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1 VG001-001/M85660-892520263-23073/1
PROSPECTUS
VANGUARD FUNDS PLC
An investment company with variable capital constituted as an umbrella fund with segregated liability between Funds and incorporated with limited liability under the laws of Ireland under registration number 499158 and authorised and regulated by the Central Bank of Ireland pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011, as may be amended
This Prospectus is dated as at 4 September 2026.
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VANGUARD FUNDS PLC
IMPORTANT INFORMATION
Investor Responsibility
Investors should review this Prospectus carefully and in its entirety and consult a stockbroker, bank manager, solicitor, accountant or other financial adviser before making an application for Shares.
Central Bank Authorisation
Authorisation of Vanguard Funds plc (the “Company”) is not an endorsement or guarantee of the Company by the Central Bank nor is the Central Bank responsible for the contents of this Prospectus. The authorisation of the Company by the Central Bank shall not constitute a warranty as to the performance of the Company and the Central Bank shall not be liable for the performance or default of the Company.
This Prospectus describes the Company, an open-ended investment company with variable capital incorporated in Ireland as a public limited company. It qualifies and is authorised in Ireland by the Central Bank as a UCITS for the purposes of the UCITS Regulations. The Company is constituted as an umbrella fund, with segregated liability between Funds, insofar as the share capital of the Company is divided into different classes of Shares with one or more classes of Shares representing a portfolio of assets that makes up a separate Fund. Shares of different classes may be established within a Fund to accommodate different subscription and/or redemption provisions and/or dividends and/or charges and/or fee arrangements, including different ongoing charges figures.
This Prospectus and any relevant Supplement should be read and constituted as one document. To the extent that there is any inconsistency between this Prospectus and the relevant Supplement, the relevant Supplement shall prevail.
The portfolio of assets maintained for each Fund is invested in accordance with the investment objective and policies applicable to such Fund. Details for each Fund are set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund.
The Board of Directors whose names appear under the heading “ Directory ” jointly accept responsibility for the information contained in this Prospectus. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document does not contain any untrue or misleading statement, is in accordance with the facts and does not omit anything likely to affect the import of such information. The Directors accept responsibility accordingly. Details in respect of future Funds may also be set out in a separate supplement to this Prospectus.
Reliance on this Prospectus and on the Key Information Document
Shares in any Fund described in this Prospectus or in any relevant Supplement as well as in any relevant Key Information Document are offered only on the basis of the information contained in those documents and the latest audited annual financial report and any subsequent semi-annual financial report of the Company. These reports will form part of this Prospectus.
This Prospectus is based on information, law and practice at the date hereof. The Company cannot be bound by an out of date prospectus when it has issued a new prospectus, and investors should check with the Administrator that this is the most recently published prospectus.
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No person has been authorised by the Company to give any information or make any representations concerning the Company or in connection with the offering of Shares other than those contained in this Prospectus, and, if given or made, such information or representations must not be relied on as having been given or made by the Company. The delivery of this Prospectus (whether or not accompanied by any reports) or the issue of Shares shall not, under any circumstances, create any implication that the affairs of the Company have not changed since the date hereof.
The distribution of this Prospectus and the offering and placing of Shares in certain jurisdictions may be restricted. Persons into whose possession this Prospectus comes are required by the Company to inform themselves about and to observe any such restrictions. This Prospectus does not constitute an offer or solicitation by anyone in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it is unlawful to make such offer or solicitation.
The distribution of this Prospectus in certain jurisdictions may require that this Prospectus is translated into the official language of those countries. Should any inconsistency arise between the translated version and the English-language version, the English-language version of this Prospectus shall prevail.
Governing Law
The issue and allotment of Shares is subject to the provisions of the Prospectus, the Constitution and the Application Form and the aforementioned documents, the subscription for or redemption of Shares and the terms of holding of such Shares will be governed by and construed in accordance with the laws of Ireland.
The Application Form and the terms on which Shares in a Fund are held shall be governed by and construed in accordance with the laws of Ireland. The Courts of Ireland are to have exclusive jurisdiction to settle any dispute, controversy or claim arising out of or in connection with the Application Form, the Prospectus, the Constitution, the Company or its operations, the application for or the holding of Shares in a Fund. Unless the Manager otherwise agrees in writing, an applicant for Shares irrevocably submits to the exclusive jurisdiction of the Irish courts.
Investors’ Reliance on U.S. Federal Tax Advice in this Prospectus
The discussion contained in this Prospectus as to U.S. federal tax considerations is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties. Such discussion is written to support the promotion or marketing of the transactions or matters addressed in this Prospectus. Each taxpayer should seek U.S. federal tax advice based on the taxpayer’s particular circumstances from an independent tax advisor.
Listing
Depending on the currency designation of the relevant ETF Shares, the ETF Shares of each Fund will normally be primarily listed and/or admitted for trading on either the Regulated Market of Euronext Dublin, the main market of London Stock Exchange, the Deutsche Börse Xetra, the Borsa Italiana, Cboe Europe Equities or the SIX Swiss Exchange, as appropriate (but may be primarily listed on an alternative stock exchange). In addition to the primary listing, it is also intended that the ETF Shares of each Fund may be listed and admitted for trading on a number of other stock exchanges, such listings being secondary to the primary listing (including without limitation any of the aforementioned exchanges and / or Euronext Amsterdam, Euronext Paris, Bolsa Mexicana de Valores and Bolsa Institucional de Valores). The Company does not warrant or guarantee that such listings will take place or continue to exist. For details of where the ETF Shares of the Funds are listed or admitted for trading, please refer to the official Vanguard website ( www.vanguard.co.uk ) .
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Euronext Dublin Listing
Neither the admission of the ETF Shares to the Official List, nor to trading on the Regulated Market of Euronext Dublin, nor the approval of the listing particulars pursuant to the listing requirements of Euronext Dublin shall constitute a warranty or representation by Euronext Dublin as to the competence of service providers to or any other party connected with the Company, the adequacy of information contained in the listing particulars or the suitability of the Company for investment purposes.
United Kingdom
The Company is registered as a “recognised scheme” for the purposes of Section 264 of the Financial Services and Markets Act 2000 (the “ FSMA ”) of the United Kingdom and shares in the Company may upon such registration be promoted and sold to the general public in the United Kingdom subject to compliance with the FSMA and applicable regulations made thereunder. Potential investors in the United Kingdom should be aware that most of the protections afforded by the United Kingdom’s regulatory system will not apply to an investment in the Company and that compensation will not be available under the United Kingdom Financial Services Compensation Scheme.
United States
The Shares have not been, and will not be, registered under the 1933 Act or the securities laws of any of the states of the United States. The Shares may not be offered or sold directly or indirectly in the United States or to or for the account or benefit of any US Person, except pursuant to an exemption from, or in a transaction not subject to the regulatory requirements of the 1933 Act or 1940 Act and any applicable federal or state securities laws. Any re-offer or resale of any of the Shares in the United States or to US Persons may constitute a violation of U.S. law. In the absence of such exemption or exempt transaction, each applicant for Shares will be required to certify that it is not a US Person.
The Company is not open for investment by any US Person except in exceptional circumstances and then only to certain qualified investors with the prior consent of the Directors. A prospective investor will be required at the time of acquiring Shares to represent that such investor meets any qualification criteria established by the Directors, and is not a US Person or acquiring Shares for or on behalf of a US Person. The prior consent of the Directors is required in respect of each application for Shares and the granting of such consent does not confer on investors a right to acquire Shares in respect of any future or subsequent application. The Directors may, in their sole discretion, redeem Shares of any investors who become US Persons and have not otherwise been approved by the Directors to own Shares.
Additionally, Shares may not be acquired by a person who is deemed to be a US Person.
India
In addition, Shares of the Company have not been and will not be registered under the laws of India and are not intended to benefit from any laws in India promulgated for the protection of investors. Due to Indian regulatory requirements, no Shares of the Vanguard FTSE All-World UCITS ETF, the Vanguard FTSE Emerging Markets UCITS ETF or the Vanguard FTSE All-World High Dividend Yield UCITS ETF shall be knowingly offered to, directly or indirectly, sold or delivered within India or, transferred to, purchased by, held for or on the account of or for the benefit of (i) a “person resident in India” (as such term is defined in the Foreign Exchange Management Act, 1999 as may be amended or supplemented from time to time), or, (ii) any other entity or person disqualified or otherwise prohibited from accessing the Indian securities market under applicable laws, as may be amended from time to time. Each investor must satisfy itself regarding compliance with these requirements, prior to subscribing to or purchasing the Shares.
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France
As of the date of this Prospectus, deposits made on a P Plan d’Epargne en Actions (PEA) can be used for the acquisition of ETF Shares of Vanguard FTSE Developed Europe ex UK UCITS ETF; Vanguard Germany All Cap UCITS ETF; and Vanguard FTSE Eurozone UCITS ETF. These Funds shall invest, in a permanent manner, more than 75% of its assets in ‘Eligible Securities’. ‘Eligible Securities’ include securities and rights with issuers registered in France, another Member State of the European Union, or a State which is party to the EEA Agreement and has entered into a tax treaty with France which contains an administrative assistance clause aimed to avoid tax fraud and avoidance. The issuers of these securities shall also be subject to corporate income tax or an equivalent tax under its local standard tax law.
Jurisdictional Considerations
Potential investors should inform themselves as to:
(a) the legal requirements within the countries of their nationality, citizenship, residence, ordinary residence or domicile for the acquisition of Shares;
(b) any foreign exchange restrictions or exchange control requirements which they might encounter on the acquisition or sale of Shares;
(c) the income tax and other taxation consequences which might be relevant to the acquisition, holding, redemption, conversion or disposal of Shares; and
(d) any requisite government or other consents and the observing of any other formalities.
The Constitution
The provisions of the Constitution are binding on each of its Shareholders (who are taken to have notice of them).
The value of Funds may fall as well as rise, and investors may not get back the amount invested or any return on an investment . There can be no assurance that any Fund will achieve its investment objective. Potential investors should not treat the contents of this Prospectus as advice relating to legal, taxation, investment or any matters and are recommended to consult their own professional advisers concerning the acquisition, holding or disposal of Shares. The Company makes no representation or warranties in respect of suitability.
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CONTENTS Page No
Terms used in this Document .............................................................................................................. 10
Directory .............................................................................................................................................. 20
The Company ...................................................................................................................................... 21 General ................................................................................................................................... 21 Umbrella Fund........................................................................................................................ 21 Share capital ........................................................................................................................... 22 The Directors .......................................................................................................................... 22 Company Secretary ................................................................................................................ 24 Base Currency ........................................................................................................................ 24 Category of scheme ................................................................................................................ 24 Further information ................................................................................................................ 24
Management and Administration ........................................................................................................ 25 The Manager .......................................................................................................................... 25 The Investment Managers and Promoter ................................................................................ 26 The Distributor ....................................................................................................................... 27 The Administrator .................................................................................................................. 28 The Depositary ....................................................................................................................... 28 Paying Agents, Local Representatives and Distributors ........................................................ 30 Index Providers ...................................................................................................................... 31 The Auditors ........................................................................................................................... 31 Conflicts of Interest t ................................................................................................................ 31
The Funds ............................................................................................................................................ 34 General ................................................................................................................................... 34 Investment Objectives and Strategies of the Funds ................................................................ 35 Indices .................................................................................................................................... 36 Change of Index ..................................................................................................................... 36 Benchmarks Regulation ......................................................................................................... 36 Index rebalancing and costs ................................................................................................... 37 Data Protection ....................................................................................................................... 37 Plain Talk about Excess Return and Tracking Error .............................................................. 38 Sustainable Finance ................................................................................................................ 39 Fixed Income Funds ............................................................................................................... 40 Investment Techniques ........................................................................................................... 41 Portfolio Management Techniques ........................................................................................ 44 Profile of a typical investor in the Funds ............................................................................... 44
Shares .................................................................................................................................................. 45 Classes of Shares .................................................................................................................... 45 Currency Hedging at Fund Level ........................................................................................... 45 Currency Hedging at Share Class Level ................................................................................. 45 ETF Shares ............................................................................................................................. 46 Distributing and Accumulating .............................................................................................. 46 Switching ................................................................................................................................ 46 Register .................................................................................................................................. 47 Clearing and Settlement ......................................................................................................... 48 Global Clearing and Settlement ............................................................................................. 48 International Central Securities Depositaries ......................................................................... 48 Notices of Meetings and the Exercise of Voting Rights through the International Central Securities Depositaries .............................................................................................. 49 Directors’ Discretion .............................................................................................................. 50
Dealing ................................................................................................................................................ 51
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General ................................................................................................................................... 51 ETF Shares ............................................................................................................................. 51 Issue of Shares in exchange for in-kind assets ....................................................................... 52 Money Laundering Prevention ............................................................................................... 52 Minimum Holdings ................................................................................................................ 53 The Secondary Market ........................................................................................................... 53
Buying Shares ..................................................................................................................................... 55 Procedure ................................................................................................................................ 55 Purchase of ETF Shares ......................................................................................................... 55 Cash Creation Fee .................................................................................................................. 58 Anti-Dilution Levy ................................................................................................................. 58 Settlement ............................................................................................................................... 59 Shares held through Recognised Clearing and Settlement Systems....................................... 59 Currency of Subscription ....................................................................................................... 59 Acceptance of Orders ............................................................................................................. 59 Amendments to Shareholder Details ...................................................................................... 60 Failure to Settle ...................................................................................................................... 60 Timing of Orders .................................................................................................................... 60 Documents the Investor will receive ...................................................................................... 60 Market timing and frequent trading........................................................................................ 60
Redeeming Shares ............................................................................................................................... 62 Procedure ................................................................................................................................ 62 Redemption of ETF Shares .................................................................................................... 62 General ................................................................................................................................... 63 Liquidity Management Tools ................................................................................................. 66 Mandatory Redemption .......................................................................................................... 66 Cash Redemption Fee ............................................................................................................. 66 Anti-Dilution Levy ................................................................................................................. 67 Holding Over .......................................................................................................................... 67 Mandatory Redemption .......................................................................................................... 67
Anti-Dilution Levy .............................................................................................................................. 68
Temporary Suspension of Dealing in Shares ...................................................................................... 69
Restrictions and Compulsory Transfer and Redemption of Shares ..................................................... 71 General ................................................................................................................................... 71 US Persons ............................................................................................................................. 72
Transfer of Shares ............................................................................................................................... 73 Procedure ................................................................................................................................ 73 Restrictions on Transfer ......................................................................................................... 73
Valuation ............................................................................................................................................. 74 Valuation ................................................................................................................................ 74
Share Prices ......................................................................................................................................... 75 Calculation of Share prices..................................................................................................... 75 Publication of prices ............................................................................................................... 75
Risk Factors ......................................................................................................................................... 76 Management Risk ................................................................................................................... 76 Index Risks ............................................................................................................................. 76 Counterparty Risk to the Depositary ...................................................................................... 76 Inaction by the Common Depositary and/or an International Central Securities Depositary .............................................................................................................................. 77 Risks Associated with delays in providing complete customer due diligence ....................... 77 Payments ................................................................................................................................ 77
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Failure to Settle ...................................................................................................................... 77 Umbrella Cash Subscription and Redemption Account (“Collection Account”) Risk .......... 78 Broker Risk and Sub-Custody Risk........................................................................................ 78 Concentration Risk ................................................................................................................. 79 Asset Class Risk ..................................................................................................................... 79 Absence of Active Market Risk ............................................................................................. 79 Index Accuracy Risk .............................................................................................................. 79 Index Sampling Risks ............................................................................................................. 80 Index Tracking Risk ............................................................................................................... 80 Index Unscheduled Rebalancing Risk .................................................................................... 81 Investment in Subordinate and Callable Bonds Risk ............................................................. 81 Investment Manager Risk ....................................................................................................... 82 Portfolio Turnover Risk ......................................................................................................... 82 Market Risk ............................................................................................................................ 82 Liquidity consideration .......................................................................................................... 82 Counterparty Risk .................................................................................................................. 82 Country Risk .......................................................................................................................... 83 Suspension Risks .................................................................................................................... 83 Emerging Markets Risks ........................................................................................................ 83 Investing in Other Collective Investment Schemes................................................................ 84 Risks Associated With Investment in Russia ......................................................................... 84 Credit and Fixed Interest Securities ....................................................................................... 85 Currency Risk ......................................................................................................................... 86 Derivative Instruments Risk ................................................................................................... 86 Risk Management Process ..................................................................................................... 88 Swaption Risk ........................................................................................................................ 89 Foreign Securities – China A-shares Risk .............................................................................. 89 Investment in China Bonds .................................................................................................... 90 Foreign Taxes Risk ................................................................................................................. 91 Portfolio Transaction Charges ................................................................................................ 91 Basket Customisation Fee ...................................................................................................... 91 Political and/or Regulatory Risks ........................................................................................... 91 Auditing and Accounting Standards Risk .............................................................................. 91 The Umbrella Structure of the Company and Segregated Liability between Funds .............. 92 Paying Agents ........................................................................................................................ 92 Investment Techniques ........................................................................................................... 92 Ownership Limit Risk ............................................................................................................ 92 Futures Contracts .................................................................................................................... 93 Repurchase and Reverse Repurchase Agreements ................................................................. 93 Securities Lending Arrangements .......................................................................................... 94 Past performance .................................................................................................................... 95 Stock market risk .................................................................................................................... 95 Investment style risk ............................................................................................................... 95 Secondary-Market Risks ........................................................................................................ 95 Nominee Arrangements Risks ................................................................................................ 95 Eurozone Crisis Risks ............................................................................................................ 96 Withdrawal of the United Kingdom from the European Union ............................................. 96 Securitisation Regulation ....................................................................................................... 96 European Market Infrastructure Regulation ........................................................................... 97 Force Majeure ........................................................................................................................ 98 Sustainability Risk .................................................................................................................. 98 Authorised Participant Concentration Risk ............................................................................ 98 Currency Hedged Share Classes ............................................................................................. 99 Investing in Smaller Companies............................................................................................. 99
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Fees and Expenses ............................................................................................................................. 100 Ongoing Charges Figure ...................................................................................................... 100 Manager’s Fee ...................................................................................................................... 100 Operational Fees ................................................................................................................... 100 Establishment Fees ............................................................................................................... 100 Directors’ Fees ..................................................................................................................... 101 Deduction and Allocation of Expenses ................................................................................ 101
Dividend Distribution Policy............................................................................................................. 102 Accumulating Shares ............................................................................................................ 102 Distributing Shares ............................................................................................................... 102
Taxation ............................................................................................................................................. 103 Taxation of the Company in Ireland ..................................................................................... 103 Irish Courts Service .............................................................................................................. 108 United Kingdom Tax Considerations ................................................................................... 111 Taxation of the Company y ..................................................................................................... 111 Taxation of Shareholders ..................................................................................................... 112 Foreign Account Tax Compliance Act and the Common Reporting Standards ................... 114
APPENDIX 1 – THE FUNDS .......................................................................................................... 116 Vanguard S&P 500 UCITS ETF .......................................................................................... 119 Vanguard FTSE 100 UCITS ETF ........................................................................................ 125 Vanguard U.K. Gilt UCITS ETF.......................................................................................... 131 Vanguard FTSE All-World UCITS ETF .............................................................................. 136 Vanguard FTSE Emerging Markets UCITS ETF ................................................................ 142 Vanguard FTSE Developed Europe UCITS ETF ................................................................ 148 Vanguard FTSE Developed Asia Pacific ex Japan UCITS ETF .......................................... 154 Vanguard FTSE Japan UCITS ETF ..................................................................................... 160 Vanguard FTSE All-World High Dividend Yield UCITS ETF ........................................... 166 Vanguard FTSE 250 UCITS ETF ........................................................................................ 172 Vanguard FTSE Developed World UCITS ETF .................................................................. 178 Vanguard FTSE North America UCITS ETF ...................................................................... 184 Vanguard FTSE Developed Europe ex UK UCITS ETF ..................................................... 190
Appendix 2 ........................................................................................................................................ 196 Determination of Net Asset Value ....................................................................................... 196
Appendix 3 ........................................................................................................................................ 199 Investment Powers and Restrictions ..................................................................................... 199
Appendix 4 ........................................................................................................................................ 206 Portfolio Investment Techniques.......................................................................................... 206
Appendix 5 ........................................................................................................................................ 215 Regulated Markets ................................................................................................................ 215
Appendix 6 ........................................................................................................................................ 219 General Information ............................................................................................................. 219
Appendix 7 ........................................................................................................................................ 226 Information for Investors in Specific Jurisdictions .............................................................. 226
Appendix 8 ........................................................................................................................................ 234 List of Depositary Sub-Delegates......................................................................................... 234
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TERMS USED IN THIS DOCUMENT
Act The Companies Act 2014 of Ireland, as amended or updated from time to time.
Administrator Brown Brothers Harriman Fund Administration Services (Ireland) Limited or such other person as may be appointed, with the prior approval of the Central Bank to provide administration, transfer and registrar services to the Funds.
ADR American Depository Receipt.
AIFMD The Alternative Investment Fund Managers Directive 2011/61/EU.
Application Form Such application form or forms as the Directors (or their delegates) may prescribe for the purposes of opening an account and pursuant to which the Authorised Participant is permitted to instruct a subscription or a redemption of Creation Units in the Company.
Authorised Participant An entity or person which is authorised by the Company for the purposes of instructing a subscription or a redemption of Creation Units with the Company.
Authorised Participant Agreement The agreement between the Company and an Authorised Participant pursuant to which the Authorised Participant is permitted to instruct a subscription or a redemption of Creation Units in the Company.
Base Currency The base currency of a Fund, being the currency in which the Net Asset Value is calculated.
Business Day Every day except Saturdays, Sundays or the days on which the London Stock Exchange is closed to observe the holidays of Christmas Day, New Year’s Day or Good Friday each year . Cash Component The cash element required in part satisfaction of an in-kind subscription.
Central Bank The Central Bank of Ireland or any successor thereto.
Central Bank UCITS Regulations The Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations 2026 as same may be amended, supplemented or re-enacted from time to time.
Central Bank Requirements The requirements of the Central Bank from time to time applicable to UCITS, including the Central Bank UCITS Regulations and any other requirements or conditions of the Central Bank pursuant to the UCITS Regulations or otherwise and to which UCITS are subject.
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Clearstream Clearstream Banking, Societe Anonyme, Luxembourg and any successor in business thereto.
Common Depositary The entity appointed as depositary for the International Central Securities Depositary, currently The Bank of New York Mellon, London Branch.
Common Depositary’s Nominee The entity appointed as nominee for the Common Depositary and as such, acts as the registered holder of the ETF Shares in a Fund, currently The Bank of New York Depository (Nominees) Limited.
Constitution The Constitution of the Company for the time being in force and as may be amended from time to time.
Courts Service The Courts Service is responsible for the administration of moneys under the control or subject to the order of the Courts.
Creation Unit In respect of a Fund, the predetermined number of Shares which an Authorised Participant must subscribe for or redeem when subscribing for or redeeming ETF Shares. Such number is set out in the details for the relevant Fund either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund. The Net Asset Value for a Creation Unit is the Net Asset Value per Share of the relevant ETF Shares multiplied by the number of Shares in a Creation Unit.
Custody Transaction Fee The transaction fee payable to the Depositary for fees incurred: (a) on a subscription, in settling each underlying security into the relevant sub-custody account or; (b) on a redemption, moving each underlying security from the relevant sub-custody account.
Cut-Off Time The point in time by reference to a Dealing Day, as specified in respect of each Fund either in Appendix 1 to this Prospectus or otherwise in the Supplement for the relevant Fund, prior to which a dealing request must be received by the Portal Operator through the Portal for onward transmission to the Administrator in order to permit the dealing request to be processed in respect of the relevant Dealing Day, provided always that, unless otherwise disclosed in either Appendix 1 to this Prospectus or the Supplement in respect of a Fund, on a day on which a market on which 25% or more of the Fund’s investments are listed or traded closes earlier than normal, such earlier time at which such market closes shall be the Cut-Off Time for the relevant Dealing Day.
Dealing Day Any day with respect to which a Fund accepts subscription and/or redemption orders, details of which for each Fund are set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund, or any such other day or days as may be determined by the Directors subject to advance Shareholder notice.
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Declaration A valid declaration as set out in Schedule 2B TCA in a form prescribed by the Irish Revenue Commissioners for the purposes of Section 739D TCA (as may be amended from time to time).
Dematerialised Form Shares, title to which is recorded as being in uncertificated form and which may be transferred by means of a computer based settlement system in accordance with the Companies Act, 1990 (Uncertificated Securities) Regulations, 1996 of Ireland.
Depositary Brown Brothers Harriman Trustee Services (Ireland) Limited or such other person as may be appointed, with the prior approval of the Central Bank to provide depositary services to the Funds.
Deposit Securities A basket of securities to be provided in part settlement of an in kind subscription.
Directive Council Directive of 13 July 2009 (2009/65/EC) on the co ordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (as may be amended and/or supplemented from time to time).
Directors The Board of Directors of the Company for the time being and any duly constituted committee thereof.
Distributor Vanguard Asset Management, Limited and/or any other person for the time being acting as a distributor of Shares.
EEA The European Economic Area being at the date of this Prospectus the EU Member States, Norway, Iceland and Liechtenstein.
EEA State A member state of the EEA.
EMIR Regulation (EU) No 648/2012 of the European Parliament and Council on OTC derivatives central counterparties and trade repositories dated 4 July 2012, as may be amended, supplemented or replaced from time to time.
ESMA The European Securities and Markets Authority or such replacement or successor authority as may be appointed from time to time.
ETF Shares Shares issued by the Company that are intended to be actively traded on a secondary market.
European Union or EU The member states as at the date of this Prospectus.
EU Member State A member state of the European Union.
EU MMF A Fund authorised as a money market fund pursuant to the EU Money Market Fund Regulation.
EU Money Market Fund Regulation or EU MMFR
Regulation (EU) 2017/1131 of the European Parliament and of the Council as amended or supplemented from time to time, including
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any delegated acts adopted thereunder and any implementing rules or conditions that may from time to time be imposed thereunder by the Central Bank or the European Securities and Markets Authority.
Euro or € The currency unit referred to in the second sentence of Article 2 of Council Regulation (EC) no. 974/98 of 3 May 1998 on the introduction of the Euro.
Euroclear Euroclear Bank S.A./N.V. and any such successor in business thereto.
Euronext Dublin Irish Stock Exchange plc trading as Euronext Dublin.
Exempt Investors Those Shareholders resident (or ordinarily resident) in Ireland for Irish tax purposes and falling within any of the categories listed in section 739D(6) TCA, and for which the Company will not deduct Irish tax in respect of the Shares once a Declaration has been received by the Company confirming the Shareholder’s exempt status (where required).
FDI Financial derivative instruments.
FCA The Financial Conduct Authority or any successor thereto.
Fund A portfolio of assets established by the Directors (with the prior approval of the Central Bank) and constituting a separate Fund represented by a class or classes of Shares and invested in accordance with the investment objective and policies applicable to such Fund.
GBP The lawful currency of the United Kingdom.
GDR Global Depository Receipt.
German Investment Tax Act The German Investment Tax Act, 2018 as same may be amended, supplemented or re-enacted from time to time.
Global Share Certificate The certificate evidencing entitlement to Shares, further described under the Global Clearing and Settlement section of this Prospectus.
Index The index of securities which an index tracking Fund will aim to track or replicate, pursuant to its investment objective and in accordance with its investment strategies as set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund.
Index Provider The entity or person who, by itself or through a designated agent, compiles, calculates and publishes information on the relevant Index and who has licensed the Index to the Investment Manager, or other members of the Vanguard Group of Companies, to use the Index.
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Indicative Net Asset Value A measure of the intraday value of the net asset value of a Fund based on the most up-to-date information. The Indicative Net Asset Value is not the value at which investors on the secondary market purchase and sell their shares.
International Central Securities Depositary
Such Recognised Clearing and Settlement System(s) used by the Funds in issuing Shares through the International Central Securities Depositary settlement system, which is an international settlement system connected to multiple national markets.
Intermediary A person who carries on a business which consists of, or includes, the receipt of payments from an investment undertaking on behalf of other persons or holds shares in an investment undertaking on behalf of other persons.
Investment Manager Such entity as may be specified, in respect of any Fund, as the entity that has been appointed to provide investment management services to the particular Fund and reference to “the Investment Manager” within this Prospectus and relevant Supplement shall be construed accordingly.
Irish Resident Any company resident or other person resident or ordinarily resident, in Ireland for the purposes of Irish tax. See the “ Taxation ” section for the summary of the concepts of residence and ordinary residence issued by the Irish Revenue Commissioners.
Key Information Document The summary information document prepared in accordance with the PRIIPs Regulation or where required, the key investor information document prepared in accordance with the requirements of any jurisdiction where a Fund is registered.
London Stock Exchange The London Stock Exchange Plc.
Manager Vanguard Group (Ireland) Limited and/or such other person as may be appointed, with the prior approval of the Central Bank to provide management services to the Company.
Member A Shareholder or Subscriber Shareholder.
MiFID II Directive 2014/65/EU on markets in financial instruments.
Money Market Instruments Instruments, as prescribed by Central Bank Requirements, normally dealt in on the money market that are liquid and have a value which can be accurately determined at any time, and which shall be understood by reference to the UCITS Regulations.
Net Asset Value The value of the total assets of a Fund minus the liabilities of that Fund as described in further detail in Appendix 2 . Net Asset Value per Share In relation to any Shares, the Net Asset Value divided by the number of Shares issued or deemed to be issued in respect of that Fund as of the relevant Valuation Point and, in relation to Shares
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of any class, subject to such adjustments, if any, as may be required in relation to such class.
OECD or OECD Member States The Organisation for Economic Co-Operation and Development. Member States being Australia, Austria, Belgium, Canada, Chile, Columbia, Costa Rica, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Latvia, Lithuania, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States and such other countries that may be admitted to membership from time to time.
OTC derivative An FDI dealt over-the-counter, rather than on a Regulated Market.
Participant Accountholders in the International Central Securities Depositaries, which may include Authorised Participants, their nominees or agents, and who hold their interests in Shares of the Funds settled and/or cleared through the applicable International Central Securities Depositary.
Portal The web based portal and online order entry facility operated by the Portal Operator.
Portal Operator The Distributor or such other entity or person that provides services in the operation of the Portal on behalf of the Company at any given time.
PRIIPs Regulation Regulation (EU) No 1286/2014 of the European Parliament and of the Council of 26 November 2014 on key information documents for packaged retail and insurance-based investment products (PRIIPs) (and as may be further amended, supplemented or replaced from time to time).
Prospectus This document and, where the context so requires or implies, any supplement or addendum thereto, any document designed to be read and construed and to form part of this document including the Company’s most recent annual report and accounts (if issued) or, if more recent, its interim report and accounts.
Qualified Holder Any person, corporation or entity other than (i) a US Person (including those deemed to be US Persons under Regulation S under the 1933 Act); (ii) any other person, corporation or entity which cannot acquire or hold Shares without violating laws or regulations whether applicable to it or the Company or otherwise, or whose holding might result (either individually or in conjunction with other Shareholders in the same circumstances) in the Company or its Shareholders incurring some legal, regulatory, taxation, pecuniary or material administrative disadvantage or other adverse consequence which the Company or its Shareholders
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might not otherwise incur or suffer, or the Company being required to register any class of its securities under the laws of any jurisdiction (including, without limitation, the 1933 Act, and the regulations thereunder); or (iii) a custodian, nominee, or trustee for any person, corporation or entity described in (i) to (ii) above and (iv) in relation to the Vanguard FTSE All-World UCITS ETF, the Vanguard FTSE Emerging Markets UCITS ETF or the Vanguard FTSE All-World High Dividend Yield UCITS ETF any person, corporation or entity other than (a) a “person resident in India” (as such term is defined in the Foreign Exchange Management Act, 1999 as may be amended or supplemented from time to time), or (b) any other entity or person disqualified or otherwise prohibited from accessing the Indian securities market under applicable laws, as may be amended from time to time.
Redemption Balancing Amount The cash element required in part satisfaction of an in-kind redemption to equalise any difference between the Redemption Securities (as defined in the section headed “ Dealing ”) and the redemption price for a Creation Unit.
Redemption Basket The basket of securities provided to an Authorised Participant redeeming a Creation Unit as published by the Portal Operator through the Portal.
Recognised Clearing and Settlement System
A clearing system recognised by the Irish Revenue Commissioners for the purposes of Section 739B TCA (e.g. Euroclear or Clearstream).
Register The register of Members of the Company.
Regulated Market Any regulated exchange or market listed or referred to in Appendix 5 hereto.
Relevant Institutions A credit institution which falls under one of the following categories:
A credit institution authorised in the EEA.
A credit institution authorised within a signatory state, other than an EEA State, to the Basle Capital Convergence Agreement of July 1988 (Switzerland, Canada, Japan, the United Kingdom or the U.S.).
A credit institution in a third country deemed equivalent pursuant to Article 107(4) of the Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012.
RMP Risk Management Process.
SEC The U.S. Securities and Exchange Commission.
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Share or Shares A participating Share or Shares of whatsoever class in the capital of the Company (other than Subscriber Shares) entitling the holders to participate in the profits of the Company attributable to the relevant Fund.
Shareholder A person registered in the Register as a holder or holders of Shares.
Special Resolution A resolution requiring, in order to be passed, a majority of not less than 75% of the votes cast by Members present in person or by proxy and being entitled to vote at a general meeting.
Sub-Investment Manager Any entity to which an Investment Manager has delegated responsibility for investment management in respect of any Fund.
Subscriber Shareholder A person registered in the Register as a holder of Subscriber Shares.
Subscriber Shares The initial issued Share capital of 2 subscriber Shares of $1.00 each and initially designated as “Subscriber Shares which do not entitle the holders to participate in the profits of the Company attributable to any Fund.
Supplement Any document issued by the Company expressed to be a supplement to this Prospectus.
Sustainable Finance Disclosure Regulation
Taxonomy Regulation
Regulation (EU) No 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability-related disclosures in the financial services sector.
Regulation (EU) No 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending the Sustainable Finance Disclosure Regulation.
TCA The Taxes Consolidation Act 1997 of Ireland (as amended).
Tracking Error The volatility of the difference between the return of a Fund and the return of the Fund’s Index.
Transferable Securities Shares in companies and other securities equivalent to shares in companies fulfilling the criteria in Part 1 of Schedule 2 of the UCITS Regulations applicable to them,
Bonds and other forms of securitised debt fulfilling the criteria in Part 1 of Schedule 2 of the UCITS Regulations applicable to them,
other negotiable securities that carry the right to acquire any such transferable securities by subscription or exchange fulfilling the criteria in Part 1 of Schedule 2 of the UCITS Regulations applicable to them,
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securities specified for the purposes of this definition in Part 2 of Schedule 2 of the UCITS Regulations,
other than the techniques and instruments referred to in Regulation 69(2)(a) of the UCITS Regulations.
UCITS An Undertaking for Collective Investment in Transferable Securities within the meaning of the UCITS Regulations.
UCITS Regulations The European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (S.I. 352 of 2011) (as amended and as may be further amended, supplemented or replaced from time to time).
U.S. or United States The United States of America, its possessions and territories, including any state of the United States of America and the District of Columbia.
US$ The lawful currency of the United States of America.
US Taxpayer This includes: (i) a U.S. citizen or resident alien of the U.S. (as defined for U.S. federal income tax purposes); (ii) any entity treated as a partnership or corporation for U.S. federal tax purposes that is created or organised in, or under the laws of, the U.S. or any state thereof (including the District of Columbia); (iii) any other partnership that is treated as a US Taxpayer under U.S. Treasury Department regulations; (iv) any estate, the income of which is subject to U.S. income taxation regardless of source; and (v) any trust over whose administration a court within the U.S. has primary supervision and all substantial decisions of which are under the control of one or more U.S. fiduciaries. Persons who have lost their U.S. citizenship and who live outside the U.S. may nonetheless, in some circumstances, be treated as US Taxpayers.
US Person Any person falling within the definition of the term US Person under Regulation S promulgated under the 1933 Act or as the Directors may otherwise from time to time determine.
Valuation Point In relation to each security or investment held in a Fund, the close of business on each Dealing Day on the market that closes last on the relevant Dealing Day and on which such security or investment is traded.
Vanguard Group The Group of Companies of which The Vanguard Group, Inc. is the ultimate parent, and the investment funds under management.
Vanguard Group of Companies The Group of Companies of which The Vanguard Group, Inc. is the ultimate parent.
1933 Act The Securities Act of 1933 (of the United States), as amended.
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1940 Act The US Investment Company Act of 1940 (of the United States), as amended.
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DIRECTORY
The Company 70 Sir John Rogerson’s Quay Dublin 2 Ireland
Board of Directors Jonathan Cleborne (Chair) Robyn Laidlaw Tom Challenor Raj Singh Lisa Harlow Kaitlyn Caughlin Carin Bryans
Investment Managers/Promoter Vanguard Asset Management, Limited 4 th Floor, The Walbrook Building 25 Walbrook London EC4N 8AF United Kingdom; and
Vanguard Global Advisers, LLC P.O. Box 2600 Valley Forge, PA 19482 U.S.A.
Manager Vanguard Group (Ireland) Limited 70 Sir John Rogerson’s Quay Dublin 2 Ireland
Administrator, Registrar and Transfer Agent Brown Brothers Harriman Fund Administration Services (Ireland) Limited 30 Herbert Street Dublin 2 Ireland
Distributor Vanguard Asset Management, Limited 4 th Floor, The Walbrook Building 25 Walbrook London EC4N 8AF United Kingdom
Depositary Brown Brothers Harriman Trustee Services (Ireland) Limited 30 Herbert Street Dublin 2 Ireland
Legal Advisers as to Matters of Irish Law Arthur Cox Ten Earlsfort Terrace Dublin 2 Ireland
Sponsoring Euronext Dublin Broker IQ EQ Fund Management (Ireland) Limited 5 th Floor 76 Sir John Rogerson's Quay Dublin Docklands Dublin 2 D02 C9D0 Ireland
Auditors KPMG 1 Harbourmaster Place IFSC Dublin 1 DO1 F6F5 Ireland
Secretary for the Company and the Manager Matsack Trust Limited 70 Sir John Rogerson’s Quay Dublin 2 Ireland
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THE COMPANY
General
The Company is a public limited company incorporated in Ireland on 24 May 2011 under registration number 499158. The Company is established as an umbrella-type investment company with variable capital and with segregated liability between Funds and is authorised by the Central Bank as a UCITS pursuant to the UCITS Regulations. Where indicated in a Supplement for the relevant Fund, a Fund may also be authorised as an EU MMF pursuant to the EU Money Market Fund Regulation. Vanguard Global Advisers, LLC is the promoter of the Company.
All holders of Shares are entitled to the benefit of, are bound by and are deemed to have notice of the provisions of the Constitution, copies of which are available as described in “ Documents of the Company ” in Appendix 6 (“ General Information ”) to this Prospectus.
Umbrella Fund
The Company has been structured as an umbrella fund, with segregated liability between sub-funds, in that the Directors may from time to time, in accordance with Central Bank Requirements, issue different classes of Shares in such currencies as they deem fit and designate one or more of such classes as representing a separate portfolio of assets (each such separate portfolio being a Fund). The assets of each Fund will be invested in accordance with the investment objective and policies applicable to such Fund. It is intended that each Fund will have segregated liability from the other Funds and that the Company will not be liable as a whole to third parties for the liabilities of any Fund. Investors should, however, note the risk factor The Umbrella Structure of the Company and Segregated Liability between Funds under the “ Risk Factors ” section of this Prospectus.
Under the Constitution, the Directors may establish separate Funds, with separate records, for one or more classes of Shares in the following manner:
(a) The Company will keep separate books of account for each Fund in the Base Currency of the relevant Fund. The proceeds from the issue of each class of Shares will be applied to the Fund established for that class or classes of Shares, and the assets and liabilities and income and expenditure attributable thereto will be applied to such Fund.
(b) The assets of each Fund shall belong exclusively to that Fund, shall be segregated in the records of the Depositary from the assets of other Funds, and shall not (save as provided in the Act), be used to discharge directly or indirectly the liabilities of or claims against any other Fund and shall not be available for such purpose.
(c) Any asset derived from another asset comprised in a Fund will be applied to the same Fund as the asset from which it was derived and any increase or diminution in value of such an asset will be applied to the relevant Fund.
(d) In the case of any asset that the Directors do not consider as readily attributable to a particular Fund or Funds, the Directors have the discretion to determine, with the consent of the Depositary, the basis upon which any such asset will be allocated between Funds, and the Directors may at any time vary such basis.
(e) Any liability will be allocated to the Fund or Funds to which in the opinion of the Directors it relates or if such liability is not readily attributable to any particular Fund, the Directors will have discretion to determine, with the consent of the Depositary, the basis upon which any liability will be allocated between Funds, and the Directors may at any time vary such basis.
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(f) The Directors may, with the consent of the Depositary, transfer any assets to and from Funds if as a result of a creditor proceeding against assets of the Company, a liability would not be properly allocated as intended under (d) above.
(g) Subject as otherwise provided in this Prospectus, the assets held in or attributable to each Fund, shall be applied solely in respect of that Fund and shall belong exclusively thereto and shall not be used to discharge directly or indirectly the liabilities of or claims against any other Fund and shall not be available for any such purpose.
The Directors may, with the prior approval of the Central Bank, from time to time issue Shares in relation to the creation of new Funds.
Share capital
The authorised Share capital of the Company is US$2.00 represented by 2 Subscriber Shares issued at US$1.00 each and 5,000,000,000,000 (five trillion) Shares of no par value, initially designated as Shares which the Directors are empowered to issue on such terms as they think fit. Shares in the Company may be marketed in other EEA States and in countries outside the EU and the EEA, subject to the UCITS Regulations and Central Bank Requirements, and any regulatory constraints in those countries, if the Manager so decides.
The Directors
The Directors are responsible for managing the business affairs of the Company. Under the Constitution, and pursuant to the Management Agreement described in the “ Management and Administration ” section of this Prospectus, the Directors have delegated certain of their powers, duties, discretions and/or functions in relation to the management and administration of the Company’s affairs, and the promotion of its Shares, to the Manager with certain powers of sub-delegation. The Manager has delegated responsibility for the preparation and maintenance of the Company’s books and records, related fund accounting matters (including the calculation of the Net Asset Value per Share), administration, transfer agency and registrar services to the Administrator. The Manager has delegated responsibility for the investment, management and disposal of the assets of the Fund to the relevant Investment Manager. The Manager has delegated responsibility for the distribution of Shares to the Distributor.
The Directors are listed below with their principal occupations. None of the Directors has entered into an employment or service contract with the Company nor is any such contract proposed. Consequently, the Directors are all non-executive Directors. The Company has granted indemnities to the Directors in respect of any loss or damages that they may suffer, save where this results from the Directors’ negligence, default, breach of duty or breach of trust in relation to the Company. The address of the Directors is the registered office of the Company.
Jonathan Cleborne CFA (American) is Managing Director for Vanguard Europe, responsible for leading the operations and distribution efforts of the European business. Mr. Cleborne relocated to London from Vanguard’s global headquarters in the United States in 2024. Prior to this role, Mr. Cleborne was head of Personal Investor Advice leading a team that provides Vanguard’s U.S. clients with ongoing asset management and investment advice consultations with Certified Financial Planner™ professionals through Vanguard's Personal Advisor offers. Mr. Cleborne and his team were also responsible for Vanguard Digital Advisor®. Collectively, the team stewarded over $300B on behalf of individual investors and 401(k) plan participants. Since joining Vanguard over 20 years ago, Mr. Cleborne has held a variety of roles in Personal Investor, Financial Advisor Services, Corporate Strategy, and the Investment Strategy Group. He was also the global head of Vanguard Portfolio Review Department, which oversees Vanguard's 400-plus mutual funds, ETFs, and their advisors. The department is also responsible for developing the optimal fund lineup for investors, analyzing the health, usage, and competitive landscape of Vanguard's funds and ETFs and serving as specialized product experts.
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Mr. Cleborne earned a B.A. from the University of Virginia and an M.B.A. from the Tuck School of Business at Dartmouth. He is a CFA® charterholder and a member of the CFA Society of the United Kingdom.
Robyn Laidlaw (New Zealand) is a Vanguard Principal and Head of Distribution, Europe. Robyn is responsible for business development and client management across intermediary and institutional channels in Europe. Previous to this, Robyn was Head of Distribution, UK. Robyn joined Vanguard in April 2006 and prior to joining the European business was Head of Product and Marketing for Vanguard Australia, where she was primarily responsible for the development and management of Vanguard's range of managed and exchange traded funds and for marketing. Robyn has experience in the funds management industry in the UK, New Zealand and Australia. She received a Master of Applied Finance from Macquarie University.
Tom Challenor (British) is a qualified chartered accountant, and worked with PWC in London, Hong Kong and Luxembourg. He was Director of Strategy and Risk, and before that Chief Financial Officer, at Threadneedle Investments. Prior to joining Threadneedle he held a senior financial position with BAT Industries plc. Tom Challenor has wide Board experience at both Executive Director and Independent Non-Executive Directorship levels. He is currently an INED with Aberdeen Diversified Income and Growth Trust plc, and recently retired from Euroclear UK & International Limited, being Senior Independent Director and Chair of Audit Committee in both companies.
Raj Singh (American) is an international business and risk leader and board director with over 20 years of large-scale C-Suite leadership experience in banking, insurance, and asset management. Mr. Singh has served as an executive and chief risk officer in large global listed businesses, as well as in smaller mid-sized international businesses. He has worked in the US and Europe in a range of C-Suite second line risk and first line roles as well as international boards and brings a broad multi-disciplinary international perspective and diversity of thought. His career has spanned executive committee and group chief risk officer roles at Allianz, Swiss Re, Standard Life Aberdeen and EFG Bank. He has served on the retail banking boards of Citibank in Germany and Belgium. He has chaired and been a board member of subsidiary entities at Standard Life Aberdeen, Swiss Re and Allianz. He was an early pioneer with regard to the sustainability agenda and ethical underwriting at Allianz SE, which at the time also included Dresdner Bank and later at Swiss Re.
Mr. Singh has also served as an Independent Non-Executive Chairman of Muscat Insurance Company (an OMX Oman listed insurer) and as an Independent Non-Executive Director, Chair of the risk committee, and member of the audit committee of HSBC Oman SAOG (an OMX Oman listed 51% HSBC subsidiary bank), both in the Sultanate of Oman. Additionally, he served on the board of The Co operative Bank PLC (a UK-listed entity) in the United Kingdom, where he was an Independent Non Executive Director, Chair of the risk committee, and served on the Audit, Ethics, and Nomination committees. Mr. Singh is currently an Independent Non-Executive Director of Allied Irish Banks PLC (listed on LSE and Euronext Dublin) in Ireland, where he is a member of the Risk and Sustainability committees. He is also an Independent Non-Executive Director at AXA UK PLC, where he chairs the risk committee and is a member of the Audit, Investment, and Nomination committees.
Lisa Harlow (British) is CEO for Vanguard Group (Ireland) Limited. Ms. Harlow joined Vanguard in 2010 and has held the role of head of Investment Stewardship for EMEA and APAC based in London, with such team being responsible for direct engagement with boards and executives, and proxy voting for portfolio companies in those regions on behalf of Vanguard’s global fund lineup. The team also works with a range of market participants to communicate Vanguard’s global principles, understand regional topics and to advocate for better governance standards.
Prior to this role, Ms. Harlow was head of distributor and client services for Vanguard Europe. She has more than 25 years financial services experience including 12 years with Fidelity International where she held a number of client focused roles covering Institutional, Adviser and Direct channels including Key Account Management for the FundsNetwork platform and head of client services India (Delhi).
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Ms. Harlow has a B.A. Honours in humanities from Manchester Metropolitan University and holds the IMC and CFA ESG.
Kaitlyn Caughlin (American) is a Principal at Vanguard, serving as Head of the Enterprise Strategy & Transformation Office and Chief of Staff to the CEO. In this role, she is responsible for driving alignment and execution of Vanguard’s most critical near- and long-term priorities. Kaitlyn leads a unified office that integrates strategy development and implementation across the firm’s highest-impact initiatives, overseeing the Corporate Strategy, Business Transformation, and Enterprise Growth Strategy teams. Prior to her current role, Kaitlyn served as Head of Strategic Risk Initiatives within Vanguard’s Global Risk & Security division. In this role, she managed Vanguard’s enterprise growth priorities and led the effort to mitigate the risk associated with the firm’s size. Previously, Kaitlyn was the chief risk officer for investment management, where she was responsible for providing risk oversight and consultation for over $6.5 trillion in assets across all global markets. Kaitlyn, who joined Vanguard in 2007, has held several senior positions, including global head of Vanguard’s Portfolio Review Department, which is responsible for overseeing Vanguard's mutual funds, ETFs, and their advisors. She has also held roles in the firm’s Personal Investor and Corporate Strategy groups. Kaitlyn currently serves on the board of directors for the Vanguard Committee for Responsible Government and is a Non Executive Director on the boards of the Vanguard Irish funds. Previously, she served as a member of the Vanguard Global Advisors board and chaired Vanguard’s Securities Lending Oversight Committee. Kaitlyn earned a B.A. in mathematics and mathematical economics from Pomona College and an M.B.A. from the MIT Sloan School of Management. She is a CFA® charter holder and holds the Certified Financial Planner™ designation.
Carin Bryans (Irish) has extensive experience in financial services at both executive and non-executive level. She spent 32 years working at J.P. Morgan and served as CEO of J.P. Morgan Bank Ireland and Country Head, driving significant growth across all business lines and shared functions. Beyond her corporate leadership, Ms. Bryans actively contributed to industry and public/private sector initiatives, chairing the IFSC Funds Group, sitting on the IFS2020 Advisory Board, serving as a Council Member and Chair of Irish Funds, and sitting on the Board of the American Chamber of Commerce, including a term as President.
In addition to her independent directorships in the financial services sector, Ms. Bryans dedicates significant time to voluntary and not-for-profit initiatives, reflecting her deep commitment to public service and social impact.
Company Secretary
The Company Secretary is Matsack Trust Limited.
Base Currency
The Base Currency for each Fund is shown either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund.
Category of scheme
The Company is a UCITS.
Further information
Further general information concerning the Company, Shareholder meetings and voting rights, provisions relating to the winding up of the Company and other matters are contained in Appendix 6 .
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MANAGEMENT AND ADMINISTRATION
The Manager
The Manager of the Company is Vanguard Group (Ireland) Limited which was incorporated in Ireland as a private limited liability company on 22 May 1997 under registration number 266761. The secretary of the Manager is Matsack Trust Limited.
The Manager and the Investment Managers are ultimately wholly owned subsidiaries of The Vanguard Group, Inc. The Vanguard Group, Inc., is a family of investment companies with more than 463 distinct funds holding assets of approximately US$12 trillion as at 31 December 2025.
Share Capital
The Manager has an authorised share capital of €126,973,810 divided into 100,000,000 shares of €1.2697381 each and an issued and fully paid share capital of €126,973.
Regulatory Status
The Manager is a management company under the UCITS Regulations and is authorised and regulated by the Central Bank.
Terms of Appointment
Under the amended and restated management agreement between the Company and the Manager dated 27 March 2019 (the “ Management Agreement ”), the Manager will provide or procure the provision of management, administration and distribution services to the Company. The Management Agreement may be terminated by either party on 90 days’ written notice to the other party or immediately by written notice to the other party if such other party:
(i) commits any material breach of the Management Agreement that is either incapable of remedy or has not been remedied within thirty days of the non-defaulting party serving notice requiring the defaulting party to remedy the default;
(ii) is unable to pay its debts as they fall due or otherwise becomes insolvent or enters into any composition or arrangement with or for the benefit of its creditors or any class thereof;
(iii) is the subject of a petition for the appointment of an examiner or similar officer to it;
(iv) has a receiver appointed over all or any substantial part of its undertaking, assets or revenues;
(v) is the subject of an effective resolution for its winding up (except a voluntary winding up for the purposes of reconstruction or amalgamation upon terms previously approved in writing by the non-defaulting party); or
(vi) is the subject of a court order for its winding up.
The Company can terminate the Management Agreement immediately by written notice to the Manager in the event that the Manager’s authorisation to act as a management company under the UCITS Regulations is revoked or that notice of intention to revoke such authorisation is received by the Manager or if the Manager is no longer permitted by any applicable law to exercise its duties or powers under the Management Agreement.
The Management Agreement provides that in the absence of negligence, wilful default, fraud or bad faith, the Manager (and its directors, officers, employees and agents) shall not be liable for any loss or
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damage arising directly or indirectly out of any act or omission done or suffered by the Manager in the performance of its duties under the Management Agreement. The Management Agreement provides further that the Company shall indemnify and hold harmless the Manager (and each of its directors, officers, employees and agents) from and against any and all claims, actions, proceedings, damages, losses, liabilities, costs and expenses (including legal fees and expenses) directly or indirectly suffered or incurred by the Manager arising out of or in connection with the performance of its duties under the Management Agreement otherwise than in respect of the negligence, wilful default, fraud or bad faith by the Manager in relation thereto.
Directors of the Manager
The directors of the Manager, details of whom are set out in “The Company” section of this Prospectus, are:
Jonathan Cleborne; Robyn Laidlaw; Tom Challenor; Raj Singh; Lisa Harlow; Kaitlyn Caughlin; and Carin Bryans.
The Manager also manages the following schemes:
Vanguard Common Contractual Fund. Vanguard Investments Common Contractual Fund. Vanguard Investments II Common Contractual Fund. Vanguard Investment Series plc.
Remuneration Policies and Practices
The Manager is subject to remuneration policies, procedures and practices (together, the “ Remuneration Policy ”) which comply with the UCITS V Directive (2014/91/EU). The Remuneration Policy is consistent with and promotes sound and effective risk management. It is designed not to encourage risk-taking which is inconsistent with the risk profile of the Funds. The Remuneration Policy is in line with the business strategy, objectives, values and interests of the Manager, the Company and the Funds, and includes measures to avoid conflicts of interest. The Remuneration Policy applies to staff whose professional activities have a material impact on the risk profile of the Manager, the Company or the Funds, and ensures that no individual will be involved in determining or approving their own remuneration. The Remuneration Policy will be reviewed annually. Details of the up-to-date Remuneration Policy are available via https://fund-docs.vanguard.com/ucits-v-remuneration policy.pdf. f. The Remuneration Policy summary will be made available for inspection and may be obtained, free of charge, at the registered office of the Manager.
The Investment Managers and Promoter
The Manager has appointed (i) Vanguard Asset Management, Limited (“ VAM ”), based in London, United Kingdom; and (ii) Vanguard Global Advisers, LLC (“ VGA ”), based in Malvern, Pennsylvania, USA as investment managers to provide discretionary investment management and advisory services to the Company, in respect of the relevant Funds to which each of VAM and VGA has been appointed. Please see the sections headed “ Fund Details ” in A Appendix 1 or the relevant Supplement for each Fund for further details on the relevant Investment Manager that has been appointed in respect of such Fund. VGA is also the promoter of the Company and each of VAM and VGA are part of the Vanguard Group of Companies.
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Terms of Appointment
The Manager has entered into a separate investment management agreement as with each Investment Manager. These investment management agreements dated 2 January 2025 (as amended, supplemented or replaced from time to time), between the Manager and the Investment Manager (each an “ Investment Management Agreement ” together, the “ Investment Management Agreements ”), provide that in the absence of negligence, wilful default, bad faith or fraud of or by the Investment Manager (or any of its directors, officers, employees and agents) the Investment Manager (and its directors, officers, employees and agents) shall not be liable for any loss or damage arising directly (or indirectly) out of any act or omission done (or suffered) by the relevant Investment Manager in the performance of its duties under the Investment Management Agreement.
Each Investment Management Agreement may be terminated only: (i) by mutual agreement of the parties, (ii) by written notice delivered by or on behalf of the respective Investment Manager to the Manager or (iii) by written notice delivered by or on behalf of the Manager to the relevant Investment Manager.
Each Investment Manager’s appointment under an Investment Management Agreement may be terminated immediately upon written notice to the Investment Manager if the Investment Manager is no longer permitted under any applicable law to perform its obligations under the Investment Management Agreement.
Each Investment Manager’s fees will be paid by the Manager.
With prior notification to, but without the prior consent of, the Manager, the Investment Manager shall be entitled to delegate all or any of its functions, powers, discretions, duties and obligations under the Investment Management Agreement, provided that the Investment Manager shall remain responsible for the acts or omissions of any such delegates as if such acts or omissions were those of the Investment Manager. Accordingly, the Investment Manager may from time to time, in accordance with the procedures of the Central Bank, appoint Sub-Investment Managers to any Fund or Funds. Details of Sub-Investment Managers will be disclosed in the Company’s periodic reports and further information will be provided to Shareholders upon request. The relevant Investment Manager will pay the fees of any Sub-Investment Manager appointed by it.
The Distributor
Vanguard Asset Management, Limited
The Manager has appointed Vanguard Asset Management, Limited as the Distributor for the Shares pursuant to a distribution agreement dated 21 November 2011 between the Manager and the Distributor (the “ Distribution Agreement ”).
The Distributor is a corporation registered under the laws of England and Wales and authorised and regulated by the FCA in the United Kingdom and is categorised as an “investment firm” within the meaning given to such term in MiFID II. The Distributor is ultimately a wholly owned subsidiary of The Vanguard Group, Inc. The Distribution Agreement provides that the Distributor is appointed to promote and sell Shares and to procure subscribers for Shares and ensure that all subscription applications and redemption requests it receives are in proper form and are forwarded to the Administrator. The Distributor agrees to comply with all applicable laws governing the promotion and sale of the Shares of the Funds including, without limitation, all applicable laws and regulations relating to money laundering. The Distributor (and its directors, officers, employees and agents) shall not be liable for any loss or damage arising directly or indirectly out of or in connection with the performance by the Distributor of its duties under the Distribution Agreement unless such loss or damage arose out of or in connection with the negligence, wilful default, fraud or bad faith of or by the Distributor or of any sub-distributor or agent appointed by the Distributor under the Distribution Agreement. The
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Distribution Agreement shall continue in force until terminated by (i) mutual written agreement of the parties (ii) by written notice delivered by or on behalf of the Manager to the Distributor (iii) with immediate effect by the Manager if considered by the Manager to be in the best interests of investors or (iv) subject to the prior written consent of the Manager (which consent shall not be unreasonably withheld), by written notice delivered by or on behalf of the Distributor to the Manager.
The Distributor’s fees will be paid by the Manager.
The Administrator
Pursuant to the Amended and Restated Administration Agreement dated 23 September 2016, as amended by an amendment agreement dated 31 May 2018 and effective from 25 May 2018, as further amended by an amendment agreement dated 8 November 2019 and as may be further amended from time to time (the “ Administration Agreement ”), the Manager has appointed Brown Brothers Harriman Fund Administration Services (Ireland) Limited as administrator, transfer agent and registrar to the Company. The Administrator will have responsibility for the administration of the Company’s affairs including the calculation of the Net Asset Value per Share and preparation of the accounts of the Company, subject to the overall supervision of the Directors.
The Administrator was incorporated as a limited liability company in Ireland on 29 March 1995 for the purposes of providing administrative services to collective investment schemes such as the Company. The Administrator has an issued and fully paid-up capital of US$700,000 and is a wholly-owned subsidiary of Brown Brothers Harriman & Co.
The Administration Agreement provides that the Administrator shall not be liable for any losses, damages or expenses of the Company or any Shareholder or former Shareholder of the Company or any other person may suffer arising from acts, omissions, errors or delays of the Administrator in the performance of its obligations and duties except damage, loss or expense resulting from the Administrator's negligence, fraud, bad faith, wilful default, wilful malfeasance, breach of contract or recklessness in the performance of such obligations and duties. The Manager has agreed to indemnify the Administrator against and hold it harmless from any and all losses, damages, liabilities or expenses the Administrator may suffer resulting from any claim, demand, action or suit in connection with or arising out of the performance of its obligations and duties under the Administration Agreement not resulting from a breach by the Administrator of the Administration Agreement or the wilful default, wilful malfeasance, bad faith, fraud, recklessness or negligence of the Administrator in the performance of such obligations and duties.
The Administration Agreement may be terminated by either party on 90 days’ written notice to the other party or immediately by written notice to the other party in circumstances including if the other party (i) goes into liquidation (except for a voluntary liquidation for the purposes of reconstruction or amalgamation upon terms previously approved in writing by the other party) or a receiver or examiner is appointed to such party or upon the happening of a like event whether at the direction of an appropriate regulatory agency or court of competent jurisdiction or otherwise; or (ii) commits any material breach of the Administration Agreement that is either incapable of remedy or has not been remedied within thirty days of the non-defaulting party serving notice requiring the defaulting party to remedy the default; or (iii) ceases to be permitted to act in its current capacity under any applicable laws. In addition, the appointment of the Administrator may be terminated by the Manager in the event that the Depositary shall cease to be engaged as the depositary of the Company.
The Administrator’s fees will be paid by the Manager.
The Depositary
The Company has entered into an agreement dated 19 April 2016 (collectively, with all appendices, exhibits, and schedules attached thereto) as amended by an amendment agreement dated 13 March 2019
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and effective from 25 May 2018 and as may be further amended from time to time in accordance with which Brown Brothers Harriman Trustee Services (Ireland) Limited (the “ Depositary ”) has been engaged to act as depositary of the Company and to perform such other services for and on behalf of the Company as are described therein (the “ Depositary Agreement ”).
The Depositary was incorporated in Ireland on 29 March 1995 as a limited liability company. The principal activity of the Depositary is to act as depositary and trustee of the assets of collective investment schemes. The Depositary’s capital is US$1,500,000.
Pursuant to the Depositary Agreement, the Depositary will provide safekeeping for the Company’s assets in accordance with the UCITS Regulations and will collect any income arising on such assets on the Company’s behalf. In addition, the Depositary has the following main duties, which may not be delegated:
- it must ensure that the sale, issue, repurchase, redemption and cancellation of Shares is carried out in accordance with the UCITS Regulations and the Constitution;
- it must ensure that the value of the Shares is calculated in accordance with the UCITS Regulations and the Constitution;
- it must carry out the instructions of the Manager unless such instructions conflict with the UCITS Regulations or the Constitution;
- it must ensure that in transactions involving the Company’s assets or the assets of any Fund that any payment in respect of same is remitted to the relevant Fund(s) within the usual time limits;
- it must ensure that the income of the Company or of any Fund(s) is applied in accordance with the UCITS Regulations and the Constitution;
- it must enquire into the conduct of the Company in each accounting period and report thereon to Shareholders; and
- it must ensure that the Company’s cash flows are properly monitored in accordance with the UCITS Regulations.
The Depositary Agreement provides that the Depositary shall be liable to the Company and the Shareholders (i) in respect of a loss of a financial instrument held in its custody (or in the custody of any third party to whom the Depositary’s safekeeping functions have been delegated in accordance with the UCITS Regulations) unless the Depositary can prove that the loss has arisen as a result of an external event beyond its reasonable control, the consequences of which would have been unavoidable despite all reasonable efforts to the contrary and (ii) in respect of all other losses arising as a result of the Depositary’s negligent or intentional failure to properly fulfil its obligations pursuant to the UCITS Regulations. In addition, the Depositary Agreement also provides that the Depositary shall be liable, subject and without prejudice to the foregoing, for its negligence, fraud, bad faith, wilful default, wilful malfeasance, breach of contract and recklessness in carrying out its functions under the Depositary Agreement.
The Company has agreed to indemnify the Depositary against any losses (as defined in the Depositary Agreement) suffered by it in acting as the Company’s depositary other than losses (as defined therein) in respect of which the Depositary is found to be liable to the Company and/or the Shareholders in accordance with the terms of the Depositary Agreement or applicable law.
The Depositary Agreement shall continue in force until terminated by any party thereto on 90 calendar days’ advance written notice to the other party or immediately by written notice to the other party if the other party; (i) commits any material breach of the Depositary Agreement which if capable of remedy
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has not been remedied within thirty days of the non-defaulting party serving notice requiring the defaulting party to remedy the default; or (ii) the Depositary ceases to be permitted to act as a depositary of collective investment schemes authorised by the Central Bank. The Company may terminate the Depositary Agreement forthwith on notice in writing to the Depositary on a number of additional grounds as specified in the Depositary Agreement.
If within 90 days from the date of the Depositary serving a termination notice, a replacement depositary acceptable to the Company and the Central Bank has not been appointed to act as Depositary, the Company shall serve notice on all Shareholders of its intention to dispose of its assets and redeem all outstanding Shares on the date specified in such notice, which shall not be less than one month nor more than three months after the date of service of such notice and shall procure that, following redemption of all but the required minimum number of Shares, a liquidator be appointed so that the Company shall be wound up. On completion of such process, the Company shall apply to the Central Bank for revocation of its authorisation of the Company under the UCITS Regulations.
The Depositary may delegate its safekeeping duties only in accordance with the UCITS Regulations and provided that: (i) the tasks are not delegated with the intention of avoiding the requirements of the UCITS Regulations; (ii) the Depositary can demonstrate that there is an objective reason for the delegation; and (iii) the Depositary has exercised all due, skill, care and diligence in the selection and appointment of any third party to whom it has delegated its safekeeping duties either wholly or in part and continues to exercise all due skill, care and diligence in the periodic review and ongoing monitoring of any such third party and of the arrangements of such third party in respect of the matters delegated to it. Any third party to whom the Depositary delegates its safekeeping functions in accordance with the UCITS Regulations may, in turn, sub-delegate those functions subject to the same requirements as apply to any delegation effected directly by the Depositary. The liability of the Depositary under the UCITS Regulations will not be affected by any delegation of its safekeeping functions.
The Depositary has delegated safekeeping of the Company’s assets to Brown Brothers Harriman & Co. (“ BBH&Co .”), its global sub-custodian, through which it has access to BBH&Co.’s global network of sub-custodians (the “ Global Custody Network ”). BBH&Co.’s Global Custody Network covers more than 100 markets worldwide. The entities to whom safekeeping of the Company’s assets have been sub delegated as at the date of this Prospectus are set out at Appendix 8 .
In accordance with the UCITS Regulations, the Depositary must not carry out activities with regard to the Company or with regard to the Manager acting on behalf of the Company that may create conflicts of interest between itself and (i) the Company, (ii) the Shareholders and/or (iii) the Manager unless it has separated the performance of its depositary tasks from its other potentially conflicting tasks in accordance with the UCITS Regulations and the potential conflicts are identified, managed, monitored and disclosed to Shareholders. Please refer to the section of this Prospectus entitled “ Conflicts of Interest ” for details of potential conflicts that may arise involving the Depositary.
Up-to-date information in relation to the Depositary, its duties, the safe-keeping functions delegated by the Depositary, the list of delegates and sub-delegates to whom safe-keeping functions have been delegated and any relevant conflicts of interest that may arise will be made available to Shareholders upon request to the Manager.
The Depositary’s fees will be paid by the Manager.
Paying Agents, Local Representatives and Distributors
The Directors, the Manager or their duly authorised delegates may appoint such paying agents, local representatives and distributors as may be required to facilitate the authorisation or registration of the Company and/or the marketing of any of its Shares in any jurisdiction. Such appointments will be made in accordance with Central Bank Requirements.
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The Manager has appointed The Bank of New York Mellon, London Branch, as paying agent (the “ Paying Agent ”) for the ETF Shares in the Funds. In such capacity, the Paying Agent will be responsible for, among other things, ensuring that payments received by the Paying Agent from the Company are duly paid; maintaining independent records of securities and dividend payment amounts; and communicating information to the relevant International Central Securities Depositary. Payment in respect of the ETF Shares will be made through the relevant International Central Securities Depositary in accordance with the standard practices of the applicable International Central Securities Depositary. The Manager may vary or terminate the appointment of the Paying Agent or appoint additional or other registrars or paying agents or approve any change in the office through which any registrar or paying agent acts.
Index Providers
The Investment Manager or other members of the Vanguard Group of Companies may enter into a licensing agreement with an Index Provider in relation to any Fund, under which an Index Provider will grant to the Investment Manager or a member of the Vanguard Group of Companies, a licence to use the relevant Index as the basis for managing the Fund.
The Auditors
The auditors of the Company are KPMG.
General
Conflicts of Interest
The Directors, Manager, the Depositary, the Administrator, the Investment Managers and the Distributor may from time to time act as manager, registrar, administrator, trustee, depositary, investment manager, advisor or distributor or in relation to serving as directors, officers, advisers or agents or be otherwise involved in, other funds or collective investment schemes that have similar investment objectives to those of the Company or any Fund. It is therefore possible that any of them may, in the due course of their business, have potential conflicts of interests with the Company or any Fund. Each will at all times have regard in such event to its obligations under the Constitution and/or any agreements to which it is party or by which it is bound in relation to the Company or any Fund and, in particular, but without limitation to its obligations to act in the best interests of Shareholders when undertaking any investments where conflicts of interest may arise and will endeavour to ensure that such conflicts are resolved fairly. In particular, each Investment Manager has agreed to act in a manner that the Investment Manager in good faith considers fair and equitable in allocating investment opportunities to the Company. The Investment Manager will not, as principal, engage in any transactions with the Company, for the account of any Fund, which are inconsistent with the proper management of the assets of the Fund.
The Manager, the Depositary, any delegates or sub-delegates of the Manager or of the Depositary (excluding any non-group company sub-custodians appointed by the Depositary) and any associated or group company of the foregoing (each a “ Connected Person ”) may each from time to time deal, as principal or agent, with the Company provided that such dealings are conducted as if at arm’s length and in the best interests of Shareholders. Transactions entered into with a Connected Person for or on behalf of the Company are permitted only in circumstances where at least one of the following conditions is satisfied: (i) the value of the transaction is certified by a person approved by the Depositary (or by the Directors in the case of a transaction involving the Depositary or an affiliate of the Depositary) as being independent and competent; or (ii) execution is on best terms on an organised investment exchange under the rules of the relevant exchange; or (iii) where (i) or (ii) are not practical, execution is on terms which the Depositary (or the Directors in the case of a transaction involving the Depositary or an affiliate of the Depositary), is satisfied conforms to the requirement that such transactions be conducted as if at arm’s length and in the best interests of Shareholders at the date of the transaction. In the case of each transaction entered into with a Connected Person for or on behalf of the Company, the
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Depositary (or the Company in the case of a transaction involving the Depositary or an affiliate of the Depositary), shall document the manner in which it has complied with the principles set out at (i) to (iii) above and where a transaction with a Connected Person is conducted in accordance with (iii) above, the Depositary (or the Company in the case of a transaction involving the Depositary or an affiliate of the Depositary) shall document its rationale for being satisfied that the transaction conformed to the requirement that such transactions be conducted as if at arm’s length and in the best interests of Shareholders at the date of the transaction.
In addition, a report in respect of related-party transactions (within the meaning of Financial Reporting Standard 8) entered into during a reporting period shall be provided in the annual and semi-annual reports, and will list all such transactions, by type, name of the related party and, where relevant, fees paid to that party in connection with the transaction.
The Directors shall endeavour to ensure that any conflicts of interest are resolved fairly and in the best interests of Shareholders.
The Depositary may hold funds for the Company subject to the provisions of the Central Bank Acts 1942 to 1998 of Ireland, as amended, and in accordance with the UCITS Regulations and Central Bank Requirements.
A Director may be a party to, or otherwise interested in, any transaction or arrangement with the Company or in which the Company is interested, provided that he has disclosed to the Directors prior to the conclusion of any such transaction or arrangement the nature and extent of any material interest of his therein. Unless the Directors determine otherwise, a Director may vote in respect of any contract or arrangement or any proposal whatsoever in which he has a material interest, having first disclosed such interest.
Each Director is also a director of the Manager. Mr. Jonathan Cleborne is a director of Vanguard Asset Management Limited, and a director on the supervisory board of Vanguard Group Europe GmbH, ultimate subsidiaries of The Vanguard Group, Inc. Ms. Robyn Laidlaw is the Head of Distribution, Europe for Vanguard Asset Management, Limited, a director for Vanguard Investments UK Limited, and a director on the supervisory board of Vanguard Group Europe GmbH, ultimate subsidiaries of Vanguard Group Inc. Ms. Lisa Harlow is the CEO of Vanguard Group (Ireland) Limited. Ms. Kaitlyn Caughlin is Head of the Enterprise Strategy & Transformation Office and Chief of Staff to the CEO at Vanguard Group, Inc.
In selecting brokers to make purchases and sales for the Company, each Investment Manager or Sub Investment Manager (where appointed) will choose those brokers who provide best execution to the Company. In determining what constitutes best execution, the Investment Manager or any Sub Investment Manager will consider the overall economic result for the Company (including the price of commission), the efficiency of the transaction, the broker’s ability to effect the transaction if a large block is involved, the availability of the broker for difficult transactions in the future, and the financial strength and stability of the broker. The brokers selected to make purchases and sales of investments for the Company will be required to comply with the Investment Manager’s execution policy. A copy of each Investment Manager’s execution policy is available on request. The Manager, each Investment Managers or any Sub-Investment Manager are prohibited from receiving any in-kind benefits, soft commission arrangements or other inducements from a broker, whether utilised in executing a transaction or otherwise. In managing the assets of the Company, the Investment Manager or Sub Investment Manager may from time to time receive or utilise certain investment research and other investment related commentary, statistics, information or material (collectively “ Research ”) provided by third parties. Direct charges for Research will be borne by the Investment Manager out of its fees and will not, in any circumstances, be allocated to the Company and or the Funds.
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Companies connected with the Vanguard Group of Companies may enter into arrangements for or provide seeding capital directly or indirectly to any or all of the Funds and, to the extent required, will be Qualified Holders for that purpose.
There is no prohibition on the Depositary, the Administrator, the Investment Manager or any other party related to the Company acting as a “ competent professional person ” for the purposes of determining the probable realisation value of an asset of a Fund in accordance with the valuation provisions outlined in the “ Determination of Net Asset Value ” section of this Prospectus. Investors should note however, that in circumstances where fees payable by the Company to such parties are calculated based on the Net Asset Value, a conflict of interest may arise as such fees will increase if the Net Asset Value increases. Any such party will endeavour to ensure that such conflicts are resolved fairly and in the best interests of the Shareholders.
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THE FUNDS
General
The Company has been established as a UCITS umbrella fund with segregated liability between Funds. Different Funds may be established from time to time by the Directors with the prior approval of the Central Bank. On the introduction of any new Fund or class of Shares, either a revised Prospectus or a Supplement will be prepared, setting out the details. The Funds are operated separately and the assets of each Fund are managed in accordance with the investment objective and policy applicable to that Fund.
As of the date of this Prospectus, the following Funds have been launched and are available for investment:
1. Vanguard S&P 500 UCITS ETF 2. Vanguard FTSE 100 UCITS ETF 3. Vanguard U.K. Gilt UCITS ETF 4. Vanguard FTSE All-World UCITS ETF 5. Vanguard FTSE Emerging Markets UCITS ETF 6. Vanguard FTSE Developed Europe UCITS ETF 7. Vanguard FTSE Developed Asia Pacific ex Japan UCITS ETF 8. Vanguard FTSE Japan UCITS ETF 9. Vanguard FTSE All-World High Dividend Yield UCITS ETF 10. Vanguard FTSE 250 UCITS ETF 11. Vanguard FTSE Developed Europe ex UK UCITS ETF 12. Vanguard FTSE North America UCITS ETF 13. Vanguard FTSE Developed World UCITS ETF 14. Vanguard EUR Corporate Bond UCITS ETF 15. Vanguard EUR Eurozone Government Bond UCITS ETF 16. Vanguard USD Corporate Bond UCITS ETF 17. Vanguard USD Treasury Bond UCITS ETF 18. Vanguard USD Emerging Markets Government Bond UCITS ETF 19. Vanguard USD Corporate 1-3 Year Bond UCITS ETF 20. Vanguard Germany All Cap UCITS ETF 21. Vanguard Global Aggregate Bond UCITS ETF 22. Vanguard LifeStrategy ® 20% Equity UCITS ETF 23. Vanguard LifeStrategy ® 40% Equity UCITS ETF 24. Vanguard LifeStrategy ® 60% Equity UCITS ETF 25. Vanguard LifeStrategy ® 80% Equity UCITS ETF 26. Vanguard U.S. Treasury 0-1 Year Bond UCITS ETF 27. Vanguard ESG Global Corporate Bond UCITS ETF 28. Vanguard ESG Global All Cap UCITS ETF 29. Vanguard ESG Emerging Markets All Cap UCITS ETF 30. Vanguard ESG North America All Cap UCITS ETF 31. Vanguard ESG Developed Europe All Cap UCITS ETF 32. Vanguard ESG Developed Asia Pacific All Cap UCITS ETF 33. Vanguard ESG EUR Corporate Bond UCITS ETF 34. Vanguard EUR Corporate 1-3 Year Bond UCITS ETF 35. Vanguard Global Government Bond UCITS ETF 36. Vanguard EUR Eurozone Government 1-3 Year Bond UCITS ETF 37. Vanguard U.S. Treasury 1-3 Year Bond UCITS ETF 38. Vanguard U.S. Treasury 3-7 Year Bond UCITS ETF 39. Vanguard U.S. Treasury 7-10 Year Bond UCITS ETF 40. Vanguard EUR Cash UCITS ETF
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41. Vanguard FTSE Developed Europe Small-Cap UCITS ETF 42. Vanguard FTSE Eurozone UCITS ETF 43. Vanguard Russell 2000 U.S. Small-Cap UCITS ETF 44. Vanguard Russell U.S. Mid-Cap UCITS ETF 45. Vanguard Russell 1000 U.S. Value UCITS ETF 46. Vanguard Russell 1000 U.S. Growth UCITS ETF 47. Vanguard FTSE Global All-Cap UCITS ETF 48. Vanguard FTSE Global Small-Cap UCITS ETF 49. Vanguard FTSE All-World ex-U.S. UCITS ETF
As at the date of this Prospectus, the following Funds have been established, but have not yet launched:
1. Vanguard ESG Developed World All Cap UCITS ETF 2. Vanguard Active EUR Corporate Bond UCITS ETF 3. Vanguard Active USD High Yield Corporate Bond UCITS ETF 4. Vanguard USD High Yield Corporate Bond UCITS ETF 5. Vanguard EUR High Yield Corporate Bond UCITS ETF
As at the date of this Prospectus, the following Funds are closed to subscription and wound up. An application for the withdrawal of approval of such Funds will be made with the Central Bank in due course:
1. Vanguard Global Minimum Volatility UCITS ETF 2. Vanguard Global Value Factor UCITS ETF 3. Vanguard Global Liquidity Factor UCITS ETF 4. Vanguard Global Momentum Factor UCITS ETF 5. Vanguard ESG USD Corporate Bond UCITS ETF
Details of the Funds listed above are set out in Appendix 1 or in a separate Supplement.
Details of other Funds that have been established and are available for investment may, from time to time, be set out in separate Supplements. Investors should consult the latest published Supplement, if any, for a full list of the Company’s Funds.
Investment Objectives and Strategies of the Funds
The specific investment objective and strategies of each Fund are set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund.
The assets of each Fund will be invested with the aim of achieving the investment objective and in accordance with the policies of that Fund. Investments of each Fund must also comply with the investment and borrowing powers and restrictions set out in the UCITS Regulations, Central Bank Requirements, the Constitution and this Prospectus (and in the case of the Vanguard EUR Cash UCITS ETF, the EU Money Market Fund Regulation). Funds established by the Company may pursue an active management investment strategy or a passive management investment strategy, as set out in Appendix 1 or the Supplement for the relevant Fund.
Index Tracking Funds
An index tracking fund, which seeks to either track or replicate the performance of an Index, employs a passive management strategy. Details in relation to the method used by such a Fund to track or replicate its Index, as relevant, will be set out in the description of the investment strategies applicable to such Fund as set out in Appendix 1 to this Prospectus or otherwise in the Supplement for the relevant Fund.
Actively Managed Funds
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A Fund, the Investment Manager of which has discretion over the composition of its portfolio, subject to its stated investment objective and policies, employs an actively managed investment strategy. A more detailed description of the investment strategy pursued by any Fund employing an actively managed strategy will be set out in the description of the investment strategies applicable to such Fund as set out in Appendix 1 to this Prospectus or otherwise in the Supplement for the relevant Fund.
Changes to the Investment Objectives and Strategies of the Funds
Any alteration to the investment objectives or material alteration to the investment strategies of any Fund at any time will be subject to the prior approval in writing of all of the Shareholders of the relevant Fund or, if a general meeting of the Shareholders of such Fund is convened, by a majority of the votes cast at such meeting. Please see the section entitled “ Notices of Meetings and the Exercise of Voting Rights through the International Central Securities Depositaries ” for information on exercising voting rights by investors in the Funds. In the event of a change in the investment objective and/or investment policy of a Fund, a reasonable notification period will be provided by the Company to enable Shares to be redeemed or sold prior to the implementation of the change.
A summary of the investment powers and restrictions applicable to each Fund, except for the Vanguard EUR Cash UCITS ETF, is set out in more detail in Appendix 3 . Please see the Supplement for the Vanguard EUR Cash UCITS ETF, including Appendix 2 thereof, to review a summary of the investment powers and restrictions applicable to the Vanguard EUR Cash UCITS ETF.
Details of the Regulated Markets in which the Funds may invest are set out in Appendix 5 .
Indices
Where set out in the investment objective of a Fund, the performance of a Fund will normally be measured against an Index, which Index may be tracked or replicated as disclosed in A Appendix 1 of this Prospectus or in a relevant Supplement. The relevant Index against which performance may be measured may change in certain circumstances as detailed below.
The Investment Manager will rely solely on each Index Provider for information as to the composition and/or weighting of the securities within each Index and is not responsible for any error in relation thereto. If the Investment Manager is unable to obtain or process such information in relation to any Index on any Business Day, then the most recently published composition and/or weighting of that Index will be used for the purpose of all adjustments.
Change of Index
The Company reserves the right to substitute a different index for the Index specified in the investment objective of the relevant Fund, if the Index is discontinued or changed in any material way, if the Company's agreement with the Index Provider is terminated, or for any other reason determined in good faith by the Directors, and with prior notification to and, where required, with prior Shareholder approval. In any such instance, the substitute Index would measure substantially the same market segment as the original Index.
Benchmarks Regulation
Regulation (EU) 2016/1011 (the “ Benchmarks Regulation ”) came into effect on 1 January 2018. In respect of the Funds, the Benchmarks Regulation prohibits the use of indices provided by benchmark administrators, other than in accordance with the Benchmarks Regulation. As of the date of this Prospectus, the benchmark administrators providing the indices used by the Funds are either included in the public register maintained by ESMA or are already used in the European Union as a reference for financial instruments, financial contracts, or for measuring the performance of an investment fund. The
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Manager maintains a robust written plan setting out the actions that it would take in the event that a benchmark materially changes or ceases to be provided.
Index rebalancing and costs
Index Providers periodically publish new constituents, reflecting changes in the securities that are included in or excluded from an Index depending on the relevant Index rules – which process is called “rebalancing”. Details of the rebalancing frequency for each Index are set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund.
When the constituents of an Index change, a Fund being managed against that Index will typically, to the extent that it is possible and practicable to do so, seek to realign its exposure to more closely reflect that of the Index and thereby reduce Excess Return and Tracking Error. Please refer to the section below headed “ Plain Talk about Excess Return and Tracking Error ” for further information.
To realign the exposures in such a Fund, securities must be bought and sold. This rebalancing will incur costs that are not reflected in the theoretical calculation of the Index return and may impact on a Fund’s ability to provide returns consistent with those of the Index. Such costs can be direct or indirect and include, but are not limited to, transaction costs (such as brokerage fees), custody fees, exchange costs and commissions (including foreign exchange spreads) and stamp duty.
Data Protection
The Company and the Manager are responsible for the personal data received on behalf of the Company. The Company, the Manager and its affiliates (collectively referred to as “ Vanguard ”, “ we ”, “ us ”), take their data protection and privacy responsibilities seriously. For full details on how we collect, use, and share personal data in the course of our business activities, what legal rights you have to help manage your privacy, and how you can contact us for support, please click here to see our privacy policy https://fund-docs.vanguard.com/irish-limited-privacy-policy.pdf. f.
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Plain Talk about Excess Return and Tracking Error
What is Excess Return?
Excess return is the difference between the performance of an index tracking Fund and the performance of the Index itself over a stated period of time. Excess return can be either positive (where the relevant Fund outperforms its Index) or negative (where the Fund underperforms the Index). It is calculated as the Fund’s total return less the Index’s total return. Because a Fund’s total return includes Fund expenses, excess return is usually negative for index tracking Funds.
What causes excess return?
An Index’s performance is theoretical – it is reflective of the increase or decrease in the value of the securities within the index. However, the Index Provider does not actually buy and sell these securities when calculating the Index’s performance. This means that the Index’s performance does not take into account the costs of buying and selling securities such as brokerage fees, commissions, stamp duty, custody fees, regulatory fees, exchange fees and spreads. An index tracking Fund incurs all of these expenses in tracking an Index. These expenses will have a negative impact on the Fund’s performance, relative to the Index.
In addition, an Index’s performance will not always take into account the exact same tax costs related to (i) withholding tax payable on income derived from the securities (i.e. dividends or coupon payments). This can either have a positive or negative impact on the performance of an index tracking Fund against the Index. Index performance also does not take into account (ii) capital gains tax arising from selling securities, which will have a negative impact on the performance of an index tracking Fund against the Index.
A Fund may also engage in securities lending. The net income from this lending is paid back into the relevant Fund and will have a positive impact on the Fund’s performance relative to the Index.
Excess return can also occur where a Fund samples an Index rather than fully replicates it. For more information on this topic and other causes of excess return please refer to the section headed “ Index Sampling Risks ”.
What is tracking error?
Tracking Error is the volatility of the difference between the return of an index tracking Fund and the return of the Index tracked by that Fund. Tracking Error indicates the consistency of a Fund’s excess return over a given period of time. It is the annualised standard deviation of excess return data points for the given time period.
Tracking Error can be expressed two ways:
1. Ex-post (or realised/actual) Tracking Error - the Tracking Error of the Fund calculated using historical data; or
2. Ex-ante (or anticipated) Tracking Error - the anticipated or expected tracking error of the Fund looking forward into the future.
Details of the estimated Tracking Error in respect of each Fund, and of ex-post Tracking Error where available, are set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund.
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Sustainable Finance
Sustainability Risk Sustainability risks are environmental, social, or governance events or conditions that, if they occur, could cause actual or potential material negative impacts on the value of a Fund’s assets. For further details in respect of sustainability risks and the impact of same on the returns of the Funds, please see “Sustainability Risk” in the “Risk Factors” section.
A policy and guidelines on the consideration and integration of sustainability risk into the investment management process of the Funds’ assets has been established.
Sustainability risk is considered as a component part of the overall investment risk management processes for each category of financial product, and is one of many risks which will be assessed so as to determine whether it is material, depending on the specific investment opportunity.
The Investment Manager utilises a common framework for considering sustainability risk. This consideration framework is summarised in three stages:
identifying sustainability risk factors that are pertinent to the Funds and investment styles that it manages;
establishing processes to quantify and measure these risk factors utilising available data; and
regularly monitoring established sustainability metrics against relevant benchmarks.
Inputs from third-party data providers, where available, may be considered as part of the investment process to help inform decisions about sustainability factors.
This consideration framework informs the materiality the Investment Manager then places on sustainability risk as a component of investment decision making and management. Whilst sustainability risk factors are considered across all the Funds, the management of these sustainability risks differs across investment styles: (i) active (sub-advised, fixed income, environmental, social, or governance (“ ESG ”) equity and multi-asset); and (ii) index (equity, fixed income, ESG and model portfolio strategies). Factors considered in the management of sustainability risk include but are not limited to the time horizon, type of assets and investment strategy of each Fund.
Consequently, unless specifically stated or referenced within a particular Funds’ investment objective or policy, sustainability risks (whether considered by the above framework to be material or otherwise) are not a determinant part of the security selection and or ongoing investment management process for the Funds. See table below for further details.
Table summarising how sustainability risks are integrated by investment style:
Investment Style
Asset Type Integration of sustainability risk into security selection and ongoing management of portfolio holdings
Index Equity These Funds have a primary investment objective to track the performance of their relevant Index and do not factor any explicit sustainability characteristics (including sustainability risks) into the selection and ongoing management of portfolio holdings.
Fixed Income
These Funds have a primary investment objective to track the performance of their relevant Index and do not factor any explicit
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Investment Style
Asset Type Integration of sustainability risk into security selection and ongoing management of portfolio holdings
sustainability characteristics (including sustainability risks) into the selection and ongoing management of portfolio holdings.
ESG These Funds screen out certain ESG factors and/or companies that conflict with pre-set rules by limiting exposure to certain industries or business activities, and thereby reducing the Fund’s exposure to certain industries/sectors as reflected in the relevant Index methodology and the investment objective of the Fund. Outside of that there is no management of sustainability risks within the investment process. These Funds are categorised as falling within the scope of Article 8 of the Sustainable Finance Disclosure Regulation (" Article 8 Funds "). For details in respect of what environmental and/or social characteristics are promoted by each Article 8 Fund and other related sustainable finance information, please see the relevant information outlined in Appendix 2 of each relevant Supplement.
Active Multi-asset (internally managed)
These Funds have a primary investment objective to hold investments to a fixed or gradually changing asset allocation and do not appraise any explicit sustainability characteristics (including sustainability risks) in the selection of portfolio holdings.
EU MMF
(internally managed)
Sustainability characteristics (including sustainability risks) are not explicitly appraised in the selection of portfolio holdings, however, Vanguard’s Fixed Income Group (FIG) assesses the financial materiality of sustainability risk factors alongside and in the context of other investment risks (such as duration and credit), to complement their assessment of standard issuers. The assessment of sustainability risk factors is carried out with an objective to reduce tracking error, and not to influence a sustainable investment outcome.
Fixed Income Funds
For actively managed funds, FIG’s credit research analysts combine the overall credit risk assessment, which incorporates sustainability risk factors, if applicable, with a risk-adjusted relative value opinion to arrive at a security recommendation. While portfolio managers are not prevented from buying companies exposed to sustainability risks, they must understand and clearly articulate the potential impact on a security’s long-term investment returns relative to its risk; this is similar to the approach taken for non-sustainability material risks.
For indexed funds, FIG assesses the financial materiality of a particular sustainability risk factor alongside and in the context of other investment risks (such as duration and credit), to complement assessments of standard issuers (such as corporate and sovereign bonds). The assessment of sustainability risk factors is carried out with an objective to reduce tracking error, and not to influence a sustainable investment outcome.
A summary of the Manager’s Investment Sustainability Risk Policy is available from the Manager upon request.
Taxonomy Regulation Alignment
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The investments underlying the Funds which are not Article 8 Funds which promote environmental characteristics do not take into account the EU criteria for environmentally sustainable economic activities as set out in the Taxonomy Regulation. Please see the disclosures included in the relevant Supplement for the Article 8 Funds which promote environmental characteristics.
Investment Stewardship
Investment Stewardship serves our investors by promoting long-term shareholder value creation at the companies in which Vanguard’s global internally-managed equity funds invest through engagement, voting and promoting corporate governance practices associated with long-term investment returns.
As a steward of our clients’ assets, Vanguard has processes to monitor material risks that can impact investor value over the long term across regions and sectors. Vanguard believes there are fundamental corporate governance principles which all companies should consider in the context of their regulatory and listing requirements. Vanguard’s investment stewardship approach is framed by four pillars of good governance: board composition and effectiveness, executive compensation, board oversight of strategy and risk, and shareholder rights. The Vanguard Group of Companies’ Investment Stewardship team (the “ Stewardship Team ”) believes good management of each of these pillars supports sustainable, long term value creation. The Stewardship Team regularly engages with boards of directors and company executives to learn about how boards effectively oversee material risks, including sustainability risk factors such as climate and human rights, among others. The Stewardship Team encourages companies to disclose material risks to investors, explain why those risks are considered material to their business and outline their approach to risk oversight and mitigation. This enables investors to understand and appropriately price companies.
In determining how to engage with companies and exercise voting rights, the Stewardship Team relies on its own internal analysis and assessment consistent with its published voting and engagement policies. The Stewardship Team's analysis is supported by proprietary data sets as well as data and research from a variety of third-party providers.
Consideration of Principal Adverse Impacts on Sustainability Factors
In accordance with the discretion granted pursuant to Article 4 of the Sustainable Finance Disclosure Regulation, the Manager does not currently consider the adverse impacts of investment decisions on sustainability factors or issue a website statement in relation to the due diligence policies with respect to those impacts, however, as outlined in the annexes set out in each relevant Supplement, principal adverse impacts are considered for certain Funds, as further described in each annex.
Investment Techniques
Investment Techniques – General
Each Fund may, for cash management purposes, hold ancillary liquid assets such as cash, commercial paper (i.e. short term paper issued by credit institutions) and money market obligations such as short and medium-term treasury bills and treasury notes (both fixed and floating rate), certificates of deposit, bankers’ acceptances, and variable and floating rate instruments (being debt instruments the interest return on which is variable) which are investment grade and may be issued or guaranteed by a national government or its agencies or corporate variable floating rate instruments.
A Fund may also, in pursuit of its investment strategies, in accordance with Central Bank Requirements and where set out in the investment strategies of the relevant Fund, invest in other Funds of the Company and other collective investment undertakings including exchange traded funds and undertakings linked by common management or control to each other or to the Company, and hold ancillary liquid assets, in each case subject to the restrictions set out in A Appendix 3 hereto. As set out in the relevant Supplement, the Vanguard EUR Cash UCITS ETF (and any other Fund which is authorised as an EU MMF) may,
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subject to the requirements of the EU MMFR, only invest in other investment funds which are themselves EU MMFs.
The Investment Manager may also, where permitted by the investment strategies of the relevant Fund, utilise various combinations of other available investment techniques for direct investment purposes. FDI including, but not limited to, exchange traded futures and options contracts (which may be used to manage cash flows on a short term basis and to achieve cost efficiencies), warrants, swap agreements and equity-linked notes (which may be used to gain exposure to the constituents of an index and/or the index itself, to reduce transaction costs or taxes or allow exposure in the case of illiquid stocks or stocks which are unavailable for market or regulatory reasons, or to minimise tracking errors) and currency forwards and interest rate futures (which may be used to protect against currency fluctuations). In such instances, the Fund will be exposed to the risk of counterparty default. See the section of the Prospectus entitled “ Risk Factors ” for a description of the risks involved in the use of such techniques and instruments.
With the exception of the Vanguard EUR Cash UCITS ETF, the investment policy and restrictions for which are set out in its Supplement, in accordance with the limitations set down in Appendix 3 and d 4 hereto, a Fund may use FDI for direct investment (where permitted by the investment strategies of the relevant Fund), efficient portfolio management purposes and/or for such other reasons as the Directors deem of benefit to the relevant Fund. A Fund may also utilise new techniques and instruments as developed from time to time provided that they are in accordance with Central Bank Requirements and used in conjunction with an RMP that has been cleared by the Central Bank. See Appendix 4 of this Prospectus for information on the use of Portfolio Investment Techniques, including FDI and for information on leverage and the calculation of global exposure.
Investment Techniques – Index Tracking Funds
As further set out in the Supplement for the relevant Fund, certain Funds seek to replicate as closely as possible the constituents of the relevant Index by holding all the securities comprising the Index in similar proportion to their weightings in the Index. In doing so, where permitted by their investment policy, such Funds may avail of higher investment limits set out in Appendix 3 , “Investment Powers and Restrictions”, section (iv), ‘Index Tracking UCITS’ . However, Investors should note that it may not be possible or practicable for an index tracking Fund to purchase or gain exposure to all of the constituent securities of its Index in their proportionate weightings or to purchase them at all due to various factors, including the costs and expenses involved and the concentration limits described in Appendix 3 t to the Prospectus. In these circumstances, the Investment Manager of such a Fund may, in tracking the Fund’s Index, decide to hold a representative sample of the securities contained in the Index.
The Investment Manager may employ a range of techniques designed to select those securities which will create the representative sample that tracks the performance of the Index as closely as possible.
To create the sample either optimisation and/or stratified sampling techniques are used. Optimisation is a sampling technique that seeks to minimize tracking error through proprietary quantitative portfolio analysis. This analysis may include consideration of matters such as: how a security’s price changes in relation to another over time, scenario analysis (which involves estimating the change in a portfolio’s value given a change in key risk factors) and stress testing.
Stratified sampling is a technique that divides the constituents of the relevant Index into distinct, non overlapping risk groups called strata and selects those securities in the Index which match the risk characteristic of these groups.
Some of the strata could include, but are not limited to, the market capitalisation of the companies, currency, country, industry sectors, and credit quality.
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In the case of fixed income securities, strata may also include key rate duration, convexity (which is measure of how a change in interest rates affects the duration of a bond), capital structure, and bond specific covenants.
The level of sampling used by any index tracking Fund will be determined by the nature of the Index components – some such Funds may use sampling extensively whilst others may only use it infrequently. Investors in such Funds will be exposed to the performance of the underlying securities comprised in the relevant Fund’s Index.
There may also be instances where an index tracking Fund holds securities which are not component securities in the Index, if the Investment Manager believes this to be appropriate. Funds availing of the increased concentration limits of Regulation 71 of the UCITS Regulations (as disclosed in their investment strategies) will not avail of these techniques.
Changes to the composition and/or weighting of the securities constituting the Index which is tracked or replicated by a Fund will ordinarily require that Fund to make corresponding adjustments or rebalancings to its holdings in order to seek to track or replicate the Index. The Investment Manager will in a timely manner and as efficiently as possible, but subject to its overall discretion in accordance with the investment strategies of the relevant Fund, seek to rebalance the composition and/or weighting of the investments held by a Fund from time to time and, to the extent practicable and possible, to conform its exposure to the changes in the composition and/or weighting of securities constituting the relevant Index. Other rebalancing measures may be taken from time to time to seek to maintain the correspondence between the performance of a Fund and the performance of the Index.
Where set out in the investment strategies of an index tracking Fund, the Investment Manager may seek to gain exposure to the component securities of the Index primarily through the use of FDI, principally OTC swaps, which will enable the relevant Fund to receive, from a counterparty, the return of the particular Index in exchange for periodic cash payments.
There may be a number of circumstances where holding the component securities of an index may be prohibited by regulation, or may not otherwise be in the interests of investors. These include, but are not limited to, the following:
(i) restrictions on the proportion of each Fund’s value which may be held in individual securities arising from compliance with the UCITS Regulations and Central Bank Requirements;
(ii) the constituent securities of the index change from time to time. The Investment Manager may adopt a variety of strategies when trading a Fund to bring it in line with the changed benchmark. For example where a security which forms part of the index is not available or a market for such security does not exist, a Fund may instead hold depository receipts relating to such securities (e.g. ADRs and GDRs) or may hold FDI;
(iii) from time to time, securities in an index may be subject to corporate actions. The Investment Manager has discretion to manage these events in the most efficient manner;
(iv) a Fund may hold ancillary liquid assets and will normally have dividends receivable. The Investment Manager may purchase FDI, for direct investment purposes, to produce a return similar to the return on an index;
(v) securities held by a Fund and included in an index may, from time to time, become illiquid or otherwise unobtainable at fair value. In these circumstances, the Investment Manager may use a number of techniques, including purchasing securities whose returns, individually or collectively, are seen to be well-correlated to desired constituents of the index or purchasing a sample of stocks in the index;
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(vi) the Investment Manager will have regard to the costs of any proposed portfolio transaction. It may not necessarily be efficient to execute transactions which bring the Fund perfectly in line with the Index at all times; and
(vii) a Fund may sell securities that are represented in the index in anticipation of their removal from the index, or purchase securities not represented in the index in anticipation of their addition to the index.
Portfolio Management Techniques
With the exception of the Vanguard EUR Cash UCITS ETF which shall invest in accordance with the investment policy and restrictions set out in its Supplement, the Company may, on behalf of each Fund, subject to the conditions and within the limits laid down by the Central Bank, employ techniques and instruments relating to Transferable Securities. Such techniques and instruments may be used for efficient portfolio management purposes (with a view to achieving a reduction in risk, a reduction in costs or an increase in capital or income returns to a Fund) or, where disclosed in a Fund’s investment strategies, for direct investment purposes. Such techniques and instruments may include investment in Money Market Instruments and/or money market funds and investments in FDI such as exchange traded futures and options contracts (which may be used to manage cash flows on a short term basis and to achieve cost efficiencies), warrants, swap agreements and equity-linked notes (which may be used to gain market exposure or exposure to a particular asset class) and currency forwards and interest rate futures (which may be used to protect against currency fluctuations). Such techniques and instruments are set out in Appendix 4 . See the section of the Prospectus entitled “ Risk Factors ” for a description of the risks involved in the use of such techniques and instruments. New techniques and instruments may be developed which may be suitable for use by the Company and the Company (subject to the Central Bank’s requirements) may employ such techniques and instruments.
With the exception of the Vanguard EUR Cash UCITS ETF, each Fund may enter into securities lending, repurchase and/or reverse repurchase agreements for the purposes of efficient portfolio management in accordance with the provisions of Appendix 4 . The Vanguard EUR Cash UCITS ETF may enter into repurchase and/or reverse repurchase agreements in accordance with the investment policy and restrictions set out in its Supplement.
Profile of a typical investor in the Funds
Each Fund is available to a wide range of investors seeking access to a portfolio managed in accordance with a specific investment objective and policy. Investors should in particular read the “ Risk Factors ” as set out in this Prospectus and, if they are in any doubt about making an investment, should consult their professional adviser concerning the acquisition, holding or disposal of any Shares.
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SHARES
Classes of Shares
Different classes of Shares may be issued in respect of each Fund. Classes may be distinguished by their different characteristics, including, without limitation, criteria for subscription and redemption (such as cash or in-kind dealing), currency of denomination, currency hedging, dividend provisions, charges and fee arrangements, including ongoing charges figures, allocation of costs, liabilities, gains and losses and charges. The classes currently available in each Fund and their characteristics are set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund.
The Directors may issue Shares of any class, and create new classes of Shares, on such terms as they may from time to time determine in relation to any Fund and in accordance with Central Bank Requirements. On the introduction of any new Fund or class of Shares, either a revised Prospectus or a separate Supplement will be prepared, setting out the details.
Currency Hedging at Fund Level
A Fund may enter into FDI for the purposes of hedging the currency exposure of the underlying securities into the relevant Fund’s Base Currency. If undertaken, the aim of this hedging will be to control the Fund’s level of currency risk. However, complete mitigation of currency risk for a Fund’s portfolio or specific assets held by a Fund may be impractical or impossible. See the “ Currency Risk ” section of the Prospectus for more information. FDI such as currency forwards, currency swaps, foreign currency or currency index futures contracts, or put and call options on such contracts or on currencies may be utilised if the Fund engages in such hedging.
Currency Hedging at Share Class Level
Where disclosed in Appendix 1 of this Prospectus or in a separate Supplement to this Prospectus, a Fund may offer Share classes which are denominated in currencies other than the Fund’s Base Currency, and will use FDI on behalf of specific classes for currency hedging purposes (“ Hedged Share Classes ”).
While not the intention, nonetheless, over-hedged or under-hedged positions may arise due to factors outside the control of the relevant Fund. However, hedged positions will be kept under review to ensure that: (i) the over-hedged positions do not exceed 105% of the Net Asset Value of the Hedged Share Class; and (ii) the under-hedged positions do not fall short of 95% of the portion of the Net Asset Value of the relevant Share class (together the “ UCITS Hedging Limits ”), which is to be hedged against currency risk. The hedged positions will be kept under daily review to ensure that over-hedged positions do not exceed, and under-hedged positions do not fall below, the UCITS Hedging Limits. Such review will incorporate a procedure to ensure that (i) positions materially in excess of 100% will not be carried forward from month to month; and (ii) positions outside the UCITS Hedging Limits are adjusted back to permitted levels.
A Fund that hedges foreign exchange risk for any Share class may enter into forward foreign exchange contracts with any single counterparty to hedge some or all of the foreign exchange risk for the relevant Share class. To the extent that hedging is successful, the performance of the relevant Share class is likely to move in line with the performance of a version of the relevant Index for a Fund which is hedged to the relevant class currency (if available) (the “ Hedged Index ”). The use of Hedged Share Classes may substantially limit holders of the class from benefiting if the class currency falls against the base currency and/or the currency in which the assets of the Fund are denominated.
Investors should note that, as a result of the currency hedging referred to above, it is expected that the performance of Hedged Share Classes in an index tracking Fund will move in line with the performance of a Hedged Index more closely than the relevant Index itself in the Base Currency of the Share class.
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Further details on any such Hedged Indices, including their performance, are available at the address specified in respect of the relevant Index for a Fund in either A Appendix 1 o of this Prospectus or otherwise in the Supplement for the relevant Fund.
Hedging the currency exposure of the Hedged Share Classes is typically achieved by entering into a forward currency exchange contract to manage the relevant currency exposures, at all times subject to the UCITS Hedging Limits. The Hedged Share Classes’ foreign currency hedged position will also typically be re-set at the end of each month. Upon receipt of a subscription/redemption in a particular Hedged Share Class, the Investment Manager will ensure the ratio remains within the UCITS Hedging Limits. Intra month, the notional amount of the hedge position may not exactly offset the foreign currency exposure of a Hedged Share Class. Depending on whether the Index has appreciated or depreciated between each hedge re-set, a Hedged Share Class’s foreign currency exposure may therefore be under-hedged or over-hedged respectively during the period between adjustments.
Any gains or losses resulting from a Hedged Share Class’s hedge position shall be reflected in the Net Asset Value of the class and the hedged amount will typically be re-set at month end. Other than as specified above, in the absence of cash flows, the hedged position will generally only be adjusted during the month should the over- or under-hedged positions exceed or, at the Investment Manager’s discretion, approach the UCITS Hedging Limits, where to do so is required by applicable Central Bank requirements or is otherwise in the best interests of Shareholders.
Where classes denominated in different currencies are created within a Fund and currency hedging transactions are entered into to hedge any relevant currency exposure, in each such case such transactions directly related to currency hedging will be clearly attributable to the specific Hedged Share Class. Further, any costs and related liabilities and/or benefits shall be for the account of that Hedged Share Class only. Accordingly, all such costs and related liabilities and/or benefits will be reflected in the Net Asset Value per Share for the Shares of any such Hedged Share Class. However, there are certain additional costs which may be caused as a result of currency hedging transactions (for example, transaction costs arising from additional trading activity that may take place as a result of the share class hedging operations, such as re-investing gains) that may be borne at Fund level and accordingly impact the Net Asset Value of all Shares Classes in the Fund.
ETF Shares
ETF Shares that are available for subscription and redemption in relation to a particular Fund are detailed either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund. See the “ Dealing ”, “ Buying Shares ” and “ Redeeming Shares ” sections of this Prospectus for further information.
Distributing and Accumulating
“ Distributing ” Shares are Shares upon which the Directors intend to declare a dividend and to distribute all or substantially all of the net income (interest and dividends less expenses) of a Fund attributable to such Share classes.
The Directors do not intend to declare a dividend on other, “ Accumulating ”, Share classes where a Fund’s income and capital gains attributable to such Share classes are reflected in the Net Asset Value per Share.
See the “ Dividend Distribution Policy ” section of this Prospectus for further information.
Switching
ETF Shares of one Fund cannot be exchanged for ETF Shares of another Fund.
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Shareholders of a class within a Fund may switch some or all of their shares of a class of a Fund (the “ Original Shares ”) to other classes within the same Fund (the “ New Shares ”) with the prior approval of the Manager. Switching requests may be submitted by Authorised Participants through the Portal. Investors which are not Authorised Participants may only submit switching requests via Authorised Participants.
The number of New Shares issued will be determined by reference to the respective prices of New Shares and Original Shares at the Valuation Points applicable at the time the Original Shares are repurchased and the New Shares are issued, after deducting the costs, if any, of undertaking the switch. The maximum fee which may be charged by the Manager for switching is 0.05% of the gross switching amount.
No switches will be made during any period in which the rights of Shareholders to deal in the Shares of the relevant Fund are suspended. Switching requests may be submitted by Authorised Participants through the Portal before the cut off time for the Original Shares and the New Shares. Any applications received after the applicable time will normally be held over until the next Dealing Day but may be accepted in exceptional circumstances for dealing on the relevant Dealing Day at the discretion of the Manager provided they are received prior to the Valuation Point. Switching requests may be declined by the Manager if they are submitted on a Fund Holiday or if the request is received after the applicable cut off time for the Original Shares and the New Shares.
The number of New Shares to be issued will be calculated in accordance with the following formula:
A + B = C x (D-E) F
Where:
A = number of New Shares to be allocated
B = balancing cash amount
C = number of Original Shares switched
D = redemption price per Original Share on the relevant Dealing Day
E = the transaction costs incurred as a result of the switching trade, as calculated at the Manager’s absolute discretion
F = subscription price per New Share on the relevant Dealing Day.
As a result of a switch, an Authorised Participant will in almost all circumstances be entitled to a fraction of a New Share. As Shares cannot be issued in fractional amounts, the value of the fraction of the New Share will be paid to / received from (as appropriate) the Authorised Participant by the Company. The balancing cash amount is the cash amount due in lieu of any fractional shares arising from the application of the formula and is calculated by multiplying any resulting fractional share amount by the subscription price per New Share on the relevant Dealing Day.
Each investor should consider the tax consequences of any such transaction in accordance with local laws in their home jurisdiction
Register
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Investors that buy ETF Shares on the secondary market are not reflected in the Register. See the “ Dealing in the Secondary Market ” section of this Prospectus for further information. Clearing and Settlement
Authorised Participants’ title and rights relating to ETF Shares in a Fund will be determined by the clearance system through which they settle and/or clear their holdings. The Funds will settle through the relevant International Central Securities Depositary and the Common Depositary’s Nominee will act as the registered holder of all such ETF Shares. For further details, see the section “ Global Clearing and Settlement ” below.
Global Clearing and Settlement
The Directors have resolved that ETF Shares in a Fund will not currently be issued in Dematerialised (or uncertificated) Form and no temporary documents of title or share certificates will be issued, other than the Global Share Certificate required for the International Central Securities Depositaries (being the Recognised Clearing and Settlement Systems through which the ETF Shares will be settled). The Company will apply for admission for clearing and settlement through the applicable International Central Securities Depositary. The International Central Securities Depositaries for the Company currently are Euroclear and Clearstream and the applicable International Central Securities Depositary for an investor is dependent on the market in which the ETF Shares are traded. All investors in the Company will ultimately settle in an International Central Securities Depositary but may have their holdings within Central Securities Depositaries. A Global Share Certificate will be deposited with the Common Depositary (being the entity nominated by the International Central Securities Depositaries to hold the Global Share Certificate) and registered in the name of the Common Depositary’s Nominee (being the registered holder of the ETF Shares of the relevant Fund, as nominated by the Common Depositary) on behalf of Euroclear and Clearstream and accepted for clearing through Euroclear and Clearstream. Interests in the Shares represented by the Global Share Certificate will be transferable in accordance with applicable laws and any rules and procedures issued by the International Central Securities Depositaries. Legal title to the ETF Shares of the relevant Fund will be held by the Common Depositary’s Nominee.
A purchaser of interests in Shares will not be a registered Shareholder in the Company, but will hold an indirect beneficial interest in such Shares and the rights of such investors, where Participants, shall be governed by their agreement with their International Central Securities Depositaries and otherwise by the arrangement with their nominee, broker or Central Securities Depositary, as appropriate. All references herein to actions by holders of the Global Share Certificate will refer to actions taken by the Common Depositary’s Nominee as registered Shareholder following instructions from the applicable International Central Securities Depositaries upon receipt of instructions from its Participants. All references herein to distributions, notices, reports, and statements to such Shareholder, shall be distributed to the Participants in accordance with such applicable International Central Securities Depositaries’ procedures.
International Central Securities Depositaries
All Shares in issue are represented by a Global Share Certificate and the Global Share Certificate is held by the Common Depositary and registered in the name of the Common Depositary’s Nominee on behalf of an International Central Securities Depositary, beneficial interests in such Shares will only be transferable in accordance with the rules and procedures for the time being of the relevant International Central Securities Depositary.
Each Participant must look solely to its International Central Securities Depositary for documentary evidence as to the amount of its interests in any Shares. Any certificate or other document issued by the relevant International Central Securities Depositary, as to the amount of interests in such Shares standing to the account of any person shall be conclusive and binding as accurately representing such records.
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Each Participant must look solely to its International Central Securities Depositary for such Participant’s share of each payment or distribution made by the Company to or on the instructions of the Common Depositary’s Nominee and in relation to all other rights arising under the Global Share Certificate. The extent to which, and the manner in which, Participants may exercise any rights arising under the Global Share Certificate will be determined by the respective rules and procedures of their International Central Securities Depositary. Participants shall have no claim directly against the Company, the Paying Agent or any other person (other than their International Central Securities Depositary) in respect of payments or distributions due under the Global Share Certificate which are made by the Company to or on the instructions of the Common Depositary’s Nominee and such obligations of the Company shall be discharged thereby. The International Central Securities Depositary shall have no claim directly against the Company, Paying Agent or any other person (other than the Common Depositary).
The Company or its duly authorised agent may from time to time require investors to provide them with information relating to: (a) the capacity in which they hold an interest in Shares; (b) the identity of any other person or persons then or previously interested in such Shares; (c) the nature of any such interests; and (d) any other matter where disclosure of such matter is required to enable compliance by the Company with applicable laws or the constitutional documents of the Company.
The Company or its duly authorised agent may from time to time request the applicable International Central Securities Depositary to provide the Company with the following details: ISIN, International Central Securities Depositary participant name, International Central Securities Depositary participant type, residence of Participant, number of ETF Shares of the Participant within Euroclear and Clearstream, as appropriate, that hold an interest in Shares and the number of such interests in Shares held by each such Participant. Euroclear and Clearstream Participants which are holders of interests in Shares or intermediaries acting on behalf of such account holders will provide such information upon request of the International Central Securities Depositary or its duly authorized agent and have authorised pursuant to the respective rules and procedures of Euroclear and Clearstream to disclose such information to the Company of the interest in Shares or to its duly authorised agent.
Investors may be required to provide promptly any information as required and requested by the Company or its duly authorised agent, and agree to the applicable International Central Securities Depositary providing the identity of such Participant or investor to the Company upon their request.
Notices of Meetings and the Exercise of Voting Rights through the International Central Securities Depositaries
Notices of general meetings and associated documentation will be issued by the Company to the registered holder of the Shares i.e. the Common Depositary’s Nominee. Each Participant must look solely to its International Central Securities Depositary and the rules and procedures for the time being of the relevant International Central Securities Depositary governing onward delivery of such notices to the Participants and the Participant’s right to exercise voting rights. Investors who are not Participants in the relevant International Central Securities Depositary would need to rely on their broker, nominee, custodian bank or other intermediary which is a Participant, or which has an arrangement with a Participant, in the relevant International Central Securities Depositary to receive any notices of Shareholder meetings of the Company and to relay their voting instructions to the relevant International Central Securities Depositary.
The Common Depositary’s Nominee has a contractual obligation to promptly notify the Common Depositary of Shareholder meetings of the Company and to relay any associated documentation issued by the Company to the Common Depositary, which, in turn, has a contractual obligation to relay any such notices and documentation to the relevant International Central Securities Depositary. Each International Central Securities Depositary will, in turn, relay notices received from the Common Depositary to its Participants in accordance with its rules and procedures. In accordance with their respective rules and procedures, the Directors understand that each International Central Securities Depositary is contractually bound to collate and transfer all votes received from its Participants to the
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Common Depositary and the Common Depositary is, in turn, contractually bound to collate and transfer all votes received from each its International Central Securities Depositary to the Common Depositary’s Nominee, which is obligated to vote in accordance with the Common Depositary’s voting instructions.
Directors’ Discretion
The Directors reserve the right in their sole discretion and with respect to any Fund to reject any purchase request, including exchanges from other Funds. The Directors may at any time require a prospective investor or the Shareholder to furnish such information as they may consider necessary for the purpose of determining whether or not the beneficial owner of such Shares is, or will be, a Qualified Holder. See also the “ Market-Timing and Frequent Trading ” section of this Prospectus for further information.
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DEALING
General
Requests to deal in Shares of a Fund must be received through the Portal, for onward transmission to the Administrator, in advance of the Cut-Off Time for the relevant Dealing Day for the Fund.
Requests to deal in Shares may also be made by mail or telephone (telephone: +44 203 753 6989; or such other numbers of the Portal Operator as may be published on h https://globaletf.vanguard.com/ from time to time; for the postal address see the Directory section of this Prospectus. All requests to deal in Shares on a particular Dealing Day received after a Fund’s Cut-Off Time for that Dealing Day will be treated as having been received on the next Dealing Day.
The investors in the Vanguard EUR Cash UCITS ETF shall provide, and authorise intermediaries to provide, information requested by the Company, the Manager, Investment Manager or a delegate in order for the Manager to comply with the “Know your customer” requirements of Article 27 of the EU MMFR. This information shall include, but is not limited to, investor type, the number of Shares owned by any investor and the evolution of inflows and outflows in respect of any investor. This information may be requested for the purpose of enabling the Manager to consider (a) identifiable patterns in investor cash needs, including the cyclical evolution of the number of Shares of the applicable EU MMF; (b) the risk aversion of investors; and (c) the degree of correlation or close links between investors, with a view to the Manager appropriately managing the liquidity and investor concentration of the relevant EU MMF.
ETF Shares
Each Fund offers and issues an exchange-traded class of shares called ETF Shares. ETF Shares are issued in large blocks, known as Creation Units. To instruct the purchase or redemption of a Creation Unit, you must be an Authorised Participant or you must transact through a broker that is an Authorised Participant. An Authorised Participant is a participant in a Recognised Clearing and Settlement System and has executed an Application Form. The Common Depositary’s Nominee, acting as the registered holder of ETF Shares in a Fund, may not apply to become an Authorised Participant. Creation Units may also be purchased (and redeemed) directly by affiliates of the Promoter for seeding purposes or where the Company otherwise believes it to be in the best interests of the Company and such affiliates will be deemed to be Authorised Participants and Qualified Holders for the purposes of those transactions. For a current list of Authorised Participants, contact the Administrator.
Investors that are not Authorised Participants must purchase ETF Shares through a broker on the secondary market. As with any stock traded on an exchange through a broker, purchases and sales of ETF Shares on the secondary market will be subject to usual and customary brokerage commissions. The Company does not set the amount of the commissions and does not receive these payments. See the section of the Prospectus entitled “ The Secondary Market ” for further information.
ETF Shares may be issued in-kind, at the Investment Manager’s discretion, in exchange for the Deposit Securities that are generally part of (or soon to be part of) the Fund’s target index. ETF Shares may also be redeemed in-kind; an investor redeeming a Creation Unit of ETF Shares will receive a basket of securities that are part of the Fund’s portfolio holdings, the “ Redemption Securities ”. As part of any in-kind creation or redemption transaction, the investor will either pay or receive some cash in addition to the Deposit Securities, as described in the “ Buying Shares ” and “ Redeeming Shares ” sections of this Prospectus. Creation Units may also be issued or redeemed for cash, with the exception that, subject to the requirements of the Central Bank as set out below, or save as the Directors or their delegate may otherwise determine in their sole discretion, cash (non-directed) dealing is not permitted in the Vanguard LifeStrategy® 20% Equity UCITS ETF, Vanguard LifeStrategy® 40% Equity UCITS ETF, Vanguard LifeStrategy® 60% Equity UCITS ETF and Vanguard LifeStrategy® 80% Equity UCITS ETF
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(collectively the “ LifeStrategy® ETFs ”) and primary market dealing in such Funds shall therefore be limited to in-kind and cash (directed) dealing only.
Issue of Shares in exchange for in-kind assets
In accordance with the UCITS Regulations, the Directors may accept in-kind subscriptions for Shares in a Fund. The securities transferred to the Fund in settlement of an in-kind subscription must be in a form in which the relevant Fund may invest in accordance with: (a) the UCITS Regulations, the Central Bank Requirements and, where applicable, the EU MMFR; and (b) the particular investment objective and policies of the relevant Fund.
No Shares may be issued for an in-kind subscription unless the Directors are satisfied that:
(i) the number of Shares issued in the relevant Fund will not be more than the number that would have been issued for a subscription settled in cash, having valued the securities to be transferred to the Fund by the investor in accordance with the valuation provisions set out in the Constitution and summarised herein;
(ii) such duties and charges as set out in the sections entitled “ Buying Shares ” and “ Redeeming Shares ” of this Prospectus, arising in connection with the vesting of such securities in the Depositary for the account of the relevant Fund are generally paid by the person subscribing for Shares in the Fund or, at the discretion of the Directors, partly by such person and partly, or all, by the Manager out of its assets;
(iii) the terms of such in-kind subscription shall not materially prejudice the Shareholders in the relevant Fund; and
(iv) the securities are vested in the Depositary. Shares may not be issued in exchange for such securities unless title to the securities has been delivered.
Applicants who subscribe for ETF Shares in-kind will for settlement purposes have access to an account in one or more Recognised Clearing and Settlement Systems. Investors who purchase ETF Shares and who are not participants in Recognised Clearing and Settlement Systems will have indirect access to such settlement systems through professional financial intermediaries, such as banks, depositaries, brokers, dealers, and trust companies which clear through or maintain a custodial relationship with participants in such settlement systems.
Money Laundering Prevention
The Company is subject to obligations under the Criminal Justice (Money Laundering and Terrorist Financing) Acts 2010 to 2021 of Ireland and regulations thereunder (as same may be amended, supplemented and/or replaced from time to time) (the “ Criminal Justice Acts ”), aimed at preventing money laundering, terrorist financing and indirect and direct tax crimes. It is also subject to adhering to sanctions administered by legislation, and sanctions administered by the United States Office of Foreign Asset Control, the European Union and the United Nations. To meet these obligations, the Company is required to apply customer due diligence measures to investors including but not limited to identifying and verifying an applicant’s identity, address, source of wealth and/or source of funds, identifying any beneficial owner connected with an applicant and conducting ongoing due diligence during the course of the business relationship.
The Administrator reserves the right to request such information as is necessary to verify the identity, address and the source of wealth and/or source of funds of an applicant. In the event of delay or failure by the applicant to produce any information required for verification purposes, the Administrator may refuse to accept the application and subscription monies and return all subscription monies or compulsorily repurchase such Shareholder’s Shares and/or payment of repurchase proceeds may be
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delayed (no repurchase proceeds will be paid nor will any interest accrue thereto if the Shareholder fails to produce such information) and none of the Company, the Directors, the Investment Manager or the Administrator shall be liable to the subscriber or Shareholder where an application for Shares is not processed or Shares are compulsorily repurchased in such circumstances. If an application is rejected, the Administrator will return application monies or the balance thereof by telegraphic transfer in accordance with any applicable laws to the account from which it was paid at the cost and risk of the applicant. The Administrator shall not pay repurchase proceeds or dividend payments where the requisite documentation and/or information for verification purposes has not been produced by the entitled Shareholder. Any such blocked payments may be held in a Collection Account pending receipt, to the satisfaction of the Administrator, of the requisite documentation and/or information. Investors should refer to the risk statement “ Umbrella Cash Subscription and Redemption Account (“Collection Account”) Risk ” in the Section of this Prospectus entitled “ Risk Factors ” for an understanding of their position vis-a-vis monies held in a Collection Account.
The Company, and the Administrator may take such other steps as each considers appropriate or necessary to discontinue the relationship with an investor where required to do so under applicable law and regulation.
Minimum Holdings
The minimum holdings for each class of each Fund are set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund. If the minimum holdings are not maintained, the Directors reserve the further right to redeem the relevant shareholding in the relevant class of Shares.
Further, if following a redemption, switch or transfer, a holding in any class of Shares should fall below the minimum holding for that class, as set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund, the Directors may effect a mandatory redemption of that Shareholder's entire holding in that class of Shares. Failure of the Directors to do so immediately after such redemption, switch or transfer does not remove this right.
The Secondary Market
The ETF Shares may be purchased through the secondary market. It is expected that the ETF Shares will be listed on one or more relevant stock exchanges to facilitate the secondary market trading in the ETF Shares. Secondary market sales of ETF Shares or purchases of ETF Shares will be conducted in accordance with the normal rules and operating procedures of the relevant stock exchange(s) and Recognised Clearing and Settlement Systems and will be settled using the normal procedures applicable to trading securities. The listing of the ETF Shares on the secondary market (1) provides intraday liquidity; (2) allows investors to trade ETF Shares in quantities smaller than a Creation Unit; and (3) facilitates distribution of, and access to, the ETF Shares for retail investors.
Upon such listings there is an expectation that at least one member of the relevant stock exchange(s) will act as market maker and provide offer and bid prices at which the ETF Shares can be purchased or sold, respectively, by investors. The bid/offer spread is typically monitored by the relevant stock exchange(s). Certain Authorised Participants who subscribe for Creation Units may act as market makers; other Authorised Participants are expected to subscribe for Creation Units in order to be able to offer to buy Shares from or sell ETF Shares to secondary market investors as part of their broker/dealer business. Through the operation of such a secondary market, persons who are not Authorised Participants or not able or willing to subscribe for and redeem Creation Units will be able to buy ETF Shares from or sell ETF Shares to other retail investors or market makers, broker/dealers, or other Authorised Participants at prices which should approximate, after currency conversion, the Net Asset Value of the ETF Shares.
As the purchase and sale of ETF Shares on the secondary market takes place through the relevant stock exchange via a member firm or stockbroker and is not a subscription or redemption of ETF Shares with a Fund, investors should note that such orders: (a) are governed by the rules of the relevant stock
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exchange; and (b) may incur costs over which the Company has no control. In addition, information will be sent by the Company to the settlement system for transmission to the member firm or stockbroker and onward to investors but the Company has no obligations other than the delivery of the information to the settlement system and cannot control the onward dissemination of any such information.
The price of any ETF Shares traded on the secondary market will depend on market supply and demand, movements in the value of the Fund’s portfolio holdings as well as other factors such as prevailing financial markets, corporate, economic and political conditions. In accordance with the requirements of the relevant stock exchanges, market makers are expected to provide liquidity and two way prices to facilitate the secondary market trading of the ETF Shares. See the “ Risk Factors ” section of this Prospectus for further information on the risk factors associated with secondary market trading.
The Indicative Net Asset Value (“ iNAV ”) for each Fund is calculated at fifteen second intervals throughout the trading day and is published on Bloomberg or Reuters. The iNAV is based on quotes and last sale prices from the securities’ local market and may not reflect events that occur subsequent to the local market’s close.
Premiums and discounts between the iNAV and the market price may occur and the iNAV should not be viewed as a “real-time” update of the Net Asset Value per Share, which is calculated only once a day. The iNAV should not be taken or relied on as the price at which Shares are subscribed or redeemed. None of the Company, the Manager, or the Investment Manager or any of their affiliates, or any third party calculation agents involved in, or responsible for, the calculation or publication of such iNAVs makes any warranty as to their accuracy or shall be liable to any person who relies on the iNAV.
As a purchase or sale of ETF Shares on the secondary market is not a subscription for or redemption of ETF Shares directly with a Fund, the Company does not charge any subscription or redemption fees for purchases or sales of ETF Shares on the secondary market. Investors that buy ETF Shares on the secondary market (with the exception of certain secondary market investors purchasing shares on the London Stock Exchange) are not reflected in the Register.
ETF Shares purchased on the secondary market cannot usually be sold directly back to the Company. Investors must buy and sell ETF Shares on a secondary market with the assistance of an intermediary (e.g. a stockbroker) and may incur fees for doing so. In addition, investors may pay more than the current Net Asset Value when buying ETF Shares on the secondary market and may receive less than the current Net Asset Value when selling them.
If the stock exchange value of ETF Shares significantly varies from their Net Asset Value, investors who have acquired their ETF Shares on the secondary market may redeem their ETF Shares directly to the Company, and such redemption will be subject to the provisions of this Prospectus. If a significant variance in value arises, a stock exchange announcement will be made to Euronext Dublin, the London Stock Exchange and such other exchange(s) on which the ETF Shares are traded, advising the Shareholder of this right. Authorised Participants wishing to redeem their ETF Shares in these circumstances should contact the Portal Operator for details of the process and relevant forms. Please see the section of the Prospectus entitled “ Redeeming Shares ” for fees payable. In addition, account opening and administration fees which shall not be excessive, reflecting the costs incurred by the Company in the processing of such redemptions, may also be charged.
Key Information Document
The Company provides a Key Information Document to applicants dealing directly with it. This document contains a summary of key features relating to a Fund. The Company makes a Key Information Document for each Fund available at https://www.ie.vanguard/product documentation/ucits-kiids-priips-kids .
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BUYING SHARES
Procedure
The purchase of Shares may be initiated directly by Authorised Participants through the Portal or by other investors through a professional adviser or other Intermediary. Authorised Participants must submit orders pursuant to procedures set forth in the Application Form and in the Prospectus. Shares will not be issued or allotted in cases where dealing in a Fund has been suspended as set out under the “ Suspension of Dealings ” section of this Prospectus. For the avoidance of doubt, all subscription requests received before a Fund’s Cut-Off Time for a Dealing Day will receive that Dealing Day’s Valuation Point. Subscription requests received after a Fund’s Cut-Off Time for a Dealing Day will normally receive the next Dealing Day’s Valuation Point. However, subscription requests received after the Cut-Off Time for a Dealing Day but before the Valuation Point for that Dealing Day may be accepted for dealing on that day in exceptional circumstances at the Directors’ sole discretion.
To open an account, mail or fax the signed Application Form to the Administrator (with the original executed and completed Application Form and all documentation required for anti-money laundering procedures to be mailed immediately thereafter). The Company will send a trade confirmation by the close of the third Business Day after the relevant Dealing Day.
To add to an existing account, mail, telephone or, where applicable, send the dealing request through the Portal, for onward transmission to the Administrator.
Purchase of ETF Shares
To purchase ETF Shares, an Authorised Participant must submit an order in proper form through the Portal to the Portal Operator and such order must be received by the Portal Operator by the Cut-Off Time. Authorised Participants must submit orders pursuant to procedures set forth in the relevant Authorised Participant Agreement and in the Prospectus.
Minimum Subscriptions
ETF Shares may only be purchased in Creation Units. The size of a Creation Unit for each Fund is set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund. The minimum subscription levels for the ETF Shares in a Fund are set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund. The Directors may, at their sole discretion: (a) accept cash subscription orders below the minimum amount; and (b) reduce the size of a Creation Unit. Any change to the minimum subscription levels will be disclosed to investors in an updated Prospectus.
Subscription Price
The subscription price for a Share will be the Net Asset Value per Share on the relevant Dealing Day. Subscriptions will be completed in the base currency of the relevant Share class.
Settlement – In-kind
The consideration for the purchase of a Creation Unit for a Fund generally consists of: (i) the in-kind deposit of a designated portfolio of (as relevant) fixed income or equity securities (“ Deposit Securities ”); and (ii) an amount of cash (“ Cash Component ”) consisting of: (1) a Purchase Balancing Amount (described below); and (2) a Custody Transaction Fee as may be charged. In addition, applicable trading charges related to stamp duty, United Kingdom stamp duty reserve tax (“ SDRT ”) and other similar transfer taxes, and other duties as detailed either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund will also apply.
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The Custody Transaction Fee will be an estimate calculated by and paid to the Manager who will in turn pay the Custody Transaction Fee as invoiced by the Depositary. In the event that there is any excess of the amount paid by the Authorised Participant to the Manager over the amount invoiced by the Depositary, such excess will be used in satisfaction of the total custody charges payable to the Depositary. This may result in the portion of the OCF payable by the Manager to the Depositary, in respect of aggregate custody transaction fees, being reduced and accordingly the amount retained by the Manager may be increased. Should this occur, any such reduction will be negligible. The Custody Transaction Fee may be waived by the Manager and, in such instances, the Custody Transaction Fee will be paid by the Manager out of its fee. Any such waiver will be notified to the Shareholder.
The Fund Deposit is the Deposit Securities and the Cash Component together (the “ Fund Deposit ”). The “ Purchase Balancing Amount ” is an amount of cash equal to the difference between: (a) the Net Asset Value of a Creation Unit; and (b) the market value of the Deposit Securities. It ensures that the Fund Deposit (not including the Custody Transaction Fee) is identical to the Net Asset Value of the Creation Unit it is used to purchase. If the Purchase Balancing Amount is a positive number (i.e. the Net Asset Value per Creation Unit exceeds the market value of the Deposit Securities), then that amount will be paid by the applicant to the Fund in cash. If the Purchase Balancing Amount is a negative number (i.e. the Net Asset Value per Creation Unit is less than the market value of the Deposit Securities), then that amount will be paid by the Fund to the applicant in cash (except as offset by the Custody Transaction Fee).
A list of the names and the number of shares of each Deposit Security to be included in the next Dealing Day’s Fund Deposit for each Fund (subject to possible amendment or correction) is made available from the Portal Operator via the Portal prior to the opening of the relevant markets on each trading day. The identity and number of shares of the Deposit Securities required for a Fund Deposit may change from one day to another to reflect rebalancing adjustments and corporate actions, or to respond to adjustments to the weighting or composition of the component stocks of a relevant target index.
The Company reserves the right to permit or require the substitution of an amount of cash - referred to as “cash-in-lieu” - to be added to the Cash Component to replace any Deposit Security that may not be available in sufficient quantity for delivery; may not be eligible for transfer; may not be eligible for trading by an Authorised Participant; or in the event that in-kind trading is not permissible in particular countries or markets. Trading costs incurred by the Company in connection with the purchase of Deposit Securities with cash-in-lieu amounts will be borne by the relevant investor, through the application of a “ Basket Customisation Fee ” (representing the estimated cost of acquisition of the relevant Deposit Security to the Fund using the cash-in-lieu amount, otherwise than in respect of “ Settlement – Cash (Directed) ” as described below), to protect existing investors from this expense. See the “ Risk Factor ” section of this Prospectus for further information on the Basket Customisation Fee.
All questions as to the number of shares of each security in the Deposit Securities and the validity, form, eligibility, and acceptance for deposit of any securities to be delivered shall be determined by the Company and the Company’s determination shall be final and binding.
The Administrator shall inform the Depositary of the subscription. The Depositary will then inform the appropriate sub-custodians. Each sub-custodian shall maintain an account into which the Authorised Participant shall be instructed to deliver, on behalf of itself or the party on whose behalf it is acting, the relevant Deposit Securities (or the cash value of all or part of such securities, in the case of a permitted or required cash purchase or cash-in-lieu amount) including all applicable fees. Deposit Securities must be delivered to an account maintained at the applicable local sub-custodians as instructed by the Depositary. The Authorised Participant must also make available on the settlement date, by means satisfactory to the Company, immediately available or same day funds sufficient to pay the Cash Component and any applicable fees next determined after acceptance of the purchase order.
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The normal settlement period for Creation Unit subscriptions is set out in A Appendix 1 to this Prospectus or otherwise in the Supplement for the relevant Fund. The settlement period may vary depending upon the standard settlement periods of the different stock exchanges on which the Shares are traded and the nature of the Deposit Securities. The Directors retain the discretion to accept settlements for Creation Unit subscriptions outside of the normal settlement periods. However, the settlement period for Creation Unit subscriptions shall not in any event exceed ten Business Days from the relevant Dealing Day. No Shares of a Creation Unit will be issued to the applicant until all the Deposit Securities (or relevant cash collateral as detailed below) has been received by the Depositary and the requisite Cash Component, Custody Transaction Fee and, if applicable, transfer taxes have been received by the Depositary.
If an applicant fails to deliver to the Depositary one or more of the Deposit Securities by the designated time, the Company may: (a) reject the application for subscription; or (b) may require the applicant to pay to it, in cash, a collateral sum at least equal to 103% of the closing value of such undelivered Deposit Securities on the relevant Dealing Day, until the date of delivery of all such undelivered securities (or the date on which the Company acquires all such Deposit Securities in the open market), plus any transfer taxes associated with the purchase by the Company of those Deposit Securities; or (c) require a letter of credit acceptable to it for such purpose. Cash collateral will be used following the default on the delivery of a Deposit Security. Securities that have a standard market settlement date past the settlement period provided for above are deemed “non delivered Deposit Securities” and therefore cash collateral will be required until the Deposit Securities are delivered. The cash collateral will be marked to-market on a daily basis and additional collateral will be requested if the value of the security exceeds the value of the cash initially received. Once the security in question has been delivered, the cash collateral will be returned to the Authorised Participant. If the applicant fails to deliver to the Depositary the Deposit Securities by the designated time, the Company reserves the right to utilise the relevant cash collateral to acquire the Deposit Securities. In the event that any cash collateral is used to purchase the security omitted from the Deposit Securities, any excess cash will be returned once the security has settled. The Company will notify the Authorised Participant in advance of taking action to purchase the Deposit Securities with cash collateral. No Creation Unit will be issued and settlement will not occur until such time as the Deposit Securities are received by the Depositary, either through delivery by the applicant or acquisition by the Company utilising the relevant cash collateral or through receipt by the Company of the cash collateral. If the actual cost to the Company of acquiring the Deposit Securities (including any trading fees and stamp duty taxes) and the Custody Transaction Fee payable to the Depositary exceed the value of such cash collateral held the applicant will be required to promptly reimburse the Company the difference on demand. No interest will be paid on any collateral held in these circumstances.
Settlement - Cash (Non-Directed)
Subscriptions for ETF Shares may be settled in cash. The Company will publish a “ Portfolio Composition File ” for each Fund dealing in cash. Trading costs incurred by the trading of cash will be an expense of the Authorised Participant and a basis point transaction fee or, if the Investment Manager deems it appropriate, the actual trading cost, the level and basis of which will be determined by the Investment Manager (the Cash Creation Fee as detailed below) will be applied to the gross subscription amount. In addition, Custody Transaction Fees (as detailed above), if any, outlined in Appendix 1 of this Prospectus or in a relevant Supplement will apply.
The normal settlement period for Creation Unit subscriptions for each Fund is set out either in A Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund. The Directors retain the discretion to accept settlements for Creation Unit subscriptions outside of the normal settlement periods. However, the settlement period for Creation Unit subscriptions shall not in any event exceed ten Business Days from the relevant Dealing Day.
Investors should note that subscriptions for ETF Shares in the LifeStrategy® ETFs may not generally be settled in cash (non-directed).
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Settlement - Cash (Directed)
An Authorised Participant settling a subscription order for ETF Shares in cash may request that the Investment Manager (or the Sub-Investment Manager) trade the underlying securities with a particular broker (selected from a list authorised by the Investment Manager which may include other Authorised Participants or parties related to Authorised Participants), who may, at its discretion, transact accordingly. Alternatively, Authorised Participants may elect to have a broker appointed on their behalf and should contact the Investment Manager to arrange for this.
Authorised Participants should contact the designated broker to inform them of the trade, prior to the Investment Manager (or its delegate) transacting for the underlying securities with the specified broker. No liability will attach to the Investment Manager (or the Sub-Investment Manager) in the event that the trade, or a portion thereof, is not effected due to a failed trade, delayed settlement, market closure or market disruption, omission or error or similar by either the investor or the designated broker. An Authorised Participant or designated broker defaulting on or changing the terms of any part of the transaction will bear all risks and costs in connection therewith and the Investment Manager (or the Sub Investment Manager) may transact with another broker and amend the terms of the Authorised Participant’s subscription or redemption to take account of the default and the changes to the terms. Fees for directed cash creations and redemptions will vary.
Any Authorised Participant requesting a cash (directed) settlement for a subscription order will be responsible for the total cost of purchasing the underlying securities which will comprise: (a) the full price of the securities purchased; and (b) any fees or costs incurred, including Custody Transaction Fees (as detailed above), the Cash Creation Fee (as detailed below) and brokerage fees and this total may exceed the Net Asset Value per Share applicable to the relevant subscription order.
The normal settlement period for Creation Unit subscriptions for each Fund is set out either in A Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund. The Directors retain the discretion to accept settlements for Creation Unit subscriptions outside of the normal settlement periods. However, the settlement period for Creation Unit subscriptions shall not in any event exceed ten Business Days from the relevant Dealing Day.
Collection Account
Subscriptions monies received in respect of a Fund in advance of the issue of Shares may be held in a Collection Account in the name of the Company. Investors should refer to the risk statement ‘ Umbrella Cash Subscription and Redemption Account (“Collection Account”) Risk ’ in the Section of this Prospectus entitled ‘ Risk Factors ’ for an understanding of their position vis-a-vis monies held in a Collection Account.
Cash Creation Fee
A Fund may charge a Cash Creation Fee to cover the trading costs incurred by the trading of cash on cash subscriptions for ETF Shares being a basis point transaction fee or, if the Investment Manager deems it appropriate, the actual trading cost, the level and basis of which will be determined by the Investment Manager, up to such amount as specified in either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund. The fee is paid directly into the assets of the relevant Fund to offset the cost of buying and selling securities and is not a subscription fee payable to the Manager or to any other person. The maximum of any such fee is 2% of the gross subscription amount as detailed in either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund.
Anti-Dilution Levy
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See the “ Anti-Dilution Levy ” section of this Prospectus for details of the anti-dilution fee which may be charged.
Settlement
The normal period within which cash settlement of purchase monies for each Fund falls due is set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund. The Directors retain the discretion to accept cash settlements for purchase monies outside of the normal settlement periods. However, the settlement period for cash settlement of purchase monies shall not in any event exceed ten Business Days from the relevant Dealing Day. The Portal Operator will send a contract note by the close of the Business Day after the relevant Dealing Day. If full settlement of purchase monies is not made within the required time, then the Company reserves the right to make an administration charge and recover any shortfall. Purchase monies must be received by telegraphic transfer. The applicant shall bear all bank costs or other associated costs which are levied on such transfer. The Company reserves the right to accept other forms of payment in its discretion; however, no cheques will be accepted, subject to the ultimate discretion of the Company.
Shares held through Recognised Clearing and Settlement Systems
Distributions of dividends and other payments with respect to Shares in the Company held through Recognised Clearing and Settlement Systems will be credited to the cash accounts of such Recognised Clearing and Settlement Systems’ participants in accordance with the relevant system’s rules and procedures. Any information or Company communications to a Shareholder holding Shares in a settlement system, including voting or proxy materials, annual reports etc., will be transmitted to those settlement systems capable of receiving and processing such information for transmission to investors.
Secondary market sales of Shares or purchases of Shares will be conducted in accordance with the normal rules and operating procedures of the relevant stock exchange(s) and settlement systems and will be settled using the normal procedures applicable to trading securities and the rights of secondary market purchasers will be governed accordingly. See the section of the Prospectus entitled “ The Secondary Market ” for further information.
Currency of Subscription
Subscriptions for Shares must be in the currency of denomination of the relevant Share class.
General
Acceptance of Orders
The Company reserves the right not to accept any subscriptions for Shares until the Administrator receives the original signed Application Form and all of the necessary anti-money-laundering documentation and all anti-money-laundering requirements are satisfied. The Company reserves the absolute right to reject a subscription order for any reason. By way of example, and without in any way limiting that right, a subscription request could be rejected if: (i) the Deposit Securities delivered in payment for the Creation Unit are not as specified by the Portal Operator via the Portal; (ii) acceptance of the Fund Deposit (securities or cash) would have certain adverse tax consequences to the Fund; (iii) the acceptance of the Fund Deposit would, in the opinion of the Company’s counsel, be unlawful; (iv) circumstances outside the control of the Fund, the Portal Operator or the Administrator make it impractical to process a subscription request; or (v) the acceptance of the Fund Deposit would otherwise, in the discretion of the Company, have an adverse effect on the Fund or its Shareholders. On any Dealing Day, in respect of which one or more Directors or their delegates determine that the acceptance of a cash subscription may have an adverse effect on a Fund or its Shareholders, the Company may only accept in-kind subscriptions for such Fund on that Dealing Day and may reject any cash subscription received in respect of that Fund. The Company will notify the Authorised Participant if it rejects the Authorised
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Participant’s subscription request. The Company, the Portal Operator and the Administrator are under no duty, however, to give notification of any defects or irregularities in the delivery of Fund Deposits, nor shall either of them incur any liability for the failure to give any such notification, however the Fund, the Portal Operator and the Administrator will endeavour to contact the Authorised Participant in the event of defects or irregularities in the delivery of Fund Deposits.
The Company also reserves the general right to reject any subscription request, including switches from other Funds for example in the case of significantly large switching requests which would impact other Shareholders. In addition, see section entitled “ Market Timing and Frequent Trading ” below. Any subscription for Shares received or deemed to be received by the Company may be withdrawn or amended only with the consent of the Directors or, where such request to withdraw or amend a subscription request is received prior to the Cut-Off Time for the relevant Dealing Day, with the consent of their duly appointed delegate(s).
The Company reserves the right to limit the issue of Shares in any Fund or class of Shares where the liquidity within the Fund or class is deemed to be detrimental to its performance by closing the Fund or class to new subscriptions or switches into it, either from existing Shareholders or new applicants or both. An example of the circumstances in which this may occur could be where the Company determines that it would be prudent to limit the capacity or the size of a Fund, the investment objective of which is aimed at a particular market or sector.
Amendments to Shareholder Details
Any amendments to a Shareholder’s registration details and payment instructions will only be effective upon receipt of a duly authorised written instruction from the relevant Shareholder. Pursuant to the Administrator’s standards, an original wet ink instruction may be required.
Failure to Settle
Under the terms of the Application Form, investors accept responsibility and liability for any failure by them to settle subscription orders in accordance with the procedures and deadlines set out above. Each investor agrees that any costs for which such investor becomes liable as a result of his or her failure to provide subscription monies in accordance with the procedures and deadlines set out above shall be recoverable by the Company and authorises the Manager to redeem such number of Shares held by a Shareholder in the Company in order to satisfy any such liability to the Company and to pay the proceeds of any such redemption into the assets of the relevant Fund. In the event that there is a failure to provide subscription monies, any provisional allotment of Shares will be cancelled.
Timing of Orders
Orders received after the Cut-Off Time for a Dealing Day will generally be held over until the next Dealing Day. The Directors may, however, at their sole discretion in exceptional circumstances, accept subscription requests or permit an applicant to withdraw or amend any subscription request after the Cut-Off Time for the relevant Dealing Day, provided that the request to subscribe or to amend or withdraw a subscription order is received before the Valuation Point for the Dealing Day to which the subscription relates.
Documents the Investor will receive
ETF Shares in a Fund will not be issued in Dematerialised (or uncertificated) Form and no temporary documents of title or share certificates will be issued, other than the Global Share Certificate required for the International Central Securities Depositaries (being the Recognised Clearing and Settlement Systems through which the ETF Shares will be settled).
Market timing and frequent trading
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Each of the Funds of the Company is designed and managed to support longer-term investment and active trading in Shares is discouraged. Short-term or frequent trading into and out of a Fund as well as market timing may harm performance by disrupting fund management and by increasing expenses. The Directors may, at their discretion, refuse to accept requests for purchase of, or requests for switching of, Shares, especially where transactions are deemed disruptive, particularly from possible frequent traders or market timers. Some investors try to profit from a strategy called market-timing – switching money into funds when they expect prices to rise and taking money out when they expect prices to fall within a short period of time.
In general, market timing refers to the investment behaviour of a person (or group of persons) buying, selling or switching investments in anticipation of making a profit on the basis of predetermined market indicators. Market timing can include elements of frequent trading and vice-versa. Both behaviours will tend to include frequent purchases and redemptions of Shares with a view to profiting from anticipated changes in market prices between Valuation Points or arbitraging on the basis of market price changes subsequent to those that are used in a Fund’s valuation. Such market timing and frequent trading activities are disruptive to fund management, may lead to additional dealing charges - which cause losses/dilution to a Fund - and may be detrimental to performance and long term interests. Accordingly, the Company has adopted special policies to discourage this type of short-term trading. Specifically, the Directors have discretion to refuse to accept a subscription request in respect of any Fund at any time without notice and regardless of size. In particular, the Directors reserve the right to reject any purchase request, including exchanges from other Funds that they regard as disruptive to the efficient management of the portfolio. A purchase request may be rejected because of timing of the investment or because of the history of excessive trading by the investor. The Company may in its absolute discretion and without providing any reason, notice and regardless of size, reject any application for subscription or switching of Shares from applicants that it considers to be associated with market timing activities. The Company may also combine Shares which are under common ownership or control for the purposes of determining whether the activities of investors can be deemed to involve market timing or frequent trading.
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REDEEMING SHARES
Procedure
Every Shareholder is entitled on any Dealing Day to redeem its Shares. Valid instructions by Authorised Participants to the Portal Operator through the Portal to redeem Shares in a Fund will be processed at a redemption price calculated with reference to the next Valuation Point for that Fund following receipt of the instruction, except in the case where dealing in a Fund has been suspended as set out under the “ Suspension of Dealings ” section of this Prospectus. For the avoidance of doubt, all redemption instructions received before a Fund’s Cut-Off Time for a Dealing Day will receive that Dealing Day’s Valuation Point. All redemption instructions received after a Fund’s Cut-Off Time for a Dealing Day will receive the next Dealing Day’s Valuation Point.
To redeem Shares, send the dealing request by approved electronic transmission to the Portal Operator through the Portal. Requests to redeem Shares may also be made by mail or telephone (telephone: +44 203 753 6989 or such other numbers of the Portal Operator as may be published on https://globaletf.vanguard.com from time to time; for the postal address see the Directory section of this Prospectus.
Redemption orders are irrevocable and may not be withdrawn without the Company’s consent except when the redemption of Shares has been temporarily suspended. The Directors or their duly appointed delegate(s) have complete discretion to permit an applicant to withdraw or amend any redemption request after it has been submitted provided that the application to withdraw or amend is received before the Cut-Off Time for the relevant Dealing Day. In exceptional circumstances, the Directors, in their sole discretion, may accept a redemption request or may permit an applicant to withdraw or amend a redemption request after the Cut-Off Time for the relevant Dealing Day, provided that the request to redeem or to amend or withdraw a redemption request is received before the calculation of the Net Asset Value per Share for the Dealing Day to which the application relates. An instruction to the Portal Operator via the Portal to redeem Shares, although irrevocable, will not be settled by either the Company or the Administrator if the redemption represents Shares where settlement on the earlier purchase of those Shares has not yet been made in full or if insufficient documentation (including the original Application Form) or anti-money laundering information has not been received by the Administrator. Redemption orders will be processed only where payment is made to the account of record.
Redemption of ETF Shares
To be eligible to place a redemption order for ETF Shares with the Company, the investor must be an Authorised Participant. Investors that are not Authorised Participants must make appropriate arrangements with an Authorised Participant in order to redeem. For a current list of Authorised Participants, contact the Administrator. ETF Shares may be redeemed only in Creation Units (and/or the cash equivalent). The Directors may, at their sole discretion accept cash redemption orders in less than Creation Units.
Settlement - In-kind
An Authorised Participant tendering a Creation Unit generally will receive redemption proceeds consisting of:
(1) a basket of Redemption Securities; plus (2) a Redemption Balancing Amount in cash equal to the difference between (i) the Net Asset Value of the Creation Unit being redeemed, as next determined after receipt of a request in proper form, and (ii) the value of the Redemption Securities; less (3) a Custody Transaction Fee (as described below);
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(4) applicable trading charges related to stamp duty, SDRT and other similar transfer taxes, and other duties (as detailed in either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund); and (5) a Basket Customisation Fee (if any).
See the “ Risk Factor ” section of this Prospectus for further information on the Basket Customisation Fee.
If the Redemption Securities have a value greater than the Net Asset Value of a Creation Unit, the redeeming Authorised Participant will be required to pay the Redemption Balancing Amount in cash to the Fund, rather than receiving such amount from the Fund.
Settlement - Cash (Non-Directed)
For cash redemptions of Creation Units, an Authorised Participant will receive redemption proceeds consisting of:
(1) the redemption proceeds; less (2) a Custody Transaction Fee (as described below); and (3) a Cash Redemption Fee (as described below).
Subject to the requirements of the Central Bank, investors should note that ETF Shares in the LifeStrategy ® ETFs will not generally be redeemed in cash (non-directed).
Settlement - Cash (Directed)
An Authorised Participant settling a redemption order for ETF Shares in cash may request that the Investment Manager trade the underlying securities with a particular broker (selected from a list authorised by the Investment Manager which may include other Authorised Participants or parties related to Authorised Participants), who may, at its discretion, transact accordingly. Alternatively, Authorised Participants may elect to have a broker appointed on their behalf. For more detail, please refer to the section entitled “ Buying Shares – Settlement –Cash (Directed )”.
Any Authorised Participant requesting a cash (directed) settlement for a redemption order will receive the total value realised from the sale of the underlying securities less any fees (including the Custody Transaction Fee (as described above) and the Cash Redemption Fee (described below)) or costs incurred.
Collection Account
Cash redemption proceeds may, pending payment to the relevant Shareholder, be held in a Collection Account, including a Held Redemption Account, in the name of the Company. Investors should refer to the risk statement “ Umbrella Cash Subscription and Redemption Account (“Collection Account”) Risk ” in the Section of this Prospectus entitled “ Risk Factors ” for an understanding of their position vis-a-vis monies held in any such account.
General
The Company makes available after the close of each Business Day, a list of the names and the number of shares of each “ Redemption Security ” to be included in the next Dealing Day’s Redemption Basket (subject to possible amendment or correction). The Redemption Basket provided to an Authorised Participant redeeming a Creation Unit may not be identical to the basket of Deposit Securities required of an Authorised Participant purchasing a Creation Unit. If a Fund and a redeeming Authorised Participant mutually agree, the Company may provide the Authorised Participant with a basket of Redemption Securities that differs from the composition of the Redemption Basket published by the Portal Operator through the Portal. The Company reserves the right to deliver cash-in-lieu of any
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Redemption Security for the same reason it might accept cash-in-lieu of a Deposit Security, as discussed in the “ Buying Shares ” section of this Prospectus.
The Company imposes a Custody Transaction Fee on redemptions to compensate the relevant Fund for the custody transaction costs associated with the redemption of Creation Units. The Custody Transaction Fee will be an estimate calculated by and paid to the Manager who will in turn pay the Custody Transaction Fee as invoiced by the Depositary. In the event that there is any excess of the amount paid by the Authorised Participant to the Manager over the amount invoiced by the Depositary, such excess will be used in satisfaction of the total custody charges payable to the Depositary. This may result in the portion of the OCF payable by the Manager to the Depositary, in respect of aggregate custody transaction fees, being reduced and accordingly the amount retained by the Manager may be increased. Should this occur, any such reduction will be negligible. The Custody Transaction Fee may be waived by the Manager and, in such instances, the Custody Transaction Fee will be paid by the Manager out of its fee. Any such waiver will be notified to Shareholders. The Custody Transaction Fee for redemptions for each Fund is set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund.
In addition, when the Company permits or requires (for example, where the specified Redemption Securities are not eligible for transfer, or not eligible for trading by an Authorised Participant or in the event that in-kind trading is not permissible in particular countries or markets) a redeeming Authorised Participant to receive cash-in-lieu of one or more Redemption Securities, the Authorised Participant will be charged an additional amount on the cash-in-lieu portion of its redemption (the “ Basket Customisation Fee ”). The amount of this charge will vary as determined by the Company at its sole discretion, but will not be more than is reasonably needed to compensate the Fund for the transaction costs including, if applicable, the estimated market costs of selling portfolio securities to raise the necessary cash. See the “ Risk Factor ” section of this Prospectus for further information on the Basket Customisation Fee.
Redemption requests for Creation Units must be submitted to the Portal Operator through the Portal by an Authorised Participant before the Cut-Off Time for the relevant Dealing Day. An order to redeem a Creation Unit is deemed received for a Dealing Day if (1) such order is received by the Portal prior to the Cut-Off Time for such Dealing Day; and (2) all other procedures set forth in the Application Form are properly followed. If a redemption order in proper form is submitted to the Portal Operator through the Portal by an Authorised Participant prior to the Cut-Off Time for the relevant Dealing Day, then the value of the Redemption Securities and the Redemption Balancing Amount will be determined by the Fund on such Dealing Day. A redemption request is considered to be in “proper form” if: (1) an Authorised Participant has transferred or caused to be transferred to the Administrator the Creation Unit being redeemed through the book-entry system of the Recognised Clearing and Settlement System so as to be effective by the deadline for settlement of redemptions as specified for the relevant Fund either in A Appendix 1 to this Prospectus or otherwise in the relevant Supplement; and (2) a request satisfactory to the Company is received by the Portal Operator through the Portal from the Authorised Participant within the time periods specified herein.
An Authorised Participant must deliver to the Fund, the ETF Shares it is seeking to redeem by the relevant deadline for settlement of redemptions. If an Authorised Participant has failed to deliver all of the ETF Shares it is seeking to redeem by the relevant time, the Fund shall be entitled to cancel the redemption order or may require the Authorised Participant to pay to it, in cash, a collateral sum at least equal to 103% of the closing value of such undelivered ETF Shares on the relevant Dealing Day, until the date of delivery of all such undelivered ETF Shares. The receipt of this will be deemed to have settled the redemption in full. Cash collateral will be used following the default on the delivery of the ETF Shares. In all cases the Company shall be entitled to charge the redeeming investor for any costs sustained by the Fund as a result of the late delivery or failure to deliver. The cash collateral will be marked-to-market on a daily basis and additional collateral will be requested if the value of the ETF Shares exceeds the value of the cash initially received. Once the ETF Shares in question have been delivered, the cash collateral will be returned to the Authorised Participant. Redemption proceeds will
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not be paid until such time as the relevant ETF Shares are received by the Fund, either through delivery by the applicant or the receipt of the relevant collateral. No interest will be paid on any collateral held in these circumstances.
The Company reserves the right, at its sole discretion, to permit a redeeming Authorised Participant to receive its redemption proceeds in cash, where requested by the redeeming Authorised Participant in situations where the original subscription was made in-kind. In such cases, the Authorised Participant will receive a cash payment equal to the Net Asset Value of its ETF Shares based on the Net Asset Value of those ETF shares as at the relevant Dealing Day in respect of which a request received in proper form relates (minus a Cash Redemption Fee as described below).
The Company reserves the right, at its sole discretion, to permit a redeeming investor to receive its redemption proceeds in-kind, where requested by the redeeming investor in situations where the original subscription was made in cash. In such cases, the investor would receive securities equal to the Net Asset Value of its ETF Shares based on the Net Asset Value of those ETF shares as at the relevant Dealing Day in respect of which a request received in proper form relates (minus a Custody Transaction Fee and a Basket Customisation Fee, if any).
Where an investor who has subscribed for ETF Shares in cash subsequently submits a redemption request, the Company and the investor may agree that such redemption will be paid in-kind provided the asset allocation for the redemption in-kind is approved by the Depositary. If a redeeming Shareholder requests redemption of a number of shares representing 5% or more of the Net Asset Value of a Fund as at the Dealing Day in respect of which a request in proper form relates, the Directors may, in their sole discretion redeem the shares by way of a redemption in-kind. In such cases, the investor would receive securities equal to the Net Asset Value of its ETF Shares based on the Net Asset Value of those ETF Shares as at the relevant Dealing Day in respect of which a request received in proper form relates (minus a Custody Transaction Fee and a Basket Customisation Fee, if any). In addition, the Directors will, if requested by the redeeming Shareholder, sell the securities, the subject of the redemption, on behalf of the Shareholder. The cost of the sale can be charged to the Shareholder. Redemption in kind is a mechanism that can be used for liquidity management and can be employed by the Manager but it has not been selected by the Manager as an LMT (as defined below) for the purpose of compliance with the UCITS Regulations. The ability to use this redemption in kind mechanism is without prejudice to the Company’s ability to deliver, during the course of regular ETF dealing activities, in whole or in part, underlying securities held by, or on behalf of, the Company to an Authorised Participant or market maker to satisfy redemption orders, which shall not be considered an activation of an LMT (as defined below).
If a redeeming investor (or an Authorised Participant through which it is acting) is subject to a legal restriction with respect to a particular security included in the basket of Redemption Securities, such investor may be paid an equivalent amount of cash-in-lieu of the security.
Deliveries of redemption proceeds by the Funds will normally be made within the time periods specified for each Fund either in Appendix 1 to this Prospectus or otherwise in the Supplement for the relevant Fund. In certain situations, including where settlement in any market requires the delivery of in-kind redemption proceeds or due to the schedule of holidays in certain countries, deliveries of redemption proceeds may take place outside of the normal settlement periods. The settlement period for redemption proceeds shall not in any event exceed ten Business Days from the day on which the redemption request is received in proper form.
In the event that cash redemptions of ETF Shares are permitted or required in respect of a Fund, proceeds will be paid to the Authorised Participant redeeming shares as soon as practicable after the date of redemption, normally within T+1 or T+2 as specified for the relevant Fund either in Appendix 1 to this Prospectus or otherwise in the relevant Supplement, but in any event no later than T+10.
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Liquidity Management Tools
The Manager employs an appropriate liquidity management system and has adopted procedures to monitor the liquidity risk of the Funds and to ensure that the liquidity profile of each Fund’s investments complies with its underlying obligations. The Manager regularly conducts stress tests under normal and exceptional liquidity conditions to assess and monitor the liquidity risk of the Funds.
The liquidity management system employed by the Manager includes the selection, calibration, activation and deactivation of liquidity management tools (“ LMTs ”) as referred to in Schedule 2A of the UCITS Regulations.
The Manager has selected the LMTs set out below to manage each Fund’s liquidity risk under different market conditions, taking into consideration, among other things: the liquidity profile, investment strategy and investor base, of the Fund, as well as the results of liquidity stress testing.
The LMTs will be applied at the level of each Fund and will, therefore, be applicable for all Share Classes of the relevant Fund.
(i) Cash redemption fee – please refer to the section of this Prospectus entitled “ Redeeming Shares ” – “ Cash Redemption Fee ” for information on the conditions under which the Manager may activate this LMT.
(ii) Anti-dilution levy – please refer to the section of this Prospectus entitled “ Anti-Dilution Levy ” for information on the conditions under which the Manager may activate this LMT.
(iii) Redemption gate – please refer to the section of this Prospectus entitled “ Redeeming Shares ” – “ General ” for information on the conditions under which the Manager may activate this LMT.
(iv) Suspension of subscriptions, redemptions and conversions– please refer to the section of this Prospectus entitled “ Temporary Suspension of Dealing in Shares ” for information on the conditions under which the Manager may activate this LMT.
The Company will without delay notify the Central Bank where any of the LMTs listed in (i) to (iv) above are activated or deactivated in a manner that is not in the ordinary course of business. Please see the section of this Prospectus entitled “ Temporary Suspension of Dealing in Shares ” for further details on the notification requirements applicable to the activation or deactiviation of the suspension of subscriptions, redemptions and conversions.
Mandatory Redemption
If any redemption order reduces the Shareholding to below any minimum holding required in respect of a Fund, such order may be treated as an order to redeem the entire Shareholding.
Cash Redemption Fee
The Company may charge a redemption transaction fee on Share redemption orders in cash of any Share class being a basis point transaction fee or, if the Investment Manager deems it appropriate, the actual trading cost, the level and basis of which will be determined by the Investment Manager, up to such amount as specified either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund. The fee is paid directly into the assets of the relevant Fund to offset the cost of buying and selling securities and is not a redemption fee payable to the Manager or to any other person. The maximum of any such fee is 2% of the gross redemption proceeds (i.e. the NAV per Share multiplied
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by the number of Shares being redeemed) as detailed either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund.
Anti-Dilution Levy
See the “ Anti-Dilution Levy ” section of this Prospectus for details of the anti-dilution fee which may be charged.
Holding Over
If total redemption requests received in respect of Shares of a particular Fund on any Dealing Day represent in aggregate 10% or more of the relevant Fund’s Net Asset Value or 10% or more of the Net Asset Value of that Fund, the Manager shall be entitled at its discretion to reduce each such request for redemption pro rata so that the total number of Shares of such Fund to be redeemed on that Dealing Day represent no more than 10% of the relevant Fund’s Net Asset Value or no more than 10% of the total number of Shares of that Fund in issue on that Dealing Day or such higher percentage as the Manager in its sole discretion may determine. Any part of a redemption request to which effect is not given by reason of the exercise of this power shall be carried forward to the next (and, if necessary, subsequent) Dealing Day(s) (in relation to which the Manager shall have the same power) and redeemed in accordance with the Constitution until all the Shares of the Fund to which the original redemption request related have been redeemed. A Shareholder may, by notice in writing to the Distributor, withdraw any part of a redemption request to which effect is not given on the Dealing Day in respect of which the request was originally made as a result of the Manager’s exercise of this discretion.
Mandatory Redemption
The Company may upon such notice as may be required by law or regulation redeem all of the issued Shares of any class if a Special Resolution of that class is passed providing for such redemption at a general shareholder meeting of the holders of the Shares of that class, or if the redemption of the Shares in that class is approved by a resolution in writing signed by all of the holders of the Shares in that class, or if the Net Asset Value of the relevant Fund falls below such amount as shall be specified for the relevant Fund either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund, or if the relevant Shares cease to be listed on a stock exchange, or if the Directors in their sole discretion deem it appropriate because of material administrative disadvantage or adverse political, economic, fiscal, regulatory or other changes or circumstances affecting the relevant class.
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ANTI-DILUTION LEVY
The actual cost of purchasing Shares in a Fund may be higher or lower than the value used in calculating the Share price. These costs may include dealing charges, commissions, transaction charges and the dealing spread may have a materially disadvantageous effect on a Shareholder's interest in a Fund.
To prevent this effect, known as “dilution”, the Company may charge an anti-dilution levy when Creation Units of ETF Shares are purchased or redeemed for cash. The purpose of the anti-dilution levy is to compensate the Fund for (a) the cost of investing money received through subscriptions, or (b) selling investments to fund a redemption request. In calculating the subscription/redemption price for ETF Shares which are purchased/redeemed in cash, the Company may, on any Dealing Day when there are net subscriptions/redemptions, adjust the consideration for ETF Shares which are purchased/redeemed in cash, by adding/deducting an anti-dilution levy to cover dealing costs and to preserve the value of the underlying assets of the relevant Fund. The anti-dilution levy is applied to recover expenses not fully offset by the (a) Cash Creation Fee, or (b) Cash Redemption Fee and will be payable in addition to these fees. Such charge by a Fund must be fair and in the interests of all Shareholders. It is not, however, possible to predict accurately whether dilution will occur at any point in time. The charging of an anti-dilution levy will effectively increase the purchase price of Shares or reduce the proceeds received from a redemption of Shares. The anti-dilution levy will be paid into the Fund and become part of the property of the Fund, thus protecting the value of the existing or remaining Shareholder’s interests, as relevant.
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TEMPORARY SUSPENSION OF DEALING IN SHARES
The Directors may at any time, with prior notification to the Depositary, temporarily suspend the valuation, or the issue, redemption and conversion of Shares during:
(i) the whole or part of any period when any Regulated Market on which a substantial portion of the investments for the time being comprised in the relevant Fund are quoted, listed or dealt in is closed otherwise than for ordinary holidays, or during which dealings on any such Regulated Market are restricted or suspended; or
(ii) the whole or part of any period when, as a result of political, military, economic or monetary events or other circumstances beyond the control, responsibility and power of the Directors, the disposal or valuation of investments for the time being comprised in the relevant Fund is not, in the opinion of the Directors, reasonably practicable or cannot be effected or completed normally or without prejudicing the interests of Shareholders; or
(iii) any breakdown in the means of communication normally employed in determining the value of any investments for the time being comprised in the relevant Fund or during any period when for any other reason the value of investments for the time being comprised in the relevant Fund cannot, in the opinion of the Directors, be promptly or accurately ascertained; or
(iv) the whole or any part of any period when the Company is unable to repatriate funds for the purposes of making redemption payments or during which the realisation of investments for the time being comprised in the relevant Fund, or the transfer or payment of funds involved in connection therewith cannot, in the opinion of the Directors, be effected at normal prices or normal rates of exchange or during which there are difficulties or it is envisaged that there will be difficulties, in the transfer of monies or assets required for subscriptions, redemptions or trading; or
(v) the whole or any part of any period when, as a result of adverse market conditions, the payment of redemption proceeds may, in the sole opinion of the Directors, have an adverse impact on the relevant Fund or the remaining Shareholders in such Fund; or
(vi) the whole or any part of any period after a notice of the total redemption of the Shares of any class has been given, or after a notice convening a meeting of Members for the purpose of dissolving the Company or terminating a Fund has been issued, up to and including the date of such meeting or adjourned meeting of Members; or
(vii) the whole or any part of any period during which dealings in a collective investment scheme in which the relevant Fund has invested a significant portion of its assets, as determined by the Directors, are suspended; or
(viii) the whole or any part of any period in which the repurchase of the Shares would, in the opinion of the Directors, result in a violation of applicable laws; or
(ix) upon mutual agreement between the Company and the Depositary for the purpose of the merger of the Company or any Fund with another collective investment scheme or sub-fund thereof; or
(x) any period when the Directors determine that it is in the best interests of the Shareholders to do so.
Any such suspension of the valuation, or issue, redemption and conversion of Shares shall apply equally to all Classes of the relevant Fund. Notice of any such suspension shall be published by the Company in the Financial Times and/or The Wall Street Journal l and/or through Bloomberg g and/or in such other
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newspapers and/or on or through such other media as the Directors may from time to time determine if, in the opinion of the Directors, it is likely to exceed 30 days, and shall be notified immediately to the Central Bank, Euronext Dublin and the Shareholder. A Shareholder who has requested the issue, conversion or redemption of Shares of any class will have their subscription or redemption request dealt with on the first Business Day after the suspension has been lifted unless applications or redemption requests have been withdrawn prior to the lifting of the suspension. Where possible, all reasonable steps will be taken to bring any period of suspension to an end as soon as possible.
The Manager shall notify the Central Bank immediately upon the lifting of any such temporary suspension and in circumstances where the temporary suspension has not been lifted within 21 working days of application, the Manager shall provide the Central Bank with an update on the temporary suspension at the expiration of the 21 working day period and each subsequent period of 21 working days where the temporary suspension continues to apply.
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RESTRICTIONS AND COMPULSORY TRANSFER AND REDEMPTION OF SHARES
General
Shareholders are required to notify the Company immediately in the event that: (a) they cease to be Qualified Holders; (b) they become Irish Residents (see the “ Taxation ” section of this Prospectus); (c) they cease to be Exempt Investors; (d) where applicable, the Declaration made by or on their behalf is no longer valid; (e) they hold Shares for the account or benefit of (i) a person who is not a Qualified Holder; (ii) Irish Residents; or (iii) Irish Residents who cease to be Exempt Investors and in respect of which the Declaration made on their behalf is no longer valid; or (f) they otherwise hold Shares in breach of any law or regulation or otherwise in circumstances having or which may have adverse regulatory, tax, pecuniary or fiscal consequences or material administrative disadvantage for the Company or the Shareholders.
No person may offer or sell any Shares to any person who would not be a Qualified Holder. No person other than a Qualified Holder shall be entitled to be registered or remain registered as a holder of Shares and the Directors may upon an application for any class of Shares or on a transfer of any class of Shares or at any other time and from time to time require such evidence to be furnished to them in this connection as they shall in their discretion deem sufficient and in default of such evidence being furnished to the satisfaction of the Directors, the Directors may require the redemption or transfer of such Shares pursuant to the Constitution.
Where the Directors become aware that a Shareholder (a) is not a Qualified Holder or is holding Shares for the account of a person who is not a Qualified Holder; (b) is holding Shares in breach of any laws or requirements of any country or government authority or otherwise in circumstances (whether directly or indirectly) affecting such person or persons, and whether taken alone or in conjunction with any other persons connected or not, or any other circumstances appearing to the Directors to be relevant) which, in the opinion of the Directors, might result in the Company or any Shareholder incurring liability to taxation or suffering any other adverse regulatory, pecuniary or fiscal consequences or material administrative disadvantage which the Company or Shareholder might not otherwise have incurred or suffered; or (c) is holding Shares in any Fund that the Directors have determined shall be closed to subsequent subscription and conversions on such basis and for such period as the Directors may determine, and the relevant Shares were acquired after the date on which the Directors determined that the relevant Fund should be closed as aforesaid: the Directors may (i) direct the Shareholder to dispose of those Shares to a person who is qualified or entitled to own or hold the Shares within such time period as the Directors stipulate or (ii) redeem the Shares at the Net Asset Value of the Shares as at the Dealing Day after the date of such direction to the Shareholder or following the end of the period specified for disposal pursuant to (i) above.
Under the Constitution, any person who becomes aware that he or she is holding Shares in contravention of any of the above provisions and who fails to transfer, or deliver for redemption, his or her Shares pursuant to the above provisions or who fails to make the appropriate notification to the Company, shall indemnify and hold harmless each of the Directors, the Company, the Manager, the Administrator, the Depositary, the Investment Manager and the Shareholder (each an “ Indemnified Party ”) from any claims, demands, proceedings, liabilities, damages, losses, costs and expenses directly or indirectly suffered or incurred by such Indemnified Party arising out of or in connection with the failure of such person to comply with his or her obligations pursuant to any of the above provisions.
The Constitution permit the Company to redeem the Shares where, during a period of six years, no acknowledgment has been received in respect of any contract note or other confirmation of ownership of the Shares sent to a Shareholder, and require the Company to hold the redemption monies in a separate interest bearing account for one year, after which period the monies shall accrue to the relevant Fund.
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US Persons
The Shares have not been and will not be registered under the 1933 Act, as amended. Subject to certain exceptions, the Shares may not be offered or sold in the US or offered or sold to US Persons. The Company has not been and will not be registered under the 1940 Act, as amended.
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TRANSFER OF SHARES
Procedure
Transfers of Shares must be affected in writing in any usual or common form or in any other form approved by the Directors from time to time. Every form of transfer must state the full name and address of each of the transferors and the transferees and must be signed by or on behalf of the transferors. The Directors or their delegate may decline to register any transfer of Shares unless the transfer form is deposited at the office of the Administrator or such other place as the Directors may reasonably require, accompanied by such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer and to determine the identity of the transferee. The transferor shall be deemed to remain the holder of the Shares until the name of the transferee is entered in the Register. A transfer of Shares will not be registered unless the transferee, if not an existing Shareholder, has completed an Application Form to the satisfaction of the Directors.
Restrictions on Transfer
Shares are freely transferable except that the Directors may decline to register a transfer of Shares: (i) in the absence of satisfactory evidence that the proposed transferee is a Qualified Holder; (ii) if in the opinion of the Directors the transfer would be unlawful or result or be likely to result in any regulatory, tax, pecuniary, legal or material administrative disadvantage to the Company or any Fund or the Shareholders as a whole; (iii) in the absence of satisfactory evidence of the transferee’s identity; (iv) where the Company is required to redeem, appropriate or cancel such number of Shares as are required to meet the appropriate tax of the Shareholder on such transfer; (v) if, as a result of such transfer, the transferor’s holding would drop below the Minimum Holding; (vi) to a person who is not already a holder of or entitled to become a holder of Shares of that class or (vii) to a person who is not already a Shareholder if, as a result of such transfer, the proposed transferee would not be the holder of a Minimum Holding. The Company may impose such restrictions as it believes necessary to ensure that no Shares are acquired by persons who are not Qualified Holders. A proposed transferee may be required to provide such representations, warranties or documentation as the Directors may require in relation to the above matters. In the event that the Company does not receive a Declaration in respect of the transferee where such a Declaration is required, the Company will be required to deduct appropriate tax in respect of any payment to the transferee or any sale, transfer, cancellation, redemption, repurchase or other payment in respect of the Shares as described in the section headed “ Taxation ” in this Prospectus.
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VALUATION
Valuation
The price of a Share is calculated by reference to the Net Asset Value of the Fund to which it relates and the basis of calculation of Net Asset Value is summarised in Appendix 2 .
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SHARE PRICES
Calculation of Share prices
The Net Asset Value per Share will be calculated and quoted separately for each class of Shares to reflect the different currency denominations and expense ratios to which the classes are subject. The Company deals on a forward-pricing basis at Share prices which are calculated with reference to the next Valuation Point determined for investments for the purchase, redemption or switch of Shares.
There may also be, for both purchases and redemptions by investors, an anti-dilution levy, as more particularly referred to under the “ Buying Shares” and “ Redeeming Shares” and “ Anti-Dilution Levy ” sections of this Prospectus.
Publication of prices
Details for each individual Fund are set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund.
Investors can obtain up-to-date Fund prices from the office of the Administrator. Up-to-date daily prices for each Fund of the Company may be published on https://www.ie.vanguard/products and https://www.vanguard.co.uk/uk-fund-directory/product , or on such website as set out in A Appendix 1 of this Prospectus or the Supplement for the relevant Fund, and/or on such other websites and publications as may be determined by the Company from time to time and notified to the Shareholder. In the event that the publication sources change, the Shareholder will be notified in advance and the Prospectus updated. The Shareholder can obtain up-to-date Fund prices free of charge by telephoning the Administrator at +353-1-2417105 or by fax on +353-1-2417104. The Net Asset Value per Share of each Fund will be notified by the Administrator, without delay, to Euronext Dublin following its calculation.
As the Company deals on a forward-pricing basis, the price that appears in these sources will not necessarily be the same as the one at which investors can currently deal. The Company may also, at its sole discretion, decide to publish certain Share prices on other third party websites or publications but the Company does not accept responsibility for the accuracy of the prices published in or for the non publication of prices by, these sources for reasons beyond the control of the Company.
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RISK FACTORS
Investment in any Fund entails a degree of risk. While there are some risks that may be common to a number or all of the Funds, there may also be specific risk considerations that apply to particular Funds. It is important to keep in mind one of the main axioms of investing: the higher the risk of losing money, the higher the potential reward. The reverse, also, is generally true: the lower the risk, the lower the potential reward. As you consider an investment in one or more of the Funds, you should take into account your personal risk tolerance. There can be no assurance that any Fund will achieve its investment objective. The Net Asset Value of Shares may go down as well as up, and you may not get back the amount invested or any return on your investment. Upon request by a Shareholder, information relating to risk management methods employed, including the quantitative limits that are applied and any recent developments in the risk and yield characteristics of the main categories of investments for any Fund will be provided to such Shareholder.
Investors’ attention is drawn to the following risk factors in relation to the Company and its Funds. Additional risk factors may also be set out in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund, depending on the investment strategy of the relevant Fund. This does not purport to be an exhaustive list of the risk factors relating to investing in the Company or its Funds.
Management Risk
Each index tracking Fund may not fully track its Index and may hold securities not included in its Index. As a result, each Fund is subject to the risk that the Investment Manager’s strategy and the implementation thereof, which may be subject to a number of constraints, may not produce the intended results.
Index Risks
The performance of an index tracking Fund may be negatively affected by a general decline of the securities or the market segment relating to its Index. Each index tracking Fund, invests in securities included in, or representative of, the Index regardless of their investment merit.
There can be no assurance that an Index will continue to be calculated and published on the basis described in this Prospectus or that it will not be amended significantly. The past performance of an Index is not necessarily a guide to its future performance.
A Fund whose respective Index is oriented to a specific economic sector, country or region will (subject to the diversification requirements set out in the “ Investment and Borrowing Restrictions ” of the Prospectus at Appendix 3 ) concentrate in the securities of issuers relating to that economic sector, country or region, and will be particularly subject to the risks of adverse political, industrial, social, regulatory, technological and economic events affecting such sector, country or region.
No Index Provider has any obligation to take the needs of the Company or the Shareholder into consideration in determining, composing or calculating any Index. The Company has neither control nor input into the determination of the composition or calculation of any Index.
Counterparty Risk to the Depositary
The Company will be exposed to the credit risk of the Depositary as a counterparty or to the credit risk of any depository used by the Depositary where cash is held by the Depositary or such other depositaries. In the event of the insolvency of the Depositary or any such other depositary, the Company will be treated as a general creditor of the Depositary or of such other depositary in relation to cash holdings of the Funds. The Funds’ securities will however normally be maintained by the Depositary or any other depositaries in segregated accounts and should be protected in the event of the insolvency of the
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Depositary or of any such other depositary. When such a counterparty is in financial difficulties, even if a Fund is able to recover all of its capital intact, its trading could be materially disrupted in the interim, potentially resulting in material losses.
Inaction by the Common Depositary and/or an International Central Securities Depositary
Investors that settle or clear through an International Central Securities Depositary will not be a registered Shareholder in the Company, they will hold an indirect beneficial interest in such Shares and the rights of such investors, where Participants, shall be governed by their agreement with the applicable International Central Securities Depositary and otherwise by the arrangement with a Participant of the International Central Securities Depositary (for example, their nominee, broker or Central Securities Depositaries, as appropriate). The Company will issue any notices and associated documentation to the registered holder of the Global Share Certificate, the Common Depositary’s Nominee, with such notice as is given by the Company in the ordinary course when convening general meetings. The Directors understand that the Common Depositary’s Nominee has a contractual obligation to relay any such notices received by the Common Depositary’s Nominee to the applicable International Central Securities Depositary, pursuant to the terms of its appointment by the relevant International Central Securities Depositary. The applicable International Central Securities Depositary will in turn relay notices received from the Common Depositary to its Participants in accordance with its rules and procedures. The Directors understand that the Common Depositary is contractually bound to collate all votes received from the applicable International Central Securities Depositary (which reflects votes received by the applicable International Central Securities Depositary from Participants) and that the Common Depositary’s Nominee should vote in accordance with such instructions. The Company has no power to ensure the Common Depositary relays notices of votes in accordance with their instructions. The Company cannot accept voting instructions from any persons, other than the Common Depositary’s Nominee.
Risks Associated with delays in providing complete customer due diligence
Investors should note that there is a risk that any delay in providing the Administrator with all documents required in connection with the Company’s obligations to prevent money laundering and terrorist financing may result in Shares not being issued on a particular Dealing Day.
Payments
Upon instruction of the Common Depositary’s Nominee, redemption proceeds and any dividends declared are paid by the Company or its authorised agent to the applicable International Central Securities Depositary. Investors, where Participants, must look solely to the applicable International Central Securities Depositary for their redemption proceeds or their share of each dividend payment made by the Company or otherwise to the relevant Participant of the International Central Securities Depositary (including, without limitation, their nominee, broker or Central Securities Depositary, as appropriate) for any redemption proceeds or any share of each dividend payment made by the Company that relates to their investment.
Investors shall have no claim directly against the Company in respect of redemption proceeds or dividend payments due on Shares represented by the Global Share Certificate and the obligations of the Company will be discharged by payment to the applicable International Central Securities Depositary upon the instruction of the Common Depositary’s Nominee.
Failure to Settle
If an Authorised Participant submits a dealing request and subsequently fails or is unable to settle and complete the dealing request, as the Authorised Participant is not a registered Shareholder of the Company, the Company will have no recourse to the Authorised Participant other than its contractual
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right to recover such costs. In the event that no recovery can be made from the Authorised Participant, any costs incurred as a result of the failure to settle will be borne by the relevant Fund and its investors.
Umbrella Cash Subscription and Redemption Account (“Collection Account”) Risk
The Company operates a single subscription and redemption account at umbrella level in the name of the Company (the “ Collection Account ”). Subscriptions and redemptions accounts will not be established at Fund level. All subscription and redemption monies and dividends or cash distributions payable to or from the Funds will be channelled and managed through the Collection Account.
Subscriptions monies received in respect of a Fund in advance of the issue of Shares will be held in the Collection Account in the name of the Company and will be treated as a general asset of the Company. Investors will be unsecured creditors of the Company with respect to any cash amount subscribed and held by the Company in the Collection Account until such time as the Shares subscribed are issued, and will not benefit from any appreciation in the Net Asset Value of the relevant Fund in respect of which the subscription request was made or any other shareholder rights (including dividend entitlement) until such time as the relevant Shares are issued. In the event of the insolvency of that Fund or the Company, there is no guarantee that the Fund or Company will have sufficient funds to pay unsecured creditors in full.
Payment by a Fund of redemption proceeds and dividends is subject to receipt by the Company or its delegate, the Administrator of original subscription documents and compliance with all anti-money laundering procedures. Payment of redemption proceeds or dividends to the Shareholder entitled to such amounts may accordingly be blocked pending compliance with the foregoing requirements to the satisfaction of the Company or its delegate, the Administrator. Redemption and distribution amounts, including blocked redemption or distribution amounts, will, pending payment to the relevant investor or Shareholder, be held in the Collection Account, or such Held Redemptions Account(s) as may be deemed appropriate, in the name of the Company. For as long as such amounts are held in the Collection Account or in a Held Redemption Account, the investors/Shareholder entitled to such payments from a Fund will be unsecured creditors of the Company with respect to those amounts and, with respect to and to the extent of their interest in such amounts, will not benefit from any appreciation in the Net Asset Value of the relevant Fund or any other shareholder rights (including further dividend entitlement). A redeeming Shareholder will cease to be a Shareholder with regard to the redeemed Shares as and from the relevant redemption date. In the event of the insolvency of that Fund or the Company, there is no guarantee that the Fund or the Company will have sufficient funds to pay unsecured creditors in full. A redeeming Shareholder and a Shareholder entitled to distributions should therefore ensure that any outstanding documentation and/or information required in order for them to receive such payments to their own account is provided to the Company or its delegate, the Administrator promptly. Failure to do so is at such Shareholder’s own risk.
In the event of the insolvency of a Fund, recovery of any amounts to which other Funds are entitled, but which may have transferred to the insolvent Fund as a result of the operation of the Collection Account, will be subject to the principles of Companies Act 2014 and the terms of the operational procedures for the Collection Account. There may be delays in effecting and / or disputes as to the recovery of such amounts, and the insolvent Fund may have insufficient funds to repay amounts due to other Funds.
The Company will operate the Collection Account in accordance with the provisions of the Constitution.
Broker Risk and Sub-Custody Risk
A Fund will be exposed to the credit risk of the counterparties or the brokers and dealers and exchanges through which, it deals, whether it engages in exchange or off-exchange traded transactions. A Fund may be subject to risk of loss of its assets held by a broker in the event of the broker’s bankruptcy or fraud, the bankruptcy or fraud of any clearing broker through which the broker executes and clears transactions on behalf of a Fund, or the bankruptcy or fraud of an exchange clearing house. A Fund’s
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Investments may be registered in the name of a sub-custodian or broker where, due to the nature of the law or market practice of jurisdictions, it is common market practice. Such Investments may not be segregated from the sub-custodian’s or the broker’s own investments and in the event of default of such sub-custodian or broker may not be protected and may be irrecoverable by the Fund.
Concentration Risk
To the extent that each Fund’s portfolio reflects the Index concentration in the securities in a particular market, industry, group of industries, sectors, countries or asset classes, each Fund may be adversely affected by the performance of those securities, and may be subject to increased price volatility and other risks.
Subject to the limits set out in Appendix 3, a Fund may concentrate its investments in a limited number of issuers. This may cause proportionately greater losses than if its investments had been spread over a larger number of investments. For example, where set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund, a Fund's investment in a single issuer's stock may increase due to exceptional market conditions, such as the dominance of that particular issuer in the relevant market. In particular, certain funds replicating an index may invest more than 10% and up to 20% of NAV in shares issued by the same issuer/body in order to replicate the respective index. This may be raised to 35% for a single issuer in exceptional market conditions.
Asset Class Risk
The securities in the Index or each Fund’s portfolio may underperform the returns of other securities or indexes that track other industries, groups of industries, markets, asset classes or sectors. Various types of securities or indices tend to experience cycles of outperformance and underperformance in comparison to general securities markets.
Absence of Active Market Risk
Although the ETF Shares of a Fund are traded on more than one stock exchange, there can no assurance that an active trading market for such shares will develop or be maintained.
Index Accuracy Risk
Where a Fund, in order to meet its investment objective, seeks to achieve a return which corresponds generally to the price and yield performance, before fees and expenses, of the relevant Index as published by the relevant Index Provider, there is no assurance that the Index Provider will compile the Index accurately, or that the Index will be determined, composed or calculated accurately. While the Index Provider does provide descriptions of what the Index is designed to achieve, the Index Provider does not provide any warranty or accept any liability in relation to the quality, accuracy or completeness of data in respect of the Index and does not guarantee that the Index will be in line with the described index methodology.
The Manager, the Investment Manager, the Company and affiliates do not provide any warranty or guarantee for Index Provider errors. Errors in respect of the quality, accuracy and completeness of the data may occur from time to time and may not be identified and corrected for a period of time, particularly where the indices are less commonly used. Therefore gains, losses or costs associated with Index Provider errors will be borne by the Funds and their investors. For example, during a period where the Index contains incorrect constituents, a Fund tracking such published Index would have market exposure to such constituents and would be underexposed to the constituents that should have been included in the Index. As such, errors may result in a negative or positive performance impact to the Funds and their investors. Investors should understand that any gains from Index Provider errors will be kept by the Funds and their investors and any losses resulting from Index Provider errors will be borne by the Funds and their investors.
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Index Sampling Risks
As it would be expensive and inefficient to buy and sell all securities held in the applicable Index — which is an indexing strategy called “replication”— certain index tracking Funds use index “sampling” techniques to select securities whereby such Funds select a representative sample of securities that approximates the full Index in terms of key risk factors and other characteristics. These factors include price/earnings ratio, industry weights, country weights, market capitalization, dividend yield, and other financial characteristics of stocks. While such a Fund keeps currency, country, industry sector and subsector exposure within tight boundaries compared with that of its Index, there is the risk that the securities selected for the Fund, in the aggregate, will not provide investment performance matching that of the relevant Index.
Index Tracking Risk
Unless otherwise stated, an index tracking Fund is not expected to track or replicate the performance of its respective Index at all times with perfect accuracy. Each such Fund is, however, expected to provide investment results that, before expenses, generally correspond to the price and yield performance of its respective Index. Although the Investment Manager will regularly monitor the level of correspondence of the performance of an index tracking Fund with the performance of the relevant Index (i.e. the “tracking accuracy”), there can be no assurance that any such Fund will achieve any particular level of tracking accuracy. The annual and semi-annual reports of the Company, together with the factsheet in respect of an index tracking Fund published by the Investment Manager, will disclose the level of tracking accuracy for each such Fund over the relevant periods.
The following factors may adversely affect the tracking by any such Fund of its respective Index:
(a) a Fund must pay various expenses, while its Index does not reflect any expenses;
(b) a Fund must comply with regulatory constraints, such as the Investment and Borrowing Restrictions (as set out in A Appendix 3 ), that do not affect the calculation of its respective Index;
(c) the existence of uninvested assets in the Fund (including cash and deferred expenses);
(d) the timing difference between when the Index reflects the event of dividends and when a Fund reflects the event of dividends;
(e) the temporary unavailability of certain securities comprising the Index;
(f) the presence of small, illiquid components in the Index which the Fund may not be able to, or may choose not to, acquire; and
(g) the extent that a Fund is not invested identically in respect of the composition and/or weighting of the constituent securities of its respective Index, and securities in which it is underweighted or overweighted in relation to its respective Index perform differently from its respective Index as a whole.
Screening Risk
Where specified in the relevant Supplement, a Fund may track an ESG index which screens out possible investments if such investments do not meet certain ESG criteria or may apply a separate screen to exclude securities from investment by the relevant Fund that would otherwise be part of the non screened parent index. This may affect the Fund’s exposure to certain issuers and cause the Fund to forego certain investment opportunities relative to the non-screened parent index or non-ESG indices
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which cover the same broad universes but which do not apply such screens. Therefore, the relevant Fund may: (a) perform differently to other funds, including underperforming funds that track non- ESG indices which do not seek to screen investments in this way, or (b) experience a higher degree of Tracking Error from the non-screened parent index as a result of the application of the screen as excluded companies may, or may not contribute significantly to the non-screened parent index’s overall performance. Details of the screening process for the relevant Funds can be found in the relevant Supplement.
Investors should also note that where a Fund uses FDI, such FDI on an index (e.g. swaps, futures) may provide indirect exposure to some underlying constituents which may not meet the relevant ESG criteria applied by the relevant index tracked by the Fund or which would otherwise be excluded through a Fund’s screening process on the constituents of the relevant index. Similarly, where a Fund engages in securities lending transactions for efficient portfolio management purposes, the Fund may receive collateral which may not meet the relevant ESG criteria applied by the relevant index tracked by the Fund or which would otherwise be excluded through a Fund’s screening process on the constituents of the relevant index.
In seeking to track an Index, the Investment Manager will not normally reduce or increase a Fund’s holdings in or exposure to any constituent security of an Index when to do so would reduce the tracking accuracy. Therefore, if a constituent security of an Index is decreasing in value, the relevant Fund will generally continue to hold such security (or any other securities which give exposure or equivalent price performance to such an constituent security’s price performance) until the weight of the constituent security is reduced in the Index, or the constituent security is removed from the Index, by the Index Provider. For avoidance of any doubt, it is at the discretion of the Investment Manager as to when to dispose of the constituent security after it ceases to form part of that Index .
Index Unscheduled Rebalancing Risk
Apart from scheduled rebalances, the relevant Index Provider may carry out additional ad hoc rebalances to the Index in order, for example, to correct an error in the selection of Index constituents. Where the Index of a Fund is rebalanced and the Fund in turn rebalances its portfolio to bring it in line with its Index, any transaction costs (including any capital gains tax and/or transaction taxes) and market exposure arising from such portfolio rebalancing will be borne directly by the Fund and its investors.
Unscheduled rebalances to the Index may also expose the Funds to tracking error risk, which is the risk that its returns may not track exactly those of the Index (see “ Index Tracking Risk ” for more detail). Therefore, errors and additional ad hoc rebalances carried out by the Index Provider to an Index may increase the costs and market exposure risk of the relevant Fund.
Investment in Subordinate and Callable Bonds Risk
Where specified either in A Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund, a Fund may invest in callable bonds. A callable bond is a bond that may be redeemed or ‘called’ by its issuer (i.e. by returning the principal to the investor and ceasing coupon payments) before it matures, usually subject to certain conditions or limits. Callable bonds are typically used as a hedge against interest rate risk since issuers can reduce their liabilities by paying off existing debt (i.e. by calling the bond) when interest rates fall and offering new bonds at lower interest rates. Such investments expose a Fund to the risk that, in falling interest rate markets, it may be forced to reinvest recouped principal (i.e. from bonds that have been called) at lower interest rates, with the result that the Fund’s income is reduced.
A Fund may also invest in subordinate bonds, which are a class of bond that rank lower than other types of bond in terms of the priority accorded to their repayment where the issuer of the bond is liquidated. A subordinate bond therefore carries a higher risk of default on repayment, but also pays higher returns than other classes of bond.
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Please also refer to the risk factor “ Credit and Fixed Interest Securities ”.
Investment Manager Risk
A Fund may be subject to the risk that the Investment Manager or Sub-Investment Manager selects investments that are detrimental to the performance of the Fund. The investment strategy used by an Investment Manager or Sub-Investment Manager for a Fund may not achieve the desired results under all circumstances and market conditions.
Portfolio Turnover Risk
A Fund will purchase and sell securities having regard to the effect on portfolio turnover. Higher portfolio turnover will cause a Fund to incur additional transaction costs.
Market Risk
The investments of a Fund are subject to normal market fluctuations and the risks inherent in investment in international securities markets, and there can be no assurances that capital will not be lost and that appreciation will occur.
Liquidity consideration
Liquidity represents the ease with which an investment can be converted into cash without materially affecting its value. Investments may be less liquid where they are not widely traded, or where trading is subject to restrictions imposed by an exchange, market rules or the issuer.
Certain Funds may invest in instruments whose trading volumes fluctuate significantly with market conditions and investor sentiment, creating a risk that such investments become less liquid over time. During periods of stress or adverse sentiment, these investments may become difficult to sell, potentially forcing a sale at a reduced value (or discount) or preventing timely sale altogether. This liquidity risk is especially pronounced in debt securities, small- and mid-cap equities, and securities issued by emerging market issuers, where liquidity may deteriorate rapidly and without warning due to economic, market, or political developments, changes in investor sentiment (whether justified or not), or credit rating downgrades. Market stress may also trigger increased selling pressure, further depressing prices and exacerbating illiquidity.
Liquidity risk may also arise in relation to FDI. Certain derivative positions, particularly those that are large or traded OTC, may be difficult to enter into or unwind at an advantageous time or price. Illiquidity in the underlying market or in the derivative itself may prevent a Fund from achieving its investment objectives or from efficiently managing its exposure.
Trading in certain securities or instruments may also be suspended or restricted by exchanges, regulators or other competent authorities. Such actions may impair a Fund’s ability to realise affected positions and may result in losses or delays in meeting redemption requests. An inability to liquidate portfolio positions may adversely affect a Fund’s net asset value and may limit its ability to take advantage of other investment opportunities.
Counterparty Risk
A Fund will be exposed to credit risk on the counterparties with which it trades in relation to futures and option contracts and other derivative financial instruments that are not traded on a recognised exchange. Such instruments are not afforded the same protections as may apply to participants trading futures or options on organised exchanges, such as the performance guarantee of an exchange clearing house. A Fund will be subject to the possibility of the insolvency, bankruptcy or default of a counterparty with which it trades such instruments, which could result in substantial losses to the Fund. Counterparties to
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these transactions are required to provide collateral, in the form of cash or securities, to protect the Company against the risk of that counterparty’s default.
Country Risk
The value of a Fund’s assets may be subject to uncertainties such as changes in a country’s government policies, taxation, restrictions on foreign investment, currency decisions, applicable laws and regulations, or any natural disasters or political upheaval, will weaken a country’s securities markets.
Suspension Risks
The Company may suspend calculation of the Net Asset Value and the subscription and redemption of Shares of one or more Funds under certain circumstances (see the “ Temporary Suspensions ” section of this Prospectus). During such suspension it may be difficult for an investor to buy or sell Shares, and the market price may not reflect the Net Asset Value per Share. In the event that the Company has to suspend the subscription and redemption of Shares of a Fund, or if a stock exchange on which a Fund’s underlying investments are traded is closed, it is expected that larger discounts or premiums could arise.
Emerging Markets Risks
There are certain risks involved in investing in securities of companies and governments of emerging market countries that are in addition to the usual risks inherent in investment in securities of more developed countries. These risks include:
Currency risk. Currency risk arises from fluctuations in currency exchange rates; revaluation of currencies; future adverse political and economic developments and the possible imposition of currency exchange blockages or other foreign governmental laws or restrictions.
Liquidity risk . Securities of many companies of emerging market countries may be less liquid and the prices more volatile than the securities of comparable companies in developing markets countries. Investment in foreign securities may also result in higher operating expenses due to the cost of converting foreign currency into the base currency of a Fund, higher valuation and communications costs and the expense of maintaining securities with foreign depositaries/custodians.
Market risk . Individual economies of emerging market countries may differ favourably or unfavourably from the economies of non-emerging market countries in such respects as growth of gross national product, rate of inflation, capital reinvestment, resource self-sufficiency and balance of payments position.
Political risk. Emerging market countries may also be subject to higher than usual risks of political changes, government regulation, social instability or diplomatic developments (including war) which could adversely affect the economies of the relevant countries and thus the value of investments in those countries. Governments of many emerging market countries have exercised and continue to exercise substantial influence over many aspects of the private sector through ownership or control of many companies. The future actions of those governments could have a significant effect on economic conditions in emerging markets, which in turn, may adversely affect companies in the private sector, general market conditions and prices and yields of certain of the securities in the Funds' portfolios.
Settlement risk. Certain emerging market countries are known to experience long delays between the trade and settlement dates of securities purchased or sold.
Expropriation risk . With respect to certain emerging market countries, there is a possibility of expropriation, nationalisation, confiscatory taxation and limitations on the use or removal of funds or other assets of a Fund, including the withholding of dividends.
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Regulatory risk . Certain emerging market countries may have reduced availability of public information concerning issuers, may lack uniform accounting, auditing and financial reporting standards and the regulatory practices and requirements of such countries are often less rigorous than those applied in more-developed countries.
Custody risk. Custody risk refers to the risks inherent in the process of clearing and settling trades and to the holding of securities by local banks, agents and depositories. Local agents are held to local standards of care and in general, the less developed a country’s securities market is, the greater the likelihood of custody problems. A Fund’s investments may be registered in the name of a sub-custodian where, due to the nature of the laws or market practice of jurisdictions, it is common market practice or not feasible to do otherwise and may be exposed to risk in circumstances whereby the Depositary may have no liability. Such investments may not be segregated from the sub-custodian’s own investments and in the event of default or fraud of such sub-custodian may not be protected and may be irrecoverable by the Fund.
For example, in Russia, registrars are not subject to effective government supervisions, nor are they always independent from issuers. The possibility of fraud, negligence, undue influence being exerted by the issuer or refusal to recognise ownership exists, which, along with other factors, could result in the registration of a shareholding being completely lost with the possibility of no successful claim for compensation.
Investing in Other Collective Investment Schemes
Where provided for in the relevant Supplement, a Fund may purchase shares of other collective investment schemes to the extent that such investment is consistent with its investment objective, policies and restrictions, and in the case of a Fund which is an EU MMF, the requirements of the EU MMFR. The collective investment schemes invested in by such a Fund may be UCITS and/or Alternative Investment Funds which are eligible for investment by a UCITS (“ Regulated Funds ”). The cost of investing in a Fund which purchases shares of other collective investment schemes will generally be higher than the cost of investing in an investment fund that invests directly in individual stocks and bonds because, by investing in such a Fund, an investor will indirectly bear fees and expenses charged by the underlying funds in addition to the Fund’s direct fees and expenses. Where a Fund invests substantially in other collective investment schemes, the risks associated with investing in that Fund may be closely related to the risks associated with the securities and other investments held by the other collective investment schemes. The Fund will rely on the calculation and publication of the net asset values of the underlying Regulated Funds in the calculation of its Net Asset Value. Accordingly, any delay, suspension or inaccuracy in the calculation of the net asset value of an underlying Regulated Fund will directly impact on the calculation of the Net Asset Value of the Fund.
Investors’ attention is also drawn to the section in the Prospectus headed “ Cross Investment ” in respect of investment in other Funds of the Company.
Risks Associated With Investment in Russia
Funds which invest directly in, or otherwise have exposure to Russian securities, may be subject to a number of additional risks.
Where a Fund invests in Russia, investors should be aware that the laws relating to securities investment and regulation in Russia have been created on an ad-hoc basis and do not tend to keep pace with market developments. This may lead to ambiguities in interpretation and inconsistent and arbitrary application of such regulation. In addition, investors should note that the process of monitoring and enforcement of applicable regulations is rudimentary.
Equity securities in Russia are dematerialised and the only legal evidence of ownership is entry of the Shareholder’s name on the share register of the issuer. The concept of fiduciary duty is not well
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established and so investors may suffer dilution or loss of investment due to the actions of management without satisfactory legal remedy.
Rules regulating corporate governance either do not exist or are underdeveloped and offer little protection to a minority shareholder.
The recent imposition of sanctions against Russian governmental institutions, Russian entities, and Russian individuals may result in the devaluation of Russian currency; a downgrade in the country’s credit rating; a freeze of Russian foreign assets; a decline in the value and liquidity of Russian securities, properties, or interests; and other adverse consequences to the Russian economy and Russian assets. In addition, a Fund’s ability to price, buy, sell, receive, or deliver Russian investments has been and may continue to be impaired. These sanctions, and the resulting disruption of the Russian economy, may cause volatility in other regional and global markets and may negatively impact the performance of various sectors and industries, as well as companies in other countries, which could have a negative effect on the performance of a Fund, even if the Fund does not have direct exposure to securities of Russian issuers.
Credit and Fixed Interest Securities
Funds that invest in bonds and other fixed interest securities are subject to the following risks:
Interest rate risk - the risk that the market values of securities overall will decline because of rising interest rates.
Income risk - the risk that a Fund's income will decline because of falling interest rates.
Reinvestment risk – the risk that it may not be possible to reinvest interest earned from a Fund’s investment in a manner similar to the initial investment in order to achieve the same return.
Extension risk – the risk that during periods of rising interest rates, issuers may choose to extend the repayment of principal, thus causing the investor to be unable to reinvest at higher interest rates.
Credit risk – the risk that a bond issuer will fail to pay interest and principal in a timely manner, or that negative perceptions of the issuer's ability to make such payments will cause the price of that bond to decline.
Default risk – the risk that an issuer fails to meet its payment obligations with respect to coupons payments or return of principal.
Call risk/Prepayment risk – the risk that during periods of falling interest rates, issuers of callable bonds may call (repay) securities with higher coupons or interest rates before their maturity dates. The Fund would then lose potential price appreciation and would be forced to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in the Fund's income.
Pricing risk – the risk that instruments traded on an OTC market could be valued differently by various parties due to differing pricing models and assumptions used in those models.
Short duration bond risk - where specified in the Supplement for the relevant Fund, a Fund which invests in short duration bonds may be subject to liquidity constraints and periods of lower liquidity in stressed market conditions. As a result, it may be more difficult for a Fund to buy or sell such underlying bonds and therefore could lead to increased transactional costs.
High Yield Bonds Risk
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Certain Funds may invest in “high yield” bonds (as defined in the relevant Supplement). Such securities are generally considered more speculative and are subject to a higher risk of loss of income and capital, compared to securities or investments that have a higher credit rating.
Consequently, high yield bonds are subject to increased risk that an issuer is unable to meet principal and interest payments (credit risk) and are more vulnerable to adverse changes in the issuer’s financial condition or in general economic conditions. During periods of economic downturn or rising interest rates, issuers of high yield bonds may experience financial stress, which may increase the likelihood of default or restructuring.
The market value of high yield bonds may be particularly sensitive to changes in credit spreads and investor sentiment. Negative perceptions of the issuer’s creditworthiness, whether justified or not, may lead to sharp price declines and increased volatility. In the event of default, recovery of principal may be uncertain or significantly delayed.
Please refer to “ Liquidity consideration ” above for further information.
Currency Risk
The Net Asset Value per Share will be computed in the base currency of the relevant Fund whereas the investments held for the account of that Fund may be acquired in other currencies. The base currency value of the investments of a Fund designated in another currency may rise and fall due to exchange rate fluctuations in respect of the relevant currencies. Adverse movements in currency exchange rates can result in a decrease in return and a loss of capital. The investments of each Fund may be fully hedged to its base currency. In addition, currency hedging transactions, while potentially reducing the currency risks to which a Fund would otherwise be exposed, involve certain other risks, including the risk of a default by a counterparty.
Where a Fund enters into “cross hedging” transactions (for example, utilising currency different from the currency in which the security being hedged is denominated), the Fund will be exposed to the risk that changes in the value of the currency used to hedge will not correlate with changes in the value of the currency in which the securities are denominated, which could result in losses for both the hedging transaction and the Fund securities.
Derivative Instruments Risk
Derivatives risk . Generally, a derivative is a financial contract in which the value depends upon, or is derived from, the value of an underlying asset, reference rate or index, and may relate to stocks, bonds, interest rates, currencies or currency exchange rates, commodities, and related indices. There is no assurance that any derivative strategy used by a Fund will succeed. The risks associated with the use of derivatives are different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. These additional risks include: the value of the derivative may fail to move in line with the underlying asset (a performance difference), the potential lack of liquidity of the derivative, the Fund may not be able to meet payment obligations as they arise, or the counterparties to the derivative contract may not be able to meet their contractual obligations. A derivative contract may also give rise to counterparty and collateral risks. Where a Fund seeks to obtain economic exposure to certain securities through derivatives, this may be more costly than owning
Plain Talk About Derivatives . D Derivatives can take many forms. Some forms of derivatives, such as exchange-traded futures and options on securities or indexes, have been trading on regulated exchanges for decades. These types of derivatives are standardised contracts that can easily be bought and sold, and whose market values are determined and published daily. Non-standardised derivatives (such as swap agreements) on the other hand, tend to be more specialised or complex, and may be harder to value.
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securities of the issuer directly and / or result in unanticipated tax consequences to a Fund that may affect the amount, timing and character of distributions to Shareholders. The taxation of derivatives can be complex and, depending upon the type and amount of derivatives employed by a Fund, the tax consequences of using derivatives could be worse than the tax consequences that result from direct exposure to impacted securities.
Management risk . FDI are highly specialised instruments that require investment techniques and risk analyses different from those associated with stocks and bonds. The use of FDI requires an understanding not only of the underlying instrument but also of the derivative itself, without the benefit of observing the performance of the derivative under all possible market conditions.
Liquidity risk . Liquidity risk exists when a particular FDI is difficult to purchase or sell. If a derivative transaction is particularly large or if the relevant market is illiquid (as in the case with many OTC derivatives), it may not be possible to initiate a transaction or liquidate a position at an advantageous time or price.
Pricing risk . Pricing risk exists when a particular FDI becomes extraordinarily expensive relative to historical prices or the prices of corresponding cash market instruments. Under certain market conditions, it may not be economically feasible to initiate a transaction or liquidate a position in time to avoid a loss or to take advantage of an opportunity.
Counterparty risk . Counterparty risk exists when a Fund may be exposed to credit risk and settlement risk on the counterparties with which it trades in relation to options, futures, swap contracts and other FDI that are not traded on a Regulated Market. Counterparties do not afford the same protections as may apply to participants trading futures or options on recognised exchanges, such as the performance guarantee of an exchange clearing house. Each Fund will be subject to the possibility of the insolvency, bankruptcy or default of a counterparty with which the Fund trades such instruments, which could result in substantial losses to the Company and the relevant Fund. Counterparties to these transactions are therefore required to provide collateral, in the form of cash or securities, to protect the Company and the relevant Fund against the risk of that counterparty’s default.
There is also the risk that, due to a significant change in the value of the FDI due to market conditions, the collateral posted by the counterparty would not be sufficient to cover the counterparty’s obligations under the FDI transactions, should the counterparty become insolvent, bankrupt or default prior to the receipt of additional collateral. This may result in substantial losses to the Company and the relevant Fund. The Company maintains collateralisation policies to mitigate counterparty risk, including:
- cash or securities held by the relevant Fund or by the counterparty, as applicable, are posted as collateral to cover daily mark-to-market changes to the value of the FDI. Specific haircut policies will apply depending on collateral type and risk associated with the underlying security;
- based on changes in the market value of each FDI transaction, collateral is posted, or received, daily on a net basis, to ensure that the value of the collateral covers the relevant Fund's mark to-market exposure to the counterparty; and
- in the event of a counterparty default, collateral held is immediately available (without recourse) to cover the relevant Fund's current mark-to-market exposure to a counterparty.
Collateral Reinvestment Risk . The risk that cash collateral reinvestment could result in a reduction of the value of the collateral capital (because the investment declines in value). This, in turn may cause losses to the Company and the relevant Fund because it is obliged to return collateral to the counterparty. In order to manage this risk, the Company reinvests cash collateral in accordance with the guidelines set out in Appendix 4.
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Correlation risk. Correlation risk exists when there is a lack of correlation between the change in the value of the underlying asset and that of the value of the derivative instruments used by a Fund.
Funding risk. Funding risk exists when the capacity of a Fund to fund the payment under an FDI is at risk due to higher funding costs or lack of cash flow.
Leverage risk . Because many FDI have a leveraged component, adverse changes in the value or level of the underlying asset, reference rate or index can result in a loss substantially greater than the amount invested in the derivative itself.
Market risk . Like most other investments, FDI are subject to the risk that the market value of the instrument will change in a way detrimental to a Fund’s interests. While hedging strategies involving FDI can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favourable price movements in other portfolio investments. A Fund may also have to buy or sell a security at a disadvantageous time or price because it is legally required to maintain offsetting positions or asset coverage in connection with certain FDI transactions.
Settlement risk . Derivative markets will have different clearance and settlement procedures and in certain markets there have been times when settlements have been unable to keep pace with the volume of transactions, thereby making it difficult to conduct such transactions. Delays in settlement could result in temporary periods when assets of a Fund are uninvested and no return is earned thereon. A Fund’s inability to make intended purchases due to settlement problems could cause it to miss attractive investment opportunities. Inability to dispose of portfolio securities due to settlement problems could result either in losses to a Fund due to subsequent declines in value of the security or, if it has entered into a contract to sell the security it could result in a possible liability of it to the purchaser.
Legal risk . The terms of OTC FDI are generally established through negotiation between the parties thereto. While therefore more flexible, OTC FDI may involve greater legal risk than exchange-traded instruments, which are standardised as to the underlying instrument, expiration date, contract size and strike price, as there may be a risk of loss if the OTC FDI are deemed not to be legally enforceable or are not documented correctly. There may also be a legal or documentation risk that the parties to the OTC FDI may disagree as to the proper interpretation of its terms. If such a dispute occurs, the cost and unpredictability of the legal proceedings required for a Fund to enforce its contractual rights may lead the Fund to decide not to pursue its claims under the OTC FDI. A Fund thus assumes the risk that it may be unable to obtain payments owed to it under OTC arrangements, and that those payments may be delayed or made only after the Fund has incurred the costs of litigation. Further, legal, tax and regulatory changes could occur which may adversely affect a Fund. The regulatory and tax environment for FDI is evolving, and changes in the regulation or taxation of FDI may adversely affect the value of such instruments held by a Fund and its ability to pursue its trading strategies.
Valuation risk. There may be complexities inherent in the nature of a Fund’s investments, the manner in which an index tracking Fund tracks or replicates an Index or the FDI used by a Fund. There may, therefore, be a limited number of market participants who are able to provide valuation for these instruments or indices and these market participants may also act as counterparties to these transactions. Valuations received from such market participants may therefore be subjective and there may be substantial differences between any available valuations.
Conflict of interest risk . The Company does not enter into financial derivative transactions with any entities within the Vanguard Group of Companies.
Risk Management Process
The Company employs an RMP which enables it to accurately measure, monitor and manage the various risks associated with the use of FDI. The Company will only use FDI which are specified in the RMP cleared by the Central Bank.
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Swaption Risk
A swap agreement may be combined with an option to give a swaption. Swaptions are helpful in managing possible interest rate risk occurring at some time in the future. Such an option may be structured in two different ways. On the one hand, “swaptions” are transactions that give the purchaser of the swaption the right, against payment of a premium, to exercise or not to exercise, until the agreed maturity date, its right to enter into a pre-agreed swap agreement. On the other hand, “caps”, “floors” and “collars” enable a party, against payment or receipt of a premium, to protect itself against, or to take an exposure on, the variation on the value or level of an underlying.
A major risk of off-exchange derivatives, (including swaps) is credit risk, whereby a party is exposed to the inability of its counterparty to perform its obligations under the relevant financial instrument. Please refer to the section headed “ Derivative Instruments Risk ” and in particular the “ Counterparty risk ” sub-section of same for further reference.
Foreign Securities – China A-shares Risk
China A-shares (A-shares) are shares of mainland Chinese companies that are traded locally on the Shanghai and Shenzhen stock exchanges. A-shares access will be available through the China Stock Connect Program, subject to separate quota limitations. The developing state of the investment and banking systems of the People’s Republic of China (China, or the PRC) subjects the settlement, clearing, and registration of securities transactions to heightened risks. Additionally, there are foreign ownership limitations that may result in limitations on investment or the return of profits if a Fund purchases and sells shares of an issuer in which it owns 5% or more of the shares issued within a six-month period. It is unclear if the 5% ownership will be determined by aggregating the holdings of a Fund with affiliated funds.
Due to these restrictions, it is possible that the A-shares quota available to a Fund as a foreign investor may not be sufficient to meet the Fund’s investment needs. In this situation, a Fund may seek an alternative method of economic exposure, such as by purchasing other classes of securities or depositary receipts or by utilising derivatives. Any of these options could increase a Fund’s index sampling risk (for index funds) or investment cost. Additionally, investing in A-shares generally increases emerging markets risk due in part to government and issuer market controls and the developing settlement and legal systems.
Investing in China A-shares through Stock Connect. The China Stock Connect Program (Stock Connect) is a mutual market access programme designed to, among other things, enable foreign investment in the PRC via brokers in Hong Kong. A Qualified Foreign Institutional Investor (QFII) or a Renminbi QFII license is not required to trade via Stock Connect. There are significant risks inherent in investing in A shares through Stock Connect. Specifically, trading can be affected by a number of issues. Stock Connect can only operate when both PRC and Hong Kong markets are open for trading and when banking services are available in both markets on the corresponding settlement days. As such, if one or both markets are closed on a Dealing Day, a Fund may not be able to dispose of its shares in a timely manner, which could adversely affect the Fund’s performance. Trading through Stock Connect may require pre-delivery or pre-validation of cash or securities to or by a broker. If the cash or securities are not in the broker’s possession before the market opens on the day of selling, the sell order will be rejected. This requirement may limit a Fund’s ability to dispose of its A-shares purchased through Stock Connect in a timely manner. Additionally, Stock Connect is subject to daily quota limitations on purchases into the PRC. Once the daily quota is reached, orders to purchase additional A-shares through Stock Connect will be rejected. In addition, a Fund’s purchase of A-shares through Stock Connect may only be subsequently sold through Stock Connect and is not otherwise transferable. Stock Connect utilizes an omnibus clearing structure, and the Fund’s shares will be registered in its custodian’s name on the Hong Kong Central Clearing and Settlement System. This may limit an advisor’s ability to effectively manage a Fund’s holdings, including the potential enforcement of equity owner rights.
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Investment in China Bonds
Chinese Renminbi-denominated government and policy bank bonds (collectively referred to as “ China Bonds ”) are predominately traded on the inter-bank bond market which is regulated by the People’s Bank of China (the “ PBoC ”).
Bond Connect is a mutual market access scheme that allows investors from the mainland of the PRC and overseas to trade in each other’s respective markets. It is to be one of the primary mechanisms for overseas investors to access China’s large domestic bond market alongside the China Interbank Bond Market (CIBM) Direct scheme. Bond Connect infrastructure contemplates two-way access between Hong Kong and China; however, it is currently only operational in respect of investment through Hong Kong into the CIBM (“ Northbound ” access).
Bond Connect was set up by the PBoC and the Hong Kong Monetary Authority, establishing a connection between mainland China and Hong Kong based financial institutions. The creation of Bond Connect allows investors to trade between the mainland China and Hong Kong markets electronically which eradicates the need for investor status and quotas that were required under previous access models.
Chinese Interbank Bond Market Risk
Investing in the PRC inter-bank bond market via Bond Connect is subject to regulatory risk. The governing rules and regulations under this regime may be subject to change with minimal notice and have the potential to be applied retrospectively. Any suspension imposed by the Chinese authorities on the PRC inter-bank bond market or in relation to the Bond Connect scheme would adversely impact the fund’s ability to acquire or dispose of assets.
Currency Risk (Renminbi “RMB” Specific)
RMB is the only currency of the PRC. Whilst both the onshore RMB (“ CNY ”) and offshore RMB (“ CNH ”) are the same currency, they are traded in different and separate markets. These markets operate separately and can be subject to different liquidity constraints and market forces meaning their valuations can vary.
The Bloomberg Global Aggregate Float-Adjusted and Scaled Index is valued with CNY as the base currency. As part of the standard fund management practices, it will be necessary to hedge the foreign exchange (“ FX ”) exposure arising from the inclusion of China Bonds into the base currency of the relevant Fund. FX hedging utilising CNY would match the index currency. Conversely, FX hedging in CNH would introduce incremental FX risk arising from any divergence between CHN and CNY.
Taxation Risk
There are risks and uncertainties associated with the current China tax laws, regulations and practice in respect of capital gains realised on its investments in China via Bond Connect. The Chinese government has issued guidance exempting foreign institutional investors from China’s withholding income tax regulations and value added tax in respect of bond interest income paid until December 31, 2025. However, uncertainties remain with respect to China’s tax laws, including the full scope of the exemption as well as whether investors are subject to tax on realised capital gains. It should also be noted that there is a possibility of the China tax rules being changed and taxes being applied retrospectively. There is a risk that taxes may be levied in the future for which no provision is made, which may potentially cause substantial losses. The Net Asset Value of a Fund may require further adjustment to take into account any retrospective application of new tax regulations and development, including change in interpretation of the relevant regulations by the Chinese tax authorities.
Issuer Risk
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In the event of a default or credit rating downgrade of the issuers of the debt, the bonds’ value will be adversely affected and investors may suffer a substantial loss as a result. A Fund may also encounter difficulties or delays in enforcing their rights against the issuer in relation to these bonds as the issuer is outside Hong Kong and subject to mainland Chinese laws.
Chinese treasury bonds and policy bank bonds are offered on an unsecured basis without collateral, and will rank equally with other unsecured debts of the relevant issuer (the Ministry of Finance of the PRC and the policy banks). As a result, if the issuer becomes bankrupt, proceeds from the liquidation of the issuer’s assets will be paid to holders of treasury bonds and policy bank bonds only after all secured claims have been satisfied in full. A Fund will be fully exposed to the credit/insolvency risk of its treasury bonds and policy bank bonds issuer counterparties as an unsecured creditor.
Foreign Taxes Risk
Dividends, interest and capital gains (if any) which the Company receives with respect to its investments (other than securities of Irish issuers) may be subject to taxes, including withholding taxes, in the countries in which the issuers of investments are located. It is anticipated that the Company may not be able to benefit from reduced rates of withholding tax in double taxation agreements between Ireland and such countries. If this position changes in the future and the application of a lower rate results in a repayment to the Company the Net Asset Value will not be re-stated and the benefit will be allocated to the existing Shareholders rateably at the time of repayment.
Portfolio Transaction Charges
The difference at any one time between the sale and redemption price of Shares (taking into account any portfolio transaction charges payable) in any Fund means that an investor should view his or her investment as for the medium to long term.
Basket Customisation Fee
On a redemption, when a Fund permits or requires a redeeming Authorised Participant to receive cash in-lieu of one or more Redemption Securities (for example, where the specified Redemption Securities are not eligible for transfer, or not eligible for trading by an Authorised Participant or in the event that in-kind trading is not permissible in particular countries or markets), the Authorised Participant will be charged a Basket Customisation Fee on the cash-in-lieu portion of its redemption. The amount of this charge will vary as determined by the Fund at its sole discretion, but will not be more than is reasonably needed to compensate the Fund for the transaction costs including, if applicable, the estimated market costs of selling portfolio securities to raise the necessary cash. Investors should be aware that, as a result of the imposition of the cash-in-lieu amount and the corresponding Basket Customisation Fee, investors may receive a basket of securities on a redemption in-kind, which differs from the Redemption Securities and/or the Portfolio Composition File (see the section headed “ Redeeming Shares ”).
Political and/or Regulatory Risks
The value of the assets of a Fund may be affected by uncertainties such as international political developments, changes in government policies, taxation, restrictions on foreign investment and currency repatriation, currency fluctuations and other developments in applicable laws and regulations.
Auditing and Accounting Standards Risk
The legal infrastructure and accounting, auditing and reporting standards in some countries, particularly emerging markets, in which some Funds will invest may not provide the same degree of information to investors as would generally apply internationally. In particular, valuation of assets, depreciation, exchange differences, deferred taxation, contingent liabilities and consolidation may be treated differently from international accounting standards.
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The Umbrella Structure of the Company and Segregated Liability between Funds
Pursuant to Irish law, there shall be segregated liability between the Funds and the Company should not be liable as a whole to third parties. There should not be the potential for cross contamination of liabilities between Funds. There can, however, be no categorical assurance that, should an action be brought against the Company in the courts of another jurisdiction, the segregated nature of the Funds will be upheld.
Paying Agents
Local regulations in EEA States may require the appointment of paying agents and the maintenance of accounts by such agents through which subscriptions and redemption monies may be paid, and investors who choose or are obliged under local regulations to pay subscriptions to and/or receive redemption monies via an intermediary entity, bear a credit risk against that intermediate entity with respect to: (a) subscription monies prior to the transmission of such monies to the Depositary for the account of the Company; and (b) redemption monies payable by such intermediate entity to the relevant investor.
Investment Techniques
There are certain investment risks that apply in relation to techniques and instruments that the Investment Manager may employ for efficient portfolio management purposes. To the extent that the Investment Manager’s expectations in employing such techniques and instruments are incorrect, a Fund may suffer a substantial loss having an adverse effect on the Net Asset Value per Share.
A Fund’s ability to use these techniques and instruments may be limited by market conditions, regulatory limits and tax considerations.
Ownership Limit Risk
As the Vanguard funds globally continue to grow, they are or may be negatively impacted by ownership restrictions and limitations imposed by law, by regulation or regulators, or by issuers. Ownership restrictions and limitations can apply to certain industries (for example, banking, insurance, and utilities), certain issuers (who may, for example, have mechanisms in place to prevent takeovers), or certain transactions, and will also vary significantly in different contexts.
Ownership limitations may impact a Fund’s investment activities. For example, the Fund’s Investment Manager or Sub-Investment Manager (where appointed) may be unable to purchase, or the Fund may be unable to directly hold, a security which would otherwise be purchased or held if the limitation did not apply.
For index funds, this means a Fund may not be able to track its index as closely as it would if it was not impacted by an ownership limitation. For actively managed Funds, this means a Fund may miss an opportunity to invest in a security that the Fund’s Investment Manager or Sub-Investment Manager (where appointed) would otherwise invest in if the Fund was not impacted by any ownership restrictions and / or limitation(s). These types of restrictions could impact a Fund’s performance.
When a Vanguard fund is impacted by an ownership limitation, the Vanguard Group of Companies will typically seek permission to exceed the limitation. Such permission may come with conditions such as limiting or altering the exercise of rights on behalf of a Fund, including voting rights. There is no guarantee that such permission will be granted or maintained. In such circumstances, the Investment Manager or Sub-Investment Manager (where appointed) on behalf of the Fund could be required to sell or otherwise dispose of holdings in one or more issuers to comply with limitations.
If the Fund’s Investment Manager or Sub-Investment Manager (where appointed) is unable to purchase, or if a Fund is unable to directly hold, a particular security due to an ownership limitation, it may seek
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to obtain economic exposure to that security through alternative means such as through total return swaps or other similar derivatives. Such exposure may be more costly than owning securities of the issuer directly or have tax consequences. See “Derivative Instruments Risk” section for more information.
Futures Contracts
Positions in futures contracts may be closed out only on an exchange that provides a secondary market for such futures. However, there can be no assurance that a liquid secondary market will exist for any particular futures contract at any specific time. Thus, it may not be possible to close a futures position. In the event of adverse price movements, a Fund would continue to be required to make daily cash payments to maintain its required margin. In such situations, if a Fund has insufficient cash, it may have to sell portfolio securities to meet daily margin requirements at a time when it may be disadvantageous to do so. In addition, a Fund may be required to make delivery of the instruments underlying futures contracts it holds. The inability to close options and futures positions also could have an adverse impact on the ability to effectively hedge the Fund.
A Fund will minimise the risk that it will be unable to close out a futures contract by only entering into futures that are traded on national futures exchanges and for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be substantial, due both to the low margin deposits required and the extremely high degree of leverage involved in futures pricing. As a result, a relatively small price movement in a futures contract may result in immediate and substantial loss (as well as gain) to the investor. Thus, a purchase or sale of a futures contract may result in losses in excess of the amount of investment in the contract. The relevant Fund also incurs the risk that the Investment Manager will incorrectly predict future stock market trends. However, because the futures strategies of each Fund are engaged in only for hedging purposes, the Company does not believe that the Funds are subject to the risks of loss frequently associated with futures transactions. A Fund would generally have sustained comparable losses if, instead of the futures contract, it had invested in the underlying financial instrument and sold it after the decline.
Utilisation of futures transactions by a Fund does involve the risk of imperfect or no correlation where the securities underlying the futures contracts have different maturities than the Fund securities being hedged. It is also possible that a Fund could both lose money on futures contracts and also experience a decline in the value of its Fund securities. There is also a risk of loss by a Fund of margin deposits in the event of the bankruptcy of a broker with whom a Fund has an open position in a futures contract or related option.
Repurchase and Reverse Repurchase Agreements
Repurchase agreements involve the risk that the market value of the securities sold by the Fund may decline below the prices at which the Fund is obliged to repurchase such securities under the agreement. In the event that the buyer of securities under a repurchase agreement files for bankruptcy or proves insolvent, the Fund’s use of proceeds from the agreement may be restricted pending the determination by the other party or its trustee or receiver whether to enforce the obligation to repurchase the securities.
If the seller of a reverse repurchase agreement fails to fulfil its commitment to repurchase the security in accordance with the terms of the agreement, the relevant Fund may incur a loss to the extent that the proceeds realised on the sale of the securities are less than the repurchase price. If the seller becomes insolvent, a bankruptcy court may determine that the securities do not belong to the Fund and order that the securities be sold to pay off the seller’s debts. The relevant Fund may experience both delays in liquidating the underlying securities and losses during the period while it seeks to enforce its rights thereto, including possible sub-normal levels of income and lack of access to income during the period and expenses in enforcing its rights.
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See the section entitled “ Use of Repurchase/Reverse Repurchase Agreements and Securities Lending Arrangements ” as set out in Appendix 4 of this Prospectus for further information.
Securities Lending Arrangements
Counterparty Risk . Counterparty risk exists when a Fund may be exposed to credit risk on the counterparties with which it lends securities. The risk is that the borrower of a security will default on its obligation to return the securities, which could result in losses to the Company and the relevant Fund. Borrowers are therefore required to provide collateral, in the form of cash or securities, to protect the Company against the risk of default.
The Company maintains collateralisation policies to mitigate counterparty risk, including:
ensuring that the value of the collateral required exceeds the market value of securities on loan for each security loan entered into by the Company. Specific haircut policies will apply depending on collateral type and type of security lent;
based on changes in the market value of each security loan, collateral is posted, or received, on a daily basis, to ensure that the value of the collateral held exceeds the market value of the securities on loan; and
in the event of counterparty default, the collateral held is immediately available to the Company (without recourse) to purchase securities lent but not returned.
While the Fund engages in conservative collateralisation policies intended to ensure that all securities lending is fully collateralised, to the extent that any securities lending is not fully collateralised (for example, due to timing lags associated with the posting of cash collateral), the Fund will have a credit risk exposure to the counterparty of a securities lending contract.
Additional risk mitigation against counterparty default is provided through: (i) contractual protections in the event of default by a counterparty; and (ii) ongoing monitoring of creditworthiness of counterparties.
Collateral Reinvestment Risk . The risk that cash collateral reinvestment could result in a reduction of the value of the collateral capital (because the investment declines in value). This, in turn may cause losses to the Company and the relevant Fund because it is obliged to return collateral equivalent to the value of the returned security. In order to manage this risk, the Company reinvests cash collateral in accordance with the guidelines set out in Appendix 4.
It is important to understand that when a securities lending contract is entered into, the lender has the ability to recall the loan at any time, and the borrower has the ability to return the security to the lender at any time. To the extent that collateral may need to be returned at any time, it is important that the collateral be available to return to securities borrowers. The Company maintains collateral reinvestment policies to mitigate this risk. These policies aim to preserve collateral capital and provide sufficient liquidity for the Company to: (i) fund redemption orders and (ii) return collateral to borrowers who return the loaned securities.
Conflict of interest risk . The Company does not enter into securities lending transactions with any entities within the Vanguard Group of Companies.
A Fund will have a credit risk on a counterparty to any securities-lending contract. The risks associated with lending Fund securities include the possible loss of rights against the securities should the borrower fail financially. Collateral is obtained from the counterparties to minimise this risk. Collateral is marked-to-market daily, and is immediately available (without recourse) to purchase securities in the event of counterparty default. A Fund could lose money in the event of a decline in the value of the
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collateral provided for the loaned securities or of the investments made with cash collateral. See the section entitled “Use of Repurchase/Reverse Repurchase Agreements and Securities Lending Arrangements” as set out in Appendix 4 of this Prospectus for further information.
Past performance
Past performance does not necessarily indicate future performance. It can in no way provide a guarantee of future returns.
Stock market risk
Funds that invest in stocks are subject to stock market risk, which is the chance that stock prices overall, will decline. Stock markets tend to move in cycles, with periods of rising prices and periods of falling prices.
Investment style risk
Funds are also subject to investment style risk, which is the chance that returns from the types of stocks in which a Fund invests will trail returns from the overall stock market. Specific types of stocks tend to go through cycles of doing better or worse-than the stock market in general. These periods have, in the past, lasted for as long as several years and there can be no assurances that appreciation will occur.
Secondary-Market Risks
The following factors may result in a fluctuation of the secondary market price of ETF Shares: (a) changes in the Net Asset Value per Share, (b) changes in the exchange rate between the currency(ies) in which the securities held by the relevant Fund are denominated and the currency in which the ETF Shares are traded and (c) supply and demand factors on the stock exchange on which the ETF Shares are traded. The Company cannot predict whether ETF Shares will trade below, at, or above their Net Asset Value per Share (when converted to the currency in which the Shares are traded). Price differences may be due, in large part, to the fact that supply and demand forces in the secondary market for a Fund’s ETF Shares will be closely related, but not identical, to the same forces influencing the prices of the constituent securities of that Fund’s Index trading individually or in the aggregate at any point in time.
The Net Asset Value per Share and the secondary market price of ETF Shares are expected to track each other through arbitrage. An Authorised Participant or other professional investor in calculating the price at which it would be willing to sell the ETF Shares of an index tracking Fund on the secondary market (the offer price), or to buy such Shares (the bid price), will take account of the notional price at which it could purchase (when selling Shares), or sell (when buying Shares), the requisite amounts of securities of the Index in respect of one or more Creation Unit(s) including transfer taxes (if applicable). Where the notional price of purchasing the securities comprising the Index corresponding to a subscription for a Creation Unit is less, or the notional price of selling securities comprising the Index corresponding to a redemption of a Creation Unit is more, than the secondary market price of ETF Shares in a Creation Unit, as the case may be, then an Authorised Participant may choose to arbitrage the relevant index tracking Fund by subscribing for or redeeming Creation Units. The Directors believe such arbitrage will help to ensure that the deviation of the trading bid and offer price per Share from the Net Asset Value per Share (after currency conversion) is generally minimised, however this cannot be assured.
Nominee Arrangements Risks
Investors may purchase Shares through a broker, market maker/Authorised Participant or a nominee or may hold Shares in a Fund through clearing agents. In such circumstances, the investor may not be entered as a Shareholder or appear on the Register. Where an investor does not appear on the Register, such investor will not have rights exercisable by Members, such as voting rights or rights to participate at meetings of the Company or of a Fund.
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Eurozone Crisis Risks
The current Eurozone crisis continues to raise uncertainty with some or no clarity on an enduring solution. Potential scenarios could include, among others, the departure of some, or all, relevant EU Member States from the Euro with the result that it may no longer be a valid trading currency. The transition by an EU Member State away from the Euro or the dissolution of the Euro may require the redenomination of some, or all, Euro-denominated sovereign debt, corporate debt and securities (including equity securities). This may have an adverse impact on the liquidity of the Company’s Euro denominated assets. A Eurozone break-up or exit from the Euro might also cause uncertainty as to the operation of certain terms of agreements that are governed by the law of an existing EU Member State.
Withdrawal of the United Kingdom from the European Union
On 31 January 2020, the U.K. left the EU (“ Brexit ”). The U.K. and the EU agreed a transition period from 31 January 2020 to 31 December 2020 (the “ Transition Period ”) during which the U.K. generally continued to apply EU law and the U.K. and the EU agreed a co-operation agreement in relation to future trading arrangements prior to the end of the Transition Period. Notwithstanding the above, the U.K.’s future economic and political relationship with the EU (and with other non-EU countries by agreement) continues to remain uncertain. This uncertainty may generate further global currency and asset price volatility. This may negatively impact the returns of the Funds and their investments resulting in greater costs if a Fund employs currency hedging policies. Ongoing uncertainty could adversely impact the general economic outlook and as such, this may impact negatively on the ability of a Fund and its investments to execute their strategies effectively, and may also result in increased costs to the Company.
Given these possibilities and others that are not anticipated at this time, it is difficult to predict the impact that the United Kingdom’s withdrawal from the European Union will ultimately have and what the economic, tax, fiscal, legal, regulatory and other implications will be for the asset management industry, the broader European and global financial markets generally and for collective investment schemes such as the Company. This uncertainty may continue to impact the global economic climate and may impact opportunities, pricing, availability and cost of bank financing, regulation, values or exit opportunities of companies or assets based, doing business, or having service or other significant relationships in the United Kingdom or the European Union, including companies or assets held or considered for prospective investment by a Fund.
The future application of European Union-based legislation to the investment funds industry in the United Kingdom and the European Union will ultimately depend on how the United Kingdom continues to renegotiate its relationship with the European Union. There can be no assurance that any renegotiated terms or regulations will not have an adverse impact on a Fund or its investments, including the ability of a Fund to achieve its investment objectives. Brexit may result in significant market dislocation, heightened counterparty risk, an adverse effect on the management of market risk and, in particular, asset and liability management due in part to redenomination of financial assets and liabilities, an adverse effect on the ability of the Investment Manager or a Sub-Investment Manager to manage, operate and invest a Fund and increased legal, regulatory or compliance burden for a Fund, each of which may have a negative impact on the operations, financial condition, returns or prospects of a Fund.
Brexit may also have an adverse effect on the tax treatment of a Fund and its investments. In particular, the European Union Directives which may result in reduced or nil withholding taxes being imposed on intra-group dividends, interest and royalties may no longer apply to payments made into and out of the United Kingdom, meaning that instead the United Kingdom’s double tax treaty network would need to be relied upon. Further, there may be changes to the operation of value-added taxes.
Securitisation Regulation
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The Securitisation Regulation (Regulation EU 2017/2402) (the “ Securitisation Regulation ”) applied across the EU from 1 January 2019. The Securitisation Regulation replaced the existing sector-specific approach to securitisation regulation with a new set of rules that apply to all European securitisations. UCITS such as the Company are within scope of the Securitisation Regulation. Investors should be aware that there are material differences between the previous EU risk retention requirements and the requirements which apply under the Securitisation Regulation.
The definition of “securitisation” is intended to capture any transaction or scheme where the credit risk associated with an exposure or a pool of exposures is tranched. Essentially, the definition includes any investment with tranches or classes where payments in the transaction or scheme are dependent on the performance of the exposure or of the pool of exposures and the participation in losses differs between the tranches during the life of the transaction or scheme.
Institutional investors such as a Fund must ensure that the originator, sponsor or original lender of a securitisation retains at least a 5% net economic interest in the securitisation. The current rules mean that the Investment Manager or the Sub-Investment Manager of the relevant Fund need to conduct due diligence before an investment is made in a securitisation position and continue to perform due diligence during the period the investment continues in a securitisation. This direct approach is intended to complement the existing due diligence requirements on institutional investors to verify before investing whether or not the securitising entity has retained risk. As a consequence, the direct approach requires securitising entities established in the EU to retain risk even if the investors are located outside of the EU and are not institutional investors. The Directive was amended to include a new provision stating that where UCITS are exposed to securitisation positions which do not meet the requirements of the Securitisation Regulation, the UCITS shall “in the best interests of the investors in the relevant UCITS, act and take corrective action”. The European Commission issued a proposal that, among other changes, will see Article 5 of the Securitisation Regulation amended in order to simplify the due diligence process and facilitate simpler and more streamlined investment in securitisations.
The Securitisation Regulation applies to securitisations the securities of which are issued on or after 1 January 2019 or which create new securitisation positions on or after that date. Pre-existing securitisations will be required to continue to apply the rules in place immediately prior to the effective date of the Securitisation Regulation unless new securities are issued or new positions created. The investments described herein made by a Fund may be affected by the Securitisation Regulation or any change thereto or review thereof.
European Market Infrastructure Regulation
Each Fund may enter into OTC derivative contracts. EMIR establishes certain requirements for OTC derivatives contracts, including mandatory clearing obligations, bilateral risk management requirements and reporting requirements. Investors should be aware that certain provisions of EMIR impose obligations on the Funds in relation to their transactions in OTC derivative contracts. The implications of EMIR for a Fund include, without limitation, the following:
clearing obligation: certain standardised OTC derivative transactions will be subject to mandatory clearing through a central counterparty (a “ CCP ”). Clearing derivatives through a CCP may result in additional costs and may be on less favourable terms than would be the case if such derivative was not required to be centrally cleared;
risk mitigation techniques: for those of its OTC derivatives which are not subject to central clearing, the Funds will be required to put in place risk mitigation requirements, which include the collateralisation of all OTC derivatives. These risk mitigation requirements may increase the cost to the Funds of pursuing their investment strategies (or hedging risks arising from their investment strategies); and
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reporting obligations: each of a Fund’s OTC derivative transactions must be reported to a trade repository (or, where such a trade repository us not available, ESMA). This reporting obligation may increase the costs to the Funds of utilising derivatives.
Force Majeure
Each of the Manager, Administrator, Depository, Investment Manager and other service providers to the Company and their delegates may be affected by force majeure events (i.e., events beyond the control of the party claiming that the event has occurred, including, without limitation, acts of God, fire, flood, earthquakes, outbreaks of an infectious disease, pandemic or any other serious public health concern, war, terrorism and labour strikes, major plant breakdowns, pipeline or electricity line ruptures, failure of technology, defective design and construction, accidents, demographic changes, government macroeconomic policies and social instability). Some force majeure events may adversely affect the ability of any such parties to perform their obligations to the Company until they are able to remedy the force majeure event. While it is expected that such service providers will implement contingency plans for addressing force majeure events it is possible that such force majeure events exceed the assumptions of such plans.
Certain force majeure events (such as war or an outbreak of an infectious disease) may also have a broader negative impact on the world economy and international business activity generally, or in any of the countries in which the Funds may invest specifically. Since late 2019, several countries have experienced outbreaks of a novel coronavirus (nCoV) which is from a family of viruses that cause illnesses ranging from the common cold to more severe diseases. Any spread of an infectious illness or similar public health threat could reduce consumer demand or economic output, impact on the market value of investments, result in market closures, travel restrictions or quarantines, and generally have a significant impact on the world economy and disrupt markets. The nature and extent of the impact of such events is difficult to predict but they may adversely affect the return on each Fund and its investments. Market disruptions or closures may result in the Investment Manager being unable to accurately value the assets of a Fund, or in the event of high levels of redemption, the Company may use certain liquidity management tools permitted by the Central Bank, including deferred redemptions, the implementation of fair value pricing or temporary suspension of a Fund.
Sustainability Risk
Sustainability risks can be singular or may combine with, exacerbate or contribute to other risks such as market risk, liquidity risk or operational risk, and, if they occur, could cause an actual or potential material negative impact on the value of a Fund. Examples of sustainability risks that could adversely impact a Fund may include, but are not limited to, climate change (environmental), human rights violations (social) and executive compensation (governance).
Assessment and Mitigation of Sustainability Risks
As outlined in the Sustainable Finance section above, only where the Fund’s investment objective explicitly requires, will the Investment Manager, or its delegate, take material sustainability risks) into account when assessing whether a Fund should be invested in a particular security and the Funds’ investments may therefore be exposed to material sustainability risks that could potentially diminish long-term returns of the Fund. Vanguard, through its Investment Stewardship activities, scrutinises how portfolio companies and their boards within internally-managed equity funds, oversee, manage and disclose material sustainability risks applicable to their respective businesses, to protect clients’ investments, and to help promote long-term shareholder value. For more information, see the Sustainable Finance section above.
Authorised Participant Concentration Risk
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Only an Authorised Participant may engage in creation or redemption transactions directly with the Funds. Certain Funds may have a limited number of institutions that act as Authorised Participants. To the extent that these institutions exit the business or are unable to proceed with creation and/or redemption orders with respect to the Funds and no other Authorised Participant is able to step forward to make creation and/or redemption orders, the ETF Shares may trade at a discount to the Funds’ Net Asset Value and possibly face delisting.
Currency Hedged Share Classes
Investors should be aware that currency hedging can negatively impact investment returns of the relevant Hedged Share Class due to transaction costs, spreads, market inefficiencies, risk premia, and other factors, especially for certain currencies or over the long term. The use of Hedged Share Classes may substantially limit holders of the class from benefitting if the class currency falls against the base currency and/or the currency in which the assets of the Fund are denominated. While currency hedging is likely to reduce currency risk in currency Hedged Share Classes, it is unlikely to eliminate it entirely.
All gains/losses or expenses directly arising from hedging transactions are borne separately by the Shareholders of the respective Hedged Share Classes. However, there are certain additional costs which may be caused as a result of currency hedging transactions (for example, transaction costs arising from additional trading activity that may take place as a result of share class hedging operations, such as re investing gains) that may be borne at Fund level and accordingly impact the Net Asset Value of all Share Classes in the Fund.
Investing in Smaller Companies
Smaller company stocks can trade less frequently and in smaller volumes and may be subject to more abrupt or erratic price movements than stocks of larger companies. The securities of small companies may also be more sensitive to market changes than securities in larger, more established companies as a result of factors such as less product lines, distribution channels and less financial and managerial resources. As such, this may adversely impact a Fund and/or the interests of investors.
Investment in Loans / Syndicated Loans
Investments in loans, including syndicated loans, involve significant credit and liquidity risk. These loans are typically below investment grade, meaning they depend more on a borrower’s ability to repay, than on movements in interest rates.
Syndicated loans are extended to companies with higher levels of debt and may be more vulnerable to default and price volatility. The market for these loans can also be less liquid than more traditional fixed income markets, which may make it harder for a Fund to sell investments at a favourable price or time. Settlement periods may also be extended, which may adversely affect a Fund’s Net Asset Value and may limit its ability to take advantage of other investment opportunities.
Even though these loans usually have variable interest rates, their value can still be affected by broader market conditions, including changes in credit markets and imbalances between supply and demand.
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FEES AND EXPENSES
Ongoing Charges Figure
The Company will pay out of the assets of each Fund a fixed single fee, the Ongoing Charges Figure (“ OCF ”) per Share class as set out either in Appendix 1 of this Prospectus or otherwise in the Supplement for the relevant Fund. The OCF is calculated in accordance with the methodology prescribed in ESMA guidelines CESR/10–674. This fee will be accrued daily and paid monthly. The fees and expenses paid out of the OCF include the Manager’s Fee, the Operational Fees (as disclosed below) all costs and expenses connected with the management and operating activities of the relevant Fund, including investment management and advisory fees, administration, registration, transfer agency, custody and trustee fees, the Directors fees and other operating expenses. The OCF will not cover (to the extent not included in the Operational Fees as detailed below) non-recurring and extraordinary or exceptional costs and expenses (if any) as may arise from time to time (such as, without limitation, material litigation) and withholding taxes deducted from interest and dividend payments to the relevant Fund, stamp duties or other documentary transfer taxes, or similar duties and brokerage fees (excluding costs for research) arising on investment management activity on the purchase or sale of securities by the relevant Fund which, if they arise, will be paid out of the assets of the relevant Fund.
Manager’s Fee
The Company will pay the OCF to the Manager. The Manager will pay the fees of the Directors, each Investment Manager, the Administrator, the Distributor, the Depositary (who will pay the fees of any sub-custodian so appointed) and the Operational Fees out of the OCF and the Manager may rebate all or part of its fees to any party that invests in or provides services to the Company or in respect of any Fund. The relevant Investment Manager will pay the fees of any Sub-Investment Manager appointed by it out of its fees.
In the event that the costs and expenses of the Company or any Fund exceed the OCF, the Manager will be responsible for discharging any excess out of its own assets.
Operational Fees
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