Exchange Traded Funds For personal use only · 2016. 9. 7. · With more than $4.6 trillion in...

Annual Report for the Vanguard® Exchange Traded Funds

PLEASE CROSS RELEASE TO ALL BELOW COMPANY CODES

7 September 2016 Vanguard Investments Australia Ltd announces the following:

ETF ASX CODE

ANNOUNCEMENT

Vanguard MSCI Index International Shares ETF VGS Annual Report

Vanguard International Fixed Interest Index (Hedged) ETF VIF Annual Report

Vanguard International Credit Securities Index (Hedged) ETF

VCF Annual Report

Vanguard has prepared an Annual Report for the Vanguard® Wholesale Funds, for the financial year ending 30 June 2016. The ETFs above are classes of units in the relevant funds. Units in the ETF class are those that are traded on the Australian Securities Exchange (ASX). The Annual Report provides financial information for each fund and where indicated, provides specific information for the ETF class. Further Information If you have any queries on Vanguard ETFs, please visit vanguard.com.au/etf © 2016 Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer, and is a wholly owned subsidiary of The Vanguard Group, Inc. based in the US. All rights reserved. The funds or securities referred to herein are not sponsored, endorsed or promoted by MSCI and MSCI bears no liability with respect to any such funds or securities. The Product Disclosure Statement contains a more detailed description of the limited relationship MSCI has with The Vanguard Group and any related funds. Vanguard Investments Australia Ltd, Level 34, Freshwater Place, 2 Southbank Boulevard, Southbank VIC 3006 vanguard.com.au 1300 655 888

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Vanguard® Wholesale Funds

Annual Report | 30 June 2016

Vanguard Investments Australia Ltd ABN 72 072 881 086 AFSL 227263

International Funds

(ASX Codes: VIF, VCF, VGS)

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Vanguard® Annual Report

2

Vanguard funds covered in this annual report

Vanguard International Fixed Interest Index Fund (Hedged) ARSN 090 940 337 ABN 59 108 266 812

Vanguard International Credit Securities Index Fund (Hedged) ARSN 095 366 055 ABN 15 118 646 737

Vanguard International Property Securities Index Fund ARSN 115 001 002 ABN 97 674 886 440

Vanguard International Property Securities Index Fund (Hedged) ARSN 115 001 360 ABN 52 511 318 838

Vanguard International Shares Index Fund ARSN 090 939 610 ABN 56 291 101 711

Vanguard International Shares Index Fund (Hedged) ARSN 093 254 909 ABN 97 123 270 094

Vanguard Emerging Markets Shares Index Fund ARSN 090 939 450 ABN 63 171 298 643

Vanguard International Small Companies Index Fund ARSN 127 015 472 ABN 20 372 713 731

Vanguard International Small Companies Index Fund (Hedged) ARSN 127 015 436 ABN 13 064 564 422

Vanguard Global Infrastructure Index Fund ARSN 128 385 277 ABN 82 191 294 545

Vanguard Global Infrastructure Index Fund (Hedged) ARSN 128 385 197 ABN 92 392 829 821

Responsible EntityVanguard Investments Australia Ltd ABN 72 072 881 086 AFSL 227263

Level 34 Freshwater Place 2 Southbank Boulevard Southbank Vic 3006

Telephone: (03) 8888 3888 Facsimile: 1300 765 712

vanguard.com.au

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3

ContentsAbout Vanguard 4

Directors’ Report 5

Auditor’s Independence Declaration 12

Statement of comprehensive income 13

Balance sheet 15

Statement of changes in equity 17

Statement of cash flows 18

Notes to the financial statements 20

Directors’ Declaration 103

Independent Auditor’s Report 104

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About Vanguard

4

About VanguardSince our establishment in 1975, Vanguard has strived to be the world’s highest-value provider of investment products and services. We have an unwavering focus on our clients with a commitment to champion what’s best for investors by offering outstanding service, while keeping costs low.

Over the years Vanguard has built a reputation as a global leader in client advocacy and earned the trust of millions of investors along the way. Our sole purpose has been to align our interest with those of our investors to ensure they have the best chance for investment success.

With more than $4.6 trillion in assets under management as of 30 June 2016, including over $750 billion in exchange traded funds, Vanguard is one of the world’s largest global investment management companies.

In Australia, Vanguard has been helping investors meet their long-term financial goals with low-cost investment solutions for over 20 years.

Our unique structure – putting investors’ interests firstWhat sets Vanguard apart – and lets Vanguard put investors first around the world – is the ownership structure of The Vanguard Group, Inc., in the United States.

Rather than being publicly traded or owned by a small group of individuals, The Vanguard Group is owned by Vanguard’s US-domiciled funds and ETFs. Those funds, in turn, are owned by their investors.

This mutual structure aligns our interests with those of our investors and drives the culture, philosophy and policies throughout the Vanguard organisation worldwide. As a result, Australian investors benefit from Vanguard’s stability and experience, low costs and client focus.

Our investment expertiseWhen you invest with Vanguard, you have more than 40 years of investing experience behind you. So no matter which investment products suit your needs, you can feel confident that Vanguard investments are built on a rigorous investment philosophy that stands the test of time.

Low-cost investingWe know we can’t control the markets, but we can control the costs of investing. To that end, providing low-cost investments isn’t a pricing strategy for us. It’s how we do business.

We can keep costs low because of our unique ownership structure in the United States, which allows us to return profits to investors through lower costs.

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Directors’ Report

5

Directors’ Report The directors of Vanguard Investments Australia Ltd, the Responsible Entity of the Vanguard Wholesale Funds, present their report together with the financial report of the following Vanguard Wholesale Funds (‘the Funds’) for the year ended 30 June 2016:

• Vanguard International Fixed Interest Index Fund (Hedged)• Vanguard International Credit Securities Index Fund (Hedged)• Vanguard International Property Securities Index Fund• Vanguard International Property Securities Index Fund (Hedged)• Vanguard International Shares Index Fund• Vanguard International Shares Index Fund (Hedged)• Vanguard Emerging Markets Shares Index Fund• Vanguard International Small Companies Index Fund • Vanguard International Small Companies Index Fund (Hedged)• Vanguard Global Infrastructure Index Fund • Vanguard Global Infrastructure Index Fund (Hedged)

Principal activitiesThe Funds invest in accordance with the investment policy of the Funds as set out in their respective Product Disclosure Statements (PDSs) and in accordance with the Constitutions of the Funds. The Funds seek to track the returns of the Funds respective indices, before taking into account Fund fees and expenses.

The Vanguard International Fixed Interest Index Fund (Hedged) ETF Class (ASX code VIF), the Vanguard International Credit Securities Index Fund (Hedged) ETF Class (ASX code VCF) and the Vanguard International Shares Index Fund ETF Class (ASX code VGS) operate as Exchange Traded Funds (ETF) listed on the Australian Stock Exchange (ASX).

The Funds did not have any employees during the year.

There were no significant changes in the nature of the activities of the Funds during the year.

DirectorsThe following persons held office as directors of Vanguard Investments Australia Ltd during the year or since the end of the year and up to the date of this report:

• J M Norris • G W Reed • C R Comegys • C Lui (Resigned 15 March 2016)• C Kelton (Appointed 1 July 2015)• M Lovett (Appointed 15 March 2016)

Review and results of operationsDuring the year, the investment policy of the Funds continued to be that detailed in the current PDS and in accordance with the provisions of the Constitutions of the Funds. There have been no changes to the operations of the Funds since last year. F

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Directors’ Report

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Directors’ Report (continued)

Review and results of operations (continued)

ResultsThe results of the operations of the Funds were as follows:

Vanguard International Fixed Interest Index

Fund (Hedged)

Vanguard International Credit Securities Index

Fund (Hedged)

Vanguard International Property Securities

Index Fund

Vanguard International Property Securities Index Fund (Hedged)

For the year ended 30 June 2016 2015 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Operating profit/(loss) before finance costs attributable to unitholders 291,188 156,477 107,539 48,486 358,614 329,477 221,442 74,045

Distributions

Distribution paid and payable 45,107 52,106 50,428 – 139,212 89,517 83,499 –

Distribution (cents per unit) * * ** ** 8.3750 5.5955 6.4231 –

* The distribution for Vanguard International Fixed Interest Index Fund (Hedged) was 2.2174 (2015: 2.2147) cents per unit for the Ordinary Class Units and 103.3802 (2015: n/a) cents

per unit for the ETF Class Units.

** The distribution for Vanguard International Credit Securities Index Fund (Hedged) was 5.2422 (2015: nil) cents per unit for the Ordinary Class Units and 212.8053 (2015: n/a) cents

per unit for the ETF Class Units.

Vanguard International Shares

Index Fund

Vanguard International Shares Index

Fund (Hedged)

Vanguard Emerging Markets Shares

Index Fund

For the year ended 30 June 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000

Operating profit/(loss) before finance costs attributable to unitholders 158,367 3,172,820 75,114 342,549 (134,356) 210,468

Distributions

Distribution paid and payable 417,221 693,355 284,374 – 58,096 31,242

Distribution (cents per unit) ** ** * * 9.0936 3.9627

* The distribution for Vanguard International Shares Index Fund (Hedged) was 7.4172 (2015: nil) Australian cents per unit for the AUD Class Units and 2.0318 (2015: Nil) New Zealand

cents per unit for the NZD Class Units.

** The distribution for Vanguard International Shares Index Fund was 6.1873 (2015: 8.6987) cents per unit for the Ordinary Class Units, 229.3959 (2015: 137.8872) cents per unit for

the ETF Class Units,and 247.0117 (2015: 152.6333) cents per unit for the Class B Units.

Vanguard International Small Companies

Index Fund


Index Fund (Hedged)

Vanguard Global Infrastructure

Index Fund

Vanguard Global Infrastructure Index

Fund (Hedged)

For the year ended 30 June 2016 2015 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Operating profit/(loss) before finance costs attributable to unitholders (5,157) 118,428 (8,386) 16,730 18,069 18,109 3,102 219

Distributions

Distribution paid and payable 20,563 42,935 18,143 – 6,521 10,679 885 482

Distribution (cents per unit) 8.9032 11.6415 42.9946 – 4.1300 8.5861 2.2415 4.2346

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Directors’ Report

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PerformanceThe table below details the performance of the Funds as represented by the total return, net of fees, which is calculated as the aggregation of the percentage capital growth and percentage distribution of income. The total return is shown for the past five years to 30 June 2016 and assumes that all distributions were re-invested during that period. These are calculated in accordance with FSC Standard 6.0 Product Performance - calculation and presentation of returns. The directors assess the performance of the Funds by comparing each Fund’s total return with the corresponding Index (the Benchmark) gross of fees.

2016 2015 2014 2013 2012

% % % % %

Vanguard International Fixed Interest Index Fund (Hedged)

Capital growth 8.60 4.11 6.83 (0.61) 11.52

Distribution of income 1.86 1.93 – 4.71 –

Total return 10.46 6.04 6.83 4.10 11.52

Benchmark return

Barclays Global Treasury Index (Hedged to AUD) 10.84 6.31 7.18 4.40 11.93

Vanguard International Credit Securities Index Fund (Hedged)

Capital growth 3.50 4.38 6.09 2.67 11.07

Distribution of income 4.41 – 2.31 2.18 –

Total return 7.91 4.38 8.40 4.85 11.07

Benchmark return

Barclays Global Aggregate Government-Related and Corporate Index (Hedged to AUD) 8.21 4.70 8.94 5.40 11.74

Vanguard International Property Securities Index Fund

Capital growth 12.65 17.21 8.06 20.33 4.39

Distribution of income 7.89 6.10 3.98 4.08 3.40

Total return 20.54 23.31 12.04 24.41 7.79

Benchmark return

FTSE EPRA/NAREIT Developed ex-Australia Rental Index (with net dividends reinvested) into Australian dollars 20.44 23.14 11.90 24.25 7.49


Capital growth 10.93 8.01 14.28 11.49 6.79


Total return 18.17 8.01 16.27 15.40 6.79

Benchmark return

FTSE EPRA/NAREIT Developed ex-Australia Rental Index (with net dividends reinvested) hedged into Australian dollars 18.27 8.02 16.30 15.48 6.92

Vanguard International Shares Index Fund

Capital growth (2.76) 19.57 16.85 30.09 (2.57)


Total return 0.58 25.29 20.50 33.26 (0.45)

Benchmark return

MSCI World ex-Australia Index (with net dividends reinvested) into Australian dollars 0.40 25.18 20.41 33.10 (0.50)

Vanguard International Shares Index Fund (Hedged) - AUD Class

Capital growth (9.91) 10.98 24.05 19.87 0.28


Total return (1.27) 10.98 24.65 24.63 0.28

Benchmark return

MSCI World ex-Australia Index (with net dividends reinvested) hedged into Australian dollars (1.43) 10.94 24.64 24.56 0.42

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Directors’ Report

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Performance (continued)

2016 2015 2014 2013 2012

% % % % %

Vanguard International Shares Index Fund (Hedged) - NZD Class

Capital growth (2.75) 11.38 14.27 12.58 (1.73)


Total return (1.18) 11.38 24.33 23.68 (1.73)

Benchmark return

MSCI World ex-Australia Index (with net dividends reinvested) hedged into New Zealand dollars (1.14) 11.66 24.51 23.69 (1.66)

Vanguard Emerging Markets Shares Index Fund

Capital growth (14.28) 13.69 7.84 12.15 (14.29)


Total return (9.61) 16.15 10.70 14.72 (12.37)

Benchmark return

MSCI Emerging Markets Index (with net dividends reinvested) in Australian dollars (9.22) 16.51 10.86 15.19 (12.22)

Vanguard International Small Companies Index Fund

Capital growth (7.04) 15.95 19.12 34.97 (5.60)


Total return (1.01) 25.20 23.42 37.69 (4.08)

Benchmark return

MSCI World ex-Australia Small Cap Index (with net dividends reinvested) in Australian dollars (0.94) 25.44 23.74 37.89 (4.01)

Vanguard International Small Companies Index Fund (Hedged)

Capital growth (36.33) 10.53 28.24 27.05 (4.61)

Distribution of income 32.51 – – 2.34 –

Total return (3.82) 10.53 28.24 29.39 (4.61)

Benchmark return

MSCI World ex-Australia Small Cap Index (with net dividends reinvested) hedged into Australian dollars (3.52) 10.81 28.57 29.78 (4.29)

Vanguard Global Infrastructure Index Fund

Capital growth 7.36 6.66 12.92 19.75 0.83


Total return 11.57 16.31 17.49 23.87 4.71

Benchmark return

FTSE Developed Core Infrastructure Index (with net dividends reinvested), in Australian dollars 11.69 16.38 15.75 24.62 4.06

Vanguard Global Infrastructure Index Fund (Hedged)

Capital growth 6.32 (1.88) 17.04 8.81 5.33


Total return 8.94 3.09 22.04 16.43 7.25

Benchmark return

FTSE Developed Core Infrastructure Hedged into Australian Dollars Index (with net dividends reinvested) 9.34 3.47 19.88 17.43 7.02

Investors should be aware that past performance is not necessarily an indicator of future performance.

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Directors’ Report

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Unit redemption pricesUnit redemption prices (quoted including distribution) are shown as follows:

At 30 JunePeriod high

Period to 30 JunePeriod low

Period to 30 June

2016 2015 2016 2015 2016 2015

$ $ $ $ $ $

Vanguard International Fixed Interest Index Fund (Hedged) 1.3166 1.2140 1.3167 1.2434 1.1878 1.1420

Vanguard International Fixed Interest Index Fund (Hedged) (ETF Class)* 53.9358 – 53.9419 – 50.0000 –

Vanguard International Credit Securities Index Fund (Hedged) 1.2787 1.1850 1.2787 1.2153 1.1820 1.1327

Vanguard International Credit Securities Index Fund (Hedged) (ETF Class)* 53.1955 – 53.1955 – 49.8533 –

Vanguard International Property Securities Index Fund 1.2819 1.1201 1.2863 1.2586 1.1005 0.9220

Vanguard International Property Securities Index Fund (Hedged) 1.0461 0.8844 1.0461 0.9856 0.8582 0.7986

Vanguard International Shares Index Fund 1.8439 1.9229 2.0009 1.9952 1.7127 1.5283

Vanguard International Shares Index Fund (ETF Class)** 56.1684 57.3661 61.0054 59.4822 52.1722 50.0000

Vanguard International Shares Index Fund (Class B)** 55.9576 57.3157 60.7824 59.4299 51.9805 50.0000

Vanguard International Shares Index Fund (Hedged) - AUD Class 0.8479 0.8587 0.8925 0.8914 0.7430 0.7339

Vanguard International Shares Index Fund (Hedged) - NZD Class *** 1.2782 1.2919 1.3441 1.3439 1.1190 1.1049

Vanguard Emerging Markets Shares Index Fund 1.7334 1.9584 1.9742 2.1109 1.5232 1.6961

Vanguard International Small Companies Index Fund 1.4467 1.5779 1.5468 1.6167 1.2927 1.2023

Vanguard International Small Companies Index Fund (Hedged) 1.2692 1.3193 1.3426 1.3577 1.0773 1.0812

Vanguard Global Infrastructure Index Fund 1.1163 1.0397 1.1163 1.1369 0.9855 0.9069

Vanguard Global Infrastructure Index Fund (Hedged) 0.9281 0.8511 0.9281 0.9188 0.7733 0.8002

* The ETF Class of Vanguard International Fixed Interest Index Fund (Hedged) and the ETF Class of Vanguard International Credit Securities Index Fund (Hedged) commenced

operations on 4 December 2015.

** The Vanguard International Shares Index Fund (ETF Class) and the Vanguard International Shares Index Fund (Class B) inception date was 18 November 2014

*** All information is expressed in New Zealand dollars.

Significant changes in state of affairsIn the opinion of the directors, there were no significant changes in the state of affairs of the Funds that occurred during the financial year under review.

Matters subsequent to the end of the financial yearExcept as disclosed in the financial report, no other matter or circumstance has arisen since 30 June 2016 that has significantly affected, or may significantly affect:

(i) the operations of the Funds in future financial years; or(ii) the results of those operations in future financial years; or(iii) the state of affairs of the Funds in future financial years.F

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Directors’ Report

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Likely developments and expected results of operationsThe Funds will continue to be managed in accordance with the investment objectives and guidelines as set out in the governing documents of the Funds and in accordance with the provisions of the Constitutions of the Funds.

The results of the Funds’ operations will be affected by a number of factors, including the performance of investment markets in which each Fund invests. Investment performance is not guaranteed and future returns may differ from past returns. As investment conditions change over time, past returns should not be used to predict future returns.

Further information on likely developments in the operations of the Funds and the expected results of those operations have not been included in this report because the Responsible Entity believes it would be likely to result in unreasonable prejudice to the Funds.

Indemnity and insurance of officersNo insurance premiums are paid for out of the assets of the Funds in regards to insurance cover provided to either the officers of Vanguard Investments Australia Ltd or the auditors of the Funds. So long as the officers of Vanguard Investments Australia Ltd act in accordance with the Constitutions of the Funds and the Law, the officers remain indemnified out of the assets of the Funds against losses incurred while acting on behalf of the Funds.

Indemnity of auditorsThe auditors of the Funds are in no way indemnified out of the assets of the Funds.

Fees paid to and interests held in the Funds by the Responsible Entity or its associatesFees paid to the Responsible Entity and its associates out of Funds’ property during the year are disclosed in note 15(b) to the financial statements.

No fees were paid out of Funds’ property to the directors of the Responsible Entity during the year.

The number of interests in the Funds held by the Responsible Entity or its associates as at the end of the financial year are disclosed in note 15(c) to the financial statements.

Interests in the FundsThe movement in units on issue in the Funds during the year is set out in note 10 to the financial statements.

The value of each Fund’s assets and liabilities are disclosed on the balance sheet and derived using the basis set out in note 2 to the financial statements.

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Directors’ Report

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Environmental regulationThe operations of the Funds are not subject to any particular or significant environmental regulations under a Commonwealth, State or Territory law.

Rounding of amounts to the nearest thousand dollarsThe Funds are registered schemes of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the ‘’rounding off’’ of amounts in the directors’ report. Amounts in the directors’ report have been rounded to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated.

Auditor’s independence declarationA copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 12.

This report is made in accordance with a resolution of the directors.

C Kelton Managing Director Melbourne 30 August 2016

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Auditors' Indepencence Declaration

12

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Statement of comprehensive income

13

Statement of comprehensive incomeFor the year ended 30 June 2016


Fund (Hedged)


Fund (Hedged)


Index Fund

Vanguard International Shares Index Fund (Hedged)


Index Fund

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Notes $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Investment income

Interest income from financial instruments not held at fair value through profit or loss – – – – 301 572 2,305 3,559 40 65

Dividend income 18 – – – – 285,006 304,081 – – 34,909 39,842

Distribution income 18 – – – – 11,507 11,958 145,744 212,587 581 607

Net gains/(losses) on financial instruments held at fair value through profit or loss 5,6 298,980 163,692 112,473 52,907 (112,566) 2,882,034 (69,793) 128,836 (162,684) 178,672

Other operating income 33 68 87 39 3,896 2,294 6 – 91 13

Total net investment income/(loss) 299,013 163,760 112,560 52,946 188,144 3,200,939 78,262 344,982 (127,063) 219,199

Expenses

Responsible Entity's fees 8 7,808 7,276 5,020 4,459 23,736 25,607 3,136 2,431 7,046 8,316

Transaction costs – – – – 133 136 – – 48 85

Other operating expenses 17 7 1 1 5,908 2,376 12 2 199 330

Total operating expenses 7,825 7,283 5,021 4,460 29,777 28,119 3,148 2,433 7,293 8,731

Operating profit/(loss) 291,188 156,477 107,539 48,486 158,367 3,172,820 75,114 342,549 (134,356) 210,468

Financing costs attributable to unitholders

Distributions to unitholders 9 (45,107) (52,106) (50,428) – (417,221) (693,355) (284,374) – (58,096) (31,242)

(Increase)/decrease in net assets attributable to unitholders 10(b) (246,081) (104,371) (57,111) (48,486) 258,854 (2,479,465) 209,260 (342,549) 192,452 (179,226)

Profit/(loss) for the period – – – – – – – – – –

Other comprehensive income – – – – – – – – – –

Total comprehensive income for the period – – – – – – – – – –

The above statement of comprehensive income should be read in conjunction with the accompanying notes.

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Statement of comprehensive income

14

Statement of comprehensive income (continued)

For the year ended 30 June 2016


Index Fund


Index Fund (Hedged)


Index Fund


Index Fund (Hedged)



Fund (Hedged)

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Notes $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Investment income

Interest income from financial instruments not held at fair value through profit or loss 69 72 – 58 8 15 – 17 6 9 – 1

Dividend income 18 2,974 3,558 – – 7,380 7,984 – – 4,627 3,447 – –

Distribution income 18 67,926 54,157 90,451 61,808 1,780 1,928 2,827 14,185 386 294 1,341 1,369

Net gains/(losses) on financial instruments held at fair value through profit or loss 5,6 295,664 277,527 131,426 12,543 (12,705) 110,702 (11,148) 2,600 13,867 15,025 1,782 (1,137)

Other operating income 1,534 1,080 3 – 401 54 – – 23 27 – –

Total net investment income/(loss) 368,167 336,394 221,880 74,409 (3,136) 120,683 (8,321) 16,802 18,909 18,802 3,123 233

Expenses

Responsible Entity's fees 7 8,206 6,837 431 363 1,810 2,040 60 72 815 661 21 14

Transaction costs 55 80 – – 10 13 5 – 3 10 – –

Other operating expenses 1,292 – 7 1 201 202 – – 22 22 – –

Total operating expenses 9,553 6,917 438 364 2,021 2,255 65 72 840 693 21 14

Operating profit/(loss) 358,614 329,477 221,442 74,045 (5,157) 118,428 (8,386) 16,730 18,069 18,109 3,102 219

Financing costs attributable to unitholders

Distributions to unitholders 9 (139,212) (89,517) (83,499) – (20,563) (42,935) (18,143) – (6,521) (10,679) (885) (482)

(Increase)/decrease in net assets attributable to unitholders 10(b) (219,402) (239,960) (137,943) (74,045) 25,720 (75,493) 26,529 (16,730) (11,548) (7,430) (2,217) 263

Profit/(loss) for the period – – – – – – – – – – – –

Other comprehensive income – – – – – – – – – – – –

Total comprehensive income for the period – – – – – – – – – – – –

The above statement of comprehensive income should be read in conjunction with the accompanying notes.

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Balance sheet

15

Balance sheetAs at 30 June 2016


Fund (Hedged)


Fund (Hedged)


Index Fund



Index Fund

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Notes $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Assets

Cash & cash equivalents 11 8,630 20,494 13,765 16,441 112,149 50,050 13,369 94,910 4,945 3,217

Collateral margin deposit – 24,370 – – – – – 49,700 – –

Futures margin deposit 1,301 417 873 469 16,311 3,968 10,335 8,469 1,825 382

Receivables 349 460 250 294 29,378 32,628 85,094 163,761 7,149 10,220

Due from brokers - receivable for securities sold 11,700 50,245 5,006 2,457 51 121,539 9,437 – 10,145 494

Financial assets held at fair value through profit or loss 12 2,768,811 2,828,595 1,244,817 1,485,227 11,843,114 15,177,294 4,680,549 4,807,269 1,008,930 1,489,800

Other assets 15,248 1,669 122 164 55,116 3,583 1,158 2,251 249 12

Total assets 2,806,039 2,926,250 1,264,833 1,505,052 12,056,119 15,389,062 4,799,942 5,126,360 1,033,243 1,504,125

Liabilities

Collateral Margins 35,108 – – – – – 91,980 – – –

Payables 15(b) 548 598 339 409 1,766 2,307 358 230 477 697

Distribution payable 9 45,107 52,106 50,428 – 237,920 520,576 284,374 – 38,998 10,240

Due to brokers - payables for securities purchased 52,060 12,399 13,785 4,298 – 117 60,094 – – 522

Financial liabilities held at fair value through profit or loss 13 43,020 57,743 7,723 10,347 601 668 80,966 219,645 2 66

Other liabilities 947 531 11,737 289 937 63,086 575 695 5 96

Total liabilities (excluding net assets attributable to unitholders) 176,790 123,377 84,012 15,343 241,224 586,754 518,347 220,570 39,482 11,621

Net assets attributable to unitholders 10(b) 2,629,249 2,802,873 1,180,821 1,489,709 11,814,895 14,802,308 4,281,595 4,905,790 993,761 1,492,504

The above balance sheet should be read in conjunction with the accompanying notes.

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Balance sheet

16

Balance sheetAs at 30 June 2016


Index Fund


Index Fund (Hedged)


Index Fund


Index Fund (Hedged)



Fund (Hedged)

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Notes $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Assets

Cash & cash equivalents 11 5,987 5,020 2,434 4,881 (445) 3,277 701 3,948 463 1,333 38 79

Collateral margin deposit – – – – – – – – – – – –

Futures margin deposit – – – – 860 243 200 120 – – – –

Receivables 7,367 6,770 62,041 40,691 684 1,002 1,950 12,814 600 522 750 571

Due from brokers - receivable for securities sold 32 12 – – 15,525 452 14,274 – – 774 – –

Financial assets held at fair value through profit or loss 12 2,056,004 1,817,557 1,315,646 1,221,993 311,070 578,427 37,087 182,327 178,319 146,252 36,579 26,245

Other assets 13,563 298 253 102 1 4 27 32 503 32 1 31

Total assets 2,082,953 1,829,657 1,380,374 1,267,667 327,695 583,405 54,239 199,241 179,885 148,913 37,368 26,926

Liabilities

Collateral Margins – – – – – – – – – – – –

Payables 15(b) 660 612 40 34 107 188 3 5 70 61 1 1

Distribution payable 9 96,654 59,010 83,499 – 16,633 38,432 18,143 – 3,707 3,173 885 –

Due to brokers - payables for securities purchased – – 12,588 – – – – – 291 – 501 –

Financial liabilities held at fair value through profit or loss 13 – 18 7,268 6,010 5 46 654 4,111 – 4 220 103

Other liabilities 188 2,479 167 130 14,274 792 – 80 3 38 – 9

Total liabilities (excluding net assets attributable to unitholders) 97,502 62,119 103,562 6,174 31,019 39,458 18,800 4,196 4,071 3,276 1,607 113

Net assets attributable to unitholders 10(b) 1,985,451 1,767,538 1,276,812 1,261,493 296,676 543,947 35,439 195,045 175,814 145,637 35,761 26,813

The above balance sheet should be read in conjunction with the accompanying notes.

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Statement of changes in equity

17

Statement of changes in equityFor the year ended 30 June 2016


Fund (Hedged)


Fund (Hedged)Vanguard International

Shares Index Fund



Index Fund

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Notes $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Total equity at the beginning of the financial year

Profit/(loss) for the year – – – – – – – – – –

Other comprehensive income – – – – – – – – – –

Total comprehensive income – – – – – – – – – –

Transactions with owners in their capacity as owners – – – – – – – – – –

Total equity at the end of the financial year – – – – – – – – – –


Index Fund


Index Fund (Hedged)


Index Fund


Index Fund (Hedged)



Fund (Hedged)

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Notes $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Total equity at the beginning of the financial year

Profit/(loss) for the year – – – – – – – – – – – –

Other comprehensive income – – – – – – – – – – – –

Total comprehensive income – – – – – – – – – – – –

Transactions with owners in their capacity as owners – – – – – – – – – – – –

Total equity at the end of the financial year – – – – – – – – – – – –

Under Australian Accounting Standards, net assets attributable to unitholders are classified as a liability rather than equity. As a result, there was no equity at the start or end of the year.

The above statements of changes in equity should be read in conjunction with the accompanying notes.

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Statement of cash flows

18

Statement of cash flowsFor the year ended 30 June 2016


Fund (Hedged)


Fund (Hedged)


Index Fund



Index Fund

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Notes $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Cash flows from operating activities

Proceeds from sale of financial instruments held at fair value through profit or loss 1,740,112 1,060,990 1,186,846 426,345 5,498,187 1,637,884 3,662,579 2,419,914 499,185 201,027

Purchases of financial instruments held at fair value through profit or loss (1,261,769) (1,082,927) (830,408) (703,777) (2,164,016) (1,754,898) (3,496,406) (2,956,480) (188,418) (201,281)

Transaction costs on purchases of financial instruments held at fair value through profit or loss – – – – (133) (136) – – (48) (85)

Dividends received – – – – 283,330 282,831 – – 33,769 33,999

Interest received – – – – 304 528 2,501 3,450 41 79

Distributions received – – – – 11,535 11,755 163,602 – 460 444

Other income received 144 68 131 39 4,074 2,111 6 – 155 13

Responsible Entity's fees paid (7,875) (7,235) (5,091) (4,366) (24,277) (25,136) (3,097) (2,361) (7,266) (8,231)

Payment of other expenses – (211) – (80) (5,909) (2,376) (13) (58) (199) (375)

Net cash inflow/(outflow) from operating activities 16(a) 470,612 (29,315) 351,478 (281,839) 3,603,095 152,563 329,172 (535,535) 337,679 25,590

Cash flows from financing activities

Proceeds from applications by unitholders 679,318 560,267 328,613 392,456 3,319,686 3,185,428 1,280,048 1,566,935 191,985 182,201

Payments for redemptions by unitholders (1,151,314) (521,266) (683,122) (106,952) (6,762,507) (3,371,470) (1,694,012) (923,604) (515,103) (223,687)

Distributions paid from financing activities (12,976) – – (1,840) (99,297) (41,477) – (20,715) (12,838) (14,230)

Net cash inflow/(outflow) from financing activities (484,972) 39,001 (354,509) 283,664 (3,542,118) (227,519) (413,964) 622,616 (335,956) (55,716)

Net increase/(decrease) in cash and cash equivalents (14,360) 9,686 (3,031) 1,825 60,977 (74,956) (84,792) 87,081 1,723 (30,126)

Cash and cash equivalents at the beginning of the year 20,494 8,677 16,441 15,056 50,050 101,696 94,910 4,170 3,217 30,652

Effects of foreign currency exchange rate changes on cash and cash equivalents 2,496 2,131 355 (440) 1,122 23,310 3,251 3,659 5 2,691

Cash and cash equivalents at the end of the year 11 8,630 20,494 13,765 16,441 112,149 50,050 13,369 94,910 4,945 3,217

Non-cash financing activities 16(b)

The above statement of cash flows should be read in conjunction with the accompanying notes.

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Statement of cash flows

19

Statement of cash flowsFor the year ended 30 June 2016


Index Fund


Index Fund (Hedged)


Index Fund


Index Fund (Hedged)



Fund (Hedged)

2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Notes $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Cash flows from operating activities

Proceeds from sale of financial instruments held at fair value through profit or loss 611,971 381,872 939,381 468,193 335,223 104,842 197,006 46,665 24,299 77,574 20,032 8,112

Purchases of financial instruments held at fair value through profit or loss (553,951) (670,495) (818,621) (763,463) (95,854) (145,851) (79,890) (84,839) (41,373) (105,038) (27,375) (24,924)

Transaction costs on purchases of financial instruments held at fair value through profit or loss (55) (80) – – (10) (13) – – (3) (10) – –

Dividends received 3,103 3,261 – – 7,122 7,162 – – 4,498 3,457 – –

Interest received 74 71 – 56 9 17 – 17 5 9 – 1

Distributions received 66,905 52,027 – – 1,889 1,815 12,812 – 373 286 570 –

Other income received 1,534 1,080 3 – 423 54 1 – 23 27 – –

Responsible Entity's fees paid (8,158) (6,638) (425) (354) (1,892) (1,987) (36) (70) (806) (642) (21) (13)

Payment of other expenses (1,302) (82) (15) (20) (201) (220) (32) (1) (23) (29) – –

Net cash inflow/(outflow) from operating activities 16(a) 120,121 (238,984) 120,323 (295,588) 246,709 (34,181) 129,861 (38,228) (13,007) (24,366) (6,794) (16,824)

Cash flows from financing activities

Proceeds from applications by unitholders 581,537 581,060 287,741 424,919 73,847 85,867 19,682 51,091 38,716 45,453 10,097 18,611

Payments for redemptions by unitholders (685,770) (359,758) (410,479) (118,935) (323,062) (58,987) (152,832) (8,054) (22,986) (14,110) (3,344) (1,475)

Distributions paid from financing activities (14,381) (6,096) – (3,056) (1,215) (836) – – (3,594) (5,788) – (257)

Net cash inflow/(outflow) from financing activities (118,614) 215,206 (122,738) 302,928 (250,430) 26,044 (133,150) 43,037 12,136 25,555 6,753 16,879

Net increase/(decrease) in cash and cash equivalents 1,507 (23,778) (2,415) 7,340 (3,721) (8,137) (3,289) 4,809 (871) 1,189 (41) 55

Cash and cash equivalents at the beginning of the year 5,020 27,140 4,881 (2,459) 3,277 10,714 3,948 (1,001) 1,333 229 79 24

Effects of foreign currency exchange rate changes on cash and cash equivalents (540) 1,658 (32) – (1) 700 42 140 1 (85) – –

Cash and cash equivalents at the end of the year 11 5,987 5,020 2,434 4,881 (445) 3,277 701 3,948 463 1,333 38 79

Non-cash financing activities 16(b)

The above statement of cash flows should be read in conjunction with the accompanying notes.

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Notes to the Financial Statements

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Notes to the Financial Statements For the year ended 30 June 2016

1. General informationThe Responsible Entity of the Vanguard Wholesale Funds is Vanguard Investments Australia Ltd (the ‘Responsible Entity’). The Responsible Entity’s registered office is Level 34, Freshwater Place, 2 Southbank Boulevard, Southbank Vic 3006.

The Funds were constituted between 16 June 1998 and 26 October 2007 and will terminate between 15 June 2078 and 25 October 2087 unless terminated earlier in accordance with the provisions of the Constitutions of the Funds.

The Funds invest in accordance with the investment policy of the Funds as set out in the current Product Disclosure Statement (PDS) and in accordance with the Constitutions of the Funds. The Funds seek to match the total returns of the Funds’ respective indexes, before taking into account Fund fees and expenses.

The financial statements were authorised for issue by the directors on 30 August 2016. The directors of the Responsible Entity have the power to amend and reissue the financial statements.

The financial statements are presented in the Australian currency.

2. Summary of significant accounting policiesThe principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all periods presented, unless otherwise stated in the following text.

(a) Basis of preparationThese general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Accounting Standards Board and the Corporations Act 2001 in Australia. The Funds are for-profit unit trusts for the purpose of preparing the financial statements.

The financial statements are prepared on the basis of fair value measurement of assets and liabilities except where otherwise stated.

The balance sheet is presented on a liquidity basis. Assets and liabilities are presented in decreasing order of liquidity and do not distinguish between current and non-current. All balances are expected to be recovered or settled within twelve months, except for financial assets at fair value through profit or loss and net assets attributable to unitholders.

The Funds manage financial assets at fair value through profit or loss based on the economic circumstances at any given point in time, as well as to meet any liquidity requirements. As such it is expected that a portion of the portfolio will be realised within 12 months, however, an estimate of that amount cannot be determined as at balance date.

In the case of net assets attributable to unitholders, the units are redeemed on demand at the unitholder’s option. However holders of these instruments typically retain them for the medium to long term. As such, the amount expected to be settled within 12 months cannot be reliably determined.

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Notes to the Financial Statements (continued)


2. Summary of significant accounting policies (continued)

(a) Basis of preparation (continued)

(i) Compliance with International Financial Reporting StandardsThe financial report of the Funds also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

(ii) New and amended standards adopted by the Fund There are no standards, interpretations or amendments to existing standards that are effective for the first time for the financial year beginning 1 July 2015 that have a material impact on the Funds.

(b) Financial instruments

(i) ClassificationThe Funds’ investments are categorised as at fair value through profit or loss. They comprise:

• Financial instruments held for trading Derivative financial instruments such as futures, forward contracts, options and interest rate swaps are included under this classification. All derivatives in a net receivable or payable position are shown gross and reported as either derivative financial assets or derivative financial liabilities. The Funds do not designate any derivatives as hedges in a hedging relationship.

• Financial instruments designated at fair value through profit or loss upon initial recognition

These include financial assets that are not held for trading purposes and which may be sold. These are investments in traded debt, unlisted trusts, unlisted equity instruments, commercial paper and exchange traded equity instruments.

Financial assets and financial liabilities designated at fair value through profit and loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Funds’ documented investment strategy. The Funds’ policy is for the Responsible Entity to evaluate the information about these financial instruments on a fair value basis together with other related financial information.

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(b) Financial instruments (continued)

(ii) Recognition/derecognitionThe Funds recognise financial assets and financial liabilities on the date they become party to the contractual agreement (trade date) and recognise changes in fair value of the financial assets or financial liabilities from this date.

Investments are derecognised when the right to receive cash flows from the investments have expired or the Funds have transferred substantially all risks and rewards of ownership.

(iii) Measurement Financial assets and liabilities held at fair value through profit or loss.

At initial recognition, the Funds measure a financial asset at its fair value. Transaction costs of financial assets carried at fair value through profit and loss are expensed in the statement of comprehensive income.

Subsequent to initial recognition, all financial assets and financial liabilities at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the ‘financial assets or financial liabilities at fair value through profit or loss’ category are presented in the statement of comprehensive income within net gains/(losses) on financial instruments held at fair value through profit or loss in the period in which they arise. This also includes dividend expense on short sales of securities, which have been classified at fair value through profit or loss.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

The fair value of financial assets and liabilities traded in active markets is based on their quoted market prices at the end of the reporting period without any deduction for estimated future selling costs. The quoted market price used for financial assets held by the Funds is the current bid price and the quoted market price for financial liabilities is the current asking price.

The fair value of financial assets and liabilities that are not traded in an active market are determined using valuation techniques. The Funds use a variety of methods and make assumptions that are based on market conditions existing at each reporting date. Valuation techniques used include the use of comparable recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity-specific inputs.

For further details on how the fair value of the financial instruments is determined are disclosed in note 4(a).

(iv) Offsetting financial instrumentsFinancial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.

(c) Net assets attributable to unitholdersUnits are redeemable at the unitholders’ option and are classified as financial liabilities as the Funds are required to distribute their taxable income. The units can be put back to the Funds at any time for cash based on the redemption price. The fair value of redeemable units is measured at the redemption amount that is payable (based on the redemption unit price) at the end of the reporting period if unitholders exercised their right to redeem units in the Funds.

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(d) Cash and cash equivalentsFor the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term highly liquid investments with original maturities of three months or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within assets on the balance sheet. Futures margin deposit accounts are restricted cash balances and accordingly are not included in cash and cash equivalents.

Payments and receipts relating to the purchase and sale of investment securities are classified as cash flows from operating activities, as movements in the fair value of these securities represent the Funds’ main income generating activity.

(e) Investment incomeInterest income and expenses are recognised in the statement of comprehensive income for all financial instruments that are not held at fair value through profit and loss using the effective interest method. Interest on assets held at fair value through profit and loss is included in the net gains/(losses) on financial instruments. Other changes in fair value for such instruments are recorded in accordance with the policies described in note 2(b).

Dividend income is recognised on the ex-dividend date net of any related foreign withholding tax, but inclusive of reclaims that are yet to be received.

Trust distributions are recognised on an entitlements basis and stated net of foreign witholding tax.

(f) ExpensesAll expenses, including Responsible Entity’s fees and custodian fees, are recognised in the statement of comprehensive income on an accruals basis.

(g) Income taxUnder current legislation, the Funds are not subject to income tax provided the taxable income of the Funds are fully distributed either by way of cash or reinvestment (i.e. unitholders are presently entitled to the income of the Funds).

Financial instruments held at fair value may include unrealised capital gains. Should such a gain be realised, the portion of the gain that is subject to capital gains tax will be distributed so that the Funds are not subject to capital gains tax.

Realised capital losses are not distributed to unitholders but are retained in the Funds to be offset against any realised capital gains. If realised capital gains exceed realised capital losses, the excess is distributed to unitholders.

The benefits of imputation credits and foreign tax paid are passed on to unitholders.

The Funds currently incur withholding tax imposed by certain countries on investment income. Such income is recorded net of withholding tax in the statement of comprehensive income.

(h) DistributionsIn accordance with the Constitutions of the Funds, the Funds fully distribute their distributable income to unitholders by cash or reinvestment. Distributions payable are the amounts that the unitholders are presently entitled to as at 30 June 2016, but have not yet received. The distributions are payable at the end of September, December, March and June each year for all Funds. Distributions are recognised in the income statement as finance costs attributable to unitholders.

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(i) Increase/decrease in net assets attributable to unitholdersIncome not distributed is included in net assets attributable to unitholders. Movements in net assets attributable to unitholders are recognised in the statement of comprehensive income as finance costs.

(j) Functional and presentation currency(i) Functional and presentation currencyItems included in the Funds’ financial statements are measured using the currency of the primary economic environment in which it operates (the “functional currency”). This is the Australian dollar, which reflects the currency of the economy in which the Funds compete for funds and are regulated. The Australian dollar is also the Funds’ presentation currency.

(ii) Transactions and balancesForeign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translations at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date when fair value was determined. Translation differences on assets and liabilities carried at fair value are reported in the statement of comprehensive income on a net basis within net gains/ (losses) on financial instruments held at fair value through profit or loss.

(k) Due from/to brokersAmounts due from/to brokers represent payables for securities purchased and receivables for securities sold that have been contracted for but not yet delivered by the end of the year. A provision for impairment of amounts due from brokers is established when there is objective evidence that the Fund will not be able to collect all amounts due from the relevant broker. Significant financial difficulties of the broker, probability that the broker will enter bankruptcy or financial reorganisation, and default in payments are considered indicators that the amount due from brokers is impaired.

(l) Margin deposit balancesDeposits held with brokers for margin, represent restricted margin deposits for derivative financial instruments.

The reported balance for collateral margins represents the level of restricted cash required to be settled as at close of business at balance date.

(m) ReceivablesReceivables may include amounts for dividends, interest and trust distributions. Dividends and trust distributions are accrued when the right to receive payment is established. Interest is accrued at the reporting date from the time of last payment using the effective interest rate method. Amounts are generally received within 30 days of being recorded as receivables.

(n) PayablesPayables include liabilities and accrued expenses owing by the Funds which are unpaid as at the end of the reporting period.

The distribution amount payable to unitholders as at the reporting date is recognised separately on the balance sheet as unitholders are presently entitled to the distributable income under the Constitutions of the Funds.

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(o) Applications and redemptionsApplications received for units in the Funds are recorded net of any entry fees payable prior to the issue of units in the Funds. Redemptions from the Funds are recorded gross of any exit fees payable after the cancellation of units redeemed. There are currently no entry or exit fees charged for the Funds.

(p) Goods and Services Tax (GST)The GST incurred on the costs of various services provided to the Responsible Entity by third parties have been passed onto the Funds. The Funds qualify for Reduced Input Tax Credit recovery rate of between 55% and 100%, hence Responsible Entity fees, custodial fees and other expenses have been recognised in the statement of comprehensive income net of the amount of GST recoverable from the Australian Taxation Office (ATO). Accounts payable are inclusive of GST. The net amount of GST recoverable from the ATO is included in receivables in the balance sheet. Cash flows relating to GST are included in the statement of cash flows on a gross basis.

(q) Use of estimatesThe Funds make estimates and assumptions that affect the reported amounts of assets and liabilities within the next financial year. Estimates are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

For the majority of the Funds’ financial instruments, quoted market prices are readily available. However, certain financial instruments, for example, over-the-counter derivatives or unquoted securities, are fair valued using valuation techniques. Where valuation techniques (for example, pricing models) are used to determine fair values, they are validated and periodically reviewed by experienced personnel of the Responsible Entity, independent of the area that created them.

Models use observable data, to the extent practicable. However, areas such as credit risk (both own and counterparty), volatilities and correlations require management to make estimates. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

For certain other financial instruments, including amounts due from/to brokers and payables, the carrying amounts approximate fair value due to the immediate or short-term nature of these financial instruments.

(r) New accounting standards and interpretationsCertain new accounting standards and interpretations have been published that are not mandatory for 30 June 2016 reporting period and have not been early adopted by the Funds. The directors’ assessment of the impact of these new standards (to the extent relevant to the Funds) and interpretation is set below:

(i) AASB 9 Financial Instruments (and applicable amendments), (effective from 1 January 2018)AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial liabilities. It has now also introduced revised rules around hedge accounting and impairment. The standard is not applicable until 1 January 2018 but is available for early adoption.

The directors do not expect this to have a significant impact on the recognition and measurement of the Funds’ financial instruments as they are carried at fair value through profit or loss.

The derecognition rules have not been changed from the previous requirements, and the Funds do not apply hedge accounting. AASB 9 introduces a new impairment model. However, as the funds’ investments are all held at fair value through profit or loss, the change in impairment rules will not impact the Funds.

The Funds have not yet decided when to adopt AASB 9.

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(r) New accounting standards and interpretations (continued)

(ii) AASB 15 Revenue from Contracts with Customers, (effective from 1 January 2018)The AASB has issued a new standard for the recognition of revenue. This will replace AASB 118 which covers contracts for goods and services and AASB 111 which covers construction contracts.

The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer – so the notion of control replaces the existing notion of risks and rewards.

The Funds’ main source of income are interest, dividends and gains on financial instruments held at fair value. All of these are outside the scope of the new revenue standard. As consequence, the directors do not expect the adoption of the new revenue recognition rules to have a significant impact on the Funds’ accounting policies or the amounts recognised in the financial statements.

(s) Rounding of amountsThe Funds are registered schemes of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the ‘’rounding off’’ of amounts in the financial report. Amounts in the financial report have been rounded off in accordance with that Class Order, unless otherwise indicated.

(t) Segment reportingA business segment is identified for a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is identified when products or services are provided within a particular economic environment subject to risks and returns that are different from those segments operating in other economic environments.

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3. Financial risk managementThe Funds’ activities expose them to a variety of financial risks: market risk (including price risk, foreign exchange risk and interest rate risk), credit risk and liquidity risk.

The Funds’ overall risk management programme focuses on ensuring compliance with the Funds’ Product Disclosure Statement and seeks to deliver investment returns which closely match the total returns of selected indexes. The Funds use derivative financial instruments to alter certain risk exposures. Financial risk management is carried out by the investment management department under the policies approved by the Board of Directors of the Responsible Entity.

The Funds use different methods to measure different types of risk to which they are exposed. These methods are explained below.

(a) Market risk(i) Price riskThe Funds are exposed to price risk whereby the future prices of the Funds’ securities are uncertain.

In any asset sector the returns of individual securities are a combination of the market return and returns specific to each security. By diversifying their holdings across the market, index funds are generally well protected from the specific risk of individual securities. Vanguard employs an indexing investment strategy in all asset classes in which the Funds invest.

Note 3 (b) summarises the impact of an increase/decrease of each Fund’s corresponding Index on net assets attributable to unitholders.

(ii) Foreign exchange riskThe Funds are exposed to foreign exchange risk as a result of investments in financial instruments denominated in foreign currencies. Fluctuations in the value of the Australian dollar and foreign currencies can affect the returns from overseas investments. This is because losses or gains must be converted back to Australian dollars.

The Vanguard International Shares Index Fund, Vanguard Emerging Markets Shares Index Fund, Vanguard International Property Securities Index Fund, Vanguard International Small Companies Index Fund and the Vanguard Global Infrastructure Index Fund do not hedge any of their exposure to foreign currencies. Accordingly, these Funds are directly affected by currency fluctuations.

The foreign exchange risk disclosures have been prepared on the basis of each Fund’s direct investment and not on a look-through basis for investments held indirectly through unit trusts. Consequently the disclosure of currency risk in the note may not represent the true foreign currency risk profile of a Fund where the Fund has significant investments in feeder trusts which also have exposure to the foreign currency markets.

Note 3 (b) summarises the sensitivities of the Funds’ monetary assets and liabilities to foreign exchange risk.

The tables on the following pages summarise the Funds’ exposure to foreign exchange risk. F

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3. Financial risk management (continued)

(a) Market risk (continued)(ii) Foreign exchange risk (continued)


United States Dollar

British Pound Euro

Japanese Yen Other

Australian Dollar TOTAL

As at 30 June 2016 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Assets

Cash and cash equivalents 526 430 66 2,403 7,127 (1,922) 8,630

Collateral margin deposit – – – – – – –

Futures margin deposit 96 108 572 358 56 111 1,301

Financial assets held at fair value through profit or loss 715,284 184,184 676,282 812,314 201,027 179,720 2,768,811

Other assets and receivables 11,700 – – – 145 15,452 27,297

Total assets 727,606 184,722 676,920 815,075 208,355 193,361 2,806,039

Liabilities

Collateral Margins – – – – – 35,108 35,108

Payables – – – – – 548 548

Distribution payable – – – – – 45,107 45,107

Due to brokers – payables for securities purchased 24,661 3,352 12,696 11,351 – – 52,060

Financial liabilities held at fair value through profit or loss 230 2 920 29,182 3,496 9,190 43,020

Other liabilities – – – – – 947 947

Total liabilities 24,891 3,354 13,616 40,533 3,496 90,900 176,790

Net assets attributable to unitholders – liability 702,715 181,368 663,304 774,542 204,859 102,461 2,629,249

As at 30 June 2015

Assets

Cash and cash equivalents 923 113 754 973 5,740 11,991 20,494

Collateral margin deposit – – – – – 24,370 24,370

Futures margin deposit 31 36 106 65 28 151 417


Other assets and receivables 8,027 2,487 14 28,614 4,115 9,117 52,374

Total assets 810,405 235,630 770,933 764,000 252,718 92,564 2,926,250

Liabilities

Collateral Margins – – – – – – –

Payables – – – – – 598 598


Due to brokers – payables for securities purchased 5,789 – – 6,610 – – 12,399

Financial liabilities held at fair value through profit or loss 7,665 5,603 19,219 15,044 1,828 8,384 57,743



Net assets attributable to unitholders – liability 796,951 230,027 751,714 742,346 250,890 30,945 2,802,873

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British Pound Euro

Japanese Yen Other


A$’000 A$’000 A$’000 A$’000 A$’000 A$’000 A$’000

Assets

Cash and cash equivalents 2,441 2,288 3,916 288 1,401 3,431 13,765



Other assets and receivables 818 – 834 226 2,081 1,419 5,378

Total assets 686,420 56,490 306,415 60,017 91,633 63,858 1,264,833

Liabilities

Payables – – – – – 339 339


Due to brokers – payables for securities purchased 10,240 179 954 343 1,703 366 13,785

Financial liabilities held at fair value through profit or loss 916 3 47 4,592 936 1,229 7,723

Other liabilities – – – – – 11,737 11,737

Total liabilities 11,156 182 1,001 4,935 2,639 64,099 84,012

Net assets attributable to unitholders – liability 675,264 56,308 305,414 55,082 88,994 (241) 1,180,821

As at 30 June 2015

Assets

Cash and cash equivalents 4,981 688 3,336 399 1,523 5,514 16,441



Other assets and receivables 559 – 74 1,064 910 308 2,915

Total assets 813,954 84,773 369,845 71,195 118,363 46,922 1,505,052

Liabilities

Payables – – – – – 409 409

Distribution payable – – – – – – –

Due to brokers – payables for securities purchased 2,656 557 433 – 652 – 4,298

Financial liabilities held at fair value through profit or loss 297 2,664 6,052 968 244 122 10,347


Total liabilities 2,953 3,221 6,485 968 896 820 15,343

Net assets attributable to unitholders – liability 811,001 81,552 363,360 70,227 117,467 46,102 1,489,709 For

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British Pound Euro

Japanese Yen Other



Assets

Cash and cash equivalents 69,098 3,921 12,734 9,691 11,041 5,664 112,149


Futures margin deposit 8,435 1,407 3,949 1,809 711 – 16,311

Financial assets held at fair value through profit or loss 7,314,230 873,547 1,303,677 1,036,106 1,315,554 – 11,843,114

Other assets and receivables 7,499 3,797 7,359 1,545 8,658 55,687 84,545

Total assets 7,399,262 882,672 1,327,719 1,049,151 1,335,964 61,351 12,056,119

Liabilities

Payables – – – – – 1,766 1,766


Due to brokers – payables for securities purchased – – – – – – –

Financial liabilities held at fair value through profit or loss 8 – 296 291 – 6 601


Total liabilities 8 – 296 291 – 240,629 241,224

Net assets attributable to unitholders – liability 7,399,254 882,672 1,327,423 1,048,860 1,335,964 (179,278) 11,814,895

As at 30 June 2015

Assets



Futures margin deposit 2,592 334 631 206 205 – 3,968

Financial assets held at fair value through profit or loss 8,989,487 1,224,736 1,818,498 1,381,138 1,763,430 5 15,177,294

Other assets and receivables 80,603 14,628 19,845 14,524 23,818 4,332 157,750

Total assets 9,101,202 1,241,220 1,845,679 1,400,666 1,792,506 7,789 15,389,062

Liabilities

Payables – – – – – 2,307 2,307


Due to brokers – payables for securities purchased – – – 117 – – 117

Financial liabilities held at fair value through profit or loss 438 138 36 15 41 – 668


Total liabilities 438 138 36 132 41 585,969 586,754

Net assets attributable to unitholders – liability 9,100,764 1,241,082 1,845,643 1,400,534 1,792,465 (578,180) 14,802,308

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British Pound Euro

Japanese Yen Other



Assets

Cash and cash equivalents 5,061 1,558 2,675 825 18,748 (15,498) 13,369


Futures margin deposit 5,599 696 2,152 1,375 513 – 10,335

Financial assets held at fair value through profit or loss 40,107 1,308 1,677 1,555 107,144 4,528,758 4,680,549

Other assets and receivables – – 1 – – 95,688 95,689

Total assets 50,767 3,562 6,505 3,755 126,405 4,608,948 4,799,942

Liabilities

Collateral Margins – – – – – 91,980 91,980

Payables – – – – – 358 358


Due to brokers – payables for securities purchased – – – – – 60,094 60,094

Financial liabilities held at fair value through profit or loss 4,304 951 1,622 28,334 19,279 26,476 80,966


Total liabilities 4,304 951 1,622 28,334 19,279 463,857 518,347

Net assets attributable to unitholders – liability 46,463 2,611 4,883 (24,579) 107,126 4,145,091 4,281,595

As at 30 June 2015

Assets


Collateral margin deposit – – – – – 49,700 49,700

Futures margin deposit 5,560 499 1,367 481 562 – 8,469

Financial assets held at fair value through profit or loss 56,356 997 467 4,658 310 4,744,481 4,807,269

Other assets and receivables – – – – – 166,012 166,012

Total assets 70,174 3,552 4,831 7,340 23,827 5,016,596 5,126,320

Liabilities

Collateral Margins – – – – – – –

Payables – – – – – – –



Financial liabilities held at fair value through profit or loss 184,646 9,521 13,644 5,795 5,287 752 219,645



Net assets attributable to unitholders – liability (114,472) (5,969) (8,813) 1,545 18,540 5,014,919 4,905,750

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British Pound Euro

Japanese Yen Other



Assets

Cash and cash equivalents 2,590 95 375 37 546 2,344 5,987


Futures margin deposit – – – – – – –

Financial assets held at fair value through profit or loss 1,385,612 109,881 202,964 169,004 188,543 – 2,056,004

Other assets and receivables 4,090 687 655 997 759 13,774 20,962

Total assets 1,392,292 110,663 203,994 170,038 189,848 16,118 2,082,953

Liabilities

Payables – – – – – 660 660



Financial liabilities held at fair value through profit or loss – – – – – – –


Total liabilities – – – – – 97,502 97,502

Net assets attributable to unitholders – liability 1,392,292 110,663 203,994 170,038 189,848 (81,384) 1,985,451

As at 30 June 2015

Assets

Cash and cash equivalents 2,534 140 616 17 1,402 311 5,020



Financial assets held at fair value through profit or loss 1,187,014 147,081 172,056 128,299 183,107 – 1,817,557

Other assets and receivables 4,043 659 189 864 820 505 7,080

Total assets 1,193,591 147,880 172,861 129,180 185,329 816 1,829,657

Liabilities

Payables – – – – – 612 612



Financial liabilities held at fair value through profit or loss 18 – – – – – 18


Total liabilities 18 – – – – 62,101 62,119

Net assets attributable to unitholders – liability 1,193,573 147,880 172,861 129,180 185,329 (61,285) 1,767,538

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British Pound Euro

Japanese Yen Other



Assets

Cash and cash equivalents – – – – – 2,434 2,434



Financial assets held at fair value through profit or loss 103 10 26 376 16 1,315,115 1,315,646


Total assets 103 10 26 376 16 1,379,843 1,380,374

Liabilities

Payables – – – – – 40 40


Due to brokers – payables for securities purchased – – – – – 12,588 12,588

Financial liabilities held at fair value through profit or loss 170 18 43 5,725 66 1,246 7,268


Total liabilities 170 18 43 5,725 66 97,540 103,562

Net assets attributable to unitholders – liability (67) (8) (17) (5,349) (50) 1,282,303 1,276,812

As at 30 June 2015

Assets

Cash and cash equivalents – – – – – 4,881 4,881



Financial assets held at fair value through profit or loss 278 104 127 39 118 1,221,327 1,221,993


Total assets 278 104 127 39 118 1,267,001 1,267,667

Liabilities

Payables – – – – – 34 34



Financial liabilities held at fair value through profit or loss 249 2,721 1,383 799 538 320 6,010


Total liabilities 249 2,721 1,383 799 538 484 6,174

Net assets attributable to unitholders – liability 29 (2,617) (1,256) (760) (420) 1,266,517 1,261,493

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British Pound Euro

Japanese Yen Other



Assets

Cash and cash equivalents 4,414 80 242 744 88 (6,013) (445)


Futures margin deposit 544 103 113 84 16 – 860

Financial assets held at fair value through profit or loss 184,847 21,062 28,925 39,252 36,918 66 311,070

Other assets and receivables 9,912 897 1,227 2,080 2,057 37 16,210

Total assets 199,717 22,142 30,507 42,160 39,079 (5,910) 327,695

Liabilities

Payables – – – – – 107 107



Financial liabilities held at fair value through profit or loss 2 – – 2 1 – 5


Total liabilities 2 – – 2 1 31,014 31,019

Net assets attributable to unitholders – liability 199,715 22,142 30,507 42,158 39,078 (36,924) 296,676

As at 30 June 2015

Assets

Cash and cash equivalents 1,721 315 178 332 617 114 3,277


Futures margin deposit 165 18 54 6 – – 243

Financial assets held at fair value through profit or loss 347,364 48,687 50,158 66,760 65,458 – 578,427

Other assets and receivables 438 334 408 80 135 63 1,458

Total assets 349,688 49,354 50,798 67,178 66,210 177 583,405

Liabilities

Payables – – – – – 188 188



Financial liabilities held at fair value through profit or loss 21 18 7 – – – 46


Total liabilities 21 18 7 – – 39,412 39,458


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British Pound Euro

Japanese Yen Other



Assets

Cash and cash equivalents 36 9 21 6 4 625 701


Futures margin deposit 129 24 26 21 – – 200

Financial assets held at fair value through profit or loss 13 – 1 6 4 37,063 37,087


Total assets 178 33 48 33 8 53,939 54,239

Liabilities

Payables – – – – – 3 3



Financial liabilities held at fair value through profit or loss 3 – – 239 10 402 654

Other liabilities – – – – – – –

Total liabilities 3 – – 239 10 18,548 18,800

Net assets attributable to unitholders – liability 175 33 48 (206) (2) 35,391 35,439

As at 30 June 2015

Assets

Cash and cash equivalents 1,522 288 223 356 22 1,537 3,948


Futures margin deposit 35 16 39 16 14 – 120

Financial assets held at fair value through profit or loss 682 105 12 334 51 181,143 182,327


Total assets 2,239 409 274 706 87 195,526 199,241

Liabilities

Payables – – – – – – –



Financial liabilities held at fair value through profit or loss 1,950 598 529 587 347 100 4,111


Total liabilities 1,950 598 529 587 347 185 4,196

Net assets attributable to unitholders – liability 289 (189) (255) 119 (260) 195,341 195,045

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British Pound Euro

Japanese Yen Other



Assets

Cash and cash equivalents 103 62 42 34 51 171 463



Financial assets held at fair value through profit or loss 112,870 9,787 10,580 15,985 23,984 5,113 178,319

Other assets and receivables 162 172 77 – 100 592 1,103

Total assets 113,135 10,021 10,699 16,019 24,135 5,876 179,885

Liabilities

Payables – – – – – 70 70


Due to brokers – payables for securities purchased 291 – – – – – 291

Financial liabilities held at fair value through profit or loss – – – – – – –



Net assets attributable to unitholders – liability 112,844 10,021 10,699 16,019 24,135 2,096 175,814

As at 30 June 2015

Assets

Cash and cash equivalents 332 93 63 90 110 645 1,333



Financial assets held at fair value through profit or loss 86,915 9,328 8,574 16,490 20,583 4,362 146,252

Other assets and receivables 580 228 110 95 166 149 1,328

Total assets 87,827 9,649 8,747 16,675 20,859 5,156 148,913

Liabilities

Payables – – – – – 61 61



Financial liabilities held at fair value through profit or loss – 4 – – – – 4


Total liabilities – 4 – – – 3,272 3,276

Net assets attributable to unitholders – liability 87,827 9,645 8,747 16,675 20,859 1,884 145,637

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British Pound Euro

Japanese Yen Other



Assets

Cash and cash equivalents – – – – – 38 38



Financial assets held at fair value through profit or loss 3 – 1 6 – 36,569 36,579

Other assets and receivables – – – – – 751 751

Total assets 3 – 1 6 – 37,358 37,368

Liabilities

Payables – – – – – 1 1

Distribution payable – – – – – 885 885

Due to brokers – payables for securities purchased – – – – – 501 501

Financial liabilities held at fair value through profit or loss 5 – 1 170 3 41 220

Other liabilities – – – – – – –

Total liabilities 5 – 1 170 3 1,428 1,607

Net assets attributable to unitholders – liability (2) – – (164) (3) 35,930 35,761

As at 30 June 2015

Assets

Cash and cash equivalents – – – – – 79 79



Financial assets held at fair value through profit or loss 2 – 1 1 – 26,241 26,245

Other assets and receivables – – – – – 602 602

Total assets 2 – 1 1 – 26,922 26,926

Liabilities

Payables – – – – – 1 1



Financial liabilities held at fair value through profit or loss 6 47 18 25 1 6 103


Total liabilities 6 47 18 25 1 16 113

Net assets attributable to unitholders – liability (4) (47) (17) (24) (1) 26,906 26,813

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Hong Kong Dollar

Korean Won

Taiwan New Dollar Other*



Assets

Cash and cash equivalents 1,794 1,276 54 62 1,412 347 4,945


Futures Margin Deposit 1,825 – – – – – 1,825

Financial assets held at fair value through profit or loss 96,141 207,690 147,475 121,613 436,011 – 1,008,930

Other assets and receivables 922 6,086 1,970 2,903 5,242 420 17,543

Total assets 100,682 215,052 149,499 124,578 442,665 767 1,033,243

Liabilities

Payables – – – – – 477 477







As at 30 June 2015

Assets

Cash and cash equivalents 172 562 110 62 1,711 600 3,217


Futures margin deposit 382 – – – – – 382

Financial assets held at fair value through profit or loss 67,486 370,092 213,292 188,279 650,651 – 1,489,800

Other assets and receivables 610 5,902 528 2,169 1,274 243 10,726

Total assets 68,650 376,556 213,930 190,510 653,636 843 1,504,125

Liabilities

Payables – – – – – 697 697


Due to brokers – payables for securities purchased 522 – – – – – 522




Net assets attributable to unitholders – liability 68,062 376,556 213,930 190,510 653,636 (10,190) 1,492,504

* For 2016 and 2015, major currencies under this category include Brazil, India, South Africa, Mexico, Malaysia, Indonesia and Thailand.

None of these currencies individually exceed 10% of the total exposure.

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(a) Market risk (continued)(iii) Cash flow and fair value interest rate risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates.

The interest rate risk disclosures have been prepared on the basis of the Funds’ direct investments and not on a look–through basis for investments held indirectly through unit trusts. Consequently, the disclosure of interest rate risk in the below note may not represent the true interest rate risk profile of the Funds where the Funds have significant investments in unit trusts which also have exposure to the interest rate markets.

Those Funds whose exposure to interest rate risk are significant are set out in the following tables:



Floating Interest

Rate

Fixed Interest

Rate

Non - Interest Bearing Total

Floating Interest

Rate

Fixed Interest

Rate

Non - Interest Bearing Total

30 June 2016 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Assets

Cash and cash equivalents 8,630 – – 8,630 13,765 – – 13,765

Collateral margin deposit 1,301 – – 1,301 – – – –

Futures margin deposit – – – – 873 – – 873

Financial assets held at fair value through profit or loss 14,986 2,663,838 89,987 2,768,811 21,383 1,182,188 41,246 1,244,817

Other assets and receivables – – 27,297 27,297 – – 5,378 5,378

Total assets 24,917 2,663,838 117,284 2,806,039 36,021 1,182,188 46,624 1,264,833

Liabilities

Financial liabilities held at fair value through profit or loss – 355 42,665 43,020 – 459 7,264 7,723

Other liabilities and payables 35,108 – 98,662 133,770 – – 76,289 76,289

Total liabilities (excluding net assets attributable to unitholders) 35,108 355 141,327 176,790 – 459 83,553 84,012

Net assets attributable to unitholders – liability (10,191) 2,663,483 (24,043) 2,629,249 36,021 1,181,729 (36,929) 1,180,821

30 June 2015

Assets

Cash and cash equivalents 20,494 – – 20,494 16,441 – – 16,441

Collateral margin deposit – – 24,370 24,370 – – – –

Futures margin deposit 417 – – 417 469 – – 469

Financial assets held at fair value through profit or loss 8,160 2,802,376 18,059 2,828,595 22,929 1,453,374 8,924 1,485,227

Other assets and receivables – – 52,374 52,374 – – 2,915 2,915

Total assets 29,071 2,802,376 94,803 2,926,250 39,839 1,453,374 11,839 1,505,052

Liabilities

Financial liabilities held at fair value through profit or loss – 5 57,738 57,743 – 46 10,301 10,347

Other liabilities and payables – – 65,634 65,634 – – 4,996 4,996

Total liabilities (excluding net assets attributable to unitholders) – 5 123,372 123,377 – 46 15,297 15,343

Net assets attributable to unitholders – liability 29,071 2,802,371 (28,569) 2,802,873 39,839 1,453,328 (3,458) 1,489,709

Note 3 (b) summarises the impact of an increase/decrease of interest rates of each Fund’s operating profit and net assets attributable to unitholders through changes in fair value or

changes in future cash flows.

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(b) Summarised sensitivity analysisThe following tables summarise the sensitivity of the Funds’ operating profit and net assets attributable to unitholders to interest rate risk, foreign exchange risk and price risk. The reasonably possible movements in the risk variables have been determined based on management’s best estimate, having regard to a number of factors, including historical levels of changes in interest rates and foreign exchange rates as well as the indices that the individual Funds are designed to track. However, actual movements in the risk variables may be greater or less than anticipated due to a number of factors, including unusually large market shocks resulting from changes in the performance of the economies, markets and securities in which the Funds invest. As a result, historic variations in risk variables are not a definitive indicator of future variations in the risk variables.

Price risk movement represents the range of historical index returns from the average return minus one standard deviation to the average return plus one standard deviation. For a normal distribution approximately two-thirds of the outcomes are expected to fall within plus or minus one standard deviation of the mean. Outcomes are expected to occur outside these ranges, approximately one-third of the time.


Impact on operating profit/(loss) and net assets attributable to unitholders

Price risk Interest rate risk Foreign exchange risk

United States Dollar British Pound Euro Japanese Yen Other

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

0% +1% –25bps +25bps –8% 5% –18% 0% –8% 3% –1% 24% –5% 5%

30 June 2016 – 26,785 (6,684) 6,684 56,214 (35,134) 32,645 – 53,086 (19,907) 7,745 (185,891) 10,243 (10,243)

0% +1% –50bps +50bps –1% 23% 0% 18% –5% 6% –5% 9% –2% 14%

30 June 2015 – 28,105 85,065 (85,065) (16) 369 – 500 (883) 1,060 639 (1,151) 168 (1,175)





$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

0% +2% –25bps +25bps –8% 5% –18% 0% –8% 3% –1% 24% –5% 5%

30 June 2016 – 24,062 (2,864) 2,864 54,047 (33,779) 10,130 – 24,433 (9,162) 551 (13,220) 4,450 (4,450)

0% +2% –50bps +50bps –1% 23% 0% 18% –5% 6% –5% 9% –2% 14%

30 June 2015 – 29,525 43,999 (43,999) 30 (684) – 439 (137) 164 27 (48) 32 (224)




United States Dollar Taiwan New Dollar Hong Kong Dollar Korean Won Other

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

–4% +6% –25bps +25bps –8% 5% –5% 5% –5% 5% –5% 5% –5% 5%

30 June 2016 (40,357) 60,536 (17) 17 363 (227) 148 (148) 368 (368) 101 (101) 333 (333)

–4% +6% –50bps +50bps –1% 23% –2% 14% –2% 14% –2% 14% –2% 14%

30 June 2015 (59,589) 89,384 (18) 18 6 (148) 45 (312) 129 (905) 13 (89) 60 (419)

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(b) Summarised sensitivity analysis (continued)





$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

–3% +4% –25bps +25bps –8% 5% –18% 0% –8% 3% –1% 24% –5% 5%

30 June 2016 (355,276) 473,701 (321) 321 6,802 (4,251) 1,642 – 1,923 (721) 130 (3,131) 1,021 (1,021)

–3% +4% –50bps +50bps –1% 23% 0% 18% –5% 6% –5% 9% –2% 14%

30 June 2015 (455,299) 607,065 (270) 270 1,117 (25,694) – (2,967) 1,359 (1,631) 971 (1,747) 582 (4,071)





$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

–4% +5% –25bps +25bps –8% 5% –18% 0% –8% 3% –1% 24% –5% 5%

30 June 2016 (159,495) 220,365 (176) 176 3,680 (2,300) 401 – 384 (144) (242) 5,806 5,351 (5,351)

–4% +5% –50bps +50bps –1% 23% 0% 18% –5% 6% –5% 9% –2% 14%

30 June 2015 (189,741) 237,177 (516) 516 (1,138) 26,183 – 1,040 (443) 532 79 (142) 373 (2,612)





$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

–4% +6% –25bps +25bps –8% 5% –18% 0% –8% 3% –1% 24% –5% 5%

30 June 2016 (82,240) 123,360 (15) 15 534 (334) 141 – 82 (31) 10 (248) 65 (65)

–5% +6% –50bps +50bps –1% 23% 0% 18% –5% 6% –5% 9% –2% 14%

30 June 2015 (90,878) 109,053 (24) 24 66 (1,508) – (144) 40 (48) 44 (79) 44 (311)





$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

–5% +7% –25bps +25bps –8% 5% –18% 0% –8% 3% –1% 24% –5% 5%

30 June 2016 (63,658) 89,121 (6) 6 (5) 3 (1) – (1) 1 (53) 1,284 (3) 3

–6% +7% –50bps +50bps –1% 23% 0% 18% –5% 6% –5% 9% –2% 14%

30 June 2015 (72,935) 85,091 (29) 29 – (7) – 471 (63) 75 (38) 68 (8) 59

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(b) Summarised sensitivity analysis (continued)





$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

–3% +5% –25bps +25bps –8% 5% –18% 0% –8% 3% –1% 24% –5% 5%

30 June 2016 (9,330) 15,550 (1) 1 1,189 (743) 194 – 127 (47) 29 (697) 108 (108)

–3% +5% –50bps +50bps –1% 23% 0% 18% –5% 6% –5% 9% –2% 14%

30 June 2015 (17,352) 28,920 (17) 17 23 (535) – (118) 32 (38) 21 (38) 15 (105)





$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

–5% +6% –25bps +25bps –8% 5% –18% 0% –8% 3% –1% 24% –5% 5%

30 June 2016 (1,736) 2,083 (2) 2 13 (8) 6 – 4 (1) (2) 49 – –

–5% +6% –50bps +50bps –1% 23% 0% 18% –5% 6% –5% 9% –2% 14%

30 June 2015 (9,051) 10,861 (20) 20 3 (66) – 33 (13) 15 6 (11) (5) 37





$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

–3% +4% –25bps +25bps –8% 5% –18% 0% –8% 3% –1% 24% –5% 5%

30 June 2016 (5,350) 7,133 (1) 1 (2) 1 42 – 9 (4) – (8) 8 (8)

–3% +4% –50bps +50bps –1% 23% 0% 18% –5% 6% –5% 9% –2% 14%

30 June 2015 (4,388) 5,850 (7) 7 9 (210) – (57) 9 (10) 9 (17) 6 (39)





$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

–2% 4% –25bps +25bps –8% 5% –18% 0% –8% 3% –1% 24% –5% 5%

30 June 2016 (710) 1,421 – – – – – – – – (2) 39 – –

–2% +3% –50bps +50bps –1% 23% 0% 18% –5% 6% –5% 9% –2% 14%

30 June 2015 (522) 784 – – – 1 – 8 (1) 1 (1) 2 – –

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(c) Credit riskCredit risk is the risk that the Funds’ trading counterparties become insolvent or cannot otherwise meet their obligations to the Funds in full when they fall due.

Funds which invest in fixed interest and debt securities are exposed to credit risk. This is the risk that an issuer of a fixed interest or debt security may not meet its payment obligations to the Funds. The Responsible Entity seeks to minimise this risk by diversifying a Funds’ holdings across issuers. At 30 June 2016 there are no financial assets that are past due or impaired (2015: $nil).

For Funds which invest in forward exchange contracts there is risk associated with unrealised profits.

Any securities lending in the fixed interest Funds is with a selected group of counterparties, all of which have AA or better long-term and A1+ short-term Standard & Poor’s credit ratings (or Moody’s equivalent).

(i) Debt securitiesThere is credit risk associated with debt securities. Vanguard seeks to reduce this risk by selecting only debt securities with a sufficiently high credit rating and by diversifying the Fund’s holding across issuers.

Vanguard will try to minimise the credit risk associated with holding bonds by primarily holding non-domestic government and supranational (issued by government-owned or government-guaranteed entities) bonds or other investment-grade entities. Investment-grade issuers are defined as those rated BBB- or higher by Standard & Poor’s or Baa3 or higher by Moody’s. An anaylsis of debt by rating is set out in the table below.

(ii) Derivative financial instrumentsThe responsible entity has established counterparty limits such that, at any time, exposure to derivative financial instruments equivalent to less than 5% of the value of a Fund are with any individual counterparty, and all contracts are with counterparties included in the Board’s Approved Counterparties list.

The Funds also restrict their exposure to credit losses on derivative instruments they hold by entering into master netting arrangements with counterparts with whom they undertake a significant volume of transactions. Master netting arrangements do not result in an offset of balance sheet assets and liabilities, as transactions are usually settled on a gross basis. However, the credit risk associated with favourable contracts is reduced by master netting arrangements to the extent that if an event of default occurs, all amounts with the counterparty are closed and settled on a net basis. The Funds’ overall exposure to credit risk on derivative instruments subject to master netting arrangements can change substantially within a short period, as it is affected by each transaction subject to the arrangements. As at 30 June 2016, the Funds had no master netting arrangements outstanding (2015: $nil).


30 June 2016 $'000

30 June 2015 $'000

International debt securities Rating

AAA 972,529 1,107,554

AA 495,178 557,168

A 877,143 814,279

BBB 262,106 122,350

Other 71,512 201,025

Total 2,678,468 2,802,376


30 June 2016 $'000

30 June 2015 $'000

International debt securities Rating

AAA 167,479 191,957

AA 228,771 224,027

A 374,013 425,157

BBB 366,687 462,826

Other 66,162 172,289

Total 1,203,112 1,476,256

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(c) Credit risk (continued)(ii) Derivative financial instruments (continued) Vanguard International Fixed Interest Index Fund (Hedged) and Vanguard International Shares Index Fund (Hedged) have entered into collateral arrangements for forward foreign exchange contracts, repurchase agreements and reverse repurchase agreements to assist in enhancing returns in a risk controlled environment for the cash flow management of the Funds.

(iii) Settlement of securities transactions All transactions in listed securities are settled/paid for upon delivery using approved brokers. The risk of default is considered low, as delivery of securities sold is only made once the broker has made payment. Payment is made on purchase once the securities have been received by the Fund. The trade will fail if either party fails to meet its obligations.

(iv) Cash and cash equivalents The exposure to credit risk for cash and cash equivalents is low as all counterparties have a rating of A1+ short-term Standard & Poor’s credit ratings (or Moody’s equivalent).

In accordance with the Responsible Entity’s derivatives policy, the Responsible Entity monitors the Funds’ exposures on a daily basis, which the Board of Directors reviews quarterly. The derivatives policy is subject to annual review.

(v) Other The Funds are not materially exposed to credit risk on other financial assets. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of the financial assets.

The clearing and depository operations for the Funds’ security transactions are mainly concentrated with one counterparty, namely JPMorgan Chase & Co. JPMorgan Chase & Co is a member of a major securities exchange, and at 30 June 2016 had a credit rating of A-1 (2015: A-1). At 30 June 2016, substantially all cash and cash equivalents, balances due from broker and investments are held in custody by JPMorgan Chase & Co.

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(d) Liquidity riskThe Funds’ approach to managing liquidity is to ensure that they will always have sufficient liquidity to meet their liabilities when due. Unitholders are able to withdraw their units at any time and the Funds are therefore exposed to the liquidity risk of meeting unitholders’ withdrawals at any time.

The Funds’ financial instruments include investments in equity investments, fixed interest securities and derivative contracts traded over-the-counter and on an exchange. The Funds’ listed securities are considered to be readily realisable as they are all listed on major stock exchanges. The Funds may use futures to gain market exposure without investing directly in the securities. This allows the Funds to maintain liquidity without being under-invested in their respective investment policies. The derivatives are not used to leverage the Funds’ portfolios.

The following tables summarise the maturity profile of the Funds’ financial liabilities. The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Funds’ can be required to pay.

(i) Maturities of non–derivative financial liabilities The table below analyses the Funds’ non-derivative financial liabilities into relevant maturity groupings based on the remaining period at balance sheet date to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows. Units are redeemed on demand at the unitholder’s option. However, the Board of Directors does not envisage that the contractual maturity disclosed in the table below will be representative of the actual cash outflows, as holders of these instruments typically retain them for the medium to long term.


Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000

Collateral Margins 35,108 – – – 35,108

Payables 548 – – – 548

Distribution payable 45,107 – – – 45,107

Due to brokers – payables for securities purchased 52,060 – – – 52,060

Financial liabilities held at fair value through profit or loss (excluding gross settled derivatives) 40,199 2,821 – – 43,020

Other liabilities 947 – – – 947

Net assets attributable to unitholders 2,629,249 – – – 2,629,249

Total financial liabilities 2,803,218 2,821 – – 2,806,039

As at 30 June 2015

Collateral Margins – – – – –

Payables 598 – – – 598







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(d) Liquidity risk (continued)(i) Maturities of non–derivative financial liabilities (continued)


Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000

Payables 339 – – – 339



Financial liabilities held at fair value through profit or loss (excluding gross settled derivatives) 7,005 718 – – 7,723

Other liabilities 11,737 – – – 11,737


Total financial liabilities 1,264,115 718 – – 1,264,833

As at 30 June 2015

Payables 409 – – – 409

Distribution payable – – – – –







Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000

Payables 1,766 – – – 1,766


Due to brokers – payables for securities purchased – – – – –

Financial liabilities held at fair value through profit or loss (excluding gross settled derivatives) 14 587 – – 601




As at 30 June 2015

Payables 2,307 – – – 2,307


Due to brokers – payables for securities purchased 117 – – – 117

Financial liabilities held at fair value through profit or loss (excluding gross settled derivatives) – 668 – – 668




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Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000

Payables 477 – – – 477


Due to brokers - payables for securities purchased – – – – –

Financial liabilities held at fair value through profit or loss (excluding gross settled derivatives) 2 – – – 2


Net assets attributable to unitholders 993,761 – – – 993,761

Total financial liabilities 1,033,243 – – – 1,033,243

As at 30 June 2015

Payables 697 – – – 697


Due to brokers - payables for securities purchased 522 – – – 522

Financial liabilities held at fair value through profit or loss (excluding gross settled derivatives) – 66 – – 66





Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000

Collateral Margins 91,980 – – – 91,980

Payables 358 – – – 358


Due to brokers - payables for securities purchased 60,094 – – – 60,094





As at 30 June 2015

Collateral Margins – – – – –

Payables 230 – – – 230


Due to brokers - payables for securities purchased – – – – –





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Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000

Payables 660 – – – 660



Financial liabilities held at fair value through profit or loss (excluding gross settled derivatives) – – – – –




As at 30 June 2015

Payables 612 – – – 612








Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000

Payables 40 – – – 40







As at 30 June 2015








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Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000

Payables 107 – – – 107






Total financial liabilities 327,694 1 – – 327,695

As at 30 June 2015

Payables 188 – – – 188








Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000





Other liabilities – – – – –



As at 30 June 2015







Total financial liabilities 198,031 1,210 – – 199,241

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Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000




Financial liabilities held at fair value through profit or loss (excluding gross settled derivatives) – – – – –



Total financial liabilities 179,885 – – – 179,885

As at 30 June 2015







Total financial liabilities 148,913 – – – 148,913


Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000


Distribution payable 885 – – – 885



Other liabilities – – – – –



As at 30 June 2015








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(d) Liquidity risk (continued)(ii) Maturities of gross settled derivative financial instruments The table below analyses the Funds’ gross settled derivative financial instruments based on their contractual maturity. The Funds may at their discretion, settle financial instruments prior to their original contractual settlement date, in accordance with its investment strategy, where permitted by the terms and conditions of the relevant instruments.


Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000

Foreign currency forward contracts

Inflows 5,537,646 2,762,294 – – 8,299,940

(Outflows) (5,494,999) (2,757,619) – – (8,252,618)

Net 42,647 4,675 – – 47,322

As at 30 June 2015

Inflows 6,205,109 3,005,149 – – 9,210,258

(Outflows) (6,245,732) (3,004,206) – – (9,249,938)

Net (40,623) 943 – – (39,680)


Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000


Inflows 3,512,812 1,718,911 – – 5,231,723

(Outflows) (3,478,573) (1,719,167) – – (5,197,740)

Net 34,239 (256) – – 33,983

As at 30 June 2015*

Inflows 7,109,077 2,172,452 – – 9,281,529

(Outflows) (7,110,278) (2,172,628) – – (9,282,906)

Net (1,201) (176) – – (1,377)


Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000


Inflows 21,667 – – – 21,667

(Outflows) (21,669) – – – (21,669)

Net (2) – – – (2)

As at 30 June 2015*

Inflows 2,679 – – – 2,679

(Outflows) (2,679) – – – (2,679)

Net – – – – –

*Comparative figures have been reclassified to conform with current year’s classification.

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(d) Liquidity risk (continued)(ii) Maturities of gross settled derivative financial instruments (continued)


Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000


Inflows 18,118 – – – 18,118

(Outflows) (18,128) – – – (18,128)

Net (10) – – – (10)

As at 30 June 2015*

Inflows 171,141 – – – 171,141

(Outflows) (171,136) – – – (171,136)

Net 5 – – – 5


Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000


Inflows 13,430,555 6,415,856 – – 19,846,411

(Outflows) (13,265,523) (6,388,600) – – (19,654,123)

Net 165,032 27,256 – – 192,288

As at 30 June 2015*

Inflows 15,117,568 7,705,376 – – 22,822,944

(Outflows) (15,229,674) (7,749,182) – – (22,978,856)

Net (112,106) (43,806) – – (155,912)


Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000


Inflows 2,000 – – – 2,000

(Outflows) (2,000) – – – (2,000)

Net – – – – –

As at 30 June 2015*

Inflows 1,935 – – – 1,935

(Outflows) (1,953) – – – (1,953)

Net (18) – – – (18)


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Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000


Inflows 2,671,784 1,359,834 – – 4,031,618

(Outflows) (2,636,365) (1,360,027) – – (3,996,392)

Net 35,419 (193) – – 35,226

As at 30 June 2015*

Inflows 2,789,381 1,383,135 – – 4,172,516

(Outflows) (2,788,730) (1,383,387) – – (4,172,117)

Net 651 (252) – – 399


Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000


Inflows 27,062 – – – 27,062

(Outflows) (27,000) – – – (27,000)

Net 62 – – – 62

As at 30 June 2015*

Inflows 2,453 – – – 2,453

(Outflows) (2,463) – – – (2,463)

Net (10) – – – (10)


Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000


Inflows 114,320 69,912 – – 184,232

(Outflows) (112,900) (69,619) – – (182,519)

Net 1,420 293 – – 1,713

As at 30 June 2015*

Inflows 409,705 203,330 – – 613,035

(Outflows) (411,357) (204,472) – – (615,829)

Net (1,652) (1,142) – – (2,794)


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Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000


Inflows 2,414 – – – 2,414

(Outflows) (2,414) – – – (2,414)

Net – – – – –

As at 30 June 2015*

Inflows 2,318 – – – 2,318

(Outflows) (2,319) – – – (2,319)

Net (1) – – – (1)


Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

As at 30 June 2016 $'000 $'000 $'000 $'000 $'000


Inflows 70,137 35,424 – – 105,561

(Outflows) (69,294) (35,432) – – (104,726)

Net 843 (8) – – 835

As at 30 June 2015*

Inflows 56,346 28,435 – – 84,781

(Outflows) (56,315) (28,443) – – (84,758)

Net 31 (8) – – 23


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4. Fair value measurement

(a) Fair value estimationThe Funds measure and recognise the following assets and liabilities at fair value on a recurring basis:

• Financial assets / liabilities designated at fair value through profit or loss (FVTPL)• Financial assets / liabilities held for trading• Derivative financial instruments

The Funds had no assets or liabilities at fair value on a non-recurring basis in the reporting period. The carrying amounts of the Funds’ assets and liabilities at the balance sheet date approximate their fair values.

Financial assets and liabilities held at fair value through profit and loss are measured initially at fair value excluding any transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Transaction costs on financial assets and financial liabilities at fair value through profit and loss are expensed immediately. Subsequent to initial recognition, all instruments held at fair value through profit or loss are measured at fair value with changes in their fair value recognised in the statement of comprehensive income.

Fair value in an active market (level 1)The fair value of financial assets and liabilities traded in active markets is based on their quoted market prices at the balance sheet date without any deduction for estimated future selling costs. Financial assets are priced at current bid prices, while financial liabilities are priced at current asking prices.

The Funds value investments in accordance with the accounting policies set out in note 2 to the financial statements. For the majority of investments, the Funds rely on information provided by independent pricing services for the valuation of investments.

The quoted market price used for financial assets held by the Fund is the current bid price; the appropriate quoted market price for financial liabilities is the current asking price.

A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

Fair value in an inactive or unquoted market (level 2 and level 3)The fair value of financial assets and liabilities that are not traded in an active market is determined using valuation techniques. These include the use of recent arm’s length market transactions, reference to the current fair value of a substantially similar other instrument, discounted cash flow techniques, option pricing models or any other valuation technique that provides a reliable estimate of prices obtained in actual market transactions.

Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate used is a market rate at the balance sheet date applicable for an instrument with similar terms and conditions.

For other pricing models, inputs are based on market data at the balance sheet date. Fair values for unquoted equity investments are estimated, if possible, using applicable price/earnings ratios for similar listed companies adjusted to reflect the specific circumstances of the issuer.

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4. Fair value measurement (continued)

(a) Fair value estimation (continued)Fair value in an inactive or unquoted market (level 2 and level 3) (continued)The fair value of derivatives that are not exchange traded is estimated at the amount that the Funds would receive or pay to terminate the contract at the balance sheet date taking into account current market conditions (volatility and appropriate yield curve) and the current creditworthiness of the counterparties. The fair value of a forward contract is determined as a net present value of estimated future cash flows, discounted at appropriate market rates as at the valuation date. The fair value of an option contract is determined by applying the Black-Scholes option valuation model.

The Vanguard International Property Securities Index Fund (Hedged), Vanguard International Shares Index Fund (Hedged), Vanguard International Small Companies Index Fund (Hedged) and Vanguard Global Infrastructure Index Fund (Hedged) held units in unlisted trusts managed by the Responsible Entity. These investments are recorded at the redemption value per unit as reported by the Responsible Entity.

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(b) Fair value hierarchyThe following tables analyse financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is,

as prices) or indirectly (that is, derived from prices) (level 2).• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The determination of what constitutes ‘observable’ requires significant judgement by the Responsible Entity. The Responsible Entity considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The following table presents the Funds’ assets and liabilities measured and recognised at fair value as at 30 June 2016.



Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

30 June 2016 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets

Financial assets held for trading

Derivatives 93 89,987 – 90,080 166 41,246 – 41,412

Financial assets designated at fair value through profit or loss:

Equity securities – – – – – – – –

Debt securities – 2,678,731 – 2,678,731 – 1,203,405 – 1,203,405

Total 93 2,768,718 – 2,768,811 166 1,244,651 – 1,244,817

Financial liabilities

Financial liabilities held for trading

Derivatives 355 42,665 43,020 459 7,264 7,723

Total 355 42,665 – 43,020 459 7,264 – 7,723

30 June 2015

Financial assets


Derivatives 110 18,058 – 18,168 47 8,924 – 8,971


Equity securities – – – – – – – –

Debt securities – 2,810,427 – 2,810,427 – 1,476,256 – 1,476,256

Total 110 2,828,485 – 2,828,595 47 1,485,180 – 1,485,227



Derivatives 5 57,738 – 57,743 46 10,301 – 10,347

Total 5 57,738 – 57,743 46 10,301 – 10,347

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(b) Fair value hierarchy (continued)




30 June 2016 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets


Derivatives 1,246 4 – 1,250 1,038 272,866 – 273,904


Equity securities 11,840,900 964 – 11,841,864 – 4,406,645 – 4,406,645

Debt securities – – – – – – – –

Total 11,842,146 968 – 11,843,114 1,038 4,679,511 – 4,680,549



Derivatives 587 14 – 601 388 80,578 – 80,966

Total 587 14 – 601 388 80,578 – 80,966

30 June 2015

Financial assets


Derivatives – 5 – 5 56 62,762 – 62,818


Equity securities 15,175,981 1,308 – 15,177,289 – 4,744,451 – 4,744,451


Total 15,175,981 1,313 – 15,177,294 56 4,807,213 – 4,807,269



Derivatives 668 – – 668 971 218,674 – 219,645

Total 668 – – 668 971 218,674 – 219,645

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30 June 2016 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets


Derivatives 40 44 – 84 – – – –


Equity securities 1,008,826 20 – 1,008,846 2,056,004 – – 2,056,004


Total 1,008,866 64 – 1,008,930 2,056,004 – – 2,056,004



Derivatives – 2 – 2 – – – –

Total – 2 – 2 – – – –

30 June 2015

Financial assets


Derivatives – 5 – 5 – – – –


Equity securities 1,484,544 5,251 – 1,489,795 1,817,557 – – 1,817,557


Total 1,484,544 5,256 – 1,489,800 1,817,557 – – 1,817,557



Derivatives 66 – – 66 – 18 – 18

Total 66 – – 66 – 18 – 18

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30 June 2016 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets


Derivatives – 42,494 – 42,494 24 68 – 92


Equity securities – 1,273,152 – 1,273,152 310,840 138 – 310,978


Total – 1,315,646 – 1,315,646 310,864 206 – 311,070



Derivatives – 7,268 – 7,268 1 4 – 5

Total – 7,268 – 7,268 1 4 – 5

30 June 2015

Financial assets


Derivatives – 6,409 – 6,409 – – – –


Equity securities – 1,215,584 – 1,215,584 578,314 113 – 578,427


Total – 1,221,993 – 1,221,993 578,314 113 – 578,427



Derivatives – 6,010 – 6,010 36 10 – 46

Total – 6,010 – 6,010 36 10 – 46

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30 June 2016 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets


Derivatives 9 2,367 – 2,376 – – – –


Equity securities – 34,711 – 34,711 178,319 – – 178,319


Total 9 37,078 – 37,087 178,319 – – 178,319



Derivatives – 654 – 654 – – – –

Total – 654 – 654 – – – –

30 June 2015

Financial assets


Derivatives 2 1,313 – 1,315 – 3 – 3


Equity securities – 181,012 – 181,012 146,249 – – 146,249


Total 2 182,325 – 182,327 146,249 3 – 146,252



Derivatives 4 4,107 – 4,111 – 4 – 4

Total 4 4,107 – 4,111 – 4 – 4

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Level 1 Level 2 Level 3 Total

30 June 2016 $'000 $'000 $'000 $'000

Financial assets


Derivatives – 1,056 – 1,056


Equity securities – 35,523 – 35,523

Debt securities – – – –

Total – 36,579 – 36,579



Derivatives – 220 – 220

Total – 220 – 220

30 June 2015

Financial assets




Equity securities – 26,119 – 26,119

Debt securities – – – –

Total – 26,245 – 26,245




Total – 103 – 103

Investments whose values are based on quoted market prices in active markets, and therefore classified within level 1, include active listed equities, certain unlisted unit trusts, exchange traded derivatives, US government treasury bills and certain non-US sovereign obligations.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument is included in level 2.

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. These include, investment-grade corporate bonds and certain non-US sovereign obligations, certain listed equities, certain unlisted unit trusts, and over-the-counter derivatives. As level 2 investments include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.

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(b) Fair value hierarchy (continued)If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3. This is the case for the Funds’ unlisted equity securities.

Specific valuation techniques used to value financial instruments include:

• The use of quoted market prices or dealer quotes for similar instruments where available.• The fair value of forward foreign exchange contracts is determined using forward exchange rates at the

balance sheet date.• Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining

financial instruments. – The Funds’ policy recognises the transfers between fair value hierarchy.

The Funds’ policy is to recognise transfers into and out of fair value hierarchy levels as at the end of the reporting period.

There were no transfers between levels as at 30 June 2016.

The following table presents the transfers between levels as at 30 June 2015:



Level 1 Level 2 Level 3 Level 1 Level 2 Level 3

30 June 2016 $'000 $'000 $'000 $'000 $'000 $'000

Transfers between level 1 and 2:

Equity securities – – – (31) 31 –

30 June 2015

Transfers between level 1 and 2:

Equity securities (1,927) 1,927 – (28) 28 –

The equity securities transferred into level 2 relates to the frequency of quoted price valuations. There were no transfers into and out of level 3 during the reporting period.

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5. Interest incomeThis table shows the average balance for the major categories of interest–bearing assets, the amount of interest revenue and the average interest rate.

2016 2015

Average Balance Interest

Average Rate

Average Balance Interest

Average Rate

$'000 $'000 % $'000 $'000 %


Fixed interest securities – international 2,936,165 68,285 2.33% 2,724,764 68,353 2.51%


Fixed interest securities – international 1,431,166 49,194 3.44% 1,339,465 47,552 3.55%

Interest revenue is recognised on an entitlements basis, and is shown in the income statement as part of net gains/losses on financial instruments designated at fair value. This is due to the discount securities and fixed interest securities being classified as financial instruments designated at fair value through profit or loss upon initial recognition, as detailed in note 2(b).

Interest revenue is net of witholding taxes of $364,441 for Vanguard International Fixed Interest Index Fund (Hedged) and $24,552 of Vanguard International Credit Securities Index Fund (Hedged).

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6. Net gains/(losses) on financial instruments held at fair value through profit or loss


Fund (Hedged)


Fund (Hedged)


Index Fund


2016 2015 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets

Net gain/(loss) on financial assets held for trading (68,301) (84,846) 722 (112,011) 7,149 17,607 87,748 (316,713)

Net gain/(loss) on financial assets designated at fair value through profit or loss 410,301 306,281 119,474 175,265 (119,114) 2,865,095 (76,575) 665,194

Net gain/(loss) on financial assets held at fair value through profit or loss 342,000 221,435 120,196 63,254 (111,965) 2,882,702 11,173 348,481

Net realised gain/(loss) on financial assets held at fair value through profit or loss 37,420 67,077 100,899 (40,487) 1,806,298 579,909 168,541 (89,605)

Net unrealised gain/(loss) on financial assets held at fair value through profit or loss 304,580 154,358 19,297 103,741 (1,918,263) 2,302,793 (157,368) 438,086

Net gain/(loss) on financial assets held at fair value through profit or loss 342,000 221,435 120,196 63,254 (111,965) 2,882,702 11,173 348,481


Net gain/(loss) on financial liabilities held for trading (43,020) (57,743) (7,723) (10,347) (601) (668) (80,966) (219,645)

Net gain/(loss) on financial liabilities designated at fair value through profit or loss – – – – – – – –

Net gain/(loss) on financial liabilities held at fair value through profit or loss (43,020) (57,743) (7,723) (10,347) (601) (668) (80,966) (219,645)

Net realised gain/(loss) on financial liabilities held at fair value through profit or loss – – – – – – – –

Net unrealised gain/(loss) on financial liabilities held at fair value through profit or loss (43,020) (57,743) (7,723) (10,347) (601) (668) (80,966) (219,645)

Net gain/(loss) on financial liabilities held at fair value through profit or loss (43,020) (57,743) (7,723) (10,347) (601) (668) (80,966) (219,645)

Total net gain/(loss) on financial instruments held at fair value through profit or loss 298,980 163,692 112,473 52,907 (112,566) 2,882,034 (69,793) 128,836

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6. Net gains/(losses) on financial instruments held at fair value through profit or loss (continued)



Index Fund



Index Fund

2016 2015 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets

Net gain/(loss) on financial assets held for trading (2,111) 209 277 (728) (11,751) (148,801) (109) (85)

Net gain/(loss) on financial assets designated at fair value through profit or loss (160,571) 178,529 295,387 278,273 150,445 167,354 (12,591) 110,833

Net gain/(loss) on financial assets held at fair value through profit or loss (162,682) 178,738 295,664 277,545 138,694 18,553 (12,700) 110,748

Net realised gain/(loss) on financial assets held at fair value through profit or loss 51,133 17,272 145,433 104,359 60,501 (70,018) 81,850 37,675

Net unrealised gain/(loss) on financial assets held at fair value through profit or loss (213,815) 161,466 150,231 173,186 78,193 88,571 (94,550) 73,073

Net gain/(loss) on financial assets held at fair value through profit or loss (162,682) 178,738 295,664 277,545 138,694 18,553 (12,700) 110,748


Net gain/(loss) on financial liabilities held for trading (2) (66) – (18) (7,268) (6,010) (5) (46)

Net gain/(loss) on financial liabilities designated at fair value through profit or loss – – – – – – – –

Net gain/(loss) on financial liabilities held at fair value through profit or loss (2) (66) – (18) (7,268) (6,010) (5) (46)

Net realised gain/(loss) on financial liabilities held at fair value through profit or loss – – – – – – – –

Net unrealised gain/(loss) on financial liabilities held at fair value through profit or loss (2) (66) – (18) (7,268) (6,010) (5) (46)

Net gain/(loss) on financial liabilities held at fair value through profit or loss (2) (66) – (18) (7,268) (6,010) (5) (46)

Total net gain/(loss) on financial instruments held at fair value through profit or loss (162,684) 178,672 295,664 277,527 131,426 12,543 (12,705) 110,702

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6. Net gains/(losses) on financial instruments held at fair value through profit or loss (continued)


Index Fund (Hedged)


Index Fund


2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000

Financial assets

Net gain/(loss) on financial assets held for trading (9,982) (15,090) (30) 149 (372) (2,051)

Net gain/(loss) on financial assets designated at fair value through profit or loss (512) 21,801 13,897 14,880 2,375 1,017

Net gain/(loss) on financial assets held at fair value through profit or loss (10,494) 6,711 13,867 15,029 2,003 (1,034)

Net realised gain/(loss) on financial assets held at fair value through profit or loss 25,836 (10,572) 3,268 15,221 (703) (1,390)

Net unrealised gain/(loss) on financial assets held at fair value through profit or loss (36,330) 17,283 10,599 (192) 2,706 356

Net gain/(loss) on financial assets held at fair value through profit or loss (10,494) 6,711 13,867 15,029 2,003 (1,034)


Net gain/(loss) on financial liabilities held for trading (654) (4,111) – (4) (221) (103)

Net gain/(loss) on financial liabilities designated at fair value through profit or loss – – – – – –

Net gain/(loss) on financial liabilities held at fair value through profit or loss (654) (4,111) – (4) (221) (103)

Net realised gain/(loss) on financial liabilities held at fair value through profit or loss – – – – – –

Net unrealised gain/(loss) on financial liabilities held at fair value through profit or loss (654) (4,111) – (4) (221) (103)

Net gain/(loss) on financial liabilities held at fair value through profit or loss (654) (4,111) – (4) (221) (103)

Total net gain/(loss) on financial instruments held at fair value through profit or loss (11,148) 2,600 13,867 15,025 1,782 (1,137)

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7. Auditor’s remunerationThe auditor’s remuneration is borne by the Responsible Entity. Other services include the audit of the Compliance Plans and Internal Controls Report. During the year, the following fees were paid and payable for services provided by the auditor of the Funds.

Vanguard International Fixed Interest

Index Fund (Hedged)

Vanguard International Credit Securities

Index Fund (Hedged)


Index Fund


2016 2015 2016 2015 2016 2015 2016 2015

Auditor’s remuneration $ $ $ $ $ $ $ $

– for auditing the financial statements 30,000 19,988 26,000 21,988 18,500 19,537 21,000 19,988

– other services 15,256 16,308 15,256 16,308 15,256 16,272 13,641 13,920


Index Fund



2016 2015 2016 2015 2016 2015

Auditor’s remuneration $ $ $ $ $ $

– for auditing the financial statements 24,500 24,890 28,000 19,988 18,500 19,988

– other services 15,256 16,308 13,641 16,308 15,256 16,308


Index Fund


Index Fund (Hedged)


Index Fund


2016 2015 2016 2015 2016 2015 2016 2015

Auditor’s remuneration $ $ $ $ $ $ $ $

– for auditing the financial statements 20,500 10,811 15,500 10,811 13,000 10,811 15,500 10,811

– other services 15,256 16,272 13,641 13,920 15,256 16,308 13,641 13,920

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8. Responsible Entity’s feesVanguard International

Fixed Interest Index Fund (Hedged)

(Ordinary Unit Class)


Fund (Hedged) (ETF Unit Class)***


Fund (Hedged)(Ordinary Unit Class)


Fund (Hedged)(ETF Unit Class)***

2016 2015 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Responsible Entity's fees incurred by the Funds 7,798 7,276 10 – 5,009 4,459 11 –

Management costs per annum 0.26% 0.26% 0.20% n/a 0.34% 0.34% 0.30% n/a



Vanguard International Shares Index Fund(ETF Unit Class)*

Vanguard International Shares Index Fund(B Unit Class)**

VanguardInternational SharesIndex Fund (Hedged)

2016 2015 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Responsible Entity's fees incurred by the Funds 23,339 25,547 89 42 308 18 3,136 2,431

Management costs per annum 0.18% 0.18% 0.18% 0.18% 0.18% 0.18% *** ***



Index Fund



Index Fund

2016 2015 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Responsible Entity's fees incurred by the Funds 7,046 8,316 8,206 6,837 431 363 1,810 2,040

Management costs per annum 0.56% 0.56% 0.40% 0.40% 0.43% 0.43% 0.39% 0.39%


Index Fund (Hedged)


Index Fund


2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000

Responsible Entity's fees incurred by the Funds 60 72 815 661 21 14

Management costs per annum 0.42% 0.42% 0.49% 0.49% 0.52% 0.52%

* Vanguard International Shares Index Fund (ETF Class) inception date was 18 November 2014

** Vanguard International Shares Index Fund (Class B) inception date was 18 November 2014

*** The ETF Class of Vanguard International Fixed Interest Index Fund (Hedged) and Vanguard International Credit Securities Index Fund (Hedged) commenced trading on 8 December 2015.

*** The management costs per annum for Vanguard International Shares Index Fund (Hedged) AUD Class is 0.21% (2015: 0.21%), and for Vanguard International Shares Index Fund

(Hedged) - NZD Class is 0.31% (2015: 0.31%)

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9. Distributions to unitholders paid and payableVanguard International

Fixed Interest Index Fund (Hedged) (Ordinary Unit Class)


(ETF Unit Class)**

2016 2015 2016 2015

$'000 CPU $'000 CPU $'000 CPU $'000 CPU

Interim distributions paid – – – – – – – –

Distribution payable – 30 June 44,745 2.2174 52,106 2.2147 362 103.3802 – –

Total Distributions to unitholders 44,745 2.2174 52,106 2.2147 362 103.3802 – –




(ETF Unit Class)**

2016 2015 2016 2015

$'000 CPU $'000 CPU $'000 CPU $'000 CPU

Interim distributions paid – – – – – – – –

Distribution payable – 30 June 49,960 5.2422 – – 468 212.8053 – –

Total Distributions to unitholders 49,960 5.2422 – – 468 212.8053 – –



Vanguard International Shares Index Fund(ETF Unit Class)*


(Class B Unit) *

2016 2015 2016 2015 2016 2015

$'000 CPU $'000 CPU $'000 CPU $'000 CPU $'000 CPU $'000 CPU

Interim distributions paid 176,194 2.5887 172,280 2.1351 2,237 80.1833 354 66.0596 870 80.8183 180 65.3843

Distribution payable – 30 June 229,087 3.5986 519,270 6.5636 6,064 149.2126 939 71.8276 2,769 166.1934 362 87.2490

Total Distributions to unitholders 405,281 6.1873 691,550 8.6987 8,301 229.3959 1,293 137.8872 3,639 247.0117 542 152.6333

VanguardInternational SharesIndex Fund (Hedged)


Index Fund

2016 2015 2016 2015

$'000CPU AUD

CPU NZD $'000

CPU AUD

CPU NZD $'000 CPU $'000 CPU

Interim distributions paid – – – – – – 19,098 2.5398 21,002 2.6267

Distribution payable – 30 June 284,374 7.4172 2.0318 – – – 38,998 6.5538 10,240 1.3360

Total Distributions to unitholders 284,374 7.4172 2.0318 – – – 58,096 9.0936 31,242 3.9627

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9. Distributions to unitholders paid and payable (continued)


Index Fund



Index Fund

2016 2015 2016 2015 2016 2015


Interim distributions paid 42,558 2.4200 30,507 1.9714 - - - - 3,930 1.2139 4,503 1.2146

Distribution payable – 30 June 96,654 5.9550 59,010 3.6241 83,499 6.4231 - - 16,633 7.6893 38,432 10.4269

Total Distributions to unitholders 139,212 8.3750 89,517 5.5955 83,499 6.4231 - - 20,563 8.9032 42,935 11.6415


Index Fund (Hedged)


Index Fund


2016 2015 2016 2015 2016 2015


Interim distributions paid - - - - 2,814 1.8236 7,506 6.3660 - - 482 4.2346

Distribution payable – 30 June 18,143 42.9946 - - 3,707 2.3064 3,173 2.2201 885 2.2415 - -

Total Distributions to unitholders 18,143 42.9946 - - 6,521 4.1300 10,679 8.5861 885 2.2415 482 4.2346

* Vanguard International Shares Index Fund (ETF Class) inception date was 18 November 2014

* Vanguard International Shares Index Fund (Class B) inception date was 18 November 2014

** The ETF Class of Vanguard International Fixed Interest Index Fund (Hedged) and Vanguard International Credit Securities Index Fund (Hedged) commenced trading on 8 December 2015.

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10. Net assets attributable to unitholders Vanguard International Fixed Interest Index Fund (Hedged)*

2016 2015

Ordinary Units ETF Class Units Ordinary Units ETF Class Units

'000 '000 '000 '000

(a) Units on issue

Opening balance 2,352,758 – 2,323,490 –

Applications 540,817 350 466,419 –

Distributions reinvested 32,829 – – –

Redemptions (908,514) – (437,151) –

Closing balance 2,017,890 350 2,352,758 –

2016 2015

Ordinary Units ETF Class Units Total Ordinary Units ETF Class Units Total

$ '000 $ '000 $ '000 $ '000 $ '000 $ '000

(b) Net assets attributable to unitholders

Opening balance 2,802,873 2,658,577

Applications 674,701 18,195 692,896 560,549 – 560,549

Distributions reinvested 39,129 – 39,129 – – –

Redemptions (1,151,730) – (1,151,730) (520,624) – (520,624)

Increase/(decrease) in net assets attributable to unitholders 246,081 104,371

Closing balance 2,629,249 2,802,873

*The ETF Class of Vanguard International Fixed Interest Index Fund (Hedged) commenced trading on 8 December 2015.

Vanguard International Credit Securities Index Fund (Hedged)*

2016 2015

Ordinary Units ETF Class Units Ordinary Units ETF Class Units

'000 '000 '000 '000

(a) Units on issue

Opening balance 1,256,129 – 996,857 –

Applications 255,284 300 330,493 –

Distributions reinvested – – 20,068 –

Redemptions (558,382) (80) (91,289) –

Closing balance 953,031 220 1,256,129 –

2016 2015

Ordinary Units ETF Class Units Total Ordinary Units ETF Class Units Total

$ '000 $ '000 $ '000 $ '000 $ '000 $ '000



Applications 313,099 15,471 328,570 392,548 – 392,548

Distributions reinvested – – – 22,842 – 22,842

Redemptions (690,354) (4,215) (694,569) (106,603) – (106,603)

Increase/(decrease) in net assets attributable to unitholders 57,111 48,486


*The ETF Class of Vanguard International Credit Securities Index Fund (Hedged) commenced trading on 8 December 2015.

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10. Net assets attributable to unitholders (continued)


Index Fund


Index Fund



Index Fund

2016 2015 2016 2015 2016 2015 2016 2015

'000 '000 '000 '000 '000 '000 '000 '000

(a) Units on issue

Opening balance 766,481 779,084 1,628,274 1,371,210 1,427,282 1,062,528 368,583 337,029

Applications 113,646 99,606 495,306 540,915 307,684 481,949 50,836 61,513

Distributions reinvested 9,184 11,456 77,281 42,849 – 14,708 27,931 11,400

Redemptions (294,266) (123,665) (577,786) (326,700) (434,987) (131,903) (231,037) (41,359)

Closing balance 595,045 766,481 1,623,075 1,628,274 1,299,979 1,427,282 216,313 368,583

2016 2015 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000


Opening balance 1,492,504 1,334,698 1,767,538 1,270,008 1,261,493 869,262 543,947 428,866

Applications 192,221 182,104 594,802 575,923 287,892 424,806 73,845 84,400

Distributions reinvested 16,500 20,195 87,187 43,842 – 12,073 41,147 14,966

Redemptions (515,012) (223,719) (683,478) (362,195) (410,516) (118,693) (336,543) (59,778)

Increase/(decrease) in net assets attributable to unitholders (192,452) 179,226 219,402 239,960 137,943 74,045 (25,720) 75,493

Closing balance 993,761 1,492,504 1,985,451 1,767,538 1,276,812 1,261,493 296,676 543,947


Index Fund (Hedged)


Index Fund


2016 2015 2016 2015 2016 2015

'000 '000 '000 '000 '000 '000

(a) Units on issue

Opening balance 147,836 113,401 142,919 109,063 31,521 10,724

Applications 15,569 40,885 37,167 44,739 11,815 21,774

Distributions reinvested – – 2,332 2,822 – 732

Redemptions (121,208) (6,450) (21,712) (13,705) (3,871) (1,709)

Closing balance 42,197 147,836 160,706 142,919 39,465 31,521

2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000


Opening balance 195,045 135,346 145,637 104,157 26,813 9,296

Applications 19,676 51,077 39,187 45,462 10,066 18,640

Distributions reinvested – – 2,394 2,715 – 624

Redemptions (152,753) (8,108) (22,952) (14,127) (3,335) (1,484)

Increase/(decrease) in net assets attributable to unitholders (26,529) 16,730 11,548 7,430 2,217 (263)

Closing balance 35,439 195,045 175,814 145,637 35,761 26,813

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2016 2015

Ordinary Units

Class R Units

ETF Class Units*

B Class Units*

Ordinary Units

Class R Units

ETF Class Units*

B Class Units*

'000 '000 '000 '000 '000 '000 '000 '000

(a) Units on issue

Opening balance 7,827,194 84,192 1,300 415 7,827,509 71,770 – –

Applications 1,913,457 8,175 3,920 1,300 1,728,261 20,542 1,300 451

Distributions reinvested 321,496 1,888 5 22 179,410 591 – 3

Redemptions (3,731,724) (58,688) (1,180) (71) (1,907,986) (8,711) – (39)

Closing balance 6,330,423 35,567 4,045 1,666 7,827,194 84,192 1,300 415

2016 2015

Ordinary Units

Class R Units

ETF Class Units*

B Class Units* Total

Ordinary Units

Class R Units

ETF Class Units*

B Class Units* Total

$ '000 $ '000 $ '000 $ ‘000 $ '000 $ '000 $ '000 $ '000 $ '000 $ '000


Opening balance 14,802,308 12,278,688

Applications 3,570,258 15,444 227,387 73,667 3,886,756 3,047,841 35,657 71,412 23,788 3,178,698

Distributions reinvested 595,838 3,510 284 1,232 600,864 297,687 961 – 180 298,828

Redemptions (7,034,683) (112,552) (64,867) (4,077) (7,216,179) (3,415,805) (15,412) – (2,154) (3,433,371)

Increase/(decrease) in net assets attributable to unitholders (258,854) 2,479,465

Closing balance 11,814,895 14,802,308

* The Vanguard International Shares Index Fund (“VISIF”) offers four classes of units, Ordinary Units, Class R Units, ETF Class Units and Class B Units . Until 21 December 2004,

Class R Units were issued on the basis that all distributions were compulsorily reinvested in further Class R Units (unless the Responsible Entity elects to pay a cash distribution). The

ETF Class Units commenced on 18 November 2014 and are traded on the Australian Stock Exchange. The Class B Units commenced on 18 November 2014 and represents Vanguard

Global Share Index Fund’s (Hedged) holdings in VISIF. All units in VISIF are denominated in AUD and are of equal value.

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2016 2015

AUD Class* NZD Class* AUD Class* NZD Class*

'000 '000 '000 '000

(a) Units on issue

Opening balance 4,483,015 931,707 4,402,124 443,350

Applications 914,504 450,090 1,157,661 491,801

Distributions reinvested – – 15,287 35,259

Redemptions (1,909,073) (63,057) (1,092,057) (38,703)

Closing balance 3,488,446 1,318,740 4,483,015 931,707

2016 2015

AUD Class* NZD Class* Total AUD Class* NZD Class* Total

$ '000 $ '000 $ '000 $ '000 $ '000 $ '000



Applications 767,847 511,109 1,278,956 955,525 600,787 1,556,312

Distributions reinvested – – – 11,829 37,996 49,825

Redemptions (1,620,029) (73,862) (1,693,891) (871,914) (51,375) (923,289)

Increase/(decrease) in net assets attributable to unitholders (209,260) 342,549


* The Vanguard International Shares Index Fund (Hedged) offers two classes of units being Australian Class Units (denominated in AUD) and New Zealand Class Units (denominated

in NZD). New Zealand Class Units are only available to New Zealand residents and carried the same restrictions as VISIF Class R Units prior to the change in legislation.

Each unit represents a right to an individual share in the Funds and does not extend to a right to the underlying assets of the Funds. The Vanguard Emerging Markets Shares Index Fund, Vanguard International Property Securities Index Fund, Vanguard International Property Securities Index Fund (Hedged), Vanguard International Small Companies Index Fund, Vanguard International Small Companies Index Fund (Hedged), Vanguard Global Infrastructure Index Fund and Vanguard Global Infrastructure Index Fund (Hedged) have no separate classes of units and each unit has the same rights attaching to it as all other units of the Fund.

Movements in the number of units and net assets attributable to unitholders are governed by the Constitutions of the Funds.

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Capital risk managementThe Funds manage their net assets attributable to unitholders as capital, notwithstanding net assets attributable to unitholders are classified as a liability. The amount of net assets attributable to unitholders can change significantly on a daily basis as the Funds are subject to daily applications and redemptions at the discretion of the unitholders.

The Funds monitor the level of daily applications and redemptions relative to the net liquid assets in the Funds. The net liquid assets include cash and cash equivalents, financial assets designated at fair value through profit and loss, receivables, payables, other assets and other liabilities with a maturity of less than 30 days.

The ratio of net liquid assets to net assets attributable to unitholders (NAATU) at end of reporting periods are as follows:




2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000

Average daily net applications/(redemptions) (1,828) 159 (1,458) 1,559 (1,286) (166)

Net liquid assets of the fund 2,629,249 2,802,873 1,180,821 1,132,436 993,761 1,492,504

Net assets attributable to unitholders (NAATU) 2,629,249 2,802,873 1,180,821 1,132,436 993,761 1,492,504

Ratio of net liquid assets to NAATU 100% 100% 100% 100% 100% 100%




2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000

Average daily net applications/(redemptions) (353) 852 (489) 1,220 (13,265) (1,015)

Net liquid assets of the fund 1,985,451 1,767,538 1,276,812 1,261,493 11,814,895 14,802,308

Net assets attributable to unitholders (NAATU) 1,985,451 1,767,538 1,276,812 1,261,493 11,814,895 14,802,308





2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000

Average daily net applications/(redemptions) (1,653) 2,522 (1,047) 98 (530) 171

Net liquid assets of the fund 4,281,595 4,905,790 296,676 543,947 35,439 195,045

Net assets attributable to unitholders (NAATU) 4,281,595 4,905,790 296,676 543,947 35,439 195,045




2016 2015 2016 2015

$'000 $'000 $'000 $'000

Average daily net applications/(redemptions) 65 125 27 68

Net liquid assets of the fund 175,814 145,637 35,761 26,813

Net assets attributable to unitholders (NAATU) 175,814 145,637 35,761 26,813

Ratio of net liquid assets to NAATU 100% 100% 100% 100%

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11. Cash and cash equivalentsVanguard International


Vanguard International Credit Securities Index Fund

(Hedged)

2016 2015 2016 2015

$'000 $'000 $'000 $'000

Cash and cash equivalents as at 30 June 8,630 20,494 13,765 16,441

Vanguard International

Shares Index Fund


(Hedged)


2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000

Cash and cash equivalents as at 30 June 112,149 50,050 13,369 94,910 4,945 3,217


Index Fund


2016 2015 2016 2015

$'000 $'000 $'000 $'000

Cash and cash equivalents as at 30 June 5,987 5,020 2,434 4,881


Index Fund


Index Fund (Hedged)

2016 2015 2016 2015

$'000 $'000 $'000 $'000

Cash and cash equivalents as at 30 June (445) 3,277 701 3,948


Index Fund


2016 2015 2016 2015

$'000 $'000 $'000 $'000

Cash and cash equivalents as at 30 June 463 1,333 38 79

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12. Financial assets held at fair value through profit or lossVanguard International



Fund (Hedged)


Index Fund


2016 2015 2016 2015 2016 2015 2016 2015

Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Held for trading

Derivatives 90,080 18,168 41,412 8,971 1,250 5 273,904 62,818

Total held for trading 90,080 18,168 41,412 8,971 1,250 5 273,904 62,818

Designated at fair value through profit or loss

Equity securities – – – – 11,841,864 15,177,289 – –

Fixed interest securities 2,678,731 2,810,427 1,203,405 1,476,256 – – – –

Unlisted unit trusts – – – – – – 4,406,645 4,744,451

Total designated at fair value through profit or loss 2,678,731 2,810,427 1,203,405 1,476,256 11,841,864 15,177,289 4,406,645 4,744,451

Total financial assets held at fair value through profit or loss 2,768,811 2,828,595 1,244,817 1,485,227 11,843,114 15,177,294 4,680,549 4,807,269

Comprising:

Derivatives

Foreign currency forward contracts 89,987 18,058 41,246 8,924 4 5 272,866 62,762

Australian share price futures – – – – – – – –

International share price futures – – – – 1,246 – 1,038 56

Australian interest rate futures – – 1 4 – – – –

International interest rate futures 93 110 165 43 – – – –

Total derivatives 90,080 18,168 41,412 8,971 1,250 5 273,904 62,818

Equity securities

Australian equity securities – – – – – – – –

International equity securities – – – – 11,841,864 15,177,289 – –

Total equity securities – – – – 11,841,864 15,177,289 – –

Fixed interest securities

Australian fixed interest securities 92,971 30,742 25,354 32,508 – – – –

International fixed interest securities 2,585,760 2,779,685 1,178,051 1,443,748 – – – –

Total fixed interest securities 2,678,731 2,810,427 1,203,405 1,476,256 – – – –

Unlisted Unit Trusts

Units in International equity trusts – – – – – – 4,406,645 4,744,451

Units in International property trusts – – – – – – – –

Total Unlisted Unit Trusts – – – – – – 4,406,645 4,744,451

Total financial assets held at fair value through profit or loss 2,768,811 2,828,595 1,244,817 1,485,227 11,843,114 15,177,294 4,680,549 4,807,269

An overview of the risk exposures relating to financial assets at fair value through profit or loss is included in note 3.

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12. Financial assets held at fair value through profit or loss (continued)



Index Fund


2016 2015 2016 2015 2016 2015

Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value

$'000 $'000 $'000 $'000 $'000 $'000

Held for trading

Derivatives 84 5 – – 42,494 6,409

Total held for trading 84 5 – – 42,494 6,409


Equity securities 1,008,846 1,489,795 2,056,004 1,817,557 – –

Fixed interest securities – – – – – –

Unlisted unit trusts – – – – 1,273,152 1,215,584

Total designated at fair value through profit or loss 1,008,846 1,489,795 2,056,004 1,817,557 1,273,152 1,215,584

Total financial assets held at fair value through profit or loss 1,008,930 1,489,800 2,056,004 1,817,557 1,315,646 1,221,993

Comprising:

Derivatives

Foreign currency forward contracts 1 – – – 42,494 6,409

Australian share price futures – – – – – –

International share price futures 83 5 – – – –

Australian interest rate futures – – – – – –

International interest rate futures – – – – – –

Total derivatives 84 5 – – 42,494 6,409

Equity securities

Australian equity securities – – – – – –

International equity securities 1,008,846 1,489,795 2,056,004 1,817,557 – –

Total equity securities 1,008,846 1,489,795 2,056,004 1,817,557 – –


Australian fixed interest securities – – – – – –

International fixed interest securities – – – – – –

Total fixed interest securities – – – – – –


Units in International equity trusts – – – – 1,273,152 1,215,584

Units in International property trusts – – – – – –

Total Unlisted Unit Trusts – – – – 1,273,152 1,215,584

Total financial assets held at fair value through profit or loss 1,008,930 1,489,800 2,056,004 1,817,557 1,315,646 1,221,993


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12. Financial assets held at fair value through profit or loss (continued)


Index Fund


Index Fund (Hedged)


Index Fund


Index Fund (Hedged)

2016 2015 2016 2015 2016 2015 2016 2015


$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Held for trading

Derivatives 92 – 2,376 1,315 – 3 1,056 126

Total held for trading 92 – 2,376 1,315 – 3 1,056 126


Equity securities 310,978 578,427 – – 178,319 146,249 – –

Fixed interest securities – – – – – – 35,523 –

Unlisted unit trusts – – 34,711 181,012 – – – –

Total designated at fair value through profit or loss 310,978 – 34,711 181,012 178,319 – 35,523 26,119

Total financial assets held at fair value through profit or loss 311,070 578,427 37,087 182,327 178,319 146,252 36,579 26,245

Comprising:

Derivatives

Foreign currency forward contracts 66 – 2,367 1,313 – 3 1,056 126


International share price futures 26 – 9 2 – – – –

Australian interest rate futures – – – – – – – –

International interest rate futures – – – – – – – –

Total derivatives 92 – 2,376 1,315 – 3 1,056 126

Equity securities

Australian equity securities – – – – 5,113 4,362 – –

International equity securities 310,978 578,427 – – 173,206 141,887 – –

Total equity securities 310,978 578,427 – – 178,319 146,249 – –


Australian fixed interest securities – – – – – – – –

International fixed interest securities – – – – – – – –

Total fixed interest securities – – – – – – – –


Units in International equity trusts – – 34,711 181,012 – – 35,523 26,119

Units in International property trusts – – – – – – – –

Total Unlisted Unit Trusts – – 34,711 181,012 – – 35,523 26,119

Total financial assets held at fair value through profit or loss 311,070 578,427 37,087 182,327 178,319 146,252 36,579 26,245


Master netting arrangement– not currently enforceableAgreements with derivative counterparties are based on the ISDA Master Agreement. Under the terms of these arrangements, only where certain credit events occur (such as default), the net position owing/ receivable to a single counterparty in the same currency will be taken as owing and all the relevant arrangements terminated.

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13. Financial liabilities held at fair value through profit or lossVanguard International



Index Fund (Hedged)


Index Fund

2016 2015 2016 2015 2016 2015

Fair Value Fair Value Fair Value Fair Value Fair Value Fair Value

$'000 $'000 $'000 $'000 $'000 $'000

Held for trading

Derivatives 43,020 57,743 7,723 10,347 601 668

Total held for trading 43,020 57,743 7,723 10,347 601 668

Total financial liabilities held at fair value through profit or loss 43,020 57,743 7,723 10,347 601 668

Comprising:

Derivatives

Foreign currency forward contracts 42,665 57,738 7,264 10,301 14 –

Australian share price futures – – – – – –

International share price futures – – – – 587 668

Australian interest rate futures 36 – – – – –

International interest rate futures 319 5 459 46 – –

Total derivatives 43,020 57,743 7,723 10,347 601 668

Total financial liabilities held at fair value through profit or loss 43,020 57,743 7,723 10,347 601 668




Index Fund


2016 2015 2016 2015 2016 2015 2016 2015


$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Held for trading

Derivatives 80,966 219,645 2 66 – 18 7,268 6,010

Total held for trading 80,966 219,645 2 66 – 18 7,268 6,010

Total financial liabilities held at fair value through profit or loss 80,966 219,645 2 66 – 18 7,268 6,010

Comprising:

Derivatives

Foreign currency forward contracts 80,578 218,674 2 – – 18 7,268 6,010


International share price futures 388 971 – 66 – – – –



Total derivatives 80,966 219,645 2 66 – 18 7,268 6,010

Total financial liabilities held at fair value through profit or loss 80,966 219,645 2 66 – 18 7,268 6,010

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13. Financial liabilities held at fair value through profit or loss (continued)


Index Fund


Index Fund (Hedged)


Index Fund


Index Fund (Hedged)

2016 2015 2016 2015 2016 2015 2016 2015


$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Held for trading

Derivatives 5 46 654 4,111 – 4 220 103

Total held for trading 5 46 654 4,111 – 4 220 103

Total financial liabilities held at fair value through profit or loss 5 46 654 4,111 – 4 220 103

Comprising:

Derivatives

Foreign currency forward contracts 4 10 654 4,107 – 4 220 103


International share price futures 1 36 – 4 – – – –



Total derivatives 5 46 654 4,111 – 4 220 103

Total financial liabilities held at fair value through profit or loss 5 46 654 4,111 – 4 220 103


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14. Derivative financial instrumentsIn the normal course of business the Funds enter into transactions in various derivative financial instruments with certain risks. A derivative is a financial instrument or other contract which is settled at a future date and whose value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index or other variable.

Derivative financial instruments require no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors.

Derivative transactions include a wide assortment of instruments, such as forwards, futures and options. Derivatives are considered to be part of the investment process. The use of derivatives is an essential part of the Funds’ portfolio management. Derivatives are not managed in isolation. Consequently, the use of derivatives is multifaceted and includes:

• hedging to protect an asset or liability of a Fund against a fluctuation in market values or to reduce volatility.• a substitution for trading of physical securities.• adjusting asset exposures within the parameters set in the investment strategy, and adjusting the duration of fixed

interest portfolios or the weighted average maturity of cash portfolios.

While derivatives are used for trading purposes, they are not used to gear (leverage) a portfolio. Gearing a portfolio would occur if the level of exposure to the markets exceeds the underlying value of the Funds.

The Funds hold the following derivative instruments:

(a) Forward currency contractsForward currency contracts are primarily used by the Funds to hedge against foreign currency exchange rate risks on its non Australian dollar denominated trading securities. The Funds agree to receive or deliver a fixed quantity of foreign currency for an agreed upon price on an agreed future date. Forward currency contracts are valued at the prevailing bid price at the reporting date. The Funds recognise a gain or loss equal to the change in fair value at the reporting date. Current forward currency exposures are detailed in note 3(a) under foreign exchange risk.

Forward currency contracts entered into by the Funds typically mature within one month from the date of trade.

(b) FuturesFutures are contractual obligations to buy or sell financial instruments on a future date at a specified price established in an organised market. The futures contracts are collateralised by cash or marketable securities. Changes in futures contracts’ values are settled daily with the exchange. Interest rate futures are contractual obligations to receive or pay a net amount based on changes in interest rates at a future date at a specified price, established in an organised financial market.

Futures contracts entered into by the Funds typically mature within 3 months from the date of acquisition.

(c) WarrantsWarrants are an option to purchase additional securities from the issuer at a specified price during a specified period. Warrants are valued at the prevailing market price at the end of each reporting period.

The fund recognises a gain or loss equal to the change in fair value at the end of each reporting period.For

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14. Derivative financial instruments (continued)


2016 2015

Contract / Notional

Fair valueContract /

Notional

Fair value

Assets Liabilities Assets Liabilities

$'000 $'000 $'000 $'000 $'000 $'000

Australian fixed interest futures (1,960) – 36 – – –

International fixed interest futures 25,819 93 319 26,576 110 5

Futures in respect of money market securities – – – – – –

International share price index futures – – – – – –

Forward currency contracts (2,609,175) 89,987 42,665 (2,782,989) 18,058 57,738

Total (2,585,316) 90,080 43,020 (2,756,413) 18,168 57,743


2016 2015

Contract / Notional


Notional

Fair value


$'000 $'000 $'000 $'000 $'000 $'000

Australian fixed interest futures 296 1 – 291 4 –

International fixed interest futures 16,438 165 459 21,103 43 46




Total (1,200,119) 41,412 7,723 (1,433,778) 8,971 10,347


2016 2015

Contract / Notional


Notional

Fair value


$'000 $'000 $'000 $'000 $'000 $'000

Australian fixed interest futures – – – – – –

International fixed interest futures – – – – – –


International share price index futures 142,807 1,246 587 47,912 – 668

Forward currency contracts 9,900 4 14 (119,500) 5 –

Total 152,707 1,250 601 (71,588) 5 668


2016 2015

Contract / Notional


Notional

Fair value


$'000 $'000 $'000 $'000 $'000 $'000

Australian share price index futures – – – – – –

International share price index futures 89,437 1,038 388 99,473 56 971


Total (3,008,398) 273,904 80,966 (3,534,100) 62,818 219,645

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2016 2015

Contract / Notional


Notional

Fair value


$'000 $'000 $'000 $'000 $'000 $'000


International share price index futures 2,695 83 – 5,408 5 66

Forward currency contracts (16,905) 1 2 (1,236) – –

Total (14,210) 84 2 4,172 5 66


2016 2015

Contract / Notional


Notional

Fair value


$'000 $'000 $'000 $'000 $'000 $'000



Forward currency contracts (2,000) – – 1 – 18

Total (2,000) – – 1 – 18


2016 2015

Contract / Notional


Notional

Fair value


$'000 $'000 $'000 $'000 $'000 $'000




Total (1,384,437) 42,494 7,268 (1,264,681) 6,409 6,010


2016 2015

Contract / Notional


Notional

Fair value


$'000 $'000 $'000 $'000 $'000 $'000


International share price index futures 1,218 26 1 1,772 – 36

International equity warrants – – – – – –

Forward currency contracts (20,533) 66 4 (1,109) – 10

Total (19,315) 92 5 663 – 46

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2016 2015

Contract / Notional


Notional

Fair value


$'000 $'000 $'000 $'000 $'000 $'000


International share price index futures 154 9 – 68 2 4

International equity warrants – – – – – –

Forward currency contracts (39,590) 2,367 654 (193,893) 1,313 4,107

Total (39,436) 2,376 654 (193,825) 1,315 4,111


2016 2015

Contract / Notional


Notional

Fair value


$'000 $'000 $'000 $'000 $'000 $'000



Forward currency contracts (1,680) – – (1,185) 3 4

Total (1,680) – – (1,185) 3 4


2016 2015

Contract / Notional


Notional

Fair value


$'000 $'000 $'000 $'000 $'000 $'000



Forward currency contracts (36,257) 1,056 (220) (26,123) 126 103

Total (36,257) 1,056 (220) (26,123) 126 103

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15. Related partiesResponsible EntityThe Responsible Entity of the Vanguard Wholesale Funds is Vanguard Investments Australia Ltd (ABN 72 072 881 086 AFSL 227263), which is a wholly owned subsidiary of The Vanguard Group, Inc.

(a) Key management personnelThe Funds do not employ personnel in their own right. However the Funds are required to have an incorporated Responsible Entity to manage the activities of the Funds. The directors of the Responsible Entity are the Key Management Personnel.

(i) DirectorsThe directors of the Responsible Entity are key management personnel of that entity and their names are as follows:

• J M Norris • G W Reed • C R Comegys• C Lui (Resigned 15 March 2016)• C Kelton (Appointed 1 July 2015)• M Lovett (Appointed 15 March 2016)

(ii) Key management personnel compensationThe Responsible Entity is entitled to receive a management fee as detailed in note 15(b) below. Payments made from the Funds to the Responsible Entity do not include any amounts directly attributable to the compensation of the directors of the Responsible Entity.

No compensation is paid directly by the Funds to directors or to any of the key management personnel of the Responsible Entity.

(iii) Key management personnel loan disclosuresThe Funds have not made, guaranteed or secured, directly or indirectly, any loans to the key management personnel or their personally related entities at any time during the reporting period.

(iv) Related party transactionsAll transactions with related parties are conducted on normal commercial terms and conditions. From time to time Vanguard Investments Australia Ltd or its director related entities may invest in or withdraw from the Funds. These investments or withdrawals are on the same terms and conditions as those entered into by other Funds’ investors and are domestic in nature.

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15. Related parties (continued)

(b) Responsible entity’s fees and other transactionsUnder the Constitution for each Fund, the Responsible Entity is entitled to receive management fees up to the following limits:

• up to 0.25% per annum of the net asset value for the Vanguard International Shares Index Fund; • up to 0.3% per annum of the net asset value of the Vanguard Emerging Markets Shares Index Fund; • up to 0.5% per annum of the net asset value for the Vanguard International Fixed Interest Index Fund (Hedged), Vanguard

International Credit Securities Index Fund (Hedged) and Vanguard International Shares Index Fund (Hedged); • up to 1.5% per annum of the net asset value for the Vanguard International Property Securities Index Fund and the

Vanguard International Property Securities Index Fund (Hedged), Vanguard International Small Companies Index Fund, Vanguard International Small Companies Index Fund (Hedged), Vanguard Global Infrastructure Index Fund and Vanguard Global Infrastructure (Hedged).

The above limits do not take into account Goods and Services Tax (GST).

In the current PDS for the Funds, the Responsible Entity has undertaken to limit the amount of its management fees and certain expense recoveries to a ‘management cost’ specified for each Fund.

The following table sets out the total Responsible Entity fee and recoverable expenses deducted in respect of each Fund. The management cost in the case of the Vanguard International Property Securities Index Fund (Hedged), Vanguard International Shares Index Fund (Hedged), Vanguard International Small Companies Index Fund (Hedged) and Vanguard Global Infrastructure Index Fund (Hedged) also includes the management costs deducted from the relevant underlying Funds. The amounts shown take into account GST and expected input tax credits.

Note that the table does not take into account rebates paid by the Responsible Entity (out of the Responsible Entity’s own assets) to particular investors in accordance with the Corporations Act 2001, relevant ASIC (Australian Securities and Investments Commission) class orders and policy and the PDS for the Funds.

Management costs

2016 2015

% per annum % per annum

Vanguard International Fixed Interest Index Fund (Hedged) 0.26 0.26

Vanguard International Fixed Interest Index Fund (Hedged) (ETF Unit Class)* 0.20 n/a

Vanguard International Credit Securities Index Fund (Hedged) 0.34 0.34

Vanguard International Credit Securities Index Fund (Hedged) (ETF Unit Class)* 0.30 n/a

Vanguard International Property Securities Index Fund 0.40 0.40

Vanguard International Property Securities Index Fund (Hedged) 0.43 0.43

Vanguard International Shares Index Fund (Ordinary Units) 0.18 0.18

Vanguard International Shares Index Fund (ETF Unit class) 0.18 0.18

Vanguard International Shares Index Fund (B Units class) 0.18 0.18

Vanguard International Shares Index Fund (Hedged) - AUD Class 0.21 0.21

Vanguard International Shares Index Fund (Hedged) - NZD Class 0.31 0.31

Vanguard Emerging Markets Shares Index Fund 0.56 0.56

Vanguard International Small Companies Index Fund 0.39 0.39

Vanguard International Small Companies Index Fund (Hedged) 0.42 0.42

Vanguard Global Infrastructure Index Fund 0.49 0.49

Vanguard Global Infrastructure Index Fund (Hedged) 0.52 0.52

* The ETF Class of Vanguard International Fixed Interest Index Fund (Hedged) and Vanguard International Credit Securities Index Fund (Hedged) inception date was 4 December 2015,

trading began on 8 December 2015.

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(b) Responsible Entity’s fees and other transactions (continued)The transactions during the year and amounts payable at year end between the Funds and the Responsible Entity were as follows:

Vanguard International Fixed Interest

Index Fund (Hedged)


Index Fund (Hedged)


Index Fund


2016 2015 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Fees paid and payable for the year by the Funds to the Responsible Entity 7,808 7,276 5,020 4,459 23,736 25,607 3,136 2,431

Aggregate amounts payable to the Responsible Entity at the reporting date 548 598 339 409 1,766 2,307 358 230



Index Fund


2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000

Fees paid and payable for the year by the Funds to the Responsible Entity 7,046 8,316 8,206 6,837 431 363

Aggregate amounts payable to the Responsible Entity at the reporting date 477 697 660 612 40 34


Index Fund


Index Fund (Hedged)


Index Fund


2016 2015 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Fees paid and payable for the year by the Funds to the Responsible Entity 1,810 2,040 60 72 815 661 21 14

Aggregate amounts payable to the Responsible Entity at the reporting date 107 188 3 5 70 61 1 1

(c) Related party schemes’ unitholdingsVanguard Investments Australia Ltd did not hold any units in the Funds during the year.

(d) Key management personnel unitholdingsThe key management personnel of Vanguard Investments Australia Ltd (VIA) did not hold any units in the Funds during the period.

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(e) Related Party investmentsThe Funds had no investment in Vanguard Investments Australia Ltd (VIA) during the year.

The Funds did not hold any investments in other Schemes managed by Vanguard Investments Australia Ltd during the year, except for Vanguard International Property Securities Index Fund (Hedged), Vanguard International Shares Index Fund (Hedged), Vanguard International Small Companies Index Fund (Hedged) and Vanguard Global Infrastructure Index Fund (Hedged) which held investments in Vanguard International Property Securities Index Fund, Vanguard International Shares Index Fund, Vanguard International Small Companies Index Fund and Vanguard Global Infrastructure Index Fund respectively during the year.

Other Schemes managed by Vanguard Investments Australia Ltd held investments in the Funds during the year as indicated:

Number of units held

Interest held at 30 June

Number of units acquired

Number of units disposed

Distributions paid/payable by the Fund

Investments in : 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Vanguard International Fixed Interest Index Fund (Hedged) % % $'000 $'000

By other schemes managed by VIA:

Vanguard Index Diversified Bond Fund 24,433,290 24,365,568 1.21 1.04 2,453,794 4,525,713 2,386,072 1,014,488 542 540

Vanguard LifeStrategy Conservative Fund 5,088,251 3,946,222 0.25 0.17 1,375,091 1,714,426 233,062 33,077 113 87

Vanguard LifeStrategy Balanced Fund 11,945,080 9,925,285 0.59 0.42 2,809,863 3,020,831 790,068 365,152 265 220

Vanguard LifeStrategy Growth Fund 12,208,105 11,807,421 0.60 0.50 1,246,896 2,258,523 846,212 598,915 271 261

Vanguard LifeStrategy High Growth Fund 3,973,725 3,777,830 0.20 0.16 608,246 1,300,979 412,351 786,625 88 84

Vanguard Conservative Index Fund 155,017,537 284,332,958 7.68 12.09 44,427,665 69,631,850 173,743,086 646,617 3,437 6,297

Vanguard Balanced Index Fund 246,871,507 463,427,388 12.23 19.70 65,674,961 84,163,340 282,230,842 3,241,807 5,474 10,263

Vanguard Growth Index Fund 143,711,598 207,323,266 7.12 8.81 20,443,812 29,812,502 84,055,480 9,628,466 3,187 4,592

Vanguard High Growth Index Fund 29,220,329 35,817,223 1.45 1.52 9,738,213 11,445,030 16,335,107 6,431,844 648 793

Vanguard Diversified Bond Index Fund 32,468,542 87,952,473 1.61 3.74 20,992,606 6,473,817 76,476,537 21,051,607 720 1,948

Vanguard Managed Payout Fund 11,706,893 – 0.58 – 12,573,345 – 866,452 – 260 –

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(e) Related Party investments (continued)






Investments in : 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Vanguard International Credit Securities Index Fund (Hedged) % % $'000 $'000


Vanguard Index Diversified Bond Fund 14,221,004 14,486,094 1.49 1.15 1,853,696 4,439,083 2,118,786 1,334,738 745 –

Vanguard LifeStrategy Conservative Fund 2,932,720 2,466,768 0.31 0.20 934,739 1,249,741 468,787 35,904 154 –

Vanguard LifeStrategy Balanced Fund 6,658,785 5,781,361 0.70 0.46 1,808,866 2,179,068 931,442 416,673 349 –

Vanguard LifeStrategy Growth Fund 6,910,458 7,112,459 0.73 0.57 939,171 1,833,856 1,141,172 357,944 362 –

Vanguard LifeStrategy High Growth Fund 2,288,265 2,304,042 0.24 0.18 1,025,535 1,131,251 1,041,312 632,167 120 –

Vanguard Conservative Index Fund 89,447,057 172,030,034 9.39 13.70 29,315,492 55,171,719 111,898,469 2,569,152 4,689 –

Vanguard Balanced Index Fund 142,025,197 278,806,813 14.90 22.20 23,965,474 66,964,524 160,747,090 875,733 7,445 –

Vanguard Growth Index Fund 84,371,128 124,972,434 8.85 9.95 15,437,122 25,141,507 56,038,428 3,964,300 4,423 –

Vanguard High Growth Index Fund 16,934,177 20,735,588 1.78 1.65 3,889,345 7,334,808 7,690,756 3,690,568 888 –

Vanguard Diversified Bond Index Fund 18,753,894 52,521,675 1.97 4.18 8,924,544 8,068,235 42,692,325 12,292,177 983 –

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Investments in : 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Vanguard International Shares Index Fund % % $'000 $'000


Vanguard Index International Shares Fund 140,140,213 144,417,442 2.20 1.83 17,002,439 17,493,393 21,279,668 9,814,088 8,768 12,483

Vanguard LifeStrategy Conservative Fund 1,527,428 1,119,248 0.02 0.01 502,057 489,408 93,877 88,493 91 92

Vanguard LifeStrategy Balanced Fund 7,341,050 5,308,680 0.12 0.07 2,275,024 1,315,259 242,654 679,359 432 457

Vanguard LifeStrategy Growth Fund 17,632,939 15,696,929 0.28 0.20 2,548,318 1,251,325 612,308 713,169 1,064 1,368

Vanguard LifeStrategy High Growth Fund 22,382,515 19,436,881 0.35 0.25 3,915,357 1,478,602 969,723 1,367,492 1,338 1,691

Vanguard Conservative Index Fund 47,934,362 77,860,179 0.75 0.98 21,805,377 14,334,915 51,731,194 4,008,784 4,026 6,694


Vanguard Growth Index Fund 214,086,412 271,098,137 3.36 3.43 50,639,884 14,139,406 107,651,609 26,215,324 15,215 23,899

Vanguard High Growth Index Fund 167,371,243 175,461,806 2.63 2.22 35,455,058 9,722,476 43,545,621 13,692,259 10,903 15,301

Vanguard International Shares Index Fund (Hedged) 2,363,176,265 2,492,567,197 37.12 31.51 693,684,410 600,771,009 823,075,342 493,212,023 145,744 212,587

Vanguard Global Shares Index Fund (Hedged) 1,666,052 414,995 0.77 0.16 1,322,447 453 71,390 39 3,639 542

Vanguard Managed Payout Fund 11,014,978 – 0.17 – 11,179,951 – 164,973 – 396 –






Investments in: 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Vanguard International Shares Index Fund (Hedged) % % $'000 $'000


Vanguard Index Hedged International Shares Fund 144,812,192 154,185,547 4.15 3.44 7,365,448 11,089,666 16,738,803 16,821,569 10,741 –

* The interest held is based on the proportion of units held in the AUD class.

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Investments in : 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Vanguard Emerging Markets Shares Index Fund % % $'000 $'000


Vanguard LifeStrategy Conservative Fund 245,289 158,037 0.04 0.02 144,194 111,918 56,942 50,178 22 5

Vanguard LifeStrategy Balanced Fund 1,153,313 799,827 0.19 0.10 353,486 391,100 – 209,416 99 28

Vanguard LifeStrategy Growth Fund 2,696,797 2,190,618 0.45 0.29 506,179 190,694 – 95,289 237 83

Vanguard LifeStrategy High Growth Fund 3,478,266 2,756,655 0.58 0.36 721,611 218,763 – 5,437 306 105

Vanguard Conservative Index Fund 7,510,755 12,326,587 1.26 1.61 5,680,706 5,509,557 10,496,538 2,422,961 856 439


Vanguard Growth Index Fund 32,031,368 38,997,660 5.38 5.09 9,073,401 1,053,461 16,039,693 – 3,184 1,531

Vanguard High Growth Index Fund 25,767,858 24,804,309 4.33 3.24 7,136,964 3,914,691 6,173,415 3,277,081 2,390 946

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Investments in : 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Vanguard International Property Securities Index Fund % % $'000 $'000


Vanguard International Property Securities Index Fund (Hedged) 1,041,518,141 1,122,526,765 64.17 68.94 351,883,917 443,828,665 432,892,542 255,941,034 90,451 61,807,581






Investments in: 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Vanguard International Property Securities Index Fund (Hedged) % % $'000 $'000


Vanguard LifeStrategy Conservative Fund 562,874 492,977 0.04 0.03 99,978 233,116 30,081 5,683 36 –

Vanguard LifeStrategy Balanced Fund 2,363,638 2,015,609 0.18 0.14 348,029 511,459 – 72,690 152 –

Vanguard LifeStrategy Growth Fund 5,515,336 5,280,090 0.42 0.37 480,469 512,274 245,223 207,684 354 –

Vanguard LifeStrategy High Growth Fund 6,565,913 6,669,057 0.51 0.47 399,735 793,916 502,879 222,323 422 –

Vanguard Conservative Index Fund 16,609,721 33,275,252 1.28 2.33 7,872,423 7,521,593 24,537,954 – 1,067 –

Vanguard Balanced Index Fund 48,726,109 93,157,611 3.75 6.53 17,445,845 10,553,475 61,877,347 – 3,130 –

Vanguard Growth Index Fund 63,209,212 92,345,545 4.86 6.47 11,855,835 5,152,315 40,992,168 2,757,897 4,060 –

Vanguard High Growth Index Fund 48,011,489 59,350,990 3.69 4.16 3,180,172 6,185,999 14,519,673 2,593,592 3,084 –

Vanguard Managed Payout Fund 2,778,704 – 0.21 – 2,778,704 – – – 178 –

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Investments in : 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Vanguard International Small Companies Index Fund % % $'000 $'000


Vanguard LifeStrategy Conservative Fund 295,393 216,722 0.14 0.06 123,558 103,856 44,887 16,886 26 25

Vanguard LifeStrategy Balanced Fund 1,402,279 979,780 0.65 0.27 647,101 144,729 224,602 – 124 114

Vanguard LifeStrategy Growth Fund 3,409,405 2,900,585 1.58 0.79 551,518 215,771 42,698 29,716 300 338

Vanguard LifeStrategy High Growth Fund 3,980,045 3,446,050 1.84 0.93 546,617 163,441 12,622 175,866 352 403

Vanguard Conservative Index Fund 8,592,812 13,870,394 3.97 3.76 4,113,721 1,365,253 9,391,303 – 857 1,614

Vanguard Balanced Index Fund 28,483,716 46,941,638 13.17 12.74 13,186,188 3,387,958 31,644,110 – 2,834 5,459

Vanguard Growth Index Fund 38,296,703 52,736,203 17.70 14.31 4,409,935 3,582,102 18,849,435 – 3,610 6,136

Vanguard High Growth Index Fund 30,306,287 32,760,381 14.01 8.89 8,524,338 1,111,353 10,978,432 – 2,746 3,812

Vanguard International Small Companies Index Fund (Hedged) 25,348,310 122,878,086 11.72 33.34 23,134,382 30,301,976 120,664,157 10,239,481 2,827 14,186






Investments in: 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Vanguard Global Infrastructure Index Fund % % $'000 $'000


Vanguard Global Infrastructure Index Fund (Hedged) 32,488,784 25,694,684 20.22 17.98 14,769,245 20,600,118 7,975,145 4,858,294 1,341 1,369






Investments in: 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015

Vanguard Global Infrastructure Index Fund (Hedged) % % $'000 $'000


Vanguard Managed Payout Fund 5,809,225 – 14.72 – 5,809,225 – – – 130 –

(f) Other transactions within the FundsApart from those details disclosed in this note, no key management personnel of the Responsible Entity has entered into a material contract with the Funds since the end of the previous financial year and there were no material contracts involving directors’ interest subsisting at year end.

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16. Reconciliation of profit/(loss) to net cash inflow/(outflow) from operating activities

(a) Reconciliation of profit/(loss) to net cash inflow/(outflow) from operating activities


Fund (Hedged)


Fund (Hedged)



(Hedged)

2016 2015 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Profit/(loss) for the year – – – – – – – –

Increase/(decrease) in net assets attributable to unitholders 246,081 104,371 57,111 48,486 (258,854) 2,479,465 (209,260) 342,549

Distributions paid and payable 45,107 52,106 50,428 – 417,221 693,355 284,374 –

Proceeds from sale of financial instruments held at fair value through profit or loss 1,740,112 1,060,990 1,186,846 426,345 5,498,187 1,637,884 3,662,579 2,419,914

Purchases of financial instruments held at fair value through profit or loss (1,261,769) (1,082,927) (830,408) (703,777) (2,164,016) (1,754,898) (3,496,406) (2,956,480)

Net gains/(losses) on financial instruments held at fair value through profit or loss (298,980) (163,692) (112,473) (52,907) 112,566 (2,882,034) 69,793 (128,836)

Net change in receivables 111 (146) 44 (80) 3,250 (8,688) 78,667 (113,150)

Net change in payables (50) (17) (70) 94 (541) 471 128 34

Non–cash items – – – – (4,718) (12,992) (60,703) (99,566)

Net cash inflow/(outflow) from operating activities 470,612 (29,315) 351,478 (281,839) 3,603,095 152,563 329,172 (535,535)

Vanguard Emerging Markets Shares Index

Fund


Index Fund


2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000

Profit/(loss) for the year – – – – – –

Increase/(decrease) in net assets attributable to unitholders (192,452) 179,226 219,402 239,960 137,943 74,045

Distributions paid and payable 58,096 31,242 139,212 89,517 83,499 –

Proceeds from sale of financial instruments held at fair value through profit or loss 499,185 201,027 611,971 381,872 939,381 468,193

Purchases of financial instruments held at fair value through profit or loss (188,418) (201,281) (553,951) (670,495) (818,621) (763,463)

Net gains/(losses) on financial instruments held at fair value through profit or loss 162,684 (178,672) (295,664) (277,527) (131,426) (12,543)

Net change in receivables 3,071 (4,074) (597) (2,435) (21,350) (27,441)

Net change in payables (220) 85 48 199 6 (7)

Non–cash items (4,267) (1,963) (300) (75) (69,109) (34,372)

Net cash inflow/(outflow) from operating activities 337,679 25,590 120,121 (238,984) 120,323 (295,588)

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16. Reconciliation of profit/(loss) to net cash inflow/(outflow) from operating activities (continued)

(a) Reconciliation of profit/(loss) to net cash inflow/(outflow) from operating activities (continued)

Vanguard International Small Companies Index

Fund


Fund (Hedged)


Index Fund


Index Fund (Hedged)

2016 2015 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Profit/(loss) for the year – – – – – – – –

Increase/(decrease) in net assets attributable to unitholders (25,720) 75,493 (26,529) 16,730 11,548 7,430 2,217 (263)

Distributions paid and payable 20,563 42,935 18,143 – 6,521 10,679 885 482

Proceeds from sale of financial instruments held at fair value through profit or loss 335,223 104,842 197,006 46,665 24,299 77,574 20,032 8,112

Purchases of financial instruments held at fair value through profit or loss (95,854) (145,851) (79,890) (84,839) (41,373) (105,038) (27,375) (24,924)

Net gains/(losses) on financial instruments held at fair value through profit or loss 12,705 (110,702) 11,148 (2,600) (13,867) (15,025) (1,782) 1,137

Net change in receivables 318 (326) 10,864 (9,366) (78) 30 (179) (480)

Net change in payables (81) 52 (3) 1 9 19 – –

Non–cash items (445) (624) (878) (4,819) (66) (35) (592) (888)

Net cash inflow/(outflow) from operating activities 246,709 (34,181) 129,861 (38,228) (13,007) (24,366) (6,794) (16,824)

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16. Reconciliation of profit/(loss) to net cash inflow/(outflow) from operating activities (continued)

(b) Non–cash financing activities


Fund (Hedged)


Fund (Hedged)


Index Fund


2016 2015 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

During the year, the following distribution payments were satisfied by the issue of units under the distribution reinvestment plan 39,129 – – 22,842 600,579 – – 49,825

During the year, the following redemptions satisfied the issue of securities – Inspecies amount – (221,239) – – – (322,070) – –

Vanguard Emerging Markets Shares Index

Fund


Index Fund


2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000

During the year, the following distribution payments were satisfied by the issue of units under the distribution reinvestment plan 16,500 20,195 87,187 43,842 – 12,073

During the year, the following redemptions satisfied the issue of securities – Inspecies amount – – – – – –


Fund


Fund (Hedged)


Index Fund


Index Fund (Hedged)

2016 2015 2016 2015 2016 2015 2016 2015

$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

During the year, the following distribution payments were satisfied by the issue of units under the distribution reinvestment plan 41,147 14,966 – – 2,394 2,715 – 624

During the year, the following redemptions satisfied the issue of securities – Inspecies amount – – – – – – – –

As described in note 2(i), non-distributable income is included in net assets attributable to unitholders. The change in this amount each year (as reported in (a) above) represents a

non-cash financing cost as it is not settled in cash until such time as it becomes distributable (i.e. taxable).

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17. Segment informationThe Funds are organised into one main segment which operates solely in the business of investment management within Australia. Consequently, no segment reporting is provided in the Funds’ financial statements.

Geographical exposuresWhile the Funds operate from Australia only (the geographical segment), some Funds have investment exposures in different countries. The geographic locations and exposures are outlined below.

Vanguard International Fixed Interest Index Fund (Hedged) Vanguard International Credit Securities Index Fund (Hedged)

2016 2015 2016 2015

Total Assets

Percentage of total Assets

Total Assets


Total Assets


Total Assets


Country $'000 % $'000 % $'000 % $'000 %

North America 799,721 28.5 874,949 29.9 581,824 46.0 701,355 46.6

Europe ex–United Kingdom 718,346 25.6 828,129 28.3 287,117 22.7 447,000 29.7

United Kingdom 210,453 7.5 239,953 8.2 64,506 5.1 84,283 5.6

Japan 867,066 30.9 749,120 25.6 74,625 5.9 75,253 5.0

Asia ex–Japan 81,375 2.9 76,083 2.6 24,032 1.9 19,566 1.3

Other 89,793 3.2 90,714 3.1 198,579 15.7 138,465 9.2

Australia 39,285 1.4 67,304 2.3 34,150 2.7 39,131 2.6

Total 2,806,039 100.0 2,926,250 100.0 1,264,833 100.0 1,505,052 100.0


2016 2015

Total Assets


Total Assets


Country $'000 % $'000 %

North America 7,836,478 65.0 9,679,719 62.9

Europe ex–United Kingdom 1,953,091 16.2 2,739,253 17.8

United Kingdom 916,265 7.6 1,246,514 8.1

Japan 1,060,938 8.8 1,400,405 9.1

Asia ex–Japan 217,010 1.8 292,392 1.9

Other 72,337 0.6 30,778 0.2

Australia – – – –

Total 12,056,119 100.0 15,389,062 100.0

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17. Segment information (continued)

Geographical exposures (continued)

Vanguard International Shares Index Fund (Hedged) Vanguard Emerging Markets Shares Index Fund

2016 2015 2016 2015

Total Assets


Total Assets


Total Assets


Total Assets


Country $'000 % $'000 % $'000 % $'000 %

North America 3,119,962 65.0 3,224,480 62.9 – – – –

Europe ex–United Kingdom 787,190 16.4 912,492 17.8 – – – –

United Kingdom 364,796 7.6 415,235 8.1 – – – –

Japan 422,395 8.8 466,499 9.1 – – – –

Pacific ex–Japan 86,399 1.8 97,401 1.9 – – – –

Asia – – – – 726,369 70.3 1,030,326 68.5

Latin America – – – – 96,092 9.3 213,586 14.2

Africa – – – – 75,427 7.3 118,826 7.9

Europe – – – – 11,366 1.1 112,809 7.5

Middle East 14,400 0.3 10,253 0.2 – – 28,578 1.9

Other 4,800 0.1 – – 123,989 12.0 – –

Australia – – – – – – – –

Total 4,799,942 100.0 5,126,360 100.0 1,033,243 100.0 1,504,125 100.0

Vanguard International Property Securities Index Fund Vanguard International Property Securities Index Fund (Hedged)

2016 2015 2016 2015

Total Assets


Total Assets


Total Assets


Total Assets


Country $'000 % $'000 % $'000 % $'000 %

North America 1,478,897 71.0 1,264,293 69.1 980,065 71.0 875,957 69.1


United Kingdom 114,562 5.5 148,202 8.1 75,921 5.5 102,681 8.1

Japan 170,802 8.2 129,906 7.1 113,191 8.2 90,004 7.1

Pacific ex–Japan 81,235 3.9 84,164 4.6 53,835 3.9 58,313 4.6

Other 2,083 0.1 – – 1,380 0.1 – –

Total 2,082,953 100.0 1,829,657 100.0 1,380,374 100.0 1,267,667 100.0

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17. Segment information (continued)

Geographical exposures (continued)

Vanguard International Small Companies Index Fund Vanguard International Small Companies Index Fund (Hedged)

2016 2015 2016 2015

Total Assets


Total Assets


Total Assets


Total Assets


Country $'000 % $'000 % $'000 % $'000 %

North America 207,757 63.4 372,796 63.9 34,388 63.4 127,315 63.9


United Kingdom 22,283 6.8 49,589 8.5 3,688 6.8 16,935 8.5

Japan 41,290 12.6 67,092 11.5 6,834 12.6 22,913 11.5

Pacific ex–Japan 5,899 1.8 14,002 2.4 976 1.8 4,782 2.4

Other 5,899 1.8 2,334 0.4 976 1.8 797 0.4

Australia – – – – – – – –

Total 327,695 100.0 583,405 100.0 54,239 100.0 199,241 100.0



2016 2015 2016 2015

Total Assets


Total Assets


Total Assets


Total Assets


Country $'000 % $'000 % $'000 % $'000 %

North America 130,237 72.4 103,792 69.7 27,054 72.4 18,767 69.7

Europe ex-United Kingdom 10,973 6.1 8,935 6.0 2,279 6.1 1,616 6.0

United Kingdom 9,894 5.5 9,530 6.4 2,055 5.5 1,723 6.4

Japan 16,010 8.9 16,827 11.3 3,326 8.9 3,043 11.3

Pacific ex-Japan 7,195 4.0 5,361 3.6 1,495 4.0 969 3.6

Australia 5,217 2.9 4,467 3.0 1,084 2.9 808 3.0

Other 360 0.2 – – 75 0.2 – –

Total 179,885 100.0 148,913 100.0 37,368 100.0 26,926 100.0

The above disclosures have been prepared on the basis of the Funds’ direct investments and not on a look-through basis for investments held indirectly through unit trusts, except for Vanguard International Shares Index Fund (Hedged), Vanguard International Property Securities Index Fund (Hedged), Vanguard International Small Companies Index Fund (Hedged) and Vanguard Global Infrastructure Index Fund (Hedged) which are based on the holding of the underlying Vanguard Funds.

The above investments are classified on the balance sheet as at fair value through profit or loss. F

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18. Dividend and Distribution Income

Dividend and Distribution income is net of foreign witholding taxes for the following:

2016 2015

$'000 $'000

Vanguard International Property Securities Index Fund 11,495 8,603

Vanguard International Shares Index Fund 39,613 39,519

Vanguard Emerging Markets Shares Index Fund 3,942 3,927

Vanguard Global Infrastructure Index Fund 696 520

Vanguard International Small Companies Index Fund 1,065 1,146

19. Events occurring after the reporting period

There are no significant events that have occurred since balance date which would impact on the financial position of the Funds as disclosed in the balance sheet as at 30 June 2016 or on the results and cash flows of the Funds for the year ended on that date.

Investors should be aware that markets and currencies can be volatile, therefore affecting the returns of an investment portfolio. You can obtain up to date fund performance and unit price information by visiting the Vanguard website at www.vanguard.com.au.

20. Contingent assets, liabilities and commitments

There are no outstanding contingent assets, liabilities or commitments as at 30 June 2016 and 30 June 2015 for the Funds.

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Directors' Declaration

103

Directors’ DeclarationIn the opinions of the directors of the Responsible Entity:

(a) the financial statements and notes set out on pages 13 to 102 are in accordance with the Corporations Act 2001, including:

(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

(ii) giving a true and fair view of each Fund’s financial position as at 30 June 2016 and of its performance for the financial year ended on that date; and

(b) there are reasonable grounds to believe that each Fund will be able to pay its debts as and when they become due and payable.

(c) Note 2 (a) confirms that the financial statements comply with International Financial Reporting Standards as issued by the International Accounting Standards Board.

This declaration is made in accordance with a resolution of the directors.

C Kelton Managing Director Melbourne 30 August 2016

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Independent Auditor's Report

104

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105

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This page has been left intentionally blank.

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Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFSL 227263) (“Vanguard”) is the product issuer and responsible entity of the interests in the Vanguard Wholesale Funds. Interests in the Vanguard Wholesale Funds are offered through a Product Disclosure Statement (“PDS”) only. You can access the relevant PDS at www.vanguard.com.au or by calling 1300 655 102.

Past performance is not an indication of future performance. In preparing this Annual Report, individual circumstances, for example tax implications, have not been taken into account and it may, therefore, not be applicable to an individual’s situation. Before making an investment decision, you should consider your circumstances and whether the information contained in the Annual Report is applicable to your situation. This Annual Report was prepared in good faith and we accept no liability for any errors or omissions. All marks are the exclusive property of their respective owners.

The funds or securities referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such funds or securities. The PDS contains a more detailed description of the limited relationship MSCI has with Vanguard and any related funds.

London Stock Exchange Group companies include FTSE International Limited (“FTSE”), Frank Russell Company (“Russell”), MTS Next Limited (“MTS”), and FTSE TMX Global Debt Capital Markets Inc. (“FTSE TMX”). All rights reserved. “FTSE®”,

“Russell®”, “MTS®”, “FTSE TMX®” and “FTSE Russell” and other service marks and trademarks related to the FTSE or Russell indexes are trademarks of the London Stock Exchange Group companies and are used by FTSE, MTS, FTSE TMX and Russell under licence. All information is provided for information purposes only. No responsibility or liability can be accepted by the London Stock Exchange Group companies nor its licensors for any errors or for any loss from use of this publication. Neither the London Stock Exchange Group companies nor any of their licensors make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the FTSE Indices or the fitness or suitability of the Indices for any particular purpose to which they might be put.

The funds are not sponsored, endorsed, sold or promoted by Barclays Capital Inc. or its affiliates (“Barclays”). Barclays does not make any representation regarding the advisability of investing in the funds or the advisability of investing in securities generally. Barclays’ only relationship with Vanguard is the licensing of the Index which is determined, composed and calculated by Barclays without regard to Vanguard or the funds. Barclays has no obligation to take the needs of Vanguard or the owners of the fund into consideration in determining, composing or calculating the Index. Barclays has no obligation or liability in connection with administration, marketing or trading of these funds.

©2016 Vanguard Investments Australia Ltd. All rights reserved.

Responsible EntityVanguard Investments Australia Ltd ABN 72 072 881 086 AFSL 227263

Level 34 Freshwater Place 2 Southbank Boulevard Southbank Vic 3006

Telephone: (03) 8888 3888 Facsimile: 1300 765 712

vanguard.com.au

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Exchange Traded Funds For personal use only · 2016. 9. 7. · With more than $4.6 trillion in...

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Transcript of Exchange Traded Funds For personal use only · 2016. 9. 7. · With more than $4.6 trillion in...