Montreal ETF Forum Ben Creary October 6, 2014
About Vanguard The Vanguard Group, Inc. Founded: 1975 Corporate headquarters: Valley Forge, Pennsylvania, United States Total assets: $3.12 trillion worldwide Number of products: More than 250 mutual funds and ETFs worldwide Vanguard Investments Canada Inc. Founded: December 2011 Headquarters: 155 Wellington Street West Suite 3720 Toronto, ON M5V 3H1 Total assets: $2.7 billion Number of products: 21 ETFs listed on Toronto Stock Exchange* * As of July 8, 2014. All other data as of June 30, 2014. Source: The Vanguard Group, Inc. Note: All assets are in CAD. Morningstar Awards 2014. Morningstar, Inc. All Rights Reserved. Awarded to Vanguard Investments Canada Inc. for Morningstar ETF Provider of the Year and Best Equity ETF, Canada. For further information about the Morningstar Awards, including information relating to the criteria upon which the awards are based, please visit www.investmentawards.com. 2
Three things that make us different Client focus Low-cost investing Long-term thinking Our core purpose: To take a stand for all investors, to treat them fairly, and to give them the best chance for investment success. 3
Low-cost and structure deliver ongoing client benefits Low-cost investment products Long-term outperformance Generates economies of scale Delivered by highly engaged crew Highest quality service Consistent cash flow and asset growth Strong client loyalty 4
Real value. Real diversification. Vanguard ETFs. Achieve broad diversification across asset classes with low-cost Vanguard ETFs. Our five new ETFs offer comprehensive access to the world s equity and fixed income markets. VXC VE VA VBU VBG Vanguard FTSE All-World ex Canada Index ETF Vanguard FTSE Developed Europe Index ETF Vanguard FTSE Developed Asia Pacific Index ETF Vanguard U.S. Aggregate Bond Index ETF (CAD-hedged) Vanguard Global ex-u.s. Aggregate Bond Index ETF (CAD-hedged) Management fee 0.25% Management fee 0.23% Management fee 0.23% Management fee 0.20% Management fee 0.35% Exposure to 2,900 large and mid-cap stocks from developed and emerging markets around the world, excluding Canada. Exposure to more than 500 stocks in 16 European countries, representing 25% of global market capitalization. Exposure to more than 800 stocks in 6 Asian countries, representing 15% of global market capitalization. Exposure to more than 3,000 bonds representing the broad U.S. investment grade bond market. Exposure to more than 2,000 bonds representing the broad global bond market with the exception of U.S. dollar-denominated bonds. Data as of June 30, 2014. 5
Growth portfolio strategy Data as of June 30, 2014. 6
Balanced portfolio strategy 7
Moderate portfolio strategy 8
Vanguard ETFs: Equities ETF Ticker Index Canadian equity MGMT fee/mer 1 FTSE Canada Index ETF VCE FTSE Canada Index 0.09%/0.10% FTSE Canada All Cap Index ETF VCN FTSE Canada All Cap Index 0.12%/0.13% FTSE Canadian High Dividend Yield Index ETF VDY FTSE Canada High Dividend Yield Index 0.30%/0.34% FTSE Canadian Capped REIT Index ETF VRE FTSE Canada All Cap Real Estate Capped 25% Index 0.35%/0.39% U.S. equity U.S. Total Market Index ETF VUN CRSP US Total Market Index 0.15%/0.17% U.S. Total Market Index ETF (CAD-hedged) VUS CRSP US Total Market Index (CAD-hedged) 0.15%/0.16% S&P 500 Index ETF VFV S&P 500 Index 0.15%/0.16% S&P 500 Index ETF (CAD-hedged) VSP S&P 500 Index (CAD-Hedged) 0.15%/0.16% U.S. Dividend Appreciation Index ETF VGG NASDAQ US Dividend Achievers Select Index 0.28%/0.31% U.S. Dividend Appreciation Index ETF (CAD-hedged) VGH NASDAQ US Dividend Achievers Select Index (CAD-hedged) 0.28%/0.30% International equity NEW FTSE All-World ex Canada Index ETF VXC FTSE All-World ex Canada Index 0.25%/ FTSE Developed ex North America Index ETF VDU FTSE Developed ex North America Index 0.28%/0.31% FTSE Developed ex North America Index ETF (CAD-hedged) VEF FTSE Developed ex North America Index Hedged CAD Index 0.28%*/0.34% NEW FTSE Developed Europe Index ETF VE FTSE Developed Europe Index 0.23%/ NEW FTSE Developed Asia Pacific Index ETF VA FTSE Developed Asia Pacific Index 0.23%/ FTSE Emerging Markets Index ETF VEE FTSE Emerging Index 0.33%*/0.44% Source : The Vanguard Group, Inc. 1 Management Expense Ratio (MER) is the audited MER as of December 31, 2013 including waivers and absorptions and is expressed as an annualized percentage of the daily average net asset value. If Vanguard Investments Canada Inc. had not waived/absorbed certain expenses, MERs would have been higher. For more detailed information, visit vanguardcanada.ca. The Manager expects to continue absorbing or waiving certain fees indefinitely, but may in its discretion, discontinue this practice at any time. * As of July 24, 2013, the management fee for VEF was reduced from 0.37% to 0.28% and as of August 12, 2013, the management fee for VEE was reduced from 0.49% to 0.33%. 9
Vanguard ETFs: Fixed income ETF Ticker Index Canadian fixed income Canadian Aggregate Bond Index ETF VAB Barclays Global Aggregate Canadian Float Adjusted Bond Index Canadian Short-Term Bond Index ETF VSB Barclays Global Aggregate Canadian Gov/Credit 1-5 year Float Adjusted Bond Index Canadian Short-Term Corporate Bond Index ETF VSC Barclays Global Aggregate Canadian 1-5 year Credit Float Adjusted Bond Index U.S. fixed income MGMT fee/mer 1 0.20%/0.23% 0.15%/0.17% 0.15%/0.17% NEW U.S. Aggregate Bond Index ETF (CAD-hedged) VBU Barclays U.S. Aggregate Float Adjusted Bond Index (CAD Hedged) 0.20%/ International fixed income NEW Global ex-u.s. Aggregate Bond Index ETF (CAD-hedged) VBG Barclays Global Aggregate ex-usd Float Adjusted RIC Capped Index (CAD Hedged) 0.35%/ Source : The Vanguard Group, Inc. 1 Management Expense Ratio (MER) is the audited MER as of December 31, 2013 including waivers and absorptions and is expressed as an annualized percentage of the daily average net asset value. If Vanguard Investments Canada Inc. had not waived/absorbed certain expenses, MERs would have been higher. For more detailed information, visit vanguardcanada.ca. The Manager expects to continue absorbing or waiving certain fees indefinitely, but may in its discretion, discontinue this practice at any time. 10
Vanguard Capital Markets Desk can help with... Monitoring and analytics Intraday monitoring of trading in Vanguard ETFs Constant communication with on-screen market makers Working with exchanges to ensure fair trading environment Managing market maker environment Facilitating and monitoring all primary market operations Ensuring market makers have the tools needed to price Vanguard ETFs Encouraging more dealers to price Vanguard ETFs Client execution support Providing pre-trade and post-trade analysis as required Educating about Vanguard ETF TM liquidity, available methods of trading and expected cost components Navigating to existing pools of liquidity 11
Important information Connect with Vanguard > vanguardcanada.ca Investors will usually pay brokerage fees to their dealer if they purchase or sell units of ETFs on Toronto Stock Exchange (TSX). If the units are purchased or sold on TSX, investors may pay more than the current net asset value when buying units of the ETF and may receive less than the current NAV when selling them. ETFs are priced continuously and bought and sold throughout the day in the secondary market, which entails paying additional costs such as bid/ask spreads. There are ongoing fees and expenses associated with owning units of an ETF. An ETF must prepare disclosure documents that contain key information about the fund. You can find more detailed information about the Vanguard ETFs in these documents at www.vanguardcanada.ca. ETFs are not guaranteed, their values change frequently and past performance may not be repeated. Vanguard ETFs are managed by Vanguard Investments Canada Inc. a wholly owned indirect subsidiary of The Vanguard Group, Inc. The opinions expressed in this presentation are those of the individual representative and do not necessarily reflect the opinions of Vanguard Investments Canada Inc., or Vanguard's Investment Strategy Group. This presentation is not intended to be relied upon as investment or tax advice and it is not a recommendation, offer, or solicitation to buy or sell any ETFs or to adopt any particular investment strategy or portfolio strategy. The Vanguard models reflect a core philosophy that a portfolio of broadly diversified, lowcost index funds provides prudent risk-return balance. Within this framework, the asset allocation model is the primary determinant of expected long-term risk and returns. Vanguard makes no representations or warranties as to the appropriateness or suitability of the models for any particular investor and assumes no liability for investment results. All investments including those described in the models are subject to risk and investors using the models may lose money. The risks associated with the model portfolios will reflect the risks of the underlying ETFs. The amount of risk is directly proportional to the amount invested in each of the underlying ETFs. All investments are subject to risk. Investments in bond funds are subject to interest rate, credit, and inflation risk. Foreign investing involves additional risks, including currency fluctuations and political uncertainty. Currency hedging transactions incur extra expenses, may not perfectly offset foreign currency exposures, and may eliminate any chance to benefit from favorable fluctuations in those currencies. Diversification does not ensure a profit or protect against a loss in a declining market. The information contained in this publication does not constitute an offer or solicitation and may not be treated as an offer or solicitation in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The management fee is equal to the current fee paid by the Vanguard ETF to Vanguard Investments Canada Inc. and does not include applicable taxes or other fees and expenses of the Vanguard ETF. For any Vanguard ETF (VA, VE, VBG, VBU, VDU, VEE, VEF, VFV, VGG, VGH, VSP, VUN, VUS, VXC) that invests in another Vanguard fund, the management fee also includes any fees paid to Vanguard Investments Canada Inc. or its affiliates by such other Vanguard fund as well as certain expenses of the other Vanguard fund that are paid directly by the other Vanguard fund. This information is provided on an "as is" basis, is subject to change without prior notice and should not be construed as investment advice. Vanguard Investments Canada Inc. does not guarantee the accuracy, completeness, timeliness or reliability of the information or any results from its use. 12
Important information All rights in the FTSE All-World ex Canada Index, the FTSE Developed Europe Index and the FTSE Developed Asia Pacific Index (the Indices ) vest in FTSE International Limited ( FTSE ). FTSE is a trademark of London Stock Exchange Group companies and is used by FTSE under licence. Vanguard FTSE All-World ex Canada Index ETF, Vanguard FTSE Developed Europe Index ETF and Vanguard FTSE Developed Asia Pacific Index ETF (the Products ) have been developed solely by Vanguard. The Indices are calculated by FTSE or its agent. FTSE and its licensors are not connected to and do not sponsor, advise, recommend, endorse or promote the Products and do not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the Products. FTSE makes no claim, prediction, warranty or representation either as to the results to be obtained from the Product or the suitability of the Index for the purpose to which it is being put by Vanguard. The Products 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 Products 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 Products. Barclays has no obligation to take the needs of Vanguard or the owners of the Products into consideration in determining, composing or calculating the Index. Barclays has no obligation or liability in connection with administration, marketing or trading of the Products. For Financial Advisors Only. Not for Public Distribution. 2014 Vanguard Investments Canada Inc. All rights reserved. 13