a. Average annual expense ratios* b. Percentage of all Vanguard funds outperforming the average returns of their peer groups**

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1 IMPORTANT: Investment involves risk, including the loss of principal. Investors are advised to consider their own investment objectives and circumstances in determining the suitability of an investment in the Vanguard S&P 500 Index ETF, the Vanguard FTSE Developed Europe Index ETF, the Vanguard FTSE Asia ex Japan Index ETF, the Vanguard FTSE Japan Index ETF, and the Vanguard FTSE Asia ex Japan High Dividend Yield Index ETF (the Funds ). If you are in any doubt, you should seek professional advice. Investors should refer to the Funds prospectus for further details, including the product features and risk factors. Investors should not base investment decisions on this marketing material alone. Investors should note: The Funds aim to provide investment results that, before fees and expenses, closely correspond to the performance of the S&P 500 Index, the FTSE Developed Europe Index, the FTSE Asia Pacific ex Japan, Australia and New Zealand Index, the FTSE Japan Index, and the FTSE Asia Pacific ex Japan, Australia and New Zealand High Dividend Yield Index. The Vanguard S&P 500 Index ETF concentrates its investment in the US securities market which may be more volatile than other securities markets and may be subject to a higher level of risks compared to investing in a more diversified portfolio/ strategy. Investment in the US securities market may involve a greater risk of loss than investing in other markets and may result in a higher risk of loss to the fund. Changes in financial regulations, tax regulations or governmental regulations on trade, decreasing imports or exports, terrorist acts, political movements and/or an economic crisis or recession in the US may have a significant adverse effect on the US economy. Such changes may have a negative impact on the securities held by the fund. The Vanguard FTSE Developed Europe Index ETF invests in European securities markets which involve a greater risk of loss than investing in other markets and may result in a higher risk of loss to the fund. Changes in governmental or European Union (the EU ) regulations on trade, exchange rate of the euro, decreasing imports or exports, the default or threat of default by an EU member country on its sovereign debt, and/or an economic recession in an EU member country may have a significant adverse effect on the EU economy. Further, the Economic and Monetary Union of the EU requires compliance with interest rates, debt levels, restrictions on inflation rates, deficits and fiscal and monetary controls, each of which may significantly affect the EU economy. The Vanguard FTSE Asia ex Japan Index ETF and the Vanguard FTSE Asia ex Japan High Dividend Yield Index ETF invest in securities markets that are considered to be emerging markets which involve a greater risk of loss than investing in more developed markets due to, among other factors, greater political, tax, economic, foreign exchange, liquidity and regulatory risks. The Vanguard FTSE Japan Index ETF concentrates its investment in the Japanese securities market which may involve a higher level of risks compared to investing in a more diversified portfolio/strategy and a greater risk of loss than investing in other markets and may result in a higher risk of loss to the fund. Changes in governmental regulations on trade, exchange rate of the Japanese yen, decreasing imports or exports, and/or an economic recession in Japan may have a significant adverse effect on the Japanese economy. The Vanguard FTSE Asia ex Japan High Dividend Yield Index ETF invests in high dividend yield securities which may offer a higher rate of dividend yield. However, high dividend yield securities are subject to risks that the dividend could be reduced or abolished, or the risks that the value of the securities could decline or have lower-than average potential for price appreciation. The Funds invest in financial derivatives instruments ( FDIs ) which are more sensitive to changes in market prices of the underlying assets and investing in FDIs, may expose investors to a higher degree of fluctuations and the Funds may be exposed to credit risk on the counterparties with which they trade FDIs. The shares of the Funds are traded on the Stock Exchange of Hong Kong Limited ( SEHK ). Their prices on the SEHK are based on secondary market trading factors and the Funds market prices may deviate significantly from the net asset value. Vanguard S&P 500 Index ETF (3140) Vanguard FTSE Developed Europe Index ETF (3101) Vanguard FTSE Asia ex Japan Index ETF (2805) Vanguard FTSE Japan Index ETF (3126) Vanguard FTSE Asia ex Japan High Dividend Yield Index ETF (3085)

2 A unique client focus The Vanguard Group, Inc., was founded in the United States in 1975 with a commitment to serving our clients interests exclusively. Over the years, we have held firm to that commitment and become the largest mutual fund company 1 and the second largest exchange-traded fund (ETF) provider 2 in the world. In 1996 we established our first office outside the United States in Australia. We later expanded into Japan, Europe, Canada, Singapore and established Hong Kong as our regional headquarters in In 2014, we opened a representative office in Beijing. What sets us apart Why have clients from around the world entrusted us with more than USD 3 trillion in assets? 3 The answer lies in our core purpose: To take a stand for all investors, to treat them fairly, and to give them the best chance for investment success. What sets us apart and enables us to deliver on that promise is our ownership structure in the United States. Unlike other investment management companies, we don t have public shareholders or private owners expecting dividends. We are owned by our US-domiciled funds, which in turn are owned by their investors. As a result, we have no conflicting interests and can stay focused on doing what s best for our clients. The most tangible benefit to our clients is our low costs. At year-end 2014, the average expense ratio of our US-domiciled mutual funds was 0.18%, far lower than the industry average of 1.02%. 4 As we expand our presence in Asia, we continue to provide high-quality, low-cost products to our clients, with the goal of giving them the best chance for investment success. Our investment philosophy Vanguard believes successful investing begins with focusing on what you can control. You can t control market returns, but you can set clear goals, stay diversified, keep costs low and maintain long-term discipline. These common sense principles guide the decisions we help our clients make. They also guide the way we manage our funds and ETFs, producing impressive long-term results. For the ten years ending 31 March 2015, 92% of Vanguard US-domiciled funds outperformed their peer group average. 5 An indexing leader Vanguard is known as a low-cost leader in both passive and actively managed investments. Although we have deep roots in active management, we are best known for introducing the first index fund for individual investors in the United States in 1976, beginning the era of low-cost indexing. Over the last decade, we have extended our indexing expertise to ETFs. Figure 1. The Vanguard cost advantage a. Average annual expense ratios* b. Percentage of all Vanguard funds outperforming the average returns of their peer groups** 1.50% % All funds 1.02% 89% 86% 85% 92% % 0.61% Major fund complexes 0.52% Vanguard 0.18% One-year Three-year Five-year Ten-year ** Sources: Vanguard and Lipper, a Thomson Reuters Company, as at 31 December Based on US-domiciled funds only. Annual expense ratios are represented as a percentage of net assets. The 0.52% is the weighted expense ratio of the top 20 management companies excluding Vanguard, based on year-end 2014 total net assets. Vanguard expense ratios range from 0.02% to 1.60%. ** Source: Lipper, a Thomson Reuters Company. Based on the number of Vanguard funds that outperformed their Lipper peer-group averages for periods ended 31 March Source: Morningstar, as at 30 tember Based on global total net assets of mutual funds (including long-term and money market funds). 2 Source: ETFGI, as at 30 tember Source: Vanguard, as at 30 tember Sources: Vanguard; Lipper, a Thomson Reuters Company, as at 31 December Source: Lipper, a Thomson Reuters Company. 2

3 Why indexing? Index investments provide an easy, low-cost way to capture broad market returns simply through buying all (or a representative sample) of the securities in the market index they seek to track. Because index investments hold securities until the index itself changes, they typically have very low costs. Due mostly to their low costs, index investments have generally outperformed higher-cost investments over time. 6 In addition to low costs and a potential performance edge, index investments offer other appealing traits, including: Diversification. Most index funds and ETFs hold a broad range of securities, which can help reduce risk. Style consistency. An investor who seeks exposure to a particular market and selects an index fund that tracks that market is assured of a consistent allocation. Transparency. Because index funds and ETFs are designed to track an index and hold the same securities (or a representative sample), index funds and ETFs are transparent and easy to understand. ETFs: Another way to index ETFs have become popular for features that traditional index funds don t offer. Like index funds, ETFs offer the benefits of low costs and diversification. But ETFs have the added flexibility of trading on a stock exchange. Like individual stocks, they can be bought and sold through an adviser or a brokerage account at market-determined prices, whenever the exchange is open. Combining indexing with active management Investors who seek market outperformance, but without the potentially higher costs and risks of an all active portfolio, may benefit from combining indexing and active strategies. The appeal of this approach is that it seeks to provide risk control through indexing while also offering prospects of outperformance. Vanguard ETFs offer low-cost access to global equity markets Vanguard ETFs offer you the diversification and transparency of indexing with the low costs and investment expertise for which Vanguard is known. With exposure to broad equity markets in Asia, Europe and the United States, our ETFs offer you access to close to 80% of the world s total equity market capitalisation. 7 And Vanguard s low costs mean you keep more of your returns a benefit that can compound in your favour over time. The average total expense ratio (TER) of our five ETFs is just 0.32% annually, compared with 0.73% for all ETFs listed in Hong Kong. 8 Used together or individually, Vanguard ETFs offer you a flexible, low-cost and high-quality way to build a globally diversified equity portfolio. Figure 2. Vanguard ETFs: Low-cost access to close to 80% of global equity markets Portion of global market capitalisation covered by Vanguard Hong Kong-domiciled ETFs 77.1% 6.9% 7.9% 19.6% 42.7% ETF name TER Vanguard S&P 500 Index ETF (3140) 0.25% Vanguard FTSE Developed Europe Index ETF (3101) 0.25% Vanguard FTSE Asia ex Japan Index ETF (2805) 0.38% Vanguard FTSE Japan Index ETF (3126) 0.25% Vanguard FTSE Asia ex Japan 0.45% High Dividend Yield Index ETF (3085) Offers exposure to higher yielding stocks across Asia ex Japan. Source: Vanguard illustration and calculations using data from FTSE and S&P as at 31 December Source: The case for index fund investing for Asian investors, Vanguard, Vanguard calculations using data from FTSE and S&P as at 31 December Vanguard calculations using data from Morningstar as at 30 tember

4 Benchmark information About the S&P 500 Introduced in 1957 by Standard & Poor s (S&P), the S&P 500 has become a widely recognised proxy for the US equity market. Globally, there is over USD 7.8 trillion benchmarked to the S&P 500, with indexed assets comprising approximately USD 2.2 trillion of this total. 9 Vanguard uses this index in part because it uses many of the benchmark best practices we promote (see page 11). Index methodology The S&P 500 is float-adjusted and market-cap weighted, which means it only includes shares that are available in the open market and the index constituents are weighted according to market capitalisation. So the influence of each constituent stock on the index performance is proportional to its market value. To be eligible for being included in the index, each constituent should meet the following criteria: US-based companies Market capitalisation of USD 5.3 billion or greater At least 50% of shares outstanding must be available for trading on the open market Four consecutive quarters of positive earnings Highly tradeable common stocks, with active and deep markets Index characteristics The S&P 500 includes 500 leading companies in leading industries of the US economy. Focusing on the large-cap segment of the market, the index covers approximately 80% of available US market capitalisation. Diversified across 10 sectors, with information technology, the largest sector, accounting for 20.4% of the index. 9 Strong stock diversification. The 10 largest stocks represent 17.3% of the index and the largest stock, Apple Inc., has a weight of just 3.7%. 9 Highly liquid. The index members have a minimum 3-month average daily traded value of USD 22 million. 9 The index is rebalanced quarterly, after the market close on the third Friday of the quarter-ending month. S&P 500 performance since ,500 2,000 Index level 1,500 1, Source: Vanguard illustration using data from Bloomberg, as at 30 tember The performance of an index is not an exact representation of any particular investment as you cannot invest directly in the index. The historical performance of the index is for illustrative purposes only. The historical performance of the index is not meant to forecast, imply or guarantee the future performance of the fund. Index performance does not reflect tracking error, charges and expenses associated with the fund, or brokerage commission associated with buying and selling the fund. 9 Source: S&P, as at 30 tember

5 Vanguard ETFs Vanguard S&P 500 Index ETF (3140) Product highlights Employs a passively managed, full replication strategy to gain exposure to large-cap US equities. The first Hong Kong-listed ETF that tracks the S&P 500 Index. 10 TER as low as 0.25%, the lowest in its category of ETFs on the Hong Kong Stock Exchange. 10 Key fund facts Stock code 3140 Benchmark S&P 500 Index Total expense ratio 0.25% Currency HKD Listing date 21 May 2015 Fund characteristics 11 Number of stocks 503 Median market cap (HKD) 587.2B Equity yield (dividend)* Number of sectors 10 * Fund distribution yield will be available after 12 months of performance. Fund sector diversification 11 Information Technology 20.4% Financials 16.5% Health Care 14.7% Consumer Discretionary 13.1% Industrials 10.1% Consumer Staples 9.9% Energy 6.9% Utilities 3.2% Materials 2.8% Telecommunication Services 2.4% Fund top 10 holdings 11 Apple Inc. 3.7% Google Inc. 2.1% Microsoft Corp. 2.1% Exxon Mobil Corp. 1.8% Johnson & Johnson 1.5% General Electric Co. 1.5% Berkshire Hathaway Inc. 1.4% Wells Fargo & Co. 1.4% JPMorgan Chase & Co. 1.3% Facebook Inc. 1.2% Total 18.0% Performance history Total returns for period ending 30 tember months Year to date 1 year 3 years 5 years Since inception Vanguard S&P 500 Index ETF S&P 500 Index* -6.62% -5.78% -1.42% -9.34% Cumulative monthly return. Annualised return. Return since fund inception. * Performance data is shown in HKD, based on the S&P 500 Index (HKD) which was incepted in January The performance of an index is not an exact representation of any particular investment as you cannot invest directly in the index. The historical performance of the index is for illustrative purposes only. The historical performance of the index is not meant to forecast, imply or guarantee the future performance of the fund. Index performance does not reflect tracking error, charges and expenses associated with the fund, or brokerage commission associated with buying and selling the fund. Fund performance may be presented only if it has an investment track record of not less than 6 months. The fund s inception date was 18 May Source: Morningstar, as at 30 tember Source: Vanguard, as at 30 tember Discrepancies due to rounding. 5

6 Benchmark information About the FTSE indices FTSE Group ( FTSE ) calculates and manages a comprehensive range of equity, fixed income, real estate and investment strategy indices, on both a standard and custom basis. The FTSE Global Equity Index Series forms the foundation of FTSE s global, regional, country and sector indices. It covers more than 7,400 securities in 47 countries and captures 98% of the world s investable market capitalisation. Vanguard uses FTSE indices in part because FTSE uses many of the benchmark best practices we promote (see page 11). Index methodology FTSE uses transparent rules in determining inclusion in its indices. Committees periodically review the indices to ensure they remain objective and accurately reflect their target markets. Stocks are screened for liquidity and adjusted for free float, so benchmarks reflect the shares available in the open market. Benchmark of 2805 versus 3085 Both FTSE indices provide exposure to the Asia ex Japan equity markets. The key difference is that the 2805 benchmark weights its stocks in proportion to market capitalisation, whereas the 3085 benchmark tilts towards higher dividend yielding stocks, hence complementing the Asia ex Japan exposure with additional dividend income. Index characteristics The FTSE indices that our Hong Kong-domiciled ETFs track are primarily market-cap weighted. Below is a closer look at the characteristics of the four FTSE indices. A closer look at four FTSE indices FTSE Asia Pacific ex Japan, Australia and New Zealand Index FTSE Asia Pacific ex Japan, Australia and New Zealand High Dividend Yield Index Index name FTSE Developed Europe Index FTSE Japan Index Vanguard ETF (stock code) Index characteristics Number of countries updated for benchmark index Number of stocks Number of sectors Median market cap (HKD) 328.9B 128.4B 125.7B 143.5B Equity yield (dividend) 3.6% 2.6% 1.9% 3.9% Source: FTSE, as at 30 tember

7 Vanguard ETFs Vanguard FTSE Developed Europe Index ETF (3101) Product highlights Employs a passively managed, index sampling strategy to gain exposure to the broad equity markets of developed European countries. The first Europe equity ETF listed on the Hong Kong Stock Exchange. 12 TER as low as 0.25%, the lowest in its category of ETFs on the Hong Kong Stock Exchange. 12 Key fund facts Stock code 3101 Benchmark FTSE Developed Europe Index Total expense ratio 0.25% Currency HKD Listing date 13 June 2014 Fund characteristics 13 Number of stocks 519 Median market cap (HKD) 328.9B Equity yield (dividend) 3.6% Number of countries 16 Number of sectors 10 Fund top 10 holdings 13 Nestle SA 3.0% Novartis AG 2.5% Roche Holding AG 2.4% Royal Dutch Shell plc 1.9% HSBC Holdings plc 1.9% Unilever 1.4% Sanofi 1.4% Bayer AG 1.3% British American Tobacco plc 1.3% Novo Nordisk A/S 1.3% Total 18.4% Fund country diversification 13 United Kingdom 31.7% Switzerland 14.4% France 14.4% Germany 13.3% Spain 5.1% Netherlands 4.5% Sweden 4.4% Italy 3.9% Denmark 2.9% Belgium 2.0% Total (top 10 markets) 96.6% Fund sector diversification 13 Financials 23.0% Consumer Goods 18.9% Health Care 12.8% Industrials 12.0% Consumer Services 7.7% Basic Materials 7.1% Oil & Gas 6.3% Telecommunications 4.9% Utilities 4.0% Technology 3.3% Performance history Total returns for period ending 30 tember months Year to date 1 year 3 years 5 years Since inception Vanguard FTSE Developed Europe Index ETF -8.64% -4.97% -9.26% % FTSE Developed Europe Index -8.57% -4.96% -9.14% 6.24% 4.25% % Cumulative monthly return. Annualised return. Return since fund inception. The performance of an index is not an exact representation of any particular investment as you cannot invest directly in the index. The historical performance of the index is for illustrative purposes only. The historical performance of the index is not meant to forecast, imply or guarantee the future performance of the fund. Index performance does not reflect tracking error, charges and expenses associated with the fund, or brokerage commission associated with buying and selling the fund. 12 Source: Morningstar, as at 30 tember Source: Vanguard, as at 30 tember Discrepancies due to rounding. 7

8 Vanguard ETFs Vanguard FTSE Asia ex Japan Index ETF (2805) Product highlights Employs a passively managed, index sampling strategy to gain exposure to developed and emerging equity markets across Asia, excluding Japan. TER as low as 0.38%, the lowest in its category of ETFs on the Hong Kong Stock Exchange. 14 Key fund facts Stock code 2805 Benchmark FTSE Asia Pacific ex Japan, Australia and New Zealand Index Total expense ratio 0.38% Currency HKD Listing date 15 May 2013 Fund characteristics 15 Number of stocks 758 Median market cap (HKD) 131.8B Equity yield (dividend) 2.6% Number of countries 10 Number of sectors 10 Fund top 10 holdings 15 Samsung Electronics Co. Ltd. 3.8% Taiwan Semiconductor Manufacturing Co. Ltd. 3.1% Tencent Holdings Ltd. 2.9% China Mobile Ltd. 2.1% AIA Group Ltd. 2.0% China Construction Bank Corp. 2.0% Industrial & Commercial Bank of China Ltd. 1.4% Hon Hai Precision Industry Co. Ltd. 1.2% CK Hutchison Holdings Ltd. 1.2% Infosys Ltd. 1.1% Total 20.8% Fund country diversification 15 China 26.4% Korea 17.1% Hong Kong 14.4% Taiwan 13.8% India 12.7% Singapore 5.3% Malaysia 3.8% Thailand 2.6% Indonesia 2.1% Philippines 1.8% Fund sector diversification 15 Financials 32.5% Consumer Goods 15.0% Technology 13.1% Industrials 13.0% Telecommunications 6.3% Oil & Gas 5.1% Basic Materials 4.3% Consumer Services 4.3% Utilities 3.9% Health Care 2.5% Performance history Total returns for period ending 30 tember months Year to date 1 year 3 years 5 years Since inception Vanguard FTSE Asia ex Japan Index ETF % % % -3.97% FTSE Asia Pacific ex Japan, Australia and New Zealand Index % % % 0.20% 0.60% -3.36% Cumulative monthly return. Annualised return. Return since fund inception. The performance of an index is not an exact representation of any particular investment as you cannot invest directly in the index. The historical performance of the index is for illustrative purposes only. The historical performance of the index is not meant to forecast, imply or guarantee the future performance of the fund. Index performance does not reflect tracking error, charges and expenses associated with the fund, or brokerage commission associated with buying and selling the fund. 14 Source: Morningstar, as at 30 tember Source: Vanguard, as at 30 tember Discrepancies due to rounding. 8

9 Vanguard ETFs Vanguard FTSE Japan Index ETF (3126) Product highlights Employs a passively managed, index sampling strategy to gain exposure to the broad equity market in Japan. The first physical, market-cap-weighted Japan equity ETF listed on the Hong Kong Stock Exchange. 16 TER as low as 0.25%, the lowest in its category of ETFs on the Hong Kong Stock Exchange. 16 Key fund facts Stock code 3126 Benchmark FTSE Japan Index Total expense ratio 0.25% Currency HKD Listing date 13 June 2014 Fund characteristics 17 Number of stocks 477 Median market cap (HKD) 125.7B Equity yield (dividend) 1.9% Number of sectors 10 Fund sector diversification 17 Consumer Goods 25.0% Industrials 19.3% Financials 18.4% Consumer Services 11.9% Health Care 7.2% Basic Materials 5.7% Technology 4.5% Telecommunications 4.4% Utilities 2.8% Oil & Gas 0.8% Fund top 10 holdings 17 Toyota Motor Corp. 5.2% Mitsubishi UFJ Financial Group Inc. 2.8% Honda Motor Co. Ltd. 1.8% Sumitomo Mitsui Financial Group Inc. 1.6% Mizuho Financial Group Inc. 1.6% KDDI Corp. 1.4% SoftBank Group Corp. 1.4% Seven & I Holdings Co. Ltd. 1.2% Takeda Pharmaceutical Co. Ltd. 1.2% East Japan Railway Co. 1.1% Total 19.3% Performance history Total returns for period ending 30 tember months Year to date 1 year 3 years 5 years Since inception Vanguard FTSE Japan Index ETF % 1.11% -1.39% 0.01% FTSE Japan Index % 1.21% -1.26% 9.50% 5.29% 0.15% Cumulative monthly return. Annualised return. Return since fund inception. The performance of an index is not an exact representation of any particular investment as you cannot invest directly in the index. The historical performance of the index is for illustrative purposes only. The historical performance of the index is not meant to forecast, imply or guarantee the future performance of the fund. Index performance does not reflect tracking error, charges and expenses associated with the fund, or brokerage commission associated with buying and selling the fund. 16 Source: Morningstar, as at 30 tember Source: Vanguard, as at 30 tember Discrepancies due to rounding. 9

10 Vanguard ETFs Vanguard FTSE Asia ex Japan High Dividend Yield Index ETF (3085) Product highlights Employs a passively managed, index sampling strategy to gain exposure to stocks that are characterised by higher than-average dividend yields in emerging and developed equity markets across Asia, excluding Japan. The first physical Asia ex Japan equity high dividend yield ETF listed on the Hong Kong Stock Exchange. 18 TER as low as 0.45%, among the lowest in its category of ETFs on the Hong Kong Stock Exchange. 18 Key fund facts Stock code 3085 Benchmark FTSE Asia Pacific ex Japan, Australia and New Zealand High Dividend Yield Index Total expense ratio 0.45% Currency HKD Listing date 13 June 2014 Fund characteristics 19 Number of stocks 352 Median market cap (HKD) 137.4B Equity yield (dividend) 3.9% Number of countries 10 Number of sectors 9 Fund top 10 holdings 19 Taiwan Semiconductor Manufacturing Co. Ltd. 6.4% China Mobile Ltd. 4.3% China Construction Bank Corp. 4.1% Industrial & Commercial Bank of China Ltd. 2.8% CK Hutchison Holdings Ltd. 2.5% Bank of China Ltd. 2.2% Hong Kong Exchanges and Clearing Ltd. 1.9% Sun Hung Kai Properties Ltd. 1.5% Cheung Kong Property Holdings Ltd. 1.4% DBS Group Holdings Ltd. 1.4% Total 28.5% Fund country diversification 19 China 28.9% Taiwan 22.2% Hong Kong 18.6% Singapore 9.3% Malaysia 6.5% Korea 4.9% Thailand 4.0% India 2.9% Indonesia 1.8% Philippines 0.9% Fund sector diversification 19 Financials 37.6% Technology 11.2% Telecommunications 10.9% Industrials 10.2% Consumer Goods 8.2% Oil & Gas 6.5% Utilities 5.8% Basic Materials 5.3% Consumer Services 4.3% Performance history Total returns for period ending 30 tember 2015 Vanguard FTSE Asia ex Japan High Dividend Yield Index ETF FTSE Asia Pacific ex Japan, Australia, and NZ High Dividend Yield Index 3 months Year to date 1 year 3 years 5 years Since inception % % % -9.91% % % % 0.38% 2.15% -9.92% Cumulative monthly return. Annualised return. Return since fund inception. The performance of an index is not an exact representation of any particular investment as you cannot invest directly in the index. The historical performance of the index is for illustrative purposes only. The historical performance of the index is not meant to forecast, imply or guarantee the future performance of the fund. Index performance does not reflect tracking error, charges and expenses associated with the fund, or brokerage commission associated with buying and selling the fund. 18 Source: Morningstar, as at 30 tember Source: Vanguard, as at 30 tember Discrepancies due to rounding. 10

11 Benchmark selection expertise What Vanguard looks for in benchmarks Index products and the benchmarks they seek to track have proliferated over the last few years, posing a challenge to investors seeking to choose appropriate investments. Over the last 35 years, Vanguard has developed a rigorous process for screening, evaluating and selecting benchmarks for its index funds and ETFs. Selecting an appropriate benchmark is crucial to providing a best-in-class ETF. We use market-capitalisation-weighted indices from FTSE and S&P because they accurately represent the markets our Hong Kong-domiciled ETFs seek to track. Best practices for benchmark construction Many index providers are adopting benchmark construction best practices that Vanguard has promoted for years, including: Objectivity. Benchmark construction is transparent and determined objectively. Accurate reflection of the market. The benchmark is the best representation of the target market or market segment and is free-float adjusted, which means it only includes securities that are available in the open market. Free float is important for efficient asset allocation and for limiting overlap among funds. Market-cap buffer zones. Market capitalisation divisions overlap, with no hard cutoff points. Buffer zones can reduce turnover, and lower transaction costs. Multi-factor style analysis. Growth and value stocks are categorised using multiple criteria, offering a better style representation within the index. Timely and efficient construction. The benchmark s rebalancing approach reflects market changes in an orderly fashion. Benefits of appropriate benchmark selection Using best practices to construct benchmarks can deliver benefits to investors, including: Low portfolio turnover, which leads to lower transaction costs Better reflection of targeted markets, which can make index funds and ETFs efficient asset allocation tools Comparability among index products, allowing investors to choose benchmarks based on preference, cost and accessibility 11

12 Vanguard Investments Hong Kong Limited 48/F, The Center, 99 Queen s Road Central, Hong Kong Phone: sales@vanguard.com.hk Connect with Vanguard vanguard.com.hk The contents of this document and any attachments/links contained in this document are for general information only and are not advice. The information does not take into account your specific investment objectives, financial situation and individual needs and is not designed as a substitute for professional advice. You should seek independent professional advice regarding the suitability of an investment product, taking into account your specific investment objectives, financial situation and individual needs before making an investment. The contents of this document and any attachments/links contained in this document have been prepared in good faith. The Vanguard Group, Inc., and all of its subsidiaries and affiliates (collectively, the Vanguard Entities ) accept no liability for any errors or omissions. Please note that the information may also have become outdated since its publication. The Vanguard Entities make no representation that such information is accurate, reliable or complete. In particular, any information sourced from third parties is not necessarily endorsed by the Vanguard Entities, and the Vanguard Entities have not checked the accuracy or completeness of such third party information. This document contains links to materials which may have been prepared in the United States and which may have been commissioned by the Vanguard Entities. They are for your information and reference only and they may not represent our views. The materials may include incidental references to products issued by the Vanguard Entities. The information contained in this document 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 Vanguard Entities may be unable to facilitate investment for you in any products which may be offered by The Vanguard Group, Inc. No part of this document or any attachments/links contained in this document may be reproduced in any form, or referred to in any other publication, without express written consent from the Vanguard Entities. Any attachments and any information in the links contained in this document may not be detached from this document and/or be separately made available for distribution. This document is being made available in Hong Kong by Vanguard Investments Hong Kong Limited (CE No.:AYT820), a Hong Kong company licensed with the Securities and Futures Commission ( SFC ) in Hong Kong. Investment involves risks, including the loss of principal. Investors are advised to consider their own investment objectives and circumstances in determining the suitability of an investment in the ETFs. If you are in any doubt, you should seek professional advice. Investors should refer to the ETFs prospectus for further details, including product features, risk factors and restrictions on owning and holding the ETFs. Investors should not base investment decisions on this document alone. Further details of the ETFs can be found at The ETFs are traded on the SEHK at market price, which may be different from their net asset value. Past performance is not an indication of future performance. The contents of this document have not been reviewed by the SFC and SFC authorisation is not an official recommendation of the ETFs. This document does not constitute an offer, an invitation to offer or a recommendation to enter into any investment products. In China, the information contained in this document does not constitute a public offer of any investment products in the People s Republic of China (the PRC ). No Vanguard fund is being offered or sold directly or indirectly in the PRC to the PRC public. Further, no legal or natural persons of the PRC may directly or indirectly purchase any of Vanguard funds or any beneficial interest therein without obtaining all prior governmental approvals that are required by the PRC (which includes conducting due approval or registration or filing formalities under the PRC laws), whether statutorily or otherwise. Persons who come into possession of this document are required by the issuer to observe these restrictions. In Taiwan, Vanguard funds are not registered and may not be sold, issued or offered. No person or entity in Taiwan has been authorised to offer, sell, give advice regarding or otherwise intermediate the offering and sale of any Vanguard funds in Taiwan. 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 its 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 Asia Pacific ex Japan, Australia and New Zealand Index, FTSE Developed Europe Index, FTSE Japan Index, FTSE Asia Pacific ex Japan, Australia and New Zealand High Dividend Yield Index (the Indices ) or the fitness or suitability of the Indices for any particular purpose to which they might be put. The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Vanguard. Standard & Poor s and S&P are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); S&P and S&P 500 are trademarks of S&P; and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Vanguard. Vanguard S&P 500 Index ETF is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, or their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index Vanguard Investments Hong Kong Limited. All rights reserved. GTLCSTHK