherlands 3.2Spain 3.0Total 87.0%

ETF characteristics





48


Top 10 holdings†


ETF facts


Benchmark FTSE Developed All Cap ex US Index





Financials 24.6%Consumer Goods 18.0Industrials 16.3Health Care 8.9Consumer Services 8.1Basic Materials 7.5Oil & Gas 5.8Technology 4.6Utilities 3.1Telecommunications 3.1Other 0.0


Inception

Market price 1.39% 1.39% 11.70% 6.62% — 10.56%

NAV 1.38% 1.38% 11.64% 6.61% — 10.55%

Benchmark 1.06% 1.06% 11.77% 7.02% — 11.23%

0

10

20

Perc

ent (

%)

Vanguard FTSE Developed All Cap exU.S. Index ETF VDU


Japan 22.4%United Kingdom 15.3France 8.2Germany 8.0Canada 7.8Switzerland 6.5Australia 5.9Korea 4.9Hong Kong 3.3Netherlands 3.0Total 85.3%

ETF characteristics



Volatility




49


Top 10 holdings†


ETF facts


Benchmark FTSE Developed All Cap ex USHedged to CAD Index





Financials 24.6%Consumer Goods 18.0Industrials 16.3Health Care 8.9Consumer Services 8.1Basic Materials 7.5Oil & Gas 5.8Technology 4.6Telecommunications 3.1Utilities 3.1Other 0.0


Inception

Market price -3.37% -3.37% 7.27% 4.16% 8.61% 10.69%

NAV -3.18% -3.18% 7.31% 4.21% 8.65% 10.70%

Benchmark -3.85% -3.85% 7.72% 4.65% 9.34% 11.83%

-20

0

20

Perc

ent (

%)

Vanguard FTSE Developed All Cap exU.S. Index ETF (CAD-hedged) VEF


Japan 22.4%United Kingdom 15.3France 8.2Germany 8.0Canada 7.8Switzerland 6.5Australia 5.9Korea 4.9Hong Kong 3.3Netherlands 3.0Total 85.3%

ETF characteristics



Volatility




50


Top 10 holdings†

Royal Dutch Shell plc 2.5%Nestle SA 2.3HSBC Holdings plc 1.8Novartis AG 1.7Roche Holding AG 1.6Unilever 1.4British American Tobacco plc 1.3BP plc 1.2TOTAL SA 1.2Banco Santander SA 1.0Total 16.0%

ETF facts


Benchmark FTSE Developed Europe All Cap Index





Financials 23.0%Consumer Goods 18.0Industrials 15.3Health Care 11.8Basic Materials 7.0Oil & Gas 6.8Consumer Services 6.8Technology 4.4Utilities 3.6Telecommunications 3.3Other 0.0


Inception

Market price 1.28% 1.28% 12.29% 5.69% — 6.93%

NAV 1.01% 1.01% 11.64% 5.60% — 6.80%

Benchmark 0.97% 0.97% 11.65% 5.87% — 7.25%

0

10

20

Perc

ent (

%)

Vanguard FTSE Developed Europe AllCap Index ETF VE


United Kingdom 28.5%France 15.1Germany 15.0Switzerland 12.0Netherlands 5.6Spain 5.1Sweden 4.8Italy 4.6Denmark 2.8Belgium 2.0Total 95.5%

ETF characteristics



Volatility




51


Top 10 holdings†

Royal Dutch Shell plc 2.5%Nestle SA 2.3HSBC Holdings plc 1.8Novartis AG 1.7Roche Holding AG 1.6Unilever 1.4British American Tobacco plc 1.3BP plc 1.2TOTAL SA 1.2Banco Santander SA 1.0Total 16.0%

ETF facts

Inception date October 03, 2016

Benchmark FTSE Developed Europe All CapHedged to CAD Index





Financials 23.0%Consumer Goods 18.0Industrials 15.3Health Care 11.8Basic Materials 7.0Consumer Services 6.8Oil & Gas 6.8Technology 4.4Utilities 3.6Telecommunications 3.3Other 0.0


Inception

Market price -3.65% -3.65% 4.42% — — 11.18%

NAV -4.31% -4.31% 4.66% — — 11.06%

Benchmark -3.95% -3.95% 4.34% — — 10.78%

-20

0

20

Perc

ent (

%)

Vanguard FTSE Developed Europe AllCap Index ETF (CAD-hedged) VEH


United Kingdom 28.5%France 15.1Germany 15.0Switzerland 12.0Netherlands 5.6Spain 5.1Sweden 4.8Italy 4.6Denmark 2.8Belgium 2.0Total 95.5%

ETF characteristics





52


Top 10 holdings†

Samsung Electronics Co. Ltd. 3.4%Toyota Motor Corp. 2.2AIA Group Ltd. 1.4Commonwealth Bank of Australia 1.3Mitsubishi UFJ Financial Group Inc. 1.1Westpac Banking Corp. 1.0BHP Billiton 0.9SoftBank Group Corp. 0.8Sony Corp. 0.8Australia & New Zealand Banking Group Ltd. 0.8Total 13.7%

ETF facts


Benchmark FTSE Developed Asia Pacific All CapIndex





Financials 23.7%Consumer Goods 21.1Industrials 18.8Consumer Services 10.0Basic Materials 7.5Health Care 6.6Technology 5.1Telecommunications 3.1Utilities 2.3Oil & Gas 1.8Other 0.0


Inception

Market price 2.82% 2.82% 14.81% 8.95% — 12.01%

NAV 1.87% 1.87% 13.35% 8.45% — 11.61%

Benchmark 2.39% 2.39% 14.22% 9.00% — 12.35%

0

10

20

Perc

ent (

%)

Vanguard FTSE Developed Asia PacificAll Cap Index ETF VA


Japan 59.0%Australia 15.6Korea 12.8Hong Kong 8.7Singapore 3.2New Zealand 0.7Total 100.0%

ETF characteristics



Volatility




53


Top 10 holdings†

Samsung Electronics Co. Ltd. 3.4%Toyota Motor Corp. 2.2AIA Group Ltd. 1.4Commonwealth Bank of Australia 1.3Mitsubishi UFJ Financial Group Inc. 1.1Westpac Banking Corp. 1.0BHP Billiton 0.9SoftBank Group Corp. 0.8Sony Corp. 0.8Australia & New Zealand Banking Group Ltd. 0.8Total 13.7%

ETF facts

Inception date October 03, 2016

Benchmark FTSE Developed Asia Pacific All CapHedged to CAD Index





Financials 23.7%Consumer Goods 21.1Industrials 18.8Consumer Services 10.0Basic Materials 7.5Health Care 6.6Technology 5.1Telecommunications 3.1Utilities 2.3Oil & Gas 1.8Other 0.0


Inception

Market price -3.01% -3.01% 14.24% — — 18.30%

NAV -3.99% -3.99% 14.35% — — 18.19%

Benchmark -3.60% -3.60% 14.31% — — 17.92%

-20

0

20

Perc

ent (

%)

Vanguard FTSE Developed Asia PacificAll Cap Index ETF (CAD-hedged) VAH


Japan 59.0%Australia 15.6Korea 12.8Hong Kong 8.7Singapore 3.2New Zealand 0.7Total 100.0%

ETF characteristics





54


Top 10 holdings†

Tencent Holdings Ltd. 5.1%Taiwan Semiconductor Manufacturing Co.Ltd. 3.6Alibaba Group Holding Ltd. 2.5Naspers Ltd. 1.8China Construction Bank Corp. 1.6Industrial & Commercial Bank of China Ltd. 1.2Ping An Insurance Group Co. of China Ltd. 1.0Itau Unibanco Holding SA 0.9China Mobile Ltd. 0.8Sberbank of Russia PJSC 0.8Total 19.3%

ETF facts


Benchmark FTSE Emerging Markets All Cap ChinaA Inclusion Index





Financials 28.7%Technology 15.5Consumer Services 11.0Industrials 10.7Consumer Goods 8.9Oil & Gas 7.3Basic Materials 7.3Telecommunications 4.4Utilities 3.1Health Care 3.1Other 0.0


Inception

Market price 5.07% 5.07% 16.75% 7.67% 9.14% 8.53%

NAV 5.02% 5.02% 16.86% 7.65% 9.14% 8.52%

Benchmark 4.23% 4.23% 16.56% 7.85% 9.47% 9.74%

0

10

20

Perc

ent (

%)

Vanguard FTSE Emerging Markets AllCap Index ETF VEE


China 34.2%Taiwan 14.5India 10.6Brazil 8.3South Africa 7.4Thailand 3.9Russia 3.8Malaysia 3.3Mexico 3.2Indonesia 2.2Total 91.4%

ETF characteristics



Volatility




55

Vanguard

fixed income index ETFs

1 The management fee is equal to the fee paid by the Vanguard ETF to Vanguard Investments Canada Inc. and does not include applicable taxes orother fees and expenses of the Vanguard ETF. For any Vanguard ETF which invests in underlying Vanguard fund(s), there shall be no duplication ofmanagement fees chargeable in connection with the Vanguard ETF and its investment in the Vanguard fund(s). As of February 13, 2018, themanagement fee for VAB was reduced from 0.12% to 0.08%.

2 The management expense ratio (MER) is the audited MER as of December 31, 2017, including waivers and absorptions and is expressed as anannualized percentage of the daily average net asset value. The MER without any absorptions or waivers would have been 0.13% for VAB, 0.35% forVGV, 0.28% for VCB, 0.11% for VSB, 0.25% for VSG, 0.11% for VSC, 0.23% for VLB, 0.22% for VBU and 0.39% for VBG.

Tickersymbol Vanguard ETF Benchmark

Managementfee1


VAB Vanguard Canadian Aggregate Bond IndexETF

Bloomberg Barclays Global AggregateCanadian Float Adjusted Bond Index

0.08% 0.13% 58

VGV Vanguard Canadian Government BondIndex ETF

Bloomberg Barclays Global AggregateCanadian Government Float Adjusted BondIndex

0.25% 0.28% 59

VCB Vanguard Canadian Corporate Bond IndexETF

Bloomberg Barclays Global AggregateCanadian Credit Float Adjusted Bond Index

0.23% 0.26% 60

VSB Vanguard Canadian Short-Term Bond IndexETF

Bloomberg Barclays Global AggregateCanadian Government/ Credit 1-5 Year FloatAdjusted Bond Index

0.10% 0.11% 61

VSG Vanguard Canadian Short-TermGovernment Bond Index ETF

Bloomberg Barclays Global AggregateCanadian Government 1-5 Year FloatAdjusted Bond Index

0.18% 0.20% 62

VSC Vanguard Canadian Short-Term CorporateBond Index ETF

Bloomberg Barclays Global AggregateCanadian Credit 1-5 Year Float AdjustedBond Index

0.10% 0.11% 63

VLB Vanguard Canadian Long-Term Bond IndexETF

Bloomberg Barclays Global AggregateCanadian 10+ Year Float Adjusted BondIndex

0.17% 0.19% 64

VBU Vanguard U.S. Aggregate Bond Index ETF(CAD-hedged)

Bloomberg Barclays U.S. Aggregate FloatAdjusted Bond Index (CAD Hedged)

0.20% 0.22% 65

VBG Vanguard Global ex-U.S. Aggregate BondIndex ETF (CAD-hedged)

Bloomberg Barclays Global Aggregateex-USD Float Adjusted RIC Capped Index(CAD Hedged)

0.35% 0.38% 66

57

Vanguard fixed income index ETFs

Asset mix by credit maturity

Under 1 Year 0.2%1 - 5 Years 43.45 - 10 Years 23.810 - 15 Years 4.515 - 20 Years 6.420 - 25 Years 7.3Over 25 Years 14.4Total 100.0%

ETF characteristics

Number of bonds 846

Effective YTM††† 2.50%

Average coupon 3.3%Average maturity 10.4 yearsAverage quality AAAverage duration 7.6 yearsCash investment 0.2%

Asset mix by credit quality‡

AAA 43.9%AA 30.7A 16.4BBB 8.8Not Rated 0.2

Sector weighting†

Provincials/Municipals 38.6%Treasury/Federal 29.1Agencies 11.0Financial Institutions 10.7Industrials 8.3Utilities 1.3Supranational 0.6Cash 0.2Asset Backed Security 0.2


Inception

Market price -0.01% -0.01% 1.39% 0.97% 2.67% 2.99%

NAV 0.10% 0.10% 1.22% 0.96% 2.66% 2.96%

Benchmark 0.07% 0.07% 1.36% 1.10% 2.83% 3.16%

-4

0

4

Perc

ent (

%)


Vanguard Canadian Aggregate BondIndex ETF VABETF facts


Benchmark Bloomberg Barclays Global AggregateCanadian Float Adjusted Bond Index




Volatility




58




ETF characteristics

Number of bonds 236


Average coupon 3.3%Average maturity 11.3 yearsAverage quality AA+Average duration 8.2 yearsCash investment 1.1%


AAA 53.6%AA 35.6A 9.7Not Rated 1.1

Sector weighting†

Provincials/Municipals 49.1%Treasury/Federal 36.1Agencies 13.7Cash 1.1


Inception

Market price -0.07% -0.07% 1.10% — — 2.16%

NAV 0.04% 0.04% 1.11% — — 2.13%

Benchmark 0.05% 0.05% 1.43% — — 2.46%

-3

0

3

Perc

ent (

%)


Vanguard Canadian Government BondIndex ETF VGVETF facts


Benchmark Bloomberg Barclays Global AggregateCanadian Government Float Adjusted

Bond Index






59




ETF characteristics

Number of bonds 426


Average coupon 3.3%Average maturity 7.2 yearsAverage quality AAverage duration 5.4 yearsCash investment 0.0%


AAA 5.4%AA 12.6A 41.7BBB 40.3

Sector weighting†

Financial Institutions 50.3%Industrials 38.7Utilities 5.8Supranational 2.9Agencies 1.5Treasury/Federal 0.8Cash 0.0


Inception

Market price 0.07% 0.07% 0.85% — — 1.87%

NAV 0.12% 0.12% 0.87% — — 1.76%

Benchmark 0.13% 0.13% 1.12% — — 2.01%

0

1

2

3

Perc

ent (

%)


Vanguard Canadian Corporate BondIndex ETF VCBETF facts


Benchmark Bloomberg Barclays Global AggregateCanadian Credit Float Adjusted Bond

Index






60



Under 1 Year 0.0%1 - 2 Years 29.42 - 3 Years 24.63 - 4 Years 23.24 - 5 Years 20.0Over 5 Years 2.8Total 100.0%

ETF characteristics

Number of bonds 364


Average coupon 2.5%Average maturity 2.8 yearsAverage quality AAAverage duration 2.7 yearsCash investment 0.0%


AAA 56.4%AA 18.5A 15.8BBB 9.3

Sector weighting†

Treasury/Federal 37.2%Provincials/Municipals 18.8Financial Institutions 17.9Agencies 16.6Industrials 7.9Supranational 1.1Utilities 0.5Cash 0.0


Inception

Market price 0.44% 0.44% -0.33% 0.51% 1.37% 1.58%

NAV 0.19% 0.19% -0.44% 0.51% 1.38% 1.56%

Benchmark 0.20% 0.20% -0.31% 0.61% 1.51% 1.72%

-2

0

2

Perc

ent (

%)


Vanguard Canadian Short-Term BondIndex ETF VSBETF facts


Benchmark Bloomberg Barclays Global AggregateCanadian Government/Credit 1-5 Year

Float Adjusted Bond Index




Volatility




61



Under 1 Year 0.2%1 - 2 Years 31.52 - 3 Years 24.73 - 4 Years 22.84 - 5 Years 20.8Total 100.0%

ETF characteristics

Number of bonds 107


Average coupon 2.4%Average maturity 2.8 yearsAverage quality AA+Average duration 2.7 yearsCash investment 0.2%


AAA 75.9%AA 19.0A 4.9Not Rated 0.2

Sector weighting†

Treasury/Federal 51.4%Provincials/Municipals 26.1Agencies 22.3Cash 0.2


Inception

Market price 0.18% 0.18% -0.69% — — -0.32%

NAV 0.17% 0.17% -0.71% — — -0.36%

Benchmark 0.20% 0.20% -0.49% — — -0.14%

-1

0

1

Perc

ent (

%)


Vanguard Canadian Short-TermGovernment Bond Index ETF VSGETF facts


Benchmark Bloomberg Barclays Global AggregateCanadian Government 1-5 Year Float

Adjusted






62



Under 1 Year -0.1%1 - 2 Years 20.02 - 3 Years 28.43 - 4 Years 24.94 - 5 Years 17.0Over 5 Years 9.8Total 100.0%

ETF characteristics

Number of bonds 259


Average coupon 2.8%Average maturity 2.9 yearsAverage quality AAverage duration 2.8 yearsCash investment -0.1%


AAA 7.0%AA 17.7A 43.0BBB 32.4Not Rated -0.1

Sector weighting†

Financial Institutions 63.6%Industrials 27.8Supranational 3.9Agencies 1.8Utilities 1.5Treasury/Federal 1.5Cash -0.1


Inception

Market price 0.05% 0.05% 0.00% 1.22% 1.96% 2.21%

NAV 0.19% 0.19% 0.02% 1.28% 2.04% 2.20%

Benchmark 0.18% 0.18% 0.15% 1.41% 2.19% 2.36%

0

1

2

3

Perc

ent (

%)


Vanguard Canadian Short-TermCorporate Bond Index ETF VSCETF facts


Benchmark Bloomberg Barclays Global AggregateCanadian Credit 1-5 Year Float

Adjusted Bond Index




Volatility




63



Under 1 Year 0.1%10 - 15 Years 14.615 - 20 Years 18.620 - 25 Years 23.3Over 25 Years 43.4Total 100.0%

ETF characteristics

Number of bonds 197


Average coupon 4.4%Average maturity 23.1 yearsAverage quality AA-Average duration 15.3 yearsCash investment 0.1%


AAA 30.3%AA 47.6A 16.2BBB 5.8Not Rated 0.1

Sector weighting†

Provincials/Municipals 64.4%Treasury/Federal 23.5Industrials 7.4Utilities 1.9Agencies 1.5Financial Institutions 1.2Cash 0.1


Inception

Market price -0.30% -0.30% 4.61% — — 6.47%

NAV -0.03% -0.03% 4.73% — — 6.48%

Benchmark -0.05% -0.05% 4.97% — — 6.70%

-7

0

7

Perc

ent (

%)


Vanguard Canadian Long-Term BondIndex ETF VLBETF facts


Benchmark Bloomberg Barclays Global AggregateCanadian 10+ Year Float Adjusted

Bond Index






64




ETF characteristics

Number of bonds 8,503


Average coupon 3.1%Average duration 6.2 yearsAverage maturity 8.46 years


U.S. Government 64.1%Aaa 5.8Aa 3.4A 12.1Baa 14.6

Sector weighting†

Treasury/Agency 42.7%Government Mortgage-Backed 21.3Industrial 16.9Finance 8.8Foreign 5.6Utilities 2.0Commercial Mortgage-Backed 1.8Other 0.5Asset-Backed 0.4


Inception

Market price -1.72% -1.72% 0.46% 0.65% — 1.60%

NAV -1.73% -1.73% 0.42% 0.66% — 1.59%

Benchmark -1.64% -1.64% 0.67% 0.99% — 1.96%

-2

0

2

Perc

ent (

%)


Vanguard U.S. Aggregate Bond IndexETF (CAD-hedged) VBUETF facts


Benchmark Bloomberg Barclays U.S. AggregateFloat Adjusted Bond Index (CAD

Hedged)




Volatility




65




ETF characteristics

Number of bonds 4,815


Average coupon 2.1%Average duration 7.9 yearsAverage maturity 9.38 years


Aaa 21.9Aa 26.9A 34.4Baa 16.8

Sector weighting†

Foreign 80.9%Industrial 6.3Other 6.0Finance 5.5Utilities 1.2Asset-Backed 0.1Treasury/Agency 0.0Commercial Mortgage-Backed 0.0Government Mortgage-Backed 0.0


Inception

Market price 0.71% 0.71% 2.34% 1.66% — 3.16%

NAV 0.63% 0.63% 2.34% 1.66% — 3.16%

Benchmark 0.86% 0.86% 3.09% 2.37% — 3.92%

0

2

4

Perc

ent (

%)


Vanguard Global ex-U.S. Aggregate BondIndex ETF (CAD-hedged) VBGETF facts


Benchmark Bloomberg Barclays Global Aggregateex-USD Float Adjusted RIC Capped

Index (CAD Hedged)




Volatility




66

Vanguard

active equity ETFs

1 Vanguard active equity ETFs are actively managed and do not seek to track the performance of a benchmark.

2 The management fee is equal to the fee paid by the Vanguard ETF to Vanguard Investments Canada Inc. and does not include applicable taxes orother fees and expenses of the Vanguard ETF.

3 The management expense ratio (MER) is the audited MER as of March 31, 2017, including waivers and absorptions and is expressed as anannualized percentage of the daily average net asset value. The MER without any absorptions or waivers would have been 0.42% for VVO, 0.42%for VVL, 0.42% for VMO and 0.42% for VLQ. Vanguard Investments Canada Inc. expects to continue absorbing or waiving certain fees indefinitelybut may, in its discretion, discontinue this practice at any time.

Tickersymbol Vanguard ETF® Investment universe1

Managementfee2


VVO Vanguard Global Minimum Volatility ETF FTSE Global All Cap Index 0.35% 0.40% 69

VVL Vanguard Global Value Factor ETF FTSE Developed All Cap Index, Russell3000 Index

0.35% 0.40% 70

VMO Vanguard Global Momentum Factor ETF FTSE Developed All Cap Index, Russell3000 Index

0.35% 0.40% 71

VLQ Vanguard Global Liquidity Factor ETF FTSE Developed All Cap Index, Russell3000 Index

0.35% 0.40% 72

68

Vanguard active equity ETFs

Top 10 holdings†

Bright Horizons Family Solutions Inc. 1.6%Broadridge Financial Solutions Inc. 1.6Grand Canyon Education Inc. 1.6Hermes International 1.6Amdocs Ltd. 1.5Chemed Corp. 1.5National Instruments Corp. 1.5BWX Technologies Inc. 1.5China Mobile Ltd. 1.5Starwood Property Trust Inc. 1.5Total 15.4%

ETF facts


Investment universe1 FTSE Global All Cap Index


Management expense ratio**** 0.40%



Financials 22.4%Industrials 19.3Consumer Services 15.4Consumer Goods 12.4Utilities 7.6Health Care 7.5Telecommunications 7.1Technology 5.2Basic Materials 1.6Oil & Gas 1.5Other 0.0


Inception

Market price -1.21% -1.21% 8.35% — — 11.36%

NAV -1.33% -1.33% 8.22% — — 11.06%

Investmentuniverse2 -2.11% -2.11% 10.76% — — 15.85%

2Performance displayed is for the FTSE Global All Cap Index. Although the ETF uses this index forlong-term performance comparisons, it is not managed relative to the composition of the index.There are differences between the ETF and the index in, among other things, security holdings andgeographical and sector allocations. As a result, the ETF may experience periods when itsperformance differs materially from that of the index.

-20

0

20

Perc

ent (

%)

Vanguard Global Minimum Volatility ETF VVO


United States 49.1%Japan 8.7United Kingdom 6.0Canada 5.2Australia 4.0Switzerland 3.8France 3.8Germany 2.8Taiwan 2.2Korea 1.7Total 87.3%

ETF characteristics


Total returns for the period ending March 31, 2018 ‡‡



1The ETF is actively managed and does not seek to track the performance of a benchmark.

69


Top 10 holdings†

Carnival 0.6%PG&E Corp. 0.4Delta Air Lines Inc. 0.4General Motors Co. 0.4Micron Technology Inc. 0.4Ford Motor Co. 0.4Exelon Corp. 0.4HCA Healthcare Inc. 0.4AT&T Inc. 0.4Duke Energy Corp. 0.4Total 4.2%

ETF facts


Investment universe1 FTSE Developed All Cap Index,Russell 3000 Index





Financials 32.6%Consumer Services 14.0Industrials 12.0Consumer Goods 9.0Utilities 8.2Oil & Gas 7.3Basic Materials 6.2Technology 4.4Health Care 3.9Telecommunications 2.4Other 0.0


Inception

Market price 1.56% 1.56% 10.32% — — 21.12%

NAV 1.64% 1.64% 9.88% — — 20.79%

Investmentuniverse2 1.67% 1.67% 10.37% — — 16.86%

2Performance displayed is for the FTSE Developed All Cap Index. Although the ETF uses this indexfor long-term performance comparisons, it is not managed relative to the composition of the index.There are differences between the ETF and the index in, among other things, security holdings andgeographical and sector allocations. As a result, the ETF may experience periods when itsperformance differs materially from that of the index.

0

10

20

30

Perc

ent (

%)

Vanguard Global Value Factor ETF VVL


United States 57.5%Japan 9.8United Kingdom 6.6France 4.3Korea 4.3Canada 3.3Italy 2.7Germany 2.6Spain 1.9Netherlands 1.4Total 94.4%

ETF characteristics






70


Top 10 holdings†

NVIDIA Corp. 0.9%Adobe Systems Inc. 0.7Applied Materials Inc. 0.6Micron Technology Inc. 0.6Intuitive Surgical Inc. 0.6Boeing Co. 0.5Progressive Corp. 0.5Marriott International Inc. 0.5PayPal Holdings Inc. 0.5Lam Research Corp. 0.5Total 5.9%

ETF facts







Industrials 19.2%Technology 15.8Health Care 15.5Financials 13.9Consumer Services 13.7Consumer Goods 11.1Basic Materials 6.3Oil & Gas 2.2Utilities 1.5Telecommunications 0.8Other 0.0


Inception

Market price 4.57% 4.57% 17.25% — — 18.01%

NAV 4.56% 4.56% 16.68% — — 17.69%



0

10

20

Perc

ent (

%)

Vanguard Global Momentum Factor ETF VMO


United States 58.5%Japan 9.6United Kingdom 6.4France 3.8Germany 3.2Canada 3.1Korea 2.9Italy 1.8Hong Kong 1.7Switzerland 1.7Total 92.7%

ETF characteristics






71


Top 10 holdings†

Southern Copper Corp. 0.5%Sprint Corp. 0.4S&P Global Inc. 0.4Fiserv Inc. 0.4Public Storage 0.4Monster Beverage Corp. 0.4Ecolab Inc. 0.4Marsh & McLennan Cos. Inc. 0.4Aon plc 0.4Stryker Corp. 0.4Total 4.1%

ETF facts







Financials 30.6%Industrials 19.7Consumer Services 11.6Health Care 9.7Consumer Goods 8.5Basic Materials 6.0Technology 5.1Utilities 4.6Oil & Gas 2.7Telecommunications 1.5Other 0.0


Inception

Market price 2.45% 2.45% 11.50% — — 17.01%

NAV 2.39% 2.39% 10.86% — — 16.66%



0

10

20

Perc

ent (

%)

Vanguard Global Liquidity Factor ETF VLQ


United States 56.0%Japan 10.0United Kingdom 6.9France 4.9Germany 3.1Canada 3.1Hong Kong 2.9Korea 1.9Switzerland 1.4Belgium 1.0Total 91.2%

ETF characteristics






72

Important information

Performance

*‡‡ Performance for all ETFs: Performance information of the Vanguard ETF reflects waivers of certain expensesand/or fees. If the Vanguard ETF had incurred all expenses, investment returns would have been reduced. Theindicated rate of return is the historical annual compounded total return including changes in unit value andreinvestment of all dividends or distributions and do not take into account sales, redemption, distribution or optionalcharges or income taxes payable by any unitholder that would have reduced returns. The performance of thebenchmark and Vanguard ETF is for illustrative purposes only.

* Performance for the benchmark index: The performance of a benchmark is not an exact representation of anyparticular investment as you cannot invest directly in an index. The performance of the benchmark does not reflectthe deduction of any expenses which would have reduced total returns.

Historical and current benchmark performance information for:

VEE [formerly Vanguard FTSE Emerging Markets Index ETF and, prior thereto, Vanguard MSCI Emerging Markets Index ETF] prior to January 10,2013, reflects the MSCI Emerging Markets Index. From January 10, 2013, until June 27, 2013, reflects the FTSE Emerging Transition Index. FromJune 28, 2013, until October 30, 2015, reflects the FTSE Emerging Index. From November 2, 2015, until September 16, 2016, reflects the FTSEEmerging Markets All Cap China A Transition Index. From September 19, 2016, reflects the FTSE Emerging Markets All Cap China A InclusionIndex.

VCE [formerly Vanguard MSCI Canada Index ETF] prior to March 28, 2013, reflects the MSCI Canada Index. From March 28, 2013, reflects theFTSE Canada Index.

VEF [formerly Vanguard FTSE Developed ex North America Index ETF (CAD-hedged) and, prior thereto, Vanguard MSCI EAFE Index ETF(CAD-hedged)] prior to May 29, 2013, reflects the MSCI EAFE 100% Hedged to CAD Index. From May 29, 2013, until December 20, 2015, reflectsthe FTSE Developed ex North America Hedged CAD Index. From December 21, 2015, until May 31, 2016, reflects the FTSE Developed All Cap exUS Hedged to CAD Transition Index. From June 1, 2016, reflects the FTSE Developed All Cap ex US Hedged to CAD Index.

VUS [formerly Vanguard MSCI U.S. Broad Market Index ETF (CAD-hedged)] prior to June 3, 2013, reflects the MSCI US Broad Market 100%Hedged to CAD Index. From June 3, 2013, reflects the CRSP US Total Market Index (CAD-hedged).

VE [formerly Vanguard FTSE Developed Europe Index ETF] prior to October 1, 2015, reflects the FTSE Developed Europe Index. From October 1,2015, reflects the FTSE Developed Europe All Cap Index.

VA [formerly Vanguard FTSE Developed Asia Pacific Index ETF] prior to October 1, 2015, reflects the FTSE Developed Asia Pacific Index. FromOctober 1, 2015, reflects the FTSE Developed Asia Pacific All Cap Index.

VXC [formerly Vanguard FTSE All-World ex Canada Index ETF] prior to October 1, 2015, reflects the FTSE All-World ex Canada Index. From October1, 2015, reflects the FTSE Global All Cap ex Canada China A Inclusion Index.

VDU [formerly Vanguard FTSE Developed ex North America Index ETF] prior to December 21, 2015, reflects the FTSE Developed ex North AmericaIndex. From December 21, 2015, until May 31, 2016, reflects the FTSE Developed All Cap ex US Transition Index. From June 1, 2016, reflects theFTSE Developed All Cap ex US Index.

Management fee

** The management fee is equal to the fee paid by the Vanguard ETF to Vanguard Investments Canada Inc. and does not include applicable taxes orother fees and expenses of the Vanguard ETF. For any Vanguard ETF which invests in underlying Vanguard fund(s), there shall be no duplication ofmanagement fees chargeable in connection with the Vanguard ETF and its investment in the Vanguard fund(s). As of February 13, 2018, themanagement fee for VAB was reduced from 0.12% to 0.08%.

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Important information (continued)

Management expense ratio

*** The management expense ratio (MER) is the audited MER as of December 31, 2017, including waivers and absorptions and is expressed as anannualized percentage of the daily average net asset value. The MER without any absorptions or waivers would have been 0.06% for VCE, 0.06%for VCN, 0.22% for VDY, 0.39% for VRE, 0.16% for VUN, 0.16% for VUS, 0.08% for VFV, 0.09% for VSP, 0.30% for VGG, 0.30% for VGH, 0.27%for VXC, 0.23% for VIU, 0.23% for VI, 0.21% for VDU, 0.22% for VEF, 0.22% for VE, 0.25% for VEH, 0.23% for VA, 0.26% for VAH, 0.24% for VEE,0.13% for VAB, 0.35% for VGV, 0.28% for VCB, 0.11% for VSB, 0.25% for VSG, 0.11% for VSC, 0.23% for VLB, 0.22% for VBU and 0.39% forVBG. Vanguard Investments Canada Inc. expects to continue absorbing or waiving certain fees indefinitely but may, in its discretion, discontinuethis practice at any time. The inception date for VCNS, VBAL and VGRO was January 25, 2018; MER information is not available.

**** The management expense ratio (MER) is the audited MER as of March 31, 2017, including waivers and absorptions and is expressed as anannualized percentage of the daily average net asset value. The MER without any absorptions or waivers would have been 0.42% for VVO, 0.42%for VVL, 0.42% for VMO and 0.42% for VLQ. Vanguard Investments Canada Inc. expects to continue absorbing or waiving certain fees indefinitelybut may, in its discretion, discontinue this practice at any time.

Portfolio holdings

† Portfolio holdings may exclude any temporary cash investments and equity index products. The number of holdings shown is unaudited and shouldnot be relied upon as investment advice. For any Vanguard Canada ETF that invests in one or more underlying ETFs, the number of holdingsdisplayed represent those of the underlying ETF(s).

†† The sector allocations provided exclude any temporary cash investments. Sector categories are based on the Industry Classification Benchmarksystem ("ICB"), except for the "Other" category (if applicable), which includes securities that have not been provided an ICB classification as of theeffective reporting period.

Yield to maturity

††† Effective YTM represents the weighted average of the ETF’s individual bond holdings’ yield to maturities and is calculated based on the marketvalue of each fixed income investment. YTM incorporates expected capital gains or losses into the calculation, but ETFs generally do not holdbonds to maturity, so the fund will never actually receive the return stated. The calculation does not include fees and expenses that might be partof the funds' investments.

Credit quality ratings

‡ Credit-quality ratings for each issue are obtained from Barclays using ratings derived from Moody’s Investors Service, Fitch Ratings, and Standard& Poor’s. When ratings from all three agencies are available, the median rating is used. When ratings are available from two of the agencies, thelower rating is used. When one rating is available, that rating is used.

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Commissions, management fees, and expensesall may be associated with investments in aVanguard ETF®. Investment objectives, risks,fees, expenses, and other important informationare contained in the prospectus; please read itbefore investing. ETFs are not guaranteed, theirvalues change frequently, and past performancemay not be repeated. Vanguard ETFs® aremanaged by Vanguard Investments Canada Inc.,an indirect wholly-owned subsidiary of TheVanguard Group, Inc., and are available acrossCanada through registered dealers.

Date of publication: May 4, 2018

This material is for informational purposes only. This material is not intended to berelied upon as research, investment, or tax advice and is not an implied or expressrecommendation, offer or solicitation to buy or sell any security or to adopt anyparticular investment or portfolio strategy. Any views and opinions expressed do nottake into account the particular investment objectives, needs, restrictions andcircumstances of a specific investor and thus, should not be used as the basis of anyspecific investment recommendation. Investors should consult a financial and/or taxadvisor for financial and/or tax information applicable to their specific situation.

Information, figures and charts are summarized for illustrative purposes only and aresubject to change without notice. While this information has been compiled fromproprietary and non-proprietary sources believed to be reliable, no representation orwarranty, express or implied, is made by The Vanguard Group, Inc., its subsidiaries oraffiliates, or any other person (collectively, “The Vanguard Group”) as to its accuracy,completeness, timeliness or reliability. The Vanguard Group takes no responsibility forany errors and omissions contained herein and accepts no liability whatsoever for anyloss arising from any use of, or reliance on, this material.

This material does not constitute an offer or solicitation and may not be treated as anoffer or solicitation in any jurisdiction where such an offer or solicitation is against thelaw, or to anyone to whom it is unlawful to make such an offer or solicitation, or if theperson making the offer or solicitation is not qualified to do so.

In this material, references to "Vanguard" are provided for convenience only and mayrefer to, where applicable, only The Vanguard Group, Inc., and/or may include itsaffiliates, including Vanguard Investments Canada Inc.

All investments, including those that seek to track indexes, are subject to risk,including the possible loss of principal. Diversification does not ensure a profit orprotect against a loss in a declining market. While index ETFs are designed to be asdiversified as the original indexes they seek to track and can provide greaterdiversification than an individual investor may achieve independently, any given ETFmay not be a diversified investment.

BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. BARCLAYS®

is a trademark and service mark of Barclays Bank Plc, used under license. BloombergFinance L.P. and its affiliates, including Bloomberg Index Services Limited ("BISL")(collectively, "Bloomberg"), or Bloomberg's licensors own all proprietary rights in theBloomberg Barclays Indices.

Connect with Vanguard® > vanguardcanada.ca > 888-293-6728

The products are not sponsored, endorsed, issued, sold or promoted by “Bloomberg orBarclays”. Bloomberg and Barclays make no representation or warranty, express orimplied, to the owners or purchasers of the products or any member of the publicregarding the advisability of investing in securities generally or in the productsparticularly or the ability of the Bloomberg Barclays Indices to track general bondmarket performance. Neither Bloomberg nor Barclays has passed on the legality orsuitability of the products with respect to any person or entity. Bloomberg’s onlyrelationship to Vanguard and the products are the licensing of the Bloomberg BarclaysIndices which are determined, composed and calculated by BISL without regard toVanguard or the Vanguard Funds and ETFs or any owners or purchasers of theproducts. Bloomberg has no obligation to take the needs of the products or theowners of the products into consideration in determining, composing or calculatingthe Bloomberg Barclays Indices. Neither Bloomberg nor Barclays is responsible forand has not participated in the determination of the timing of, prices at, or quantitiesof the products to be issued. Neither Bloomberg nor Barclays has any obligation orliability in connection with the administration, marketing or trading of the products.

The S&P 500 Index is a product of S&P Dow Jones Indices LLC ("SPDJI"), and hasbeen licensed for use by The Vanguard Group, Inc. (Vanguard). Standard & Poor's®,S&P® and S&P 500® are registered trademarks of Standard & Poor's FinancialServices LLC ("S&P"); Dow Jones® is a registered trademark of Dow Jones TrademarkHoldings LLC ("Dow Jones"); and these trademarks have been licensed for use bySPDJI and sublicensed for certain purposes by Vanguard. Vanguard ETFs are notsponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respectiveaffiliates, and none of such parties make any representation regarding the advisabilityof investing in such product(s) nor do they have any liability for any errors, omissions,or interruptions of the S&P 500 Index.

“Dividend Achievers" is a trademark of The NASDAQ OMX Group, Inc. (collectively,with its affiliates, "NASDAQ OMX") and has been licensed for use by The VanguardGroup, Inc. Vanguard ETFs are not sponsored, endorsed, sold, or promoted byNASDAQ OMX and NASDAQ OMX makes no representation regarding the advisabilityof investing in the ETFs. NASDAQ OMX MAKES NO WARRANTIES AND BEARS NOLIABILITY WITH RESPECT TO THE VANGUARD ETFs.

London Stock Exchange Group companies include FTSE International Limited ("FTSE"),Frank Russell Company ("Russell"), MTS Next Limited ("MTS"), and FTSE TMX GlobalDebt Capital Markets Inc. ("FTSE TMX"). All rights reserved. "FTSE®", "Russell®","MTS®", "FTSE TMX®" and "FTSE Russell" and other service marks and trademarksrelated to the FTSE or Russell indexes are trademarks of the London Stock ExchangeGroup companies and are used by FTSE, MTS, FTSE TMX and Russell under licence.All information is provided for information purposes only. No responsibility or liabilitycan be accepted by the London Stock Exchange Group companies nor its licensors forany errors or for any loss from use of this publication. Neither the London StockExchange Group companies nor any of its licensors make any claim, prediction,warranty or representation whatsoever, expressly or impliedly, either as to the resultsto be obtained from the use of the FTSE Indexes or the fitness or suitability of theIndexes for any particular purpose to which they might be put. The IndustryClassification Benchmark ("ICB") is owned by FTSE. FTSE does not accept any liabilityto any person for any loss or damage arising out of any error or omission in the ICB.

© 2018 Vanguard Investments Canada Inc.All rights reserved.

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