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Annual Report for the Vanguard® Exchange Traded Funds

PLEASE CROSS RELEASE TO ALL BELOW COMPANY CODES

6 September 2017 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 2017. 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 © 2017 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 2017

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 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 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 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 Minimum Volatility Fund ARSN 165 787 708 ABN 80 259 391 198

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

Vanguard International Shares Select Exclusions Index Fund ARSN 163 045 739 ABN 45 215 187 041

Vanguard Global Value Equity Fund ARSN 613 053 062 ABN 71 928 129 734

Vanguard Global Quantitative Equity Fund ARSN 608 272 626 ABN 90 171 261 300

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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Vanguard Wholesale Funds

3

ContentsAbout Vanguard 4

Directors’ Report 5

Auditor’s Independence Declaration 14

Statement of comprehensive income 15

Balance sheet 18

Statement of changes in equity 21

Statement of cash flows 22

Notes to the financial statements 25

Directors’ Declaration 123

Independent Auditor’s Report 124

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About Vanguard

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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 AUD $5.7 trillion in assets under management as of 30 June 2017, including more than AUD $1 trillion 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

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Directors’ Report The Responsible Entity of Vanguard Wholesale Funds (the “Funds”) for the year ended 30 June 2017 was Vanguard Investments Australia Ltd (the “Responsible Entity”).

The directors of Vanguard Investments Australia Ltd present their report together with the financial statements for the year ended 30 June 2017.

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 Fund Constitutions.

The Vanguard International Shares Select Exclusions Index Fund inception date was 9 December 2016 and commenced trading on 13 December 2016.

The Vanguard Global Value Equity Fund inception date was 8 September 2016 and commenced trading on 8 September 2016.

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 (ETFs) 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 the Responsible Entity during the year or since the end of the year and up to the date of this report:

• J M Norris• G W Reed (Resigned 31 July 2017)• C R Comegys (Resigned 31 August 2017)• C Kelton• M Lovett (Resigned 6 December 2016)• L Carr (Appointed 6 December 2016)• C Lui (Appointed 31 August 2017)

Review and results of operationsThe Funds invest in listed equity securities, listed unit trusts, listed property trusts, unlisted unit trusts, fixed interest securities, money market securities, derivatives and cash and cash equivalents. The investment policy of the Funds continues to be in accordance with the provisions of the Fund Constitutions.

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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 Shares

Index Fund

Vanguard International Shares Index Fund

(Hedged)

Vanguard Emerging Markets Shares

Index Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

Operating profit/(loss) before finance costs attributable to unitholders ($’000) (33,721) 291,188 32,922 107,539 1,663,220 158,367 739,939 75,114 185,599 (134,356)

Distributions - Ordinary Class

Distribution paid and payable ($'000) 194,049 44,745 90,231 49,960 723,509 405,281 – – 44,159 58,096

Distribution (cents per unit) 8.5258 2.2174 7.9334 5.2422 12.8105 6.1873 – 2.2174 7.6663 9.0936

Distributions - ETF Class

Distribution paid and payable ($'000) 5,855 362 5,849 468 13,740 8,301 – – – –

Distribution (cents per unit) 354.6941 103.3802 332.7852 212.8053 185.4586 229.3959 – – – –

Distributions - B Class

Distribution paid and payable ($'000) – – – – 5,947 3,639 – – – –

Distribution (cents per unit) – – – – 184.3984 247.0117 – – – –

Distributions - AUD Class

Distribution paid and payable ($'000) – – – – – – 570,546 258,746 – –

Distribution (cents per unit) – – – – – – 15.6487 7.4172 – –

Distributions - NZD Class

Distribution paid and payable ($'000) – – – – – – 49,464 25,628 – –

Distribution (cents per unit) – – – – – – 18.2514 2.0318 – –

Vanguard International Property Securities

Index Fund

Vanguard International Property Securities Index Fund (Hedged)

Vanguard International Small Companies Index

Fund


Fund (Hedged)

Vanguard Global Minimum Volatility

Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

Operating profit/(loss) before finance costs attributable to unitholders ($’000) (97,653) 358,614 8,938 221,442 55,999 (5,157) 11,643 (8,386) 2,583 1,608


Distribution paid and payable ($'000) 143,953 139,212 307,250 83,499 27,903 20,563 6,880 18,143 1,127 460

Distribution (cents per unit) 8.5077 8.3750 19.3199 6.4231 10.6498 8.9032 9.6244 42.9946 5.1684 2.3019

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Directors’ Report

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Results (continued)The results of the operations of the Funds were as follows:

Vanguard Global Infrastructure Index

Fund


Fund (Hedged)

Vanguard International Shares Select

Exclusions Index Fund

Vanguard Global Value Equity Fund

Vanguard Global Quantitative Equity Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

Operating profit/(loss) before finance costs attributable to unitholders ($’000) 12,821 18,069 6,071 3,102 53,242 – 2,107 – 2,815 (49)


Distribution paid and payable ($'000) 17,128 6,521 7,110 885 – – 716 – 854 75

Distribution (cents per unit) 7.5819 4.1300 9.6155 2.2415 – – 4.7946 – 5.5684 0.5163

Distributions - AUD Unhedged Class

Distribution paid and payable ($'000) – – – – 3,220 – – – – –

Distribution (cents per unit) – – – – 1.3650 – – – – –

Distributions - NZD Hedged Class

Distribution paid and payable ($'000) – – – – – – – – – –

Distribution (cents per unit) – – – – – – – – – –

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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 2017 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.

2017 2016 2015 2014 2013

% % % % %

Vanguard International Fixed Interest Index Fund (Hedged)

Capital growth (7.92) 8.60 4.11 6.83 (0.61)

Distribution of income 6.63 1.86 1.93 – 4.71

Total return (1.29) 10.46 6.04 6.83 4.10

Benchmark

Barclays Global Treasury Index (Hedged to AUD) (0.97) 10.84 6.31 7.18 4.40

Vanguard International Credit Securities Index Fund (Hedged)

Capital growth (4.04) 3.50 4.38 6.09 2.67

Distribution of income 6.52 4.41 – 2.31 2.18

Total return 2.48 7.91 4.38 8.40 4.85

Benchmark

Barclays Global Aggregate Government-Related and Corporate Index (Hedged to AUD) 2.83 8.21 4.70 8.94 5.40


Capital growth 7.62 (2.76) 19.57 16.85 30.09

Distribution of income 7.19 3.34 5.72 3.65 3.17

Total return 14.81 0.58 25.29 20.50 33.26

Benchmark

MSCI World ex-Australia Index (with net dividends reinvested) in Australian dollars 14.73 0.40 25.18 20.41 33.10

Vanguard International Shares Index Fund (Hedged) - AUD Class

Capital growth 0.15 (9.91) 10.98 24.05 19.87


Total return 20.55 (1.27) 10.98 24.65 24.63

Benchmark

MSCI World ex-Australia Index (with net dividends reinvested) hedged into Australian dollars 20.53 (1.43) 10.94 24.64 24.56

Vanguard International Shares Index Fund (Hedged) - NZD Class

Capital growth 5.43 (2.75) 11.38 14.27 12.58


Total return 20.82 (1.18) 11.38 24.33 23.68

Benchmark

MSCI World ex-Australia Index (with net dividends reinvested) hedged into New Zealand dollars 20.99 1.14 11.66 24.51 23.69

Vanguard Emerging Markets Shares Index Fund

Capital growth 14.75 (14.28) 13.69 7.84 12.15


Total return 19.52 (9.61) 16.15 10.70 14.72

Benchmark

MSCI Emerging Markets Index (with net dividends reinvested) in Australian dollars 20.12 (9.22) 16.51 10.86 15.19

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Performance (continued)

2017 2016 2015 2014 2013

% % % % %

Vanguard International Property Securities Index Fund

Capital growth (11.64) 12.65 17.21 8.06 20.33


Total return (4.71) 20.54 23.31 12.04 24.41

Benchmark

FTSE EPRA/NAREIT Developed ex-Australia Index (with net dividends reinvested), in Australian dollars (4.83) 20.44 23.14 11.90 24.25


Capital growth (19.85) 10.93 8.01 14.28 11.49


Total return (0.14) 18.17 8.01 16.27 15.40

Benchmark

FTSE EPRA/NAREIT Developed ex-Australia Rental Index (with net dividends reinvested), Australian Dollar Hedged (0.12) 18.27 8.02 16.30 15.48

Vanguard International Small Companies Index Fund

Capital growth 9.59 (7.04) 15.95 19.12 34.97


Total return 17.42 (1.01) 25.20 23.42 37.69

Benchmark

MSCI World ex-Australia Small Cap Index (with net dividends reinvested) in Australian dollars 17.52 (0.94) 25.44 23.74 37.89

Vanguard International Small Companies Index Fund (Hedged)

Capital growth 12.21 (36.33) 10.53 28.24 27.05

Distribution of income 11.54 32.51 – – 2.34

Total return 23.75 (3.82) 10.53 28.24 29.39

Benchmark

MSCI World ex-Australia Small Cap Index (with net dividends reinvested) hedged into Australian dollars 23.88 (3.52) 10.81 28.57 29.78

Vanguard Global Minimum Volatility Fund

Capital growth 7.28 6.01 – – –

Distribution of income 4.88 2.30 – – –

Total return 12.16 8.31 – – –

Benchmark

FTSE Global All Cap Index (AUD hedged) 20.53 (2.13) – – –

Vanguard Global Infrastructure Index Fund

Capital growth (1.43) 7.36 6.66 12.92 19.75


Total return 5.59 11.57 16.31 17.49 23.87

Benchmark

FTSE Developed Core Infrastructure Index (with net dividends reinvested), in Australian dollars 5.52 11.69 16.38 15.75 24.62

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

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Performance (continued)

2017 2016 2015 2014 2013

% % % % %

Vanguard Global Infrastructure Index Fund (Hedged)

Capital growth 0.14 6.32 (1.88) 17.04 8.81


Total return 10.75 8.94 3.09 22.04 16.43

Benchmark

FTSE Developed Core Infrastructure Hedged into Australian Dollars Index (with net dividends reinvested) 10.69 9.34 3.47 19.88 17.43

Vanguard International Shares Select Exclusions Index Fund

Capital growth 5.31 – – – –

Distribution of income 1.38 – – – –

Total return 6.69 – – – –

Benchmark*

MSCI World ex Australia, ex Tobacco, ex Controversial Weapons, ex Nuclear Weapons (with net dividends reinvested) in Australian dollars Index 6.63 – – – –

Vanguard International Shares Select Exclusions Index Fund - NZD Hedged


Distribution of income – – – – –


Benchmark*

MSCI World ex Australia, ex Tobacco, ex Controversial Weapons, ex Nuclear Weapons (with net dividends reinvested) hedged into New Zealand dollars Index 8.37 – – – –



Distribution of income 4.80 – – – –


Benchmark**

FTSE Developed All-Cap in Australian Dollars Index 11.95 – – – –


Capital growth 13.74 (0.69) – – –

Distribution of income 5.71 0.52

Total return 19.45 (0.17) – – –

Benchmark

MSCI World ex Australia (with net dividends reinvested) in AUD 14.73 2.87 – – –

* These results are from inception date 13 December 2016 to reporting date.

** These results are from inception date 8 September 2016 to reporting date.

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

At 30 June Period high Period low

2017 2016 2017 2016 2017 2016

$ $ $ $ $ $

Vanguard International Fixed Interest Index Fund (Hedged) 1.2078 1.3166 1.3031 1.3167 1.1999 1.1878

Vanguard International Fixed Interest Index Fund (Hedged) (ETF Class) 49.3392 53.9358 53.2603 53.9419 49.0137 50.0000

Vanguard International Credit Securities Index Fund (Hedged) 1.2056 1.2787 1.2537 1.2787 1.1887 1.1820

Vanguard International Credit Securities Index Fund (Hedged) (ETF Class) 50.1514 53.1955 52.1022 53.1955 49.4432 49.8533

Vanguard International Shares Index Fund 2.0440 1.8439 2.1314 2.0009 1.7648 1.7127

Vanguard International Shares Index Fund (ETF Class) 61.8456 56.1684 64.4511 61.0054 53.3715 52.1722

Vanguard International Shares Index Fund (B Class) 61.4148 55.9576 64.0021 60.7824 53.0004 51.9805

Vanguard International Shares Index Fund (Hedged) - AUD Class 0.8888 0.8479 0.9086 0.8925 0.7697 0.7430

Vanguard International Shares Index Fund (Hedged) - NZD Class * 1.4846 1.2782 1.5066 1.3441 1.2515 1.1190

Vanguard Emerging Markets Shares Index Fund 1.9643 1.7334 2.0278 1.9742 1.6284 1.5232

Vanguard International Property Securities Index Fund 1.1420 1.2819 1.2608 1.2863 1.0698 1.1005

Vanguard International Property Securities Index Fund (Hedged) 0.9491 1.0461 1.0285 1.0461 0.8954 0.8582

Vanguard International Small Companies Index Fund 1.5956 1.4467 1.6496 1.5468 1.3457 1.2927

Vanguard International Small Companies Index Fund (Hedged) 1.0130 1.2692 1.0191 1.3426 0.8330 1.0773

Vanguard Global Minimum Volatility Fund 1.1872 1.0811 1.2080 1.0811 1.0331 0.9327

Vanguard Global Infrastructure Index Fund 1.1352 1.1163 1.2021 1.1163 1.0071 0.9855

Vanguard Global Infrastructure Index Fund (Hedged) 1.0009 0.9281 1.0275 0.9281 0.8653 0.7733

Vanguard International Shares Select Exclusions Index Fund 1.0620 – 1.1063 – 0.9867 –

Vanguard International Shares Select Exclusions Index Fund - NZD Hedged * 1.0819 – 1.0965 – 0.9923 –

Vanguard Global Value Equity Fund 1.1528 – 1.1811 – 0.9659 –

Vanguard Global Quantitative Equity Fund 1.1688 0.9973 1.2115 1.0659 0.9758 0.9400

* All information is expressed in New Zealand dollars.

Significant changes in state of affairsThe Vanguard International Shares Select Exclusions Index Fund inception date was 9 December 2016 and commenced trading on 13 December 2016.

The Vanguard Global Value Equity Fund inception date was 8 September 2016 and commenced trading on 8 September 2016.

In the opinion of the directors, there were no other significant changes in the state of affairs of the Funds that occurred during the financial year. F

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Matters subsequent to the end of the financial year• Glenn Reed resigned as a Director of Vanguard Investments Australia Ltd on 31 July 2017.• Rodney Comegys resigned as a Director of Vanguard Investments Australia Ltd on 31 August 2017.• Cynthia Lui was appointed as a Director of Vanguard Investments Australia Ltd on 31 August 2017.

No matter or circumstance has arisen since 30 June 2017 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.

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 Fund Constitutions.

The results of the Funds’ operations will be affected by a number of factors, including the performance of investment markets in which the Funds invest. 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.

Indemnity and insurance of officers and auditorsNo 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.

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 the Funds’ property during the year are disclosed in note 14 of the financial statements.

No fees were paid out of the 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 14 of the financial statements.

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Interests in the FundsThe movement in units on issue in the Funds during the year is disclosed in note 9 of the financial statements.

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

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

Rounding of amounts to the nearest thousand dollarsAmounts in the directors’ report have been rounded to the nearest thousand dollars in accordance with ASIC Corporations (Rounding in Financial/Directors’ Report) Instrument 2016/191, 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 14.

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

C Kelton Managing Director Melbourne 31 August 2017

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Auditor's independence declaration

14

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Statement of comprehensive income

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Statement of comprehensive incomeFor the year ended 30 June 2017


Fund (Hedged)


Index Fund (Hedged)


Index Fund


(Hedged)


Index Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Investment income

Interest income – – – – 203 301 1,503 2,305 21 40

Dividend income – – – – 265,918 285,006 – – 25,436 34,909

Distribution income – – – – 10,759 11,507 221,611 145,744 567 581

Net gains/(losses) on financial instruments held at fair value through profit or loss 5 (26,464) 298,980 37,266 112,473 1,404,837 (112,566) 519,098 (69,793) 165,546 (162,684)

Other operating income 87 33 337 87 4,986 3,896 – 6 54 91

Total net investment income/(loss) (26,377) 299,013 37,603 112,560 1,686,703 188,144 742,212 78,262 191,624 (127,063)

Expenses

Responsible Entity's fees 14 7,241 7,706 4,534 4,982 21,915 23,647 2,119 2,993 5,818 6,954

Custody fees 103 102 39 38 71 89 154 143 61 92

Transaction costs – – – – 203 133 – – 36 48

Other operating expenses – 17 108 1 1,294 5,908 – 12 110 199

Total operating expenses 7,344 7,825 4,681 5,021 23,483 29,777 2,273 3,148 6,025 7,293

Operating profit/(loss) (33,721) 291,188 32,922 107,539 1,663,220 158,367 739,939 75,114 185,599 (134,356)

Financing costs attributable to unitholders

Distributions to unitholders 10 (199,904) (45,107) (96,080) (50,428) (743,196) (417,221) (620,010) (284,374) (44,159) (58,096)

(Increase)/decrease in net assets attributable to unitholders 9 233,625 (246,081) 63,158 (57,111) (920,024) 258,854 (119,929) 209,260 (141,440) 192,452

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

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

Total comprehensive income for the year – – – – – – – – – –

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

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Statement of comprehensive income (continued)

For the year ended 30 June 2017


Index Fund


Vanguard International Small Companies

Index Fund


Index Fund (Hedged)


Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Investment income

Interest income 73 69 20 – 7 8 – – – –

Dividend income 4,182 2,974 – – 5,122 7,380 – – 502 557

Distribution income 62,089 67,926 105,386 90,451 1,552 1,780 4,619 2,827 81 97

Net gains/(losses) on financial instruments held at fair value through profit or loss 5 (155,743) 295,664 (95,997) 131,426 50,918 (12,705) 7,066 (11,148) 2,140 1,063

Other operating income 33 1,534 – 3 127 401 – – – 6

Total net investment income/(loss) (89,366) 368,167 9,409 221,880 57,726 (3,136) 11,685 (8,321) 2,723 1,723

Expenses

Responsible Entity's fees 14 7,882 8,163 454 406 1,392 1,760 20 33 95 87

Custody fees 51 43 17 25 35 50 22 27 40 20

Transaction costs 100 55 – – 15 10 – 5 2 6

Other operating expenses 254 1,292 – 7 285 201 – – 3 2

Total operating expenses 8,287 9,553 471 438 1,727 2,021 42 65 140 115

Operating profit/(loss) (97,653) 358,614 8,938 221,442 55,999 (5,157) 11,643 (8,386) 2,583 1,608


Distributions to unitholders 10 (143,953) (139,212) (307,250) (83,499) (27,903) (20,563) (6,880) (18,143) (1,127) (460)

(Increase)/decrease in net assets attributable to unitholders 9 241,606 (219,402) 298,312 (137,943) (28,096) 25,720 (4,763) 26,529 (1,456) (1,148)





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17

Statement of comprehensive income (continued)



Fund


Fund (Hedged)





30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Investment income

Interest income 10 6 5 – 148 – 1 – – –

Dividend income 6,752 4,627 – – 9,534 – 289 – 366 188

Distribution income 561 386 4,685 1,341 344 – 14 – 5 4

Net gains/(losses) on financial instruments held at fair value through profit or loss 5 6,365 13,867 1,411 1,782 44,294 – 1,884 – 2,547 (202)

Other operating income 245 23 – – 59 – 1 – – –

Total net investment income/(loss) 13,933 18,909 6,101 3,123 54,379 – 2,189 – 2,918 (10)

Expenses

Responsible Entity's fees 14 1,071 797 19 10 947 – 54 – 66 28

Custody fees 24 18 11 11 62 – 23 – 34 9

Transaction costs 16 3 – – 31 – 5 – 2 2

Other operating expenses 1 22 – – 97 – – – 1 –

Total operating expenses 1,112 840 30 21 1,137 – 82 – 103 39

Operating profit/(loss) 12,821 18,069 6,071 3,102 53,242 – 2,107 – 2,815 (49)


Distributions to unitholders 10 (17,128) (6,521) (7,110) (885) (3,220) – (716) – (854) (75)

(Increase)/decrease in net assets attributable to unitholders 9 4,307 (11,548) 1,039 (2,217) (50,022) – (1,391) – (1,961) 124





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Balance sheet

18

Balance sheetFor the year ended 30 June 2017


Fund (Hedged)


Index Fund (Hedged)


Index Fund


(Hedged)


Index Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Assets

Cash and cash equivalents 11 19,318 8,630 22,812 13,765 282,304 112,149 13,441 13,369 13,754 4,945

Margin accounts 779 1,301 753 873 8,542 16,311 3,163 10,335 763 1,825

Receivables 9,356 15,582 2,856 304 33,468 69,531 2,124 1,210 1,061 1,026

Accrued income – 15 43 68 13,545 14,963 164,580 85,042 4,578 6,372

Due from brokers – receivable for securities sold 31,533 11,700 7,484 5,006 – 51 30,714 9,437 41 10,145

Financial assets held at fair value through profit or loss 6 3,230,134 2,768,811 1,557,833 1,244,817 11,778,124 11,843,114 3,519,275 4,680,549 1,136,674 1,008,930

Total assets 3,291,120 2,806,039 1,591,781 1,264,833 12,115,983 12,056,119 3,733,297 4,799,942 1,156,871 1,033,243

Liabilities

Margin accounts 71,818 35,108 – – – – 82,898 91,980 – –

Distribution payable 10 40,580 45,107 36,673 50,428 563,256 237,920 453,028 284,374 29,545 38,998

Payables 1,308 1,495 419 12,076 35,838 2,703 1,110 933 550 482

Due to brokers – payables for securities purchased 108,989 52,060 36,300 13,785 846 – – 60,094 – –

Financial liabilities held at fair value through profit or loss 7 3,133 43,020 9,431 7,723 1,086 601 54,085 80,966 11 2

Total liabilities (excluding net assets attributable to unitholders) 225,828 176,790 82,823 84,012 601,026 241,224 591,121 518,347 30,106 39,482

Net assets attributable to unitholders (liability) 9 3,065,292 2,629,249 1,508,958 1,180,821 11,514,957 11,814,895 3,142,176 4,281,595 1,126,765 993,761

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

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Balance sheet

19

Balance sheet (continued)



Index Fund



Index Fund


Index Fund (Hedged)


Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Assets

Cash and cash equivalents 11 30,670 5,987 2,579 2,434 3,853 (445) 933 701 245 25

Margin accounts – – – – 299 860 55 200 54 29

Receivables 2,714 14,566 675 260 2,354 231 113 28 324 17

Accrued income 6,813 6,364 77,512 62,034 509 454 4,028 1,949 65 69

Due from brokers – receivable for securities sold 121,468 32 10,525 – 196 15,525 1,144 14,274 43 –

Financial assets held at fair value through profit or loss 6 1,888,358 2,056,004 1,397,671 1,315,646 418,994 311,070 68,894 37,087 25,590 21,588

Total assets 2,050,023 2,082,953 1,488,962 1,380,374 426,205 327,695 75,167 54,239 26,321 21,728

Liabilities

Distribution payable 10 104,083 96,654 253,663 83,499 24,304 16,633 5,073 18,143 1,127 460

Payables 129,296 848 242 207 1,278 14,381 59 3 7 8

Due to brokers – payables for securities purchased 502 – – 12,588 62 – – – 277 –

Financial liabilities held at fair value through profit or loss 7 154 – 2,197 7,268 29 5 433 654 127 87

Total liabilities (excluding net assets attributable to unitholders) 234,035 97,502 256,102 103,562 25,673 31,019 5,565 18,800 1,538 555

Net assets attributable to unitholders (liability) 9 1,815,988 1,985,451 1,232,860 1,276,812 400,532 296,676 69,602 35,439 24,783 21,173


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Balance sheet

20

Balance sheet (continued)


Vanguard Global Infrastructure

Index Fund


Vanguard International Shares Select Exclusions

Index Fund


Vanguard Global Quantitative

Equity Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Assets

Cash and cash equivalents 11 2,241 463 139 38 21,845 – 247 – 572 15

Margin accounts – – – – 1,708 – 24 – 21 7

Receivables 1,105 545 96 1 3,282 – 10 – 19 10

Accrued income 750 558 3,697 750 892 – 19 – 20 22

Due from brokers – receivable for securities sold 7,284 – – – – – – – 80 85

Financial assets held at fair value through profit or loss 6 254,774 178,319 71,152 36,579 941,237 – 17,074 – 18,102 14,374

Total assets 266,154 179,885 75,084 37,368 968,964 17,374 18,814 14,513

Liabilities – –

Margin accounts – – – – 21,407 – – – – –

Distribution payable 10 13,489 3,707 6,958 885 2,425 – 645 – 626 75

Payables 144 73 3 1 202 – 5 – 5 5

Due to brokers – payables for securities purchased – 291 895 501 19,715 – – – 539 36

Financial liabilities held at fair value through profit or loss 7 – – 112 220 8,069 – 9 – 14 21

Total liabilities (excluding net assets attributable to unitholders) 13,633 4,071 7,968 1,607 51,818 659 1,184 137

Net assets attributable to unitholders (liability) 9 252,521 175,814 67,116 35,761 917,146 – 16,715 – 17,630 14,376


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Statement of changes in equity

21

Statement of changes in equityFor the year ended 30 June 2017


Fund (Hedged)


Index Fund (Hedged)


Index Fund


(Hedged)


Index Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Total equity at the beginning of the financial year


Other comprehensive income for the year – – – – – – – – – –

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

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

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


Index Fund



Fund


Fund (Hedged)


Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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








Fund


Fund (Hedged)





30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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







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.

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Statement of cash flows

22

Statement of cash flowsFor the year ended 30 June 2017


Fund (Hedged)


Index Fund (Hedged)


Index Fund


(Hedged)


Index Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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 801,241 1,740,112 844,663 1,186,846 3,982,216 5,498,187 2,578,226 3,662,579 141,869 499,185

Purchases of financial instruments held at fair value through profit or loss (1,255,235) (1,261,769) (1,098,507) (830,408) (2,490,201) (2,164,016) (866,463) (3,496,406) (88,726) (188,418)

Transaction costs on purchases of financial instruments held at fair value through profit or loss – – – – (203) (133) – – (36) (48)

Interest received – – – – 207 304 1,505 2,501 17 41

Dividends received – – – – 250,868 283,330 84 – 23,452 33,769

Distributions received – – – – 9,466 11,534 – 163,602 404 460

Other income received 195 144 408 131 4,988 4,074 – 6 62 155

Responsible Entity's fees paid (7,147) (7,757) (4,475) (5,053) (21,872) (24,188) (2,267) (2,954) (5,758) (7,174)

Operating expenses paid (5) (118) (145) (38) (1,365) (5,997) (130) (156) (171) (291)

Net cash inflow/(outflow) from operating activities 12(a) (460,951) 470,612 (258,056) 351,478 1,734,104 3,603,095 1,710,955 329,172 71,113 337,679

Cash flows from financing activities

Proceeds from applications by unitholders 1,011,492 679,318 547,740 328,613 3,507,467 3,319,686 882,176 1,280,048 127,447 191,985

Payments for redemptions by unitholders (480,782) (1,151,314) (254,662) (683,122) (4,986,107) (6,762,507) (2,421,911) (1,694,012) (165,592) (515,103)

Distributions paid from operating activities (59,719) (12,976) (25,934) – (85,391) (99,297) (171,667) – (23,980) (12,838)

Net cash inflow/(outflow) from financing activities 470,991 (484,972) 267,144 (354,509) (1,564,031) (3,542,118) (1,711,402) (413,964) (62,125) (335,956)

Net increase/(decrease) in cash and cash equivalents 10,040 (14,360) 9,088 (3,031) 170,073 60,977 (447) (84,792) 8,988 1,723

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

Effects of foreign currency exchange rate changes on cash and cash equivalents 648 2,496 (41) 355 82 1,122 519 3,251 (179) 5

Cash and cash equivalents at the end of the year 11 19,318 8,630 22,812 13,765 282,304 112,149 13,441 13,369 13,754 4,945

Non-cash financing activities 12(b) 144,712 39,129 83,901 – 332,469 600,579 279,689 – 29,632 16,500

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

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Statement of cash flows (continued)



Index Fund



Index Fund


Index Fund (Hedged)


Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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


Proceeds from sale of financial instruments held at fair value through profit or loss 822,915 611,971 861,150 939,381 88,715 335,223 42,412 197,006 10,093 8,773

Purchases of financial instruments held at fair value through profit or loss (928,191) (553,951) (977,455) (818,621) (129,403) (95,854) (51,554) (79,890) (11,860) (29,047)

Transaction costs on purchases of financial instruments held at fair value through profit or loss (100) (55) – – (15) (10) – – (2) (6)

Interest received 70 74 27 – 6 9 – – – –

Dividends received 3,263 3,103 – – 4,914 7,122 – – 492 493

Distributions received 60,353 66,905 – – 1,534 1,889 – 12,812 78 77

Other income received 34 1,534 – 3 127 423 – 1 – 6

Responsible Entity's fees paid (7,863) (8,115) (445) (425) (1,366) (1,842) (20) (36) (96) (79)

Operating expenses paid (305) (1,345) (18) (15) (322) (251) (22) (32) (43) (25)

Net cash inflow/(outflow) from operating activities 12(a) (49,824) 120,121 (116,741) 120,323 (35,810) 246,709 (9,184) 129,861 (1,338) (19,808)


Proceeds from applications by unitholders 990,069 581,537 756,182 287,741 105,731 73,847 36,991 19,682 2,260 20,025

Payments for redemptions by unitholders (885,052) (685,770) (610,456) (410,479) (64,622) (323,062) (9,435) (152,832) (866) –

Distributions paid from operating activities (28,331) (14,381) (28,840) – (814) (1,215) (18,136) – – –

Net cash inflow/(outflow) from financing activities 76,686 (118,614) 116,886 (122,738) 40,295 (250,430) 9,420 (133,150) 1,394 20,025

Net increase/(decrease) in cash and cash equivalents 26,862 1,507 145 (2,415) 4,485 (3,721) 236 (3,289) 56 217

Cash and cash equivalents at the beginning of the year 5,987 5,020 2,434 4,881 (445) 3,277 701 3,948 25 –

Effects of foreign currency exchange rate changes on cash and cash equivalents (2,179) (540) – (32) (187) (1) (4) 42 164 (192)

Cash and cash equivalents at the end of the year 11 30,670 5,987 2,579 2,434 3,853 (445) 933 701 245 25

Non cash financing activities 12(b) 108,193 87,187 108,246 – 19,418 41,147 1,815 – 460 –


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24

Statement of cash flows (continued)



Fund


Fund (Hedged)





30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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


Proceeds from sale of financial instruments held at fair value through profit or loss 92,629 24,299 86,318 20,032 53,293 – 5,770 – 9,936 3,060

Purchases of financial instruments held at fair value through profit or loss (169,546) (41,373) (117,457) (27,375) (902,300) – (20,699) – (10,610) (17,886)

Transaction costs on purchases of financial instruments held at fair value through profit or loss (16) (3) – – (31) – (5) – (2) (3)

Interest received 9 5 5 – 148 – 1 – – –

Dividends received 6,353 4,498 – – 7,864 – 249 – 334 159

Distributions received 499 373 – 570 288 – 12 – 6 4

Other income received 245 23 – – 59 – 1 – – –

Responsible Entity's fees paid (1,033) (788) (18) (10) (773) – (49) – (66) (23)

Operating expenses paid (34) (41) (11) (11) (183) – (23) – (35) (11)

Net cash inflow/(outflow) from operating activities 12(a) (70,894) (13,007) (31,163) (6,794) (841,635) – (14,743) – (437) (14,700)


Proceeds from applications by unitholders 171,907 38,716 102,750 10,097 944,626 – 15,252 – 1,065 14,500

Payments for redemptions by unitholders (94,734) (22,986) (71,342) (3,344) (81,051) – – – – –

Distributions paid from operating activities (3,979) (3,594) (144) – (50) – – – (75) –

Net cash inflow/(outflow) from financing activities 73,194 12,136 31,264 6,753 863,525 – 15,252 – 990 14,500

Net increase/(decrease) in cash and cash equivalents 2,300 (871) 101 (41) 21,890 509 553 (200)

Cash and cash equivalents at the beginning of the year 463 1,333 38 79 – – – – 15 –

Effects of foreign currency exchange rate changes on cash and cash equivalents (522) 1 – – (45) – (262) – 4 215

Cash and cash equivalents at the end of the year 11 2,241 463 139 38 21,845 – 247 – 572 15

Non cash financing activities 12(b) 3,367 2,394 893 – 745 – 72 – 228 –


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Notes to the financial statements

25

Notes to the financial statements For the year ended 30 June 2017

1. General informationThese financial statements cover the Vanguard Investor Funds (the “Funds”) as registered managed investment schemes. The respective constitution dates are as follows:

• Vanguard International Fixed Interest Index Fund (Hedged) 18 May 1999

• Vanguard International Credit Securities Index Fund (Hedged) 11 December 2000

• Vanguard International Shares Index Fund 6 December 1996

• Vanguard International Shares Index Fund (Hedged) 8 June 2000

• Vanguard Emerging Markets Shares Index Fund 24 November 1997

• Vanguard International Property Securities Index Fund 25 June 2005

• Vanguard International Property Securities Index Fund (Hedged) 30 June 2005

• Vanguard International Small Companies Index Fund 9 August 2007

• Vanguard International Small Companies Index Fund (Hedged) 9 August 2007

• Vanguard Global Minimum Volatility Fund 31 August 2016

• Vanguard Global Infrastructure Index Fund 26 October 2007

• Vanguard Global Infrastructure Index Fund (Hedged) 26 October 2007

• Vanguard International Shares Select Exclusions Index Fund 9 December 2016

• Vanguard Global Value Equity Fund 31 August 2016

• Vanguard Global Quantitative Equity Fund 23 November 2015

The 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 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 Fund Constitutions.

The financial statements were authorised for issue by the directors on 31 August 2017. The directors of the Responsible Entity have the power to amend and reissue the financial statements.

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Notes to the financial statements (continued)


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 material balances are expected to be recovered or settled within twelve months, except for investments in financial assets and net assets attributable to unitholders. The amount expected to be recovered or settled within twelve months after the end of each reporting period cannot be reliably determined.

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.

(i) Compliance with International Financial Reporting StandardsThe financial statements 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 FundsThere are no standards, interpretations or amendments to existing standards that are effective for the first time for the financial year beginning 1 July 2016 that have a material impact on the Funds.

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2. Summary of significant accounting policies (continued)

(b) Financial instruments

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

• Financial instruments held for trading Derivative financial instruments such as futures, forward foreign exchange contracts, options and swaps are included under this classification. 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 equity securities, listed unit trusts, unlisted trusts, fixed interest securities and money market securities.

Financial assets and financial liabilities designated at fair value through profit or loss upon initial recognition 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.

(ii) Recognition/derecognitionThese include financial assets that are not held for trading purposes and which may be sold. These are investments in equity securities, listed unit trusts, unlisted trusts, fixed interest securities and money market securities.

Financial assets and financial liabilities designated at fair value through profit or loss upon initial recognition 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.

(iii) MeasurementFinancial 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.

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

(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.

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(c) Net assets attributable to unitholdersUnits are redeemable at the unitholders’ option, however, applications and redemptions may be suspended by the Responsible Entity if it is in the best interests of the unitholders. The units are classified as financial liabilities as the Funds are required to distribute their distributable income, in accordance with the Fund Constitutions.

The units can be put back to the Funds at any time for cash based on the redemption price, which is equal to a proportionate share of the Funds’ net asset value attributable to the unitholders.

The units are carried at the redemption amount that is payable at balance sheet date if the holder exercises the right to put the unit back to the Funds.

(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 from the date of acquisition that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.

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) Margin accountsDeposits 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.

(f) Investment incomeInterest income is recognised in profit or loss for all financial instruments that are held at fair value through profit or loss using the effective interest method. Interest income on assets held at fair value through profit or 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).

The effective interest method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument, or a shorter period where appropriate, to the net carrying amount of the financial asset or liability. When calculating the effective interest rate, the Funds estimates cash flows considering all contractual terms of the financial instrument (for example, prepayment options) but does not consider future credit losses. The calculation includes all fees paid or received between the parties to the contract that are an integral part of the effective interest rate, including transaction costs and all other premiums or discounts.

Dividend income is recognised on the ex dividend date with any related foreign withholding tax recorded as an expense. The Funds currently incur withholding tax imposed by certain countries on investment income.

Trust distributions are recognised on an entitlements basis.

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

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(h) Income taxUnder current legislation, the Funds are not subject to income tax as unitholders are presently entitled to the income of the Funds.

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

(i) DistributionsIn accordance with the Fund Constitutions, the Funds distribute income adjusted for amounts determined by the Responsible Entity, to unitholders by cash or reinvestment. The distributions are recognised in the statement of comprehensive income as finance costs attributable to unitholders.

(j) 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.

(k) 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 is 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.

(l) 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.

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(m) Receivables and accrued incomeReceivables 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 end of each reporting period from the time of last payment in accordance with the policy set out in note 2(f) above. 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.

As the Funds have a contractual obligation to distribute their distributable income, a separate distribution payable is recognised in the balance sheet as at the end of each reporting period where this amount remains unpaid as at the end of the reporting period

(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.

(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’s 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) Comparative revisionsComparative information has been revised where appropriate to enhance comparability. Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.

(r) 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.

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(s) New accounting standards and interpretationsCertain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2017 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 interpretations is set out 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. 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.

(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 sources 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 a 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.

(t) Rounding of amountsThe Funds are registered schemes of the kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, relating to the “rounding off” amounts in the financial statements. Amounts in the financial statements have been rounded off to the nearest thousand dollars unless otherwise indicated.

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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 maximise the returns derived for the level of risk to which the Funds are exposed. The Funds use derivative financial instruments to moderate and create certain risk exposures. Financial risk management is carried out by the investment management department of the Responsible Entity under policies approved by the Board of Directors of the Responsible Entity (the “Board”).

The Funds use different methods to measure different types of risks 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. Where non monetary financial instruments are denominated in currencies other than the Australian dollar, the price in the future will also fluctuate because of changes in foreign exchange rates. Paragraph (ii) ‘Foreign exchange risk’ below sets out how this component of price risk is managed and measured.

In any asset sector the returns of individual securities are a combination of the market returns and returns specific to each security.

At 30 June, the fair value of equities and related derivatives exposed to price risk were as follows:


Index Fund

Vanguard International Shares Index Fund (Hedged)


Index Fund


Index Fund


30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Derivative assets held for trading – 1,246 8 1,038 – 83 – – – –

Equity securities designated at fair value through profit or loss 11,777,902 11,841,864 – – 1,136,673 1,008,846 – – – –

Listed unit trusts designated at fair value through profit or loss – – – – – – 1,887,438 2,056,004 – –

Unlisted unit trusts designated at fair value through profit or loss – – 3,360,184 4,406,645 – – – – 1,352,299 1,273,152

Derivative liabilities held for trading (781) (587) (181) (388) (11) – – – – –

Net total 11,777,121 11,842,523 3,360,011 4,407,295 1,136,662 1,008,929 1,887,438 2,056,004 1,352,299 1,273,152

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3. Financial risk management (continued)

(a) Market risk (continued)

(i) Price risk (continued)


Index Fund


Index Fund (Hedged)


Fund


Fund


Fund (Hedged)

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Derivative assets held for trading 8 26 – 9 – 1 – – – –

Equity securities designated at fair value through profit or loss 418,986 310,978 – – 25,141 21,214 254,774 178,319 – –

Unlisted unit trusts designated at fair value through profit or loss – – 66,464 34,711 – – – – 69,167 35,523

Derivative liabilities held for trading (29) (1) – – (9) (4) – – – –

Net total 418,965 311,003 66,464 34,720 25,132 21,211 254,774 178,319 69,167 35,523





30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Derivative assets held for trading 26 – – – – –

Equity securities designated at fair value through profit or loss 910,803 – 17,074 – 18,084 14,365

Unlisted unit trusts designated at fair value through profit or loss – – – – – –

Derivative liabilities held for trading (316) – (9) – – –

Net total 910,513 – 17,065 – 18,084 14,365

The table presented in note 3(b) summarises the impact on operating profit before finance costs attributable to unitholders and liabilities attributable to unitholders from possible changes in market prices that were reasonably based on the risk that the Funds were exposed to at reporting date.

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(a) Market risk (continued)(ii) Foreign exchange riskThe Funds have exposure to foreign assets and holds both monetary and non monetary assets denominated in currencies other than the Australian dollar. Foreign exchange risk arises as the value of monetary securities denominated in other currencies will fluctuate due to changes in exchange rates. The foreign exchange risk relating to non monetary assets and liabilities is a component of price risk not foreign exchange risk. The risk is measured using sensitivity analysis.

The Vanguard International Shares Index Fund, Vanguard Emerging Markets Shares Index Fund, Vanguard International Property Securities Index Fund, Vanguard International Small Companies Index Fund, Vanguard Global Infrastructure Index Fund, Vanguard Global Minimum Volatility Fund, Vanguard Global Value Equity Fund and Vanguard Global Quantitative 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 the Funds’ direct investments and not on a look through basis to investments held via interposed investment funds. In addition, any currency hedging to minimise the impact of foreign exchange risk has not been incorporated into the disclosures unless the derivatives are held directly in these Funds.

In accordance with the Funds’ policy, the Investment Manager monitors the Funds’ foreign exchange exposure on a daily basis.

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(ii) Foreign exchange risk (continued)The tables below summarise the Funds’ assets and liabilities that are denominated in a currency other than the Australian dollar.


As at 30 June 2017 As at 30 June 2016

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

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

Assets

Cash and cash equivalents 740 624 1,933 2,432 7,795 526 430 66 2,403 7,127

Margin accounts 31 121 439 93 22 96 108 572 358 56

Receivables – – – – 52 – – – – 145

Due from brokers – receivable for securities sold 16,600 – 7,114 5,817 2,002 11,700 – – – –

Financial assets held at fair value through profit or loss 875,112 211,684 813,197 875,473 236,258 715,284 184,184 676,282 812,314 201,027

Total assets 892,483 212,429 822,683 883,815 246,129 727,606 184,722 676,920 815,075 208,355

Liabilities

Due to brokers – payables for securities purchased 45,666 6,896 34,460 15,936 1,945 24,661 3,352 12,696 11,351 –

Financial liabilities held at fair value through profit or loss 101 99 450 303 1,756 230 2 920 29,182 3,496

Total liabilities 45,767 6,995 34,910 16,239 3,701 24,891 3,354 13,616 40,533 3,496

Net increase/(decrease) in exposure from foreign currency forward contracts

- Buy foreign currency 1,428,186 216,809 828,942 893,467 240,085 1,217,624 180,505 667,906 810,463 215,149

- Sell foreign currency (2,304,710) (427,581) (1,630,285) (1,802,268) (488,423) (1,943,974) (384,235) (1,358,759) (1,589,678) (424,176)

Net exposure including foreign currency forward contracts (29,808) (5,338) (13,570) (41,225) (5,910) (23,635) (22,362) (27,549) (4,673) (4,168)

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(ii) Foreign exchange risk (continued)



US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

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

Assets

Cash and cash equivalents 8,061 749 5,379 619 5,525 2,441 2,288 3,916 288 1,401

Margin accounts 339 167 128 28 20 577 44 99 30 67

Receivables – – – – 18 – – – – 64

Accrued income – – 39 – – – – 63 – –

Due from brokers – receivable for securities sold 5,590 – 1,894 – – 818 – 771 226 2,017


Total assets 860,057 72,506 408,911 61,226 109,877 686,420 56,490 306,415 60,017 91,633

Liabilities

Due to brokers – payables for securities purchased 23,306 2,543 8,869 – 1,582 10,240 179 954 343 1,703

Financial liabilities held at fair value through profit or loss 195 384 5,088 16 3,667 916 3 47 4,592 936

Total liabilities 23,501 2,927 13,957 16 5,249 11,156 182 1,001 4,935 2,639


- Buy foreign currency 2,817,164 72,026 412,974 61,359 109,100 2,277,900 57,755 316,890 62,421 95,445

- Sell foreign currency (3,681,947) (144,115) (822,442) (125,804) (217,906) (2,968,200) (120,605) (632,688) (119,259) (186,512)


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US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

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

Assets

Cash and cash equivalents 137,834 11,603 31,639 20,439 16,385 69,098 3,921 12,734 9,691 11,041

Margin accounts 4,949 644 2,005 598 346 8,435 1,407 3,949 1,809 711

Receivables 58 11 10,413 6 8,010 30 63 6,287 2 7,478

Accrued income 6,632 3,893 452 1,277 1,273 7,469 3,702 1,056 1,540 1,180

Due from brokers – receivable for securities sold – – – – – – 32 16 3 –

Financial assets held at fair value through profit or loss 7,221,718 793,147 1,435,701 1,053,294 1,274,264 7,314,230 873,547 1,303,677 1,036,106 1,315,554

Total assets 7,371,191 809,298 1,480,210 1,075,614 1,300,278 7,399,262 882,672 1,327,719 1,049,151 1,335,964

Liabilities

Due to brokers – payables for securities purchased – – 846 – – – – – – –

Financial liabilities held at fair value through profit or loss 444 111 406 47 78 8 – 296 291 –

Total liabilities 444 111 1,252 47 78 8 – 296 291 –


- Buy foreign currency 161,265 4,267 9,291 4,456 4,172 10,511 1,642 3,030 1,268 1,682

- Sell foreign currency (217,786) (10,554) (22,234) (13,781) (10,804) (7,622) – – (611) –

Net exposure including foreign currency forward contracts 7,314,226 802,900 1,466,015 1,066,242 1,293,568 7,402,143 884,314 1,330,453 1,049,517 1,337,646

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US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

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

Assets

Cash and cash equivalents 6,555 901 1,519 1,215 1,984 5,061 1,558 2,675 825 18,748

Margin accounts 1,615 292 790 264 196 5,599 696 2,152 1,375 513

Receivables – – – – – – – 1 – –

Financial assets held at fair value through profit or loss 4,582 1,958 1,450 8 42,952 40,107 1,308 1,677 1,555 107,144

Total assets 12,752 3,151 3,759 1,487 45,132 50,767 3,562 6,505 3,755 126,405

Liabilities

Margin accounts – – – – 13,028 – – – – –

Payables – – – – 1 – – – – –

Financial liabilities held at fair value through profit or loss 1,237 4,520 10,101 2 12,764 4,304 951 1,622 28,334 19,279

Total liabilities 1,237 4,520 10,101 2 25,793 4,304 951 1,622 28,334 19,279


- Buy foreign currency 6,880,430 283,323 513,346 342,571 1,209,226 8,528,628 339,240 597,255 477,699 3,753,361

- Sell foreign currency (9,034,623) (516,786) (934,492) (661,826) (1,219,977) (11,282,777) (698,837) (1,098,667) (852,115) (2,700,463)

Net exposure including foreign currency forward contracts (2,142,678) (234,832) (427,488) (317,770) 8,588 (2,707,686) (356,986) (496,529) (398,995) 1,160,024

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US Dollars

Hong Kong

Dollars

Korean Won

Taiwan New

Dollars

Other* Currencies

US Dollars

Hong Kong

Dollars

Korean Won

Taiwan New

Dollars

Other* Currencies

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

Assets

Cash and cash equivalents 10,083 296 53 64 1,548 1,794 1,276 54 62 1,412

Margin accounts 763 – – – – 1,825 – – – –

Receivables – – 424 (5) 150 – – 433 73 104

Accrued income 192 2,362 66 1,341 613 194 3,741 151 1,552 730

Due from brokers – receivable for securities sold – – – – 41 728 2,345 1,386 1,278 4,408


Total assets 133,310 239,136 178,116 143,291 460,812 100,682 215,052 149,499 124,578 442,665

Liabilities

Financial liabilities held at fair value through profit or loss 11 – – – – 2 – – – –

Total liabilities 11 – – – – 2 – – – –


- Buy foreign currency 530 – – – – 4,767 – – – –

- Sell foreign currency (13,900) – – – – (16,900) (3,116) – – (1,651)

Net exposure including foreign currency forward contracts 119,929 239,136 178,116 143,291 460,812 88,547 211,936 149,499 124,578 441,014

* For 2017 and 2016, 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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US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

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

Assets

Cash and cash equivalents 5,359 6,948 13,000 6 5,243 2,590 95 375 37 546

Receivables 219 78 1,218 24 42 – 223 536 14 21

Accrued income 4,396 523 209 900 780 4,090 464 103 967 738

Due from brokers - receivable for securities sold 97,168 1,728 3,062 10,212 9,298 – – 16 16 –

Financial assets held at fair value through profit or loss 1,249,013 112,468 202,517 138,463 184,996 1,385,612 109,881 202,964 169,004 188,543

Total assets 1,356,155 121,745 220,006 149,605 200,359 1,392,292 110,663 203,994 170,038 189,848

Liabilities

Due to brokers – payables for securities purchased 382 – – 120 – – – – – –

Financial liabilities held at fair value through profit or loss 19 27 47 – 61 – – – – –

Total liabilities 401 27 47 120 61 – – – – –


- Buy foreign currency 50,668 305 – 231 8 – – – – –

- Sell foreign currency (153,544) (8,780) (16,383) (10,598) (14,907) (2,000) – – – –

Net exposure including foreign currency forward contracts 1,252,878 113,243 203,576 139,118 185,399 1,390,292 110,663 203,994 170,038 189,848

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US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

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

Assets

Financial assets held at fair value through profit or loss 17 10 36 18 57 103 10 26 376 16

Total assets 17 10 36 18 57 103 10 26 376 16

Liabilities

Financial liabilities held at fair value through profit or loss 98 30 93 42 523 170 18 43 5,725 66

Total liabilities 98 30 93 42 523 170 18 43 5,725 66


- Buy foreign currency 1,105,776 104,676 190,112 133,151 170,477 862,012 95,483 135,116 121,861 116,744

- Sell foreign currency (2,085,805) (192,492) (346,904) (243,851) (312,935) (1,783,083) (175,737) (271,746) (227,992) (242,560)


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US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

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

Assets

Cash and cash equivalents 1,863 198 474 315 670 4,414 80 242 744 88

Margin accounts 141 41 51 50 16 544 103 113 84 16

Receivables 2 10 141 2 54 – 12 117 – 65

Accrued income 284 71 35 65 53 239 92 26 59 38

Due from brokers – receivable for securities sold 189 – 3 – 4 9,673 793 1,084 2,021 1,954


Total assets 244,013 32,096 44,358 52,131 51,128 199,717 22,142 30,507 42,160 39,079

Liabilities

Due to brokers – payables for securities purchased 54 – – 8 – – – – – –

Financial liabilities held at fair value through profit or loss 4 7 16 – 2 2 – – 2 1

Total liabilities 58 7 16 8 2 2 – – 2 1


- Buy foreign currency 214 – 52 – – 6,548 – – – –

- Sell foreign currency (618) – (74) – – (20,525) (808) (1,283) (2,790) (1,667)


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US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

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

Assets

Cash and cash equivalents 127 10 102 188 4 36 9 21 6 4

Margin accounts 36 – 8 11 – 129 24 26 21 –

Financial assets held at fair value through profit or loss – 14 1 – 22 13 – 1 6 4

Total assets 163 24 111 199 26 178 33 48 33 8

Liabilities

Financial liabilities held at fair value through profit or loss – 16 2 – 40 3 – – 239 10

Total liabilities – 16 2 – 40 3 – – 239 10



- Sell foreign currency (85,413) (11,521) (15,829) (18,219) (17,720) (65,220) (8,330) (10,896) (14,179) (12,826)


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US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

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

Assets

Cash and cash equivalents 17 1 7 10 14 3 – 18 – 4

Margin accounts 12 – 42 – – 12 – 17 – –

Receivables 2 – 4 – 15 6 – 1 – 6

Accrued income 43 6 – 1 9 34 22 – – 8

Due from brokers – receivable for securities sold 29 – 14 – – – – – – –

Financial assets held at fair value through profit or loss 14,706 1,238 1,759 1,429 4,904 13,197 2,108 484 775 3,901

Total assets 14,809 1,245 1,826 1,440 4,942 13,252 2,130 520 775 3,919

Liabilities

Due to brokers – payables for securities purchased 196 45 – – 36 – – – – –

Financial liabilities held at fair value through profit or loss 1 29 37 – 58 10 – 4 31 35

Total liabilities 197 74 37 – 94 10 – 4 31 35


- Buy foreign currency 12,400 49 – – – 11,074 277 99 68 56

- Sell foreign currency (24,679) (1,250) (1,686) (1,742) (7,469) (21,769) (2,556) (710) (776) (6,117)

Net exposure including foreign currency forward contracts 2,333 (30) 103 (302) (2,621) 2,547 (149) (95) 36 (2,177)

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US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

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

Assets

Cash and cash equivalents 911 82 51 94 87 103 62 42 34 51

Receivables – – 52 – 12 – – 14 – 8

Accrued income 223 223 41 – 152 162 172 63 – 92

Due from brokers – receivable for securities sold 4,387 326 490 616 1,289 – – – – –


Total assets 158,538 11,509 17,362 21,653 48,130 113,135 10,021 10,699 16,019 24,135

Liabilities

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

Total liabilities – – – – – 291 – – – –


- Buy foreign currency 2,725 – – – – 382 – – – 52

- Sell foreign currency (8,000) (330) (491) (615) (1,289) (2,032) – (82) – –


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US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

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

Assets

Financial assets held at fair value through profit or loss 1 1 2 1 3 3 – 1 6 –

Total assets 1 1 2 1 3 3 – 1 6 –

Liabilities

Financial liabilities held at fair value through profit or loss 4 1 2 2 86 5 – 1 170 3

Total liabilities 4 1 2 2 86 5 – 1 170 3



- Sell foreign currency (91,899) (7,103) (10,225) (12,412) (25,856) (45,943) (4,060) (4,570) (6,904) (9,228)


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US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

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

Assets

Cash and cash equivalents 9,427 937 2,755 1,746 4,471 – – – – –

Margin accounts 797 228 418 84 181 – – – – –

Receivables 43 1 231 3 148 – – – – –

Accrued income 413 269 32 80 98 – – – – –

Financial assets held at fair value through profit or loss 539,772 56,653 109,960 80,343 154,507 – – – – –

Total assets 550,452 58,088 113,396 82,256 159,405 – – – – –

Liabilities

Margin accounts – – – – 21,407 – – – – –

Due to brokers – payables for securities purchased 11,867 1,261 2,796 1,812 1,979 – – – – –

Financial liabilities held at fair value through profit or loss 372 799 1,874 – 4,992 – – – – –

Total liabilities 12,239 2,060 4,670 1,812 28,378 – – – – –

Net increase/(decrease) in exposure from foreign currency forward contracts – – – – –

- Buy foreign currency 1,215,481 46,186 90,445 62,867 1,429,749 – – – – –

- Sell foreign currency (1,609,157) (86,893) (169,174) (122,897) (850,049) – – – – –

Net exposure including foreign currency forward contracts 144,537 15,321 29,997 20,414 710,727 – – – – –

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US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

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

Assets

Cash and cash equivalents 49 4 21 16 19 – – – – –

Margin accounts – – 24 – – – – – – –

Receivables – – 8 – 2 – – – – –

Accrued income 9 6 1 1 2 – – – – –

Financial assets held at fair value through profit or loss 9,895 1,154 2,276 1,571 2,063 – – – – –

Total assets 9,953 1,164 2,330 1,588 2,086 – – – – –

Liabilities

Financial liabilities held at fair value through profit or loss – – 9 – – – – – – –

Total liabilities – – 9 – – – – – – –

Net increase/(decrease) in exposure from foreign currency forward contracts – – – – –

- Buy foreign currency – – – – – – – – – –

- Sell foreign currency – – – – – – – – – –

Net exposure including foreign currency forward contracts 9,953 1,164 2,321 1,588 2,086 – – – – –

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US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

US Dollars

British Pounds

Euros

Japanese Yen

Other Currencies

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

Assets

Cash and cash equivalents 298 2 18 14 24 5 2 – 1 2

Margin accounts 15 – 6 – – – – 7 – –

Receivables 1 – 13 – 3 1 – 5 – 2

Accrued income 7 7 1 1 4 8 9 1 – 3

Due from brokers – receivable for securities sold 69 – – 11 – 64 2 – 19 –

Financial assets held at fair value through profit or loss 8,339 1,365 3,337 2,881 2,180 7,413 846 1,913 1,788 2,414

Total assets 8,729 1,374 3,375 2,907 2,211 7,491 859 1,926 1,808 2,421

Liabilities

Due to brokers – payables for securities purchased 185 8 133 198 15 – – – 36 –

Financial liabilities held at fair value through profit or loss – – 14 – – – – – 21 –

Total liabilities 185 8 147 198 15 – – – 57 –


- Buy foreign currency 2,161 6 129 186 13 986 – – 17 (1)

- Sell foreign currency (148) – (759) (847) (325) (17) – (296) (528) (161)

Net exposure including foreign currency forward contracts 10,557 1,372 2,598 2,048 1,884 8,460 859 1,630 1,240 2,259

Note 3(b) summarises the impact of an increase/decrease of foreign exchange rates of each Funds’ operating profit and net assets attributable to unitholders through changes in fair value or changes in future cash flows.

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(a) Market risk (continued)(iii) Cash flow and fair value interest rate riskInterest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

The Funds are exposed to cash flow interest rate risk on financial instruments with variable interest rates. Financial instruments with fixed rates expose the Funds to fair value interest rate risk.

The Funds’ interest bearing financial assets and financial liabilities expose it to risks associated with the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. The risk is measured using sensitivity analysis.

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 below 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.

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(iii) Cash flow and fair value interest rate risk (continued)The tables below summarise those Funds whose exposure to interest rate risk is significant:



Floating Interest

Rate

Fixed Interest

Rate

Non - Interest Bearing Total

Floating Interest

Rate

Fixed Interest

Rate


30 June 2017 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Assets

Cash and cash equivalents 19,318 – – 19,318 22,812 – – 22,812

Margin accounts 779 – – 779 753 – – 753

Receivables – – 9,356 9,356 – – 2,856 2,856

Accrued income – – – – – – 43 43

Due from brokers - receivable for securities sold – – 31,533 31,533 – – 7,484 7,484

Financial assets held at fair value through profit or loss 10,432 3,132,844 86,858 3,230,134 37,200 1,474,261 46,372 1,557,833

Total assets 30,529 3,132,844 127,747 3,291,120 60,765 1,474,261 56,755 1,591,781

Liabilities

Margin accounts 71,818 – – 71,818 – – – –

Distribution payable – – 40,580 40,580 – – 36,673 36,673

Payables – – 1,308 1,308 – – 419 419

Due to brokers-payables for securities purchased – – 108,989 108,989 – – 36,300 36,300

Financial liabilities held at fair value through profit or loss – – 3,133 3,133 – 66 9,365 9,431

Total liabilities (excluding net assets attributable to unit holders) 71,818 – 154,010 225,828 – 66 82,757 82,823

Net assets attributable to unitholders - liability (41,289) 3,132,844 (26,263) 3,065,292 60,765 1,474,195 (26,002) 1,508,958

Net increase/(decrease) in exposure from Australian fixed interest futures – – – – – 1,470 – 1,470

Net increase/(decrease) in exposure from international money market futures – (4,305) – (4,305) – 25,444 – 25,444

Net exposure (41,289) 3,128,539 (26,263) 3,060,987 60,765 1,501,109 (26,002) 1,535,872

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(iii) Cash flow and fair value interest rate risk (continued)



Floating Interest

Rate

Fixed Interest

Rate


Floating Interest

Rate

Fixed Interest

Rate


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

Assets

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

Margin accounts 1,301 – – 1,301 873 – – 873

Receivables – – 15,582 15,582 – – 304 304

Accrued income – – 11,700 11,700 – – 68 68

Due from brokers - receivable for securities sold – – 15 15 – – 5,006 5,006

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

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

Liabilities

Margin accounts 35,108 – – 35,108 – – – –

Distribution payable – – 45,107 45,107 – – 50,428 50,428

Payables – – 1,495 1,495 – – 12,076 12,076

Due to brokers-payables for securities purchased – – 52,060 52,060 – – 13,785 13,785

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

Total liabilities (excluding net assets attributable to unit holders) 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

Net increase/(decrease) in exposure from Australian fixed interest futures – (1,960) – (1,960) – 296 – 296

Net increase/(decrease) in exposure from international money market futures – 25,819 – 25,819 – 16,438 – 16,438

Net exposure (10,191) 2,687,342 (24,043) 2,653,108 36,021 1,198,463 (36,929) 1,197,555

The table presented in note 3(b) summarises the impact of an increase/decrease of interest rates on the Funds’ 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 table summarises 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 economies, markets and securities in which the Funds invest. As a result, historic variations in risk variables are no 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

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

-25bps +25bps -6% 0% -5% 7% -2% +8% -13% +2% -4% +2%

30 June 2017 7,935 (7,935) 50,803 – 10,272 (14,380) 15,755 (63,022) 112,781 (17,351) 9,697 (4,849)

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

30 June 2016 (6,684) 6,684 56,214 (35,134) 32,645 – 53,086 (19,907) 7,445 (185,891) 10,243 (10,243)



Interest rate risk Foreign exchange risk


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

-25bps +25bps -6% 0% -5% +7% -2% +8% -13% +2% -4% +2%

30 June 2017 3,534 (3,534) 50,193 – 3,479 (4,871) 7,899 (31,596) 7,957 (1,224) 4,185 (2,093)

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

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



Price risk Interest rate risk Foreign exchange risk


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

-3% +4% -25bps +25bps -6% 0% -5% +7% -2% +8% -13% +2% -4% +2%

30 June 2017 (353,314) 471,085 (727) 727 8,963 – 808 (1,131) 873 (3,493) 2,903 (447) 1,040 (520)

-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 (4,521) 1,642 – 1,923 (721) 130 (3,131) 1,021 (1,021)

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(b) Summarised sensitivity analysis (continued)





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

–4% +5% –25bps +25bps –6% 0% –5% +7% –2% +8% –13% +2% –4% +2%

30 June 2017 (134,400) 168,001 (205) 205 693 – (67) 94 (125) 500 192 (30) 774 (387)

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

30 June 2016 (176,292) 220,365 (176) 176 3,680 (2,300) 401 – 384 (144) (242) 5,806 5,351 (5,351)




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

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

–4% +6% –25bps +25bps –6% 0% –7% 0% –6% +1% –5% +5% –4% +2%

30 June 2017 (45,466) 68,200 (36) 36 662 – 186 – 33 (5) 70 (70) 94 (47)

–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)





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

–4% +6% –25bps +25bps –6% 0% –5% +7% –2% +8% –13% +2% –4% +2%

30 June 2017 (75,498) 113,246 (77) 77 6,406 – 462 (647) 349 (1,395) 1,433 (220) 612 (306)

–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)





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

–5% +7% –25bps +25bps –6% 0% –5% +7% –2% +8% –13% +2% –4% +2%

30 June 2017 (67,615) 94,661 (6) 6 (5) – (1) 1 (1) 5 (3) – (19) 9

–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

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

–3% +5% –25bps +25bps –6% 0% –5% 7% –2% +8% –13% +2% –4% +2%

30 June 2017 (12,569) 20,948 (10) 10 146 – 16 (22) 14 (57) 55 (8) 32 (16)

–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)





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

–4% +6% –25bps +25bps –6% 0% –5% +7% –2% +8% –13% +2% –4% +2%

30 June 2017 (2,659) 3,988 (2) 2 10 – – (1) 2 (9) 26 (4) (1) –

–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 – –





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

–2% +4% –25bps +25bps –6% 0% –5% +7% –2% +8% –13% +2% –4% +2%

30 June 2017 (503) 1,005 (1) 1 (2) – (3) 5 1 (3) 1 – (2) 1

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

30 June 2016 (848) 848 – – 23 (14) 4 – 3 (1) – 7 (1) 1





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

–3% +4% –25bps +25bps –6% 0% –5% 7% –2% +8% –13% +2% –4% +2%

30 June 2017 (7,643) 10,191 (6) 6 331 – 32 (44) 13 (51) 92 (14) 62 (31)

–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)

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

–2% +3% –25bps +25bps –6% +0% –5% 7% –2% +8% –13% +2% –4% +2%

30 June 2017 (1,383) 2,075 – – – – – – – – – – (3) 2

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

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





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

–2% +3% –25bps +25bps –6% +0% –5% +7% –2% +8% –13% +2% –4% +2%

30 June 2017 (18,210) 27,315 57 (57) (31) – (11) 16 (18) 72 13 (2) (34,476) 17,238

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

30 June 2016 – – – – – – – – – – – – – –





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

–2% +4% –25bps +25bps –6% 0% –5% +7% –2% +8% –13% +2% –4% +2%

30 June 2017 (341) 683 (1) 1 3 – 1 (1) 1 (4) 2 – 1 –

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

30 June 2016 – – – – – – – – – – – – – –





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

–3% +4% –25bps +25bps –6% 0% –5% +7% –2% +8% –13% +2% –4% +2%

30 June 2017 (543) 723 1 (1) 13 – – – (2) 9 (22) 3 1 –

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

30 June 2016 (575) 575 – – 7 (4) 2 – 1 – – 9 – –

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(c) Credit riskThe Funds are exposed to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when they fall due.

The main concentration of credit risk, to which the Funds are exposed, arises from the Funds’ investments in debt securities. The Funds are also exposed to counterparty credit risk on derivative financial instruments, cash and cash equivalents, amounts due from brokers and other receivables. None of these assets are impaired nor past due but not impaired.

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

Credit risk is managed by ensuring that:

• counterparties with respective credit limits are approved by the Responsible Entity; and• transactions are undertaken with a number of counterparties.

The Funds invest in fixed interest securities and money market securities which have credit ratings as rated by well known rating agencies. For unrated fixed interest securities a rating is assigned by the investment manager using an approach that is consistent with the approach used by rating agencies.

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(c) Credit risk (continued)

(i) Debt securities (continued)There 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 Funds’ 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.

An analysis of directly held fixed interest securities by rating is set out in the table below:



30 June2017

30 June2016

30 June2017

30 June2016

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

International debt securities Rating

AAA 1,169,094 972,529 219,182 167,479Aa3 20,698 24,370 1,107 1,165Aa3e – – 967 –Aa2 210,440 179,196 20,539 20,037Aa2e – – 1,454 –Aa1 210,516 184,178 13,286 9,181Aa1e – – 653 –Aaae – – 1,236 –AA+ 50,096 41,288 69,329 64,557AA 32,221 51,403 75,074 68,299AA- 41,427 14,743 113,770 65,532A3 13,080 5,070 3,200 3,337A3e – – 589 –A2 – – 4,693 4,728A2e – – 576 –A1 812,563 805,345 17,099 13,745A1e – – 1,506 –A+ 30,067 21,400 116,253 114,813A+e – – 98 –Ae – – 292 –A 76,448 29,278 140,040 117,830A- 17,085 16,050 145,172 119,561BBB+ 116,462 96,781 223,909 172,548BBB – 7,713 146,809 112,048BBB- 15,797 – 110,956 82,090BB+ – – 8,557 9,705BB – – 2,981 2,127B+ – – – 5BB- – – 285 –Baa1 6,213 4,060 6,899 2,032Baa2 180,903 153,552 8,451 4,038Baa3 – – 6,569 13,501Not Rated 140,166 71,512 49,864 34,754

Total 3,143,276 2,678,468 1,511,395 1,203,112

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(c) Credit risk (continued)(ii) DerivativesThe 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 2017, the Funds had no master netting arrangements outstanding (30 June 2016: $nil).

Vanguard International Fixed Interest Index Fund (Hedged), Vanguard International Shares Index Fund (Hedged) and Vanguard International Shares Select Exclusions Index Fund 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 JP Morgan Chase & Co. JP Morgan Chase & Co is a member of a major securities exchange, and at 30 June 2017 had a credit rating of A 1 (30 June 2016: A 1). At 30 June 2017, substantially all cash and cash equivalents, balances due from brokers and investments are held in custody by JP Morgan Chase & Co.

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(d) Liquidity riskLiquidity risk is the risk that the Funds may not be able to generate sufficient cash resources to settle its obligations in full as they fall due or can only do so on terms that are materially disadvantageous.

The Funds are exposed to daily cash redemptions of redeemable units. The Funds primarily hold investments that are traded in active markets and can be readily disposed. 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 table below analyses the Funds’ financial liabilities into relevant maturity groupings based on the remaining period at the end of the reporting period. The amounts in the table are contractual undiscounted cash flows.



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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

Net settled derivatives 2,095 1,038 – – 3,133 40,199 2,821 – – 43,020

Margin accounts 71,818 – – – 71,818 35,108 – – – 35,108

Distribution payable 40,580 – – – 40,580 45,107 – – – 45,107

Payables 1,308 – – – 1,308 1,495 – – – 1,495

Due to brokers - payables for securities purchased 108,989 – – – 108,989 52,060 – – – 52,060

Net assets attributable to unitholders 3,065,292 – – – 3,065,292 2,629,249 – – – 2,629,249

Total liabilities 3,290,082 1,038 – – 3,291,120 2,803,218 2,821 – – 2,806,039



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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

Net settled derivatives 9,055 376 – – 9,431 7,005 718 – – 7,723


Payables 419 – – – 419 12,076 – – – 12,076

Due to brokers - payables for securities purchased 36,300 – – – 36,300 13,785 – – – 13,785


Total liabilities 1,591,405 376 – – 1,591,781 1,264,115 718 – – 1,264,833For

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(d) Liquidity risk (continued)



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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

Net settled derivatives 305 781 – – 1,086 14 587 – – 601


Payables 35,838 – – – 35,838 2,703 – – – 2,703

Due to brokers - payables for securities purchased 846 – – – 846 – – – – –


Total liabilities 12,115,202 781 – – 12,115,983 12,055,532 587 – – 12,056,119



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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

Net settled derivatives 48,506 5,579 – – 54,085 76,166 4,801 – – 80,967

Margin accounts 82,898 – – – 82,898 91,980 – – – 91,980


Payables 1,110 – – – 1,110 932 – – – 932

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


Total liabilities 3,727,718 5,579 – – 3,733,297 4,795,141 4,801 – – 4,799,942



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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

Net settled derivatives - 11 – – 11 2 - - - 2

Distribution payable 29,545 - – – 29,545 38,998 - - - 38,998

Payables 550 - – – 550 482 - - - 482

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

Net assets attributable to unitholders 1,126,765 - – – 1,126,765 993,761 - - - 993,761

Total liabilities 1,156,860 11 – – 1,156,871 1,033,243 - - - 1,033,243For

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Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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

Net settled derivatives 154 – – – 154 – – – – –


Payables 129,296 – – – 129,296 848 – – – 848



Total liabilities 2,050,023 – – – 2,050,023 2,082,953 – – – 2,082,953



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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

Net settled derivatives 1,150 1,047 – – 2,197 6,971 297 – – 7,268


Payables 242 – – – 242 207 – – – 207

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


Total liabilities 1,487,915 1,047 – – 1,488,962 1,380,077 297 – – 1,380,374



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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

Net settled derivatives – 29 – – 29 4 1 – – 5


Payables 1,278 – – – 1,278 14,381 – – – 14,381


Net assets attributable to unitholders 400,532 – – – 400,532 296,676 – – – 296,676

Total liabilities 426,176 29 – – 426,205 327,694 1 – – 327,695For

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Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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

Net settled derivatives 396 37 – – 433 646 8 – – 654


Payables 59 – – – 59 3 – – – 3


Total liabilities 75,130 37 – – 75,167 54,231 8 – – 54,239



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Distribution payable 1,127 – – – 1,127 460 – – – 460

Payables 7 – – – 7 8 – – – 8






Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Payables 144 – – – 144 73 – – – 73

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


Total liabilities 266,154 – – – 266,154 179,885 – – – 179,885

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Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Distribution payable 6,958 – – – 6,958 885 – – – 885

Payables 3 – – – 3 1 – – – 1

Due to brokers - payables for securities purchased 895 – – – 895 501 – – – 501





Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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

Net settled derivatives 6,691 1,378 – – 8,069 – – – – –

Margin accounts 21,407 – – – 21,407 – – – – –

Distribution payable 2,425 – – – 2,425 – – – – –

Payables 202 – – – 202 – – – – –

Due to brokers - payables for securities purchased 19,715 – – – 19,715 – – – – –

Net assets attributable to unitholders 917,146 – – – 917,146 – – – – –

Total liabilities 967,586 1,378 – – 968,964 – – – – –



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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

Net settled derivatives – 9 – – 9 – – – – –

Distribution payable 645 – – – 645 – – – – –

Payables 5 – – – 5 – – – – –

Net assets attributable to unitholders 16,715 – – – 16,715 – – – – –

Total liabilities 17,365 9 – – 17,374 – – – – –For

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Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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

Net settled derivatives 14 – – – 14 21 – – – 21

Distribution payable 626 – – – 626 75 – – – 75

Payables 5 – – – 5 5 – – – 5

Due to brokers - payables for securities purchased 539 – – – 539 36 – – – 36


Total liabilities 18,814 – – – 18,814 14,513 – – – 14,513

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

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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

Foreign currency forward contracts

Inflows 6,487,812 3,225,751 – – 9,713,563 5,537,646 2,762,294 – – 8,299,940

(Outflows) (6,403,105) (3,226,733) – – (9,629,838) (5,494,999) (2,757,619) – – (8,252,618)

Net 84,707 (982) – – 83,725 42,647 4,675 – – 47,322



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Inflows 4,323,897 2,162,884 – – 6,486,781 3,512,812 1,718,911 – – 5,231,723

(Outflows) (4,286,582) (2,163,192) – – (6,449,774) (3,478,573) (1,719,167) – – (5,197,740)

Net 37,315 (308) – – 37,007 34,239 (256) – – 33,983



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Inflows 379,272 – – – 379,272 18,118 – – – 18,118

(Outflows) (379,355) – – – (379,355) (18,128) – – – (18,128)

Net (83) – – – (83) (10) – – – (10)

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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

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Inflows 10,865,503 5,047,707 – – 15,913,210 13,430,555 6,415,856 – – 19,846,411

(Outflows) (10,775,181) (5,032,850) – – (15,808,031) (13,265,523) (6,388,600) – – (19,654,123)

Net 90,322 14,857 – – 105,179 165,032 27,256 – – 192,288



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Inflows 14,431 – – – 14,431 21,667 – – – 21,667

(Outflows) (14,430) – – – (14,430) (21,669) – – – (21,669)

Net 1 – – – 1 (2) – – – (2)



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Inflows 203,900 – – – 203,900 2,000 – – – 2,000

(Outflows) (203,134) – – – (203,134) (2,000) – – – (2,000)

Net 766 – – – 766 – – – – –

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Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Inflows 3,194,856 1,690,052 – – 4,884,908 2,671,784 1,359,834 – – 4,031,618

(Outflows) (3,150,654) (1,691,079) – – (4,841,733) (2,636,365) (1,360,027) – – (3,996,392)

Net 44,202 (1,027) – – 43,175 35,419 (193) – – 35,226



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Inflows 833 – – – 833 27,062 – – – 27,062

(Outflows) (833) – – – (833) (27,000) – – – (27,000)

Net - – – – - 62 – – – 62



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Inflows 150,279 73,829 – – 224,108 114,320 69,912 – – 184,232

(Outflows) (148,561) (73,550) – – (222,111) (112,900) (69,619) – – (182,519)

Net 1,718 279 – – 1,997 1,420 293 – – 1,713

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Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Inflows 36,921 – – – 36,921 32,760 – – – 32,760

(Outflows) (36,590) – – – (36,590) (32,470) – – – (32,470)

Net 331 – – – 331 290 – – – 290



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Inflows 10,725 – – – 10,725 2,414 – – – 2,414

(Outflows) (10,725) – – – (10,725) (2,414) – – – (2,414)

Net – – – – – – – – – –



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Inflows 148,818 73,122 – – 221,940 70,137 35,424 – – 105,561

(Outflows) (146,933) (73,134) – – (220,067) (69,294) (35,432) – – (104,726)

Net 1,885 (12) – – 1,873 843 (8) – – 835

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Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Inflows 1,934,420 919,612 – – 2,854,032 – – – – –

(Outflows) (1,913,027) (918,350) – – (2,831,377) – – – – –

Net 21,393 1,262 – – 22,655 – – – – –



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Inflows – – – – – – – – – –

(Outflows) – – – – – – – – – –

Net – – – – – – – – – –



Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

Less than 1 month

1 to 6 months

6 to 12 months

1 to 2 years Total

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


Inflows 2,462 – – – 2,462 996 – – – 996

(Outflows) (2,458) – – – (2,458) (1,008) – – – (1,008)

Net 4 – – – 4 (12) – – – (12)

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4. Fair value measurementThe 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) (see note 6 and 7)• Financial assets / liabilities held for trading (see note 6 and 7)• Derivative financial instruments (see note 8)

The Fund had no assets or liabilities at fair value on a non recurring basis in the current reporting period.

AASB 13 requires disclosure of fair value measurements by level of the following fair value hierarchy;

(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)

(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2); and

(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3)

(i) 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 end of the reporting period without any deduction for estimated future selling costs.

The Funds value their investments in accordance with the accounting policies set out in note 2(b) 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 Funds is the current bid price; the appropriate quoted market price for financial liabilities is the current asking price. When the Funds hold derivatives with offsetting market risks, they use mid market prices as a basis for establishing fair values for the offsetting risk positions and applies this bid or asking price to the net open position, as appropriate.

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.

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4. Fair value measurement (continued)

(i) 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 end of the reporting period applicable for an instrument with similar terms and conditions.

For other pricing models, inputs are based on market data at the end of the reporting period. 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.

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.

Investments in other unlisted unit trusts are recorded at the redemption value per unit as reported by the investment managers of such funds.

Some of the inputs to these models may not be market observable and are therefore estimated based on assumptions.

The output of a model is always an estimate or approximation of a value that cannot be determined with certainty, and valuation techniques employed may not fully reflect all factors relevant to the positions the Funds hold. Valuations are therefore adjusted, where appropriate, to allow for additional factors including liquidity risk and counterparty risk.

The carrying value less impairment provision of other receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Fund for similar financial instruments.

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Recognised fair value measurements The following tables present the Fund’s financial assets and liabilities (by asset class) measured at fair value according to the fair value hierarchy at 30 June 2017 and 30 June 2016.



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

30 June 2017 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets

Financial assets held for trading:

Derivatives 30 86,858 – 86,888 23 46,372 – 46,395

Financial assets designated at fair value through profit or loss:

Equity securities – – – – – – – –

Fixed interest securities – 3,143,246 – 3,143,246 – 1,511,438 – 1,511,438

Total 30 3,230,104 – 3,230,134 23 1,557,810 – 1,557,833

Financial liabilities

Financial liabilities held for trading:

Derivatives – 3,133 – 3,133 66 9,365 – 9,431

Total – 3,133 – 3,133 66 9,365 – 9,431




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

Financial assets


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



Fixed interest 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



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

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

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Recognised fair value measurements The following tables present the Fund’s financial assets and liabilities measured at fair value according to the fair value hierarchy at 30 June 2017 and 30 June 2016.




30 June 2017 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets


Derivatives – 222 – 222 8 159,083 – 159,091


Equity securities 11,777,030 872 – 11,777,902 – 3,360,184 – 3,360,184

Fixed interest securities – – – – – – – –

Total 11,777,030 1,094 – 11,778,124 8 3,519,267 – 3,519,275



Derivatives 781 305 – 1,086 181 53,904 – 54,085

Total 781 305 – 1,086 181 53,904 – 54,085




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

Fixed interest 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

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Recognised fair value measurements (continued)




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

30 June 2017 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets


Derivatives – 1 – 1 – 920 – 920 – 45,372 – 45,372


Equity securities 1,100,433 36,240 – 1,136,673 – – – – – – – –

Listed unit trusts – – – – 1,887,438 – – 1,887,438 – – – –

Unlisted unit trusts – – – – – – – – – 1,352,299 – 1,352,299

Total 1,100,433 36,241 – 1,136,674 1,887,438 920 – 1,888,358 – 1,397,671 – 1,397,671



Derivatives 11 – – 11 – 154 – 154 – 2,197 – 2,197

Total 11 – – 11 – 154 – 154 – 2,197 – 2,197




Level 1 Level 2 Level 3 Total 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 $'000 $'000 $'000 $'000

Financial assets


Derivatives 40 44 – 84 – – – – – 42,494 – 42,494


Equity securities 1,008,826 20 – 1,008,846 – – – – – – – –

Listed unit trusts – – – – 2,056,004 – – 2,056,004 – – – –

Unlisted unit trusts – – – – – – – – – 1,273,152 – 1,273,152

Total 1,008,866 64 – 1,008,930 2,056,004 – – 2,056,004 – 1,315,646 – 1,315,646



Derivatives – 2 – 2 – – – – – 7,268 – 7,268

Total – 2 – 2 – – – – – 7,268 – 7,268For

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30 June 2017 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets


Derivatives 3 5 – 8 – 2,430 – 2,430


Equity securities 418,858 128 – 418,986 – – – –

Unlisted unit trusts – – – – – 66,464 – 66,464

Total 418,861 133 – 418,994 – 68,894 – 68,894



Derivatives 29 – – 29 – 433 – 433

Total 29 – – 29 – 433 – 433




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

Financial assets


Derivatives 24 68 – 92 9 2,367 – 2,376


Equity securities 310,840 138 – 310,978 – – – –

Unlisted unit trusts – – – – – 34,711 – 34,711

Total 310,864 206 – 311,070 9 37,078 – 37,087



Derivatives 1 4 – 5 – 654 – 654

Total 1 4 – 5 – 654 – 654

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30 June 2017 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets


Derivatives – 449 – 449 – – – –


Equity securities 25,141 – – 25,141 254,774 – – 254,774

Unlisted unit trusts – – – – – – – –

Total 25,141 449 – 25,590 254,774 – – 254,774



Derivatives 9 118 – 127 – – – –

Total 9 118 – 127 – – – –




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

Financial assets


Derivatives 1 373 – 374 – – – –




Total 21,215 373 – 21,588 178,319 – – 178,319



Derivatives 4 83 – 87 – – – –

Total 4 83 – 87 – – – –

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30 June 2017 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets


Derivatives – 1,985 – 1,985 26 30,408 – 30,434


Equity securities – – – – 883,120 27,683 – 910,803

Unlisted unit trusts – 69,167 – 69,167 – – – –

Total – 71,152 – 71,152 883,146 58,091 – 941,237



Derivatives – 112 – 112 316 7,753 – 8,069

Total – 112 – 112 316 7,753 – 8,069




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

Financial assets


Derivatives – 1,056 – 1,056 – – – –



Unlisted unit trusts – 35,523 – 35,523 – – – –

Total – 36,579 – 36,579 – – – –



Derivatives – 220 – 220 – – – –

Total – 220 – 220 – – – –

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30 June 2017 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000

Financial assets


Derivatives – – – – – 18 – 18




Total 17,074 – – 17,074 18,084 18 – 18,102



Derivatives 9 – – 9 – 14 – 14

Total 9 – – 9 – 14 – 14




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

Financial assets


Derivatives – – – – – 9 – 9


Equity securities – – – – 14,365 – – 14,365


Total – – – – 14,365 9 – 14,374



Derivatives – – – – – 21 – 21

Total – – – – – 21 – 21

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

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Transfer between levels

The following tables present the transfers between levels during the year ended 30 June 2017:



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

30 June 2017 $'000 $'000 $'000 $'000 $'000 $'000

Transfers between level 1 and 2:

Equity securities (19,693) 19,693 – – – –

30 June 2016

Transfers between level 1 and 2:

Equity securities – – – (31) 31 –

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

Net gains/(losses) recognised in relation to financial assets and financial liabilities held at fair value through profit or loss:


(Hedged)

Vanguard International Credit Securities Index

Fund (Hedged)


Index Fund



Index Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Net unrealised gain/(loss) on financial instruments held for trading 36,659 86,635 3,276 35,066 (1,513) 1,312 (87,932) 349,765 (49) 144

Net unrealised gain/(loss) on financial instruments designated at fair value through profit or loss (277,327) 174,924 (68,064) (23,492) 326,804 (1,920,177) (11,265) (588,099) 152,608 (213,961)

Net realised gain/(loss) on financial instruments held for trading 147,789 (197,955) 49,098 (42,067) 17,330 5,237 293,076 (342,983) 1,848 (2,258)

Net Realised gain/(loss) on financial instruments designated at fair value through profit or loss 66,415 235,376 52,956 142,966 1,062,216 1,801,062 325,219 511,524 11,139 53,391

Total net gains/(losses) on financial Instruments held at fair value through profit or loss (26,464) 298,980 37,266 112,473 1,404,837 (112,566) 519,098 (69,793) 165,546 (162,684)


Index Fund



Fund


Fund (Hedged)


Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Net unrealised gain/(loss) on financial instruments held for trading 766 17 7,948 34,829 (107) 133 284 4,516 35 287

Net unrealised gain/(loss) on financial instruments designated at fair value through profit or loss (320,844) 150,215 (230,577) 36,095 31,519 (94,688) 3,348 (41,499) 1,326 1,359

Net realised gain/(loss) on financial instruments held for trading 1,151 259 56,538 (53,847) 794 (249) 2,394 (15,153) 511 152

Net Realised gain/(loss) on financial instruments designated at fair value through profit or loss 163,184 145,173 70,094 114,349 18,712 82,099 1,040 40,988 268 (735)

Total net gains/(losses) on financial Instruments held at fair value through profit or loss (155,743) 295,664 (95,997) 131,426 50,918 (12,705) 7,066 (11,148) 2,140 1,063F

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


Fund


Fund (Hedged)


Index Fund



30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Net unrealised gain/(loss) on financial instruments held for trading – 1 1,038 812 22,365 – (9) – 16 –

Net unrealised gain/(loss) on financial instruments designated at fair value through profit or loss (2,231) 10,598 (1,877) 1,674 32,133 – 1,356 – 1,879 (82)

Net realised gain/(loss) on financial instruments held for trading 480 (30) 1,036 (1,404) (11,467) – 256 – 5 (276)

Net Realised gain/(loss) on financial instruments designated at fair value through profit or loss 8,116 3,298 1,214 700 1,263 – 281 – 647 156

Total net gains/(losses) on financial Instruments held at fair value through profit or loss 6,365 13,867 1,411 1,782 44,294 – 1,884 – 2,547 (202)

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6. Financial assets held at fair value through profit or lossVanguard International

Fixed Interest Index Fund (Hedged)


Fund (Hedged)


Index Fund



Index Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

Fair value Fair value Fair value Fair value Fair value Fair value Fair value Fair value Fair value Fair value

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

Held for trading

Derivatives 86,888 90,080 46,395 41,412 222 1,250 159,091 273,904 1 84

Total held for trading 86,888 90,080 46,395 41,412 222 1,250 159,091 273,904 1 84

Designated at fair value through profit or loss

Equity securities – – – – 11,777,902 11,841,864 – – 1,136,673 1,008,846

Fixed interest securities 3,143,246 2,678,731 1,511,438 1,203,405 – – – – – –

Unlisted unit trusts – – – – – – 3,360,184 4,406,645 – –

Total designated at fair value through profit or loss 3,143,246 2,678,731 1,511,438 1,203,405 11,777,902 11,841,864 3,360,184 4,406,645 1,136,673 1,008,846

Total financial assets held at fair value through profit or loss 3,230,134 2,768,811 1,557,833 1,244,817 11,778,124 11,843,114 3,519,275 4,680,549 1,136,674 1,008,930

Comprising:

Derivatives

Foreign currency forward contracts 86,858 89,987 46,372 41,246 222 4 159,083 272,866 1 1

Australian share price futures – – – – – – – – – –

International share price futures – – – – – 1,246 8 1,038 – 83

Australian interest rate futures – – – 1 – – – – – –

International interest rate futures 30 93 23 165 – – – – – –

Total derivatives 86,888 90,080 46,395 41,412 222 1,250 159,091 273,904 1 84

Equity securities

International equity securities – – – – 11,777,902 11,841,864 – – 1,136,673 1,008,846

Total equity securities – – – – 11,777,902 11,841,864 – – 1,136,673 1,008,846

Fixed interest securities

Australian fixed interest securities 133,328 92,971 28,643 25,354 – – – – – –

International fixed interest securities 3,009,918 2,585,760 1,482,795 1,178,051 – – – – – –

Total fixed interest securities 3,143,246 2,678,731 1,511,438 1,203,405 – – – – – –

Unlisted unit trusts

Units in International equity trusts – – – – – – 3,360,184 4,406,645 – –

Total unlisted unit trusts – – – – – – 3,360,184 4,406,645 – –

Total financial assets held at fair value through profit or loss 3,230,134 2,768,811 1,557,833 1,244,817 11,778,124 11,843,114 3,519,275 4,680,549 1,136,674 1,008,930

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6. Financial assets held at fair value through profit or loss (continued)


Index Fund



Fund


Fund (Hedged)


Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016


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

Held for trading

Derivatives 920 - 45,372 42,494 8 92 2,430 2,376 449 374

Total held for trading 920 - 45,372 42,494 8 92 2,430 2,376 449 374


Equity securities – – – – 418,986 310,978 – – 25,141 21,214

Listed unit trusts 1,887,438 2,056,004 – – – – – – – –

Unlisted unit trusts – – 1,352,299 1,273,152 – – 66,464 34,711 – –

Total designated at fair value through profit or loss 1,887,438 2,056,004 1,352,299 1,273,152 418,986 310,978 66,464 34,711 25,141 21,214

Total financial assets held at fair value through profit or loss 1,888,358 2,056,004 1,397,671 1,315,646 418,994 311,070 68,894 37,087 25,590 21,588

Comprising:

Derivatives

Foreign currency forward contracts 920 – 45,372 42,494 – 66 2,430 2,367 449 373

International share price futures – – – – 8 26 – 9 – 1

Total derivatives 920 – 45,372 42,494 8 92 2,430 2,376 449 374

Equity securities

Australian equity securities – – – – – – – – 1,158 993

International equity securities – – – – 418,986 310,978 – – 23,983 20,221

Total equity securities – – – – 418,986 310,978 – – 25,141 21,214

Listed unit trusts

International listed trusts 1,887,438 2,056,004 – – – – – – – –

Total listed unit trusts 1,887,438 2,056,004 – – – – – – – –


Units in International equity trusts – – 1,352,299 1,273,152 – – 66,464 34,711 – –

Total unlisted unit trusts – – 1,352,299 1,273,152 – – 66,464 34,711 – –

Total financial assets held at fair value through profit or loss 1,888,358 2,056,004 1,397,671 1,315,646 418,994 311,070 68,894 37,087 25,590 21,588

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6. Financial assets held at fair value through profit or loss (continued)


Fund


Fund (Hedged)


Index Fund



30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016


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

Held for trading

Derivatives – – 1,985 1,056 30,434 – – – 18 9

Total held for trading – – 1,985 1,056 30,434 – – – 18 9


Equity securities 254,774 178,319 – – 910,803 – 17,074 – 18,084 14,365

Unlisted unit trusts – – 69,167 35,523 – – – – – –

Total designated at fair value through profit or loss 254,774 178,319 69,167 35,523 910,803 – 17,074 – 18,084 14,365

Total financial assets held at fair value through profit or loss 254,774 178,319 71,152 36,579 941,237 – 17,074 – 18,102 14,374

Comprising:

Derivatives

Foreign currency forward contracts – – 1,985 1,056 30,408 – – – 18 9

International share price futures – – – – 26 – – – – –

Total derivatives – – 1,985 1,056 30,434 – – – 18 9

Equity securities

Australian equity securities 6,618 5,113 – – – – 115 – – –

International equity securities 248,156 173,206 – – 910,803 – 16,959 – 18,084 14,365

Total equity securities 254,774 178,319 – – 910,803 – 17,074 – 18,084 14,365


Units in International equity trusts – – 69,167 35,523 – – – – – –

Total unlisted unit trusts – – 69,167 35,523 – – – – – –

Total financial assets held at fair value through profit or loss 254,774 178,319 71,152 36,579 941,237 – 17,074 – 18,102 14,374

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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7. Financial liabilities held at fair value through profit or lossVanguard International

Fixed Interest Index (Hedged)


Fund (Hedged)


Index Fund



Index Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016


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

Held for trading

Derivatives 3,133 43,020 9,431 7,723 1,086 601 54,085 80,966 11 2

Total held for trading 3,133 43,020 9,431 7,723 1,086 601 54,085 80,966 11 2

Total financial liabilities held at fair value through profit or loss 3,133 43,020 9,431 7,723 1,086 601 54,085 80,966 11 2

Comprising:

Derivatives

Foreign currency forward contracts 3,133 42,665 9,365 7,264 305 14 53,904 80,578 – 2

International share price futures – – – – 781 587 181 388 11 –

Australian interest rate futures – 36 10 – – – – – – –

International interest rate futures – 319 56 459 – – – – – –

Total derivatives 3,133 43,020 9,431 7,723 1,086 601 54,085 80,966 11 2

Total financial liabilities held at fair value through profit or loss 3,133 43,020 9,431 7,723 1,086 601 54,085 80,966 11 2

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7. Financial liabilities held at fair value through profit or loss (continued)


Index Fund



Index Fund


Index Fund (Hedged)


Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016


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

Held for trading

Derivatives 154 – 2,197 7,268 29 5 433 654 127 87

Total held for trading 154 – 2,197 7,268 29 5 433 654 127 87

Total financial liabilities held at fair value through profit or loss 154 – 2,197 7,268 29 5 433 654 127 87

Comprising:

Derivatives

Foreign currency forward contracts 154 – 2,197 7,268 – 4 433 654 118 83

International share price futures – – – – 29 1 – – 9 4

Total derivatives 154 – 2,197 7,268 29 5 433 654 127 87

Total financial liabilities held at fair value through profit or loss 154 – 2,197 7,268 29 5 433 654 127 87

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7. Financial liabilities held at fair value through profit or loss (continued)


Fund


Fund (Hedged)





30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016


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

Held for trading

Derivatives – – 112 220 8,069 – 9 – 14 21

Total held for trading – – 112 220 8,069 – 9 – 14 21

Total financial liabilities held at fair value through profit or loss – – 112 220 8,069 – 9 – 14 21

Comprising:

Derivatives

Foreign currency forward contracts – – 112 220 7,753 – – – 14 21

International share price futures – – – – 316 – 9 – – –

Total derivatives – – 112 220 8,069 – 9 – 14 21

Total financial liabilities held at fair value through profit or loss – – 112 220 8,069 – 9 – 14 21

An overview of the risk exposures relating to financial liabilities at fair value through profit or loss is included in note 3.

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8. 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:

Forward currency contractsForward currency contracts are primarily used by the Funds to manage against foreign currency risks on their investments. The Funds agrees 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 end of each reporting period. The Funds recognise a gain or loss equal to the change in fair value at the end of each reporting period.

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 usually settled net 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.

The Funds’ derivative financial instruments at year end are detailed below:

Vanguard International Fixed Interest Index Fund (Hedged) Vanguard International Credit Securities Index Fund (Hedged)

2017 2016 2017 2016

Contract / Notional

Fair valueContract /

Notional


Notional


Notional

Fair value

Assets Liabilities Assets Liabilities Assets Liabilities Assets Liabilities

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

Australian fixed interest futures – – – (1,960) – 36 1,470 – 10 296 1 –

International fixed interest futures (4,305) 30 – 25,819 93 319 25,444 23 56 16,438 165 459

Forward currency contracts (3,045,778) 86,858 3,133 (2,609,175) 89,987 42,665 (1,519,591) 46,372 9,365 (1,216,853) 41,246 7,264

Total (3,050,083) 86,888 3,133 (2,585,316) 90,080 43,020 (1,492,677) 46,395 9,431 (1,200,119) 41,412 7,723

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8. Derivative financial instruments (continued)

Vanguard International Shares Index Fund Vanguard International Shares Index Fund (Hedged)

2017 2016 2017 2016

Contract / Notional


Notional


Notional


Notional

Fair value


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

International share price index futures 139,169 – 781 142,807 1,246 587 19,900 8 181 89,437 1,038 388

Forward currency contracts (91,708) 222 305 9,900 4 14 (3,138,808) 159,083 53,904 (3,097,835) 272,866 80,578

Total 47,461 222 1,086 152,707 1,250 601 (3,118,908) 159,091 54,085 (3,008,398) 273,904 80,966

Vanguard Emerging Markets Shares Index Fund Vanguard International Property Securities Index Fund

2017 2016 2017 2016

Contract / Notional


Notional


Notional


Notional

Fair value


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

International share price index futures – – 11 2,695 83 – – – – – – –

Forward currency contracts (13,370) 1 – (16,905) 1 2 (153,000) 920 154 (2,000) – –

Total (13,370) 1 11 (14,210) 84 2 (153,000) 920 154 (2,000) – –

Vanguard International Property Securities Index Fund (Hedged) Vanguard International Small Companies Index Fund

2017 2016 2017 2016

Contract / Notional


Notional


Notional


Notional

Fair value


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

International share price index futures – – – – – – 3,791 8 29 1,218 26 1

Forward currency contracts (1,477,795) 45,372 2,197 (1,384,437) 42,494 7,268 (426) – – (20,533) 66 4

Total (1,477,795) 45,372 2,197 (1,384,437) 42,494 7,268 3,365 8 29 (19,315) 92 5

Vanguard International Small Companies Index Fund (Hedged) Vanguard Global Minimum Volatility Fund

2017 2016 2017 2016

Contract / Notional


Notional


Notional


Notional

Fair value


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

International share price index futures – – – 154 9 – 362 – 9 226 1 4

Forward currency contracts (72,958) 2,430 433 (39,590) 2,367 654 (24,377) 449 118 (20,520) 373 83

Total (72,958) 2,430 433 (39,436) 2,376 654 (24,015) 449 127 (20,294) 374 87

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8. Derivative financial instruments (continued)

Vanguard Global Infrastructure Index Fund Vanguard Global Infrastructure Index Fund (Hedged)

2017 2016 2017 2016

Contract / Notional


Notional


Notional


Notional

Fair value


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

Forward currency contracts (8,000) – – (1,680) – – (73,042) 1,985 112 (36,257) 1,056 220

Total (8,000) – – (1,680) – – (73,042) 1,985 112 (36,257) 1,056 220

Vanguard International Shares Select Exclusions Index Fund Vanguard Global Value Equity Fund

2017 2016 2017 2016

Contract / Notional


Notional


Notional


Notional

Fair value


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

International share price index futures 32,481 26 316 – – – 255 – 9 – – –

Forward currency contracts 6,658 30,408 7,753 – – – – – – – – –

Total 39,139 30,434 8,069 – – – 255 – 9 – – –


2017 2016

Contract / Notional


Notional

Fair value

Assets Liabilities Assets Liabilities

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

International share price index futures 51 – – – – –

Forward currency contracts 416 18 14 (42) 9 21

Total 467 18 14 (42) 9 21

Risk exposures and fair value measurementsInformation about the Funds’ exposure to credit risk, foreign exchange risk, and interest rate risk and about the methods and assumptions used in determining fair values is provided in note 3 to the financial statements. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of derivative financial instruments disclosed above.

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9. Net assets attributable to unitholdersVanguard International Fixed Interest Index Fund (Hedged)

Ordinary Class units

ETF Class units


ETF Class units


ETF Class units


ETF Class units

30 June 2017 30 June 2016 30 June 2017 Total 30 June 2016 Total

No. ‘000 No. ‘000 No. ‘000 No. ‘000 $’000 $’000 $’000 $’000 $’000 $’000

Opening balance 2,017,890 350 2,352,758 – – – 2,629,249 – – 2,802,873

Applications 730,604 1,745 540,817 350 916,031 89,327 1,005,358 674,701 18,195 692,896

Redemptions (379,849) – (908,514) – (480,402) – (480,402) (1,151,730) – (1,151,730)

Units issued upon reinvestment of distributions 118,773 3 32,829 – 144,569 143 144,712 39,129 – 39,129

Increase/(decrease) in net assets attributable to unitholders – – – – – – (233,625) – – 246,081

Closing balance 2,487,418 2,098 2,017,890 350 – – 3,065,292 – – 2,629,249



ETF Class units


ETF Class units


ETF Class units


ETF Class units


No. ‘000 No. ‘000 No. ‘000 No. ‘000 $’000 $’000 $’000 $’000 $’000 $’000

Opening balance 953,031 220 1,256,129 – – – 1,180,821 – – 1,489,709

Applications 371,412 1,830 255,284 300 457,033 93,303 550,336 313,099 15,471 328,570

Redemptions (198,060) – (558,382) (80) (242,943) – (242,943) (690,354) (4,215) (694,569)

Units issued upon reinvestment of distributions 69,365 1 – – 83,850 52 83,902 – – –

Increase/(decrease) in net assets attributable to unitholders – – – – – – (63,158) – – 57,111

Closing balance 1,195,748 2,051 953,031 220 – – 1,508,958 – – 1,180,821

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9. Net assets attributable to unitholders (continued)



ETF Class units

B Class units

R Class units


ETF Class units

B Class units

R Class units

30 June 2017 30 June 2016

No. ‘000 No. ‘000 No. ‘000 No. ‘000 No. ‘000 No. ‘000 No. ‘000 No. ‘000

Opening balance 6,330,423 4,045 1,666 35,567 7,827,194 1,300 415 84,192

Applications 1,603,989 4,685 2,060 6,318 1,913,457 3,920 1,300 8,175

Redemptions (2,612,060) – (60) (10,469) (3,731,724) (1,180) (71) (58,688)

Units issued upon reinvestment of distributions 175,867 23 90 61 321,496 5 22 1,888

Closing balance 5,498,219 8,753 3,756 31,477 6,330,423 4,045 1,666 35,567



ETF Class units

B Class units

R Class units


ETF Class units

B Class units

R Class units

30 June 2017 Total 30 June 2016 Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Opening balance 11,814,895 14,802,308

Applications 3,057,924 277,557 119,774 11,512 3,466,767 3,570,258 227,387 73,667 15,444 3,886,756

Redemptions (4,994,518) – (3,569) (21,111) (5,019,198) (7,034,683) (64,867) (4,077) (112,552) (7,216,179)

Units issued upon reinvestment of distributions 326,037 1,274 5,045 113 332,469 595,838 284 1,232 3,510 600,864

Increase/(decrease) in net assets attributable to unitholders – – – – 920,024 – – – – (258,854)

Closing balance – – – – 11,514,957 – – – – 11,814,895

* 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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AUD Class units

NZD Class units

AUD Class units

NZD Class units

AUD Class units

NZD Class units

AUD Class units

NZD Class units


No. ‘000 No. ‘000 No. ‘000 No. ‘000 $’000 $’000 $’000 $’000 $’000 $’000

Opening balance 3,488,446 1,318,740 4,483,015 931,707 4,281,595 4,905,790

Applications 862,186 118,350 914,504 450,090 734,314 148,791 883,105 767,847 511,109 1,278,956

Redemptions (1,037,469) (1,196,152) (1,909,073) (63,057) (901,944) (1,520,198) (2,422,142) (1,620,029) (73,862) (1,693,891)

Units issued upon reinvestment of distributions 306,331 27,074 – – 246,410 33,279 279,689 – – –

Increase/(decrease) in net assets attributable to unitholders – – – – – – 119,929 (209,260)

Closing balance 3,619,494 268,012 3,488,446 1,318,740 – – 3,142,176 – – 4,281,595



30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

No. ‘000 No. '000 $’000 $’000 No. ‘000 No. ‘000 $’000 $’000

Opening balance 595,045 766,481 993,761 1,492,504 1,623,075 1,628,274 1,985,451 1,767,538

Applications 70,188 113,646 127,532 192,221 852,814 495,306 977,412 594,802

Redemptions (95,129) (294,266) (165,600) (515,012) (884,407) (577,786) (1,013,462) (683,478)

Units issued upon reinvestment of distributions 17,471 9,184 29,632 16,500 89,664 77,281 108,193 87,187

Increase/(decrease) in net assets attributable to unitholders 141,440 (192,452) (241,606) 219,402

Closing balance 587,575 595,045 1,126,765 993,761 1,681,146 1,623,075 1,815,988 1,985,451



30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

No. ‘000 No. '000 $’000 $’000 No. ‘000 No. ‘000 $’000 $’000

Opening balance 1,299,979 1,427,282 1,276,812 1,261,493 216,313 368,583 296,676 543,947

Applications 795,411 307,684 756,620 287,892 71,289 50,836 107,835 73,845

Redemptions (641,849) (434,987) (610,506) (410,516) (34,966) (231,037) (51,493) (336,543)

Units issued upon reinvestment of distributions 112,447 – 108,246 – 13,923 27,931 19,418 41,147

Increase/(decrease) in net assets attributable to unitholders (298,312) 137,943 28,096 (25,720)

Closing balance 1,565,988 1,299,979 1,232,860 1,276,812 266,559 216,313 400,532 296,676

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30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

No. ‘000 No. '000 $’000 $’000 No. ‘000 No. ‘000 $’000 $’000

Opening balance 42,197 147,836 35,439 195,045 19,982 – 21,173 –

Applications 39,228 15,569 37,076 19,676 2,174 19,982 2,560 20,025

Redemptions (9,865) (121,208) (9,491) (152,753) (784) – (866) –

Units issued upon reinvestment of distributions 2,114 – 1,815 – 434 – 460 –

Increase/(decrease) in net assets attributable to unitholders 4,763 (26,529) 1,456 1,148

Closing balance 73,674 42,197 69,602 35,439 21,806 19,982 24,783 21,173



30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

No. ‘000 No. '000 $’000 $’000 No. ‘000 No. ‘000 $’000 $’000

Opening balance 160,706 142,919 175,814 145,637 39,465 31,521 35,761 26,813

Applications 160,513 37,167 172,414 39,187 113,616 11,815 102,844 10,066

Redemptions (90,124) (21,712) (94,767) (22,952) (80,088) (3,871) (71,343) (3,335)

Units issued upon reinvestment of distributions 3,087 2,332 3,367 2,394 975 – 893 –

Increase/(decrease) in net assets attributable to unitholders (4,307) 11,548 (1,039) 2,217

Closing balance 234,182 160,706 252,521 175,814 73,968 39,465 67,116 35,761



30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

No. ‘000 No. '000 $’000 $’000 No. ‘000 No. ‘000 $’000 $’000

Opening balance – – – – 14,484 – 14,376 –

Applications 14,996 – 15,252 – 924 14,484 1,065 14,500

Redemptions – – – – – – – –

Units issued upon reinvestment of distributions 63 – 72 – 207 – 228 –

Increase/(decrease) in net assets attributable to unitholders 1,391 – 1,961 (124)

Closing balance 15,059 – 16,715 – 15,615 14,484 17,630 14,376

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NZD Hedged Class units








No. ‘000 No. ‘000 No. ‘000 No. ‘000 $’000 $’000 $’000 $’000 $’000 $’000

Opening balance – – – – – – – – – –

Applications 286,258 670,902 – – 291,926 655,507 947,433 – – –

Redemptions (44,410) (30,622) – – (46,636) (34,418) (81,054) – – –

Units issued upon reinvestment of distributions 726 – – – 745 – 745 – – –

Increase/(decrease) in net assets attributable to unitholders – – – – 50,022 – – –

Closing balance 242,574 640,280 – – – – 917,146 – – –

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 Minimum Volatility Fund, Vanguard Global Infrastructure Index Fund, Vanguard Global Infrastructure Index Fund (Hedged), Vanguard Global Value Equity Fund and Vanguard Global Quantatitive Equity Fund have no separate classes of units and each unit has the same rights attaching to it as all other units of the Funds.

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Capital Risk Management The Funds consider 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 unitholders.

Daily applications and redemptions are reviewed relative to the liquidity of the Funds’ underlying assets on a daily basis by the Responsible Entity. Under the terms of the Fund Constitutions, the Responsible Entity has the discretion to reject an application for units and to defer or adjust a redemption of units if the exercise of such discretion is in the best interests of unitholders.

The Funds’ investment strategy remains unchanged and they continues to hold direct investments which provide exposure to liquid assets including equity securities, income securities, interest earnings and cash equivalent securities. As such, the Funds will meet any capital requirements from the liquidation of liquid assets, which include cash and cash equivalents.

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10. Distributions to unitholders paid and payableVanguard International Fixed Interest Index Fund (Hedged)

Ordinary Class units ETF Class units

30 June 2017 30 June 2016 30 June 2017 30 June 2016

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

Distributions paid

31 March 154,840 6.9495 – – 4,484 289.4645 – –

Distributions payable

30 June 39,209 1.5763 44,745 2.2174 1,371 65.2296 362 103.3802

194,049 8.5258 44,745 2.2174 5,855 354.6941 362 103.3802


Ordinary Class units ETF Class units


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

Distributions paid

31 March 55,943 5.0659 – – 3,464 216.6059 – –


30 June 34,288 2.8675 49,960 5.2422 2,385 116.1793 468 212.8053

90,231 7.9334 49,960 5.2422 5,849 332.7852 468 212.8053


Ordinary Class units ETF Class units B Class units

30 June 2017 30 June 2016 30 June 2017 30 June 2016 30 June 2017 30 June 2016

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

Distributions paid

30 September 56,746 0.8221 64,066 0.9470 1,180 24.9066 595 29.8121 509 24.9623 229 30.0703

31 December 67,110 1.1623 57,477 0.8655 2,052 35.5383 820 26.7259 901 35.3468 271 26.7530

31 March 48,744 0.8630 54,651 0.7762 1,831 26.5001 822 23.6453 867 26.3982 370 23.9950


30 June 550,909 9.9631 229,087 3.5986 8,677 98.5136 6,064 149.2126 3,670 97.6911 2,769 166.1934

723,509 12.8105 405,281 6.1873 13,740 185.4586 8,301 229.3959 5,947 184.3984 3,639 247.0117

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10. Distributions to unitholders paid and payable (continued)


AUD Class units NZD Class units


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

Distributions paid

30 September – – – – – – – –

31 December – – – – – – – –

31 March 158,241 4.2575 – – 8,741 3.0571 – –


30 June 412,305 11.3912 258,746 7.4172 40,723 15.1943 25,628 2.0318

570,546 15.6487 258,746 7.4172 49,464 18.2514 25,628 2.0318






Distributions paid

30 September 11,459 2.0824 14,773 1.9228 15,972 0.9299 10,016 0.6014 – – – –

31 December 1,668 0.2968 2,232 0.3228 16,132 0.9768 14,782 0.8324 – – – –

31 March 1,487 0.2589 2,093 0.2942 7,766 0.4098 17,760 0.9862 53,587 3.1216 – –


30 June 29,545 5.0282 38,998 6.5538 104,083 6.1912 96,654 5.9550 253,663 16.1983 83,499 6.4231

44,159 7.6663 58,096 9.0936 143,953 8.5077 139,212 8.3750 307,250 19.3199 83,499 6.4231






Distributions paid

30 September 1,028 0.4551 1,923 0.5050 – – – – – – – –

31 December 1,496 0.6361 1,136 0.4058 – – – – – – – –

31 March 1,075 0.4410 871 0.3031 1,807 2.7392 – – – – – –


30 June 24,304 9.1176 16,633 7.6893 5,073 6.8852 18,143 42.9946 1,127 5.1684 460 2.3019

27,903 10.6498 20,563 8.9032 6,880 9.6244 18,143 42.9946 1,127 5.1684 460 2.3019

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10. Distributions to unitholders paid and payable (continued)




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

Distributions paid

30 September 1,037 0.5949 1,011 0.6802 – – – –

31 December 1,263 0.6061 921 0.5963 – – – –

31 March 1,339 0.6208 882 0.5471 152 0.2088 – –


30 June 13,489 5.7601 3,707 2.3064 6,958 9.4067 885 2.2415

17,128 7.5819 6,521 4.1300 7,110 9.6155 885 2.2415




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

Distributions paid

30 September – – – – 35 0.2433 – –

31 December 33 0.2572 – – 144 0.9900 – –

31 March 38 0.2570 – – 49 0.3270 – –


30 June 645 4.2804 – – 626 4.0081 75 0.5163

716 4.7946 – – 854 5.5684 75 0.5163


Ordinary Class units NZD Hedged Class units


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

Distributions paid

31 March 795 0.3654 – – – – – –


30 June 2,425 0.9996 – – – – – –

3,220 1.3650 – – – – – –

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11. Cash and cash equivalentsVanguard International

Fixed Interest Index Fund (Hedged)


Fund (Hedged)


Index Fund


(Hedged)


Index Fund

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

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

Domestic cash at bank 5,794 – 2,479 3,431 64,404 5,664 1,267 – 1,710 347

Foreign cash at bank 13,524 8,630 20,333 10,334 217,900 106,485 12,174 13,369 12,044 4,598

Total cash and cash equivalents 19,318 8,630 22,812 13,765 282,304 112,149 13,441 13,369 13,754 4,945


Index Fund

Vanguard International Property Securities Index

Fund (Hedged)


Fund


Fund (Hedged)

Vanguard Global Minimum

Volatility Fund

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

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

Domestic cash at bank 115 2,344 2,579 2,434 333 (445) 502 625 196 –

Foreign cash at bank 30,555 3,643 – – 3,520 – 431 76 49 25

Total cash and cash equivalents 30,670 5,987 2,579 2,434 3,853 (445) 933 701 245 25


Index Fund


(Hedged)


Index Fund



Equity Fund

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

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

Domestic cash at bank 1,015 171 139 38 2,502 – 138 – 216 5

Foreign cash at bank 1,226 292 – – 19,343 – 109 – 356 10

Total cash and cash equivalents 2,241 463 139 38 21,845 – 247 – 572 15

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12. Reconciliation of profit/(loss) to net cash inflow/(outflow) from operating activities

Vanguard International Fixed Interest Index Fund

(Hedged)

Vanguard International Credit Securities Index Fund

(Hedged)

Vanguard International Shares Index

Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

(a) Reconciliation of profit/(loss) to net cash inflow/(outflow) from operating activities

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

Increase/(decrease) in net assets attributable to unitholders (233,625) 246,081 (63,158) 57,111 920,024 (258,854)

Distributions to unitholders 199,904 45,107 96,080 50,428 743,196 417,221

Proceeds from sale of financial instruments held at fair value through profit or loss 801,241 1,740,112 844,663 1,186,846 3,982,216 5,498,187

Purchases of financial instruments held at fair value through profit or loss (1,255,235) (1,261,769) (1,098,507) (830,408) (2,490,201) (2,164,016)

Net gains/(losses) on financial instruments held at fair value through profit or loss 26,464 (298,980) (37,266) (112,473) (1,404,837) 112,566

Net change in receivables 107 111 70 44 (3,218) 3,250

Net change in payables 193 (50) 62 (70) 43 (541)

Non cash items – – – – (13,119) (4,718)

Net cash inflow/(outflow) from operating activities (460,951) 470,612 (258,056) 351,478 1,734,104 3,603,095

(b) Non cash financing activities

During the year, the following distribution payments were satisfied by the issue of units under the distribution reinvestment plan 144,712 39,129 83,901 - 332,469 600,579

Vanguard International Shares Index

Fund (Hedged)


Index Fund


Index Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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



Increase/(decrease) in net assets attributable to unitholders 119,929 (209,260) 141,440 (192,452) (241,606) 219,402


Proceeds from sale of financial instruments held at fair value through profit or loss 2,578,226 3,662,579 141,869 499,185 822,915 611,971

Purchases of financial instruments held at fair value through profit or loss (866,463) (3,496,406) (88,726) (188,418) (928,191) (553,951)

Net gains/(losses) on financial instruments held at fair value through profit or loss (519,098) 69,793 (165,546) 162,684 155,743 (295,664)

Net change in receivables (79,523) 78,667 1,844 3,071 (1,235) (597)

Net change in payables (54) 128 60 (220) 19 48

Non cash items (142,072) (60,703) (3,987) (4,267) (1,422) (300)

Net cash inflow/(outflow) from operating activities 1,710,955 329,172 71,113 337,679 (49,824) 120,121


During the year, the following distribution payments were satisfied by the issue of units under the distribution reinvestment plan 279,689 – 29,632 16,500 108,193 87,187

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12. Reconciliation of profit/(loss) to net cash inflow/(outflow) from operating activities (continued)


Fund (Hedged)

Vanguard International Small

Companies Index Fund


(Hedged)

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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



Increase/(decrease) in net assets attributable to unitholders (298,312) 137,943 28,096 (25,720) 4,763 (26,529)


Proceeds from sale of financial instruments held at fair value through profit or loss 861,150 939,381 88,715 335,223 42,412 197,006

Purchases of financial instruments held at fair value through profit or loss (977,455) (818,621) (129,403) (95,854) (51,554) (79,890)

Net gains/(losses) on financial instruments held at fair value through profit or loss 95,997 (131,426) (50,918) 12,705 (7,066) 11,148

Net change in receivables (15,479) (21,350) (74) 318 (2,079) 10,864

Net change in payables 9 6 26 (81) – (3)

Non cash items (89,901) (69,109) (155) (445) (2,540) (878)

Net cash inflow/(outflow) from operating activities (116,741) 120,323 (35,810) 246,709 (9,184) 129,861


During the year, the following distribution payments were satisfied by the issue of units under the distribution reinvestment plan 108,246 – 19,418 41,147 1,815 –



Index Fund


(Hedged)

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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



Increase/(decrease) in net assets attributable to unitholders 1,456 1,148 (4,307) 11,548 (1,039) 2,217

Distributions to unitholders 1,127 460 17,128 6,521 7,110 885

Proceeds from sale of financial instruments held at fair value through profit or loss 10,093 8,773 92,629 24,299 86,318 20,032

Purchases of financial instruments held at fair value through profit or loss (11,860) (29,047) (169,546) (41,373) (117,457) (27,375)

Net gains/(losses) on financial instruments held at fair value through profit or loss (2,140) (1,063) (6,365) (13,867) (1,411) (1,782)

Net change in receivables (3) (86) (245) (78) (2,948) (179)

Net change in payables (1) 7 38 9 1 –

Non cash items (10) – (226) (66) (1,737) (592)

Net cash inflow/(outflow) from operating activities (1,338) (19,808) (70,894) (13,007) (31,163) (6,794)


During the year, the following distribution payments were satisfied by the issue of units under the distribution reinvestment plan 460 – 3,367 2,394 893 –

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12. Reconciliation of profit/(loss) to net cash inflow/(outflow) from operating activities (continued)


Index Fund


Vanguard Global Quantitative Equity

Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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



Increase/(decrease) in net assets attributable to unitholders 50,022 – 1,391 – 1,961 (124)

Distributions to unitholders 3,220 – 716 – 854 75

Proceeds from sale of financial instruments held at fair value through profit or loss 53,293 – 5,770 – 9,936 3,060

Purchases of financial instruments held at fair value through profit or loss (902,300) – (20,699) – (10,610) (17,886)

Net gains/(losses) on financial instruments held at fair value through profit or loss (44,294) – (1,884) – (2,547) 202

Net change in receivables (1,366) – (29) – (7) (32)

Net change in payables 198 – 5 – – 5

Non cash items (408) – (13) – (24) –

Net cash inflow/(outflow) from operating activities (841,635) – (14,743) – (437) (14,700)


During the year, the following distribution payments were satisfied by the issue of units under the distribution reinvestment plan 745 – 72 – 228 –

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13. Remuneration of auditorsThe auditor’s remuneration is borne by the Responsible Entity. During the year, the following fees were paid or payable for services provided by the auditor of the Funds.


Fund (Hedged)


Fund (Hedged)


Index Fund



Index Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

PricewaterhouseCoopers

Audit and other assurance services

Audit and review of financial statements 30,000 30,000 26,000 26,000 24,500 24,500 28,000 28,000 18,500 18,500

Audit of compliance plan 1,933 1,933 1,933 1,933 1,933 1,933 1,933 1,933 1,933 1,933

Audit of specified assertions and internal controls report 6,046 5,963 6,046 5,963 6,046 5,963 6,046 5,963 6,046 5,963

Total remuneration for audit and other assurance services 37,979 37,896 33,979 33,896 32,479 32,396 35,979 35,896 26,479 26,396

Taxation services

Tax compliance services 9,950 7,360 9,950 7,360 9,950 4,360 8,335 5,745 9,950 7,360

Total remuneration for taxation services 9,950 7,360 9,950 7,360 9,950 4,360 8,335 5,745 9,950 7,360

Total remuneration of PricewaterhouseCoopers 47,929 45,256 43,929 41,256 42,429 36,756 44,314 41,641 36,429 33,756

Vanguard International

Property Securities Index Fund



Fund


Fund (Hedged)


Volatility Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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



Audit and review of financial statements 18,500 18,500 21,000 21,000 18,500 20,500 15,500 15,500 15,500 15,500

Audit of compliance plan 1,933 1,933 1,933 1,933 1,933 1,933 1,933 1,933 1,933 1,933

Audit of specified assertions and internal controls report 6,046 5,963 6,046 5,963 6,046 5,963 6,046 5,963 6,046 5,963

Total remuneration for audit and other assurance services 26,479 26,396 28,979 28,896 26,479 28,396 23,479 23,396 23,479 23,396

Taxation services

Tax compliance services 9,950 7,360 8,335 5,745 9,950 7,360 8,335 5,745 9,950 2,228

Total remuneration for taxation services 9,950 7,360 8,335 5,745 9,950 7,360 8,335 5,745 9,950 2,228

Total remuneration of PricewaterhouseCoopers 36,429 33,756 37,314 34,641 36,429 35,756 31,814 29,141 33,429 25,624

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13. Remuneration of auditors (continued)

The auditor’s remuneration is borne by the Responsible Entity. During the year, the following fees were paid or payable for services provided by the auditor of the Funds.


Index Fund


Fund (Hedged)





Equity Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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



Audit and review of financial statements 20,000 13,000 15,550 15,500 17,000 – 15,500 – 15,500 15,500

Audit of compliance plan 1,933 1,933 1,933 1,933 1,933 – 1,933 – 1,933 1,933

Audit of specified assertions and internal controls report 6,046 5,963 6,046 5,963 6,046 – 6,046 – 6,046 5,963

Total remuneration for audit and other assurance services 27,979 20,896 23,529 23,396 24,979 – 23,479 – 23,479 23,396

Taxation services

Tax compliance services 9,950 7,360 8,335 5,745 9,950 – 9,950 – 9,950 2,228

Total remuneration for taxation services 9,950 7,360 8,335 5,745 9,950 – 9,950 – 9,950 2,228

Total remuneration of PricewaterhouseCoopers 37,929 28,256 31,864 29,141 34,929 – 33,429 – 33,429 25,624

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14. Related party transactionsResponsible 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.

Key management personnelKey management personnel includes persons who were directors of Responsible Entity at any time during the financial year as follows:

• J M Norris• G W Reed (Resigned 31 July 2017)• C R Comegys (Resigned 31 August 2017)• C Kelton• M Lovett (Resigned 6 December 2016)• L Carr (Appointed 6 December 2016)

No other person had authority and responsibility for planning, directing and controlling the activities of the Funds, directly or indirectly during the financial year.

Transactions with key management personnelKey management personnel services are provided by Vanguard Investments Australia Ltd and included in the management fees. There is no separate charge for these services. There was no compensation paid directly by the Funds to any of the key management personnel.

Key management personnel unitholdingsThe key management personnel of Vanguard Investments Australia Ltd (VIA) did not hold any units in the Funds during the period.

Key management personnel remunerationKey management personnel are paid by the Responsible Entity. Payments made from the Funds do not include any amounts directly attributable to key management personnel remuneration.

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.

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14. Related party transactions (continued)

Responsible Entity’s fees and other transactionsDuring the year ended 30 June 2017, the Responsible Entity received an all inclusive management fee (inclusive of GST, net of RITC available to the Funds) over the Funds’ average net assets attributable to unitholders for the year as follows:

Management costs

2017 2016

% per annum % per annum

Vanguard International Fixed Interest Index Fund (Hedged) 0.26 0.26

Vanguard International Fixed Interest Index Fund (Hedged) (ETF Class units) 0.20 0.20

Vanguard International Credit Securities Index Fund (Hedged) 0.32 0.34

Vanguard International Credit Securities Index Fund (Hedged) (ETF Class units) 0.30 0.30

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 Class units) 0.18 0.18

Vanguard International Shares Index Fund (ETF Class units) 0.18 0.18

Vanguard International Shares Index Fund (B Class units) 0.18 0.18

Vanguard International Shares Index Fund (Hedged) AUD Class 0.21 0.21

Vanguard International Shares Index Fund (Hedged) NZD Class 0.24 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 Minimum Volatility Fund 0.35 0.45

Vanguard Global Infrastructure Index Fund 0.49 0.49

Vanguard Global Infrastructure Index Fund (Hedged) 0.52 0.52

Vanguard International Shares Select Exclusions Index Fund 0.20 N/A

Vanguard International Shares Select Exclusions Index Fund - NZD Hedged 0.26 N/A

Vanguard Global Value Equity Fund 0.35 N/A

Vanguard Global Quantitative Equity Fund 0.35 0.45

Effective from 1 May 2017, the management cost of Vanguard Global Minimum Volatility Fund was reduced from 0.45% p.a. to 0.35% p.a.

Effective from 1 May 2017, the management cost of Vanguard Global Value Equity Fund was reduced from 0.45% p.a. to 0.35% p.a.

Effective from 1 May 2017, the management cost of Vanguard Global Quantitative Equity Fund was reduced from 0.45% p.a. to 0.35% p.a.

Effective from 1 December 2016, the management cost of Vanguard International Shares Fund (Hedged) NZD Class was reduced from 0.31% p.a. to 0.24% p.a.

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Responsible Entity’s fees and other transactions (continued)All related party transactions are conducted on normal commercial terms and conditions. The transactions during the year and amounts payable at year end between the Funds and the Responsible Entity are as follows:

Vanguard International Fixed Interest Index Fund

(Hedged)


Fund (Hedged)


Index Fund



Index Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Responsible Entity’s fees for the year 7,241 7,706 4,534 4,982 21,915 23,647 2,119 2,993 5,818 6,954

Total fees payable to the Responsible Entity at year end 642 548 398 339 1,809 1,766 121 358 537 477

Vanguard International

Property Securities Index Fund


Fund (Hedged)


Fund


Fund (Hedged)


Volatility Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Responsible Entity’s fees for the year 7,882 8,163 454 406 1,392 1,760 20 33 95 87

Total fees payable to the Responsible Entity at year end 679 660 48 40 133 107 2 3 7 8

Vanguard Global

Infrastructure Index Fund


Fund (Hedged)





Equity Fund

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

30 June2017

30 June2016

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

Responsible Entity’s fees for the year 1,071 797 19 10 947 – 54 – 66 28

Total fees payable to the Responsible Entity at year end 108 70 2 1 174 – 5 – 5 5

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Related party unitholdingsParties related to the Funds including the Responsible Entity, its affiliates or other funds managed by the Responsible Entity held units in the Funds as follows:


30 June 2017

Number of units held

opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed

Distributions paid/payable by

the Fund

Unitholder Units Units $ % Units Units $

Vanguard Index Diversified Bond Fund 24,433,290 23,316,489 27,793,254 0.94 3,446,931 4,563,732 1,988,133

Vanguard LifeStrategy® Conservative Fund 5,088,251 7,490,566 8,928,755 0.30 2,659,752 257,437 548,642

Vanguard LifeStrategy® Balanced Fund 11,945,080 16,230,082 19,346,256 0.65 5,197,583 912,581 1,259,467

Vanguard LifeStrategy® Growth Fund 12,208,105 15,718,473 18,736,419 0.63 5,326,030 1,815,662 1,233,432

Vanguard LifeStrategy® High Growth Fund 3,973,725 5,176,898 6,170,862 0.21 2,130,034 926,861 411,036

Vanguard Conservative Index Fund 155,017,537 233,062,739 277,810,785 9.37 90,525,481 12,480,279 17,987,557

Vanguard Balanced Index Fund 246,871,507 372,603,161 444,142,969 14.98 155,049,911 29,318,257 28,043,661

Vanguard Growth Index Fund 143,711,598 209,517,921 249,745,361 8.42 89,014,784 23,208,461 15,550,364

Vanguard High Growth Index Fund 29,220,329 39,587,530 47,188,336 1.59 21,830,564 11,463,363 2,929,269

Vanguard Diversified Bond Index Fund 32,468,542 49,573,200 59,091,254 1.99 20,361,595 3,256,937 3,855,385

Vanguard Managed Payout Fund 11,706,893 12,794,086 15,250,550 0.51 2,276,701 1,189,508 974,754


30 June 2016


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard Index Diversified Bond Fund 24,365,568 24,433,290 31,627,076 1.21 2,453,794 2,386,072 541,793


Vanguard LifeStrategy® Balanced Fund 9,925,285 11,945,080 15,462,017 0.59 2,809,863 790,068 264,875

Vanguard LifeStrategy® Growth Fund 11,807,421 12,208,105 15,802,484 0.60 1,246,896 846,212 270,707

Vanguard LifeStrategy® High Growth Fund 3,777,830 3,973,725 5,143,691 0.20 608,246 412,351 88,115




Vanguard High Growth Index Fund 35,817,223 29,220,329 37,823,543 1.45 9,738,213 16,335,107 647,943

Vanguard Diversified Bond Index Fund 87,952,473 32,468,542 42,028,112 1.61 20,992,606 76,476,537 719,970

Vanguard Managed Payout Fund - 11,706,893 15,153,702 0.58 12,573,345 866,452 259,593For

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Related party unitholdings (continued)


30 June 2017


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard Index Diversified Bond Fund 14,221,004 13,004,693 15,305,222 1.09 2,619,537 3,835,848 1,037,023



Vanguard LifeStrategy® Growth Fund 6,910,458 8,872,163 10,441,649 0.74 2,550,314 588,609 678,023

Vanguard LifeStrategy® High Growth Fund 2,288,265 2,976,957 3,503,580 0.25 1,331,521 642,829 219,012





Vanguard Diversified Bond Index Fund 18,753,894 27,960,620 32,906,853 2.34 11,581,444 2,374,718 2,100,116


30 June 2016


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard Index Diversified Bond Fund 14,486,094 14,221,004 17,438,908 1.49 1,853,696 2,118,786 745,489

Vanguard LifeStrategy® Conservative Fund 2,466,768 2,932,720 3,596,331 0.31 934,739 468,787 153,738


Vanguard LifeStrategy® Growth Fund 7,112,459 6,910,458 8,474,145 0.73 939,171 1,141,172 362,258

Vanguard LifeStrategy® High Growth Fund 2,304,042 2,288,265 2,806,049 0.24 1,025,535 1,041,312 119,955




Vanguard High Growth Index Fund 20,735,588 16,934,177 20,766,015 1.78 3,889,345 7,690,756 887,718

Vanguard Diversified Bond Index Fund 52,521,675 18,753,894 22,997,494 1.97 8,924,544 42,692,325 983,111

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30 June 2017


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard Index International Shares Fund 140,140,213 139,671,341 271,576,957 2.53 11,485,762 11,954,634 17,906,968


Vanguard LifeStrategy® Balanced Fund 7,341,050 8,643,778 16,806,963 0.16 2,145,527 842,799 1,088,899

Vanguard LifeStrategy® Growth Fund 17,632,939 19,918,933 38,730,375 0.36 2,910,944 624,950 2,515,889

Vanguard LifeStrategy® High Growth Fund 22,382,515 25,023,533 48,655,759 0.45 3,519,163 878,145 3,156,136





Vanguard International Shares Index Fund (Hedged) 2,363,176,265 1,651,907,727 3,211,969,386 29.87 412,578,724 1,123,847,262 221,611,082

Vanguard Global Shares Index Fund (Hedged) 1,666,052 3,756,823 227,287,437 0.07 2,150,353 59,582 5,946,837

Vanguard Managed Payout Fund 11,014,978 12,578,376 24,457,395 0.23 1,910,671 347,273 1,593,976


30 June 2016


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard Index International Shares Fund 144,417,442 140,140,213 253,361,442 2.20 17,002,439 21,279,668 8,767,945









Vanguard International Shares Index Fund (Hedged) 2,492,567,197 2,363,176,265 4,272,419,454 37.12 693,684,410 823,075,342 145,744,425

Vanguard Global Shares Index Fund (Hedged) 414,995 1,666,052 93,321,737 0.77 1,322,447 71,390 3,638,544

Vanguard Managed Payout Fund - 11,014,978 19,914,132 0.17 11,179,951 164,973 396,386For

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30 June 2017


opening


closing

Fair value of

investments

Interest held at

year end*

Number of units

acquired

Number of units

disposed


the Fund


Vanguard Index Hedged International Shares Fund 144,812,192 155,967,560 120,859,262 4.31 30,287,116 19,131,748 24,150,454


30 June 2016


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard Index Hedged International Shares Fund 154,185,547 144,812,192 112,045,214 4.15 7,365,448 16,738,803 10,741,043

* The interest held is based on the proportion of units held in the AUD class.

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30 June 2017


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard LifeStrategy® Conservative Fund 245,289 282,443 540,597 0.05 37,154 – 20,980

Vanguard LifeStrategy® Balanced Fund 1,153,313 1,290,273 2,469,582 0.22 184,857 47,897 96,770

Vanguard LifeStrategy® Growth Fund 2,696,797 2,962,615 5,670,445 0.50 265,818 – 223,401


Vanguard Conservative Index Fund 7,510,755 9,675,294 18,518,514 1.65 2,164,539 – 699,135





30 June 2016


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard LifeStrategy® Conservative Fund 158,037 245,289 409,109 0.04 144,194 56,942 21,641

Vanguard LifeStrategy® Balanced Fund 799,827 1,153,313 1,923,566 0.19 353,486 – 99,056

Vanguard LifeStrategy® Growth Fund 2,190,618 2,696,797 4,497,885 0.45 506,179 – 236,955

Vanguard LifeStrategy® High Growth Fund 2,756,655 3,478,266 5,801,266 0.58 721,611 – 305,980

Vanguard Conservative Index Fund 12,326,587 7,510,755 12,526,902 1.26 5,680,706 10,496,538 856,052





30 June 2017


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard International Property Securities Index Fund (Hedged) 1,041,518,141 1,251,897,108 1,352,299,257 74.47 727,465,828 517,086,861 105,386,415


30 June 2016


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard International Property Securities Index Fund (Hedged) 1,122,526,765 1,041,518,141 1,274,505,749 64.17 351,883,917 432,892,542 90,450,947

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30 June 2017


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund






Vanguard Conservative Index Fund 16,609,721 25,214,489 19,846,324 1.61 9,213,041 608,273 4,845,942




Vanguard Managed Payout Fund 2,778,704 3,587,724 2,823,897 0.23 809,020 – 689,520


30 June 2016


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund



Vanguard LifeStrategy® Balanced Fund 2,015,609 2,363,638 2,320,782 0.18 348,029 – 151,819

Vanguard LifeStrategy® Growth Fund 5,280,090 5,515,336 5,415,336 0.42 480,469 245,223 354,257






Vanguard Managed Payout Fund – 2,778,704 2,728,323 0.21 2,778,704 – 178,480

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30 June 2017


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund





Vanguard LifeStrategy® High Growth Fund 3,980,045 4,589,688 6,904,728 1.72 609,643 - 484,776





Vanguard International Small Companies Index Fund (Hedged) 25,348,310 44,179,582 66,463,762 16.57 22,881,812 4,050,540 4,618,499


30 June 2016


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund



Vanguard LifeStrategy® Balanced Fund 979,780 1,402,279 1,920,852 0.65 647,101 224,602 123,719



Vanguard Conservative Index Fund 13,870,394 8,592,812 11,770,491 3.97 4,113,721 9,391,303 857,079




Vanguard International Small Companies Index Fund (Hedged) 122,878,086 25,348,310 34,722,292 11.72 23,134,382 120,664,157 2,827,380

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30 June 2017


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard Managed Payout Fund 19,981,620 19,716,195 22,387,739 90.42 518,503 783,928 1,019,004


30 June 2016


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund




30 June 2017


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard Global Infrastructure Index Fund (Hedged) 32,488,784 64,179,974 69,166,758 27.41 103,672,194 71,981,004 4,684,909



30 June 2016


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard Global Infrastructure Index Fund (Hedged) 25,694,684 32,488,784 35,558,974 20.22 14,769,245 7,975,145 1,340,538

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30 June 2017


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard Managed Payout Fund 5,809,225 – – – 143,549 5,952,774 –


30 June 2016


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund




30 June 2017


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard Investments Australia Ltd – 13,250,117 14,707,630 87.98 13,250,117 – –


30 June 2017


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard Investments Australia Ltd 14,484,068 14,690,169 16,580,794 94.07 206,101 – –


30 June 2016


opening


closing

Fair value of

investments

Interest held at

year end

Number of units

acquired

Number of units

disposed


the Fund


Vanguard Investments Australia Ltd – 14,484,068 14,385,576 100.00 14,484,068 – 74,786

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InvestmentsThe Funds held investments in the following schemes which were also managed by Responsible Entity or its related parties:


30 June 2017Fair value of investment

Interest held

Distribution received/

receivable

Number of units

acquired

Number of units

disposed

Distribution receivable

unpaid

$ % $ Units Units $

Vanguard International Shares Index Fund 3,211,969,386 29.87 221,611,082 412,578,724 1,123,847,262 164,580,401

3,211,969,386 221,611,082 412,578,724 1,123,847,262 164,580,401



Interest held


receivable

Number of units

acquired

Number of units

disposed


unpaid

$ % $ Units Units $

Vanguard International Shares Index Fund 4,268,057,455 37.12 145,744,425 693,684,410 823,075,342 85,041,265

4,268,057,455 145,744,425 693,684,410 823,075,342 85,041,265



Interest held


receivable

Number of units

acquired

Number of units

disposed


unpaid

$ % $ Units Units $

Vanguard International Property Securities Index Fund 1,352,299,257 74.47 105,386,415 727,465,828 517,086,861 77,507,336

1,352,299,257 105,386,415 727,465,828 517,086,861 77,507,336



Interest held


receivable

Number of units

acquired

Number of units

disposed


unpaid

$ % $ Units Units $

Vanguard International Property Securities Index Fund 1,274,505,749 64.17 90,450,947 351,883,917 432,892,542 62,022,389

1,274,505,749 90,450,947 351,883,917 432,892,542 62,022,389



Interest held


receivable

Number of units

acquired

Number of units

disposed


unpaid

$ % $ Units Units $

Vanguard International Small Companies Index Fund 66,463,762 16.57 4,618,499 22,881,812 4,050,540 4,028,106

66,463,762 4,618,499 22,881,812 4,050,540 4,028,106

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Investments (continued)



Interest held


receivable

Number of units

acquired

Number of units

disposed


unpaid

$ % $ Units Units $

Vanguard International Small Companies Index Fund 34,722,292 11.72 2,827,380 23,134,382 120,664,157 1,949,115

34,722,292 2,827,380 23,134,382 120,664,157 1,949,115



Interest held


receivable

Number of units

acquired

Number of units

disposed


unpaid

$ % $ Units Units $

Vanguard Global Infrastructure Index Fund 69,166,758 27.41 4,684,909 518,503 783,928 3,696,854

69,166,758 4,684,909 518,503 783,928 3,696,854



Interest held


receivable

Number of units

acquired

Number of units

disposed


unpaid

$ % $ Units Units $

Vanguard Global Infrastructure Index Fund 35,558,974 20.22 1,340,538 14,769,245 7,975,145 749,320

35,558,974 1,340,538 14,769,245 7,975,145 749,320

The fair value of financial assets held in the investee fund is included in financial assets at fair value through profit or loss in the balance sheet.

Interest held represents the entity’s average percentage interest in the total net assets of the investee funds.

The Funds’ maximum exposure to loss from its interest in investee funds is equal to the total fair value of its investments in the investee funds as there are no off-balance sheet exposure relating to any of the investee funds. Once the Fund has disposed of its shares in an investee fund, it ceases to be exposed to any risk from that investee fund.

The proportion of ownership interest is equal to the proportion of the voting power held.

The Funds did not hold any investments in Vanguard Investments Australia Ltd during the year.

Other transactions within the FundsApart from those details disclosed in this note, no directors have entered into a material contract with the Funds during the financial year and there were no material contracts involving directors’ interests subsisting at year end.F

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15. Responsible Entity’s feesVanguard

International Fixed Interest Index Fund (Hedged)


Index Fund (Hedged)


Ordinary Class units ETF Class units Ordinary Class units ETF Class units

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Responsible Entity's fees incurred by the Funds 7,132 7,766 109 10 4,374 4,971 160 11 5,818 6,954

Management costs per annum 0.26% 0.26% 0.20% 0.20% 0.32% 0.34% 0.30% 0.30% 0.56% 0.56%


Index Fund


(Hedged) *


Ordinary Class units ETF Class units B Class units

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Responsible Entity's fees incurred by the Funds 21,035 23,250 640 89 240 308 2,119 2,993 95 87

Management costs per annum 0.18% 0.18% 0.18% 0.18% 0.18% 0.18% *** *** 0.35% 0.45%

* The management costs per annum for Vanguard International Shares Index Fund (Hedged) AUD Class is 0.21% (2016: 0.21%), and for Vanguard International Shares Index Fund

(Hedged) - NZD class change from 0.31 to 0.24 on 1 December 2016 (2016: 0.31%).


Index Fund



Index Fund


Index Fund (Hedged)

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Responsible Entity’s fees incurred by the Funds 7,882 8,163 454 406 1,392 1,760 20 33

Management costs per annum 0.40% 0.40% 0.43% 0.43% 0.39% 0.39% 0.42% 0.42%


Index Fund


Index Fund (Hedged)



Equity Fund

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

30 June 2017

30 June 2016

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Responsible Entity’s fees incurred by the Funds 1,071 797 19 10 54 – 66 28

Management costs per annum 0.49% 0.49% 0.52% 0.52% 0.35% –% 0.35% 0.45%


Ordinary Class units NZD Hedged Class units

30 June 2017

30 June 2016

30 June 2017

30 June 2016

$’000 $’000 $’000 $’000

Responsible Entity’s fees incurred by the Funds 208 – 739 –

Management costs per annum 0.20% –% 0.26% –%

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122



16. Dividend and distribution incomeDividend and distribution income is net of foreign withholding taxes for the following funds:

2017 2016

$’000 $’000

Vanguard International Property Securities Index 11,067 11,495

Vanguard International Shares Index Fund 35,500 39,613

Vanguard Emerging Markets Shares Index Fund 3,045 3,942

Vanguard Global Minimum Volatility Fund 74 60

Vanguard Global Infrastructure Index Fund 888 696

Vanguard International Small Companies Index Fund 864 1,065

Vanguard Global Quantitative Equity Fund 47 24

Vanguard Global Value Equity Fund 38 –

17. Interest incomeThe following table details the interest income earned by the Funds during the year:

2017 2016

Average Balance Interest

Average Rate

Average Balance Interest

Average Rate

$’000 $’000 % $’000 $’000 %


Fixed interest securities - international 2,784,879 54,507 1.95 2,936,165 68,285 2.33%


Fixed interest securities - international 1,330,423 41,459 3.11 1,431,166 49,194 3.44%

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 withholding taxes of $318,363 for Vanguard International Fixed Interest Index Fund (Hedged) and $21,028 of Vanguard International Credit Securities Index Fund (Hedged).

18. Events occurring after the reporting periodThere 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 2017 or on the results and cash flows of the Funds for the year ended on that date.

19. Contingent assets, contingent liabilities and commitments

There are no outstanding contingent assets, liabilities or commitments as at 30 June 2017 (2016: Nil).

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Directors’ Declaration

123

Directors’ DeclarationIn the opinions of the directors of the Responsible Entity:

(a) the financial statements and notes set out on pages 20 to 122 are in accordance with the Corporations Act 2001, including:

(iv) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and

(v) giving a true and fair view of each Fund’s financial position as at 30 June 2017 and of its performance for the financial year ended on that date; and

(b) there are reasonable grounds to believe that the Funds will be able to pay their 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 31 August 2017

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Independent Auditor's Report

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130

This page has been left intentionally blank.

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131

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.

©2017 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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