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Vanguard Etfs™ Annual Financial Statements | December 31, 2016 Vanguard ETFs™ Contents Independent Auditor’s Report 1 Vanguard Canadian Aggregate Bond Index ETF 2 Vanguard Canadian Short-Term Bond Index ETF 16 Vanguard Canadian Short-Term Corporate Bond Index ETF 24 Vanguard FTSE Canada All Cap Index ETF 31 Vanguard FTSE Canada Index ETF 38 Vanguard FTSE Canadian Capped REIT Index ETF 42 Vanguard FTSE Canadian High Dividend Yield Index ETF 45 Vanguard FTSE Developed All Cap ex North America Index ETF 49 Vanguard FTSE Developed All Cap ex North America Index ETF (CAD-hedged) 98 Vanguard FTSE Developed All Cap ex U.S. Index ETF 103 Vanguard FTSE Developed All Cap ex U.S. Index ETF (CAD-hedged) 107 Vanguard FTSE Developed Asia Pacific All Cap Index ETF 113 Vanguard FTSE Developed Asia Pacific All Cap Index ETF (CAD-hedged) 146 Vanguard FTSE Developed Europe All Cap Index ETF 151 Vanguard FTSE Developed Europe All Cap Index ETF (CAD-hedged) 172 Vanguard FTSE Emerging Markets All Cap Index ETF 176 Vanguard FTSE Global All Cap ex Canada Index ETF 179 Vanguard Global ex-U.S. Aggregate Bond Index ETF (CAD-hedged) 182 Vanguard S&P 500 Index ETF 186 Vanguard S&P 500 Index ETF (CAD-hedged) 189 Vanguard U.S. Aggregate Bond Index ETF (CAD-hedged) 193 Vanguard U.S. Dividend Appreciation Index ETF 197 Vanguard U.S. Dividend Appreciation Index ETF (CAD-hedged) 200 Vanguard U.S. Total Market Index ETF 204 Vanguard U.S. Total Market Index ETF (CAD-hedged) 207 Notes to the Financial Statements 211 Independent Auditor’s Report To the Unitholders of Auditor’s responsibility Our responsibility is to express an opinion on the financial Vanguard Canadian Aggregate Bond Index ETF statements of each of the Funds based on our audits. We Vanguard Canadian Short-Term Bond Index ETF conducted our audits in accordance with Canadian generally Vanguard Canadian Short-Term Corporate Bond Index ETF accepted auditing standards. Those standards require that Vanguard FTSE Canada All Cap Index ETF we comply with ethical requirements and plan and perform Vanguard FTSE Canada Index ETF the audit to obtain reasonable assurance about whether the Vanguard FTSE Canadian Capped REIT Index ETF financial statements are free from material misstatement. Vanguard FTSE Canadian High Dividend Yield Index ETF Vanguard FTSE Developed All Cap ex North America Index ETF An audit involves performing procedures to obtain audit evidence Vanguard FTSE Developed All Cap ex North America Index ETF about the amounts and disclosures in the financial statements. (CAD-hedged) The procedures selected depend on the auditor’s judgment, Vanguard FTSE Developed All Cap ex U.S. Index ETF including the assessment of the risks of material misstatement Vanguard FTSE Developed All Cap ex U.S. Index ETF of the financial statements, whether due to fraud or error. In (CAD-hedged) making those risk assessments, the auditor considers internal Vanguard FTSE Developed Asia Pacific All Cap Index ETF control relevant to the entity’s preparation and fair presentation Vanguard FTSE Developed Asia Pacific All Cap Index ETF of the financial statements in order to design audit procedures (CAD-hedged) that are appropriate in the circumstances, but not for the Vanguard FTSE Developed Europe All Cap Index ETF purpose of expressing an opinion on the effectiveness of the Vanguard FTSE Developed Europe All Cap Index ETF entity’s internal control. An audit also includes evaluating the (CAD-hedged) appropriateness of accounting policies used and the reasonable- Vanguard FTSE Emerging Markets All Cap Index ETF ness of accounting estimates made by management, as well as Vanguard FTSE Global All Cap ex Canada Index ETF evaluating the overall presentation of the financial statements. Vanguard Global ex-U.S. Aggregate Bond Index ETF (CAD-hedged) We believe that the audit evidence we have obtained in each Vanguard S&P 500 Index ETF of our audits is sufficient and appropriate to provide a basis Vanguard S&P 500 Index ETF (CAD-hedged) for our audit opinion. Vanguard U.S. Aggregate Bond Index ETF (CAD-hedged) Vanguard U.S. Dividend Appreciation Index ETF Opinion Vanguard U.S. Dividend Appreciation Index ETF (CAD-hedged) In our opinion, the financial statements of each of the Funds Vanguard U.S. Total Market Index ETF present fairly, in all material respects, the financial position of Vanguard U.S. Total Market Index ETF (CAD-hedged) each of the Funds as at December 31, 2016 and December 31, (Collectively, the Funds) 2015 and the financial performance and cash flows of each of the Funds as at and for the periods then ended, as applicable, We have audited the accompanying financial statements of as indicated in Note 1, in accordance with International each of the Funds, which comprise the statements of financial Financial Reporting Standards. position as at December 31, 2016 and December 31, 2015, as applicable, and the statements of comprehensive income, changes in net assets attributable to holders of redeemable units and cash flows as at and for the periods then ended, as applicable, as indicated in Note 1, and the related notes, which comprise a summary of significant accounting policies and Toronto, Ontario other explanatory information. 22 March 2017 Chartered Professional Accountants, Management’s responsibility for Licensed Public Accountants the financial statements Management is responsible for the preparation and fair presentation of the financial statements of each of the Funds in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. 1 Vanguard Canadian Aggregate Bond Index ETF Statement of Financial Position As at December 31, 2016 and 2015 2016 2015 Assets Current assets Investments $1,117,314,231 $518,571,924 Cash 2,579,286 2,773,854 Amounts receivable for investments sold 17,308,978 14,515,338 Interest receivable 5,580,327 2,669,334 Total assets 1,142,782,822 538,530,450 Liabilities Current liabilities Amounts payable for investments purchased 17,387,109 15,699,856 Distributions payable 2,218,175 1,044,401 Accounts payable and accrued expenses 55,421 30,700 Total liabilities excluding net assets attributable to holders of redeemable units 19,660,705 16,774,957 Total net assets attributable to holders of redeemable units $1,123,122,117 $521,755,493 Number of redeemable units outstanding (Note 7) 44,300,000 20,300,000 Net assets attributable to holders of redeemable units per unit $25.35 $25.70 Statement of Comprehensive Income For the years ended December 31, 2016 and 2015 2016 2015 Income Net gain (loss) on investments Interest for distributions purposes $25,200,750 $11,555,737 Net realized gain (loss) on sale of investments (193,275) 150,736 Change in unrealized appreciation (depreciation) of investments (25,306,770) (2,763,023) Net gain (loss) on investments (299,295) 8,943,450 Miscellaneous Income 18,187 4,203 Total income (net) (281,108) 8,947,653 Expenses (Note 8) Management fees 1,147,676 505,135 Independent Review Committee fees 4,085 4,320 Total expenses 1,151,761 509,455 Expenses absorbed by manager (4,085) (4,320) Net expenses 1,147,676 505,135 Increase (decrease) in net assets attributable to holders of redeemable units ($1,428,784) $8,442,518 Weighted average number of redeemable units 33,062,568 14,603,014 Increase (decrease) in net assets attributable to holders of redeemable units per unit ($0.04) $0.58 The accompanying notes are an integral part of the financial statements. 2 Vanguard Canadian Aggregate Bond Index ETF Statement of Changes in Net Assets Attributable to Holders of Redeemable Units For the years ended December 31, 2016 and 2015 2016 2015 Net assets attributable to holders of redeemable units, beginning of year $521,755,493 $194,071,819 Increase (decrease) in net assets attributable to holders of redeemable units ($1,428,784) $8,442,518 Distributions to holders of redeemable units Net investment income (23,404,555) (10,642,942) Net realized gains (388,109) (231,022) Return of capital (30,047) (25,842) (23,822,711) (10,899,806) Redeemable unit transactions Proceeds from sale of redeemable units 638,961,740 335,057,070 Reinvestment of distributions to holders of redeemable units 388,109 231,022 Payment for redeemable units redeemed (12,731,730) (5,147,130) 626,618,119 330,140,962 Net assets attributable to holders of redeemable units, end of year $1,123,122,117 $521,755,493 Statement of Cash Flows For the years ended December 31, 2016 and 2015 2016 20152 Cash flows from (used in) operating activities Increase (decrease) in net assets attributable to holders of redeemable units ($1,428,784) $8,442,518 Adjustments for: Net realized (gain) loss on sale of investments 193,275 (150,736) Change in unrealized (appreciation) depreciation of investments 25,306,770 2,763,023 Purchase of investments¹ (282,044,918) (117,237,370) Proceeds from sale of investments¹ 228,398,829 110,926,182 (28,146,044) (3,698,901) Change in non-cash working capital (2,886,272) (1,615,197) Net cash from (used in) operating activities (32,461,100) 3,128,420 Cash flows from (used in) financing activities Proceeds from sale of redeemable units¹ 54,807,306 7,478,586 Distributions to holders of redeemable units, net of reinvested distributions (22,260,828) (9,995,453) Payment for redeemable units redeemed¹ (279,946) (52,043) Net cash from (used in) financing activities 32,266,532 (2,568,910) Net increase (decrease) in cash during the year ($194,568) $559,510 Cash, beginning of year $2,773,854 $2,214,344 Cash, end of year $2,579,286 $2,773,854 Supplemental cash flow information relating to operating activities Interest received $22,289,757 $9,921,254 1 Excludes in-kind transactions for the years ended December 31, 2016 and 2015.
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