Benefits of investing with Vanguard

Competitive long-term performance 

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

Diversification

The Fund invests in a diversified portfolio of securities, which means the Fund is less exposed to the performance fluctuations of individual securities.

Low cost investing 

The Fund has low ongoing fees as we strive to minimise the costs of managing and operating the Fund.

Risk level

High

Investor suitability

Buy and hold investors seeking long-term capital growth, international diversification, and with a higher tolerance for the risks associated with share market volatility.

About the Fund

The ETF provides low-cost exposure to securities listed in major European markets. The ETF is exposed to the fluctuating values of foreign currencies, as there will not be any hedging of foreign currencies to the Australian dollar.

Vanguard FTSE Europe Shares ETF structure

The Vanguard FTSE Europe Shares ETF is a class of units in an Australian registered managed investment scheme that invests in a US-listed ETF that provides Europe equity exposure.

Investors in the Australian ETF do not hold a direct interest in the US ETF. The Australian Fund holds a direct interest in the US ETF and, consequently, investors in the Australian ETF have an indirect exposure to the US ETF. The US ETF is an exchange- traded class of shares offered by the Vanguard European Stock Index Fund ("US Fund). For further information about the US ETF, refer to the section Additional information about the underlying security holding'. The US Fund invests in the common stocks included in the FTSE Developed Europe All Cap Index, which is made up of common stocks of large-, mid-, and small-cap companies located in 16 European countries.

What is an ETF?

An ETF is an Exchange Traded Fund, which is quoted for trading on the AQUA market of the ASX (in this case, it is the CDIs that are quoted for trading on the AQUA market of the ASX). Generally, these exchange traded funds comprise broadly diversified investment portfolios of either shares, bonds or real estate securities and are constructed using an indexed investment methodology.

ETFs seek to combine the best features of index managed funds and listed shares in one investment. Vanguard ETFs come with the benefits of low cost, broad diversification, transparency and tax efficiency due to low turnover of the underlying securities. However, unlike traditional index funds which are priced only once per day, ETF securities trade on a stock exchange so they can be bought and sold at any time during the trading day at prevailing market prices. ETFs carry certain risks (refer to the section 2. Risks' in the PDS for further details).

Who is Vanguard?

Vanguard Investments Australia Ltd (Vanguard) is a wholly owned subsidiary of The Vanguard Group, Inc. With more than AUD$6.9 trillion in assets under management as of 31 December 2018, including over AUD$1.2 trillion in ETFs; The Vanguard Group Inc is one of the world's largest global investment management companies. In Australia, Vanguard has been serving financial advisers, retail clients and institutional investors for more than 20 years.

How we invest your money

To track the performance of the benchmark Index, the Fund will invest substantially all of its assets in the US listed Vanguard FTSE Europe ETF listed on the New York Stock Exchange Arca (NYSE Code: VGK).

The Fund may also, from time to time, hold underlying securities included in the benchmark Index or which have been or are expected to be included in the Index. This may occur if, for example, the Australian Fund comes close to holding 3% of the US Fund, as the Australian Fund is restricted under US law from holding more than 3% of the assets of the US Fund. Vanguard considers that the risk of this occurring is low because at 30 June 2018, the US Fund had assets exceeding USD$16 billion. The Fund may hold underlying securities in the benchmark at any time, including where the Australian Fund holding comes close to the 3% limit.

Futures traded on a licensed exchange may be used in the Australian Fund to gain market exposure without investing directly in the US ETF. This allows Vanguard to maintain the Fund's liquidity without being under-invested. Importantly, derivatives are not used to leverage the Australian Fund's portfolio.

The Australian Fund does not hedge its exposure to foreign currencies. Investments in the ETF are subject to the currency risk of Europe equity securities and the value of the investment may decrease because of unfavourable changes in currency exchange rates.

The Australian Fund does not lend securities. The investment strategy of the US Fund permits the lending of securities. For further details regarding the US Fund's investment strategy, including securities lending by the US Fund, please refer to the PDS section US Fund investment strategy'.

Index information

The US Fund seeks to track the investment performance of the FTSE Developed Europe All Cap Index. The FTSE Developed Europe All Cap Index is a market-capitalization-weighted index that includes approximately 1277 securities of large-, mid- and small-cap companies located in 15 European countries mostly companies in the United Kingdom, France and Germany Other countries represented in the Index include Switzerland, Spain, the Netherlands, Sweden, Italy, Denmark, Belgium, Finland and Norway.

Markets included in the Index are determined by numerous factors including economic development, market capitalisation, the regulatory environment and the degree of restrictions on foreign investment, custody and settlement, and the dealing landscape. Index securities are determined so that each region aims to reflect 98% of the market capitalisation before adjustments for free float, foreign ownership limits and security liquidity. The markets included in the Index are reviewed by FTSE on a regular basis.

Countries within the FTSE Global Equity Index Series are usually reviewed semi-annually. The review process is designed to reflect recent market movements (including new issues, changes in market capitalisation, liquidity and free float) and to minimise turnover. Securities may be added or removed from the Index between reviews to reflect significant new issues or corporate events.

Index values are calculated daily using exchange closing prices and respective foreign exchange rates.

The FTSE Developed Europe All Cap Index was not created by, and is not managed by, a related body corporate of Vanguard.

For information regarding the benchmark index values, returns and methodology, please refer to FTSE's website www.ftse.com/products/indices/geis-series