The Fund seeks to track the weighted average return of the indices of the underlying funds in proportion to the Strategic Asset 
Allocation (SAA), before taking into account fees, expenses and tax. 

Benefits of investing in the Vanguard Conservative Index Fund

The significant features and benefits of investing in the Fund include:

• Competitive long-term performance - Vanguard's investment approach provides investors with an efficient way to capture long-term market performance.

• Diversification - The Fund provides exposure to a diversified portfolio of securities, which means the Fund is less exposed to the performance fluctuations of individual securities. This moderates the volatility of the portfolio and smooths out' investment returns over time. The Fund provides exposure to a wide selection of available securities in the relevant index, generally holding significantly more securities than most active funds with the same benchmark. From time to time, however, the number of securities in a given index may reduce due to factors such as index rebalancing.

• Tax efficiency - Vanguard's buy and hold strategy means that securities are generally held within a portfolio over a long period of time. If certain securities are held for more than 12 months, any capital gain (if applicable) on the disposal of those securities may be reduced under the capital gains tax discount rules - a tax efficient outcome for eligible investors.

• Low cost investing - The Fund has low ongoing fees as we strive to minimise the costs of managing and operating the Fund. The Fund typically has low portfolio turnover resulting in low trading costs such as brokerage and other transaction costs.

The significant features and benefits of investing with Vanguard include:

• Stability and experience - The Vanguard Group, Inc. established the world's first index mutual fund for individual investors in 1976 and has been a leader in low cost index investing ever since. In Australia, Vanguard leverages the scale, experience and resources of our established global business. Investing in the Fund allows you to access the knowledge and skill of Vanguard as a specialist investment manager.

• Client focus - The Vanguard Group, Inc. was founded on a simple but revolutionary idea - that an investment company should manage the funds it offers in the sole interest of its clients. From rigorous risk management to transparent pricing to plain talk communications, we put our clients' interest first.

• Low costs - Investors can't control the markets, but they can control the costs of investing. Providing low cost investments isn't a pricing strategy for us. It's how we do business. Vanguard's scale also helps to keep costs low.

Risk Level - Low

Relatively stable returns, with a moderately low probability for loss of capital over the investment timeframe.

Investor Suitability

Investors with a short to medium term investment horizon, seeking a steady source of income with some capital growth potential.

Investors with a short to medium term investment horizon, seeking a steady source of 
income with some capital growth potential.

How Vanguard invests

While maintaining the objective of a fund, Vanguard tries to minimise the transaction costs associated with managing cash flows and making adjustments for index or benchmark changes.

Cash and liquidity management

To manage day-to-day transaction requirements such as investor withdrawals and collateral requirements, the Fund may maintain a variable balance of cash. To effectively manage this cash, the Fund may transact in cash equivalent instruments that aim to preserve capital and provide liquidity to the Fund.

Cash equivalent instruments include, but are not limited to, high quality short-term money market instruments and short dated debt securities such as government issued securities, government-related (semi-government) issued securities and repurchase agreements, where a high quality government or government related security is received or provided as collateral for the term of the agreement.

Derivative financial instruments

A fund may utilise over-the-counter and exchange traded derivatives such as futures, forwards and swaps, to help achieve its investment objective. Derivative financial instruments may be used for the purposes of maintaining fund liquidity and managing market exposure. Derivative financial instruments will not be used to leverage the assets of the Funds.

Borrowings

While the Funds' constitutions permit borrowing, Vanguard does not currently intend to borrow for the purposes of gearing. A Fund will only borrow where Vanguard believes it is in the best interests of investors to do so.

How we invest your money

Investment strategy and investment return objective

The Fund seeks to track the weighted average return of the various indices of the underlying funds in which the Fund invests in proportion to the Strategic Asset Allocation (SAA) for the Fund, before taking into account fees, expenses and tax.

The Fund holds units in underlying funds, including but not limited to:

• Vanguard Cash Plus Fund

• Vanguard Australian Fixed Interest Index Fund

• Vanguard Global Aggregate Bond Index Fund (Hedged)*

• Vanguard Australian Shares Index Fund

• Vanguard International Shares Index Fund

• Vanguard International Small Companies Index Fund

• Vanguard Emerging Markets Shares Index Fund

• Vanguard International Shares Index Fund (Hedged)

*The Vanguard Global Aggregate Bond Index Fund (Hedged) is not currently available at the date of this PDS. It is expected to become available during July 2017. This Fund will seek to track the return of the Bloomberg Barclays Global Aggregate Bond Index (Hedged to AUD) before taking into account fees, expenses and tax.

Vanguard may, at its discretion, commence investing directly in the securities that are, have been or are expected to be in the indices of the underlying funds or in different funds. For more information about the underlying funds and the indices that they track, visit the Vanguard website at www.vanguard.com.au.

Strategic asset allocation

Income assets (SAA (%) / Range (%))

• Cash 10 / 8 - 12
• Australian fixed interest 18 / 16 - 20
• International fixed interest (hedged) 42 / 40 - 44

Total income assets 70 / 68 - 72

Growth assets

• Australian shares 12 / 10 - 14

• International shares 8.5 / 6.5 - 10.5

• International shares (hedged) 5.5 / 3.5 - 7.5

• International small companies 2 / 0 - 4

• Emerging markets shares 2 / 0 - 4

Total growth assets 30 / 28 - 32