Vanguard LifeStrategyTM Funds Preset Dilution Levy Changes Q&A 30 July 2015 Please note that the changes described in this document are effective from 30 July 2015. Executive Summary Effective 30 July 2015, Vanguard will eliminate the Preset Dilution Levy (PDL) on the five UKdomiciled LifeStrategyTM Funds (collectively, the “Funds”): Reduced PDL to 0.0%: • Vanguard LifeStrategyTM 20% Equity Fund • Vanguard LifeStrategyTM 40% Equity Fund • Vanguard LifeStrategyTM 60% Equity Fund • Vanguard LifeStrategyTM 80% Equity Fund • Vanguard LifeStrategyTM 100% Equity Fund The previous rate of the PDL for each Fund was 10 basis points as at 29 July 2015. Background 1. Why do some Funds impose a PDL on purchases? Historically, Vanguard has imposed PDLs on funds that invest in securities or markets that have high transaction costs. PDLs allow the funds to minimise the performance drag associated with transaction costs. PDLs are set at a percentage roughly equal to the estimated cost of buying or selling securities, including the spread between bid and ask prices, market impact costs, country-specific taxes and brokerage commissions. 2. How does Vanguard apply PDLs compared to the industry? Vanguard’s PDLs are paid directly to the funds so that investors cover the costs associated with their own purchase/redemption activity. The imposition of the PDLs ensures that long-term shareholders do not subsidise the entry or exit costs of transacting shareholders, creating a more equitable distribution of cost. 3. Why has Vanguard determined that the PDLs for these Funds should be changed? Vanguard’s recently completed analysis indicates that the Funds eligible for a PDL reduction have experienced decreased market trading expenses compared with the assessed PDLs. As you may know, we operate PDLs on some of our funds to offset the transaction costs of purchases and redemptions. The PDLs are paid straight into the fund in question and are designed to prevent existing investors from bearing the transaction costs of investors who trade in or out of the fund. As the funds grow, these costs become less significant and we are passing the benefit of this growth on to our investors. As a result, the LifeStrategy funds can support a PDL reduction to zero, without causing performance impact. 4. What are the new PDLs for the Funds following the change? Fund Previous PDL New PDL as at 30 July 2015 TM 20% Equity 10 bps 0 bps TM 40% Equity 10 bps 0 bps TM 60% Equity 10 bps 0 bps TM 80% Equity 10 bps 0 bps TM 100% Equity 10 bps 0 bps LifeStrategy LifeStrategy LifeStrategy LifeStrategy LifeStrategy 5. How often will the PDL on funds change? Vanguard’s Portfolio Review Department, in collaboration with Vanguard’s Investment Management Group, reviews all funds with fees on a semi-annual basis to ensure the charges assessed accurately reflect the actual transaction costs a fund incurs. 6. When are the changes effective? The changes to the Funds’ PDLs will be effective on 30 July 2015. All transactions processed with a trade date of 30 July 2015 or later will be subject to the reduced PDLs, including those submitted after 10am. on Wednesday, 29 July 2015. 7. Is shareholder approval required? No. 8. How will the platforms and data vendors provide the correct PDL? We notify the platforms and data vendors so they are prepared to make the updates to their systems. Some platforms will be showing a PDL charge after 30 July, but the client/investor will not be charged this PDL. 9. Are any of the other Vanguard funds affected by these changes? No, no other Vanguard funds will be affected by these changes. Important notes: This document is directed at professional investors and should not be distributed to, or relied upon by retail investors. It is designed for use by, and is directed only at persons resident in the UK. The material contained in this document is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information presented does not constitute legal, tax, or investment advice. You must not, therefore, rely on the content of this presentation when making any investment decisions. The Authorised Corporate Director for Vanguard LifeStrategy Funds ICVC is Vanguard Investments UK, Limited. Vanguard Asset Management, Limited is a distributor of Vanguard LifeStrategy Funds ICVC. For further information on the fund’s investment policy, please refer to the Key Investor Information Document (“KIID”). The KIID and the Prospectus for this fund is available in local languages from Vanguard via our website https://global.vanguard.com/. The value of investments, and the income from them, may fall or rise and investors may get back less than they invested. This fund invests in overseas markets and the value of this investment may fall or rise as a result of changes in exchange rates. Some funds invest in emerging markets which can be more volatile than more established markets. As a result the value of your investment may rise or fall. Funds investing in fixed interest securities carry the risk of default on repayment and erosion of the capital value of your investment and the level of income may fluctuate. Movements in interest rates are likely to affect the capital value of fixed interest securities. Corporate bonds may provide higher yields but as such may carry greater credit risk increasing the risk of default on repayment and erosion of the capital value of your investment. The level of income may fluctuate and movements in interest rates are likely to affect the capital value of bonds. The fund(s) may invest in financial derivative instruments that could increase or reduce exposure to underlying assets and result in greater fluctuations of the fund's Net Asset Value. Some derivatives give rise to increased potential for loss where the fund's counterparty defaults in meeting its payment obligations. Issued by Vanguard Asset Management, Limited, which is authorised and regulated in the UK by the Financial Conduct Authority. (c) 2015 Vanguard Asset Management, Limited. All rights reserved.