Smartshares Limited Investment Statement

Smartshares Limited Investment Statement

To view the investment statements for:

New Zealand Dividend Index Trust – NZ Dividend Fund (DIV) Australian Financials Index Trust - Aus Financials Fund (ASF) Australian Resources Index Trust - Aus Resources Fund (ASR)

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To view the investment statements for: Australian Property Index Trust - Aus Property Fund (ASP)

Australian Dividend Index Trust - Aus Dividend Fund (ASD)

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To view the investment statements for: smartTENZ - NZX 10 Fund (TNZ)

smartMIDZ - NZX MidCap Index Fund (MDZ) smartFONZ - NZX 50 Portfolio Index Fund (FNZ) smartMOZY - NZX Australian MidCap Index Fund (MZY) smartOZZY – NZX Australian 20 Leaders Index Fund (OZY)

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To view the investment statements for: Global Bond Trust

New Zealand Bond TrustNew Zealand Cash Trust

Click Here To view the investment statements for:

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US 500 Trust (USF) Europe Trust (EUF) Asia Pacific Trust (APA) Emerging Markets Trust (EMF) Total World Trust (TWF) US Large Value Trust (USV) US Large Growth Trust (USG) US Mid Cap Trust (USM) US Small Cap Trust (USS)

To view the investment statements for:

New Zealand Property Trust


AUSTRALIAN PROPERTY INDEX TRUST (Aus Property Fund)

AUSTRALIAN DIVIDEND INDEX TRUST (Aus Dividend Fund)

Investment Statement for the purposes of the Securities Act 1978. Dated 5 June 2015

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Contents

IMPORTANT INFORMATION

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HOW DO I APPLY?

10

AUSTRALIAN PROPERTY INDEX TRUST (AUS PROPERTY FUND)

13

AUSTRALIAN DIVIDEND INDEX TRUST (AUS DIVIDEND FUND)

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ANSWERS TO IMPORTANT QUESTIONS

18

What sort of investment is this? 18

Who is involved in providing it for me? 18

How much do I pay? 21

What are the charges? 23

What returns will I get? 25

What are my risks? 30

Can the investment be altered? 34

Amendments to an Investment Policy 35

Replacement of an index 35

How do I cash in my investment? 35

Who do I contact with inquiries about my investment? 36

Is there anyone to whom I can complain if I have problems with the investment? 37

What other information can I obtain about this investment? 37

GLOSSARY OF TERMS

40

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(The information in this section is required under the Securities Act 1978.)

Investment decisions are very important. They often have long-term consequences. Read all documents

carefully. Ask questions. Seek advice before committing yourself.

Choosing an investment

When deciding whether to invest, consider carefully the answers to the following questions that can be found

on the pages noted below:

Page












In addition to the information in this document, important information can be found in the current registered

prospectus for the investment. You are entitled to a copy of that prospectus on request.

The Financial Markets Authority regulates conduct in financial markets

The Financial Markets Authority regulates conduct in New Zealand’s financial markets. The Financial

Markets Authority’s main objective is to promote and facilitate the development of fair, efficient, and

transparent financial markets.

For more information about investing, go to http://www.fma.govt.nz.

Financial advisers can help you make investment decisions

Using a financial adviser cannot prevent you from losing money, but it should be able to help you make

better investment decisions.

Financial advisers are regulated by the Financial Markets Authority to varying levels, depending on the type

of adviser and the nature of the services they provide. Some financial advisers are only allowed to provide

advice on a limited range of products.

When seeking or receiving financial advice, you should check—

the type of adviser you are dealing with;

http://www.legislation.govt.nz/regulation/public/2009/0230/latest/link.aspx?search=ts_regulation_securities_resel&p=2&id=DLM25999#DLM25999

http://www.fma.govt.nz/

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the services the adviser can provide you with;

the products the adviser can advise you on.

A financial adviser who provides you with personalised financial adviser services may be required to give

you a disclosure statement covering these and other matters. You should ask your adviser about how he or

she is paid and any conflicts of interest he or she may have.

Financial advisers must have a complaints process in place and they, or the financial services provider they

work for, must belong to a dispute resolution scheme if they provide services to retail clients. So if there is a

dispute over an investment, you can ask someone independent to resolve it.

Most financial advisers, or the financial services provider they work for, must also be registered on the

financial service providers register. You can search for information about registered financial service

providers at http://www.fspr.govt.nz.

You can also complain to the Financial Markets Authority if you have concerns about the behaviour of a

financial adviser.

NZX Main Board Listing & Quotation

Units in the Funds have been accepted for quotation by the Special Division on the NZX Main Board and will

be quoted on completion of allotment procedures. However, the Special Division accepts no responsibility

for any statement in this Investment Statement. The NZX Main Board is a licensed market operated by NZX,

a licensed market operator regulated under the Financial Markets Conduct Act.

Disclaimer

The Return on each Smartshares Fund is intended to closely match the Return on the index it tracks (the

Aus Property Fund tracks the S&P/ASX 200 A-REIT Equal Weight Index and the Aus Dividend Fund tracks

the S&P/ASX Dividend Opportunities Index). These indices rise and fall according to market events and

conditions. None of the Trustee, the Manager, the Custodian, the Administration Manager, NZX, nor any

other person guarantees the Return on the indices or the Return on each Smartshares Fund or investment in

either Smartshares Fund. No warranty expressed or implied is given as to the results to be obtained by the

Manager or each Smartshares Fund from the use of the indices or any data included in them, or as to the

liquidity of investment in each Smartshares Fund, Smartshares Units or the fitness of any Smartshares Fund

for any Unitholder’s purposes. The offer set out in this Investment Statement is only made in New Zealand.

No person may offer, sell or deliver Smartshares Units or distribute any documents in relation to the offer

(including any copy or extract from this Investment Statement) to any person in any jurisdiction other than in

compliance with any applicable laws and regulations.

Definitions

Defined terms in this Investment Statement have the meaning set out in the Glossary of Terms on pages 40 to 42.

http://www.fspr.govt.nz/

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KEY INFORMATION SUMMARY

This section of the Investment Statement contains a summary of the key information relating to this offer. The rest of this Investment Statement contains important information. You should read all of it before deciding whether to invest.

How do the Smartshares Funds work?

This Investment Statement relates to the following Smartshares Funds:

- AUSTRALIAN PROPERTY INDEX TRUST (Aus Property Fund); and

- AUSTRALIAN DIVIDEND INDEX TRUST (Aus Dividend Fund).

The basic concept

Each Smartshares Fund is a unit trust, as defined in the Unit Trusts Act 1960. The beneficial interest in each Smartshares Fund is divided into Units with each Unit representing an equal interest in the assets of that Smartshares Fund but not conferring any interest in any specific asset of that Smartshares Fund.

The objective of each of the Smartshares Funds is to provide a Return to Unitholders that closely matches the Return on a specific equity market index. An equity market index is a measure of the Return on a group of individual securities and is typically independently calculated by an index provider. To meet this objective, each Smartshares Fund aims to hold securities (Index Securities) of the entities that are part of the relevant index (Index Issuers) in proportions that match their weightings in the relevant index. This is called index tracking, and there is further information about it below on this page and on page 30, together with more specific comments about tracking performance for each of the Smartshares Funds in the descriptions of each individual Smartshares Fund from pages 13 to 17.

Exchange traded funds

Your Units are quoted on a stock exchange, in this case on the NZX Main Board. As quoted securities, Units can be traded like shares in Listed companies. For most investors, trading their Units on market through an NZX Firm will be the only way of redeeming their investment, because there is no general right to redeem Units.

Differences from direct investment

Although an investment in a Smartshares Fund is similar to a direct investment in the relevant Index Securities, you will not have any rights in relation to specific Index Securities held by a Smartshares Fund. There are also some differences between the Returns you will receive on the two investments. The principal differences are as follows:

Tracking differences – The Manager aims to track the relevant index for a Smartshares Fund by

investing in the relevant Index Issuers in proportions that match their weightings in the relevant index. However, there will inevitably be some differences. For example, the makeup of the relevant index may be changed, and the Manager may not be able to exactly match the change by buying and selling Index Securities because the prices it pays and receives for the Index Securities may not exactly match the prices used to adjust the index. This means that the net asset value (NAV) of the Index Securities held by the Smartshares Fund diverges over time from the value of the relevant index (and therefore from the value of an equivalent direct investment in the Index Issuers).

Distribution differences – An investor that invests directly in Index Securities will receive distributions in relation to those Index Securities when they are paid by the relevant Index Issuers. In contrast, distributions that are received by a Smartshares Fund from the relevant Index Issuers will be held by that Smartshares Fund (and included in the Smartshares Fund's NAV) until a quarterly Distribution Date. It is only on that quarterly Distribution Date that distributions received during the previous three months will be paid out (or reinvested for you) in one lump sum.

Management fees – Management fees are deducted before distributions are paid to you, meaning you get less than the full distributions paid on the Index Securities the Smartshares Fund invests in. Of course, it is unlikely that you would be able to invest in the Index Securities directly without also paying brokerage and potentially other investment fees to third parties.

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Different market values – Units trade at the market price for Units, which is unlikely to be exactly the same as the Current Unit Value. One mechanism in place to reduce this difference is provision for larger investors to be able to exchange Baskets of Index Securities for the equivalent Units and vice versa. With this ability, larger investors are able to take advantage of any difference between the market price of Units and the equivalent Index Securities. If they do take advantage of that difference, it affects the demand and supply of Units in a way that is expected to align the market price of Units more closely with the per Unit value of the relevant Index Securities. However, despite this mechanism, the market price of the Units and the per Unit value of the relevant Index Securities are not always closely aligned due to market forces that are outside the control of the Manager.

Distributions

Distributions to Unitholders are currently made directly from each Smartshares Fund within 20 Business Days of each Record Date. The Record Date is currently on or around the last Business Day of each of March, June, September and December in any year. These distributions comprise dividends or any other income received by the Smartshares Fund, less fees and other expenses. Unitholders will automatically have their distributions re-invested for Smartshares Units unless they elect to have them paid directly to a nominated New Zealand bank account in New Zealand dollars. There is further information about distributions on page 26.

Who is involved in providing the Smartshares Funds?

Smartshares Limited (the Manager) is a wholly owned subsidiary of NZX Limited (NZX). Smartshares Limited offers a range of funds.

The Manager is responsible for all adjustments to the Smartshares Funds' portfolios, the maintenance of accounting records of the Smartshares Funds, communication with Unitholders, supervision of the Unit Registrar, including the payment of distributions to Unitholders and the purchase or sale of Index Securities as determined by the Smartshares Funds in the event of any required adjustments to the different indices that the Smartshares Funds track. Some of these duties are delegated to the Administration Manager, Custodian and the Unit Registrar.

The other principal persons involved in providing the Smartshares Funds are:

Trustees Executors Limited (the Trustee);

BNP Paribas Fund Services Australasia Pty Ltd, acting through its New Zealand branch (the Administration Manager and the Custodian); and

Link Market Services Limited (the Unit Registrar).

None of the Manager, Trustee, Administration Manager, Custodian, Unit Registrar or NZX (as the parent company of the Manager) provide any guarantee in relation to the Smartshares Funds.

There is further information about the persons involved in providing the Smartshares Funds on pages 18 to 20.

Particular Smartshares Funds

The Smartshares Fund you choose to invest in is designed to give you Returns similar to the Returns on the index tracked by the relevant Smartshares Fund. The Manager buys and sells Index Securities to track the relevant index rather than making investment decisions based on its own assessment of the Index Issuers. This means the Smartshares Funds are what is commonly referred to as “passive funds” (as opposed to “active funds”, which involve a manager making its own judgement about where and when to invest and divest).

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The Smartshares Funds are:

Fund Name Index Description

Aus Property Fund

S&P/ASX 200 A-REIT Equal Weight Index

Comprises around 16 of the largest real estate investment trusts listed on the ASX

Aus Dividend Fund

S&P/ASX Dividend Opportunities Index

Comprises 50 of the highest yielding issuers listed on the ASX.

When the index that your Smartshares Fund tracks changes, your investment is designed to change with it.

The unit price of each Smartshares Unit (the Current Unit Value) reflects the value of the Index Securities held in the relevant Smartshares Fund and the dividends and other income received or accrued by and held in the relevant Smartshares Fund, less liabilities (such as tax, fees and expenses). As noted above, if you sell your Units on the market, the price you receive may differ from the Current Unit Value.

Further information about the index tracked by each of the Smartshares Funds can be found in the registered prospectus for the Smartshares Funds, and also on pages 13 to 17 of this Investment Statement.

Benefits of Smartshares

Spread your investment

When you invest in a Smartshares Fund, you get an indirect investment through the Smartshares Fund in each entity in the index in which the Smartshares Fund invests. With one simple purchase you get an investment in the issuers included in the relevant index, spreading your risk across a portfolio of securities, which makes this a more diversified investment than an investment in a single issuer. Diversification may reduce risk. This is because it is unlikely that all the entities in the Smartshares Fund will perform similarly at the same time. For example, the losses from entities performing poorly may be balanced by the gains from those performing well. However, each Smartshares Fund only allows diversification within the asset class, investment type or Index Issuer industry represented in the index tracked by that specific Smartshares Fund.

Flexibility

Smartshares Funds provide the diversification of a fund investment while giving you similar transparency and convenience to an investment in individual shares – the ability to know the value of your investment at any moment, and the flexibility to trade your investment quickly (subject to liquidity risk). This is because Smartshares Units are expected to trade like individual shares, with their prices published in the newspapers and on-line (www.nzx.com) so you can track the progress of your investment at any time. You are able to trade your Smartshares Units on market at any point (subject to liquidity), just like a share in a Listed company.

Smartshares makes contributing simple

Once you hold the Minimum Holding of 100 Units in a Smartshares Fund, you can make regular contributions from as little as $50 per month by way of the Regular Savings Plan. And you can stop, restart, increase or decrease your regular contributions whenever you like (subject to providing the Unit Registrar with ten Business Days' notice prior to the 20th of a month and, unless you are completely stopping contributions, maintaining a minimum contribution of $50 per month). You can also add to your investment through the Distribution Reinvestment Plan – where your distributions are automatically reinvested as additional Smartshares Units or you can choose to have your distributions paid directly to you by direct credit.

Lower Fees

Smartshares Funds are able to keep costs down because the Manager does not make active investment decisions, which may require expensive research, analytical and trading expertise. Trading only occurs to rebalance the Smartshares Funds' holdings to match the weighting of each entity’s shares in the indices. By contrast, actively managed funds, where the manager makes active investment decisions, generally incur higher costs and therefore may charge a higher management fee.

http://www.nzx.com/

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What types of risks are involved with the Smartshares Funds?

In summary, some of the principal risks are:

Risks arising because of investment in Index Securities

Market risk – Fluctuations in the security price of, and distributions paid by, the Index Issuers will lead to fluctuations in the Returns on Units in the Smartshares Funds. Such fluctuations could be related to the circumstances of an individual Index Issuer and affect the share price or distributions of that Index Issuer only, or could be related to circumstances with more widespread effects and affect a number of, or all, Index Issuers or Index Issuers within a particular industry.

Risks arising because of investment through Smartshares Funds

Tracking risk – For a variety of reasons, including those described on page 5, the Manager will not always manage to exactly track the relevant index for each Smartshares Fund. As a result of this, the Index Securities held by a Smartshares Fund may, over time, not exactly match the composition of the relevant index. Of course, investors investing directly in order to track an index are likely to face the same issues as the Manager in trying to exactly track the relevant index. There is further information about index tracking on page 30.

Operational risk – Tracking an index is complex and, as a result, operational errors can occur. Such errors could potentially affect Unitholders' Returns.

Passive management risk – The Smartshares Funds are passive investments, which means the Manager will not react to events that affect the value of particular Index Issuers unless and until those events lead to a change in the composition of the relevant index.

Liquidity risk – Investors are only able to cash in their investment by selling their Units on market unless they have enough Units to redeem their Units through a Basket withdrawal. (Basket withdrawals are described on page 35.) The market price per Unit may vary from the Current Unit Value due to supply and demand factors. Units in each Smartshares Fund are quoted on the NZX Main Board and, in the opinion of the Manager, a market will develop for sales of Units. However, although the Smartshares Funds are listed on the NZX Main Board, the fact that investors can apply to purchase Units directly from the Manager may mean there are fewer buyers of Units on the NZX Main Board.

Foreign currency risk – Because the Smartshares Funds invest in ASX listed entities, and so therefore receive Returns in Australian dollars, these will be exposed to currency risk based on the exchange rate between the Australian and New Zealand dollars. This is a risk because the Manager does not currently take steps to hedge against currency fluctuations.

Regulatory and tax risk – The Smartshares Funds are subject to an ongoing risk that regulatory or tax law requirements may change, and that this may have an adverse effect on Unitholders' Returns. Also, the Smartshares Funds are Portfolio Investment Entities (PIEs), with benefits for Unitholders, and there is a risk that this status may be lost, as discussed on pages 26 to 28 below.

There is further information about risks on pages 30 to 33.

What charges do Unitholders pay directly?

When Unitholders first subscribe for Units they will pay an application fee to the Manager, which will be deducted from their Subscription Amount. For Subscription Amounts of less than $20,000 this will be a flat fee of $30, and for Subscription Amounts equal to or greater than $20,000 the subscription fee will be 0.2% of the full Subscription Amount. This fee is not payable for subsequent Cash Applications, subscriptions under the Regular Savings Plan or the Distribution Reinvestment Plan, or in relation to a Basket application. (Basket applications are for large investors, and are discussed on page 22.)

Unitholders lodging or withdrawing a Basket will be charged a fee by the Manager for each lodgement or withdrawal. The amount they are charged is set out in the table below:

Basket Creation

Basket Withdrawal

$400 for Aus Property Fund


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$800 for Aus Dividend Fund $800 for Aus Dividend Fund

Fees are GST inclusive.

The application fees for initial Cash Applications and Baskets may be increased and an application fee for subsequent Cash Applications may be added by the Manager by giving ten Business Days' notice of the change to the Trustee. The other fees referred to above may be increased or imposed by the Manager by giving three months' notice to the Trustee and, if the Manager determines in its reasonable discretion that the increase or imposition is material, Unitholders of the relevant Smartshares Fund. All fees may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the amount by which fees may be increased or imposed.

The Manager is also entitled to charge a Unitholder in respect of non-standard services requested by that Unitholder.

Further information about charges for Unitholders can be found on pages 23 to 24.

What charges do the Smartshares Funds pay?

Each Smartshares Fund pays a management fee to the Manager. This is currently 0.54% per annum (inclusive of GST) of the relevant Smartshares Fund's NAV (for each of the Smartshares Funds), and is accrued daily and payable monthly in arrear.

The management fee is currently used by the Manager to pay the Trustee, the Administration Manager, the Custodian, the Unit Registrar, any penalties and interest charged by the Inland Revenue and any bank fees, although the Manager reserves the right to have such amounts paid out of the Smartshares Funds. If the Manager does exercise its right to have such amounts paid out of the Smartshares Funds, it will first notify the Trustee and Unitholders but the Manager is not required to notify potential investors. Other expenses that arise, such as operating expenses that do not arise in the ordinary course of business, will be paid out of the Smartshares Funds.

All of these fees may be increased by the Manager by giving three months' notice of the change to the Trustee and, if the change is material (as determined by the Manager in its reasonable discretion), to Unitholders of the relevant Smartshares Fund or the fees may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit on the changes that the Manager may make to fees charged.

The Manager is also entitled to interest on amounts held in respect of distributions and other income received by the Smartshares Funds and on Subscription Amounts (received as Cash Applications or under the Regular Savings Plan or Distribution Reinvestment Plan) between the date on which they are received and the date of issue of Units.

Further information about the Manager's fees can be found on pages 24 to 25.

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HOW DO I APPLY?

How to get started with Smartshares

You can start your investment in a Smartshares Fund by making an initial Cash Application from as little as $500. You can do this by completing the Application Form for new Units at the back of this Investment Statement.

Alternatively you can obtain an investment in a Smartshares Fund by purchasing existing Units on market through an NZX Firm.

If you are buying new Units, send in your completed Application Form, together with the full amount of the application payment, to Link Market Services Limited, PO Box 91976, Auckland 1142. Alternatively, you can send it to the Manager, an NZX Firm, or through any other channel approved by NZX (of which there are currently none).

Make sure you read all the information contained in this Investment Statement before deciding whether to invest and which Smartshares Fund to invest in. There is also additional information that you may find helpful in the registered prospectus for the Smartshares Funds.

Before investing, you should consider seeking advice from a financial adviser. Using a financial adviser cannot prevent you from losing money, but it should be able to help you make better investment decisions. More information about financial advisers is set out on pages 3 and 4.

Further investments

Once you've made the initial investment, you can make further investments, either:

through a further Cash Application (for a minimum of $250);

through the Regular Savings Plan; or

through the Distribution Reinvestment Plan.

These options are each described below.

Alternatively you can purchase existing Units on market through an NZX Firm.

Cash Application Investment

As with the initial Cash Application, a Cash Application for further Units can be made by completing the Application Form attached to the back of this Investment Statement and sending it with the full amount of the application payment to Link Market Services Limited, PO Box 91976, Auckland 1142. Alternatively, you can send it to the Manager, an NZX Firm, or through any other channel approved by NZX (of which there are currently none).

The Manager may suspend the acceptance of Cash Applications at any time by way of an Announcement to NZX. The Manager may also reject any application for any reason.

The Regular Savings Plan

You can currently make a regular monthly investment directly from your bank account with no transaction fees charged by the Manager.

Every month for an amount you choose (minimum contribution $50 per month) the Manager will add Smartshares Units to your investment. Simply complete the Application Form and direct debit authority included in this Investment Statement. Your payments will then be automatically withdrawn from your nominated bank account on a monthly basis.

In addition you can make additional lump sum deposits with your monthly direct debit at any time ($250 minimum value).

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How your Regular Savings Plan works

Think about how much you can afford to invest each month. Keep in mind that you can stop, restart, increase or decrease (so long as you don't decrease your contribution to below $50 per month unless you are completely stopping contributions) your contributions at any time by contacting the Unit Registrar. Specify that amount in your application. The Unit Registrar will require notice to change contributions by at least ten Business Days before the 20th of the month.

On or about the 20th of each month your bank account will be direct debited and the money will then be invested in Smartshares Units in your Smartshares Fund(s) on or around the end of each month. The Unit Registrar will send you a statement each month confirming your new Smartshares Unit holding(s).

To join the Smartshares Regular Savings Plan, you must already have the Minimum Holding of 100 Smartshares Units for the Smartshares Fund that you wish to invest in on a regular basis or you must make a Cash Application that, if accepted, would mean you held at least 100 Units in the fund you want to invest in.

The Manager may open or close the Regular Savings Plan at any time by way of an Announcement to NZX.

Key benefits of the Regular Savings Plan

Zero transaction cost – no transaction fees charged by the Manager at present

Affordable – contributions from just $50 per month

Flexible – you can stop, restart, increase or decrease (subject to maintaining a minimum contribution of $50 per month) your regular contributions

Investing regularly provides dollar cost averaging (which is described on page 21)

Helps you accumulate Smartshares Units – every month you acquire additional Smartshares Units automatically without needing to think about it.

The Distribution Reinvestment Plan

Each Smartshares Fund may receive dividends from the Index Issuers in which it invests. These dividends and other income are retained in the Smartshares Fund (and reflected in the Current Unit Value) and the Smartshares Fund makes quarterly distributions to Unitholders, with each Unitholder’s entitlement based on the Unitholder’s holding as at the Record Date for that distribution.

Your share of each distribution by the relevant Smartshares Fund will be automatically reinvested as additional Smartshares Units four times a year unless you choose to have distributions paid out to you by direct credit. By having these payments automatically reinvested, you are increasing your unitholding without having to do anything. Compounding distributions can work in your favour if you want to accumulate Smartshares Units over the longer term. See page 28 for more details.

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BOARD OF DIRECTORS

The directors of the Manager are Bevan Miller (Chair), Tim Bennett and Kristin Brandon. The Smartshares

Funds operated by the Manager are passively managed funds or have their investment management

function outsourced. Consequently, the board has been constructed to provide a mix of operational,

financial and legal skills rather than specific funds management experience. Brief profiles for each of the

directors, detailing their experience and qualifications, are set out below.

Bevan Miller Bevan is the Chief Financial Officer of NZX. He has extensive financial

experience in both the corporate and accounting sectors, previously

working as CFO for Acurity Health Group Limited. Prior to that Bevan

held a number of senior finance roles at Telecom New Zealand, now

Spark, having started his career in the audit division of global

accounting firm KPMG. Bevan is a Chartered Accountant and holds a

Bachelor of Commerce and Administration, Honours (first class) from

Victoria University of Wellington.

Tim Bennett Tim is the Chief Executive Officer of NZX. He has extensive capital

markets and commodity market development experience in Asia, the

Middle East and North America. Prior to joining NZX, Tim was a partner

at Oliver Wyman in Singapore, and previously was a partner with the

Boston Consulting Group in Asia and Australia. Tim holds an MBA in

Strategy and Finance from Wharton School, University of Pennsylvania,

and a Bachelor of Commerce and Administration in Computer Science

and Business Administration from Victoria University of Wellington.

Kristin Brandon Kristin is Head of Compliance at NZX and has worked at NZX since

2007. Kristin has significant legal experience working at Chapman Tripp

Wellington and Dechert LLP London where she specialised in company

and securities law, including advising in relation to capital raisings,

mergers and acquisitions and acting for fund managers. Prior to joining

NZX, Kristin was Assistant Company Secretary at Telecom New

Zealand Limited (now Spark).. Kristin holds an LLB (Hons) and a

Bachelor of Commerce and Administration from Victoria University of

Wellington and is both a barrister and solicitor.

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AUSTRALIAN PROPERTY INDEX TRUST (Aus Property Fund)

The Aus Property Fund gives investors exposure to entities listed on the ASX that are included in the S&P/ASX 200 Index (the index used as the primary gauge for the Australian market) and are classified as Australian Real Estate Investment Trusts. An Australian Real Estate Investment Trust ("REIT") is an entity that owns, and generally, operates income producing real estate. These investment vehicles must have most of their assets and income tied to real estate investment. Securities are classified using the Global Industry Classification Standard (GICS®). The Global Industry Classification Standard is designed to meet the needs of the investment community by categorising companies into sectors and industries that reflect a company’s primary business model as determined by its financial performance.

The S&P/ASX 200 A-REIT Equal Weight Index (the index tracked by the Aus Property Fund) is rebalanced quarterly with each constituent allocated a fixed, equal weight at the time of the rebalance. Additions to the index normally only take place at the quarterly rebalance. However, if a REIT replaces another REIT in the ASX200 it will enter the index immediately, assuming the weighting of the security it is replacing.

A link to the index methodology for the S&P/ASX 200 A-REIT Equal Weight Index can be found at http://www.spindices.com/indices/equity/sp-asx-200-a-reit-equal-weight. The methodology for constructing the index may be changed from time to time by the Index Administrator.

As at 30 April 2015 the S&P/ASX 200 A-REIT Equal Weight Index had 16 constituents with a total market capitalisation of AUD $106,957 million. The number of constituents and the specific entities included in the index may change over time. At 30 April 2015 the following entities were included:

Abacus Property Group

BWP Trust

Charter Hall Group

Cromwell Property Group

Charter Hall Retail REIT

Dexus Property Group

Federation Centres

Goodman Group

GPT Group

Investa Office Fund

Mirvac Group

Novion Property Group

Scentre Group

Shopping Centres Australasia Property Group Stockland

Westfield Corporation

Aus Property Fund performance to 31 March 2015

Return to 31 March 2015

Fund Gross Return 6.65%

Notes to the above table "Fund Gross Return" is the return on total fund net of management fees but including gross dividends reinvested on payment date. Return period is from the date funds were first received by the Fund, being 16 December 2014, to 31 March 2015.

Unitholders are reminded to use care when considering past performance in making long-term decisions. Past performance is not necessarily indicative of future Returns.

S&P Dow Jones Indices and the Australian Stock Exchange Disclaimer

The S&P/ASX 200 A-REIT Equal Weight Index (the “Index”) is a product of S&P Dow Jones Indices LLC, a part of McGraw Hill Financial, Inc, (“SPDJI”) and ASX Operations Pty Ltd, and has been licensed for use by Smartshares

http://www.spindices.com/indices/equity/sp-asx-200-a-reit-equal-weight

http://www.spindices.com/indices/equity/sp-asx-200-a-reit-equal-weight

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Limited. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and ASX is a

trademark of ASX Operations Pty Ltd. The trademarks have been licensed to SPDJI and have been sublicensed for use for certain purposes by Smartshares Limited. The Australian Property Index Trust is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”) or ASX Operations Pty Ltd. Neither S&P Dow Jones Indices nor ASX Operations Pty Ltd make any representation or warranty, express or implied, to the owners of the Australian Property Index Trust or any member of the public regarding the advisability of investing in securities generally or in the Australian Property Index Trust particularly or the ability of the S&P/ASX 200 A-REIT Equal Weight Index to track general market performance. S&P Dow Jones Indices’ and ASX Operations Pty Ltd's only relationship to Smartshares Limited with respect to the Australian Property Index Trust is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P/ASX 200 A-REIT Equal Weight Index is determined, composed and calculated by S&P Dow Jones Indices or ASX Operations Pty Ltd without regard to Smartshares Limited or the Australian Property Index Trust. S&P Dow Jones Indices and ASX Operations Pty Ltd have no obligation to take the needs of Smartshares Limited or the owners of the Australian Property Index Trust into consideration in determining, composing or calculating the S&P/ASX

200 A-REIT Equal Weight Index. Neither S&P Dow Jones Indices nor ASX Operations Pty Ltd are responsible for and have not participated in the determination of the prices, and amount of the Australian Property Index Trust or the timing of the issuance or sale of the Australian Property Index Trust or in the determination or calculation of the equation by which the Australian Property Index Trust is to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and ASX Operations Pty Ltd have no obligation or liability in connection with the administration, marketing or trading of the Australian Property Index Trust. There is no assurance that investment products based on the S&P/ASX 200 A-REIT Equal Weight Index will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice.

NEITHER S&P DOW JONES INDICES NOR ASX OPERATIONS PTY LTD GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND ASX OPERATIONS PTY LTD SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND ASX OPERATIONS PTY LTD MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY SMARTSHARES LIMITED, OWNERS OF THE AUSTRALIAN PROPERTY INDEX TRUST, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR ASX OPERATIONS PTY LTD BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND SMARTSHARES LIMITED, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

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AUSTRALIAN DIVIDEND INDEX TRUST (Aus Dividend Fund)

The Aus Dividend Fund gives investors exposure to 50 high yielding securities listed on the ASX, contained in the S&P/ASX 300 Index. The entities are those in the S&P/ASX Dividend Opportunities Index (the index tracked by the Aus Dividend Fund).

Entities in the S&P/ASX Dividend Opportunities Index are selected taking into account their market capitalisation, dividend growth history and other filters as defined in the index methodology. To be eligible for inclusion in the index each entity must have a minimum float-adjusted market capitalisation of AUD 500 million, a six month average daily value traded of AUD 2 million or higher, positive earnings-per-share before extraordinary items, and growing or stable 3-year dividend per share growth.

Securities classified as Real Estate Investment Trusts using the Global Industry Classification Standard (GICS®) are excluded.

A link to the index methodology for the S&P/ASX Dividend Opportunities Index can be found at http://us.spindices.com/indices/strategy/sp-asx-dividend-opportunities-index. The methodology for constructing the index may be changed from time to time by the Index Administrator.

As at 30 April 2015 the S&P/ASX Dividend Opportunities Index had 50 constituents with a total market capitalisation of AUD $1,141,085 million. The specific entities included in the index may change over time. At 30 April 2015 the following entities were included:

Adelaide Brighton Ltd

AGL Energy Ltd

Asciano Ltd

ALS Ltd

Amcor Ltd

AMP Ltd

Ansell Ltd

ANZ Banking Group

APA Group

ASX Ltd

Aurizon Holdings Ltd

Bendigo and Adelaide Bank Ltd

BHP Billiton Ltd

Brambles Ltd Commonwealth Bank Australia

Coca-Cola Amatil Ltd

Challenger Ltd

Cochlear Ltd

Computershare Ltd

CSL Ltd

Flight Centre Travel Group Ltd

Fortescue Metals Group

Insurance Australia Group Ltd

IOOF Holdings Ltd

Incitec Pivot Ltd JB Hi-Fi Ltd

James Hardie Industries plc

Lend Lease Group Macquarie Group Ltd

Metcash Ltd

National Australia Bank Ltd

Origin Energy Ltd

http://us.spindices.com/indices/strategy/sp-asx-dividend-opportunities-index

http://us.spindices.com/indices/strategy/sp-asx-dividend-opportunities-index

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Orica Ltd

Platinum Asset Management Ltd

Ramsay Health Care Ltd

Rio Tinto Ltd

Seek Ltd

Sonic Healthcare Ltd

Santos Ltd Suncorp Group Ltd

Sydney Airport

Transurban Group NPV Telstra Corp Ltd

Toll Holdings Ltd Tatts

Group Ltd Westpac

Banking Corp

Wesfarmers Ltd Worleyparsons Ltd Woolworths Ltd

Woodside Petroleum Ltd

Aus Dividend Fund performance to 31 March 2015

Return to 31 March 2015

Fund Gross Return 9.18%

Notes to the above table "Fund Gross Return" is the return on total fund gross of management fees but including gross dividends reinvested on payment date. Return period is from the date funds were first received by the Fund, being 16 December 2014, to 31 March 2015.

Unitholders are reminded to use care when considering past performance in making long-term decisions. Past performance is not necessarily indicative of future Returns.


The S&P/ASX Dividend Opportunities Index (the “Index”) is a product of S&P Dow Jones Indices LLC, a part of McGraw Hill Financial, Inc, (“SPDJI”) and ASX Operations Pty Ltd, and has been licensed for use by Smartshares Limited. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and ASX is a trademark of

ASX Operations Pty Ltd. The trademarks have been licensed to SPDJI and have been sublicensed for use for certain purposes by Smartshares Limited. The Australian Dividend Index Trust is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”) or ASX Operations Pty Ltd. Neither S&P Dow Jones Indices nor ASX Operations Pty Ltd make any representation or warranty, express or implied, to the owners of the Australian Dividend Index Trust or any member of the public regarding the advisability of investing in securities generally or in the Australian Dividend Index Trust particularly or the ability of the S&P/ASX Dividend Opportunities Index to track general market performance. S&P Dow Jones Indices’ and ASX Operations Pty Ltd's only relationship to Smartshares Limited with respect to the Australian Dividend Index Trust is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P/ASX Dividend Opportunities Index is determined, composed and calculated by S&P Dow Jones Indices or ASX Operations Pty Ltd without regard to Smartshares Limited or the Australian Dividend Index Trust. S&P Dow Jones Indices and ASX Operations Pty Ltd have no obligation to take the needs of Smartshares Limited or the owners of the Australian Dividend Index Trust into consideration in determining, composing or calculating the S&P/ASX Dividend Opportunities Index. Neither S&P Dow Jones Indices nor ASX Operations Pty Ltd are responsible for and have not participated in the determination of the prices, and amount of the Australian Dividend Index Trust or the timing of the issuance or sale of the Australian Dividend Index Trust or in the determination or calculation of the equation by which the Australian Dividend Index Trust is to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and ASX Operations Pty Ltd have no obligation or liability in connection with the administration, marketing or trading of the Australian Dividend Index Trust. There is no assurance that investment products based on the S&P/ASX Dividend Opportunities Index will accurately track index performance or provide positive investment returns.

17

S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice.

NEITHER S&P DOW JONES INDICES NOR ASX OPERATIONS PTY LTD GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND ASX OPERATIONS PTY LTD SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND ASX OPERATIONS PTY LTD MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY SMARTSHARES LIMITED, OWNERS OF THE AUSTRALIAN DIVIDEND INDEX TRUST, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR ASX OPERATIONS PTY LTD BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND SMARTSHARES LIMITED, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

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What sort of investment is this?

Each Smartshares Fund is a unit trust constituted under the Unit Trusts Act 1960 and, accordingly, the Units offered in this Investment Statement are units in a unit trust. Each Smartshares Fund was established on 1 December 2014 under the relevant Trust Deed.

When you buy Smartshares Units you become a Unitholder in the relevant Smartshares Fund you have chosen to invest in. The Smartshares Funds are passively managed and their objective is to provide Returns that track the Return on the particular index that the Smartshares Fund tracks. Each Smartshares Fund owns a portfolio of securities in a proportion that is as close as possible to the weightings of the securities in the relevant index that the Smartshares Fund tracks.

The Units in the Smartshares Funds are quoted on the NZX Main Board, therefore the Funds can be classified as exchange traded funds.

Who is involved in providing it for me?

Names of Smartshares Funds

The names of the Smartshares Funds in which Units are offered in this Investment Statement are:

AUSTRALIAN PROPERTY INDEX TRUST (Aus Property Fund); and AUSTRALIAN DIVIDEND INDEX TRUST (Aus Dividend Fund).

The Manager

The Manager for the Smartshares Funds is Smartshares Limited, a wholly-owned subsidiary of NZX.

None of the Manager, any of its directors, any person associated with this offer, or NZX guarantees the Smartshares Units, repayment of Smartshares Units, or the payment of any dividends or distributions on Smartshares Units.

The principal activity of the Manager is to manage funds, including the Smartshares Funds. The Manager led the development of index tracking funds in New Zealand with the launch of the NZX 10 Fund (formerly “The NZSE TeNZ Fund”) in 1996. The NZX 10 Fund remains the longest standing exchange traded index tracking fund listed on the NZX Main Board.

The Financial Markets Conduct Act 2013 requires managers who act as the manager of a registered scheme to be licensed by the FMA before they can make offers under the new disclosure regime in the Financial Markets Conduct Act 2013. The Manager intends to begin the application process with the FMA in 2015 in order to obtain the necessary licence. Licences will be issued at the discretion of the FMA. As the Manager does not yet hold a licence, it offers units under the Securities Act 1978, which will apply to this offer.

Address of the Manager

Smartshares Limited NZX Centre Level 1, 11 Cable Street PO Box 2959 Wellington Tel: 0800 80 87 80 Email: [email protected]

mailto:[email protected]

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The Manager's address may change from time to time. You can find up-to-date details at any time at www.business.govt.nz/companies.

Directors of the Manager

As at the date of this Investment Statement, the directors of the Manager are:

Timothy Oliver Bennett (Wellington)

Kristin Anne Brandon (Wellington)

Bevan Keith Miller (Wellington)

The directors of the Manager may be contacted at the offices of the Manager.

The directors of the Manager, and their respective addresses, may change from time to time without notice to you. You can find up-to-date details of the directors, and their respective addresses, at any time, at www.business.govt.nz/companies. Profiles for each of the directors are set out on page 12.

The powers of the Manager are set out in the “Summary of the Trust Deeds” in the registered prospectus for the Smartshares Funds.

Summary of Duties

The Manager is responsible for all adjustments to the Smartshares Funds’ portfolios of Index Securities, including the purchase or sale of Index Securities in the event of any required adjustments as a result of changes to the indices or corporate actions, the maintenance of accounting records of the Smartshares Funds, communication with Unitholders, supervision of the Unit Registrar, the payment of distributions to Unitholders and administration of any securities lending programme implemented for the Smartshares Funds (see page 29 for further details). Some of these responsibilities are delegated to the Administration Manager, Custodian and the Unit Registrar.

The Trustee

The Trustee is:

Trustees Executors Limited Level 5, 10 Customhouse Quay PO Box 3222 Wellington Tel: (04) 495 0999 Fax: (04) 496 2952 Email: [email protected]

The Trustee's address may change from time to time. You can find up-to-date details at any time at www.business.govt.nz/companies.

The Trustee has been granted a licence under section 16(1) of the Financial Markets Supervisors Act 2011 to act as a trustee in respect of debt securities, unit trusts, and KiwiSaver schemes, and as a statutory supervisor for participatory securities, for a term expiring 16 January 2018.

A copy of the Trustee’s licence, including the conditions on the licence, can be obtained at the FMA’s website: www.fma.govt.nz by clicking on “Help Me Comply”, “Trustees”, “Licensed Trustees and Statutory Supervisors”, “Trustees Executors Limited”. Alternatively, a copy can be found on the Trustee’s website: www.trustees.co.nz. All conditions and reporting obligations have been duly satisfied by the required dates. If you have any queries about the licence please contact the Trustee in the first instance.

http://www.business.govt.nz/companies







http://www.fma.govt.nz/

http://www.trustees.co.nz/

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The Administration Manager

The Administration Manager for the Smartshares Funds is:

BNP Paribas Fund Services Australasia Pty Ltd, New Zealand branch Level 18, State Insurance Tower, 1 Willis Street PO Box 3299, Wellington www.securities.bnpparibas.com

The Administration Manager's address may change from time to time. You can find up-to-date details at any time at www.business.govt.nz/companies.

The Administration Manager provides general fund administration services as delegated to it by the Manager, including the calculation of the Current Unit Value and fund accounting.

The Custodian

The Custodian for the Smartshares Funds is:

BNP Paribas Fund Services Australasia Pty Ltd, New Zealand branch Level 18, State Insurance Tower, 1 Willis Street PO Box 3299, Wellington www.securities.bnpparibas.com

The Custodian's address may change from time to time. You can find up-to-date details at any time at www.business.govt.nz/companies.

The Custodian provides custodial services, including holding assets of the Smartshares Funds in custody for safekeeping and separate from the personal assets of the Trustee or Manager.

Unit Registrar

The Unit Registrar for the Smartshares Funds is:

Link Market Services Limited Level 7, Zurich House 21 Queen Street Auckland 1010 Tel: (09) 375 5998 Fax: (09) 375 5990 Email: [email protected]

The Unit Registrar's address may change from time to time. You can find up-to-date details at any time at www.business.govt.nz/companies.

None of the Trustee, the Administration Manager, the Custodian, the Unit Registrar nor any of their directors nor any other persons associated with the offer guarantees the Smartshares Units, repayment of the Smartshares Units, or the payment of any dividends or distributions on Smartshares Units.

Nature and duration of Smartshares Funds

The Smartshares Funds are unit trusts constituted under the Unit Trusts Act 1960. The Smartshares Funds were established on 1 December 2014 under the Trust Deeds. For more information regarding the Trust

http://www.securities.bnpparibas.com/










21

Deeds see the "Summary of the Trust Deeds" section in the registered prospectus for the Smartshares Funds.

How much do I pay?

There are four ways in which you can subscribe for Smartshares Units, and the method you choose affects how many Units you must subscribe for.

1. Cash Applications

Subscriptions for Smartshares Units can be made by completing the Application Form attached to this Investment Statement and sending it with the full amount of the application payment to Smartshares Limited at the address of the Unit Registrar or to any NZX Firm.

The minimum cash Subscription Amount for investors who do not already have the Minimum Holding of 100 Smartshares Units in the Smartshares Fund that they wish to invest in is $500 (which includes a flat application fee of $30 for amounts of less than $20,000 or 0.20% of the full Subscription Amount for Subscription Amounts equal to or greater than $20,000, which is deducted from the application amount and paid to the Manager).

For investors who already have the Minimum Holding in the Smartshares Fund they wish to invest in, the minimum cash Subscription Amount is $250.

Subscription Amounts for Cash Applications need to be received by the Unit Registrar, Link Market Services, by the 20th of the month so Smartshares Units can be priced at the end of the month by the Manager. There is no maximum Subscription Amount. No interest will be paid to subscribers on Subscription Amounts.

The Manager will, at its discretion, use a Subscription Amount either to purchase Index Securities and then issue new Units to the investor or to purchase existing Units on market through an NZX Firm and pass those existing Units on to the investor. In either case, the Manager's purchase of Index Securities or Units with the Subscription Amount will be made on or about the last Business Day of each month at current market prices. Units will not be allocated until after the end of the month in which the Cash Application is received.

If the Manager decides that an investor’s application will not be accepted, the Subscription Amount will be returned to the investor within 20 Business Days of making that decision (such decision to be made within seven days after receiving the application). No interest will be paid on amounts refunded.

2. Regular Savings Plan

Once you have the Minimum Holding of 100 Smartshares Units, investing regularly can be a very effective way to accumulate Smartshares Units over the long term. Even small amounts saved on a regular basis have the potential to grow into a significant number of Smartshares Units over a number of years.

Regular investment gives Unitholders the benefit of dollar cost averaging. Dollar cost averaging is the investment technique of investing regularly over a period of time, which effectively means that an average price over that period of time is paid. In theory, this reduces an investor's exposure to the risk of short term fluctuations in the price of Units, as it works to smooth out the market’s ups and downs and helps reduce the market risk of investing.

The Regular Savings Plan lets Unitholders make a regular investment on or about the 20th of each month, directly from their nominated New Zealand bank account. Provided Unitholders hold the Minimum Holding, or if a they make a Cash Application that, if accepted, would mean they hold the Minimum Holding, they can choose to participate in the Regular Savings Plan and start saving with contributions as low as $50 per month. Simply complete the Application Form and direct debit authority included in this Investment Statement. Unitholders’ payments will be automatically withdrawn from their nominated bank account on a monthly basis. Unitholders can add an additional lump sum payment ($250 minimum value), or increase or decrease their contribution at any time (subject to providing the Unit Registrar with ten Business Days' notice prior to the 20th of a month and, unless contributions are being completely stopped, maintaining a minimum contribution of $50 per month).

22

If Unitholders enter the Regular Savings Plan and then fail to make payments, no additional Smartshares Units will be allocated to their investment. If Unitholders fail to make payments for three consecutive months, their access to the Regular Savings Plan may be discontinued. Unitholders may at any time, by giving the Unit Registrar ten Business Days' notice prior to the 20th of a month, cease their payments into the Regular Savings Plan. The Manager will, at its discretion, use the Regular Savings Plan monies either to purchase Index Securities and then issue new Units to the Unitholder or to purchase existing Units on market and pass those existing Units on to the Unitholder. In either case, the Manager's purchase of Index Securities or Units with Regular Savings Plan monies will be made on or about the last Business Day of each month at current market prices. Units will not be allocated until after the end of the month in which the subscription under the Regular Savings Plan is received.

Any interest earned on the Regular Savings Plan monies prior to the purchase of Smartshares Units or Index Issuer securities each month will be retained by the Manager. These amounts will be used to cover the cost of operating the Regular Savings Plan and other administrative costs. Any amount left over after this will go to the Manager.

3. Basket Investments

For large investment amounts, Smartshares Units can be acquired by way of Basket creation. Baskets may be created by way of delivery of the proportionate amounts of the securities of the Index Issuers (plus any applicable Cash Amount). The Cash Amount is to ensure that each existing Unitholder’s proportionate interest in the income held within that Fund prior to the issue of Smartshares Units to the Basket applicant, is not diluted on a per unit basis by the creation of additional Smartshares Units issued to the Basket applicant.

This should result in the aggregate value of the Basket securities and the Cash Amount being equal to the aggregate Current Unit Value of the Smartshares Units issued. The securities and Cash Amount are then exchanged for Smartshares Units. Subscriptions for Smartshares Units by Basket creation may only be made in multiples of 250,000.

Basket applications must be made directly to the Manager by delivery through an NZX Firm. Each delivery of a Basket must be accompanied by a completed Basket Application Form (not attached to this Investment Statement, but available from the Manager or any NZX Firm). Charges for Basket investments are explained under the section entitled “What are the charges?” on page 23.

4. Distribution Reinvestment Plan

Each Smartshares Fund receives dividends from the Index Issuers in which it invests. As described on page 26 these dividends and other income are retained within the relevant Smartshares Fund and then allocated to Unitholders for distribution. Such distributions are automatically reinvested (after the deduction of Distribution Reinvestment Plan fees (if any)) to provide you with additional Smartshares Units four times a year, unless you choose to have these paid out to you by direct credit.

Four times a year, the Manager will, at its discretion, use the reinvestment monies for Unitholders who have their quarterly distributions reinvested either to purchase Index Securities and then issue new Units to those Unitholders or to purchase existing Units on market and pass those existing Units on to those Unitholders. In either case, the Manager's purchase of Index Securities or Units with reinvestment monies will be made at current market prices.

The Distribution Reinvestment Plan described in the Prospectus for the Smartshares Funds constitutes the description of the "dividend reinvestment plan" for the purposes of the Financial Markets Conduct Act 2013 and Financial Markets Conduct Regulations 2014.

Minimum Holding

Unitholders should maintain a minimum number of Smartshares Units at all times (Minimum Holding). If you fail to maintain the minimum number of Smartshares Units, the Manager reserves the right to purchase your Units or instruct the Trustee to redeem them (provided that the exercise of that right would not breach the Listing Rules). The Minimum Holding of Smartshares Units is 100.

23

Smartshares Unit Issue Price

Smartshares Units are issued at the Current Unit Value applying at the relevant time for Cash Applications, the Regular Savings Plan and the Distribution Reinvestment Plan.

The Current Unit Value of a Smartshares Unit is determined by dividing the total value of the Smartshares Fund’s NAV by the total number of Smartshares Units on issue. The Current Unit Value of a Smartshares Unit includes not only the value of the underlying Index Securities held in a Smartshares Fund, but also accrued income in relation to the portfolio (for example, dividends and tax credits) less liabilities (for example, tax expenses and management fees). Please note that these examples of income and liabilities are not exhaustive and other types of income may be received and liabilities incurred from time to time.

Oversubscription

There is no limit on the total number of Smartshares Units that may be subscribed for and accordingly none of the Smartshares Funds have a policy providing for oversubscription. However, the Manager may reject an application for Units or require redemption of Units to maintain the Fund’s PIE status where there is a risk that a Unitholder will exceed the maximum investor interest size requirement prescribed in the Tax Act (and as set out in the “PIE Eligibility” section at page 27 below).

Suspension of Issues and Withdrawals

The Manager is not obliged to issue Smartshares Units or redeem Units (via a Basket withdrawal) in a Smartshares Fund in the period from (and including) the date of the Announcement of a distribution to (and including) the Distribution Ex Date for that distribution.

Refunds

The Trustee will not refund any Subscription Amount, except where the Trustee, on the advice of the Manager, decides that an investor’s application will not be accepted. In such situations the Subscription Amount will be returned to the investor within 20 Business Days of making that decision (such decision to be made within seven days of receiving the application). No interest will be paid on amounts refunded.

No Cooling-off Period

There is no cooling-off period in respect of the Smartshares Units. An investor may not withdraw their application.

Manager may request information

The Manager may request any Unitholder to provide information to the Manager to enable the Manager to determine whether a Smartshares Fund can continue to meet the PIE eligibility requirements (further details are provided in the "Taxation" section on page 26).

The Manager may also ask a Unitholder to provide any other information that the Manager reasonably requires in order to manage its obligation to comply with any laws or regulations in New Zealand or any other country in relation to the Smartshares Funds.

If the Manager requests a Unitholder to provide information to the Manager, the Unitholder must supply such information within 14 days after the request. The Manager may also request such information from any other person who the Manager understands has an interest in the Units held by a Unitholder.

What are the charges?

Unless otherwise specified all fees are inclusive of GST.

Entry and Exit charges

If you buy Smartshares Units directly from the Manager through a Cash Application (as described on page 21 above) you pay a flat application fee to the Manager of $30 for Subscription Amounts of less than

24

$20,000, or 0.20% of the full Subscription Amount for Subscription Amounts equal to or greater than $20,000. However, this application fee is not payable if you already hold the Minimum Holding of 100 Smartshares Units in the relevant Smartshares Fund. The application fee may be increased by the Manager by giving ten Business Days' notice of the change to the Trustee. The application fee may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.

The Manager may impose an application fee for subsequent Cash Applications, subscriptions under the Regular Savings Plan or the Distribution Reinvestment Plan, or in relation to a Basket application by giving ten Business Days' notice of the change to the Trustee and Unitholders of the relevant Smartshares Fund. There is no limit to the fee that may be imposed.

If you buy or sell Smartshares Units via the NZX Main Board you may be charged a brokerage fee by the NZX Firm with whom you are dealing. The brokerage fee is likely to vary between NZX Firms.

Basket creation and withdrawal charges

When subscribing for Units via Basket creation and redeeming Units via Basket withdrawal the following charges are payable to the Manager as at the date of this Investment Statement.

Basket Creation

Basket Withdrawal



$800 for Aus Dividend Fund

$800 for Aus Dividend Fund

The Basket creation fees may be increased by the Manager by giving ten Business Days' notice of the change to the Trustee or the fees may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.

The Basket withdrawal fees may be increased by the Manager by giving three months' notice of the change to the Trustee and, if the change is material (as determined by the Manager in its reasonable discretion), to Unitholders of the relevant Smartshares Fund. The Basket withdrawal fees may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.

There are no other entry or exit charges.

Other management charges

Management fees are charged to the Smartshares Funds and are currently 0.54% of the NAV of the relevant Smartshares Fund and are accrued daily and payable monthly. The Manager may agree payments to individual Unitholders that are the equivalent of management fee rebates (in the form of additional Smartshares Units or cash, as agreed between the Manager and the Unitholder).

The fee charged by the Manager may be increased by the Manager by giving three months’ notice of the change to the Trustee and, if the change is material (as determined by the Manager in its reasonable discretion), to Unitholders of the relevant Smartshares Fund or the fee may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.

In addition to the management fee, the Manager is entitled to interest on amounts held in respect of distributions and other income received by the Smartshares Funds and on cash Subscription Amounts (including amounts received under the Regular Savings Plan or Distribution Reinvestment Plan) between the date on which they are received and the date of issue of Units.


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The Trustee receives fees for the services it provides. The Trustee’s fees are currently met by the Manager out of the management fee and not from the assets of the Smartshares Funds. The Manager is entitled however, in the future to seek to have the Trustee's fees charged to the Smartshares Funds. The Manager would notify Unitholders if such a change was adopted. The amount of the fees payable to the Trustee shall be agreed by the Manager and the Trustee.

Persons associated with the Manager are involved in the operation of the designated settlement system that will provide services in relation to securities lending if a securities lending programme is implemented for a Smartshares Fund, and these persons may receive fees and other remuneration in that capacity. The services that these persons may provide include the holding of the relevant Smartshares Fund's Index Securities in the central securities depository and the facilitation of securities lending. The Manager will not pay those fees or remuneration from the relevant Smartshares Funds – they will be paid from the management fee.

The management fees cover the expenses for the ongoing operation of the Smartshares Funds. These include reporting, custodian fees, administration fees, trustee fees, registry costs, brokerage fees for purchasing securities in the Smartshares Funds and index licensing fees. The Manager reserves the right, however, to have these amounts and any other expenses that arise paid from the Smartshares Funds.

By investing in the Smartshares Funds investors accept and authorise these deductions and fees to occur and understand that these fees can be altered on the terms set out in this Investment Statement and the Trust Deeds.

What returns will I get?

Nature of the returns

Any Returns you get from your Smartshares Units will be a combination of:

(a) any change in the price of Smartshares Units at the time you sell, relative to the price at which you

bought on market, or subscribed if an application was made directly; and

(b) the distribution of dividends or other income received by the Smartshares Fund. Smartshares Funds

distribute all income received (for example, dividends and tax credits) less liabilities (for example, tax expenses and management fees). Please note that these examples of incom e and liabilities are not exhaustive and other types of income may be received and liabilities incurred from time to time. You will automatically have your distributions re-invested as Smartshares Units unless you elect to have them paid directly to a nominated bank account.

Key factors that determine returns for Smartshares Funds

The Returns for the Funds are subject to the general fluctuations and direction of the Australian sharemarket, up or down, and the performance of the Index Issuers, which includes changes in their security prices and the value of any dividends or other distributions paid. Both of these factors are influenced by the Australian and global economies.

In addition, currency fluctuations between the New Zealand and Australian dollar will impact on the Returns for the Smartshares Funds as the Manager does not currently take steps to hedge against currency fluctuations.

Amount of the returns

The amount of the Returns you get from your investment in Smartshares Units will vary from time to time, depending on the factors above. Returns cannot be predicted with any accuracy. None of the Manager, the Trustee, NZX, the Custodian and Administration Manager nor any other person guarantees a particular level of Return on your investment in Smartshares Units. No Returns are promised.

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Distributions

Distributions are currently made directly from each Smartshares Fund within 20 Business Days of the Record Date and are paid to Unitholders whose names are on the register in respect of Units held on the Record Date. The Record Date is on or around the last Business Day of each of March, June, September and December in any year.

Unitholders who sell Units or redeem Units (via a Basket withdrawal) from a Smartshares Fund before a Distribution Ex Date for a Record Date will not receive any distributions from that Smartshares Fund in respect of that Record Date.

These distributions comprise dividends or any other income (including income from securities lending, if a securities lending programme is implemented, which will be 50% of net revenue received by the Manager from securities lending), less fees and other expenses. Income paid into a Smartshares Fund in foreign currency will not be available for distribution to Unitholders until it has been exchanged for New Zealand dollars. Unitholders will automatically have their distributions reinvested as Smartshares Units unless they elect to have them paid directly to a nominated New Zealand bank account.

The Manager may, at its discretion, deduct from any distribution an amount of cash if, and to the extent that, the Manager reasonably considers that such a deduction is required to meet any liabilities that become payable in the next (or later) distribution period. Such deductions will be retained in the Fund.

The Manager receives and retains any interest earned on income held prior to distribution. The directors of the Manager expect to continue with this distribution policy.

Taxation

The following comments are intended to be only a general summary and indication of the relevant New Zealand and Australian tax law as at the date of this Investment Statement. There may be non-New Zealand tax consequences which affect the Smartshares Funds or the Unitholders. Neither the Trustee nor the Manager accepts any responsibility for the taxation consequences of an investment in the Smartshares Funds. Unitholders who buy or sell Smartshares Units may have different taxation positions. Consequently, each Unitholder should consider their own taxation position and if necessary seek professional advice before investing in Smartshares Units.

Taxation may affect the Returns on the Smartshares Funds and each of the Smartshares Funds may have varying tax implications. The taxation summary below is based on New Zealand and Australian tax law as at the date of this Investment Statement.

The Smartshares Funds became portfolio investment entities (PIEs) that are Listed PIEs from the date that they were Listed (16 December 2014). As Listed PIEs the Smartshares Funds pay tax on income derived by the Funds at a rate of 28%.

New Zealand Taxation of investments of the Fund

The Smartshares Funds are not subject to tax on gains that they derive from the sale of shares in most New Zealand resident companies and most companies resident in Australia that are listed on the ASX. Losses incurred on the disposal of such shares are not deductible. Dividends from such shares are usually fully taxable to the Smartshares Funds, with a credit allowed for any Imputation Credits attached (but not for any Australian Franking Credits), and any withholding tax deducted from such dividends subject to certain limits.

Depending on the equities which constitute the index that the relevant Smartshares Fund tracks, any of the Smartshares Funds may be subject to tax in respect of offshore portfolio equity investments. These rules only apply to non-New Zealand and certain Australian quoted securities. In relation to the applicable equities, the Funds will apply the “fair dividend rate” (“FDR”) method to calculate the amount of any taxable income. Under the FDR method, the Smartshares Funds will generally have taxable income in each income year (1 April to 31 March) in relation to the applicable equities calculated by reference to 5% of the average daily opening market value of the applicable equities. Dividends or sales proceeds received by the Smartshares Funds in relation to these shares should not be subject to further tax. The Smartshares Funds may be entitled to a credit for any withholding tax paid on dividends received from the applicable equities subject to certain limits. No tax deduction may be claimed for any losses in respect of the applicable equities

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under the FDR method.

New Zealand Taxation Liability of New Zealand resident investors - distributions

The following summarises the New Zealand taxation of distributions made by the Smartshares Funds to Unitholders who are resident in New Zealand for New Zealand income tax purposes.

To the extent that Imputation Credits are available, the Smartshares Funds will fully impute distributions to Unitholders by attaching Imputation Credits to the distribution at the maximum permitted ratio.

To the extent that distributions are not fully imputed New Zealand resident Unitholders will not be taxed on distributions that they receive from the Smartshares Funds. The effect of this is that non-taxable income (e.g. capital gains from the sale of investments) derived by the Smartshares Funds can be distributed to such Unitholders free from tax.

Natural person Unitholders and trustee Unitholders (other than a trustee of a unit trust) subject to a tax rate below the corporate tax rate (currently 28%) may choose to treat distributions that are fully imputed as assessable income by including that amount in their tax return. This allows such Unitholders to use Imputation Credits attached to distributions in excess of what is necessary to fully satisfy the income tax liability in relation to those distributions, to offset against their other taxable income. How Unitholders should treat distributions from the Smartshares Funds for tax purposes will depend on their personal tax circumstances and as such it is recommended that all Unitholders should seek independent tax advice.

New Zealand Taxation Liability of non-resident investors - distributions

The following summarises the New Zealand taxation of distributions made by the Smartshares Funds to Unitholders who are not resident in New Zealand for New Zealand income tax purpose.

To the extent that Imputation Credits are available, distributions to Unitholders will be fully imputed.

Non-resident withholding tax (“NRWT”) will be withheld at the rate of 15% from distributions which are fully imputed. The NRWT rate on fully imputed distributions can be reduced:

to 0% if the Unitholder holds 10% or more of the Smartshares Units in a Smartshares Fund; or

to a rate below 15% if the Unitholder is resident in a jurisdiction with which New Zealand has a double tax agreement that permits a lower tax rate.

New Zealand also has a foreign investor tax credit regime whereby the impact of NRWT on dividends is reduced by the payment of a supplementary dividend for investors holding less than 10% of the Smartshares Units in a Smartshares Fund and if the NRWT rate is 15% or more. The Smartshares Funds intend to pay supplementary dividends to non-resident Unitholders wherever possible, provided that payment meets the Trust Deeds' requirements and does not disadvantage other Unitholders.

To the extent distributions are not fully imputed, non-resident Unitholders will not be taxed on such distributions and no NRWT will be withheld by the Smartshares Funds.

Benefits of PIE

A benefit of the PIE regime is that Smartshares Funds will not be taxed on any gains derived from the sale of most shares.

The other potential benefit is that tax payable on distributions made by a Smartshares Fund to Unitholders is effectively capped at 28%. If you are currently paying tax at a rate less than 28% then the excess tax paid by the Smartshares Funds can be used to reduce the tax liabilities of Unitholders in respect of other income that they derive at the end of each income year by including the distributions from the Fund(s) in your tax return.

PIE Eligibility

The Manager has the discretion to take any steps the Manager considers necessary or desirable to ensure that each Smartshares Fund is eligible to be enrolled and remain as a PIE. This includes ensuring that any

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one Unitholder’s unit holding does not exceed the maximum investor interest size requirement in the Tax Act, which is a number of Smartshares Units not exceeding 20% of the total issued Smartshares Units of each Smartshares Fund (for these purposes, the Smartshares Units held by the relevant Unitholder’s “associated persons” that are not Exempt Investors and who, themselves, hold Smartshares Units amounting to 5% or more of the units on issue will also be taken into account in determining whether the 20% threshold has been exceeded).

There is no investor interest size requirement for a Unitholder that is an Exempt Investor. Any such exempted Unitholder may hold up to 100% of the Smartshares Units in the Fund.

The Manager also has the ability to request any relevant information from Unitholders to endeavour to ensure compliance with the PIE rules and the Trust Deeds. Additionally, the Manager has the ability to rectify any breach of the PIE holding restrictions in accordance with the PIE rules and the Trust Deeds.

For further information regarding the eligibility of a Smartshares Fund to operate as a PIE within the PIE requirements please refer to the Smartshares Funds' prospectus or contact the Manager.

Basket Investments

The tax status of some Unitholders may be such that they are liable for tax on profits derived from the disposal of Index Securities. In the case of the Smartshares Funds, contributing securities in exchange for Smartshares Units will constitute a realisation of the securities for tax purposes for those Unitholders.

New Zealand Taxation Treatment on Disposal of Units in the Smartshares Funds

The New Zealand tax treatment of profits realised or losses incurred on the disposal of Smartshares Units will depend upon the tax position of the Unitholder. Generally speaking, profits from the disposal of Smartshares Units will be subject to tax or a deduction will be allowed for losses incurred if:

the Unitholder acquired the Smartshares Units for the purpose of sale or other disposal; or

the Unitholder carries on a business involving dealing in the Smartshares Units or other similar property; or

the disposal of the Smartshares Units occurs as an act done in the carrying on of a profit-making scheme or undertaking.

As a general comment, most PIEs that invest in a Smartshares Fund should not be subject to tax on any gains made on the disposal of Units in the Fund, and other Unitholders which are resident in a country with which New Zealand has a double tax agreement may qualify for tax relief so that they are also not subject to tax on any gains made on the disposal of Units in the Fund.

Australian taxation treatment

As the Smartshares Funds do not have a permanent establishment in Australia and will not hold at any time 10% or more of the issued shares in any Index Issuer, the Smartshares Funds should not be subject to Australian income tax in respect of any gains made on disposal.

Where fully Franked dividends are paid by Australian resident companies to the Smartshares Funds, no Australian tax should be withheld at source in Australia.

Where unfranked or partially Franked dividends are paid by Australian resident companies to the Smartshares Funds, it is likely that Australian tax will be withheld at source in Australia in relation to the unfranked portion of the dividend. Where the Smartshares Funds hold less than a 10% interest in each company that they invest in, the rate of Australian withholding tax on unfranked dividends should be 15%. Any such unfranked dividends would be paid to the Smartshares Funds net of any withholding tax paid to the Australian tax authorities.

Please refer to the prospectus for the Smartshares Funds for information on stamp duty.

Reinvestment of distributions

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Unitholders will automatically have their distributions reinvested in Smartshares Units unless they elect to have them paid directly to a nominated New Zealand bank account. If not already a member of the Distribution Reinvestment Plan, a Unitholder may elect to reinvest his or her distributions by returning the Distribution Reinvestment Plan form to:

The Unit Registrar Link Market Services Limited PO Box 91976 Auckland 1142 Tel (09) 375 5998 Fax (09) 375 5990 Email: [email protected]

Notice of election for the Distribution Reinvestment Plan (forms are available from Smartshares Limited) received by the Unit Registrar at least 10 Business Days prior to a quarterly Distribution Date will be effective in respect of that distribution, otherwise such notice will be effective in respect of the next distribution. Once you have elected to reinvest your distributions, reinvestment will continue until you advise the Unit Registrar otherwise. Fees for the Distribution Reinvestment Plan are set out on page 23.

Securities Lending

The Manager currently does not operate a securities lending programme for the Smartshares Funds, but has the power under the Trust Deeds to undertake securities lending for both Smartshares Funds, and the possibility of a securities lending programme for the Smartshares Funds is (and is deemed to be) included in the issue terms for the Smartshares Funds.

Securities lending involves the transfer of legal title and beneficial interest in the securities to a third party borrower. Any Smartshares Fund that implements a securities lending programme will receive income earned from securities lending following payment of the Manager’s costs of and fees for administering securities lending.

Any Smartshares Fund that implements a securities lending programme will receive a cash payment for any dividends (including any Imputation Credits) paid in respect of any loaned securities to the holder on the record date for the payment of the dividend, so that the Smartshares Funds will receive the same Return from the securities that they would have received had they held them directly.

The potential benefits of securities lending are two-fold:

Additional source of income: Securities lending should earn income (for example, by receiving a

share of interest received on cash collateral provided by borrowers) and, following payment of the Manager’s costs of and fees for administering securities lending, should increase Returns to Unitholders of Smartshares Funds that implement a securities lending programme.

Facilitates creation of Baskets: The creation and withdrawal of Baskets tends to assist the market price of the Smartshares Units of Smartshares Funds that implement a securities lending programme to more closely follow the value of the underlying securities. One of the constraints on Basket trading is the lack of liquidity of some Index Securities. The ability to borrow these securities may assist Market Participants to trade complete Baskets of underlying securities.

Terms of Securities Lending

The Trust Deeds permit the Manager to lend securities held by the Smartshares Funds only in accordance with certain terms.

Liability to pay returns

The Trustee is the person legally liable to pay Returns (if any).


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What are my risks?

The principal risks of an investment in a Smartshares Fund are:


Market Risk

Smartshares Units are subject to the risks of an investment in a broadly based portfolio of securities, including the risk that the general level of security prices may decline, thereby adversely affecting the value of the investment in that Smartshares Fund.

Securities are susceptible to general market fluctuations and to volatile increases and decreases in price due to changes in market confidence in, and investor perception of, the issuer of those securities. These investor perceptions are unpredictable and may be based on various factors including expectations regarding government, economic, monetary and fiscal policies, inflation and interest rates, economic expansion or contraction, and global or regional political, economic and banking crises. This may result in a Unitholder being unable to recover the full amount or any of their investment and/or any Returns relating to such investment in any of the Smartshares Funds.

An investment in Smartshares Funds should be made with the understanding of the risk inherent in an investment in securities, including the risk that the financial condition of the Index Issuers may become impaired or that the general condition of the market may deteriorate (either of which may cause a decrease in the value of the Index Securities of the Index Issuers and thus in the value of Units).

The value of securities can also be affected by their liquidity. For smaller stocks, where there can often be limited liquidity, a change in their weighting on an Index could have an effect on the level of demand in the marketplace. This in turn may impact the price the relevant Smartshares Fund has to trade at to track the relevant Index and the fluctuation in the price of the Index Securities may ultimately affect the Return an investor receives.

Industry Risk

Industry risk is the risk that a particular industry may perform poorly, which may cause a decrease in the value of the shares of the Index Issuers in that industry and thus in the value of the relevant Smartshares Units. This will present a greater risk for funds that track industry based indices such as the Aus Property Fund, which will be exposed to fluctuations in the Australian property market.

Distributions Risk

The level of distributions that Unitholders receive is dependent on the level of distributions paid by Index Issuers on the Index Securities. The Manager has no influence over the dividend policies of Index Issuers or over anything else that may affect the level of distributions paid by them. Accordingly, there is no guarantee of any particular level of distributions.

Index Issuer Risk

Index Issuer risk occurs where the individual assets of the Smartshares Funds fluctuate in value due to circumstances specifically applicable to a particular Index Issuer.

Risks arising because of investment through Smartshares Fund

Tracking Risk

For a variety of reasons the Manager will not always manage to exactly track the relevant index for each Smartshares Fund. As a result of this, the Index Securities held by a Smartshares Fund may, over time, be less than a portfolio of securities that exactly matches the composition of the relevant index. Of course, investors investing directly in order to track an index are likely to face the same issues as the Manager in trying to exactly track the relevant index.

The Manager measures its tracking performance as follows. On the date on which the Smartshares Funds are launched, there is a mathematical relationship between the NAV of the Index Securities held in each Smartshares Fund and the value of the relevant index, which can be expressed as:

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If the Manager was able to perfectly track an index, this relationship would continue. However, for the reasons explained below, this is not always possible and so a difference between the number on the left- hand side and the number on the right-hand side develops over time. To measure its tracking performance:

(a) First, the Manager calculates the difference between the left-hand side of the equation and the right-

hand side of the equation, with that difference being expressed as a positive number if the left-hand side is greater and a negative number if the right-hand side is greater.

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(b) Next the Manager compares the difference calculated in (a) with the equivalent difference at the start

of the year to calculate the change in that difference over the year.

The number calculated in (b) is the Manager's measure of its tracking performance over the year. The closer that number is to zero, the more closely the Manager has tracked the index during the year.

The principal reasons for imperfect tracking performance are as follows:

First, it may not be possible for the Manager to exactly match changes to the indices by buying and selling Index Securities, because the prices it pays and receives for the Index Securities may not exactly match the prices used to adjust the index. For example, there may be limited liquidity in relation to securities the Manager is attempting to buy that pushes up the purchase price of those securities after an adjustment to an index, but before the Manager can buy. In some cases the relevant adjustment to an index may even cause such limited liquidity as it could affect the level of demand for the securities in the market place.

Second, tracking is a complex exercise, and errors may arise due to human or systems errors.

Some tracking imperfections mean the value of a Smartshares Fund's Index Securities increases in relation to the value of the relevant index. This causes no detriment to Unitholders. However, some tracking imperfections mean the value of a Smartshares Fund's Index Securities reduces in relation to the value of the relevant index. When this is the case, the Return generated by the Smartshares Fund may be less than the Return on the relevant index, which is detrimental to Unitholders.

Operational Risk

There is a risk that operational errors (including improperly analysing the effect of tax laws), fraud or misconduct may cause a loss to the relevant Smartshares Fund or otherwise affect Unitholders' Returns. In particular, tracking an index and assessing the reasons for tracking differences (that is, differences between the NAV of a Smartshares Fund and the value of the relevant index) is very complex and some errors are occasionally made.

In order to mitigate this risk the Manager has adopted a set of internal policies and procedures and also outsources some aspects of its operations to the Administration Manager to draw on the Administration Manager's systems and expertise. The Manager has also insured, subject to normal commercial excesses, against losses arising from fraud and misconduct.

1 If at any time the Manager subdivides or consolidates Units, it will adjust the "1,000" referred to in the right-hand side of the equation so that this action, which has nothing to do with tracking difference, does not affect the mathematical relationship. For example, if the Manager subdivides all Units in two, which will halve the left-hand side of the equation, it will change the "1,000" to "2,000" to also halve the right-hand side of the equation.

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Passive Management Risk

Traditional methods of investment management for an actively managed fund typically involve deliberate changes to a portfolio of securities based on judgement of economic, financial and market conditions. No attempt will be made to actively manage Smartshares Funds in the traditional sense, and the Manager and Trustee do not monitor the performance of Index Issuers.

The adverse financial condition of an Index Issuer or the industry it is in will not be a reason for the Manager to direct the Trustee to cause a Smartshares Fund to dispose of that Smartshares Fund’s investments in the Index Securities of that Index Issuer unless the Index Issuer is removed from the relevant index. Nor will Index Securities held in Smartshares Funds be disposed of as a result of fluctuations in the market unless they are removed from the relevant index.

Market fluctuations and such adverse conditions may affect the value of a Unitholder’s investment and/or any Returns either positively or negatively. Neither the Manager nor the Trustee may delay decisions to re- weight Smartshares Funds to reflect the relevant index to enhance the Returns on particular Smartshares Units.

Liquidity Risk

Investors are only able to cash in their investment by selling their Units on market unless they have enough Units to redeem their Units through a Basket withdrawal (Basket withdrawals are described on page 35). The market price per Unit may vary from the Current Unit Value due to supply and demand factors. Units in the Smartshares Funds are quoted on the NZX Main Board and, in the opinion of the Manager, a market for sales of Units will develop. However, although the Smartshares Units are quoted on the NZX Main Board, the fact that investors can apply to purchase Units directly from the Manager may result in a reduced number of buyers of Units on the NZX Main Board.

Foreign Currency Risk

While Subscription Amounts and income for reinvestment are payable in New Zealand dollars, the Manager invests the proceeds for the Smartshares Funds in securities denominated in Australian dollars. In addition, Smartshares Units in the Smartshares Funds are quoted on the NZX Main Board in New Zealand dollars even though the assets underlying the value of those Smartshares Units are denominated in Australian dollars.

Both of these situations give rise to currency risk that may affect the value of the Smartshares Funds, and amounts for reinvestment, either positively or negatively and hence the value or amount of the Smartshares Units when considered in New Zealand dollar terms. The Manager currently takes no steps to mitigate the Smartshares Funds’ foreign currency exposure.

Regulatory Risk

Regulatory risk is the risk that a Smartshares Fund may be adversely affected by future changes in applicable laws, including tax laws, or by decisions taken by regulatory agencies enforcing those laws. Among the regulatory risks that the Manager faces is the risk that when it applies for a market service licence under the Financial Markets Conduct Act 2013 (described in more detail in the Prospectus for the Smartshares Funds at section 20 of the statutory information section) its application is declined by the FMA or overly stringent conditions are imposed on its licence.

Tax Risk

Taxation laws, their interpretation, or the New Zealand Inland Revenue Department or Australian Taxation Office’s application of those laws may change during the period of a Unitholder’s investment in Smartshares Funds, in a way which has an adverse impact on the Returns to that Unitholder.

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There are tax risks that need to be managed in relation to the Smartshares Funds continuing to be eligible to be PIEs, including (but not limited to):

If a Smartshares Fund fails to meet the required criteria and therefore ceases to be a PIE, it will not

be able to re-elect to be a PIE for the succeeding five years.

If a Unitholder who is not an Exempt Investor (including all associates) holds more than 20% of the Smartshares Units in a Smartshares Fund, that Fund may not qualify to be a PIE.

Although the Manager has put processes in place designed to ensure that each Smartshares Fund complies with all requirements to be a PIE, there is a risk that a Smartshares Fund could lose PIE status if there is a breach of those requirements which is not remedied within the time permitted under the PIE Rules. If PIE status of a Smartshares Fund is lost that Fund will be taxed as a company and distributions to Unitholders will be dividends taxable at the Unitholder’s marginal tax rate and potentially will be subject to withholding tax. No compensation will be paid to Unitholders in the event that PIE status is lost. For further information on PIE Tax risk please refer to the Smartshares Funds' prospectus.

Custodian Risk

Legal title to the assets of the Smartshares Fund is held by the Custodian. That means there is a risk that if the Custodian becomes insolvent, this could temporarily or permanently deprive the Smartshares Funds of assets. This risk is managed by having the Custodian hold the assets of the Smartshares Funds as a bare trustee and by keeping those assets separately identifiable from other assets it holds (for itself and others). This should mean that, if the Custodian ever does become insolvent, the assets it is holding for the Smartshares Funds will not form a part of the pool of assets to be liquidated for the benefit of the Custodian's creditors.

Key Personnel Risk

The management of the Smartshares Funds is complex and many of the tasks associated with that management require considerable experience in relation to exchange traded funds. Consequently, there is a risk that if any of the Manager's key personnel leave, there is an increased risk of disruption and potential calculation errors. Among other things, such calculation errors could lead to unintended tracking differences. This risk is mitigated, to some extent, by the Manager's appointment of the Administration Manager to the Smartshares Funds. As the Administration Manager will be responsible for the day to day administration of the Smartshares Funds, this should minimise the risk of disruption if any of the Manager's key personnel leave.

Unitholder Liability

No Unitholder shall be personally liable in respect of any debt or liability of the relevant Smartshares Fund, nor be personally liable to indemnify the Trustee or the Manager in respect of any such debt or liability, except for any tax liability paid by the Smartshares Funds that is attributable to that Unitholder. The Trustee and Manager, except in the case of wilful default, wilful breach of trust or dishonesty, are indemnified out of the assets of the relevant Smartshares Fund.

Consequences of Insolvency

Unitholders are not liable to make any payments to third parties upon the winding up of Smartshares Funds, or as a result of the insolvency of the Manager or Trustee. However, in the event that a wind-up proves necessary, the Manager and/or Trustee shall be entitled to recover from the relevant Smartshares Fund all costs and expenses, which are incurred in connection with or arising out of the winding up of the Fund. This will be done prior to distributing money (or assets) to Unitholders. Claims of Unitholders in respect of their Smartshares Units will rank equally among themselves in such circumstances.

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Can the investment be altered?

Regular Savings Plan

Unitholders may at any time initiate, cease or alter (subject to maintaining a minimum contribution of $50 per month unless contributions are being completely stopped) the monthly Regular Savings Plan payments by giving ten Business Days’ notice to the Unit Registrar prior to the Direct Debit Date.

Distribution Reinvestment Plan

Unitholders may at any time initiate or cease the Distribution Reinvestment Plan by notifying the Unit Registrar. However, Unitholders will need to give the Unit Registrar at least 10 Business Days' notice prior to the quarterly Distribution Ex Date to enable the change to be made for that distribution period.

Fees

The Manager is entitled to increase the amount of any fee (including by adding a fee not currently charged) payable in respect of a Smartshares Fund. To do this it must:

(a) give at least ten Business Days' prior notice of any such increase of any fee relating to applications

to the Trustee;

(b) give at least three months' prior notice of any such increase of any fee not referred to in paragraph (a) to the Trustee (including the Manager's fee); and

(c) if such increase is material for Unitholders of a Smartshares Fund (as determined by the Manager in its reasonable discretion), give at least three months' prior notice of any such increase of any fee not referred to in paragraph (a) to all Unitholders of the relevant Smartshares Fund.

The Manager is entitled to decrease the amount of any fee payable in respect of a Smartshares Fund by giving notice to the Trustee (and such decrease may have immediate effect).

Amendments to the relevant trust deed and issue terms

The Manager and the Trustee may amend the relevant Trust Deed for a Smartshares Fund in any of the following cases:

(a) if the same is authorised by an extraordinary resolution of Unitholders;

(b) if the same is required or recommended by the FMA;

(c) if, at any time while the Units of a Trust are listed on an exchange, the same is requested or

recommended by that exchange because of a change to the rules of that exchange;

(d) if the same is required or desirable because of any amendment or repeal and/or replacement of the

Unit Trusts Act 1960 or any other relevant legislation (including, without limitation, provisions of the Financial Markets Conduct Act 2013, or regulations under that Act, which will become applicable to the Smartshares Funds when the Manager opts into the Financial Markets Conduct Act regime before the relevant statutory transition period ends on 1 December 2016 and may require changes to the Trust Deed), or otherwise permitted or required under any relevant law; or

(e) if in the opinion of the Trustee the same does not have a material adverse effect on Unitholders.

Following any alteration, modification, variation or addition to the provisions of a Trust Deed as set out above, the Manager will notify the Unitholders in writing in summary form of all amendments made. This notification will be sent to Unitholders within three months after the date the amendments are made and no later than the time the Manager next mails information to Unitholders if that time falls no later than three months after the date the amendments are made.

In addition, where the Trustee and the Manager agree that it is in the interests of the Unitholders to vary the definition of ‘Authorised Investments’ (as defined in the Trust Deeds) in respect of the relevant Smartshares Fund then the proposed variation will be notified to all Unitholders no later than three months prior to the variation taking effect.

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Further details on the Trust Deeds and issue terms are provided in the registered prospectus for the Smartshares Funds.

Amendments to an Investment Policy

The Investment Policy of each Smartshares Fund may be amended or replaced from time to time by the Manager in consultation with the Trustee. If the Manager proposes to amend or replace an Investment Policy in a manner that materially affects existing Unitholders, the Manager shall, prior to effecting any such amendment or replacement, give at least 30 days' written notice to the Unitholders and if such notice is required, the relevant amendment or replacement shall not be effective until such notice period has expired.

Replacement of an index

The Manager may, with the Trustee's prior written consent, replace an index with a different index that is materially the same if the index that a Smartshares Fund tracks is discontinued or the index methodology is changed in a way that means, in the Manager's opinion, continuing to track that index would materially change an investment in Units in the relevant Smartshares Fund. In such circumstances, the Manager may, with the Trustee's prior written consent, make any amendments to the Investment Policy that are necessary or desirable in connection with the replacement of the index and must give ten Business Days' notice (or such alternative notice period agreed with the Trustee) of such replacement to Unitholders of the relevant Smartshares Fund. After the notice period has passed the index will be deemed to be so replaced.

How do I cash in my investment?

Smartshares Units can be cashed up in two ways:

1. Market sale

Units in each Smartshares Fund are quoted on the NZX Main Board and, in the opinion of the Manager, a market will develop for sales of Units. Smartshares Units are able to be sold on market through NZX Firms (no written redemption notice will be required). The market price per Smartshares Unit may vary from the Current Unit Value due to supply and demand factors. The costs involved in a sale on the NZX Main Board is normal sharemarket brokerage, which may vary between NZX Firms. The Manager may decline to register a transfer of Smartshares Units if it would result in a transferee holding less than the Minimum Holding (provided that doing so would not breach the Listing Rules).

2. Basket withdrawal

Basket withdrawals are for holdings in multiples of 250,000 Units in a Smartshares Fund.

A Unitholder can surrender Smartshares Units and receive equivalent Index Securities and a Cash Amount representing any accrued income applicable from the relevant Index Securities of Index Issuers. All withdrawal requests should be made through an NZX Firm to the Manager after completing a Basket withdrawal notice. Charges in relation to Basket withdrawals are explained under “What are the charges?” on page 23.

The Manager is not obliged to redeem Smartshares Units in any of the Smartshares Funds in response to a Basket withdrawal request in the period from (and including) the Announcement of a distribution to (and including) the Distribution Ex Date (as redemptions during that period could result in a decreased number of Smartshares Units on issue, which would in turn result in an increase in the announced distribution on a per unit basis).

Sale to retain PIE status

In some circumstances the Manager may be required to take action to ensure that the Smartshares Funds retain their PIE status. The Manager has been granted a waiver by the Special Division to enable it to do so. For further information about the waiver see the registered prospectus for the Smartshares Funds.

36

If a Unitholder exceeds the investor interest size requirement prescribed in the Tax Act (the “Breach”) in respect of a Smartshares Fund, the Manager may take the following steps to ensure that the Breach is remedied:

(a) as soon as practicable after the Manager becomes aware of the Breach, the Manager shall give

written notice to the relevant Unitholder(s) of the Breach, including details of the number of Smartshares Units (the “Excess Units”) giving rise to the Breach;

(b) the Unitholder shall have a period consisting of the grace period determined in accordance with the

Tax Act (the “Remedy Period”) less 30 days to remedy the Breach, but if the Manager becomes aware of the Breach and determines that there are 30 days or less to remedy the Breach then the Breach shall be deemed to have not been remedied; and

(c) if the Breach has not been remedied upon expiry of the period referred to in (b) above, then the

Manager shall within the remaining 30 days of the Remedy Period, in its discretion, and only to the extent permitted by the Listing Rules (or any ruling in respect of, or waiver from the Listing Rules), sell, redeem, or repurchase the amount of the Excess Units in order to remedy the Breach, and:

(i) the Manager shall account to the relevant Unitholder for the proceeds of any disposal of the

Excess Units after deduction of all expenses arising from such disposal; and

(ii) neither the Manager nor the Trustee is required to maximise the Fund unit price for any

disposal and in any event, shall not be liable to any Unitholders for any loss on disposal.

Winding up of Smartshares Funds

The Manager has the power to wind up any Smartshares Fund (after giving three months’ notice to the Trustee). The Trustee shall give Unitholders notice that the Trustee has received a notice from the Manager terminating the relevant Smartshares Fund. The Trustee shall then distribute the balance, after payment of any costs, charges, expenses, claims and liabilities (including tax and contingent liabilities) incurred in connection with the relevant Smartshares Fund, or arising out of the liquidation of the Fund, amongst the Unitholders in proportion to the number of Units held by them. The Trustee shall retain such amount as the Manager considers necessary or appropriate to meet all the above costs, charges, expenses, claims and liabilities (including contingent liabilities and tax) that are not paid prior to distribution.

Who do I contact with inquiries about my investment?

If you require any information about your investment in Smartshares Units, you should first contact:

The Unit Registrar Link Market Services Limited Level 7, Zurich House 21 Queen Street AUCKLAND 1010 Tel: (09) 375 5998 Fax: (09) 375 5990 Email: [email protected]

The Manager Manager Smartshares Smartshares Limited Level 1, NZX Centre, 11 Cable Street PO Box 2959, Wellington Tel: 0800 80 87 80 Email: [email protected] www.smartshares.co.nz



http://www.nzx.com/

37

Is there anyone to whom I can complain if I have problems with the investment?

Complaints can be made to any of the following:

The Manager Unit Registrar

Manager Smartshares Smartshares Limited Level 1, NZX Centre 11 Cable Street PO Box 2959 WELLINGTON Tel: 0800 80 87 80 Email: [email protected]

Link Market Services Limited Level 7, Zurich House 21 Queen Street AUCKLAND 1010 Tel: (09) 375 5998 Fax: (09) 375 5990 Email: [email protected]

Trustee

Trustees Executors Limited Level 5, Maritime Tower 10 Customhouse Quay PO Box 3222 WELLINGTON Tel: (04) 495 0999 Fax: (04) 496 2952 Email: [email protected]

Alternatively, you may lodge a complaint with the Manager’s or the Trustee's Dispute Resolution Scheme provider. The Dispute Resolution Scheme provider for the Manager and the Trustee is Financial Services Complaints Limited. They can be contacted at:

4th Floor, 101 Lambton Quay Wellington P O Box 5967 Wellington 6011 Tel: 0800 347 257 Fax: (04) 472 3727

There is no ombudsman to whom complaints may be made.

What other information can I obtain about this investment?

Further information about the Smartshares Funds, and Smartshares Limited, is contained in or referred to in:

The latest registered prospectus for the Smartshares Funds

The latest annual report (including financial statements) of the Smartshares Funds (when prepared).

The latest annual report including financial statements will be available from the Manager free of charge at www.smartshares.co.nz (when prepared). The prospectus and financial statements (when prepared) are also filed with the Companies Office, and are available on the Companies Office website (www.business.govt.nz/companies) under the Manager’s file reference, free of charge.

The Trust Deeds for the Smartshares Funds may be inspected, without fee, by any person at the registered office of the Manager. A copy of the Trust Deeds will be sent (electronically where possible) to prospective and current investors, free of charge, on request to the Manager.




http://www.smartshares.co.nz/


38

A Unitholder (or his/her/its representative) may inspect that part of the register of Smartshares Units kept by the Unit Registrar that relates to his/her/its Smartshares Units, except when the register is duly closed (and subject to any reasonable restrictions that the Manager may impose so that not less than two hours in each working day is allowed for inspection). A copy of that part of the register of Smartshares Units relating to a Unitholder may be obtained on payment of a reasonable fee.

Up-to-date information on the performance of Smartshares Funds and the relevant indices is available in the daily newspapers and on NZX's website (www.nzx.com). Announcements to NZX, including Announcements of the tracking differences for the Smartshares Funds can be found at www.nzx.com under the ticker symbols "ASP" for the Aus Property Fund and "ASD" for the Aus Dividend Fund.

Information to the Unitholder

The annual report and half year report is made available to every investor on the Smartshares website within 90 days of the end of the relevant period. Notification of the availability of this annual report is sent to all investors by mail and a hard copy of the report can be posted to any Unitholder, if requested.

Investors will also receive a distribution notice four times a year, as well as confirmation of Smartshares Units allocated if they are members of the Distribution Reinvestment Plan.

Unitholders who are members of the Regular Savings Plan will receive a monthly statement confirming the price and number of Smartshares Units allocated for each contribution made.

Information in relation to the value of your investment and trading history can be obtained via the Registry Investor Service Centre web site at www.linkmarketservices.co.nz.

Request information

Investors may also request from the Manager, in accordance with section 54B of the Securities Act 1978 and regulation 44 of the Securities Regulations 2009, the information required by those provisions to be made available. A prescribed fee may be payable (but not for a copy of the registered prospectus, a copy of the financial statements or a copy of any document extending the period during which allotments may be made under the registered prospectus). Such a request may be made by contacting the Manager, on the contact

details as set out on page 18 above, and the Manager will be able to let Unitholders know what the fee is (if

any) prior to actioning their request.

The information that may be requested under regulation 44 is:

(a) a copy of the most recent annual report of the Smartshares Funds (when prepared);

(b) a copy of the most recent financial statements of the Smartshares Funds, together with a copy of the

auditor's report on those statements (when prepared);

(c) a copy of the Trust Deeds;

(d) a copy of the Smartshares Funds' prospectus, together with copies of any documents registered

under the Securities Act 1978 for the purpose of extending the period during which allotments may be made under that prospectus;

(e) a copy of the most recent investment statement relating to the Units (which, as at the date of this

Investment Statement is this document);

(f) if prospective information about Returns on the Units is or was contained in any prospectus or

advertisement, a comparison (if practicable, in the same form and for the same period as the prospective information) of the actual Returns against the prospective Returns; and

(g) if prospective financial information about the Fund was contained in any prospectus or advertisement,

a comparison (if practicable, in the same form and for the same period as the prospective financial information) of the actual results against the prospective financial information.

http://www.nzse.co.nz/


http://www.nzx.com/

http://www.linkmarketservices.co.nz/

39

Privacy

The Manager, through the Unit Registrar, collects and holds personal information about you for the purposes of managing your investment and advising you of other investment opportunities. You may request access to personal information held about you in relation to your investment. You may make such request by writing to the Unit Registrar at:

Link Market Services Limited PO Box 91976 Auckland 1142

or by telephoning the Unit Registrar on (09) 375 5998. Depending on the nature of any such request, the Manager or the Unit Registrar reserves the right to impose a reasonable charge for providing access to personal information.

The Unit Registrar's privacy policy is available on its website www.linkmarketservices.co.nz.


40

GLOSSARY OF TERMS

Administration Manager BNP Paribas Fund Services Australasia Pty Limited, acting through its New Zealand branch, or any other administration manager appointed from time to time.

Announcement a market announcement to NZX that can be viewed on nzx.com under the ticker symbols "ASP" for the Aus Property Fund and "ASD" for the Aus Dividend Fund (and Announce and Announced have corresponding meanings).

Application Form the application form attached to this Investment Statement.

ASX the Australian Stock Exchange.

Basket a proportionate amount of the securities of the Index Issuers determined from time to time by the Manager as equivalent to 250,000 Smartshares Units.

Business Day a day on which the NZX Main Board is open for usual business.

Cash Amount a cash amount determined by the Manager as being equal to:

(a) in relation to a person subscribing for Units via Basket creation, a proportionate share of the income accrued and held in the particular Smartshares Fund that will be attributable to the Smartshares Units issued to the Basket applicant; and

(b) in relation to a person redeeming Units via Basket withdrawal, the income accrued and held in the particular Smartshares Fund that is attributable to the Units being redeemed.

Cash Application an application for Units that is made for cash and is not made under the Regular Savings Plan or the Distribution Reinvestment Plan.

Current Unit Value the market value of all securities held by the relevant Smartshares Fund (plus any received and accrued income) less liabilities or provisions (including accrued liabilities and expenses) properly to be taken into account in determining the NAV of the relevant Smartshares Fund, divided by the number of Units on issue for that Fund.

Custodian BNP Paribas Fund Services Australasia Pty Limited, acting through its New Zealand branch, or any other custodian appointed (by the Trustee) from time to time.

Direct Debit Date on or about the 20th

of every month.

Distribution Date each date on which distributions are paid to Unitholders, which will be within 20 Business Days after each Record Date.

Distribution Ex Date in relation to a distribution, the date on which NZX quotes the Units on an "ex" basis under the NZX Participant Rules.

Aus Dividend Fund the Australian Dividend Index Trust.Aus Property Fund the Australian Property Index Trust.

41


means the plan currently provided for in the prospectus for the Smartshares Funds under which Unitholders may automatically invest their dividends and other distributions in the relevant Smartshares Fund quarterly.

Establishment Deed an establishment deed establishing a Smartshares Fund between the Manager and the Trustee.

Exempt Investor a Unitholder that is an investor of the type listed in section HM 21(2) of the Tax Act (including Parts A and B of Schedule 29 of that act), or equivalent provision.

FMA the Financial Markets Authority.

Franked or Franking Credit the Australian tax credit which is attached to the dividend, distributed in accordance with Australia's dividend imputation system.

Imputation Credit “imputation credit” as defined in section YA 1 of the Tax Act.

Index Administrator S&P Dow Jones Indices.

Index Issuer in respect of either Smartshares Fund, an issuer whose securities are included from time to time in the index which that Smartshares Fund tracks.

Index Securities securities issued by an Index Issuer that are held or to be acquired by a Smartshares Fund.

Investment Policy an investment policy that is developed by the Manager in accordance with the relevant Trust Deed (and which may not be inconsistent with the index tracking objective for the relevant Smartshares Fund set out in the relevant Establishment Deed) and sets out how the Manager will invest on behalf of the relevant Smartshares Fund.

Investment Statement this investment statement.

Listed listed on the NZX Main Board.

Listing Rules the NZX Main Board listing rules that regulate issuers listed on the NZX Main Board.

Manager Smartshares Limited.

Market Participant any entity approved by NZX pursuant to the NZX Participant Rules to participate in any market provided by NZX.

Master Trust Deed the master trust deed between the Manager and the Trustee dated 24 June 2014.

Minimum Holding the minimum number of Smartshares Units in a Smartshares Fund that a Unitholder must hold at all times. Currently this is 100 Smartshares Units.

NAV the net asset value of the relevant Smartshares Fund.

NZX NZX Limited.

NZX Firm a Market Participant accredited by NZX pursuant to the NZX Participant Rules to provide advice and trade on behalf of a client or as a principal (a list of which can be found on www.nzx.com).

NZX Main Board the main board equity security market operated by NZX.

http://www.nzx.com/

42

NZX Participant Rules means the rules regulating Market Participants of NZX.

PIE Portfolio Investment Entity under the Tax Act.

Record Date in relation to a distribution to Unitholders, the time and date fixed by the Manager for the determination of the Unitholders to whom a distribution will be paid, which is currently on or about the last Business Day in March, June, September and December in each year.

Regular Savings Plan the scheme under which Unitholders may make monthly payments of at least NZ$50 to the Smartshares Funds in order to purchase further Smartshares Units on an ongoing basis.

Return in relation to Units and other securities means the amounts distributed to holders of them together with any increase in their capital value and, in relation to an index, means the amounts that would be distributed to a person that held the Index Securities used to calculate the value of the relevant Index and any increase in the value of such a holding.

Smartshares Funds or Funds the Aus Dividend Fund and the Aus Property Fund.

Smartshares Unit or Unit a unit in one of the Smartshares Funds.

Special Division means the division of the NZ Markets Disciplinary Tribunal constituted under the NZ Markets Disciplinary Tribunal Rules, that regulates the Manager (in the place of NZX), for compliance with the NZX Main Board Listing Rules.

Subscription Amount the amount of money that is being provided for investing in Smartshares Funds (which includes the application fee).

Tax Act the Income Tax Act 2007.

Trust Deed in respect of any particular Smartshares Fund, the Master

Trust Deed and the relevant Establishment Deed (as may be supplemented or amended by any supplementary deeds or deeds of modifications).

Trustee Trustees Executors Limited.

Unitholder a holder of Smartshares Units.

Unit Registrar Link Market Services Limited.

You A potential investor or a Unitholder.

Terms described above in the singular include the plural and vice versa. All dates and times contained in the

Investment Statement refer to New Zealand time.


smartTENZ - NZX 10 FUND smartMIDZ - NZX MIDCAP INDEX FUND smartFONZ - NZX 50 PORTFOLIO INDEX FUND smartMOZY - NZX AUSTRALIAN MIDCAP INDEX FUND smartOZZY – NZX AUSTRALIAN 20 LEADERS INDEX FUND

Investment Statement for the purposes of the Securities Act 1978. Dated 17 September 2015

2

Contents

IMPORTANT INFORMATION 3

HOW DO I APPLY? 12

THE NZX 10 FUND (SMARTTENZ) 15

THE NZX MIDCAP INDEX FUND (SMARTMIDZ) 18

THE NZX 50 PORTFOLIO INDEX FUND (SMARTFONZ) 20

THE NZX AUSTRALIAN MIDCAP INDEX FUND (SMARTMOZY) 23

THE NZX AUSTRALIAN 20 LEADERS INDEX FUND (SMARTOZZY) 26

ANSWERS TO IMPORTANT QUESTIONS 28












GLOSSARY OF TERMS 52

3



Investment decisions are very important. They often have long-term consequences. Read all

documents carefully. Ask questions. Seek advice before committing yourself.


When deciding whether to invest, consider carefully the answers to the following questions

that can be found on the pages noted below:

Page












In addition to the information in this document, important information can be found in the

current registered prospectus for the investment. You are entitled to a copy of that

prospectus on request.1


The Financial Markets Authority regulates conduct in New Zealand’s financial markets. The

Financial Markets Authority’s main objective is to promote and facilitate the development of

fair, efficient, and transparent financial markets.



Using a financial adviser cannot prevent you from losing money, but it should be able to help

you make better investment decisions.

Financial advisers are regulated by the Financial Markets Authority to varying levels,

depending on the type of adviser and the nature of the services they provide. Some financial

advisers are only allowed to provide advice on a limited range of products.

1 Each of the funds discussed in this investment statement has its own registered prospectus.


4





A financial adviser who provides you with personalised financial adviser services may be

required to give you a disclosure statement covering these and other matters. You should

ask your adviser about how he or she is paid and any conflicts of interest he or she may have.

Financial advisers must have a complaints process in place and they, or the financial services

provider they work for, must belong to a dispute resolution scheme if they provide services to

retail clients. So if there is a dispute over an investment, you can ask someone independent

to resolve it.

Most financial advisers, or the financial services provider they work for, must also be

registered on the financial service providers register. You can search for information about

registered financial service providers at http://www.fspr.govt.nz.

You can also complain to the Financial Markets Authority if you have concerns about the

behaviour of a financial adviser.

Overseas Investors

The offer set out in this Investment Statement is only made to New Zealand residents.


Units in the Smartshares Funds were accepted for quotation on the NZX Main Board by NZX

Limited (NZX) (the NZX Main Board is a licensed market operated by NZX, and NZX is a

licensed market under the Financial Markets Conduct Act 2013) and Units are quoted on the

NZX Main Board. However, the Special Division of the NZ Markets Disciplinary Tribunal that

regulates Smartshares Limited accepts no responsibility for this offer.

Disclaimer

The Return on each Smartshares Fund is expressly intended to closely match the Return on

the Index it tracks (smartFONZ tracks the S&P/NZX 50 Portfolio Index, smartTENZ tracks the

S&P/NZX 10 Index, smartMIDZ tracks the S&P/NZX MidCap Index, smartMOZY tracks the

S&P/ASX MidCap 50 Index and smartOZZY tracks the S&P/ASX 20 Index). These indices

rise and fall according to market events and conditions. None of the Trustee or the Manager

of any of the Smartshares Funds referred to in this Investment Statement, NZX, nor any other

person associated with this offer guarantees the Return on the indices or the Return on each

Smartshares Fund or investment in any Smartshares Fund. No warranty expressed or

implied is given as to the results to be obtained by the Manager or each Smartshares Fund

from the use of the indices or any data included in them, or as to the liquidity of investment in

each Smartshares Fund, Smartshares Units or the fitness of any Smartshares Fund for any

Unitholder’s purpose. NZX does not guarantee the accuracy or continuity or completeness of

the Indices or any data included in them. No person may offer, sell or deliver Smartshares

Units or distribute any documents in relation to the offer (including any copy or extract from

this Investment Statement) to any person in any jurisdiction other than in compliance with any

5

applicable laws and regulations. S&P Dow Jones Indices and NZX Disclaimer

The "S&P/NZX 50 Portfolio Index, S&P/NZX 10 Index and S&P/NZX MidCap Index" are products of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and NZX Limited, and has been licensed for use by Smartshares Limited. Standard & Poor’s® and S&P® are registered trademarks of Standard &

Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). NZX Limited’s trademark is a registered trademark of NZX Limited. The trademarks have been licensed to SPDJI and have been sublicensed for use for certain purposes by Smartshares Limited. Smartshares Limited’s Products are not sponsored, endorsed,

sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”) or NZX Limited. Neither S&P Dow Jones Indices nor NZX Limited make any representation or warranty, express or implied, to the owners of the Smartshares Limited’s Products

or any member of the public regarding the advisability of investing in securities generally or in Smartshares Limited’s Products particularly or the ability of the S&P/NZX 50 Portfolio Index, S&P/NZX 10 Index and S&P/NZX MidCap Index to track general market performance. S&P Dow Jones Indices and NZX Limited only relationship to Smartshares Limited with respect to the S&P/NZX 50 Portfolio Index, S&P/NZX 10 Index and S&P/NZX MidCap Index are the licensing of the Indices

and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P/NZX 50 Portfolio Index, S&P/NZX 10 Index and S&P/NZX MidCap Index are determined, composed and calculated by S&P Dow Jones Indices or NZX Limited without regard to Smartshares Limited or the Smartshares Limited’s Products. S&P Dow Jones Indices and NZX Limited have no obligation to take the needs of Smartshares Limited or the owners of Smartshares Limited’s Products into consideration in determining, composing or calculating the S&P/NZX 50 Portfolio Index, S&P/NZX 10 Index and S&P/NZX MidCap Index. Neither S&P Dow Jones Indices nor NZX Limited are responsible for and have not participated in the determination of the prices, and amount of Smartshares Limited’s Products or the timing of the issuance or sale of Smartshares Limited’s Products or in the determination or calculation of the equation by which Smartshares Limited’s Products are to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and NZX Limited have no obligation or liability in connection with the administration, marketing or trading of Smartshares Limited’s Products. There is no assurance that investment products based on the S&P/NZX 50 Portfolio Index, S&P/NZX 10 Index and S&P/NZX MidCap Index

will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice. NEITHER S&P DOW JONES INDICES NOR THIRD PARTY LICENSOR GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P/NZX 50 PORTFOLIO INDEX, S&P/NZX 10 INDEX AND S&P/NZX MIDCAP INDEX OR ANY DATA RELATED

THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND NZX LIMITED SHALL NOT BE SUBJECT TO ANY DAMAGES OR

LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND NZX LIMITED MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY

DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY SMARTSHARES LIMITED, OWNERS OF THE SMARTSHARES LIMITED’S PRODUCTS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P/NZX 50 PORTFOLIO INDEX, S&P/NZX 10 INDEX AND S&P/NZX MIDCAP INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING

ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR NZX LIMITED BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR

CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBLITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND SMARTSHARES LIMITED, OTHER THAN THE

LICENSORS OF S&P DOW JONES INDICES.


The "S&P/ASX MidCap 50 Index and S&P/ASX 20 Index" are products of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and ASX Operations Pty Ltd, and has been licensed for use by Smartshares Limited. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s

Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). ASX Operations Pty Ltd’s trademark is a registered trademark of ASX Operations Pty Ltd. The trademarks have been licensed to SPDJI and have been sublicensed for use for certain purposes by Smartshares Limited. Smartshares Limited’s Products are not sponsored,

6

endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”) or ASX Operations Pty Ltd. Neither S&P Dow Jones Indices nor ASX Operations Pty Ltd make any representation or warranty, express or implied, to the owners of the Smartshares Limited’s Products or any member of the public regarding the advisability of investing in securities generally or in Smartshares Limited’s Products particularly or the ability of the S&P/ASX MidCap 50 Index and S&P/ASX 20 Index to track general market performance. S&P Dow Jones Indices and ASX Operations Pty Ltd only relationship to Smartshares Limited with respect to the S&P/ASX MidCap 50 Index and S&P/ASX 20 Index are the licensing of the Indices and certain

trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P/ASX MidCap 50 Index and S&P/ASX 20 Index are determined, composed and calculated by S&P Dow Jones Indices or ASX Operations Pty Ltd without regard to Smartshares Limited or the Smartshares Limited’s Products. S&P Dow Jones Indices and ASX Operations Pty Ltd have no obligation to take the needs of Smartshares Limited or the owners of Smartshares Limited’s Products into consideration in determining, composing or calculating the S&P/ASX MidCap 50 Index and S&P/ASX 20 Index. Neither S&P Dow Jones Indices nor ASX Operations Pty Ltd are responsible for and have not participated in the determination of the prices, and amount of Smartshares Limited’s Products or the timing of the issuance or sale of Smartshares Limited’s Products or in the determination or calculation of the equation by which Smartshares Limited’s Products are to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and ASX Operations Pty Ltd have no obligation or liability in connection with the administration, marketing or trading of Smartshares Limited’s Products. There is no assurance that investment products based on the S&P/ASX MidCap 50 Index and S&P/ASX 20 Index will accurately track index performance or

provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice. NEITHER S&P DOW JONES INDICES NOR THIRD PARTY LICENSOR GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P/ASX MIDCAP 50 INDEX AND S&P/ASX 20 INDEX OR ANY DATA RELATED THERETO OR ANY

COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND ASX OPERATIONS PTY LTD SHALL NOT BE SUBJECT TO ANY DAMAGES OR

LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND ASX OPERATIONS PTY LTD MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND

EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY SMARTSHARES LIMITED, OWNERS OF THE SMARTSHARES LIMITED’S PRODUCTS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P/ASX MIDCAP 50 INDEX AND S&P/ASX 20 INDEX OR

WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR ASX OPERATIONS PTY LTD BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR

CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBLITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND SMARTSHARES LIMITED, OTHER THAN THE

LICENSORS OF S&P DOW JONES INDICES.

Definitions


7

KEY INFORMATION SUMMARY This section of the investment statement contains a summary of the key information relating to this offer. The rest of this investment statement contains important information. You should read all of it before deciding whether to invest.


The basic concept

The objective of each of the Smartshares Funds is to provide a Return to Unitholders that closely matches the Return on a specific equity market index. An equity market index is a measure of the return on a group of individual securities and is typically independently calculated by an exchange, such as NZX, or an index provider, such as Standard & Poor's. To meet this objective, each Smartshares Fund aims to hold securities (Index Securities) of the entities that are part of the relevant index (Index Issuers) in proportions that match their weightings in the relevant index. This is called index tracking, and there is further information about it below on this page and on pages 42 and 43, together with more specific comments about tracking performance for each of the Smartshares Funds in the descriptions of each individual Smartshares Fund from pages 16 to 27.


The Smartshares Funds are exchange traded funds (ETFs), which means your Units are quoted on a stock exchange, in this case on the NZX Main Board. As quoted securities, Units can be traded like shares in listed companies. For most investors, trading their Units on market through an NZX Firm will be the only way of redeeming their investment.


Although an investment in a Smartshares Fund is similar to a direct investment in the relevant Index Securities, you will not have any rights in relation to specific Index Securities held by a Smartshares Fund. There are also some differences between the Returns you will receive on the two investments. The principal differences are as follows:

Tracking differences - The Manager aims to track the relevant index for a Smartshares Fund, by which we mean that it aims to invest in the relevant Index Issuers in proportions that match their weightings in the relevant index. However, there will inevitably be some differences. For example, the makeup of the index may be changed, and the Manager may not be able to exactly match the change by buying and selling Index Securities because the prices it pays and receives for the Index Securities may not exactly match the prices used to adjust the index. This means that the net asset value (NAV) of the Index Securities held by the Smartshares Fund diverges over time from the value of the relevant index (and therefore from the value of an equivalent direct investment in the Index Issuers). This divergence is often called tracking difference. Of course, investors investing directly are likely to face the same issues as the Manager in trying to exactly track the Index. The descriptions of each of the individual Smartshares Funds at pages 16 to 27 contain performance information describing how accurately the Manager has tracked the relevant index for each Smartshares Fund.

Distribution differences – An investor that invests directly in Index Securities will receive distributions in relation to those Index Securities when they are paid by the relevant Index Securities issuers. In contrast, distributions that are received by a Smartshares Fund from the relevant Index Securities issuers will be held by that Smartshares Fund (and included in the Smartshares Fund's NAV) until a semi-annual Distribution Date. It is only on that semi-annual Distribution Date that distributions received during the previous six months will be paid out (or reinvested for you) in one lump sum.

Management fees – Management fees are deducted before distributions are paid to you, meaning you get less than the full distributions paid on the Index Securities the

8

Smartshares Fund invests in. Of course, it is unlikely that you would be able to invest in the Index Securities directly without also paying brokerage and potentially other fees to third parties.

Different market values – Units in Smartshares Funds trade at the market price for Units, which is unlikely to be exactly the same as the NAV per Unit. The structure of the Smartshares Funds includes a mechanism that is designed to move the market price of Units closer to the per Unit value of the Index Securities held by the relevant Smartshares Fund. This mechanism is the provision for larger investors to be able to exchange baskets of Index Securities for the equivalent Units and vice versa. With this ability, larger investors are able to take advantage of any difference between the market price of Units and the equivalent Index Securities. If they do take advantage of that difference, it affects the demand and supply of Units in a way that is expected to move the market price of Units closer to the per Unit value of the relevant Index Securities. However, despite this mechanism, the market price of the Units and the per Unit value of the relevant Index Securities do not always closely track each other due to market forces that are outside the control of the Manager.

Distributions

Distributions to Unitholders are currently made directly from each Smartshares Fund within 20 Business Days of each Record Date. The Record Date is currently on or around the last Business Day of each March and September in any year. These distributions comprise dividends or any other income received by the Smartshares Fund, less fees and other expenses. Unitholders will automatically have their distributions re-invested for Smartshares Units unless they elect to have them paid directly to a nominated New Zealand Dollar bank account. There is further information about distributions on page 39.


Smartshares Limited (the Manager) is a wholly owned subsidiary of NZX Limited (NZX). Smartshares Limited offers a range of index tracking funds (the Smartshares Funds).

The Manager, either on its own or on behalf of the Trustees, is responsible for all adjustments to the Smartshares Funds' portfolios, the maintenance of accounting records of the Smartshares Funds, communication with Unitholders, supervision of the Unit Registrar, the payment of distributions to Unitholders and the purchase or sale of Index Securities as determined by the Smartshares Funds in the event of any required adjustments to the different indices that the Smartshares Funds track.


The New Zealand Guardian Trust Company Limited, trustee for smartTENZ, smartFONZ, and smartMOZY;

Trustees Executors Limited, trustee for smartMIDZ and smartOZZY;

JB Were (NZ) Nominees Limited, the custodian for smartTENZ, smartFONZ, smart MIDZ and smartMOZY;

BNP Paribas Fund Services Australasia Pty Ltd, acting through its New Zealand branch (the Administration Manager for all Funds and the custodian for smartOZZY); and


None of the Manager, Trustees, Custodian, Administration Manager, Unit Registrar or NZX provide any guarantee in relation to the Smartshares Funds.


9


The Smartshares Fund you choose to invest in is designed to give you Returns similar to the Returns on the index tracked by the relevant Smartshares Fund. The Manager buys and sells Index Securities to track the relevant index rather than making investment decisions based on its own assessment of the Index Issuers. This means the Smartshares Funds are what is commonly referred to as “passive funds” (as opposed to “active funds”, which involve a manager making its own judgement about where to invest).



smartTENZ S&P/NZX 10 Index Comprises 10 of the largest listed New Zealand Issuers (Capital Index)

smartMIDZ S&P/NZX MidCap Index Comprises mid sized listed New Zealand Issuers (Capital Index)

smartFONZ S&P/NZX 50 Portfolio Index Comprises 50 of the largest listed New Zealand Issuers (Capital Index)

smartMOZY S&P/ASX MidCap 50 Index Comprises mid sized listed Australian Issuers (Capital Index)

smartOZZY S&P/ASX 20 Index Comprises 20 of the largest listed Australian Issuers (Capital Index)


The unit price of each Smartshares Unit (the Current Unit Value) reflects the value of the Index Securities held in the relevant Smartshares Fund and the dividends and other income received or accrued by and held in the relevant Smartshares Fund, less liabilities (such as tax, fees and expenses). As noted above, if you sell your Unit on the market, the price you receive may differ from the Current Unit Value.

Further information about the index tracked by each of the Smartshares Funds can be found in the registered prospectus for that Smartshares Fund, and also on pages 15 to 29 of this Investment Statement.


Diversification

When you invest in a Smartshares Fund, you get an indirect investment through the Smartshares Fund in each entity in the index in which the Fund invests. With one simple purchase you get an investment in a broad range of issuers, spreading your risk across a diversified portfolio. Diversification typically reduces risk. This is because there is less chance that all the entities in the Smartshares Fund will perform similarly at the same time. The losses from entities performing poorly can often be balanced by the gains from those performing well. However, each Smartshares Fund only allows diversification within the asset class or investment type represented in the index tracked by that specific fund.

Flexibility

Smartshares Funds provide the broad exposure of a fund with the flexibility of shares, by giving you similar transparency and convenience to an investment in individual shares – the ability to know the value of your investment at any moment, and the flexibility to get in and out of your investment quickly. This is because Smartshares Units trade like individual shares, and their prices are published in the newspapers and on-line (www.nzx.com) so you can track

http://www.nzx.com/

10

the progress of your investment at any time. You can trade your Smartshares Units at any point, just like a share in an NZX listed company.

Smartshares makes contributing simple.

Once you have made the initial minimum investment and hold a minimum holding, you can make regular contributions from as little as $50 per month by way of the Regular Savings Plan. And you can stop, restart, increase or decrease your regular contributions whenever you like (subject to providing the Unit Registrar with ten Business Days notice prior to the 20th of a month and, unless you are completely stopping contributions, maintaining a minimum contribution of $50 per month). You can also boost your investment through the Distribution Reinvestment Plan – where your distributions are automatically re-invested as additional Smartshares Units. Or you can choose to have your distributions paid directly to you by direct credit.

Transparency

Smartshares Funds are transparent because the Smartshares Funds' holdings are always known to the market. Investors know that whenever there is a change to the relevant index (which will be announced by the index provider) the Manager will buy and sell the Index Securities to adjust the Smartshares Funds holdings, with the intention of matching that change.

Lower Fees

Smartshares Funds are able to offer lower fees because the manager does not make active investment decisions, which may require expensive research, analytical and trading expertise. Trading only occurs to rebalance the Smartshares Funds' holdings to match the weighting of each entity’s shares in the index. By contrast, actively managed funds, where the manager makes constant investment decisions, generally incur higher costs and therefore may charge a higher management fee.




Market risk - Fluctuations in the share price of, and distributions paid by, the Index Issuers will lead to fluctuations in the Returns on Units in the Smartshares Funds. Such fluctuations could be related to the circumstances of an individual Index Issuer and affect the share price or distributions of that Index Issuer only, or could be related to circumstances with more widespread effects and affect a number of, or all, Index Issuers.

Foreign currency risk – Because the smartOZZY and smartMOZY Smartshares Funds invest in ASX listed entities, and so receive Returns in Australian dollars, these will be exposed to a currency risk based on the exchange rate between the Australian and New Zealand dollars. This is a risk because the Manager does not currently take steps to hedge against currency fluctuations. This risk does not apply to the other Smartshares Funds.


Tracking risk – For a variety of reasons, including those described on page 7, the Manager will not always manage to exactly track the relevant index for each Smartshares Fund. As a result of this, the Index Securities held by a Smartshares Fund may, over time, be less than a portfolio of securities that exactly matches the composition of the relevant index. Of course, investors investing directly are likely to face the same issues as the Manager in trying to exactly track the relevant index. There is further information about index tracking on pages 42 and 43, and the description of each of the individual Smartshares Funds at pages 16 to 27 contains

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information about the Manager's tracking performance for each of the Smartshares Funds.

Operational risk – Tracking an index and assessing the reasons for tracking differences (that is, differences between the NAV of a Smartshares Fund and the value of the relevant index) is complex and, as a result, operational errors can occur. Such errors could potentially affect Unitholders' Returns.

Passive management risk – The Smartshares Funds are passive investments, which means the Manager will not be able to react to events that affect the value of particular Index Issuers unless and until those events lead to a change in the composition of the relevant index.

Liquidity Risk – Investors are only able to cash in their investment by selling their Units on market unless they have enough Units to do a Basket redemption. (Basket redemptions are described on page 48.) The market price per Unit may vary from the Current Unit Value due to supply and demand factors. Each Smartshares Fund is listed on the NZX Main Board and, in the opinion of the Manager, there is an established market for sales of Units. However, although the Smartshares Funds are listed on the NZX Main Board, the fact that investors can apply to purchase Units directly from the Manager may result in a reduced number of buyers of Units on the NZX Main Board.

Regulatory and tax risk – The Smartshares Funds are subject to an ongoing risk that regulatory or tax law requirements may change, and that this may have an adverse effect on Unitholders' Returns. Also, the Smartshares Funds are Portfolio Investment Entities (PIEs), with benefits for Unitholders, and there is a risk that this status may be lost, as discussed in the tax status question below.



When Unitholders first subscribe for Units they will pay an application fee to the Manager, which will be deducted from their subscription amount. For subscription amounts of less than $20,000 this will be a flat fee of $30, and for subscriptions equal to or greater than this amount the subscription fee will be 0.2% of the subscription amount. This fee is not payable for subsequent Cash Applications, subscriptions under the Regular Savings Plan, the Distribution Reinvestment Plan, or in relation to a Basket application. (Basket Applications are for large investors, and are discussed in page 34.)

Unitholders lodging or withdrawing a Basket of Units will be charged a fee by the Manager for each lodgement or withdrawal. The amount they are charged is set out in the table below:

Basket Creation Basket Redemption

$250 for smartFONZ and smartMOZY $250 for smartFONZ and smartMOZY

$250 for smartTENZ $500 for smartTENZ

$400 for smartMIDZ $400 for smartMIDZ

$300 for smartOZZY $300 for smartOZZY

All of these fees may be changed by the Manager by giving 6 months' notice of the change to Unitholders and making an Announcement to NZX (or providing less notice, if the Manager is reducing fees). There is no limit on the changes that the Manager may make.


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Each Smartshares Fund pays a management fee to the Manager. This is a percentage per annum of the relevant Smartshares Fund's NAV (for each of the Smartshares Funds), and is accrued daily and payable monthly. That percentage is as follows:

Smartshares Fund Management Fee

smartFONZ 0.75% p.a.

smartMIDZ 0.75% p.a.

smartMOZY 0.75% p.a.

smartOZZY 0.60% p.a.

smartTENZ 0.60% p.a.

In addition to this management fee, the Manager may also receive payment for administering securities lending on behalf of a Smartshares Fund. smartTENZ, smartFONZ and smartMIDZ undertake securities lending, but the Manager has elected not to operate a securities lending programme for smartOZZY and smartMOZY. The amount of the payment received by the Manager for administering securities lending is currently 50% of the net revenue payable to the relevant Smartshares Fund in respect of the securities of the Smartshares Fund lent.

The Manager is also entitled to interest on amounts held including in respect of distributions and other income received by the Smartshares Funds and on subscription amounts (received as Cash Applications or under the Regular Savings Plan or Distribution Reinvestment Plan) between the date on which they are received and the date of issue of Units.

All of these fees may be changed by the Manager by giving 6 months' notice of the change to Unitholders and making an Announcement to NZX (or providing less notice, if the Manager is reducing fees). There is no limit on the changes that the Manager may make.

Further information about the Manager's fees can be found on pages 34 to 36.

HOW DO I APPLY?


You can start your Smartshares investment by making an initial cash application from as little as $500. You can do this by completing the application form for new Units at the back of this Investment Statement, or by applying online at http://smartshares.co.nz/invest-now.

Alternatively you can obtain an investment in a Smartshares Fund by purchasing existing Units on market through an NZX Firm.

If you are buying new Units, send in your completed application form, together with the full amount of the application payment, to Link Market Services Limited, PO Box 91976, Auckland 1142. Alternatively, you can send it to the Manager, an NZX Firm, or through any other channel approved by NZX (of which there are currently none). Investors can also apply online at http://smartshares.co.nz/invest-now.

Make sure you read all the information contained in this Investment Statement before deciding whether to invest and which Smartshares Fund to invest in. There is also additional information that you may find helpful in the registered prospectus for each Smartshares Fund.

Before investing, you should consider seeking advice from a financial adviser. Using a

13

financial adviser cannot prevent you from losing money, but it should be able to help you make better investment decisions. More information about financial advisers is set out on pages 3 and 4.

Further investments


through a further cash application (for a minimum of $250);






As with the initial cash application, a cash application for further Units can be made by completing the application form attached to the back of this Investment Statement and sending it with the full amount of the application payment to Link Market Services Limited, PO Box 91976, Auckland 1142. Alternatively, you can send it to the Manager, an NZX Firm, or through any other channel approved by NZX (of which there are currently none). Investors can also apply online at http://smartshares.co.nz/invest-now.

Smartshares Limited may open or close the offer for cash applications at any time by way of an Announcement to NZX.



Every month for an amount you choose (minimum contribution $50 per month) the Manager will add Smartshares Units to your investment. Simply complete the application form and direct debit authority included in this Investment Statement. Your payments will then be automatically withdrawn from your nominated bank account on a monthly basis.

To apply, fill out the application form at the back of this Investment Statement and complete the direct debit form, which can also be found at the back of this Investment Statement. Investors can also apply online at http://smartshares.co.nz/invest-now.

And, you can make additional lump sum deposits with your monthly direct debit at any time ($250 minimum value).


Think about how much you can afford to invest each month, keeping in mind that you can

stop, restart, increase or decrease (subject to maintaining a minimum contribution of $50 per

month unless you are completely stopping contributions) your contributions at any time by

contacting the Unit Registrar. (The Unit Registrar will require notice to change contributions

by at least 10 Business Days before the 20th of the month).

On or about the 20th of each month your bank account will be direct debited and the money will then be converted into Smartshares Units in your Smartshares Fund(s) at the end of each month. The Unit Registry will send you a statement each month confirming your new Smartshares Unit holding(s).

To join the Smartshares Regular Savings Plan, you must already have a minimum holding for

14

the Smartshares Fund that you wish to invest in on a regular basis (see page 31 for details of the Minimum Holdings for each Smartshares Fund).

Smartshares Limited may open or close the Regular Savings Plan at any time by way of an Announcement to NZX.


Zero transaction cost – no transaction fees charged by the Manager

Affordable – from just $50 per month



Helps you accumulate Smartshares Units – every month you acquire additional Smartshares Units automatically without needing to think about it


Each Smartshares Fund may receive dividends from the Index Issuers in which it invests. These dividends and other income are retained in the Smartshares Fund (and reflected in the Current Unit Value) and the Smartshares Fund makes six-monthly distributions to Unitholders, with each Unitholder’s entitlement based on the Unitholder’s holding as at the Record Date for that distribution.

Your proportionate share of each distribution by the relevant Smartshares Fund will be automatically reinvested as additional Smartshares Units twice a year unless you choose to have them paid out to you by direct credit. By having these payments automatically re-invested, you are increasing your unitholding without having to do anything. Compounding of distributions can work in your favour if you want to accumulate Smartshares Units over the longer term.

15

BOARD OF DIRECTORS

The directors of the Manager are Tim Bennett, Kristin Brandon and Bevan Miller (Chair). The

funds operated by the Manager are passively managed funds or have their investment

management function outsourced. Consequently, the board has been constructed to provide

a mix of operational, financial and legal skills rather than specific funds management

experience. Brief profiles for each of the directors, detailing their experience and

qualifications, are set out below.

Bevan Miller

Bevan is the Chief Financial Officer of NZX. He has extensive financial








Tim Bennett

Tim is the Chief Executive Officer of NZX. He has extensive capital






and a B Comm in Computer Science and Business Administration from


Kristin Brandon

Kristin is Head of Compliance at NZX and has worked at NZX since

2007. Kristin has significant legal experience working at Chapman Tripp

Wellington and Dechert LLP London where she specialised in company

and securities law, including advising in relation to capital raisings,

mergers and acquisitions and acting for fund managers. Prior to joining

NZX, Kristin was Assistant Company Secretary at Telecom New

Zealand Limited (now Spark). Kristin holds an LLB (Hons) and a

Bachelor of Commerce and Administration from Victoria University of

Wellington. Kristin is a barrister and solicitor of the High Court of New

Zealand.

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THE NZX 10 FUND (smartTENZ)

What is smartTENZ?

smartTENZ is listed on the NZX Main Board. The objective of smartTENZ is to provide a Return that closely matches the Return on the S&P/NZX 10 Index. The S&P/NZX 10 Index comprises 10 of the largest entities listed on the NZX Main Board, meaning that your investment is effectively diversified across 10 of the largest entities listed on the NZX Main Board.

When you invest in smartTENZ, you buy exposure to all the Index Issuers in the S&P/NZX 10 Index. Together these entities made up around 41.08% of the value of the NZX Main Board by full market capitalisation as at 31 August 2015.

This makes smartTENZ a relatively diversified sharemarket investment compared with investing in individual Index Securities.

smartTENZ was New Zealand’s first ETF and was launched in May 1996.

The Manager has implemented a securities lending programme for smartTENZ. Please refer to page 41 for further information on securities lending.

smartTENZ Objective

The objective of smartTENZ is to track the Return on the S&P/NZX 10 Index by investing in the shares of the top 10 entities in the same weightings as they are represented in the index.

A link to the index methodology for the S&P/NZX 10 Index can be found at http://us.spindices.com/indices/equity/sp-nzx-10-index. The methodology for constructing the Index may change from time to time.

smartTENZ Holdings*

NZX Code Index Issuer

AIA Auckland International Airport Limited

CEN Contact Energy Limited

FBU Fletcher Building Limited

FPH Fisher & Paykel Healthcare Corporation Limited

MEL Meridian Energy Limited

RYM Ryman Healthcare Limited

SKC SKYCITY Entertainment Group Limited

SKT Sky Network Television Limited

SPK Spark New Zealand Limited

XRO Xero Limited

* as at 31 August 2015.

smartTENZ Performance Over Last 3 Years

Year to

31/03/2015 Year to

31/03/2014 Year to

31/03/2013

Change in Capital Index 1.88% 14.09% 15.90%

http://us.spindices.com/indices/equity/sp-nzx-10-index

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Investor Return 5.83% 17.85% 20.12%

Fund Return 5.20% 18.57% 20.71%

Change in tracking difference year on year

0.18% -0.39% -0.09%

Notes on above table

(a) The "Capital Index" referred to in the first row is the value of the S&P/NZX 10 Index (Capital Series). (b) "Investor Return" shows the percentage difference between (i) the aggregate Current Unit Price of a

Unitholder's holding of smartTENZ Units one year earlier and (ii) the on market price of the holding of Units that Unitholder would have on the relevant date if they reinvested all of their distributions received over the year (after tax) in new Units. It is assumed that distributions would be reinvested on the Distribution Dates for smartTENZ Fund in April and October of each year. The return is calculated after management fees and tax are deducted.

(c) "Fund Return" shows the percentage difference between (i) the aggregate Current Unit Price of a Unitholder's holding of smartTENZ Units one year earlier and (ii) the aggregate Current Unit Price of the holding of Units that Unitholder would have on the relevant date if they reinvested all of their distributions received over the year (after tax) in new Units. It is assumed that distributions would be reinvested on the Distribution Dates for smartTENZ Fund in April and October of each year. The return is calculated after management fees and tax are deducted.

(d) Change in tracking difference is the change in the tracking difference over the preceding year. Tracking difference is the difference between the Capital Index/1,000 and the Current Unit Value. (SmartTENZ is designed so that, if it is perfectly tracking the S&P/NZX 10 Index, the Current Unit Value will equal 1/1,000 of the value of the S&P/NZX 10 Index.)

PERFORMANCE DISCLAIMER

Past performance is not indicative of future performance. Performance can be negative as well as positive.

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THE NZX MIDCAP INDEX FUND (smartMIDZ)

What is smartMIDZ?

smartMIDZ is listed on the NZX Main Board. The objective of smartMIDZ is to provide a Return that closely matches the Return on the S&P/NZX MidCap Index. The S&P/NZX MidCap Index comprises a broad range of medium sized New Zealand entities listed on the NZX Main Board, meaning that your investment is effectively diversified across that broad range of medium sized New Zealand entities.

When you invest in smartMIDZ, you buy exposure to all the Index Issuers in the S&P/NZX MidCap Index – all of the entities in the S&P/NZX 50 Index, excluding entities for which their NZX listing is not their primary listing and excluding entities that are in the S&P/NZX 10 Index.

smartMIDZ entities are a diverse group, covering almost every sector of New Zealand business and comprising around 42.6% of the total value of the NZX Main Board by market capitalisation as at 31 July 2015. Many of these entities are leaders in their field and cover industry sectors such as Consumer, Energy and Finance and Other Services.

The Manager has implemented a securities lending programme for smartMIDZ. Please refer to page 41 for further information on securities lending.

smartMIDZ Objective

The objective of smartMIDZ is to track the Return on the S&P/NZX MidCap Index, by investing in the shares of the MidCap entities in the same weightings as they are represented in the index.

A link to the index methodology for the S&P/NZX MidCap Index can be found at http://us.spindices.com/indices/equity/sp-nzx-midcap-index. The methodology for constructing the Index may change from time to time.

smartMIDZ Holdings*


AIR Air New Zealand Limited

ARG Argosy Property Limited

ATM A2 Corporation Limited

CNU Chorus Limited

DIL Diligent Board Member Services INC

DNZ DNZ Property Fund Limited

EBO Ebos Group Limited

FRE Freightways Limited

FSF Fonterra Shareholders Fund

GMT Goodman Property Trust

GNE Genesis Energy Limited

HNZ Heartland New Zealand Limited

IFT Infratil Limited

KPG Kiwi Income Property Group Limited

KMD Kathmandu Holdings Limited

MET Metlifecare Limited

MFT Mainfreight Limited

MPG Metro Performance Glass Limited

MRP Mighty River Power Lmited

http://us.spindices.com/indices/equity/sp-nzx-midcap-index

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NPX Nuplex Industries Limited

NZX NZX Limited

OHE Orion Health Group Limited

PCT Precinct Properties New Zealand Limited

PEB Pacific Edge Limited

PFI Property For Industry Limited

POT Port of Tauranga Limited

RBD Restaurant Brands New Zealand Limited

SKL Skellerup Holdings Limited

STU Steel & Tube Holdings Limited

SUM Summerset Group Holdings Limited

TME Trade Me Group Limited

TPW TrustPower Limited

TWR Tower Limited

VCT Vector Limited

VHP Vital Healthcare Property Trust

WHS The Warehouse Group Limited

ZEL Z Energy Limited


smartMIDZ Performance Over Last 3 Years*

31/03/2015 31/03/2014 31/03/2013

Change in Capital Index 19.24% 10.83% 27.21%

Investor Return 24.03% 13.14% 30.42%

Fund Return 24.35% 14.50% 32.04%


-0.01% 0.02% 0.41%


(a) The "Capital Index" referred to in the first row is the value of the S&P/NZX MidCap Index (Capital Series). (b) "Investor Return" shows the percentage difference between (i) the aggregate Current Unit Price of a

Unitholder's holding of smartMIDZ Units one year earlier and (ii) the on market price of the holding of Units that Unitholder would have on the relevant date if they reinvested all of their distributions received over the year (after tax) in new Units. It is assumed that distributions would be reinvested on the Distribution Dates for smartMIDZ Fund in April and October of each year. The return is calculated after management fees and tax are deducted.

(c) "Fund Return" shows the percentage difference between (i) the aggregate Current Unit Price of a Unitholder's holding of smartMIDZ Units one year earlier and (ii) the aggregate Current Unit Price of the holding of Units that Unitholder would have on the relevant date if they reinvested all of their distributions received over the year (after tax) in new Units. It is assumed that distributions would be reinvested on the Distribution Dates for smartMIDZ Fund in April and October of each year. The return is calculated after management fees and tax are deducted.

(d) Change in tracking difference is the change in the tracking difference over the preceding year. Tracking difference is the difference between the Capital Index/1,000 and the Current Unit Value. (SmartMIDZ is designed so that, if it is perfectly tracking the S&P/NZX MidCap Index, the Current Unit Value will equal 1/1,000 of the value of the S&P/NZX MidCap Index.)

PERFORMANCE DISCLAIMER Past performance is not indicative of future performance. Performance can be negative as well as positive.

20

THE NZX 50 PORTFOLIO INDEX FUND (smartFONZ)

What is smartFONZ?

smartFONZ is listed on the NZX Main Board. The objective of smartFONZ is to provide a Return that closely matches the Return on the S&P/NZX 50 Portfolio Index. The S&P/NZX 50 Portfolio Index comprises 50 of the largest entities listed on the NZX Main Board by market capitalisation and liquidity, meaning that your investment is effectively diversified across 50 of the largest entities listed on the NZX Main Board.

When you invest in smartFONZ, you buy exposure to all the Index Issuers in the S&P/NZX Portfolio 50 Index. Together the entities in this index comprise around 85.8% of the total value of the NZX Main Board by full market capitalisation as at 31 July 2015. Currently included in smartFONZ are entities you may have contact with everyday such as Spark, Fletcher Building, Contact Energy and Sky Television. These may change over time.

smartFONZ also gives you a portfolio that is diversified across a range of sectors.

The Manager has implemented a securities lending programme for smartFONZ. Please refer to page 41 for further information on securities lending.

smartFONZ Objective

The objective of smartFONZ is to track the Return on the S&P/NZX 50 Portfolio Index by investing in the shares of the top 50 entities in the same weightings as they are represented in the index.

A link to the index methodology for the S&P/NZX 50 Portfolio Index can be found at http://us.spindices.com/indices/equity/sp-nzx-50-portfolio-index. The methodology for constructing the Index may change from time to time.

smartFONZ Holdings*


AIA Auckland International Airport Limited

AIR Air New Zealand Limited

ANZ Australia and New Zealand Banking Group Limited

ARG Argosy Property Limited

ATM A2 Corporation Limited

CEN Contact Energy Limited

CNU Chorus Limited

COA Coats Group PLC

DIL Diligent Board Member Services INC

DNZ DNZ Property Fund Limited

EBO Ebos Group Limited

FBU Fletcher Building Limited

FPH Fisher & Paykel Healthcare Corporation Limited

FRE Freightways Limited

FSF Fonterra Shareholders' Fund

GMT Goodman Property Trust

GNE Genesis Energy Limited

HNZ Heartland New Zealand Limited

http://us.spindices.com/indices/equity/sp-nzx-50-portfolio-index

21

IFT Infratil Limited

KMD Kathmandu Holdings Limited

KPG Kiwi Income Property Group Limited

MEL Meridian Energy Limited

MET Metlifecare Limited

MFT Mainfreight Limited

MPG Metro Performance Glass Limited

MRP Mighty River Power Limited

NPX Nuplex Industries Limited

NZX NZX Limited

OHE Orion Health Group Limited

PCT Precinct Properties New Zealand Limited

PEB Pacific Edge Limited

PFI Property For Industry Limited

POT Port of Tauranga Limited

RBD Restaurant Brands New Zealand Limited

RYM Ryman Healthcare Limited

SKC SKYCITY Entertainment Group Limited

SKL Skellerup Holdings Limited

SKT Sky Network Television Limited

SPK Spark New Zealand Limited

STU Steel & Tube Holdings Limited

SUM Summerset Group Holdings Limited

TME Trade Me Group Limited

TPW TrustPower Limited

TWR Tower Limited

VCT Vector Limited

VHP Vital Healthcare Property Trust

WBC Westpac Banking Corporation

WHS The Warehouse Group Limited

XRO Xero limited

ZEL Z Energy Limited


22

smartFONZ Performance Over Last 3 Years*

31/03/2015 31/03/2014 31/03/2013

Capital Index 11.78% 11.41% 22.32%

Investor Return 16.07% 16.42% 28.25%

Fund Return 15.85% 15.32% 27.36%


0.20% -0.03% 0.14%


(a) The "Capital Index" referred to in the first row is the value of the S&P/NZX 50 Portfolio Index (Capital Series). (b) "Investor Return" shows the percentage difference between (i) the aggregate Current Unit Price of a

Unitholder's holding of smartFONZ Units one year earlier and (ii) the on market price of the holding of Units that Unitholder would have on the relevant date if they reinvested all of their distributions received over the year (after tax) in new Units. It is assumed that distributions would be reinvested on the Distribution Dates for smartFONZ Fund in April and October of each year. The return is calculated after management fees and tax are deducted.

(c) "Fund Return" shows the percentage difference between (i) the aggregate Current Unit Price of a Unitholder's holding of smartFONZ Units one year earlier and (ii) the aggregate Current Unit Price of the holding of Units that Unitholder would have on the relevant date if they reinvested all of their distributions received over the year (after tax) in new Units. It is assumed that distributions would be reinvested on the Distribution Dates for smartFONZ Fund in April and October of each year. The return is calculated after management fees and tax are deducted.

(d) Change in tracking difference is the change in the tracking difference over the preceding year. Tracking difference is the difference between the Capital Index/1,000 and the Current Unit Value. (SmartFONZ is designed so that, if it is perfectly tracking the S&P/NZX 50 Portfolio Index, the Current Unit Value will equal 1/1,000 of the value of the S&P/NZX 50 Portfolio Index.)



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THE NZX AUSTRALIAN MIDCAP INDEX FUND (smartMOZY)

What is smartMOZY?

smartMOZY is listed on the NZX Main Board. The objective of smartMOZY is to provide a Return that closely matches the Return on the S&P/ASX MidCap 50 Index. The S&P/ASX MidCap 50 Index comprises 50 entities ranked from 51 to 100 by market capitalisation and liquidity on the ASX, meaning your investment is effectively diversified across 50 medium sized Australian entities listed on the ASX.

When you invest in smartMOZY you buy exposure to all the Index Issuers in the S&P/ASX MidCap 50 Index. This provides exposure to a broad range of industry segments. Many of the names of entities that are currently included are well known to New Zealanders and have businesses that are active on both sides of the Tasman, like Harvey Norman, and Flight Centre. Together the entities in this index comprise around 11% of the total value of the ASX market by full market capitalisation as at 31 July 2015

smartMOZY Objective

The objective of smartMOZY is to track the Return on the S&P/ASX MidCap 50 Index, which is a capitalisation-weighted index covering the 50 entities ranked from 51 to 100 by market capitalisation and liquidity on the ASX.

A link to the index methodology for the S&P/ASX MidCap 50 Index can be found at http://us.spindices.com/indices/equity/sp-asx-midcap-50. The methodology for constructing the Index may change from time to time.

smartMOZY Holdings*

ASX Code Index Issuer

ABC Adelaide Brighton Ltd

ALL Aristocrat Leisure Ltd

ALQ ALS Ltd

ANN Ansell Ltd

AST Ausnet Services Ltd

AWC Alumina Ltd

BEN Bendigo and Adelaide Bank Limited

BLD Boral Ltd

BOQ Bank of Queensland Ltd

BSL Bluescope Steel Ltd

CAR Carsales Com Limited

CGF Challenger Limited

CIM Cimic Group Limited

COH Cochlear Ltd

CSR CSR Ltd

DLX DuluxGroup Ltd

DMP Dominos Pizza Enterprises Limited

DOW Downer EDI Ltd

DUE Duet Group

EGP Echo Entertainment Group

FLT Flight Centre Ltd

FMG Fortescue Metals Group

FXJ Fairfax Media Limited

GNC Graincorp Ltd A

http://us.spindices.com/indices/equity/sp-asx-midcap-50

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HGG Henderson Group PLC

HSO Healthscope Limited

HVN Harvey Norman Hldgs Ltd

IFL Ioof Holdings Ltd

ILU Iluka Resources Limited

IOF Investa Office Fund

JBH JB Hifi limited

MFG Magellan Financial Group

MTS Metcash Ltd

NVT Navitas Limited

ORA Orora Limited

PPT Perpetual Limited

PRY Primary Health Care Ltd

QAN Qantas Airways Ltd

REA REA Group Ltd

REC Recall Holdings Limited

RMD ResMed Inc

SGH Slater & Gordon Limited

SGM Sims Metal Management Ltd

SKI Spark Infrastructure Trust

TAH Tabcorp Hldgs Ltd

TPI Transpacific Industries Group Ltd

TPM TPG Telecom Limited

TTS Tatts Group Limited

TWE Treasury Wine Estates

WOR WorleyParsons Limited


smartMOZY Performance Over Last 3 Years

31/03/2015 31/03/2014 31/03/2013

Capital Index 12.00% -7.41% 3.99%

Investor Return 14.46% -5.52% 10.83%

Fund Return 14.22% -5.33% 6.45%


0.17% 0.14% -1.04%


(a) The "Capital Index" referred to in the first row is the value of the S&P/ASX MidCap 50 Index (Capital Series). (b) "Investor Return" shows the percentage difference between (i) the aggregate Current Unit Price of a

Unitholder's holding of smartMOZY Units one year earlier and (ii) the on market price of the holding of Units that Unitholder would have on the relevant date if they reinvested all of their distributions received over the year (after tax) in new Units. It is assumed that distributions would be reinvested on the Distribution Dates for smartMOZY Fund in April and October of each year. The return is calculated after management fees and tax are deducted.

(c) "Fund Return" shows the percentage difference between (i) the aggregate Current Unit Price of a Unitholder's holding of smartMOZY Units one year earlier and (ii) the aggregate Current Unit Price of the holding of Units that Unitholder would have on the relevant date if they reinvested all of their distributions received over the year (after tax) in new Units. It is assumed that distributions would be reinvested on the Distribution Dates for smartMOZY Fund in April and October of each year. The return is calculated after management fees and tax are deducted.

(d) Change in tracking difference is the change in the tracking difference over the preceding year. Tracking

25

difference is the difference between the Capital Index/1,000 and the Current Unit Value. (SmartMOZY is designed so that, if it is perfectly tracking the S&P/ASX MidCap 50 Index, the Current Unit Value will equal 1/1,000 of the value of the S&P/ASX MidCap 50 Index.)



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THE NZX AUSTRALIAN 20 LEADERS INDEX FUND (smartOZZY)

What is smartOZZY?

smartOZZY is listed on the NZX Main Board. The objective of smartOZZY is to provide a Return that closely matches the Return on the S&P/ASX 20 Index. The S&P/ASX 20 Index comprises 20 of the largest entities listed on the ASX market, meaning that your investment is effectively diversified across 20 of the largest entities listed on the ASX.

When you invest in smartOZZY, you buy exposure to all the Index Issuers in the S&P/ASX 20 Index. Together, these entities currently make up around 46% of the value of the ASX market by full market capitalisation as at 31 July 2015.

This makes smartOZZY a diversified sharemarket investment compared with investing in individual Index Securities.

smartOZZY Objective

The objective of smartOZZY is to track the Return on the S&P/ASX 20 Index by investing in the shares of the top 20 entities in the same weightings as they are represented in the index.

A link to the index methodology for the S&P/ASX 20 Index can be found at http://au.spindices.com/indices/equity/sp-asx-20. The methodology for constructing the Index may change from time to time.

smartOZZY Holdings*

ASX Code Index Issuer

AMP AMP Ltd

ANZ ANZ Banking Group

BHP BHP Billiton Ltd

BXB Brambles Industries Ltd

CBA Commonwealth Bank Australia

CSL CSL Ltd

IAG Insurance Australia Group Ltd

MQG Macquarie Group Ltd

NAB National Australia Bank Ltd

ORG Origin Energy Ltd

QBE QBE Insurance Group Ltd

RIO Rio Tinto Ltd

SCG Scentre Group Ltd

SUN Suncorp Group Ltd

TLS Telstra Corp Ltd

WBC Westpac Banking Corp

WES Wesfarmers Ltd

WFD Westfield Corporation

WOW Woolworths Ltd

WPL Woodside Petroleum Ltd


http://au.spindices.com/indices/equity/sp-asx-20

27

smartOZZY Performance Over Last 3 Years*

31/03/2015 31/03/2014 31/03/2013

Capital Index 3.53% -4.98% 16.89%

Investor Return 7.20% -2.93% 23.40%

Fund Return 6.87% -2.56% 20.60%


-0.18% -0.35% 0.08%


(a) The "Capital Index" referred to in the first row is the value of the S&P/ASX 20 Index (Capital Series). (b) "Investor Return" shows the percentage difference between (i) the aggregate Current Unit Price of a

Unitholder's holding of smartOZZY Units one year earlier and (ii) the on market price of the holding of Units that Unitholder would have on the relevant date if they reinvested all of their distributions received over the year (after tax) in new Units. It is assumed that distributions would be reinvested on the Distribution Dates for smartOZZY Fund in April and October of each year. The return is calculated after management fees and tax are deducted.

(c) "Fund Return" shows the percentage difference between (i) the aggregate Current Unit Price of a Unitholder's holding of smartOZZY Units one year earlier and (ii) the aggregate Current Unit Price of the holding of Units that Unitholder would have on the relevant date if they reinvested all of their distributions received over the year (after tax) in new Units. It is assumed that distributions would be reinvested on the Distribution Dates for smartOZZY Fund in April and October of each year. The return is calculated after management fees and tax are deducted.

(d) Change in tracking difference is the change in the tracking difference over the preceding year. Tracking difference is the difference between the Capital Index/1,000 and the Current Unit Value. (SmartOZZY is designed so that, if it is perfectly tracking the S&P/ASX 20 Index, the Current Unit Value will equal 1/1,000 of the value of the S&P/ASX 20 Index.)



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Smartshares Funds are exchange traded funds that are listed on the NZX Main Board. Each Smartshares Fund is constituted as a Group Investment Fund under its trust deed and the Trustee Companies Act 1967.

When you buy Smartshares Units you become a Unitholder in the Smartshares Funds you have chosen to invest in. Each Smartshares Fund owns a portfolio of securities in a proportion that is as close as possible to the weightings of the securities in the specific index that the Smartshares Fund tracks. Smartshares Funds are passively managed and their objective is to provide investment Returns that track the Return on the particular index that the Smartshares Fund tracks.


The names of the Smartshares Funds offered in this Investment Statement are:

NZX 10 FUND (“smartTENZ”)

NZX MIDCAP INDEX FUND (“smartMIDZ”)

NZX 50 PORTFOLIO INDEX FUND (“smartFONZ”)

NZX AUSTRALIAN MIDCAP INDEX FUND (“smartMOZY”)

NZX AUSTRALIAN 20 LEADERS INDEX FUND (“smartOZZY”)


The Manager

The Manager for the Smartshares Funds is Smartshares Limited, a wholly-owned subsidiary of NZX Limited (NZX).


The principal activity of the Manager is to manage the Smartshares Funds. The Manager led the development of index funds in New Zealand with the launch of the NZX 10 Fund (formerly “The NZSE TeNZ Fund”) in 1996. SmartTENZ remains the longest standing ETF listed on the NZX Main Board.



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The powers of the Manager are set out in the “Summary of the Trust Deed” in the registered prospectus for each of the Smartshares Funds.

Summary of Duties

The Manager, either on its own or on behalf of the Trustee, is responsible for all adjustments to the Smartshares Funds’ portfolios of Index Securities, including the purchase or sale of Index Securities in the event of any required adjustments as a result of changes to the indices or corporate actions, the maintenance of accounting records of the Smartshares Funds, communication with Unitholders, supervision of the Unit Registrar, including the payment of distributions to Unitholders and administration of any securities lending programme implemented for the Funds (see page 41 for further details).

The Trustee

The Trustee for smartTENZ, smartFONZ and smartMOZY is: The New Zealand Guardian Trust Company Limited Level 14, 191 Queen Street Auckland 1010 Tel: (09) 909 5100 Fax: (09) 969 3732 Email: [email protected]

The Trustee for smartMIDZ and smartOZZY is: Trustees Executors Limited Level 5, 10 Customhouse Quay PO Box 3222 Wellington Tel: (04) 495 0999 Fax: (04) 496 2952 Email: [email protected]

The Trustees have each been granted a licence under section 16(1) of the Securities Trustees and Statutory Supervisors Act 2011 (“the Act”) to act as a trustee in respect of debt securities, unit trusts, and KiwiSaver schemes, and as a statutory supervisor for participatory securities, for a term expiring 16 March 2018 (in the case of The New Zealand Guardian Trust Company Limited) and 16 January 2018 (in the case of Trustees Executors Limited).

A copy of each Trustee’s licence, including the conditions on the licence, can be obtained at the FMA’s website: www.fma.govt.nz and clicking on “Compliance”, “Lists and registers”, “Licensed Supervisors”, “The New Zealand Guardian Trust Company Limited” / “Trustees Executors Limited” or the Trustee’s website: www.guardiantrust.co.nz / www.trustees.co.nz. All conditions and reporting obligations have been duly satisfied by the required dates. If you have any queries about the licence please contact the Trustee in the first instance.


http://www.guardiantrust.co.nz/

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The Administration Manager for the Smartshares Funds is: BNP Paribas Fund Services Australasia Pty Ltd, New Zealand branch Level 18, State Insurance Tower, 1 Willis Street PO Box 3299, Wellington www.securities.bnpparibas.com The Administration Manager's address may change from time to time. You can find up-to-date details at any time at www.business.govt.nz/companies.


The Custodian

The Custodian for smartOZZY is: BNP Paribas Fund Services Australasia Pty Ltd, New Zealand branch Level 18, State Insurance Tower, 1 Willis Street PO Box 3299, Wellington www.securities.bnpparibas.com

The Custodian for smartTENZ, smartFONZ, smartMIDZ and smartMOZY is: JB Were (NZ) Nominees Limited Level 38, Vero Centre, 48 Shortland Street PO Box 887, Auckland 1001 www.jbwere.co.nz

The Custodians' addresses may change from time to time. You can find up-to-date details at any time at www.business.govt.nz/companies.

The Custodians provide custodial services, including holding assets of the relevant Smartshares Funds in custody for safekeeping and separate from the personal assets of the Trustee or Manager.

Unit Registrar



None of the Trustees, the Custodian, the Administration Manager, the Unit Registrar nor any of their directors nor any other persons associated with the offer guarantees the Smartshares Units, repayment of the Smartshares Units, or the payment of any dividends or distributions on Smartshares Units.



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The Smartshares Funds are Group Investment Funds constituted under the Trustee Companies Act 1967. The Smartshares Funds commenced operation on the following dates:

smartTENZ 7 May 1996

smartOZZY 20 January 1997

smartMIDZ 15 April 1997

smartMOZY 10 August 2004

smartFONZ 15 October 2004

How much do I pay?

There are four ways in which you can subscribe for Smartshares Units, and the method you choose affects how many Units you must subscribe for:


Subscriptions for Smartshares Units can be made by completing the application form attached to this Investment Statement and sending it with the full amount of the application payment to Smartshares Limited at the address of the Unit Registrar or to any NZX Firm. Alternatively, investors can apply online at www.smartshares.co.nz/invest-now.

The minimum cash Subscription Amount for investors who do not already have a Minimum Holding of Smartshares Units in the Smartshares Fund that they wish to invest in (see the section entitled “Minimum Holding” on page 33 below for details of Minimum Holdings for each Smartshares Fund) is $500 (which includes an application fee of $30 for amounts of less than $20,000 or 0.20% for amounts equal to or greater than $20,000, which is deducted from the application amount and paid to the Manager).

For investors who already have a minimum holding of Smartshares Units in the Smartshares Fund they wish to invest in, the minimum cash Subscription Amount is $250. Subscription Amounts for cash applications need to be received by the Unit Registrar, Link Market Services, by the 20th of the month so Smartshares Units can be allocated and priced at the end of the month by the Manager. There is no maximum Subscription Amount. No interest will be paid to subscribers on Subscription Amounts.

The Manager will, at its discretion, use a Subscription Amount either to purchase Index Securities and then issue new Units to the investor or to purchase existing Units on market through an NZX Firm and pass those existing Units on to the investor. In either case, the Manager's purchase of Index Securities or Units with the Subscription Amount will be made on or about the last Business Day of each month at current market prices.

If the Manager decides that an investor’s application will not be accepted, the Subscription Amount will be returned to the investor within 20 Business Days of making that decision. No interest will be paid on amounts refunded.


Once you have established a Minimum Holding, investing regularly can be a very effective way to accumulate Smartshares Units over the long term. Even small amounts saved on a regular basis have the potential to grow into a significant number of Smartshares Units over a number of years.

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Regular investment gives Unitholders the benefit of dollar cost averaging. Dollar cost averaging is the investment technique of investing regularly over a period of time, which effectively means that an average price over that period of time is paid. That reduces an investor's exposure to the risk of short term fluctuations in the price of Units. Dollar cost averaging can thus smooth out the market’s ups and downs and help reduce the market risk of investing.

The Regular Savings Plan lets Unitholders make a regular investment on or about the 20th of each month, directly from their nominated bank account. Provided Unitholders have made an initial lump sum investment of $500 and hold a Minimum Holding, they can choose to participate in the Regular Saving Plan and start saving with contributions as low as $50 per month. Simply complete the application form and direct debit authority included in this Investment Statement, or apply online at http://smartshares.co.nz/invest-now. Unitholders’ payments will be automatically withdrawn from their nominated bank account on a monthly basis. Unitholders can add an additional lump sum payment ($250 minimum value), or increase or decrease their contribution at any time (subject to providing the Unit Registrar with ten Business Days notice prior to the 20th of a month and, unless contributions are being completely stopped, maintaining a minimum contribution of $50 per month).

If Unitholders enter the Regular Savings Plan and then fail to make payments, no additional Smartshares Units will be allocated to their investment. If Unitholders fail to make payments for 3 consecutive months, their access to the Regular Savings Plan may be discontinued. Unitholders may at any time, by giving 10 Business Days notice prior to the 20th of a month to the Unit Registrar, cease their payments into the Regular Savings Plan. Unitholders’ initial and subsequent investments to this point, however, will remain as long as they maintain the Minimum Holding.

The Manager will, at its discretion, use the Regular Savings Plan monies either to purchase Index Securities and then issue new Units to the Unitholder or to purchase existing Units on market and pass those existing Units on to the Unitholder. In either case, the Manager's purchase of Index Securities or Units with Regular Savings Plan monies will be made on or about the last Business Day of each month at current market prices.


For large investment amounts, Smartshares Units can be acquired by way of Basket creation. Baskets may be created by way of delivery of the proportionate amounts of the securities of the Index Issuers (plus any applicable Cash Amount). (The Cash Amount is to ensure that each existing Unitholder’s proportionate interest in the income held within that fund prior to the issue of Smartshares Units to the Basket applicant, is not diluted on a per unit basis by the creation of additional Smartshares Units issued to the Basket applicant).

This should result in the aggregate value of the Basket securities and the Cash Amount being equal to the aggregate Current Unit Value of the Smartshares Units issued. The securities and Cash Amount are then exchanged for Smartshares Units. Subscriptions for Smartshares Units by Basket creation may only be made in multiples of:

500,000 units for smartTENZ;

200,000 units for smartFONZ and smartMIDZ; and

150,000 units for smartMOZY and smartOZZY.

Basket applications must be made directly to the Manager by delivery through an NZX Firm. Each delivery of a Basket must be accompanied by a completed Basket application form (not attached to this Investment Statement, but available from the Manager or any NZX Firm). Charges for Basket investments are explained under the section entitled “What are the charges?”

33


Each Smartshares Fund receives dividends from the Index Issuers in which it invests. These dividends and other income are retained within the Fund and automatically reinvested (after the deduction of distribution reinvestment plan fees (if any)) to provide you with additional Smartshares Units twice a year, unless you choose to have these paid out to you by direct credit.

Twice a year, the Manager will, at its discretion, use the reinvestment monies for Unitholders who have their semi-annual distributions reinvested either to purchase Index Securities and then issue new Units to those Unitholders or to purchase existing Units on market and pass those existing Units on to those Unitholders. In either case, the Manager's purchase of Index Securities or Units with reinvestment monies will be made at current market prices.

The Distribution Reinvestment Plan described in the relevant Prospectus for each of the Smartshares Funds constitutes the description of the dividend reinvestment plan for the purposes of the Financial Markets Conduct Act 2013 and Financial Markets Conduct Regulations 2014.

Minimum Holding

Unitholders should maintain a minimum number of Smartshares Units at all times. If Unitholders fail to maintain the minimum number of Smartshares Units, the Manager reserves the right to instruct the Trustee, after giving prior notice to the Unitholder, to sell such Smartshares Units and to account to the Unitholders for the proceeds of sale, after deduction of reasonable sale expenses.

The minimum holding is 100 units for smartFONZ, smartTENZ, smartMIDZ, and smartOZZY, and 50 units for smartMOZY (or such different amount as is determined by the Manager, or the Trustee in respect of smartTENZ, in their sole discretion, from time to time) (Minimum Holding).


Smartshares Units are issued at the Current Unit Value applying at the relevant time for cash applications, the Regular Savings Plan and the Distribution Reinvestment Plan.

The Current Unit Value of a Smartshares Unit is determined by dividing the total value of the Smartshares Fund’s NAV by the total number of Smartshares Units on issue. The Current Unit Value of a Smartshares Unit includes not only the value of the underlying Index Securities held in a Fund but also accrued income in relation to the portfolio (for example, dividends and tax credits) less liabilities (for example, tax expenses and management fees). Please note that these examples of income and liabilities are not exhaustive and other types of income may be received and liabilities incurred from time to time.

Oversubscription

There is no limit on the total number of Smartshares Units that may be subscribed for and accordingly none of the Smartshares Funds have a policy providing for oversubscription. However, the Smartshares Funds may reject an application for Units or require redemption of Units to maintain the Fund’s PIE status where there is a risk that a Unitholder will exceed the maximum investor interest size requirement prescribed in the Tax Act (and as set out in the “PIE Eligibility” section at page 41 below).

Refunds

The Trustee will not refund any Subscription Amount, except where the Trustee, on the advice of the Manager, decides that an investor’s application will not be accepted. In such situations the Subscription Amount will be returned to the investor within 20 Business Days of making that decision. No interest will be paid on amounts refunded.

34






If you buy Smartshares Units directly from Smartshares Limited through a cash application (as described on page 33 above) you pay an application fee to the Manager of $30.00 for amounts of less than $20,000, or 0.20% of the Subscription Amount for amounts equal to or greater than $20,000. However, this application fee is only payable if you do not already hold the Minimum Holding of Smartshares Units in the relevant Smartshares Fund. The application fee may be altered by the Manager by giving six months’ notice of the change to Unitholders and making an Announcement to NZX (or providing less notice, if the Manager is reducing this fee) There is no limit to the altered fee that may be charged.

If you buy or sell Smartshares Units via the NZX Main Board you will be charged a brokerage fee by the NZX Firm with whom you are dealing. The brokerage fee is likely to vary between NZX Firms.

Basket creation and redemption charges

When subscribing via Basket creation and withdrawing via Basket redemption the following charges are payable to the Manager as at the date of this Investment Statement.

Basket Creation Basket Redemption

$250 for smartFONZ and smartMOZY $250 for smartFONZ and smartMOZY

$250 for smartTENZ $500 for smartTENZ

$400 for smartMIDZ $400 for smartMIDZ

$300 for smartOZZY $300 for smartOZZY

The Basket creation fees and the Basket redemption fees may be altered by the Manager by giving six months’ notice of the change to Unitholders and making an Announcement to NZX . (or providing less notice, if the Manager is reducing this fee). There is no limit to the altered fee that may be charged. There are no other entry or exit charges.


Unitholders automatically have their twice-yearly distributions reinvested in additional Smartshares Units unless they elect to have these direct credited to a nominated bank account.


Management fees are charged to the Smartshares Funds and are a percentage of the value of the assets in the fund. The Manager may negotiate management fee rebates to individual Unitholders (in the form of additional Smartshares Units or cash, as agreed between the Manager and the Unitholder).

The fee percentages for each of the Smartshares Funds are set out below:

35

Smartshares Fund Management Fee

smartFONZ 0.75% p.a.

smartMIDZ 0.75% p.a.

smartMOZY 0.75% p.a.

smartOZZY 0.60% p.a.

smartTENZ 0.60% p.a. All fees are stated on a GST inclusive basis. Under current law some fees are wholly or partially exempt from GST. The fee charged by the Manager may be altered by the Manager by giving six months’ notice to Unitholders of the change and making an Announcement to NZX (or providing less notice, if the Manager is reducing this fee). There is no limit to the altered fee that may be charged.

In addition to the management fee, the Manager is entitled to interest on amounts held in respect of distributions and other income received by the Smartshares Funds, on cash subscription amounts between the date on which they are received and the date of issue of Units.

The Manager is also entitled to charge an investor in respect of non-standard services requested by that investor.

The Manager is also entitled to receive fees for administering securities lending. The amount of fees received by the Manager is currently 50% of the net revenue payable to the relevant Smartshares Fund in respect of the securities of that Smartshares Fund lent. Cash payment for any dividends (including any imputation credits) paid in respect of any loaned securities, and any additional securities required to be returned to the Fund as a result of corporate actions (for example a bonus issue), do not form part of the net revenue from which the Manager is entitled to take a fee.

The Trustee for each Smartshares Fund receives fees for the services it provides. The Trustee’s fees are currently met by the Manager out of the management fee and not from the assets of the relevant Smartshares Fund. The Manager is entitled however, in the future to seek to have each of the Trustee's fees charged to the Smartshares Funds. The Manager would notify Unitholders if such a change was adopted. The amount of the fees payable to each Trustee shall be agreed by the Manager and the relevant Trustee.

Persons associated with the Manager are involved in the operation of the designated settlement system in which all of the Index Securities of smartFONZ, smartMIDZ and smartTENZ are held and under which securities lending is undertaken, and these persons may receive fees and other remuneration in that capacity. The services that these persons provide include the holding of those Index Securities in the central securities depository and the facilitation of securities lending. None of those fees or remuneration is paid from the relevant Smartshares Funds – they are paid from the management fee.

The above fees cover the expenses for the ongoing operation of the Smartshares Funds. These include reporting, custodian fees, trustee fees, registry costs, brokerage fees for purchasing securities in the Smartshares Funds and fees paid to the index providers to track the relevant indices.

By investing in the Smartshares Funds investors accept and authorise these deductions and fees to occur and understand that these fees can be altered.

Tracking levy

The Trust Deed allows the Manager to impose a tracking levy, which is essentially an amount deducted from the income to be distributed to Unitholders from a Smartshares Fund, to eliminate a tracking difference. The purpose of a tracking levy is to bring the current value of

36

the Index Securities held by a Smartshares Fund back in line with the value of the relevant index by purchasing additional Index Securities with the amount deducted from income that would otherwise be distributed.

The Manager has never imposed a tracking levy because it does not believe it improves the position of Unitholders or the Return on Smartshares Funds.



The Returns you get from your Smartshares Units will be a combination of:

(a) any change in the price of Smartshares Units at the time you sell, relative to the price at which you bought; and

(b) the distribution of dividends or other income received by the Smartshares Fund. Smartshares Funds distribute all income received (for example, dividends and tax credits) less liabilities (for example, tax expenses and management fees) and any amounts held for the purpose of addressing a current or anticipated tracking difference. Please note that these examples of income and liabilities are not exhaustive and other types of income may be received and liabilities incurred from time to time. Unitholders will automatically have their distributions re-invested as Smartshares Units unless they elect to have them paid directly to a nominated bank account.


The Returns are subject to the general fluctuations and direction of the New Zealand sharemarket (in the case of smartTENZ, smartFONZ and smartMIDZ) or the Australian sharemarket (in the case of smartMOZY and smartOZZY) up or down, and the performance of the Index Issuers, which includes changes in their security prices and the value of any dividends or other distributions paid. Both of these factors are influenced by the New Zealand, Australian and global economies.

In addition, currency fluctuations between the New Zealand and Australian dollar will impact on the Returns on smartMOZY and smartOZZY as the Manager does not currently take steps to hedge against currency fluctuations.


The amount of the Returns you get from your investment in Smartshares Units will vary from time to time, depending on the factors above. Returns cannot be predicted with any accuracy. Neither the Manager, the Trustee nor any other person associated with the Offer guarantees a particular level of Return on your investment in Smartshares Units. No Returns are promised.

Distributions

Distributions are currently made directly from each Smartshares Fund within 20 Business Days of the Record Date. The Record Date is on or around the last Business Day of each March and September in any year.

These distributions comprise dividends and any other income (including income from securities lending, where relevant, which will be 50% of net revenue received by the Manager from securities lending), less fees and other expenses, and, if necessary, amounts held for the purpose of addressing current or anticipated tracking differences. Unitholders will automatically have their distributions re-invested as Smartshares Units unless they elect to have them paid directly to a nominated bank account.

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The Manager may, at its discretion, deduct from any distribution an amount of cash if and to the extent that the Manager reasonably considers that such a deduction is required to meet any liabilities that become payable in the next (or later) distribution period. Such deductions will be retained in the Fund.

The Manager does not issue Smartshares Units in any of the Smartshares Funds in the period from (and including) the announcement of a distribution to (and including) the Ex Date for that distribution.


Taxation

The following comments are intended to be only a general summary and indication of the relevant New Zealand tax law as at the date of this Investment Statement. There may be non-New Zealand tax consequences which affects the Fund or the Unitholders. Neither the Trustee nor the Manager accepts any responsibility for the taxation consequences of an investment in Smartshares Funds. Unitholders who buy or sell Smartshares Units may have different taxation positions. Consequently, each Unitholder should consider their own taxation position and if necessary seek professional advice before investing in Smartshares Units.

Taxation may affect the Returns on the Smartshares Funds and each of the Smartshares Funds may have varying tax implications. The taxation summary below is based on New Zealand and Australian tax law as at the date of this Investment Statement.

The Smartshares Funds are Portfolio Investment Entities (“PIEs”). As listed PIEs the Smartshares Funds will pay tax on taxable income derived by the Funds at a rate of 28%.


The Smartshares Funds are not subject to tax on gains that they derive from the sale of shares in most New Zealand resident companies and most companies resident in Australia that are listed under the ASX Market Rules. Dividends from such shares are usually fully taxable to the Smartshares Funds, with a credit allowed for any Imputation Credits attached (but not for any Australian Franking Credits), and any withholding tax deducted from such dividends subject to certain limits.

Depending on the equities which constitute the index that the relevant Smartshares Fund tracks, the Fund may be subject to tax in respect of offshore portfolio equity investments. These rules only apply to non New Zealand and certain Australian quoted securities (including any NZX listed securities consisting of shares in non-New Zealand resident entities). In relation to the applicable equities, the Funds will apply the “fair dividend rate” (“FDR”) method to calculate the amount of any taxable income. Under the FDR method, the Smartshares Funds will generally have taxable income in each income year (1 April to 31 March) in relation to the applicable equities calculated by reference to 5% of the average daily opening market value of the applicable equities. Dividends or sales proceeds received by the Smartshares Funds in relation to these shares should not be subject to further tax. The Smartshares Funds may be entitled to a credit for any withholding tax paid on dividends received from the applicable equities subject to certain limits. No tax deduction may be claimed for any losses in respect of the applicable equities under the FDR method.

New Zealand Liability of New Zealand resident investors - distributions

The following summarises the New Zealand taxation of distributions made by the Smartshares Funds to Unitholders who are resident in New Zealand.


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To the extent that distributions are not fully imputed resident Unitholders will not be taxed on distributions that they receive from the Smartshares Funds. The effect of this is that non-taxable income (e.g. capital gains from the sale of investments) derived by the Smartshares Funds can be distributed to resident Unitholders free from tax.

Natural person Unitholders and trustee Unitholders (other than a trustee of a unit trust) subject to a tax rate below the corporate tax rate (currently at 28%) may choose to treat distributions that are fully imputed as assessable income by including that amount in their tax return. This allows such Unitholders to use Imputation Credits attached to distributions in excess of what is necessary to fully satisfy the income tax liability in relation to those distributions, to offset against their other taxable income. How Unitholders should treat distributions from the Smartshares Funds for tax purposes will depend on their personal tax circumstances and as such it is recommended that all Unitholders should seek independent tax advice.


The following summarises the New Zealand taxation of distributions made by the Smartshares Funds to Unitholders who are not resident in New Zealand.


Non-resident withholding tax (“NRWT”) will be withheld at 15% from distributions which are fully imputed. The NRWT rate on fully imputed distributions can be reduced:

to 0% if the Unitholder holds 10% or more of the Smartshares Units in a Fund; or

to a rate below 15% if the Unitholder is resident in a jurisdiction with which New Zealand has a Double Tax Agreement that permits a lower tax rate.

New Zealand also has a foreign investor tax credit regime whereby the impact of NRWT on dividends is ameliorated by the payment of a supplementary dividend for investors holding less than 10% of the Smartshares Units in a Fund and if the NRWT rate is 15% or more. The Funds intend to pay supplementary dividends to non-resident Unitholders wherever possible, provided that it meets the Trust Deed requirements and does not disadvantage other Unitholders.


Benefits of PIE

A benefit of the PIE regime is that Smartshares Funds are not expected to be taxed on any gains derived from the sale of the securities that they trade.

The other potential benefit is that tax payable on distributions made by a Smartshares Fund to Unitholders is effectively capped at 28%. If you are currently paying tax at a rate less than 28% then the excess tax paid by the Funds can be used to reduce the tax payable on other income that you derive at the end of each income year by including the distributions from the Fund(s) in your tax return.

PIE Eligibility

The Manager has the discretion to take any steps the Manager considers necessary or desirable to ensure that a Fund is eligible to be enrolled and remain as a PIE. This includes ensuring that any one investor’s unit holding does not exceed the maximum investor interest size requirement in the Tax Act as follows:

(a) for a Unitholder that has always held an interest of greater than 20% from 17 May 2006, a number of Smartshares Units up to but less than 40% of the total issued Smartshares Units of each Fund; and

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(b) for all Unitholders not specified in (a) above, a number of Smartshares Units not

exceeding 20% of the total issued Smartshares Units of each Fund (for these purposes, the Smartshares Units held by the relevant investor’s “associated persons” that are not Exempt Investors and who, themselves, hold Smartshares Units amounting to 5% or more of the units on issue will also be taken into account in determining whether the 20% threshold has been exceeded).

There is no investor interest size requirement for a Unitholder that is an investor of the type listed in the PIE regime in section HM 21(2) and Schedule 29 Parts A and B of the Tax Act, or equivalent provision. Any such exempted Unitholder may hold up to 100% of the Smartshares Units in the Fund.

The Manager also has the ability to request any relevant information from Unitholders to endeavour to ensure compliance with the PIE rules and the Trust Deed, as well as to enable the Manager to meet its requirements under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009. Additionally, the Manager has the ability to rectify any breach of the PIE holding restrictions in accordance with the PIE rules and the Trust Deed.

For further information regarding the eligibility of a Fund within the PIE requirements please refer to the relevant Smartshares Fund’s prospectus or contact the Manager.

Basket Investments


New Zealand Taxation Treatment on Disposal of units in the Smartshares Funds


The Unitholder acquired the Smartshares Units for the purpose of sale or other disposal; or

The Unitholder carries on a business involving dealing in the Smartshares Units or other similar property; or

The disposal of the Smartshares Units occurs as an act done in the carrying on of a profit-making scheme or undertaking.

As a general comment, PIEs that invest in a Smartshares Fund should not be subject to tax on any gains made on the disposal of Units in the Fund, and other Unitholders which are resident in a country with which New Zealand has a Double Tax Agreement may qualify for tax relief so that they are also not subject to tax on any gains made on the disposal of Units in the Fund.


As the smartMOZY and smartOZZY Funds do not have a permanent establishment in Australia and will not hold at any time 10% or more of the issued shares in any Index Issuer, those Funds will not be subject to Australian income tax in respect of any gains made on disposal.

Where fully Franked dividends are paid by Australian resident companies to the smartMOZY or smartOZZY Fund, no Australian tax should be withheld at source in Australia.

Where unfranked or partially Franked dividends are paid by Australian resident companies to

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the smartMOZY or smartOZZY Fund, it is likely that Australian tax will be withheld at source in Australia in relation to the unfranked portion of the dividend. Where the smartMOZY or smartOZZY Fund holds less than a 10% interest in each company that they invest in, the rate of Australian withholding tax on unfranked dividends should be 15%. Any such unfranked dividends would be paid to the smartMOZY or smartOZZY Fund net of any withholding tax paid to the Australian tax authorities.

Please refer to the smartMOZY and smartOZZY prospectuses for information on stamp duty.

Withholding of distributions

Distributions may be withheld through the imposition of a tracking levy (as discussed on pages 34 and 35). As noted above, the Manager has never imposed a tracking levy because it does not believe it improves the position of Unitholders or the Return on Smartshares Funds.


Unitholders will automatically have their distributions reinvested as Smartshares Units unless they elect to have them paid directly to a nominated bank account. If not already a member of the Distribution Reinvestment Plan, a Unitholder may elect to reinvest his or her distributions by returning the Distribution Reinvestment Plan form to:


Notice of election for the Distribution Reinvestment Plan (forms are available from Smartshares Limited) received by the Unit Registrar at least 10 Business Days prior to a semi-annual distribution date will be effective in respect of that distribution, otherwise such notice will be effective in respect of the next distribution. Once you have elected to reinvest your distributions, reinvestment will continue until you advise the Unit Registrar otherwise. Fees for the Distribution Reinvestment Plan are set out on pages 35 and 36.

Securities Lending

The Manager has implemented a securities lending programme for certain Smartshares Funds. The Manager has the power under the Trust Deeds to undertake securities lending for the Smartshares Funds, and the possibility of a securities lending programme for the Smartshares Funds is (and is deemed to be) included in the Issue Terms for the Fund.

Securities lending involves the transfer of legal title and beneficial interest in the securities to a third party borrower, in some cases, against collateral, and in other cases under other appropriate risk mitigation arrangements. There are additional risks associated with securities lending. These risks are set out on pages 44 and 45. The Smartshares Funds would receive income earned from securities lending following payment of the Manager’s costs of and fees for administering securities lending.

When securities are lent, the Smartshares Funds will receive a cash payment for any dividends (including any Imputation Credits) paid in respect of any loaned securities to the holder on the record date for the payment of the dividend, so that the Smartshares Funds will receive the same Return from the securities had they held them directly.


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Additional source of income: Securities lending should earn income (for example, by receiving a share of interest received on cash collateral provided by borrowers) and, following payment of the Manager’s costs of and fees for administering securities lending, should increase Returns to Unitholders.

Facilitates creation of Baskets: The creation and withdrawal of Baskets tends to assist the market price of the Smartshares Units to more closely follow the value of the underlying securities. One of the constraints on Basket trading is the lack of liquidity of some Index Securities. The ability to borrow these securities may assist market participants to trade complete Baskets of underlying securities.


The Trust Deeds permit the Manager to lend securities held by the Smartshares Funds only in accordance with certain terms, as set out in the appendix to the relevant Smartshares Fund’s prospectus.

The Manager relies on the Securities Act (Group Investment Index Funds) Exemption Notice 2002 (“Exemption Notice”). That Exemption Notice may only be relied on by a fund that conducts securities lending if it carries out that securities lending in accordance with the rules and requirements of a “designated settlement system” under section 156N of the Reserve Bank of New Zealand Act 1989. The Manager carries out its securities lending through the NZCDC Settlement System, which is a designated settlement system.

The NZCDC Settlement System is operated by NZX through its subsidiaries. NZCL, a subsidiary of NZX, is the central counterparty for the clearing house for the NZCDC Settlement System, and will become the borrower in respect of all securities lent by the Smartshares Funds. It will also settle all securities loans in accordance with the rules of the NZCDC Settlement System. NZDL, another subsidiary of NZX, operates the depository for the NZCDC Settlement System, in which Index Securities of smartFONZ, smartMIDZ and smartTENZ are held, and administers securities lending. New Zealand Depository Nominee Limited, another subsidiary of NZX, holds the legal title to those Index Securities that are held in the depository.

Therefore the entities which operate the NZCDC Settlement System used by the Manager, being ultimately wholly owned by NZX, are related parties of the Manager under the NZX Main Board Listing Rules. The Special Division of the NZ Markets Disciplinary Tribunal has granted the Manager a waiver from the NZX Main Board Listing Rules to allow the Manager to conduct securities lending through the NZCDC Settlement System.

The Manager does not currently bilaterally lend securities held by a Smartshares Fund directly to NZX Market Participants. This is because the rules of the NZCDC Settlement System do not currently allow bilateral securities lending. However, if the rules are changed to allow bilateral lending, the Manager may conduct bilateral lending on the terms described in the appendix to the relevant prospectus.


The Trustee is the person legally liable to pay returns (if any).

What are my risks?



Market Risk

Smartshares Units are subject to the risks of an investment in a broadly based portfolio of securities, including the risk that the general level of security prices may decline, thereby

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adversely affecting the value of the investment in that Smartshares Fund.

Securities are susceptible to general market fluctuations and to volatile increases and decreases in value due to changes in market confidence in, and investor perception of, the issuer of those securities. These investor perceptions are based on various and unpredictable factors including expectations regarding government, economic, monetary and fiscal policies, inflation and interest rates, economic expansion or contraction, and global or regional political, economic and banking crises. This may result in a Unitholder being unable to recover the full amount or any of their investment and/or any Returns relating to such investment in any of the Smartshares Funds.


The value of securities can also be affected by their liquidity. For smaller stocks, where there can often be limited liquidity, a change in their weighting on an Index could have an effect on the level of demand in the marketplace. This in turn may impact the price the relevant Smartshares Fund has to trade at to track the relevant Index and the fluctuation in the price of the Index Security may ultimately affect the Return an investor receives.

Industry Risk

Industry risk is the risk that a particular industry may perform poorly, which may cause a decrease in the value of the shares of the Index Issuers in that industry and thus in the value of the relevant Smartshares Units.

Index Issuer Risk

Index Issuer risk occurs where the individual assets of the Funds fluctuate in value due to circumstances specifically applicable to the Index Issuers. The risk is mitigated to an extent because the Funds invest across a number of industries in a range of securities at approximately their relevant Index weight.

Foreign Currency Risk for smartMOZY and smartOZZY

While Subscription Amounts and income for reinvestment are payable in New Zealand dollars, the Manager invests the proceeds for smartMOZY and smartOZZY in securities denominated in Australian dollars. In addition, Smartshares Units in smartMOZY and smartOZZY are quoted on the NZX Main Board in New Zealand dollars even though the assets underlying the value of those Smartshares Units are denominated in Australian dollars.

Both of these situations give rise to a currency risk that may affect the value of smartMOZY and smartOZZY, and amounts for reinvestment, either positively or negatively and hence the value or amount of the Smartshares Units in those Smartshares Funds when considered in New Zealand dollar terms. The Manager currently takes no steps to mitigate those Smartshares Funds’ foreign currency exposure.


Tracking risk

For a variety of reasons the Manager will not always manage to exactly track the relevant index for each Smartshares Fund. As a result of this, the Index Securities held by a Smartshares Fund may, over time, be less than a portfolio of securities that exactly matches the composition of the relevant index. Of course, investors investing directly are likely to face the same issues as the Manager in trying to exactly track the relevant index.

The principal reasons for tracking differences arising are as follows:

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First, it may not be possible for the Manager to exactly match changes to the indices by buying and selling Index Securities, because the prices it pays and receives for the Index Securities may not exactly match the prices used to adjust the index. For example, there may be limited liquidity in relation to securities the Manager is attempting to buy that pushes up the purchase price of those securities after an adjustment to an index, but before the Manager can buy. In some cases the relevant adjustment to an index may even cause such limited liquidity as it could affect the level of demand for it in the market place.

Secondly, tracking is a complex exercise, and errors occasionally arise due to human or systems errors.

Thirdly, there is also potential for tracking difference during each distribution period as a result of income being retained in the Smartshares Funds. The portfolio of Index Securities held by each Smartshares Fund represents stocks held in proportion to the weightings in the index tracked by that Smartshares Fund, and does not include any income received. As income from those Index Securities is received in cash, which adds to the NAV of the Fund, a slight tracking difference will occur during a distribution period. This tracking difference should substantially correct at the Distribution Date when the cash is paid to Unitholders.

Some tracking differences, such as the third one described above that arises because of income accruing in the relevant Smartshares Fund, mean the value of the Smartshares Fund's assets are greater than the value of the index. There is no detriment to Unitholders from such a difference. However, some differences mean the value of the Smartshares Fund's assets is less than the value of the index. When this is the case, the Return generated by the Smartshares Fund may be less than the Return on the relevant index, which is detrimental to Unitholders.

The tracking difference for each Smartshares Fund is Announced to NZX on a daily basis.

Operational risk

There is a risk that the operational procedures adopted by the Manager could result in errors, fraud or misconduct that cause a loss to the relevant Smartshares Fund or otherwise affect Unitholders' Returns. In particular, tracking an index and assessing the reasons for tracking differences (that is, differences between the NAV of a Smartshares Fund and the value of the relevant index) is very complex and some errors are occasionally made.

In order to mitigate this risk the Manager follows a set of internal policies and procedures and also outsources some aspects of its operations to the Administration Manager to draw on the Administration Manager's systems and expertise. The Manager also insures against losses arising from fraud and misconduct.

In 2013, an operational error occurred in relation to one of the Smartshares Funds (smartMOZY) over a period of time that increased the tracking difference in that Fund. The Manager's operational procedures have been rectified to ensure that the specific error cannot recur.

Passive management risk

Traditional methods of investment management for an actively managed fund typically involve deliberate changes to a portfolio of Index Securities based on judgement of economic, financial and market conditions. No attempt will be made to manage Smartshares Funds in the traditional sense, and the Manager and Trustee do not monitor the performance of Index Issuers.

The adverse financial condition of an Index Issuer or the industry it is in will not be a reason for Smartshares Limited to direct the relevant Trustee to cause a Smartshares Fund to dispose of that Smartshares Fund’s investments in the Index Securities of that Index Issuer unless the Index Issuer is removed from the relevant index. Nor will Index Securities held in Smartshares Funds be disposed of as a result of fluctuations in the market unless they are removed from the relevant index.

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Market fluctuations and such adverse conditions may affect the value of a Unitholder’s investment and/or any Returns relating thereto either positively or negatively. Neither the Manager nor the Trustee may delay decisions to re-weight Smartshares Funds to reflect the relevant Capital Index to enhance the Returns on particular Smartshares Units.

Liquidity Risk

Investors are only able to cash in their investment by selling their Units on market unless they have enough Units to do a Basket redemption (Basket redemptions are described on page 48). The market price per Unit may vary from the Current Unit Value due to supply and demand factors. Each Smartshares Fund is listed on the NZX Main Board and, in the opinion of the Manager, there is an established market for sales of Units. However, although the Smartshares Funds are listed on the NZX Main Board, the fact that investors can apply to purchase Units directly from Smartshares may result in a reduced number of buyers of Units on the NZX Main Board.

Regulatory Risk

Regulatory risk is the risk that Smartshares Funds may be adversely affected by future changes in applicable laws, including tax laws.

Tax Risk

Taxation laws, their interpretation, or the Inland Revenue Department’s application of those laws may change during the period of an investor’s investment in Smartshares Funds, in a way which has an adverse impact on the Returns to that investor.


If a Fund fails to meet the required criteria and therefore ceases to be a PIE, it will not be able to re-elect to be a PIE for the succeeding five years.

If an investor (including all associates) holds more than 20% of the Smartshares Units in a Smartshares Fund, that Fund may not qualify to be a PIE (or for an investor that meets certain requirements, 40% of the Smartshares Units in that Fund).

Although the Manager has put appropriate processes in place designed to ensure that the Fund complies with all requirements to be a PIE, there is a risk that the Fund could lose PIE status if there is a breach of those requirements which is not remedied within the time permitted under the PIE Rules. If PIE status is lost the Fund will be taxed as a company and distributions to investors will be dividends taxable at the investor’s marginal tax rate and potentially will be subject to withholding tax. No compensation will be paid to investors in the event that PIE status is lost. For further information on PIE Tax risk please refer to the relevant Smartshares Fund prospectus.

Securities Lending Risk

There are a number of possible risks associated with securities lending, including, but not limited to, the following:

(a) Borrower credit risk and settlement risk: There is a risk that a borrower of securities could fail to deliver equivalent securities on termination of a loan or encounter financial difficulties, for example, become insolvent. In this event there could be delays in or failure in respect of redelivery of securities and the Smartshares Funds may incur loss as a result.

For bilateral loans of securities to individual counterparties (which the Smartshares Funds are not currently permitted to enter into (see page 41)) collateral in excess of 105% of the value of the securities lent will be required to be deposited with the Trustee. This collateral will be used, if possible, to purchase replacement securities if the borrower fails to deliver securities on the termination of a loan.

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For loans settled through a central counterparty settlement system, the obligations of the borrower to the Funds are unsecured, as collateral is managed by the settlement system operator and is not directly provided to the Funds. However, this risk is mitigated by any arrangements (including prudential arrangements and oversight by the Reserve Bank) made for the management of risks associated with the operation of the settlement system.

(b) Failure by central counterparty settlement system operator to meet settlement obligations: In the event that the settlement system operator (such as NZCL) does not fulfil its settlement obligations to the Funds in relation to a securities loan, the Funds’ sole right is to make a claim for compensation to the settlement system operator. The settlement system operator’s liability is limited to determinations relating to claims for compensation. The NZ Markets Disciplinary Tribunal can require the settlement system operator to redetermine a claim for compensation if the settlement system operator has acted in bad faith.

(c) Legal risk: There is a risk that the contract relating to the lending will not be legally enforceable or documented correctly, resulting for example in an inability to enforce an obligation to re-transfer securities. This risk can be mitigated by the use of a standard form contract based on industry standards.

In order to limit each Smartshares Fund’s exposure to the risk that may arise as a result of securities lending, the Trustees and the Manager have agreed that at the time and immediately after lending any securities in a Smartshares Fund no more than 50% of the value of that Smartshares Fund or 50% of the aggregate value of a security within that Smartshares Fund may be lent. Securities may not be lent if, as a result, either of those limits is breached.

Custodian risk

The assets of the Smartshares Fund are legally held by the Custodian. That means there is a risk that if the Custodian becomes insolvent, this could temporarily or permanently deprive the Smartshares Funds of assets. This risk is managed by having the Custodian hold the assets of the Smartshares Funds as a bare trustee and by keeping those assets separately identifiable from other assets it holds. This should mean that, if the Custodian ever does become insolvent, the assets it is holding for the Smartshares Funds will not form a part of the pool of assets to be liquidated for the benefit of the Custodian's creditors.

Key personnel risk

The management of the Smartshares Funds is complex and many of the tasks associated with that management require considerable experience in relation to exchange traded funds. Consequently, there is a risk that if key personnel at the Manager leave at any time, there is a heightened risk of disruption and potential calculation errors. Among other things, such calculation errors could lead to unintended tracking differences. This risk is mitigated, to some extent, by the Manager's appointment of the Administration manager to the Smartshares Funds.

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Unitholders are not liable to make any payments to third parties upon winding up of Smartshares Funds, or as a result of the insolvency of the Manager or Trustee. However, in the event a wind-up proves necessary, the Manager and/or Trustee shall be entitled to recover all costs and expenses, which are incurred in doing so. This will be done prior to distributing money (or assets) to Unitholders. Claims of Unitholders in respect of their Smartshares Units will rank equally among themselves in such circumstances.

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Unitholders may at any time, initiate, cease or alter (subject to maintaining a minimum contribution of $50 per month unless contributions are being completely stopped) the monthly Regular Savings Plan payments by giving 10 Business Days’ notice to the Unit Registrar prior to the Direct Debit Date.


Unitholders may at any time initiate or cease the Distribution Reinvestment Plan by notifying the Unit Registrar. However, Unitholders will need to give the Unit Registrar at least 10 Business Days' notice prior to the twice-yearly Distribution Ex Date to enable the change to be made for that distribution period.

Fees

The fees charged by the Manager may be changed by the Manager by giving six months’ notice of the change to Unitholders and making an Announcement to NZX (or providing less notice, if the Manager is reducing these fees). There is no limit on the changes the Manager may make.


The Manager and the Trustee of a Smartshares Fund may amend the Trust Deed for a Smartshares Fund and the issue terms without notice to Unitholders when the amendment is not, in the opinion of the Trustee, materially and adversely prejudicial to Unitholders generally, or in certain other limited circumstances, including under the authority of an extraordinary resolution of Unitholders.

Otherwise the Manager must give at least three months’ notice to the Unitholders and an amendment will become effective if:

(a) during the three month notice period both of the following conditions are met:

i Basket holders would have been able to redeem one or more Baskets on at least 20 Business Days during that notice period, at their Current Unit Value; and

ii The reported weighted average price for sales of Smartshares Units in parcels of less than a Basket, on at least 20 Business Days during that period, has been higher than 1% below the Current Unit Value at the time of sale, or

(b) the requirements in paragraph (a) are not met but the Trustee gives notice to Unitholders informing them that it will, if required to do so by Unitholders, call a meeting of Unitholders to consider whether to reject the amendment and either of the following conditions are then met:

i. the holders of 10% or more of the Units do not require the Trustee to call such a meeting; or

ii. the holders of 10% or more of the Units do require the Trustee to call such a meeting, but at that meeting a proposed resolution to reject the amendment is supported by less than 25% of the valid votes cast on the resolution.

Issue terms may be prescribed in a registered prospectus with effects specified in the Trust Deed. They may change as described above when new prospectuses are issued. An extraordinary resolution shall be binding on all Unitholders, and the Trustee and Manager shall give effect to such a resolution.

Further details on the Trust Deed and issue terms are provided in the registered prospectus

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for each Smartshares Fund.

Amendments to comply with NZX Main Board Listing Rules

The Trustee may at any time make any alteration, modification, variation, or addition to the Trust Deed or any term or conditions on which Smartshares Units are held from time to time with the concurrence of the Manager where it is necessary or expedient so that the relevant Smartshares Fund complies with the NZX Main Board Listing Rules, or as a consequence of an amendment to or repeal of the NZX Main Board Listing Rules.


Smartshares Units can be cashed in two ways:

1. Market sale

Smartshares Units can be sold on market through NZX Firms. In this case, no written redemption notice is required. The market price per Smartshares Unit may vary from the Current Unit Value due to supply and demand factors. The costs involved in a sale on the NZX Main Board is normal sharemarket brokerage, which may vary between NZX Firms. Each Smartshares Fund is listed on the NZX Main Board and, in the opinion of the Manager, there is an established market for such sales of Smartshares Units. The Trustee may decline to register a transfer of Smartshares Units if it would result in a transferee holding less than the Minimum Holding.

2.Basket withdrawal

For holdings in multiples of:

500,000 units for smartTENZ;

200,000 units for smartFONZ and smartMIDZ; and

150,000 units for smartMOZY and smartOZZY,

a Unitholder can surrender Smartshares Units and receive equivalent Index Securities and a cash amount representing any accrued income applicable from the relevant Index Securities of Index Issuers. All withdrawal requests should be made through an NZX Firm to the Manager after completing a Basket withdrawal notice. Charges in relation to Basket withdrawals are explained under “What are the charges?” on page 34.

The Manager is not obliged to redeem Smartshares Units in any of the Smartshares Funds in response to a Basket withdrawal request in the period from (and including) the announcement of a distribution to (and including) the Ex Date for that distribution (as redemptions during that period could result in an decreased number of Smartshares Units on issue, which would in turn result in an increase in the announced distribution on a per unit basis).


In some circumstances the Manager may be required to take action to ensure that the Smartshares Funds retain their PIE status, and has been granted a waiver by the Special Division of the NZ Markets Disciplinary Tribunal to enable it to do so.

If a Unitholder exceeds the investor interest size requirement prescribed in the Tax Act (the “Breach”) in respect of a Fund, the Manager may take the following steps to ensure that the Breach is remedied:

(a) as soon as practicable after the Manager becomes aware of the Breach, the Manager shall give written notice to the relevant Unitholder(s) of the Breach, including details of the number of Smartshares Units (the “Excess Units”) giving rise to the Breach;

(b) the Unitholder shall have a period consisting of the grace period determined in

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accordance with the Tax Act (the “Remedy Period”) less 30 days to remedy the Breach, but if the Manager becomes aware of the Breach and determines that there are 30 days or less to remedy the Breach then the Breach shall be deemed to have not been remedied; and

(c) if the Breach has not been remedied upon expiry of the period referred to in (b) above, then the Manager shall within the remaining 30 days of the Remedy Period, in its discretion, and only to the extent permitted by the NZX Main Board Listing Rules (or any ruling in respect of, or waiver from the NZX Main Board Listing Rules), sell, redeem, or repurchase the amount of the Excess Units in order to remedy the Breach, and:

(i) the Manager shall account to the relevant Unitholder for the proceeds of any disposal of the Excess Units after deduction of all expenses arising from such disposal; and

(ii) neither the Manager nor the Trustee is required to maximise the Fund unit price for any disposal and in any event, shall not be liable to any Unitholders for any loss on disposal.


The Manager has the power to wind up the Smartshares Funds (after giving two months’ notice to Unitholders and the Trustee). The Trustee shall then distribute the balance after payment of costs and expenses amongst the Unitholders in proportion to the number of Smartshares Units held by them.




The Manager Head of Business Smartshares Limited Level 1, NZX Centre, 11 Cable Street PO Box 2959, Wellington Tel: 0800 80 87 80 Email: [email protected] www.smartshares.co.nz

http://www.nzx.com/

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The Manager Head of Business Smartshares Limited Level 1, NZX Centre 11 Cable Street PO Box 2959 WELLINGTON Tel: 0800 80 87 80 Email: [email protected]

Unit Registrar Link Market Services Limited Level 7, Zurich House 21 Queen Street AUCKLAND 1142 Tel: (09) 375 5998 Fax: (09) 937 5990 Email: [email protected]

Trustee for smartTENZ, smartFONZ and smartMOZY The New Zealand Guardian Trust Company Limited Level 14, 191 Queen Street AUCKLAND 1010 Tel: (09) 909 5100 Fax: (09) 969 3732 Email: [email protected]

Trustee for smartMIDZ and smartOZZY Trustees Executors Limited Level 5, 10 Customhouse Quay PO Box 3222 WELLINGTON Tel: (04) 495 0999 Fax: (04) 496 2952 Email: [email protected]

Alternatively, you may lodge a complaint with the Manager’s or the relevant Trustee's Dispute Resolution Scheme provider. The Dispute Resolution Scheme provider for the Manager and each Trustee is Financial Services Complaints Limited. They can be contacted at:





The latest registered prospectus for each Smartshares Fund

The latest annual report (including financial statements) of the Smartshares Funds.

The latest annual report (including financial statements) is available from Smartshares Limited (free of charge) on www.smartshares.co.nz, or any NZX Firm. The prospectuses and financial statements are also filed with the Companies Office, and are available on the Companies Office website (www.business.govt.nz/companies) under the Manager’s file reference, free of charge.

The Trust Deed for each Smartshares Fund may be inspected, without fee, by any person at

51

the registered office of the Manager. A copy of the Trust Deed will be sent (electronically where possible) to prospective and current investors, free of charge, on request to the Manager.

A Unitholder (or his/her/its representative) may inspect that part of the register of Smartshares Units kept by the Unit Registrar that relates to his/her/its Smartshares Units, except when the register is duly closed (and subject to any reasonable restrictions that the Manager may impose so that not less than two hours in each working day is allowed for inspection). A copy of that part of the register of Smartshares Units relating to a Unitholder may be obtained on payment of a reasonable fee.

Up to date information on the performance of Smartshares Funds and the relevant indices is available in the daily newspapers and on NZX's website (www.nzx.com). Announcements to NZX, including Announcements of the tracking differences for the Smartshares Funds can be found at www.nzx.com under the ticker symbols TNZ (for smartTENZ), MDZ (for smartMIDZ), FNZ (for smartFONZ), OZY (for smartOZZY) and MZY (for smartMOZY).



Investors will also receive a distribution notice twice a year, as well as confirmation of Smartshares Units allocated if they are members of the Distribution Reinvestment Plan.



Request information

Investors may also request from the Manager, in accordance with section 54B of the Securities Act 1978 and regulation 44 of the Securities Regulations 2009, the information required by those provisions to be made available. A prescribed fee may be payable (but not for a copy of the registered prospectus, a copy of the financial statements or a copy of any document extending the period during which allotments may be made under the registered prospectus). Such a request may be made by contacting the Manager, on the contact details as set out on page 30, above.

Privacy





http://www.nzx.com/

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GLOSSARY OF TERMS

“Announcement” a market announcement to NZX that can be viewed on nzx.com under the tickers symbols TNZ (for smartTENZ), MDZ (for smartMIDZ), FNZ (for smartFONZ), OZY (for smartOZZY) and MZY (for smartMOZY), (and Announce and Announced have corresponding meanings).

“Application Form” the application form attached to this Investment Statement.

“ASX” the Australian Stock Exchange.

“Available Subscribed Capital has the meaning given to it in the Tax Act.

Basket” a proportionate amount of the securities of the Index Issuers determined from time to time by the Manager as equivalent to 500,000 smartTENZ, 200,000 smartFONZ and smartMIDZ and 150,000 smartMOZY and smartOZZY Units.

“Business Day” a day on which the NZX Main Board is open for usual business.

“Capital Index” an index that represents movements in the prices of constituents excluding the value of any distributions received.

“Cash Amount” a cash amount determined by the Manager as being equal to:


(b) in relation to a person redeeming Units via Basket withdrawal, the income accrued and held in the particular Smartshares Fund that is attributable to the Basket of securities being withdrawn.

“Current Unit Value” the market value of all securities held by the relevant Fund (plus any received and accrued income) less liabilities or provisions (including accrued liabilities and expenses) properly to be taken into account in determining the NAV of the relevant Fund, divided by the number of Units on issue for that Fund.

“Direct Debit Date” on or about the 20th of every month.

“Distribution Date” each date on which distributions are paid to Unitholders, which will be within 20 Business Days after each Record Date.

“Distribution Ex Date” in relation to an entitlement means the second business day before the Record Date of that entitlement.

“Distribution Reinvestment Plan”

means the scheme currently provided for in the prospectus for each Smartshares Fund under which Unitholders may semi-annually automatically invest their dividends and other distributions in the relevant Smartshares Fund.

“Ex Date” in relation to a benefit, means the second Business Day before the Record Date for that benefit, unless NZX determines otherwise.

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“Franked or Franking Credit” the Australian tax credit which is attached to the dividend, distributed in accordance with Australia's dividend imputation system.

“GIF” Group Investment Fund.

“Imputation Credit” “imputation credit” as defined in section YA 1 of the Tax Act.

“Index Issuer” in respect of any particular Smartshares Fund, an issuer whose securities are included from time to time in the index which that Smartshares Fund tracks.

“Index Security” a security issued by an Index Issuer that is held or to be acquired by a Smartshares Fund.

“Issuer” Smartshares Limited.

“Quoted” listed for quotation on the NZX Main Board.

“Manager” Smartshares Limited.

“Market Participant” any entity approved by NZX pursuant to the NZX Participant Rules to participate in any market provided by NZX.

“Minimum Holding” means the minimum number of Units in the Fund that a Unitholder must hold at all times. Currently this is 100 Units smartFONZ, smartTENZ, smartMIDZ, and smartOZZY, and 50 Units for smartMOZY (or such different amount as is determined by the Manager, or the Trustee in respect of smartTENZ, in their sole discretions, from time to time).

“NAV” the net asset value of the relevant Fund.

NZCDC Settlement System the central counterparty clearing and settlement system operated by NZX through its subsidiaries.

“NZCL” New Zealand Clearing Limited.

“NZDL” New Zealand Depository Limited.

“NZX” NZX Limited.

“NZX Firm” a Market Participant accredited by NZX pursuant to the NZX Participant Rules to provide advice and trade on behalf of a client or as a principal (a list of which can be found on nzx.com).

“NZX Main Board” the main board equity security market operated by NZX.

“PIE” Portfolio Investment Entity under the Tax Act.

“Record Date” in relation to each distribution to Unitholders, the time and date fixed by the Manager for the determination of the Unitholders to whom a distribution will be paid, which is currently on or about the last Business Day in March and September in each year.

“Regular Savings Plan” the scheme under which Unitholders may make monthly payments of at least NZ$50 to the Smartshares Funds in order to purchase further Smartshares Units on an ongoing basis.

“Regular Savings Plan” and “Cash Application Account”

the account maintained in the name of the Trustee to receive funds from Unitholders to enable them to invest an amount into the Smartshares Funds on a one off, intermittent or monthly basis. Such account does not

54

constitute part of any Smartshares Fund.

“Return” in relation to Units and other securities means the amounts distributed to holders of them together with any increase in their capital value and, in relation to an index, means the amounts that would be distributed to a person that held the Index Securities used to calculate the value of the relevant Index and any increase in the value of such a holding.

“smartFONZ” NZX 50 Portfolio Index Fund.

“smartMIDZ” NZX MidCap Index Fund.

“smartMOZY” NZX Australian MidCap Index Fund.

“smartOZZY” NZX Australian 20 Leaders Index Fund.

“smartTENZ” NZX 10 Fund.

“Smartshares Funds” smartFONZ, smartMIDZ, smartMOZY, smartTENZ or smartOZZY.

“Smartshares Unit or Unit” a unit in one of the Smartshares Funds.

“Subscription Amount” the amount of money that is being provided for investing in Smartshares Funds (which includes the application fee).

“Tax Act” the Income Tax Act 2007.

“Trustee” Trustees Executors Limited in respect of smartMIDZ and smartOZZY and The New Zealand Guardian Trust Company Limited in respect of smartMOZY, smartFONZ and smartTENZ or both of them as the context permits.

“Trust Deed” in respect of any particular Smartshares Fund, the trust deed and all supplementary deeds and deeds of modifications for that Smartshares Fund.

“Unitholder” a holder of Smartshares Units.

“Unit Registrar” Link Market Services Limited.

Terms described above in the singular include the plural and vice versa. All dates and times contained in the Investment Statement refer to New Zealand time.


NEW ZEALAND DIVIDEND INDEX TRUST (NZ Dividend Fund) AUSTRALIAN FINANCIALS INDEX TRUST (Aus Financials Fund) AUSTRALIAN RESOURCES INDEX TRUST (Aus Resources Fund).

Investment Statement for the purposes of the Securities Act 1978. Dated 18 December 2015

2

Contents


HOW DO I APPLY? 13

NEW ZEALAND DIVIDEND INDEX TRUST (NZ DIVIDEND FUND) 17

AUSTRALIAN FINANCIALS INDEX TRUST (AUS FINANCIALS FUND) 19

AUSTRALIAN RESOURCES INDEX TRUST (AUS RESOURCES FUND) 21














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Page




























4













financial adviser.


Applications were made to the Special Division that regulates the Manager (in the place of NZX) for

permission to quote the units in the Smartshares Funds (Units) on the NZX Main Board and all the

requirements of the Special Division relating thereto that can be complied with on or before the date of this

Investment Statement have been duly complied with. These applications were accepted, and the Units are

quoted on the NZX Main Board. However, the Special Division accepts no responsibility for any statement in

this Investment Statement.

Disclaimer

The Return on each Smartshares Fund is intended to closely track the Return on the index it tracks (the Aus

Financials Fund tracks the S&P/ASX 200 Financials Ex-A-REIT Index, the Aus Resources Fund tracks the

S&P/ASX 200 Resources Index, and the NZ Dividend Fund tracks the S&P/NZX 50 High Dividend Index)

less certain costs (including tax) and fees of the Fund. These indices rise and fall according to market

events and conditions. None of the Trustee, the Manager, the Custodians, the Administration Manager,

NZX, nor any other person guarantees the Return on the indices or the Return on each Smartshares Fund or

investment in each Smartshares Fund. No warranty expressed or implied is given as to the results to be

obtained by the Manager or each Smartshares Fund from the use of the indices or any data included in

them, or as to the liquidity of investment in each Smartshares Fund, Smartshares Units or the fitness of any

Smartshares Fund for any Unitholder’s purposes. The offer set out in this Investment Statement is only

made in New Zealand. No person may offer, sell or deliver Smartshares Units or distribute any documents in

relation to the offer (including any copy or extract from this Investment Statement) to any person in any

jurisdiction other than in compliance with any applicable laws and regulations.

S&P Dow Jones Indices and NZX Disclaimer

The "S&P/NZX 50 High Dividend Index" is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and NZX Limited, and has been licensed for use by Smartshares Limited. Standard & Poor’s® and S&P® are registered

trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). NZX Limited’s trademark is a registered trademark of NZX Limited. The trademarks have been licensed to SPDJI and have been sublicensed for use for certain purposes by Smartshares

5

Limited. Smartshares Limited’s Products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”) or NZX Limited. Neither S&P Dow Jones Indices nor NZX Limited make any representation or warranty, express or implied, to the owners of the Smartshares Limited’s Products or any member of the public regarding the advisability of investing in securities generally or in Smartshares Limited’s Products particularly or the ability of the S&P/NZX 50 High Dividend Index to track general market performance. S&P Dow Jones Indices and NZX Limited only relationship to Smartshares Limited with respect to the S&P/NZX 50 High Dividend Index is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P/NZX 50 High Dividend Index is determined, composed and calculated by S&P Dow Jones Indices or NZX Limited without regard to Smartshares Limited or the Smartshares Limited’s Products. S&P Dow Jones Indices and NZX Limited have no obligation to take the needs of Smartshares Limited or the owners of Smartshares Limited’s Products into consideration in determining, composing or calculating the S&P/NZX 50 High Dividend Index. Neither S&P Dow Jones Indices nor NZX Limited are responsible for and have not participated in the determination of the prices, and amount of Smartshares Limited’s Products or the timing of the issuance or sale of Smartshares Limited’s Products or in the determination or calculation of the equation by which Smartshares Limited’s Products are to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and NZX Limited have no obligation or liability in connection with the administration, marketing or trading of Smartshares Limited’s Products. There is no assurance that investment products based on the S&P/NZX 50 High Dividend Index will accurately track index performance or provide positive investment returns. S&P

Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice. NEITHER S&P DOW JONES INDICES NOR THIRD PARTY LICENSOR GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P/NZX 50 HIGH DIVIDEND INDEX OR ANY

DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND NZX LIMITED SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND NZX LIMITED MAKES NO EXPRESS OR

IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY SMARTSHARES LIMITED, OWNERS OF THE SMARTSHARES LIMITED’S PRODUCTS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P/NZX 50 HIGH DIVIDEND INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO.

WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR NZX LIMITED BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL

DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBLITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND SMARTSHARES LIMITED,

OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.


The "S&P/ASX 200 Financials Ex-A-REIT Index and the S&P/ASX 200 Resources Index" are products of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and ASX Operations Pty Ltd, and has been licensed for use by Smartshares Limited. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial

Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). ASX Operations Pty Ltd’s trademark is a registered trademark of ASX Operations Pty Ltd. The trademarks have been licensed to SPDJI and have been sublicensed for use for certain purposes by Smartshares Limited. Smartshares Limited’s Products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”) or ASX Operations Pty Ltd. Neither S&P Dow Jones Indices nor ASX Operations Pty Ltd make any representation or warranty, express or implied, to the owners of the Smartshares Limited’s Products or any member of the public regarding the advisability of investing in securities generally or in Smartshares Limited’s Products particularly or the ability of the S&P/ASX 200 Financials Ex-A-REIT Index and S&P/ASX 200 Resources Index to track general market performance. S&P Dow Jones Indices and ASX Operations Pty Ltd only relationship to Smartshares Limited with respect to the S&P/ASX 200 Financials Ex-A-REIT Index and S&P/ASX 200 Resources Index are the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P/ASX 200 Financials Ex-A-REIT Index and S&P/ASX 200 Resources Index are determined, composed and calculated by S&P Dow Jones Indices or ASX Operations Pty Ltd without regard to Smartshares Limited or the Smartshares Limited’s Products. S&P Dow Jones Indices and ASX Operations Pty Ltd have no obligation to take the needs of Smartshares Limited or the owners of Smartshares Limited’s Products into consideration in determining, composing or calculating the S&P/ASX 200 Financials Ex-A-REIT Index and S&P/ASX 200 Resources Index. Neither S&P Dow Jones Indices nor ASX Operations Pty Ltd are responsible for and have not participated in the determination of the prices, and amount of Smartshares Limited’s Products or the timing of the issuance or sale of Smartshares Limited’s Products or in the determination or calculation of the equation by which Smartshares Limited’s Products are to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and ASX Operations Pty Ltd have no obligation or liability in connection with the administration, marketing or trading of Smartshares Limited’s Products. There is no assurance that investment products based on the S&P/ASX 200 Financials Ex-A-REIT Index and

6

S&P/ASX 200 Resources Index will accurately track index performance or provide positive investment returns. S&P

Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice. NEITHER S&P DOW JONES INDICES NOR THIRD PARTY LICENSOR GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P/ASX 200 FINANCIALS EX-A-REIT INDEX AND S&P/ASX 200 RESOURCES INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION,

INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND ASX OPERATIONS PTY LTD

SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND ASX OPERATIONS PTY LTD MAKES NO EXPRESS OR IMPLIED

WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY SMARTSHARES LIMITED, OWNERS OF THE SMARTSHARES LIMITED’S PRODUCTS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P/ASX 200 FINANCIALS EX-A-REIT INDEX AND S&P/ASX 200 RESOURCES INDEX OR WITH RESPECT TO

ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR ASX OPERATIONS PTY LTD BE LIABLE FOR ANY INDIRECT, SPECIAL,

INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBLITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND SMARTSHARES LIMITED, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

Definitions


7

KEY INFORMATION SUMMARY This section of the Investment Statement contains a summary of the key information relating to this offer. The rest of this Investment Statement contains important information. You should read all of it before deciding whether to invest.



- NEW ZEALAND DIVIDEND INDEX TRUST (NZ Dividend Fund);

- AUSTRALIAN FINANCIALS INDEX TRUST (Aus Financials Fund); and

- AUSTRALIAN RESOURCES INDEX TRUST (Aus Resources Fund).

The basic concept

Each Smartshares Fund is a unit trust, as defined in the Unit Trusts Act 1960. The beneficial interest in each Smartshares Fund is divided into Units with each Unit representing an equal interest in the assets of that Smartshares Fund but not conferring any interest in any specific asset of that Smartshares Fund.

The objective of each of the Smartshares Funds is to provide a Return to Unitholders that closely tracks the Return on a specific equity market index less certain costs (including tax) and fees of the Fund. An equity market index is a measure of the Return on a group of individual securities and is typically independently calculated by an index provider. To meet this objective, each Smartshares Fund aims to hold securities (Index Securities) of the entities that are part of the relevant index (Index Issuers) in proportions that match their weightings in the relevant index. This is called index tracking, and there is further information about it below on this page and on page 36, together with more specific comments about tracking performance for each of the Smartshares Funds in the descriptions of each individual Smartshares Fund on pages 17 to 21


Applications were made to the Special Division that regulates the Manager (in the place of NZX) for permission to quote the Units on the NZX Main Board. These applications were accepted, and the Units are quoted on the NZX Main Board. As quoted securities, Units can be traded like shares in Listed companies. For most investors, trading their Units on market through an NZX Firm will be the only way of redeeming their investment, because there is no general right to redeem Units.


Although an investment in a Smartshares Fund is similar to a direct investment in the relevant Index Securities, you will not have any rights in relation to specific Index Securities held by a Smartshares Fund. There are also some differences between the Returns you will receive on the investments. The principal differences are as follows:

Tracking differences – The Manager aims to track the relevant index for a Smartshares Fund by investing in the relevant Index Issuers in proportions that match their weightings in the relevant index. However, there will inevitably be some differences. For example, the makeup of the relevant index may be changed, and the Manager is unlikely to exactly match the change by buying and selling Index Securities because the prices it pays and receives for the Index Securities may not exactly match the prices used to adjust the index. This means that the net asset value (NAV) of the Index Securities held by the Smartshares Fund diverges over time from the value of the relevant index (and therefore from the value of an equivalent direct investment in the Index Issuers).

Distribution differences – An investor that invests directly in Index Securities will receive distributions in relation to those Index Securities when they are paid by the relevant Index Issuers. In contrast, distributions that are received by a Smartshares Fund from the relevant Index Issuers will be held by that Smartshares Fund (and included in the Smartshares Fund's NAV) until the next Distribution Date. It is only on that Distribution Date that distributions received by the Smartshares Fund during the months following the previous Distribution Date will be paid out (or reinvested for you) in one lump sum. Currently, distributions received by the NZ Dividend Fund and Aus Financials

8

Fund are paid out quarterly and distributions received by the Aus Resources Fund are paid to investors semi-annually.

Management fees – Management fees are deducted before distributions are paid to you, meaning you earn less than the full distributions paid on the Index Securities the Smartshares Fund invests in. Of course, it is unlikely that you would be able to invest in the Index Securities directly without also paying some management costs, taxes and fees such as brokerage to third parties.

Different market values – Units trade at the market price, which is unlikely to be exactly the same as the Current Unit Value. One mechanism in place to reduce this difference is provision for larger investors to be able to exchange Baskets of Index Securities for the equivalent Units and vice versa. With this ability, larger investors are able to take advantage of any difference between the market price of Units and the equivalent Index Securities. If they do take advantage of that difference, it affects the demand and supply of Units in a way that is expected to align the market price of Units more closely with the per Unit value of the relevant Index Securities. However, despite this mechanism, the market price of the Units and the per Unit value of the relevant Index Securities are not always closely aligned due to market forces that are outside the control of the Manager.

Distributions

Distributions to Unitholders are currently made directly from each Smartshares Fund within 20 Business Days of each Record Date. Currently, the Record Date for the NZ Dividend Fund and the Aus Financials Fund is on or around the last Business Day of each of March, June, September and December in any year and the Record Date for the Aus Resources Fund is on or around the last Business Day of each of March and September. These distributions comprise dividends or any other income received by the Smartshares Fund, less fees and other expenses. Unitholders will automatically have their distributions re-invested for Smartshares Units unless they elect to have them paid directly to a nominated New Zealand bank account in New Zealand dollars. There is further information about distributions on page 31.


Smartshares Limited (the Manager) is a wholly owned subsidiary of NZX Limited (NZX). Smartshares Limited offers a range of funds.

The Manager is responsible for all adjustments to the Smartshares Funds' portfolios, the maintenance of accounting records of the Smartshares Funds, communication with Unitholders, supervision of the Unit Registrar, including the payment of distributions to Unitholders and the purchase or sale of Index Securities as determined by the Smartshares Funds in the event of any required adjustments to the different indices that the Smartshares Funds track. Some of these duties are delegated to the Administration Manager, the relevant Custodian and the Unit Registrar.



BNP Paribas Fund Services Australasia Pty Ltd, acting through its New Zealand branch (the Administration Manager for all Funds and the Custodian for the Aus Financials Fund and Aus Resources Fund);

JB Were (NZ) Nominees Limited (the Custodian for the NZ Dividend Fund); and


None of the Manager, Trustee, Administration Manager, Custodians, Unit Registrar or NZX (as the parent company of the Manager) provide any guarantee in relation to the Smartshares Funds.


9


The Smartshares Fund you choose to invest in is designed to give you Returns similar to the Returns on the index tracked by the relevant Smartshares Fund. The Manager buys and sells Index Securities to track the relevant index rather than making investment decisions based on its own assessment of the Index Issuers. This means the Smartshares Funds are what are commonly referred to as “passive funds” (as opposed to “active funds”, which involve a manager making its own judgement about where and when to invest and divest).



NZ Dividend Fund

S&P/NZX 50 High Dividend Index

Comprises 25 of the highest yielding issuers included in the S&P/NZX 50 Index. The S&P/NZX 50 High Dividend Index limits the weighting of any one Index Issuer to 10%.

Aus Financials Fund

S&P/ASX 200 Financials Ex-A-REIT Index

Comprises those securities included in the S&P/ASX 200 Index in the Financials Sector (excluding real estate investment trusts). The S&P/ASX 200 Financials Ex-A-REIT Index does not limit the weighting of any one Index Issuer.

Aus Resources Fund

S&P/ASX 200 Resources Index

Comprises those securities included in the S&P/ASX 200 Index in the resources sector. The S&P/ASX 200 Resources Index does not limit the weighting of any one Index Issuer.


The unit price of each Smartshares Unit (the Current Unit Value) reflects the value of the Index Securities held in the relevant Smartshares Fund and the dividends and other income received or accrued by and held in the relevant Smartshares Fund, less liabilities (such as tax, fees and expenses). As noted above, if you sell your Units on market, the price you receive may differ from the Current Unit Value.

Further information about the index tracked by each of the Smartshares Funds can be found in the registered prospectus for the Smartshares Funds, and also on pages 17 to 22 of this Investment Statement.



When you invest in a Smartshares Fund, you get an indirect investment through the Smartshares Fund in each entity in the index in which the Smartshares Fund invests. With one simple purchase you get an investment in the issuers included in the relevant index, spreading your risk across a portfolio of securities, which makes this a more diversified investment than an investment in a single issuer. Diversification may reduce risk. This is because it is less likely that all the entities in the Smartshares Fund will perform similarly at the same time. For example, the losses from entities performing poorly may be balanced by the gains from those performing well. However, each Smartshares Fund only allows diversification within the asset class, investment type or Index Issuer industry represented in the index tracked by that specific Smartshares Fund.

Flexibility

Smartshares Funds provide the diversification of a fund investment while giving you similar transparency and convenience to an investment in individual shares – the ability to know the value of your investment at any moment, and the flexibility to trade your investment quickly (subject to liquidity risk). This is because Smartshares Units are expected to trade like individual shares, with their prices published in the newspapers

10

and on-line (www.nzx.com) so you can track the progress of your investment at any time. The Special Division has permitted the Manager to quote the Units on the NZX Main Board, so you are able to trade your Smartshares Units on market (subject to liquidity), just like a share in a Listed company.


Once you hold the Minimum Holding in the relevant Fund, you can make regular contributions from as little as $50 per month by way of the Regular Savings Plan. And you can stop, restart, increase or decrease your regular contributions whenever you like (subject to providing the Unit Registrar with ten Business Days' notice prior to the 20th of a month and, unless you are completely stopping contributions, maintaining a minimum contribution of $50 per month). You can also add to your investment through the Distribution Reinvestment Plan – where your distributions are automatically reinvested as additional Smartshares Units or you can choose to have your distributions paid directly to you by direct credit.

Transparency

Smartshares Funds are transparent because the Smartshares Funds' holdings are always known to the market. Unitholders will know that whenever there is a change to the relevant index (which will be announced by the Index Administrator) the Manager will buy and sell the Index Securities to adjust the relevant Smartshares Fund's holdings, with the intention of matching that change to the relevant index.

Lower Fees

Smartshares Funds are able to offer lower fees because the Manager does not make active investment decisions, which may require expensive research, analytical and trading expertise. Trading only occurs to rebalance the Smartshares Funds' holdings to match the weighting of each entity’s shares in the indices. By contrast, actively managed funds, where the manager makes active investment decisions, generally incur higher costs and therefore may charge a higher management fee.




Market risk – Fluctuations in the security price of, and distributions paid by, the Index Issuers will lead to fluctuations in the Returns on Units in the Smartshares Funds. Such fluctuations could be related to the circumstances of an individual Index Issuer and affect the share price or distributions of that Index Issuer only, or could be related to circumstances with more widespread effects and affect a number of, or all, Index Issuers or Index Issuers within a particular industry.


Tracking risk – For a variety of reasons, including those described on page 7, the Manager will not always manage to exactly track the relevant index for each Smartshares Fund. As a result of this, the Index Securities held by a Smartshares Fund may, over time, not exactly match the composition of the relevant index. Of course, investors investing directly in order to track an index are likely to face the same issues as the Manager in trying to exactly track the relevant index. There is further information about index tracking on page 36.

Operational risk – Tracking an index is complex and, as a result, operational errors can occur. Such errors could potentially affect Unitholders' Returns.

Passive management risk – The Smartshares Funds are passive investments, which means the Manager will not react to events that affect the value of particular Index Issuers unless and until those events lead to a change in the composition of the relevant index.

Liquidity risk – Investors are only able to cash in their investment by selling their Units on market unless they have enough Units to do a Basket withdrawal. (Basket withdrawals are described on page 42.) The market price per Unit may vary from the Current Unit Value due to supply and demand factors. Each Smartshares Fund is listed on the NZX Main Board and, in the opinion of the Manager, there is an established market for sales of Units. However, although the Smartshares Funds are listed on the NZX Main Board, the fact that investors can apply to purchase Units directly from the Manager may mean there are fewer buyers of Units on the NZX Main Board.

http://www.nzx.com/

11

Foreign currency risk – Because the Aus Financials Fund and Aus Resources Fund invest in ASX listed entities, and therefore receive Returns in Australian dollars, these Funds will be exposed to currency risk based on the exchange rate between the Australian and New Zealand dollar. This is a risk because the Manager does not currently take steps to hedge against currency fluctuations. This risk does not apply to the NZ Dividend Fund.

Regulatory and tax risk – The Smartshares Funds are subject to an ongoing risk that regulatory or tax law requirements may change, and that this may have an adverse effect on Unitholders' Returns. Also, the Smartshares Funds are Portfolio Investment Entities (PIEs), with benefits for Unitholders, and there is a risk that this status may be lost, as discussed on pages 31 to 33 below.



When Unitholders first subscribe for Units they will pay an application fee to the Manager, which will be deducted from their Subscription Amount. For Subscription Amounts of less than $20,000 this will be a flat fee of $30, and for Subscription Amounts equal to or greater than $20,000 the subscription fee will be 0.2% of the full Subscription Amount. This fee is not payable for subsequent Cash Applications, subscriptions under the Regular Savings Plan or the Distribution Reinvestment Plan, or in relation to a Basket application. (Basket applications are for large investors, and are discussed on page 27.)

Unitholders lodging or withdrawing a Basket will be charged a fee by the Manager for each lodgement or withdrawal. The amount they are charged is set out in the table below:

Basket Creation Basket Withdrawal

$400 for the NZ Dividend Fund and Aus Financials Fund


$800 for Aus Resources Fund $800 for Aus Resources Fund

Fees are GST inclusive.

The application fees for initial Cash Applications and Baskets may be increased and an application fee for subsequent Cash Applications may be added by the Manager by giving ten Business Days' notice of the change to the Trustee. The other fees referred to above may be increased or imposed by the Manager by giving three months' notice to the Trustee and, if the Manager determines in its reasonable discretion that the increase or imposition is material to the Unitholders of the relevant Smartshares Fund. All fees may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the amount by which fees may be increased or imposed.


Further information about charges for Unitholders can be found on page 29 and 30.


Each Smartshares Fund pays a management fee to the Manager. This is currently 0.54% per annum (inclusive of GST) of the relevant Smartshares Fund's NAV (for each of the Smartshares Funds), and is accrued daily and payable monthly in arrear.

The management fee is currently used by the Manager to pay the expenses of the Fund including the Trustee, the Administration Manager, the Custodians, the Unit Registrar, any penalties and interest charged by the Inland Revenue and any bank fees, although the Manager reserves the right to have such amounts paid out of the Smartshares Funds. If the Manager does exercise its right to have such amounts paid out of the Smartshares Funds, it will first notify the Trustee and Unitholders but the Manager is not required to notify potential investors. Other expenses that arise, such as operating expenses that do not arise in the ordinary course of business, will be paid out of the Smartshares Funds.

In addition to this management fee, the Manager may also receive payment for administering securities

12

lending on behalf of a Smartshares Fund. (Securities lending is explained on page 34 and 33.) Currently, only the NZ Dividend Fund undertakes securities lending. The amount of the payment received by the Manager for administering securities lending is currently 50% of the net revenue payable to the relevant Smartshares Fund in respect of the securities of the Smartshares Fund lent.


The Manager is also entitled to interest on amounts held including in respect of distributions and other income received by the Smartshares Funds and on Subscription Amounts (received as Cash Applications or under the Regular Savings Plan or Distribution Reinvestment Plan) between the date on which they are received and the date of issue of Units.

Further information about the Manager's fees can be found on page 29.

13

HOW DO I APPLY?


You can start your investment in a Smartshares Fund by making an initial Cash Application from as little as $500. You can do this by completing the Application Form for new Units at the back of this Investment Statement, or by applying online at http://smartshares.co.nz/invest-now.

Alternatively you can obtain an investment in a Smartshares Fund by purchasing existing Units on market through an NZX Firm, in which case the Manager’s application fees will not apply.

If you are buying new Units, send in your completed Application Form, together with the full amount of the application payment, to Link Market Services Limited, PO Box 91976, Auckland 1142. Alternatively, you can send it to the Manager, an NZX Firm and through any other channel approved by NZX (of which there are currently none). Investors can also apply online at http://smartshares.co.nz/invest-now.

Make sure you read all the information contained in this Investment Statement before deciding whether to invest and which Smartshares Fund to invest in. There is also additional information that you may find helpful in the registered prospectus for the Smartshares Funds.


Further investments








As with the initial Cash Application, a Cash Application for further Units can be made by completing the Application Form attached to the back of this Investment Statement and sending it with the full amount of the application payment to Link Market Services Limited, PO Box 91976, Auckland 1142. Alternatively, you can send it to the Manager, an NZX Firm, through any other channel approved by NZX (of which there are currently none). Investors can also apply online at http://smartshares.co.nz/invest-now.




Every month for an amount you choose (minimum contribution $50 per month) the Manager will add Smartshares Units to your investment. Simply apply online at http://smartshares.co.nz/invest-now, or complete the Application Form and direct debit authority included in this Investment Statement. Your payments will then be automatically withdrawn from your nominated bank account on a monthly basis.


http://smartshares.co.nz/invest-now

14


Think about how much you can afford to invest each month. Keep in mind that you can stop, restart, increase or decrease (so long as you don't decrease your contribution to below $50 per month) your contributions at any time by contacting the Unit Registrar. Specify that amount in your application. The Unit Registrar will require notice to change contributions at least ten Business Days before the 20th of the month.


To join the Smartshares Regular Savings Plan, you must already have the Minimum Holding of 50 Smartshares Units in the Aus Financials Fund, or 100 Smartshares Units in the NZ Dividend Fund or Aus Resources Fund, whichever of these Funds you wish to invest in on a regular basis. Alternatively you must make a Cash Application that, if accepted, would mean you held at least 50 Units in the Aus Financials Fund, or 100 Units in the NZ Dividend Fund or Aus Resources Fund, whichever Fund you want to invest in.









Each Smartshares Fund may receive dividends from the Index Issuers in which it invests. These dividends and other income are retained in the Smartshares Fund (and reflected in the Current Unit Value) and the Smartshares Fund makes distributions to Unitholders periodically, with each Unitholder’s entitlement based on the Unitholder’s holding as at the Record Date for that distribution.

Your share of each distribution by the relevant Smartshares Fund will be automatically reinvested as additional Smartshares Units on each Distribution Date unless you choose to have distributions paid out to you by direct credit. By having these payments automatically reinvested, you are increasing your unitholding without having to do anything. Compounding distributions can work in your favour if you want to accumulate Smartshares Units over the longer term. See page 34 for more details.

Below is a summary of the different ways of purchasing and selling Units:

Method of Investment Price you will pay (per Unit)

On Market Purchase The market price available at the time of purchase

Direct Application

Current Unit Value determined on the last Business Day of the month that the direct application contribution is processed.


Current Unit Value determined on the last Business Day of the month that the Regular Savings Plan contribution is processed.

Distribution Reinvestment Plan The strike price that is Announced to the market for that distribution period.

Basket Application Securities and Cash as determined by the

15

Basket composition equal to the Current Unit Value on the Business Day the basket

is applied for.

Method of Sale Price you will receive (per Unit)

On Market Sale The market price available at the time of sale

Basket Redemption

Securities and cash as determined by the Basket composition equal to the Current Unit Value on the Business Day the basket redemption is requested.

16

BOARD OF DIRECTORS

The directors of the Manager are Bevan Miller (Chair), Tim Bennett, John Willliams and Guy Elliffe. The

Smartshares Funds operated by the Manager are passively managed funds or have their investment

management function outsourced. Consequently, the board has been constructed to provide a mix of

operational, financial and legal skills rather than specific funds management experience. Brief profiles for

each of the directors, detailing their experience and qualifications, are set out below.

Bevan Miller









Tim Bennett









John Williams John is currently the Investment Manager at Trust Investments

Management Limited. Previously he was a Key Client Manager at

Vanguard Investments, and he has held a range of investment strategy

roles.

Guy Elliffe Guy is currently Corporate Governance Manager at the Accident

Compensation Corporation. Previously he was Head of Equities at AMP

Capital Investors (New Zealand) Limited, and he has held a range of

senior investment roles in New Zealand and the US.

17

NEW ZEALAND DIVIDEND INDEX TRUST (NZ Dividend Fund)

The NZ Dividend Fund tracks the S&P/NZX 50 High Dividend Index, which gives investors exposure to 25 entities listed on the NZX that are included in the S&P/NZX 50 Index (the index used as the primary gauge for the New Zealand market) and have paid a dividend within the last twelve months. Securities are ranked based on the highest trailing twelve month gross dividend yields.

The S&P/NZX 50 High Dividend Index (the index tracked by the NZ Dividend Fund) is rebalanced semi-

annually with each constituent allocated a weight, at the time of the rebalance, set proportional to its dividend

yield adjusted market cap. Additions to the index normally only take place at the semi-annual rebalance.

A link to the index methodology for the S&P/NZX 50 High Dividend Index can be found at

http://us.spindices.com/indices/strategy/sp-nzx-50-high-dividend-index. The methodology for constructing

the index may change from time to time.

The S&P/NZX 50 High Dividend Index was established prior to the offer opening. The specific entities included in the index may change over time. The following entities are included in the S&P/NZX 50 High Dividend Index as at 30 September 2015:

Auckland International Airport Limited

Air New Zealand Limited

Australia and New Zealand Banking Group Limited

Argosy Property Limited

Contact Energy Limited

Fletcher Building Limited

Freightways Limited

FSF Management Company Limited

Genesis Energy Limited

Goodman Property Trust

Heartland New Zealand Limited

Infratil Limited

Kathmandu Holdings Limited

Kiwi Property Group Limited

Meridian Energy Limited

Mighty River Power Limited

Nuplex Industries Limited

Precinct Properties New Zealand Limited

SKYCITY Entertainment Group Limited

Sky Network Television Limited

Spark New Zealand Limited

Trade Me Group Limited

Trustpower Limited

http://us.spindices.com/indices/strategy/sp-nzx-50-high-dividend-index

18

Westpac Banking Corporation

Z Energy Limited

19

AUSTRALIAN FINANCIALS INDEX TRUST (Aus Financials Fund)

The Aus Financials Fund tracks the S&P/ASX 200 Financials Ex A-REIT Index, which gives investors

exposure to entities listed on the ASX that are included in the S&P/ASX 200 Index (the index used as the

primary gauge for the Australian market) and are classified as Financial Sector companies, but excluding

Australian real estate investment trusts. Securities are classified using the Global Industry Classification

Standard (GICS®). The Global Industry Classification Standard is designed to meet the needs of the

investment community by categorising companies into sectors and industries that reflect a company’s

primary business model as determined by its financial performance.

The S&P/ASX 200 Financials Ex A-REIT Index (the index tracked by the Aus Financials Fund) is rebalanced

quarterly with each constituent allocated a weight at the time of the rebalance representing its proportionate

market capitalisation. Additions to the index normally only take place at the quarterly rebalance.

A link to the index methodology for the S&P/ASX 200 Financials Ex A-REIT Index can be found at

http://us.spindices.com/indices/equity/sp-asx-200-financial-x-a-reit-sector. The methodology for constructing

the index may change from time to time.

The number of constituents and the specific entities included in the index may change over time. At 30

September 2015 the entities included in the S&P/ASX 200 Financial Ex A-REIT Index were:

AMP Limited

Australia and New Zealand Banking Group Limited

ASX Limited

Aveo Group Trust

Bank of Queensland Limited

Bendigo and Adelaide Bank Limited

BT Investment Management Limited

Cover-More Group Limited

Challenger Limited

Commonwealth Bank of Australia Limited

FlexiGroup Limited

Genworth Mortgage Insurance Australia Limited

Henderson Group PLC

Insurance Australia Group Limited

Ioof Hldgs Limited

Lend Lease Group Limited

Macquarie Group Limited

Magellan Financial Group Limited

Medibank Private Limited National Australia Bank Limited

OzForex Group Limited

Perpetual Limited

Platinum Asset Management Limited

QBE Insurance Group Limited

Steadfast Group Limited

http://us.spindices.com/indices/equity/sp-asx-200-financial-x-a-reit-sector

20

Suncorp Group Limited

Westpac Banking Corp

21

AUSTRALIAN RESOURCES INDEX TRUST (Aus Resources Fund)

The Aus Resources Fund tracks the S&P/ASX 200 Resources Index, which gives investors exposure to

entities listed on the ASX that are included in the S&P/ASX 200 Index (the index used as the primary gauge

for the Australian market) and are classified as Resource Sector companies. Securities are classified using

the Global Industry Classification Standard (GICS®). The Global Industry Classification Standard is designed

to meet the needs of the investment community by categorising companies into sectors and industries that

reflect a company’s primary business model as determined by its financial performance.

The S&P/ASX 200 Resources Index (the index tracked by the Aus Resources Fund) is rebalanced quarterly

with each constituent allocated a weight at the time of the rebalance representing its proportionate market

capitalisation. Additions to the index normally only take place at the quarterly rebalance.

A link to the index methodology for the S&P/ASX 200 Resources Index can be found at

http://us.spindices.com/indices/equity/sp-asx-200-resources. The methodology for constructing the index

may change from time to time.

The number of constituents and the specific entities included in the index may change over time. At 30

September 2015 the entities included in the S&P/ASX 200 Resources Index were:

AWE Limited

Alumina Limited

Arrium Limited

BHP Billiton Limited

Beach Energy Limited

Bluescope Steel Limited

Caltex Australia Limited

Drillsearch Energy Limited

Evolution Mining Limited

Fortescue Metals Group Limited

Iluka Resources Limited

Independence Group NL

Karoon Gas Australia Limited

Liquefied Natural Gas Limited

Newcrest Mining Limited

Northern Star Resources Ltd

OZ Minerals Limited

Oil Search Limited

Origin Energy Limited

Paladin Energy Limited

Regis Resources Limited

Rio Tinto Limited

Sandfire Resources NL

Santos Limited

Sims Metal Management Limited

South 32 Limited

http://us.spindices.com/indices/equity/sp-asx-200-resources

22

Syrah Resources Limited

Western Areas Limited

Whitehaven Coal Limited

Woodside Petroleum Limited

WorleyParsons Limited

23




Each Smartshares Fund is a unit trust constituted under the Unit Trusts Act 1960 and, accordingly, the Units offered in this Investment Statement are units in a unit trust. Each Smartshares Fund was established on 19 March 2015 under the relevant Trust Deed.

When you buy Smartshares Units you become a Unitholder in the relevant Smartshares Fund you have chosen to invest in. The Smartshares Funds are passively managed and their objective is to provide Returns that track the Return on the particular index that the Smartshares Fund tracks less certain costs (including tax) and fees of the Smartshares Fund. Each Smartshares Fund owns a portfolio of securities in a proportion that is as close as possible to the weightings of the securities in the relevant index that the Smartshares Fund tracks.




- NEW ZEALAND DIVIDEND INDEX TRUST (NZ Dividend Fund);

- AUSTRALIAN FINANCIALS INDEX TRUST (Aus Financials Fund); and

- AUSTRALIAN RESOURCES INDEX TRUST (Aus Resources Fund).

The Manager




The Financial Markets Conduct Act 2013 requires managers who act as the manager of a registered scheme to be licensed by the FMA before they can make offers under the new disclosure regime in the Financial Markets Conduct Act 2013. Fund managers were able to submit an application for a licence from 1 April 2014. The Manager has applied to the FMA to obtain the necessary licence and the FMA is currently considering the Manager’s application. Licences will be issued at the discretion of the FMA. As the Manager does not yet hold a licence, it offers units under the Securities Act 1978, which will apply to this offer.




24






Guy Roulston Elliffe (Wellington)

Alister John Williams (Auckland)




Summary of Duties

The Manager is responsible for all adjustments to the Smartshares Funds’ portfolios of Index Securities, including the purchase or sale of Index Securities in the event of any required adjustments as a result of changes to the indices or corporate actions, the maintenance of accounting records of the Smartshares Funds, communication with Unitholders, supervision of the Unit Registrar, the payment of distributions to Unitholders and administration of any securities lending programme implemented for the Smartshares Funds (see pages 34 and 35 for further details). Some of these responsibilities are delegated to the Administration Manager, the relevant Custodian and the Unit Registrar.

The Trustee

The Trustee is: Trustees Executors Limited Level 5, 10 Customhouse Quay PO Box 3222 Wellington Tel: (04) 495 0999 Fax: (04) 496 2952 Email: [email protected] The Trustee's address may change from time to time. You can find up-to-date details at any time at www.business.govt.nz/companies.


A copy of the Trustee’s licence, including the conditions on the licence, can be obtained at the FMA’s website: www.fma.govt.nz by clicking on “Compliance”, “Lists and registers”, “Licensed Supervisors”, “Trustees Executors Limited”. Alternatively, a copy can be found on the Trustee’s website: www.trustees.co.nz. All conditions and reporting obligations have been duly satisfied by the required dates. If you have any queries about the licence please contact the Trustee in the first instance.



25




The Custodian

The Custodian for the Aus Financials Fund and Aus Resources Fund is: BNP Paribas Fund Services Australasia Pty Ltd, New Zealand branch Level 18, State Insurance Tower, 1 Willis Street PO Box 3299, Wellington www.securities.bnpparibas.com

The Custodian for the NZ Dividend Fund is: JB Were (NZ) Nominees Limited Level 38, Vero Centre, 48 Shortland Street PO Box 887, Auckland 1001 www.jbwere.co.nz

The Custodians' addresses may change from time to time. You can find up-to-date details at any time at www.business.govt.nz/companies.

The Custodians provide custodial services, including holding assets of the relevant Smartshares Funds in custody for safekeeping and separate from the personal assets of the Trustee or Manager.

Unit Registrar




None of the Trustee, the Administration Manager, the Custodians, the Unit Registrar nor any of their directors nor any other persons associated with the offer guarantees the Smartshares Units, repayment of the Smartshares Units, or the payment of any dividends or distributions on Smartshares Units.


www.jbwere.co.nz



26


The Smartshares Funds are unit trusts constituted under the Unit Trusts Act 1960. The Smartshares Funds were established on 19 March 2015 under the Trust Deeds, and amended by a deed of modification dated 5 June 2015. For more information regarding the Trust Deeds see the "Summary of the Trust Deeds" section in the registered prospectus for the Smartshares Funds.

How much do I pay?



Subscriptions for Smartshares Units can be made by applying online at www.smartshares.co.nz/invest-now, or by completing the Application Form attached to this Investment Statement and sending it with the full amount of the application payment to Smartshares Limited at the address of the Unit Registrar or to any NZX Firm. You can also buy Units on market via an NZX Firm, in which case the Manager’s application fees will not apply.

The minimum cash Subscription Amount for investors who do not already have the Minimum Holding of 50 Smartshares Units in the Aus Financials Fund, or 100 Smartshares Units in the NZ Dividend Fund or Aus Resources Fund, is $500 (which includes a flat application fee of $30 for amounts of less than $20,000 or 0.20% of the full Subscription Amount for Subscription Amounts equal to or greater than $20,000, which is deducted from the application amount and paid to the Manager).


Subscription Amounts for Cash Applications need to be received by the Unit Registrar, Link Market Services, by the 20th of the month so Smartshares Units can be allocated and priced at the end of the month by the Manager. There is no maximum Subscription Amount. No interest will be paid to subscribers on Subscription Amounts.

The Manager will, at its discretion, use a Subscription Amount either to purchase Index Securities and then issue new Units to the investor or to purchase existing Units on market through an NZX Firm and pass those existing Units on to the investor. In either case, the Manager's purchase of Index Securities or Units with the Subscription Amount will be made on a date selected by the Manager that is no more than ten Business Days after the end of each month at current market prices or Current Unit Values.



Once you have the Minimum Holding in the relevant Fund, investing regularly can be a very effective way to accumulate Smartshares Units over the long term. Even small amounts saved on a regular basis have the potential to grow into a significant number of Smartshares Units over a number of years.


The Regular Savings Plan lets Unitholders make a regular investment on or about the 20th of each month, directly from their nominated New Zealand bank account. Provided Unitholders hold the Minimum Holding, or if a they make a Cash Application that, if accepted, would mean they hold the Minimum Holding, they can choose to participate in the Regular Savings Plan and start saving with contributions as low as $50 per

http://www.smartshares.co.nz/invest-now

27

month. Simply complete the Application Form and direct debit authority included in this Investment Statement, or apply online at http://smartshares.co.nz/invest-now. Unitholders’ payments will be automatically withdrawn from their nominated bank account on a monthly basis. Unitholders can add an additional lump sum payment ($250 minimum value), or increase or decrease their contribution at any time (subject to providing the Unit Registrar with ten Business Days' notice prior to the 20th of a month and, unless contributions are being completely stopped, maintaining a minimum contribution of $50 per month).

If Unitholders enter the Regular Savings Plan and then fail to make payments, no additional Smartshares Units will be allocated to their investment. If Unitholders fail to make payments for three consecutive months, their access to the Regular Savings Plan may be discontinued. Unitholders may at any time, by giving the Unit Registrar ten Business Days' notice prior to the 20th of a month, cease their payments into the Regular Savings Plan. The Manager will, at its discretion, use the Regular Savings Plan monies either to purchase Index Securities and then issue new Units to the Unitholder or to purchase existing Units on market and pass those existing Units on to the Unitholder. In either case, the Manager's purchase of Index Securities or Units with Regular Savings Plan monies will be made on a date selected by the Manager that is no more than ten Business Days after the last Business Day of each month at current market prices or Current Unit Values.

Any interest earned on the Regular Savings Plan monies prior to the purchase of Smartshares Units or Index Issuer securities each month will be retained by the Manager. These amounts will be used to cover the cost of operating the Regular Savings Plan and other administrative costs. Any amount left over after this will go to the Manager.


For large investment amounts, Smartshares Units can be acquired by way of Basket creation. Baskets may be created by way of delivery of the proportionate amounts of the securities of the Index Issuers (plus any applicable Cash Amount). The Cash Amount is to ensure that each existing Unitholder’s proportionate interest in the income held within that Fund prior to the issue of Smartshares Units to the Basket applicant, is not diluted on a per unit basis by the creation of additional Smartshares Units issued to the Basket applicant.

This should result in the aggregate value of the Basket securities and the Cash Amount being equal to the aggregate Current Unit Value of the Smartshares Units issued. The securities and Cash Amount are then exchanged for Smartshares Units. Subscriptions for Smartshares Units by Basket creation may only be made in multiples of 50,000 Smartshares Units for the Aus Financials Fund, 150,000 Smartshares Units for the Aus Resources Fund and 250,000 Smartshares Units for the NZ Dividend Fund.

Basket applications must be made directly to the Manager by delivery through an NZX Firm. Each delivery of a Basket must be accompanied by a completed Basket Application Form (not attached to this Investment Statement, but available from the Manager or any NZX Firm). Charges for Basket investments are explained under the section entitled “What are the charges?” on pages 29 and 30.


Each Smartshares Fund receives dividends from the Index Issuers in which it invests. As described on page 31 these dividends and other income are retained within the relevant Smartshares Fund and then allocated to Unitholders for distribution. Such distributions are automatically reinvested on each Distribution Date (after the deduction of Distribution Reinvestment Plan fees (if any)) to provide you with additional Smartshares Units, unless you choose to have these paid out to you by direct credit.

On each Distribution Date, the Manager will, at its discretion, use the reinvestment monies for Unitholders who have their distributions reinvested either to purchase Index Securities and then issue new Units to those Unitholders or to purchase existing Units on market and pass those existing Units on to those Unitholders. In either case, the Manager's purchase of Index Securities or Units with reinvestment monies will be made at current market prices or Current Unit Values.

The Distribution Reinvestment Plan described in the Prospectus for the Smartshares Funds constitutes the description of the "dividend reinvestment plan" for the purposes of the Financial Markets Conduct Act 2013 and Financial Markets Conduct Regulations 2014.

28

Minimum Holding

Unitholders should maintain a minimum number of Smartshares Units at all times (Minimum Holding). If you fail to maintain the minimum number of Smartshares Units, the Manager reserves the right to purchase your Units or instruct the Trustee to redeem them (provided that the exercise of that right would not breach the Listing Rules). The Minimum Holding of Smartshares Units is 50 for the Aus Financials Fund, and 100 for the NZ Dividend Fund and Aus Resources Fund (or such different amount as is determined by the Manager in its sole discretion).


Smartshares Units are issued at the Current Unit Value applying at the relevant time for Cash Applications, the Regular Savings Plan and the Distribution Reinvestment Plan.

The Current Unit Value of a Smartshares Unit is determined by dividing the total value of the Smartshares Fund’s NAV by the total number of Smartshares Units on issue. The Current Unit Value of a Smartshares Unit includes not only the value of the underlying Index Securities held in a Smartshares Fund, but also accrued income in relation to the portfolio (for example, dividends and tax credits) less liabilities (for example, tax expenses and management fees). Please note that these examples of income and liabilities are not exhaustive and other types of income may be received and liabilities incurred from time to time.

Oversubscription

There is no limit on the total number of Smartshares Units that may be subscribed for and accordingly none of the Smartshares Funds have a policy providing for oversubscription. However, the Manager may reject an application for Units or require redemption of Units to maintain the Fund’s PIE status where there is a risk that a Unitholder will exceed the maximum investor interest size requirement prescribed in the Tax Act (and as set out in the “PIE Eligibility” section at page 33 below).

Suspension of Issues and Withdrawals

The Manager is not obliged to accept basket applications or basket withdrawals in a Smartshares Fund in the period from (and including) the date of the Announcement of a distribution to (and including) the Distribution Ex Date for that distribution.

Refunds






The Manager may also ask a Unitholder to provide any other information that the Manager reasonably requires in order to manage its obligation to comply with any laws or regulations in New Zealand or any other country in relation to the Smartshares Funds, including to enable the Manager to meet its requirements under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009.

If the Manager requests a Unitholder to provide information to the Manager, the Unitholder must supply such information within 14 days after the request. The Manager may also request such information from any other person whom the Manager understands has an interest in the Units held by a Unitholder.

29




If you buy Smartshares Units directly from the Manager through a Cash Application (as described on page 26 above) you pay a flat application fee to the Manager of $30 for Subscription Amounts of less than $20,000, or 0.20% of the full Subscription Amount for Subscription Amounts equal to or greater than $20,000. However, this application fee is not payable if you already hold the Minimum Holding of 50 Smartshares Units in the Aus Financials Fund, or 100 Smartshares Units in the NZ Dividend Fund or Aus Resources Fund, whichever Fund you have invested in. The application fee may be increased by the Manager by giving ten Business Days' notice of the change to the Trustee. The application fee may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.



Basket creation and withdrawal charges

When subscribing via Basket creation and withdrawing via Basket redemption the following charges are payable to the Manager as at the date of this Investment Statement.

Basket Creation Basket Withdrawal



$800 for the Aus Resources Fund $800 for the Aus Resources Fund


The Basket withdrawal fees may be increased by the Manager by giving three months' notice of the change to the Trustee and, if the change is material (as determined by the Manager in its reasonable discretion), to Unitholders of the relevant Smartshares Fund. The Basket withdrawal fees may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.



Management fees are charged to the Smartshares Funds and are currently 0.54% per annum of the NAV of the relevant Smartshares Fund and are accrued daily and payable monthly. The Manager may agree payments to individual Unitholders that are the equivalent of management fee rebates (in the form of additional Smartshares Units or cash, as agreed between the Manager and the Unitholder).

The fee charged by the Manager may be increased by the Manager by giving three months’ notice of the change to the Trustee. If the change is material (as determined by the Manager in its reasonable discretion), the Manager must give notice to Unitholders of the relevant Smartshares Fund as well. The Manager may

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reduce the fee by giving notice to the Trustee (and such decrease may have immediate effect). There are no limits to the Manager’s ability to alter its management fees.

In addition to the management fee, the Manager is entitled to interest on amounts held, including in respect of distributions and other income received by the Smartshares Funds and on cash Subscription Amounts (including amounts received under the Regular Savings Plan or Distribution Reinvestment Plan) between the date on which they are received and the date of issue of Units.


The Manager is also entitled to receive fees for administering securities lending (securities lending is explained on pages 34 and 33.) Currently, only the NZ Dividend Fund undertakes securities lending. The amount of fees received by the Manager is currently 50% of the net revenue payable to the relevant Smartshares Fund in respect of the securities of that Smartshares Fund lent. Cash payment for any dividends (including any Imputation Credits) paid in respect of any loaned securities, and any additional securities required to be returned to the Fund as a result of corporate actions (for example a bonus issue), do not form part of the net revenue from which the Manager is entitled to take a fee.


Persons associated with the Manager are involved in the operation of the designated settlement system that will provide services in relation to securities lending if a securities lending programme is implemented for a Smartshares Fund, and these persons may receive fees and other remuneration in that capacity. The services that these persons may provide include the holding of the relevant Smartshares Fund's Index Securities in the central securities depository and the facilitation of securities lending. The Manager will not pay those fees or remuneration from the relevant Smartshares Funds – they will be paid from the management fee.

The management fees cover the expenses for the ongoing operation of the Smartshares Funds. These include reporting, the relevant custodian fees, administration fees, trustee fees, registry costs, brokerage fees for purchasing securities in the Smartshares Funds and index licensing fees. The Manager reserves the right, however, to have these amounts paid from the Smartshares Funds.





(a) any change in the price of Smartshares Units at the time you sell, relative to the price at which you bought on market, or subscribed if an application was made directly; and

(b) the distribution of dividends or other income received by the Smartshares Fund. Smartshares Funds distribute all income received (for example, dividends and tax credits) less expenses (for example, tax expenses and management fees). Please note that these examples of income and expenses are not exhaustive and other types of income may be received and expenses incurred from time to time. You will automatically have your distributions re-invested as Smartshares Units unless you elect to have them paid directly to a nominated bank account.

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The Returns for the Smartshares Funds are subject to the general fluctuations and direction of the New Zealand sharemarket (in the case of the NZ Dividend Fund) or the Australian sharemarket (in the case of the Aus Financials Fund and Aus Resources Fund), up or down, and the performance of the Index Issuers, which includes changes in their security prices and the value of any dividends or other distributions paid. Both of these factors are influenced by New Zealand, Australian and global economies.

In addition, currency fluctuations between the New Zealand and Australian dollar will impact on the Returns for the Aus Financials Fund and the Aus Resources Fund as the Manager does not currently take steps to hedge against currency fluctuations.


The amount of the Returns you get from your investment in Smartshares Units will vary from time to time, depending on the factors above. Returns cannot be predicted with any accuracy. None of the Manager, the Trustee, NZX, the Custodians and Administration Manager nor any other person guarantees a particular level of Return on your investment in Smartshares Units. No Returns are promised.

Distributions

Distributions are currently made directly from each Smartshares Fund within 20 Business Days of the Record Date and are paid to Unitholders whose names are on the register in respect of Units held on the Record Date. The Record Date for the NZ Dividend Fund and the Aus Financials Fund is on or around the last Business Day of each of March, June, September and December in any year and the Record Date for the Aus Resources Fund is on or around the last Business Day of each of March and September.

Unitholders who sell Units or withdraw Baskets from a Smartshares Fund before a Distribution Ex Date for a Record Date will not receive any distributions from that Smartshares Fund in respect of that Record Date.

These distributions comprise dividends or any other income (including income from securities lending, where relevant, which will be 50% of net revenue received by the Manager from securities lending), less fees and other expenses. Income paid into a Smartshares Fund in a foreign currency will not be available for distribution to Unitholders until it has been exchanged for New Zealand dollars. Unitholders will automatically have their distributions reinvested as Smartshares Units unless they elect to have them paid directly to a nominated New Zealand bank account.

The Manager may, at its discretion, deduct from any distribution an amount of cash if, and to the extent that, the Manager reasonably considers that such a deduction is required to meet any liabilities that may well become payable in the next (or later) distribution period. Such deductions will be retained in the Fund.


Taxation

The following comments are intended to be only a general summary and indication of the Manager’s understanding of relevant New Zealand and Australian tax law as at the date of this Investment Statement. There may be non-New Zealand tax consequences which affect the Smartshares Funds or the Unitholders. Neither the Trustee nor the Manager accepts any responsibility for the taxation consequences of an investment in the Smartshares Funds. Unitholders who buy or sell Smartshares Units may have different taxation positions. Consequently, each Unitholder should consider their own taxation position and if necessary seek professional advice before investing in Smartshares Units.

Taxation may affect the Returns on the Smartshares Funds and each of the Smartshares Funds may have varying tax implications. The taxation summary below is based on the Manager’s understanding of New Zealand and Australian tax law as at the date of this Investment Statement.

The Smartshares Funds are Listed PIEs. As Listed PIEs the Smartshares Funds pay tax on income derived by the Smartshares Funds at a rate of 28%.

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The Smartshares Funds are not subject to tax on gains that they derive from the sale of shares in most New Zealand resident companies and most companies resident in Australia that are listed under the ASX Market Rules. Losses incurred on the disposal of such shares are not deductible. Dividends from such shares are usually fully taxable to the Smartshares Funds, with a credit allowed for any Imputation Credits attached (but not for any Australian Franking Credits), and any withholding tax deducted from such dividends subject to certain limits.

Depending on the equities which constitute the index that each Smartshares Fund tracks, any of the Smartshares Funds may be subject to tax in respect of offshore portfolio equity investments. These rules only apply to non-New Zealand and certain Australian quoted securities (including any NZX listed securities consisting of shares in non-New Zealand resident entities). In relation to the applicable equities, the Smartshares Funds will apply the “fair dividend rate” (“FDR”) method to calculate the amount of any taxable income. Under the FDR method, the Smartshares Funds will generally have taxable income in each income year (1 April to 31 March) in relation to the applicable equities calculated by reference to 5% of the average daily opening market value of the applicable equities. Dividends or sales proceeds received by the Smartshares Funds in relation to these shares should not be subject to further tax. The Smartshares Funds may be entitled to a credit for any withholding tax paid on dividends received from the applicable equities subject to certain limits. No tax deduction may be claimed for any losses in respect of the applicable equities under the FDR method.




To the extent that distributions are not fully imputed New Zealand resident Unitholders will not be taxed on distributions that they receive from the Smartshares Funds. The effect of this is that non-taxable income (e.g. capital gains from the sale of investments) derived by the Smartshares Funds can be distributed to such Unitholders free from tax.

Natural person Unitholders and trustee Unitholders (other than a trustee of a unit trust) subject to a tax rate below the corporate tax rate (currently 28%) may choose to treat distributions that are fully imputed as assessable income by including that amount in their tax return. This allows such Unitholders to use Imputation Credits attached to distributions in excess of what is necessary to fully satisfy the income tax liability in relation to those distributions, to offset against their other taxable income. How Unitholders should treat distributions from the Smartshares Funds for tax purposes will depend on their personal tax circumstances and as such it is recommended that all Unitholders should seek independent tax advice.







New Zealand also has a foreign investor tax credit regime whereby the impact of NRWT on dividends is reduced by the payment of a supplementary dividend for investors holding less than 10% of the Smartshares Units in a Smartshares Fund and if the NRWT rate is 15% or more. The Smartshares Funds intend to pay supplementary dividends to non-resident Unitholders wherever possible, provided that payment meets the

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Trust Deeds' requirements and does not disadvantage other Unitholders.


Benefits of PIE

A benefit of the PIE regime is that Smartshares Funds are not expected to be taxed on any gains derived from the sale of the securities that they trade.

The other potential benefit is that tax payable on distributions made by a Smartshares Fund to Unitholders is effectively capped at 28%. If you are currently paying tax at a rate less than 28% then the excess tax paid by the Smartshares Funds can be used to reduce the tax payable on other income that you derive at the end of each income year by including the distributions from the Fund(s) in your tax return.

PIE Eligibility

The Manager has the discretion to take any steps the Manager considers necessary or desirable to ensure that each Smartshares Fund is eligible to be enrolled and remain as a PIE. This includes ensuring that any one Unitholder’s unit holding does not exceed the maximum investor interest size requirement in the Tax Act, which is a number of Smartshares Units not exceeding 20% of the total issued Smartshares Units of each Smartshares Fund (for these purposes, the Smartshares Units held by the relevant Unitholder’s “associated persons” that are not Exempt Investors and who, themselves, hold Smartshares Units amounting to 5% or more of the units on issue will also be taken into account in determining whether the 20% threshold has been exceeded).




Basket Investments




the Unitholder acquired the Smartshares Units for the purpose of sale or other disposal; or

the Unitholder carries on a business involving dealing in the Smartshares Units or other similar property; or

the disposal of the Smartshares Units occurs as an act done in the carrying on of a profit-making scheme or undertaking.


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As the Smartshares Funds do not have a permanent establishment in Australia and will not hold at any time 10% or more of the issued shares in any Index Issuer, the Smartshares Funds should not be subject to Australian income tax in respect of any gains made on disposal.

Where fully Franked dividends are paid by Australian resident companies to the Smartshares Funds, no Australian tax should be withheld at source in Australia.

Where unfranked or partially Franked dividends are paid by Australian resident companies to the Smartshares Funds, it is likely that Australian tax will be withheld at source in Australia in relation to the unfranked portion of the dividend. Where the Smartshares Funds hold less than a 10% interest in each company that they invest in, the rate of Australian withholding tax on unfranked dividends should be 15%. Any such unfranked dividends would be paid to the Smartshares Funds net of any withholding tax paid to the Australian tax authorities.

Please refer to the prospectus for the Smartshares Funds for information on stamp duty.




Notice of election for the Distribution Reinvestment Plan (forms are available from Smartshares Limited) received by the Unit Registrar at least ten Business Days prior to a Distribution Date will be effective in respect of that distribution, otherwise such notice will be effective in respect of the next distribution. Once you have elected to reinvest your distributions, reinvestment will continue until you advise the Unit Registrar otherwise. Fees for the Distribution Reinvestment Plan are set out on page 29.

Securities Lending

The Manager will administer a securities lending programme for the NZ Dividend Fund, under which securities held by the NZ Dividend Fund may be loaned to a borrower.

The Manager has the power under the Trust Deeds to also undertake securities lending for the Aus Financials Fund and Aus Resources Fund, and the possibility of a securities lending programme for those Smartshares Funds is (and is deemed to be) included in the issue terms for each Smartshares Fund.

Securities lending involves the transfer of legal title and beneficial interest in the securities to a third party borrower, in some cases, against collateral, and in other cases under other appropriate risk mitigation arrangements. There are additional risks associated with securities lending. These risks are set out on page 38. The NZ Dividend Fund (and any other Smartshares Fund that implements a securities lending programme) will receive income earned from securities lending following payment of the Manager’s costs of and fees for administering securities lending.

When securities are lent the NZ Dividend Fund (and any other Fund that implements a securities lending programme) will receive a cash payment for any dividends (including any Imputation Credits) paid in respect of any loaned securities to the holder on the Record Date for the payment of the dividend, so that the Smartshares Funds will receive the same Return from the securities that they would have received had they held them directly.

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Additional source of income: Securities lending should earn income and, following payment of the Manager’s costs of and fees for administering securities lending, should increase Returns to Unitholders of Smartshares Funds that have or implement a securities lending programme.

Facilitates creation of Baskets: The creation and withdrawal of Baskets tends to assist the market price of the Smartshares Units of Smartshares Funds that have or implement a securities lending programme to more closely follow the value of the underlying securities. One of the constraints on Basket trading is the lack of liquidity of some Index Securities. The ability to borrow these securities may assist Market Participants to trade complete Baskets of underlying securities.


The Trust Deeds permit the Manager to lend securities held by the Smartshares Funds only in accordance with certain terms, as set out in the appendix to the Smartshares Funds' prospectus.

The Manager will carry out any securities lending for the NZ Dividend Fund through the NZCDC Settlement System, which is a designated settlement system.

The NZCDC Settlement System is operated by subsidiaries of NZX. NZCL, a subsidiary of NZX, is the central counterparty clearing house for the NZCDC Settlement System, and will become the borrower in respect of all securities lent by the NZ Dividend Fund. It will also settle all securities loans in accordance with the rules of the NZCDC Settlement System. NZDL, another subsidiary of NZX, operates the depository for the NZCDC Settlement System, in which Index Securities of the NZ Dividend Fund are held, and administers securities lending. New Zealand Depository Nominee Limited, another subsidiary of NZX, holds the legal title to those Index Securities that are held in the depository.

Therefore the entities which operate the NZCDC Settlement System used by the Manager, being ultimately wholly owned by NZX, are related parties of the Manager under the Listing Rules. The Special Division has granted the Manager a waiver from the Listing Rules to allow the Manager to conduct securities lending through the NZCDC Settlement System.

The Manager does not currently lend securities held by the NZ Dividend Fund directly to NZX Market Participants (bilateral lending), rather than through NZCL. This is because the rules of the NZCDC Settlement System do not currently allow bilateral securities lending. However, if the rules are changed to allow bilateral lending, the Manager may conduct bilateral lending on the terms described in the appendix to the Smartshares Funds' prospectus.



What are my risks?



Market Risk

Smartshares Units are subject to the risks of an investment in a broadly based portfolio of securities, including the risk that the general level of security prices may decline, thereby adversely affecting the value of the investment in that Smartshares Fund.

Securities are susceptible to general market fluctuations and to volatile increases and decreases in price due to changes in market confidence in, and investor perception of, the issuer of those securities. These investor perceptions are unpredictable and may be based on various factors including expectations regarding government, economic, monetary and fiscal policies, inflation and interest rates, economic expansion or contraction, and global or regional political, economic and banking crises. This may result in a Unitholder

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being unable to recover the full amount or any of their investment and/or any Returns relating to such investment in any of the Smartshares Funds.


The value of securities can also be affected by their liquidity. For smaller stocks, where there can often be limited liquidity, a change in their weighting on an Index could have an effect on the level of demand in the marketplace. This in turn may impact the price the relevant Smartshares Fund has to trade at to track the relevant Index and the fluctuation in the price of the Index Securities may ultimately affect the Return an investor receives.

Industry Risk

Industry risk is the risk that a particular industry may perform poorly, which may cause a decrease in the value of the shares of the Index Issuers in that industry and thus in the value of the relevant Smartshares Units. This will present a greater risk for funds that track industry based indices such as the Aus Resources Fund, which will be exposed to fluctuations in the Australian resources market. Similarly, the Aus Financials Fund will be exposed to fluctuations affecting the Australian financial sector.

Distributions Risk


Index Issuer Risk

Index Issuer risk occurs where the individual assets of the Smartshares Funds fluctuate in value due to circumstances specifically applicable to a particular Index Issuer.


Tracking Risk

For a variety of reasons the Manager will not always manage to exactly track the relevant index for each Smartshares Fund. As a result of this, the Index Securities held by a Smartshares Fund may, over time, be less than a portfolio of securities that exactly matches the composition of the relevant index. Of course, investors investing directly in order to track an index are likely to face the same issues as the Manager in trying to exactly track the relevant index.

The Manager measures its tracking performance as follows. On the date on which the Smartshares Funds are launched, there is a mathematical relationship between the NAV of the Index Securities held in each Smartshares Fund and the value of the relevant index, which can be expressed as:

If the Manager was able to perfectly track an index, this relationship would continue. However, for the reasons explained below, this is not always possible and so a difference between the number on the left-hand side and the number on the right-hand side develops over time. To measure its tracking performance:

(a) First, the Manager calculates the difference between the left-hand side of the equation and the right-hand side of the equation, with that difference being expressed as a positive number if the left-hand side is greater and a negative number if the right-hand side is greater.1

1 If at any time the Manager subdivides or consolidates Units, it will adjust the "1,000" referred to in the right-hand side of the equation so that this action, which has nothing to do with tracking difference, does not affect the mathematical relationship. For

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(b) Next the Manager compares the difference calculated in (a) with the equivalent difference at the start of the year to calculate the change in that difference over the year.

The number calculated in (b) is the Manager's measure of its tracking performance over the year. The closer that number is to zero, the more closely the Manager has tracked the index during the year.


First, it may not be possible for the Manager to exactly match changes to the indices by buying and selling Index Securities, because the prices it pays and receives for the Index Securities may not exactly match the prices used to adjust the index. For example, there may be limited liquidity in relation to securities the Manager is attempting to buy that pushes up the purchase price of those securities after an adjustment to an index, but before the Manager can buy. In some cases the relevant adjustment to an index may even cause such limited liquidity as it could affect the level of demand for the securities in the market place.

Second, tracking is a complex exercise, and errors may arise due to human or systems errors.

Some tracking imperfections mean the value of a Smartshares Fund's Index Securities increases in relation to the value of the relevant index. This causes no detriment to Unitholders. However, some tracking imperfections mean the value of a Smartshares Fund's Index Securities reduces in relation to the value of the relevant index. When this is the case, the Return generated by the Smartshares Fund may be less than the Return on the relevant index, which is detrimental to Unitholders.

Operational Risk

There is a risk that operational errors (including improperly analysing the effect of tax laws), fraud or misconduct may cause a loss to the relevant Smartshares Fund or otherwise affect Unitholders' Returns. In particular, tracking an index and assessing the reasons for tracking differences (that is, differences between the NAV of a Smartshares Fund and the value of the relevant index) is very complex and some errors are occasionally made.

In order to mitigate this risk the Manager has adopted a set of internal policies and procedures and also outsources some aspects of its operations to the Administration Manager to draw on the Administration Manager's systems and expertise. The Manager has also insured, subject to normal commercial excesses, against losses arising from fraud and misconduct.


Traditional methods of investment management for an actively managed fund typically involve deliberate changes to a portfolio of securities based on judgement of economic, financial and market conditions. No attempt will be made to actively manage Smartshares Funds in the traditional sense, and the Manager and Trustee do not monitor the performance of Index Issuers.

The adverse financial condition of an Index Issuer or the industry it is in will not be a reason for the Manager to direct the Trustee to cause a Smartshares Fund to dispose of that Smartshares Fund’s investments in the Index Securities of that Index Issuer unless the Index Issuer is removed from the relevant index. Nor will Index Securities held in Smartshares Funds be disposed of as a result of fluctuations in the market unless they are removed from the relevant index.

Market fluctuations and such adverse conditions may affect the value of a Unitholder’s investment and/or any Returns either positively or negatively. Neither the Manager nor the Trustee may delay decisions to re-weight Smartshares Funds to reflect the relevant index to enhance the Returns on particular Smartshares Units.

Liquidity Risk

Investors are only able to cash in their investment by selling their Units on market unless they have enough Units to do a Basket withdrawal (Basket withdrawals are described on page 42). The market price per Unit

example, if the Manager subdivides all Units in two, which will halve the left-hand side of the equation, it will change the "1,000" to "2,000" to also halve the right-hand side of the equation.

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may vary from the Current Unit Value due to supply and demand factors. Each Smartshares Fund is listed on the NZX Main Board and, in the opinion of the Manager, there is an established market for sales of Units. However, although the Smartshares Funds are listed on the NZX Main Board, the fact that investors can apply to purchase Units directly from the Manager may mean there are fewer buyers of Units on the NZX Main Board.

Foreign Currency Risk for the Aus Financials Fund and Aus Resources Fund

While Subscription Amounts and income for reinvestment are payable in New Zealand dollars, the Manager invests the proceeds for the Aus Financials Fund and Aus Resources Fund in securities denominated in Australian dollars. In addition, Smartshares Units in the Aus Financials Fund and Aus Resources Fund are quoted on the NZX Main Board in New Zealand dollars even though the assets underlying the value of those Smartshares Units are denominated in Australian dollars.

Both of these situations give rise to currency risk that may affect the value of the Aus Financials Fund and Aus Resources Fund, and amounts for reinvestment, either positively or negatively and hence the value or amount of the Smartshares Units in those Smartshares Funds when considered in New Zealand dollar terms. The Manager currently takes no steps to mitigate the Smartshares Funds’ foreign currency exposure.

Regulatory Risk

Regulatory risk is the risk that a Smartshares Fund may be adversely affected by future changes in applicable laws, including tax laws, or by decisions taken by regulatory agencies enforcing those laws. Among the regulatory risks that the Manager faces is the risk that its application for a market service licence under the Financial Markets Conduct Act 2013 (described in more detail in the Prospectus for the Smartshares Funds at section 20 of the statutory information section) is declined by the FMA or overly stringent conditions are imposed on its licence.

Tax Risk

Taxation laws, their interpretation, or the New Zealand Inland Revenue Department or Australian Taxation Office’s application of those laws may change during the period of a Unitholder’s investment in Smartshares Funds, in a way which has an adverse impact on the Returns to that Unitholder.


If a Smartshares Fund fails to meet the required criteria and therefore ceases to be a PIE, it will not be able to re-elect to be a PIE for the succeeding five years.

If a Unitholder who is not an Exempt Investor (including all associates) holds more than 20% of the Smartshares Units in a Smartshares Fund, that Fund may not qualify to be a PIE.

Although the Manager has put processes in place designed to ensure that each Smartshares Fund complies with all requirements to be a PIE, there is a risk that a Smartshares Fund could lose PIE status if there is a breach of those requirements which is not remedied within the time permitted under the PIE Rules. If PIE status of a Smartshares Fund is lost that Fund will be taxed as a company and distributions to Unitholders will be dividends taxable at the Unitholder’s marginal tax rate and potentially will be subject to withholding tax. No compensation will be paid to Unitholders in the event that PIE status is lost. For further information on PIE Tax risk please refer to the Smartshares Funds' prospectus.

Securities Lending Risk

There are a number of possible risks associated with securities lending (that the Manager undertakes for the NZ Dividend Fund) which include, but are not limited to, the following:

(a) Borrower credit risk and settlement risk: There is a risk that a borrower of securities could fail to deliver equivalent securities on termination of a loan. For example, it may become insolvent and therefore unable to acquire the relevant securities for delivery. A delay in, or failure in respect of, redelivery of securities may cause the Smartshares Fund that lent the securities to incur a loss of revenue and/or securities as a result.

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For bilateral loans of securities to individual counterparties, collateral in excess of 105% of the value of the securities lent will be required to be deposited with the Trustee. This collateral will be used to purchase replacement securities if the borrower fails to deliver securities on the termination of a loan.

For loans settled through a central counterparty settlement system (such as the NZCDC Settlement System), the obligations of the borrower to a Smartshares Fund are unsecured, as collateral is managed by the settlement system operator and is not directly provided to that Smartshares Fund. However, this risk is mitigated by arrangements (including prudential arrangements and oversight by the New Zealand Reserve Bank) made for the management of risks associated with the operation of the settlement system.

(b) Failure by central counterparty settlement system operator to meet settlement obligations: In the event that the settlement system operator (such as NZCL) does not fulfil its settlement obligations to a Smartshares Fund in relation to a securities loan, that Smartshares Fund’s sole right is to make a claim for compensation to the settlement system operator. The settlement system operator’s liability is limited to determinations relating to claims for compensation. The NZ Markets Disciplinary Tribunal can require the settlement system operator to re-determine a claim for compensation if the settlement system operator has acted in bad faith.

(c) Legal risk: There is a risk that the Manager may enter into a contract relating to the securities lending that will not be legally enforceable or not document the terms of the loan correctly. While this is a risk with any contract, the consequences of such an error in relation to securities lending could be more significant, because an inability to enforce an obligation to re-transfer securities could have a material impact on the relevant Smartshares Fund's income. The Manager intends to minimise this risk by using standard form contracts based on industry standards.

In order to limit a Smartshares Fund’s exposure to the risk that may arise as a result of securities lending, the Trustee and the Manager have agreed that at the time and immediately after lending any securities in that Smartshares Fund no more than 50% of the value of that Smartshares Fund and 50% of the aggregate value of a security within that Smartshares Fund may be lent. Securities may not be lent if, as a result, either of those limits will be breached.

Custodian Risk

Legal title to the assets of each Smartshares Fund is held by the relevant Custodian. That means there is a risk that if the relevant Custodian becomes insolvent, this could temporarily or permanently deprive the Smartshares Funds of assets. This risk is managed by having the relevant Custodian hold the assets of the Smartshares Funds as a bare trustee and by keeping those assets separately identifiable from other assets it holds (for itself and others). This should mean that, if the relevant Custodian ever does become insolvent, the assets it is holding for the Smartshares Funds will not form a part of the pool of assets to be liquidated for the benefit of the relevant Custodian's creditors.

Key Personnel Risk

The management of the Smartshares Funds is complex and many of the tasks associated with that management require considerable experience in relation to exchange traded funds. Consequently, there is a risk that if any of the Manager's key personnel leave, there is an increased risk of disruption and potential calculation errors. Among other things, such calculation errors could lead to unintended tracking differences. This risk is mitigated, to some extent, by the Manager's appointment of the Administration manager to the Smartshares Funds. As the Administration Manager will be responsible for the day to day administration of the Smartshares Funds, this should minimise the risk of disruption if any of the Manager's key personnel leave.

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Unitholders are not liable to make any payments to third parties upon the winding up of Smartshares Funds, or as a result of the insolvency of the Manager or Trustee. However, in the event that a wind-up proves necessary, the Manager and/or Trustee shall be entitled to recover from the relevant Smartshares Fund all costs and expenses, which are incurred in connection with or arising out of the winding up of the Fund. This will be done prior to distributing money (or assets) to Unitholders. Claims of Unitholders in respect of their Smartshares Units will rank equally among themselves in such circumstances.

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Unitholders may at any time initiate or cease the Distribution Reinvestment Plan by notifying the Unit Registrar. However, Unitholders will need to give the Unit Registrar at least ten Business Days' notice prior to the next Distribution Ex Date to enable the change to be made for that distribution period.

Fees


(a) give at least ten Business Days' prior notice of any such increase of any fee relating to applications to the Trustee;








(c) if, at any time while the Units of a Trust are listed on an exchange, the same is requested or recommended by that exchange because of a change to the rules of that exchange;

(d) if the same is required or desirable because of any amendment or repeal and/or replacement of the Unit Trusts Act 1960 or any other relevant legislation (including, without limitation, provisions of the Financial Markets Conduct Act 2013, or regulations under that Act, which will become applicable to the Smartshares Funds when the Manager opts into the Financial Markets Conduct Act regime before the relevant statutory transition period ends on 1 December 2016 and may require changes to the Trust Deed), or otherwise permitted or required under any relevant law; or




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Replacement of an index

The Manager may, with the Trustee's prior written consent, replace an index with a different index that is materially the same if the index that a Smartshares Fund tracks is discontinued or the index methodology is changed in a way that means, in the Manager's opinion, continuing to track that index would materially change an investment in Units in the relevant Smartshares Fund. In such circumstances, the Manager may, with the Trustee's prior written consent, make any amendments to the Investment Policy that are necessary or desirable in connection with the replacement of the index and must give ten Business Days' notice (or such alternative notice period agreed with the Trustee) of such replacement to Unitholders of the relevant Smartshares Fund. After the notice period has passed the index will be deemed to be so replaced.



1. Market sale

Each Smartshares Fund is listed on the NZX Main Board and, in the opinion of the Manager, there is an established market for sales of Units. Smartshares units are able to be sold on market through NZX firms (no written redemption notice is required). The market price per Smartshares Unit may vary from the Current Unit Value due to supply and demand factors. The costs involved in a sale on the NZX Main Board is normal sharemarket brokerage, which may vary between NZX Firms. The Manager may decline to register a transfer of Smartshares Units if it would result in a transferee holding less than the Minimum Holding (provided that doing so would not breach the Listing Rules).


Basket withdrawals are for holdings in multiples of 50,000 Smartshares Units for the Aus Financials Fund, 150,000 Smartshares Units for the Aus Resources Fund and 250,000 Smartshares Units for the NZ Dividend Fund. A Unitholder can surrender Smartshares Units and receive equivalent Index Securities and a Cash Amount representing any accrued income less accrued expenses applicable from the relevant Index Securities of Index Issuers. All withdrawal requests should be made through an NZX Firm to the Manager after completing a Basket withdrawal notice. Charges in relation to Basket withdrawals are explained under “What are the charges?” on page 29.

The Manager is not obliged to redeem Smartshares Units in any of the Smartshares Funds in response to a Basket withdrawal request in the period from (and including) the Announcement of a distribution to (and including) the Distribution Ex Date (as redemptions during that period could result in a decreased number of Smartshares Units on issue, which would in turn result in an increase in the announced distribution on a per unit basis).


In some circumstances the Manager may be required to take action to ensure that the Smartshares Funds retain their PIE status. The Manager has been granted a waiver by the Special Division to enable it to do so. For further information about the waiver see the registered prospectus for the Smartshares Funds.

If a Unitholder exceeds the investor interest size requirement prescribed in the Tax Act (the “Breach”) in respect of a Smartshares Fund, the Manager may take the following steps to ensure that the Breach is

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remedied:


(b) the Unitholder shall have a period consisting of the grace period determined in accordance with the Tax Act (the “Remedy Period”) less 30 days to remedy the Breach, but if the Manager becomes aware of the Breach and determines that there are 30 days or less to remedy the Breach then the Breach shall be deemed to have not been remedied; and

(c) if the Breach has not been remedied upon expiry of the period referred to in (b) above, then the Manager shall within the remaining 30 days of the Remedy Period, in its discretion, and only to the extent permitted by the Listing Rules (or any ruling in respect of, or waiver from the Listing Rules), sell, redeem, or repurchase the amount of the Excess Units in order to remedy the Breach, and:




The Manager has the power to wind up any Smartshares Fund (after giving three months’ notice to the Trustee). The Trustee shall give Unitholders notice that the Trustee has received a notice from the Manager terminating the relevant Smartshares Fund. The Trustee shall then distribute the balance, after payment of any costs, charges, expenses, claims and liabilities (including tax and contingent liabilities) incurred in connection with the relevant Smartshares Fund, or arising out of the liquidation of the Fund, amongst the Unitholders in proportion to the number of Units held by them. The Trustee shall retain such amount as the Manager considers necessary or appropriate to meet all the above costs, charges, expenses, claims and liabilities (including contingent liabilities and tax) that are not paid prior to distribution.







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Trustee Trustees Executors Limited Level 5, 10 Customhouse Quay PO Box 3222 WELLINGTON Tel: (04) 495 0999 Fax: (04) 496 2952 Email: [email protected]










A Unitholder (or his/her/its representative) may inspect that part of the register of Smartshares Units kept by


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the Unit Registrar that relates to his/her/its Smartshares Units, except when the register is duly closed (and subject to any reasonable restrictions that the Manager may impose so that not less than two hours in each working day is allowed for inspection). A copy of that part of the register of Smartshares Units relating to a Unitholder may be obtained on payment of a reasonable fee.

Up-to-date information on the performance of Smartshares Funds is available through various sources, including the daily newspapers and on NZX's website (www.nzx.com). Announcements to NZX, including Announcements of the tracking differences for the Smartshares Funds can be found at www.nzx.com under the ticker symbols "DIV" for the NZ Dividend Fund, "ASF" for the Aus Financials Fund and "ASR" for the Aus Resources Fund.



Investors will also receive a distribution notice in respect of each Distribution Date, as well as confirmation of Smartshares Units allocated if they are members of the Distribution Reinvestment Plan.



Request information


details as set out on page 23, and the Manager will be able to let Unitholders know what the fee is (if any)

prior to actioning their request.



(b) a copy of the most recent financial statements of the Smartshares Funds, together with a copy of the auditor's report on those statements (when prepared);


(d) a copy of the Smartshares Funds' prospectus, together with copies of any documents registered under the Securities Act 1978 for the purpose of extending the period during which allotments may be made under that prospectus;

(e) a copy of the most recent investment statement relating to the Units (which, as at the date of this Investment Statement is this document);

(f) if prospective information about Returns on the Units is or was contained in any prospectus or advertisement, a comparison (if practicable, in the same form and for the same period as the prospective information) of the actual Returns against the prospective Returns; and

(g) if prospective financial information about the Fund was contained in any prospectus or advertisement, a comparison (if practicable, in the same form and for the same period as the prospective financial information) of the actual results against the prospective financial information.


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Privacy





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GLOSSARY OF TERMS

“Administration Manager” BNP Paribas Fund Services Australasia Pty Limited, acting through its New Zealand branch, or any other administration manager appointed from time to time.

“Announcement” a market announcement to NZX that can be viewed on nzx.com under the ticker symbols "DIV" for the NZ Dividend Fund, "ASF" for the Aus Financials Fund and "ASR" for the Aus Resources Fund (and Announce and Announced have corresponding meanings).


“ASX” the Australian Stock Exchange.

“Aus Financials Fund” the Australian Financials Index Trust

“Aus Resources Fund” the Australian Resources Index Trust

“Basket” a proportionate amount of the securities of the Index Issuers determined from time to time by the Manager as equivalent to 50,000 Smartshares Units for the Aus Financials Fund, 150,000 Smartshares Units for the Aus Resources Fund and 250,000 Smartshares Units for the NZ Dividend Fund.




(b) in relation to a person redeeming Units via Basket withdrawal, the income accrued and held in the particular Smartshares Fund that is attributable to the Basket of securities being withdrawn.

“Cash Application” an application for Units that is made for cash and is not made under the Regular Savings Plan or the Distribution Reinvestment Plan.

“Current Unit Value” the market value of all securities held by the relevant Smartshares Fund (plus any received and accrued income) less liabilities or provisions (including accrued liabilities and expenses) properly to be taken into account in determining the NAV of the relevant Smartshares Fund, divided by the number of Units on issue for that Fund.

“Custodian” Means:

(a) for the Aus Financials Fund and Aus Resources Fund, BNP Paribas Fund Services Australasia Pty Limited, acting through its New Zealand branch, or any other custodian appointed (by the Trustee) from time to time;

(b) for the NZ Dividend Fund, JB Were (NZ) Nominees Limited or any other custodian appointed (by the

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Trustee) from time to time.


“Distribution Date” each date on which distributions are paid to Unitholders, which will be within 20 Business Days after each Record Date. Currently, distributions for the NZ Dividend Fund and Aus Financials Fund are made quarterly and distributions for the Aus Resources Fund are made semi-annually.

“Distribution Ex Date” in relation to a distribution, the date on which NZX quotes the Units on an "ex" basis under the NZX Participant Rules.


means the plan currently provided for in the prospectus for the Smartshares Funds under which Unitholders may automatically invest their dividends and other distributions in the relevant Smartshares Fund.

“Establishment Deed” an establishment deed establishing a Smartshares Fund between the Manager and the Trustee.

“Exempt Investor” a Unitholder that is an investor of the type listed in section HM 21(2) of the Tax Act (including Parts A and B of Schedule 29 of that act), or equivalent provision.

“FMA” the Financial Markets Authority.

“Franked or Franking Credit” the Australian tax credit which is attached to the dividend, distributed in accordance with Australia's dividend imputation system.


“Index Administrator” S&P Dow Jones Indices.

“Index Issuer” in respect of each Smartshares Fund, an issuer whose securities are included from time to time in the index which that Smartshares Fund tracks.

“Index Securities” securities issued by an Index Issuer that are held or to be acquired by a Smartshares Fund.

“Investment Policy” an investment policy that is developed by the Manager in accordance with the relevant Trust Deed (and which may not be inconsistent with the index tracking objective for the relevant Smartshares Fund set out in the relevant Establishment Deed) and sets out how the Manager will invest on behalf of the relevant Smartshares Fund.

“Investment Statement” this investment statement.

“Listed” listed on the NZX Main Board.

“Listing Rules” the NZX Main Board listing rules that regulate issuers listed on the NZX Main Board.



“Master Trust Deed” the master trust deed between the Manager and the Trustee dated 24 June 2014.

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“Minimum Holding” the minimum number of Smartshares Units in a Smartshares Fund that a Unitholder must hold at all times. Currently this is 100 Units for the Aus Resources Fund and NZ Dividend Fund and 50 Units in the Aus Financials Fund (or such different amount as is determined by the Manager in its sole discretion).

“NAV” the net asset value of the relevant Smartshares Fund.

“NZCDC Settlement System” the central counterparty clearing and settlement system operated by NZX through its subsidiaries.

“NZCL” New Zealand Clearing Limited.

“NZ Dividend Fund” means the New Zealand Dividend Index Trust.

“NZDL” New Zealand Depository Limited.


“NZX Firm” a Market Participant accredited by NZX pursuant to the NZX Participant Rules to provide advice and trade on behalf of a client or as a principal (a list of which can be found on www.nzx.com).


“NZX Participant Rules” means the rules regulating Market Participants of NZX.


“Record Date” in relation to a distribution to Unitholders, the time and date fixed by the Manager for the determination of the Unitholders to whom a distribution will be paid, which, for the NZ Dividend Fund and Aus Financials Fund, is currently on or about the last Business Day in March, June, September and December in each year and, for the Aus Resources Fund, is currently on or about the last Business Day in March and September in each year.


“Return” in relation to Units and other securities means the amounts distributed to holders of them together with any increase in their capital value and, in relation to an index, means the amounts that would be distributed to a person that held the Index Securities used to calculate the value of the relevant Index and any increase in the value of such a holding.

“Smartshares Funds” or “Funds”

the NZ Dividend Fund, Aus Financials Fund and the Aus Resources Fund.

“Smartshares Unit” or “Unit” a unit in one of the Smartshares Funds.

“Special Division” means the division of the NZ Markets Disciplinary Tribunal constituted under the NZ Markets Disciplinary Tribunal Rules, that regulates the Manager (in the place of NZX), for compliance with the Listing Rules.



“Trust Deed” in respect of any particular Smartshares Fund, the Master

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Trust Deed and the relevant Establishment Deed (as may be supplemented or amended by any supplementary deeds or deeds of modifications).

“Trustee” Trustees Executors Limited.



“You” A potential investor or a Unitholder.




- US 500 TRUST - EUROPE TRUST - ASIA PACIFIC TRUST - EMERGING MARKETS TRUST - TOTAL WORLD TRUST - US LARGE VALUE TRUST - US LARGE GROWTH TRUST - US MID-CAP TRUST - US SMALL-CAP TRUST

Investment Statement for the purposes of the Securities Act 1978. Dated 18 December 2015

2

Contents


HOW DO I APPLY? 14














3








Page





























4












financial adviser.


Applications were made to the Special Division that regulates the Manager (in the place of NZX) for

permission to quote the units in the Smartshares Funds (Units) on the NZX Main Board and all the

requirements of the Special Division relating thereto that can be complied with on or before the date of this

Investment Statement have been duly complied with. These applications were accepted, and the Units are

quoted on the NZX Main Board. However, the Special Division accepts no responsibility for any statement in

this Investment Statement. The NZX Main Board is a licensed market operated by NZX, which is a licensed

market operator regulated under the FMC Act.

Disclaimer

The Return on each Smartshares Fund is intended to closely track the Return on the Underlying Fund that

the Smartshares Fund invests in, subject to fluctuations in the value of the New Zealand dollar versus foreign

currencies and less certain costs and fees of the Smartshares Fund that are deducted. The Return on each

Underlying Fund will rise and fall according to market events and conditions. None of the Trustee, the

Manager, the Underlying Fund Manager, the Custodian, the Administration Manager, NZX, nor any other

person guarantees the Return on any Underlying Fund or Smartshares Fund. No warranty expressed or

implied is given as to the results to be obtained by the Manager or any Smartshares Fund from its

investment in an Underlying Fund, or as to the liquidity of an investment in any Smartshares Fund,

Smartshares Units or the fitness of any Smartshares Fund for any Unitholder’s purposes.

Information about the Underlying Funds is derived from each Underlying Fund's prospectus and the

Vanguard Index Funds' statement of additional information and Vanguard International Equity Index Funds'

statement of additional information and has not been independently verified by the Manager. The Manager

gives no warranty about the accuracy of such information.

The offer set out in this Investment Statement is only made in New Zealand. No person may offer, sell or

deliver Smartshares Units or distribute any documents in relation to the offer (including any copy or extract

from this Investment Statement) to any person in any jurisdiction other than in compliance with any

applicable laws and regulations.

5

These materials do not constitute an offer of securities for sale in the United States or to “U.S. Persons” (as

defined in Regulation S under the U.S. Securities Act of 1933) (“U.S. Persons”) and may not be sent or

disseminated, directly or indirectly, in the United States or to any U.S. Person in any place. The Units are not

and will not be registered under the U.S. Securities Act of 1933 (the “U.S. Securities Act”) or the securities

laws of any state of the United States and may not be offered, sold or otherwise transferred in the United

States or to, or for the account or benefit of, any U.S. Person except in compliance with the registration

requirements of the U.S. Securities Act and any other applicable state securities laws or pursuant to an

exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act

and applicable state securities laws.

Definitions


6

KEY INFORMATION SUMMARY This section of the Investment Statement contains a summary of the key information relating to this offer. The rest of this Investment Statement contains important information. You should read all of it before deciding whether to invest.



- US 500 TRUST;

- EUROPE TRUST;

- ASIA PACIFIC TRUST;

- EMERGING MARKETS TRUST;

- TOTAL WORLD TRUST;

- US LARGE VALUE TRUST;

- US LARGE GROWTH TRUST;

- US MID-CAP TRUST; and

- US SMALL-CAP TRUST.

Overview of fund structure

Unitholders (you) hold Units

in a Smartshares Fund, which invests in shares in an

Underlying Fund (“Underlying

Shares”). Unitholders do not

hold a direct interest in the

Underlying Fund, i.e. you have an indirect investment in

an Underlying Fund.

The return a Smartshares

Fund receives as a shareholder in an Underlying

Fund is passed on to

Unitholders (after the

deduction of certain fees,

costs and tax expenses).

Each Underlying Fund is an index

tracking fund.

The Underlying Fund aims to

provide a return to its

shareholders (i.e. the relevant Smartshares Fund) that closesly

tracks the return of an

Underlying Index. This is called

index tracking.

Each Underlying Fund invests in

securities listed in various global markets in order to track

the relevant Underlying Index.

The basic concept

Each Smartshares Fund is a unit trust, as defined in the Unit Trusts Act 1960. The beneficial interest in each Smartshares Fund is divided into Units with each Unit representing an equal interest in the assets of that Smartshares Fund, but not conferring any interest in any specific asset of that Smartshares Fund.

Each Smartshares Fund invests in a different fund (an Underlying Fund) by purchasing shares in that Underlying Fund (Underlying Shares). The Underlying Shares are an exchange-traded class of shares issued by each of the Underlying Funds and effectively represent an interest in the Index Securities held by the relevant Underlying Fund.

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The Return received by each Smartshares Fund, as a shareholder in a single Underlying Fund, is (after the deduction of certain fees, costs and tax expenses) passed on to Unitholders. This means that Unitholders receive Returns that are intended to closely track the Returns received by a person investing directly in the relevant Underlying Fund less certain costs (including tax) and fees of the Smartshares Fund.

Each Underlying Fund is an index tracking fund. This means it is a fund that aims to provide a Return to its shareholders (including the Smartshares Fund that has invested in it) that closely tracks the Return on an index of securities (an Underlying Index) by investing in securities contained in the Underlying Index. There are two different ways in which the Underlying Funds endeavour to achieve this objective, each of which is described on page 21.

The Underlying Indices are made up of securities from various global markets, including North America, the Asia Pacific Region, Africa, South America and Europe. By investing in Underlying Shares, the New Zealand based Smartshares Funds give New Zealand investors' indirect access to the US listed Underlying Funds, which in turn gives investors exposure to a range of international investments.

In this way, the Smartshares Funds give investors the opportunity to indirectly invest in a broad range of overseas securities through one product. A description of the Underlying Funds and the Underlying Indices that they track can be found on pages 18 to 19.


Applications were made to the Special Division that regulates the Manager (in the place of NZX) for permission to quote the Units on the NZX Main Board. These applications were accepted, and the Units are quoted on the NZX Main Board. As quoted securities, Units can be traded like shares in Listed companies (subject to liquidity). For most investors, trading their Units on market through an NZX Firm will be the only way of redeeming their investment, because there is no general right to redeem Units.


Although an investment in a Smartshares Fund is similar to a direct investment in the Index Securities held by the relevant Underlying Fund, you will not have any rights in relation to those specific Index Securities, nor any interest in the Underlying Fund itself. There are also some differences between the Returns you will receive on the Smartshares Fund and the Returns on direct investments in Index Securities. The principal differences are as follows:

Market price differences – Units trade at the market price. The price at which they trade will be set by market forces such as supply and demand relevant to their market rather than by direct reference to the market price of the Index Securities. Consequently, while the market price of Index Securities (which will be set by market forces relevant to Index Securities' markets) is likely to affect the market price of Units, the two may not exactly correlate.

Liquidity differences – Smartshares Units may be more or less liquid than Index Securities due to differences in supply and demand (and other market forces). Accordingly, Units may be more difficult to sell than some Index Securities. There is further information about liquidity risk on page 12.

Tracking differences – The Manager expects each Underlying Fund to track the investment performance of the relevant Underlying Index. However, the Underlying Fund Manager is unlikely to track the investment performance of the relevant Underlying Index exactly. There is further information about tracking risk on page 34.

Distribution differences – An investor that invests directly in Index Securities will receive distributions in relation to those Index Securities when they are paid by the relevant Index Issuers. In contrast, distributions that are received by an Underlying Fund from the relevant Index Issuers will be held and distributed in accordance with that Underlying Fund's distribution policy (as set out on page 20). Once those distributions are received by the relevant Smartshares Fund from the Underlying Fund they will be held by that Smartshares Fund (and be included in the Smartshares Fund's NAV) until the next Distribution Date. It is only on that Distribution Date that distributions received during the months following the previous Distribution Calculation Date will be reinvested for you (or paid out) in one lump sum. Any interest earned on distributions received by the Smartshares Fund prior to the Distribution Date will be retained by the Manager. Currently, distributions received by the Smartshares Funds are reinvested or paid to investors quarterly.

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Management fees – Management fees charged by the Manager and similar fees charged by the Underlying Fund Manager are deducted before distributions are paid to you, meaning you receive less than the full distributions paid on the Index Securities the Underlying Fund invests in. However, if you invested in the Index Securities directly it is likely that you would have to pay some management costs, taxes and fees, such as brokerage, to third parties (particularly given that the Index Securities are not currently, and are unlikely to be, quoted on a New Zealand stock exchange).

Distributions

Distributions to Unitholders are currently made directly from each Smartshares Fund within 20 Business Days of each Record Date. Currently, the Record Date is a day selected by the Manager on or about the last Business Day in each of January, April, July and October in each year. These distributions comprise distributions from an Underlying Fund received by the Smartshares Fund, less fees and other expenses.

According to the Underlying Funds' prospectuses, distributions received by the Smartshares Funds from the Underlying Funds will be made in accordance with each Underlying Fund's distribution policy (a description of which can be found on page 20) and will represent income that the Underlying Fund has received from its holdings in the Index Issuers (such as dividends) less operating expenses (including management fees) and transaction fees (such as trading and brokerage fees).

Unitholders will automatically have their distributions re-invested for Smartshares Units unless they elect to have them paid directly to a nominated New Zealand bank account in New Zealand dollars. There is further information about distributions on page 29.


Smartshares Limited is the manager of the Smartshares Funds. It is a wholly owned subsidiary of NZX Limited (NZX). Smartshares Limited offers a range of funds.

The Manager is responsible for investing in Underlying Shares, the maintenance of accounting records of the Smartshares Funds, communication with Unitholders, supervision of the Unit Registrar and payment of distributions to Unitholders. Some of these duties are delegated to the Administration Manager, the Custodian and the Unit Registrar.



BNP Paribas Fund Services Australasia Pty Ltd, acting through its New Zealand branch (the Administration Manager and the Custodian); and


None of the Manager, Trustee, Administration Manager, Custodian, Unit Registrar or NZX (as the parent company of the Manager) provide any guarantee in relation to the Smartshares Funds or the Underlying Funds.



The Smartshares Fund you choose to invest in is designed to give you Returns similar to the Returns on the Underlying Index tracked by the Underlying Fund that the Smartshares Fund invests in.

9

The Manager invests in the relevant Underlying Fund. The stated objective of each Underlying Fund is to buy and sell Index Securities to track the investment performance of the relevant Underlying Index, rather than making investment decisions based on its own assessment of the Index Issuers. This means that each Smartshares Fund and Underlying Fund is what is commonly referred to as a “passive fund” (as opposed to an “active fund”, which involves a manager making its own judgement about where and when to invest and divest).


Smartshares Fund Name Underlying Fund Underlying Index1

US 500 TRUST Vanguard 500 Index Fund ETF Shares

S&P 500 Index

EUROPE TRUST Vanguard European Stock Index Fund ETF Shares

FTSE Developed Europe All Cap Index

ASIA PACIFIC TRUST Vanguard Pacific Stock Index Fund ETF Shares

FTSE Developed Asia Pacific All Cap Index

EMERGING MARKETS TRUST Vanguard Emerging Markets Stock Index Fund ETF Shares

FTSE Emerging Markets All Cap China A Transition Index

TOTAL WORLD TRUST Vanguard Total World Stock Index Fund ETF Shares

FTSE Global All Cap Index

US LARGE VALUE TRUST Vanguard Value Index Fund ETF Shares

CRSP US Large Cap Value Index

US LARGE GROWTH TRUST Vanguard Growth Index Fund ETF Shares

CRSP US Large Cap Growth Index

US MID-CAP TRUST Vanguard Mid-Cap Index Fund ETF Shares

CRSP US Mid Cap Index

US SMALL-CAP TRUST Vanguard Small-Cap Index Fund ETF Shares

CRSP US Small Cap Index

The unit price of each Smartshares Unit (the Current Unit Value) reflects the market value of the Underlying Shares held in the relevant Smartshares Fund and the distributions and other income received or accrued by and held in the relevant Smartshares Fund, less outgoings from the Smartshares Funds (such as tax, fees and expenses).

As noted above, if you sell your Units on market, the price you receive may differ from the Current Unit Value.

Further information about the index tracked by each of the Underlying Funds can be found in the registered prospectus for the Underlying Funds, and also on pages 18 to 19 of this Investment Statement.

1 The Underlying Indices are selected by the Underlying Fund Manager and may change from time to time without notification to Unitholders or the Manager. For further information about the Underlying Fund Manager, please visit http://investor.vanguard.com. Information contained on the website has not been independently verified by the Manager. The Manager gives no warranty about the accuracy of such information.

10

Benefits of Smartshares Funds

Access to international securities

The Smartshares Funds provide you with exposure to a broad range of international listed securities through a single Smartshares purchase.


When you invest in a Smartshares Fund, you get an indirect investment in a range of issuers providing you with a more diversified investment than an investment in a single issuer. Diversification may reduce risk. This is because it is unlikely that all the entities in the Underlying Fund will perform similarly at the same time. For example, the losses from entities performing poorly may be balanced by the gains from those performing well. However, each Underlying Fund is diversified only to the extent that diversification within the asset class, investment type or Index Issuer industry represented in the Underlying Index tracked by that specific Underlying Fund allows.

Flexibility

Smartshares Funds provide the diversification of a fund investment while giving you similar transparency and convenience to an investment in individual shares – the ability to know the value of your investment at any moment, and the flexibility to trade your investment quickly (subject to liquidity risk). This is because Smartshares Units are expected to trade like individual shares, with their prices published in the newspapers and on-line (www.nzx.com) so you can track the progress of your investment at any time. Applications were made to the Special Division for permission to quote the Units on the NZX Main Board. These applications were accepted, and Units are quoted on the NZX Main Board. If your application for Smartshares Units is accepted, you will be able to trade your Smartshares Units on market (subject to liquidity), just like a share in a Listed company.


Once you hold the Minimum Holding in a Smartshares Fund, you can make regular contributions from as little as $50 per month by way of the Regular Savings Plan. And you can stop, restart, increase or decrease your regular contributions whenever you like (subject to providing the Unit Registrar with ten Business Days' notice prior to the 20th of a month and, unless you are completely stopping contributions, maintaining a minimum contribution of $50 per month). You can also add to your investment through the Distribution Reinvestment Plan – where your distributions are automatically reinvested as additional Smartshares Units or you can choose to have your distributions paid directly to you by direct credit.

Lower Fees

While both the Manager and the Underlying Fund Manager charge management (or similar) fees, Smartshares Funds are able to keep costs down because neither the Manager nor the Underlying Fund Manager makes active investment decisions, which normally may require expensive research, analytical and trading expertise. Actively managed funds, where the manager makes active investment decisions, generally incur higher costs and therefore normally charge a higher management fee.


Pages 32 to 37 contain a detailed description of the material risks that apply to the Smartshares Funds. Some of the risks arise due to the structure of the Smartshares Funds in that it invests in the Underlying Funds, others arise due to the nature of the Underlying Funds themselves.

In summary, some of the risks that could affect your Returns are:

Market risk

The Underlying Funds invest inbroadly based portfolios of securities and there is a risk that the Index Securities’ value may decline, thereby adversely affecting the Return on the Underlying Shares and thereby the Units.

The level of distributions that the Smartshares Funds receive from the Underlying Funds is dependent on the level of distributions paid by Index Issuers on the Index Securities. The Manager has no influence over the dividend policies of Index Issuers or the Underlying Funds or over anything else that may affect the level

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11

of distributions paid by them. Returns on Index Securities may be affected by the circumstances of individual Index Issuers (Index Issuer risk) or the circumstances of Index Issuers within a particular industry or index (sector risk) or geographic area (regional risk) or by general sharemarket fluctuations or volatile increases and decreases in the price of securities generally (general market risk). Accordingly, there is no guarantee of any particular level of distributions.

Foreign currency risk

The Smartshares Funds acquire investments and receive returns in US dollars. Fluctuations in the value of the New Zealand dollar versus the US dollar may affect the returns received by the Smartshares Funds, because the value of the Underlying Shares and any distributions received in respect of the Underlying Shares must be converted back into New Zealand dollars by the Smartshares Funds. The Smartshares Funds do not hedge any of their indirect exposure to the US dollar or any other foreign currencies.

In addition, the Underlying Funds pay distributions in US Dollars and the Underlying Shares are denominated in US Dollars. However, several of the Underlying Funds invest in foreign entities. These Underlying Funds may be exposed to a currency risk based on the exchange rate between the currency the Returns are received in by the Underlying Fund and the US dollar.

Tracking risk

The Underlying Shares are purchased by the Smartshares Funds at market prices. Although it is expected that the market price of an Underlying Share will approximate its net asset value, there may be times when the Smartshares Funds may pay more or less than the net asset value when buying Underlying Shares and may receive more or less than the net asset value when selling Underlying Shares. In addition, the Manager may be unable to trade Underlying Shares either temporarily or permanently because the Underlying Shares are listed for trading on NYSE Arca (an exchange) and Trading in the Underlying Shares may be halted or suspended or the Underlying Shares may be delisted. These circumstances could affect each Smartshares Fund’s ability to provide Returns to Unitholders that closely track the Return of the relevant Underlying Index.

For a variety of reasons the Underlying Fund Manager is unlikely to track the relevant Underlying Index for each Underlying Fund exactly. As a result of this, the investment performance of the Index Securities held by each Underlying Fund may not, over time, track the investment performance of the relevant Underlying Index exactly. Of course, investors investing directly in order to track an Underlying Index are likely to face the same issues as the Underlying Fund Manager in trying to track the relevant Underlying Index.

Passive investment risk

The Smartshares Funds are passive investments and so the Manager will not react to events that affect the value of its investments in the Underlying Funds (such as poor performance of Index Issuers in the Underlying Indices that the Underlying Funds track) and will continue to hold and purchase the relevant Underlying Shares.

The Underlying Funds are also passive investments, meaning that the Underlying Fund Manager does not make active investment decisions in relation to the Index Issuers it invests in. The prospectus of each Underlying Fund states that the Underlying Fund Manager aims to buy and sell Index Securities with the intention of tracking the relevant Underlying Index. If an Index Issuer were to perform particularly well or badly, the Underlying Fund Manager would not take any action, unless and until action would be required to ensure that the Underlying Fund continues to track the relevant Underlying Index.

Operational risk

There is a risk that errors, fraud or misconduct may cause a loss to a Smartshares Fund or otherwise affect Unitholders' Returns. The Manager has adopted policies and procedures to mitigate this risk, and the Manager has also insured, subject to normal commercial excesses, against losses arising from fraud and misconduct.

The Smartshares Funds rely on the Underlying Fund Manager to properly manage the Underlying Funds. The Manager does not have control over the Underlying Fund Manager and so there is a risk that the Underlying Fund Manager will not perform its functions properly (which the Manager may not immediately become aware of). Such performance failures could have a material adverse effect on the value of a Smartshares Fund's investment in an Underlying Fund, and thus on Unitholders. The Underlying Fund Manager does not owe any obligations to Unitholders and only owes obligations to each Smartshares Fund as a shareholder in the relevant Underlying Fund.

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Liquidity risk

Except in limited circumstances, Unitholders are only able to cash in their investment by selling their Units on market. The market price per Unit may vary from the Current Unit Value due to supply and demand factors. Units are quoted on the NZX Main Board and, in the opinion of the Manager, there is an established market for sales of Units. However, although the Units are quoted on the NZX Main Board, the fact that investors can apply to purchase Units directly from the Manager may mean there are fewer buyers of Units on the NZX Main Board.

Regulatory and Tax risk

The Smartshares Funds are subject to an ongoing risk that regulatory or tax law requirements may change, and that this may have an adverse effect on Unitholders' Returns. For example, each Smartshares Fund is a Portfolio Investment Entity (PIE), which has benefits for Unitholders, and there is a risk that this status may be lost, as discussed on page 36 below.

The Underlying Funds are based in the United States and so there is a risk that US tax and other laws will apply to the Smartshares Funds and/or investors in a way that the Manager did not anticipate or that such laws change in a way that adversely affects the Underlying Funds, the Smartshares Funds and/or investors.

The Underlying Funds may be adversely affected by future changes in applicable laws, including tax laws, or by decisions taken by regulatory agencies enforcing those laws, which may affect the net asset value of Underlying Shares or distributions made to holders of Underlying Shares (including the relevant Fund).



When Unitholders first subscribe for Units they will pay an application fee to the Manager, which will be deducted from their Subscription Amount. For Subscription Amounts of less than $20,000 this will be a flat fee of $30, and for Subscription Amounts equal to or greater than $20,000 the subscription fee will be 0.2% of the full Subscription Amount. This fee is not payable for subsequent Cash Applications, subscriptions under the Regular Savings Plan or the Distribution Reinvestment Plan, or in relation to a Basket application. (Basket applications from large investors are accepted at the Manager's sole discretion and are discussed on page 26).

There are no fees for Basket applications or Basket withdrawals. The application fees for initial Cash Applications may be increased and an application fee for Baskets and subsequent Cash Applications may be added by the Manager by giving ten Business Days' notice of the change to the Trustee. The other fees referred to above may be increased or imposed by the Manager by giving three months' notice to the Trustee and, if the Manager determines in its reasonable discretion that the increase or imposition is material, Unitholders of the relevant Smartshares Fund. All fees may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the amount by which fees may be increased or imposed.


Further information about charges for Unitholders can be found on page 27.

13


Each Smartshares Fund pays a management fee to the Manager. This is currently, for the US 500 Trust, 0.30% per annum (inclusive of GST) of the NAV of the US 500 Trust and, for all other Smartshares Funds, 0.45% per annum of the NAV of the relevant Smartshares Fund, and is accrued daily and payable monthly in arrear.

The management fee is currently used by the Manager to pay the expenses of the Fund including the Trustee, the Administration Manager, the Custodian, the Unit Registrar, any penalties and interest charged by the Inland Revenue and any bank fees, although the Manager reserves the right to have such amounts paid out of the Smartshares Funds. If the Manager does exercise its right to have such amounts paid out of the Smartshares Funds, it will first notify the Trustee and Unitholders but the Manager is not required to notify potential investors. Other expenses that arise, such as operating expenses that do not arise in the ordinary course of business, will be paid out of the Smartshares Funds.


The Manager is also entitled to interest including on amounts held in respect of distributions and other income received by the Smartshares Funds and on Subscription Amounts (received as Cash Applications or under the Regular Savings Plan or Distribution Reinvestment Plan) between the date on which they are received and the date of issue of Units.

The Underlying Fund Manager's operating expenses (including management fees) and the Underlying Fund's transaction fees (such as brokerage and trading costs) are paid out of the relevant Underlying Fund (rather than the Smartshares Fund that invests in that Underlying Fund). However, these expenses and fees will affect the Return received by the relevant Smartshares Fund (and therefore Unitholders).

Further information about the above fees can be found on page 28.

14

HOW DO I APPLY?


You can start your investment in a Smartshares Fund by making an initial Cash Application from as little as $500. You can do this by applying online at www.smartshares.co.nz/invest-now, or by completing the Application Form for new Units at the back of this Investment Statement.

Alternatively you can obtain an investment in a Smartshares Fund by purchasing existing Units on market through an NZX Firm, in which case the Manager’s application fees will not apply.

If you are buying new Units, send in your completed Application Form, together with the full amount of the application payment, to Link Market Services Limited, PO Box 91976, Auckland 1142. Alternatively, you can send it to the Manager, an NZX Firm, or through any other channel approved by NZX (of which there are currently none).

Make sure you read all the information contained in this Investment Statement before deciding whether to invest and which Smartshares Fund to invest in. There is also additional information in the registered prospectus for the Smartshares Funds.


Further investments



through the Regular Savings Plan (for a minimum contribution of $50 per month); or





As with the initial Cash Application, a Cash Application for further Units can be made by applying online at www.smartshares.co.nz/invest-now, or by completing the Application Form attached to the back of this Investment Statement and sending it with the full amount of the application payment to Link Market Services Limited, PO Box 91976, Auckland 1142. Alternatively, you can send it to the Manager, an NZX Firm, or through any other channel approved by NZX (of which there are currently none).




Every month for an amount you choose (minimum contribution $50 per month) the Manager will add Smartshares Units to your investment. Simply apply online at http://smartshares.co.nz/invest-now, or complete the Application Form and direct debit authority included in this Investment Statement. Your payments will then be automatically withdrawn from your nominated bank account on a monthly basis.




15




To join the Smartshares Regular Savings Plan, you must already have the Minimum Holding of Smartshares Units for the Smartshares Fund that you wish to invest in on a regular basis or you must make a Cash Application that, if accepted, would mean you held at least the Minimum Holding of Units in the Smartshares Fund you want to invest in.








Each Smartshares Fund may receive distributions from the Underlying Fund in which it invests. These distributions and other income are retained in the Smartshares Fund (and reflected in the Current Unit Value) and the Smartshares Fund makes distributions to Unitholders periodically, with each Unitholder’s entitlement based on the Unitholder’s holding as at the Record Date for that distribution.


Below is a summary of the different ways of purchasing and selling Units:

Method of Investment Price you will pay (per Unit)

On Market Purchase The market price available at the time of purchase

Direct Application

Current Unit Value determined on the last Business Day of the month that the direct application contribution is processed.


Current Unit Value determined on the last Business Day of the month that the Regular Savings Plan contribution is processed.

Distribution Reinvestment Plan The strike price that is Announced to the market for that distribution period.

Basket Application

Securities and Cash as determined by the Basket composition equal to the Current Unit Value on the Business Day the basket

16

is applied for.

Method of Sale Price you will receive (per Unit)

On Market Sale The market price available at the time of sale

Basket Redemption

Securities and cash as determined by the Basket composition equal to the Current Unit Value on the Business Day the basket redemption is requested.

17

BOARD OF DIRECTORS

The directors of the Manager are Bevan Miller (Chair), Tim Bennett, John Willliams and Guy Elliffe. The

funds operated by the Manager are passively managed funds or have their investment management function

outsourced. Consequently, the board has been constructed to provide a mix of operational, financial and

legal skills rather than specific funds management experience. Brief profiles for each of the directors,

detailing their experience and qualifications, are set out below.

Bevan Miller







Bachelor of Commerce and Administration with Honours from Victoria

University of Wellington.

Tim Bennett









John Williams John is currently the Investment Manager at Trust Investments

Management Limited. Previously he was a Key Client Manager at

Vanguard Investments, and he has held a range of investment strategy

roles.

Guy Elliffe Guy is currently Corporate Governance Manager at the Accident

Compensation Corporation. Previously he was Head of Equities at AMP

Capital Investors (New Zealand) Limited, and he has held a range of

senior investment roles in New Zealand and the US.

18

SUMMARY OF UNDERLYING FUNDS At the date of this Investment Statement the Smartshares Funds gives investors exposure to the Underlying Funds set out in the table below (each of which is listed in the US and is currently overseen by The Vanguard Group, Inc.). For further information about The Vanguard Group, Inc. and the funds it oversees please visit http://investor.vanguard.com. Information contained on the website has not been independently verified by the Manager. The Manager gives no warranty about the accuracy of such information. The Underlying Fund Manager's current annual operating expenses (including management fees) for each Underlying Fund (listed in the table below) are paid out of the relevant Underlying Fund and are not charged to the relevant Smartshares Fund or its Unitholders directly. However, because the annual operating expenses (along with transaction fees) are paid out of the relevant Underlying Fund, the Return on an investment in the Underlying Fund is reduced accordingly (which in turn reduces the Return received by Unitholders of the Smartshares Fund that invests in that Underlying Fund).

Smartshares Fund Name

Underlying Fund (The Vanguard Group, Inc. Code)

Description Annual operating expenses for Underlying Fund as at 13 November20152

Management fee for Smartshares Fund3

US 500 Trust Vanguard 500 Index Fund ETF Shares (VOO)

The Vanguard 500 Index Fund ETF Shares gives investors exposure to 500 large entities listed on the NYSE or NASDAQ markets by tracking the S&P 500 Index (which is used as the primary gauge for the American market).

0.05% 0.30%

Europe Trust Vanguard European Stock Index Fund ETF Shares (VGK)

The Vanguard European Stock Index Fund ETF Shares gives investors a broad exposure to entities listed in developed European markets by tracking the FTSE Developed Europe All Cap Index, which comprises large- and mid-capitalisation entities, as determined by the index administrator, from developed European markets such as Germany, Switzerland and the UK.

0.12% 0.45%

Asia Pacific Trust

Vanguard Pacific Stock Index Fund ETF Shares (VPL)

The Vanguard Pacific Stock Index Fund ETF Shares gives investors a broad exposure to entities listed in developed Asia Pacific markets by tracking the FTSE Developed Asia Pacific All Cap Index, which comprises large- and mid- capitalisation entities, as determined by the index administrator, from developed markets in Asia Pacific, including Australia, Japan and Singapore.

0.12% 0.45%

2 The annual operating expenses are expressed to be a percentage of the net asset value of the Underlying Fund and do not include transactions fees which are also paid out of the Underlying Fund. The impact of the operating expenses on Unitholders' Returns will depend on timing and foreign exchange differences. 3 More information on the fees and charges that apply in relation to investing in a Smartshares Fund is set out on pages 26 and 27 of this document.

19

Emerging Markets Trust

Vanguard Emerging Markets Stock Index Fund ETF Shares (VWO)

The Vanguard Emerging Markets Stock Index Fund ETF Shares gives investors a broad exposure to entities listed in advanced and secondary emerging markets by tracking the FTSE Emerging Markets All Cap China A Transition Index, which comprises large- and mid-capitalisation entities, as determined by the index administrator, from emerging markets such as Brazil, China, and India.

0.15% 0.45%

Total World Trust

Vanguard Total World Stock Index Fund ETF Shares (VT)

The Vanguard Total World Stock Index Fund ETF Shares gives investors a broad exposure to entities listed in developed and emerging markets by tracking the FTSE Global All Cap Index, which comprises large-, mid- and small -capitalisation entities, as determined by the index administrator, globally from both developed and emerging markets such as the U.S, Asia Pacific, Europe and Asia.

0.17% 0.45%

US Large Value Trust

Vanguard Value Index Fund ETF Shares (VTV)

The Vanguard Value Index Fund ETF Shares gives investors exposure to large-capitalisation value entities, as determined by the index administrator, listed on the NYSE or NASDAQ markets by tracking the CRSP U.S. Large Cap Value Index.

0.09% 0.45%

US Large Growth Trust

Vanguard Growth Index Fund ETF Shares (VUG)

The Vanguard Growth Index Fund ETF Shares gives investors exposure to large-capitalisation growth entities, as determined by the index administrator, listed on the NYSE or NASDAQ markets by tracking the CRSP U.S. Large Cap Growth Index.

0.09% 0.45%

US Mid-Cap Trust

Vanguard Mid-Cap Index Fund ETF Shares (VO)

The Vanguard Mid-Cap Index Fund ETF Shares gives investors exposure to mid-capitalisation entities, as determined by the index administrator, listed on the NYSE or NASDAQ markets by tracking the CRSP U.S. Mid Cap Index.

0.09% 0.45%

US Small-Cap Trust

Vanguard Small-Cap Index Fund ETF Shares (VB)

The Vanguard Small-Cap Index Fund ETF Shares gives investors exposure to small-capitalisation entities, as determined by the index administrator, listed on the NYSE or NASDAQ markets by tracking the CRSP U.S. Small Cap Index.

0.09% 0.45%

The Underlying Funds described above share the following characteristics: Underlying Fund Manager: The Vanguard Group, Inc. is the investment adviser to each Underlying Fund (the Underlying Fund Manager) and is responsible for making adjustments to the portfolio of each Underlying Fund in order to track the relevant Underlying Index.

20

Fees and Expenses: The Underlying Fund Manager is entitled to charge its operating expenses (including management fees) to the relevant Underlying Fund. The current annual operating expenses are set out above (but may change without notification to Unitholders or the Manager). Transaction fees, such as commissions when the Index Securities are bought and sold, are also paid out of the relevant Underlying Fund. Distributions Policy: The distribution policy for each Underlying Fund is to distribute to its shareholders virtually all of its net income (interest and dividends, less expenses) as well as any net short-term or long-term capital gains realised from the sale of its holdings. Income dividends generally are distributed quarterly and capital gains distributions (if any) generally occur annually.

Index Methodology: The methodology for constructing each Underlying Index is determined by the index

administrator and may change from time to time.

21




Each Smartshares Fund is a unit trust constituted under the Unit Trusts Act 1960 and, accordingly, the Units offered in this Investment Statement are units in a unit trust. Each Smartshares Fund was established on 10 July 2015 under the relevant Trust Deed.

Applications were made to the Special Division that regulates the Manager (in the place of NZX) for permission to quote Units in the Smartshares Funds on the NZX Main Board so that they are exchange traded funds. These applications were accepted, and Units are quoted on the NZX Main Board. However, the Special Division accepts no responsibility for any statement in this Investment Statement.

When you buy Smartshares Units you become a Unitholder in the relevant Smartshares Fund you have chosen to invest in. Each Smartshares Fund is passively managed and its objective is to provide Returns to Unitholders that closely track the Return (price and yield performance) of the relevant Underlying Fund subject to fluctuations in the value of the New Zealand dollar versus foreign currencies, and less certain costs (including tax) and fees of the Smartshares Fund. To achieve this objective, the Manager invests in shares in the Underlying Fund (Underlying Shares).

Each Underlying Fund is an index tracking fund. This means it is a fund that aims to provide a Return to its shareholders (including the Smartshares Fund that has invested in it) that tracks the Return of the relevant Underlying Index, before fees, expenses and tax. This is called index tracking, and can be achieved in two ways.

Index replication

The prospectuses of the relevant Underlying Funds state that the Underlying Funds that use index replication to track the relevant Underlying Index aim to invest in securities (Index Securities) of entities that are part of the relevant Underlying Index (Index Issuers) in proportions that track their weightings in the Underlying Index.

From time to time the Index Issuers that comprise the Underlying Index that the Underlying Fund tracks may change. This may be caused by new Index Issuers being included in the index, existing Index Issuers being excluded from the index, Index Issuers delisting, or changes to the index methodology. Where this happens each relevant Underlying Fund will buy and sell Index Securities to continue to maintain holdings in close proportion to the weightings of securities in the Underlying Index that the Underlying Fund tracks.

Currently, all Underlying Funds other than the Vanguard FTSE Emerging Markets ETF (which the Emerging Markets Trust invests in) and the Vanguard Total World Stock ETF (which the Total World Trust invests in) use index replication to track the relevant Underlying Index. The Underlying Fund Manager may instead from time to time elect to use index sampling (described below) to track the relevant Underlying Index (without notification to Unitholders or the Manager).

Index sampling

The prospectuses of the relevant Underlying Funds state that the Underlying Funds that use index sampling to track the relevant Underlying Index aim to track the investment performance of the Underlying Index by investing in a representative sample of Index Securities (selected by computer programs) that will resemble the Underlying Index in terms of key risk factors and other characteristics. These factors include industry weightings, country weightings, market capitalisation, and other financial characteristics of securities.

Currently, the Vanguard FTSE Emerging Markets ETF (which the Emerging Markets Trust invests in) and the Vanguard Total World Stock ETF (which the Total World Trust invests in) use index sampling to track the relevant Underlying Index. The Underlying Fund Manager may from time to time elect to use index replication (described above) to track the relevant Underlying Index instead (without notification to

22

Unitholders or the Manager).




- US 500 TRUST;

- EUROPE TRUST;

- ASIA PACIFIC TRUST;

- EMERGING MARKETS TRUST;

- TOTAL WORLD TRUST;

- US LARGE VALUE TRUST;

- US LARGE GROWTH TRUST;

- US MID-CAP TRUST; and

- US SMALL-CAP TRUST.

The Manager




The FMC Act requires managers who act as the manager of a registered scheme to be licensed by the FMA before they can make offers under the new disclosure regime in the FMC Act. The Manager has applied to the FMA for the necessary licence and the FMA is currently considering the Manager’s application. Licences will be issued at the discretion of the FMA. As the Manager does not yet hold a licence, it offers the Units under the Securities Act 1978, which will apply to this offer.





23




Guy Roulston Elliffe (Wellington)


Alister John Williams (Auckland)




Summary of Duties

The Manager is responsible for investing in Underlying Shares, the maintenance of accounting records of the Smartshares Funds, communication with Unitholders, supervision of the Unit Registrar and the payment of distributions to Unitholders. Some of these responsibilities are delegated to the Administration Manager, the Custodian and the Unit Registrar.

The Trustee

The Trustee is: Trustees Executors Limited Level 5, 10 Customhouse Quay PO Box 3222 Wellington Tel: (04) 495 0999 Fax: (04) 496 2952 Email: [email protected]

The Trustee's address may change from time to time. You can find up-to-date details at any time at www.business.govt.nz/companies.


A copy of the Trustee’s licence, including the conditions on the licence, can be obtained at the FMA’s website: www.fma.govt.nz by clicking on “Help Me Comply”, “Trustees”, “Licensed Trustees and Statutory Supervisors”, “Trustees Executors Limited”. Alternatively, a copy can be found on the Trustee’s website: www.trustees.co.nz. All conditions and reporting obligations have been duly satisfied by the required dates. If you have any queries about the licence please contact the Trustee in the first instance.



24




The Custodian

The Custodian is: BNP Paribas Fund Services Australasia Pty Ltd, New Zealand branch Level 18, State Insurance Tower, 1 Willis Street PO Box 3299, Wellington www.securities.bnpparibas.com

The Custodian's address may change from time to time. You can find up-to-date details at any time at www.business.govt.nz/companies.

The Custodian provides custodial services, including holding assets of the relevant Smartshares Funds in custody for safekeeping and separate from the personal assets of the Trustee or Manager.

Unit Registrar




None of the Manager, the Trustee, the Administration Manager, the Custodian, the Unit Registrar nor any of their directors nor any other persons associated with the offer guarantees the Smartshares Units, repayment of the Smartshares Units, or the payment of any dividends or distributions on Smartshares Units.


The Smartshares Funds are unit trusts constituted under the Unit Trusts Act 1960. The Smartshares Funds were established on 10 July 2015 under the Trust Deeds. For more information regarding the Trust Deeds see the "Summary of the Trust Deeds" section in the registered prospectus for the Smartshares Funds.

SuperLife Limited will, before the offer described in this Investment Statement is made, provide "seed" funding for the Smartshares Funds by subscribing for Smartshares Units. The provision of this seed funding




25

is described in the registered prospectus for the Smartshares Funds.

How much do I pay?



Subscriptions for Smartshares Units can be made by applying online at http://smartshares.co.nz/invest-now, or by completing the Application Form attached to this Investment Statement and sending it with the full amount of the application payment to Smartshares Limited at the address of the Unit Registrar or to any NZX Firm. You can also buy Units on market via an NZX Firm, in which case the Manager’s application fees will not apply.

The minimum cash Subscription Amount for investors who do not already have the Minimum Holding of Smartshares Units in the Smartshares Fund that they wish to invest in is $500 (which includes a flat application fee of $30 for amounts of less than $20,000 or 0.20% of the full Subscription Amount for Subscription Amounts equal to or greater than $20,000, which is deducted from the application amount and paid to the Manager).


Subscription Amounts for Cash Applications need to be received by the Unit Registrar, Link Market Services, by the 20th of the month so Smartshares Units can be priced at the end of the month by the Manager. There is no maximum Subscription Amount. No interest will be paid to subscribers on Subscription Amounts.

The Manager will, at its discretion, use a Subscription Amount either to purchase the relevant Underlying Shares and then issue new Units to the investor or to purchase existing Units on market through an NZX Firm and pass those existing Units on to the investor. In either case, the Manager's purchase of Index Securities or Units with the Subscription Amount will be made on or about the last Business Day of each month at current market prices. Smartshares Units will not be allocated until after the end of the month in which the Cash Application is received.



Once you have the Minimum Holding of Smartshares Units, investing regularly can be a very effective way to accumulate Smartshares Units over the long term. Even small amounts saved on a regular basis have the potential to grow into a significant number of Smartshares Units over a number of years.

The Regular Savings Plan lets Unitholders make a regular investment on or about the 20th of each month, directly from their nominated New Zealand bank account. Provided Unitholders hold the Minimum Holding, or if they make a Cash Application that, if accepted, would mean they hold the Minimum Holding, they can choose to participate in the Regular Savings Plan and start saving with contributions as low as $50 per month. Simply apply online at http://smartshares.co.nz/invest-now, or complete the Application Form and direct debit authority included in this Investment Statement. Unitholders’ payments will be automatically withdrawn from their nominated bank account on a monthly basis. Unitholders can add an additional lump sum payment ($250 minimum value), or increase or decrease their contribution at any time (subject to providing the Unit Registrar with ten Business Days' notice prior to the 20th of a month and, unless contributions are being completely stopped, maintaining a minimum contribution of $50 per month).

If Unitholders enter the Regular Savings Plan and then fail to make payments, no additional Smartshares Units will be allocated to their investment. If Unitholders fail to make payments for three consecutive months, their access to the Regular Savings Plan may be discontinued. Unitholders may at any time, by giving the Unit Registrar ten Business Days' notice prior to the 20th of a month, cease their payments into



26

the Regular Savings Plan. The Manager will, at its discretion, use the Regular Savings Plan monies either to purchase the relevant Underlying Shares and then issue new Units to the Unitholder or to purchase existing Units on market and pass those existing Units on to the Unitholder. In either case, the Manager's purchase of Underlying Shares or Units with Regular Savings Plan monies will be made on or about the last Business Day of each month at current market prices. Smartshares Units will not be allocated until after the end of the month in which the subscription under the Regular Savings Plan is received.

Any interest earned on the Regular Savings Plan monies prior to the purchase of Smartshares Units or the relevant Underlying Shares each month will be retained by the Manager. These amounts will be used to cover the cost of operating the Regular Savings Plan and other administrative costs. Any amount left over after this will go to the Manager.


Each Smartshares Fund receives distributions from the relevant Underlying Fund. As described on page 15 these distributions and other income are retained within the relevant Smartshares Fund and then allocated to Unitholders for distribution. Such distributions are automatically reinvested on each Distribution Date (after the deduction of Distribution Reinvestment Plan fees (if any)) to provide you with additional Smartshares Units, unless you choose to have these paid out to you by direct credit.

On each Distribution Date, the Manager will, at its discretion, use the reinvestment monies for Unitholders who have their distributions reinvested either to purchase Underlying Shares and then issue new Units to those Unitholders or to purchase existing Units on market and pass those existing Units on to those Unitholders. In either case, the Manager's purchase of Underlying Shares or Units with reinvestment monies will be made at current market prices.

The Distribution Reinvestment Plan described in the Prospectus for the Smartshares Funds constitutes the description of the "dividend reinvestment plan" for the purposes of the FMC Act and Financial Markets Conduct Regulations 2014.


The Manager may, at its sole discretion, allow some investors to subscribe for Smartshares Units in exchange for a Basket or Baskets of Underlying Shares plus an additional Cash Amount (which will be equivalent to income accrued in the relevant Smartshares Fund that will be attributable to the Units being subscribed for).

The Manager will decide the number of Underlying Shares that constitute a Basket, the Cash Amount per Basket and the number of Units that will be issued in exchange for a Basket at the time the Manager is approached by an investor about making a Basket application. While the Manager has not set a minimum Basket size, it anticipates that it will only allow investors to make a Basket application in limited circumstances.

There is no Basket application fee.

Basket applications must be made through an NZX Firm on the Basket application form available from the Manager or any NZX Firm. The Manager may, at its sole discretion, either refuse or accept a Basket application request.

Minimum Holding

Unitholders should maintain a minimum number of Smartshares Units at all times (Minimum Holding). If you fail to maintain the minimum number of Smartshares Units, the Manager reserves the right to purchase your Units or instruct the Trustee to redeem them (provided that the exercise of that right would not breach the Listing Rules). The Minimum Holding of Smartshares Units in the US 500 Trust is 50 Units, while the Minimum Holding of Smartshares Units in all of the other Smartshares Funds (as defined) is 100 Units.


Smartshares Units are issued at the Current Unit Value applying at the relevant time for Cash Applications,

27

the Regular Savings Plan and the Distribution Reinvestment Plan.

The Current Unit Value of a Smartshares Unit is determined by dividing the total value of the Smartshares Fund’s NAV by the total number of Smartshares Units on issue. The Current Unit Value of a Smartshares Unit includes not only the market value of the relevant Underlying Shares held by a Smartshares Fund, but also accrued income in relation to those Underlying Shares (for example, Underlying Fund distributions) less outgoings (for example, tax expenses and the Manager's fee). Please note that these examples of income and outgoings are not exhaustive and other types of income may be received and outgoings incurred from time to time.

Oversubscription

There is no limit on the total number of Smartshares Units that may be subscribed for and accordingly none of the Smartshares Funds have a policy providing for oversubscription. However, the Manager may reject an application for Units or require redemption of Units to maintain the Smartshares Fund’s PIE status where there is a risk that a Unitholder will exceed the maximum investor interest size requirement prescribed in the Tax Act (and as set out in the “PIE Eligibility” section at page 31 below).

Suspension of Issues and Redemptions

The Manager is not obliged to accept basket applications or basket withdrawals in a Smartshares Fund in the period from (and including) the date of the Announcement of a distribution to (and including) the Distribution Ex Date for that distribution.

Refunds






The Manager may also ask a Unitholder to provide any other information that the Manager reasonably requires in order to manage its obligation to comply with any laws or regulations in New Zealand or any other country in relation to the Smartshares Funds (including in relation to anti-money laundering and countering financing of terrorism).





If you buy Smartshares Units directly from the Manager through a Cash Application (as described on page 25 above) you pay a flat application fee to the Manager of $30 for Subscription Amounts of less than $20,000, or 0.20% of the full Subscription Amount for Subscription Amounts equal to or greater than $20,000. However, this application fee is not payable if you already hold the Minimum Holding of

28

Smartshares Units in the relevant Smartshares Fund. The application fee may be increased by the Manager by giving ten Business Days' notice of the change to the Trustee. The application fee may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.




Management fees are charged to the Smartshares Funds and is currently, for the US 500 Trust, 0.30% per annum of the NAV of the US 500 Trust and, for all other Smartshares Fund, 0.45% per annum of the NAV of the relevant Smartshares Fund, and is accrued daily and paid to the Manager on a monthly basis in arrear. The Manager may agree payments to individual Unitholders that are the equivalent of management fee rebates (in the form of additional Smartshares Units or cash, as agreed between the Manager and the Unitholder).

The fee charged by the Manager may be increased by the Manager by giving three months’ notice of the change to the Trustee and, if the change is material (as determined by the Manager in its reasonable discretion), to Unitholders of the relevant Smartshares Fund or the fee may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.

In addition to the management fee, the Manager is entitled to interest on amounts held including in respect of distributions and other income received by the Smartshares Funds and on cash Subscription Amounts (including amounts received under the Regular Savings Plan or Distribution Reinvestment Plan) between the date on which they are received and the date of issue of Units.



The management fees cover the expenses for the ongoing operation of the Smartshares Funds. These include reporting, the custodian fees, administration fees, trustee fees, registry costs, and brokerage fees for purchasing Underlying Shares. The Manager reserves the right, however, to have these amounts, and any other expenses that arise, paid from the Smartshares Funds.

Underlying Fund Fees and Charges

The Underlying Fund Manager charges its operating expenses (including management fees) to the Underlying Funds. The current annual operating expenses in relation to each Underlying Fund are set out on pages 18 to 19, but these may change without notification to Unitholders or the Manager. Unlike the Manager, the Underlying Fund Manager charges transaction fees (such as trading and brokerage costs) directly to the relevant Underlying Fund (rather than including them in its operating expenses). These costs will affect the Return received by shareholders of the Underlying Funds (including the relevant Smartshares Fund and therefore Unitholders).


29




(a) any increase in the price of Smartshares Units at the time you sell, relative to the price at which you bought on market, or subscribed if an application was made directly; and

(b) any distributions from the relevant Underlying Fund or other income received by the Smartshares Fund. Smartshares Funds distribute all income received (for example, Underlying Fund distributions) less outgoings (for example, tax, expenses and management fees). Please note that these examples of income and outgoings are not exhaustive and other types of income may be received and outgoings incurred from time to time. You will automatically have your distributions re-invested as Smartshares Units unless you elect to have them paid directly to a nominated bank account.


The Returns for the Smartshares Funds are dependent on the Returns of the relevant Underlying Fund.

The Returns for the Underlying Funds are subject to the general fluctuations and direction of the sharemarkets that Index Securities are listed in and the performance of the Index Issuers, which includes changes in their security prices and the value of any dividends or other distributions paid. Both of these factors are influenced by global economies.

The Returns for the Underlying Fund are also affected by increases or decreases in the Underlying Fund Manager's operating expenses (including management fees) in respect of that Underlying Fund, currency fluctuations where the Underlying Fund has investments that are not denominated in US Dollars and other events such as changes in relevant tax laws.

In addition, the Returns for the Smartshares Funds may be affected by currency fluctuations between the New Zealand and US Dollar (as the Manager does not currently take steps to hedge against currency fluctuations) and the application of US law to the Smartshares Funds or investors.


The amount of the Returns you get from your investment in Smartshares Units will vary from time to time, depending on the factors above. Returns cannot be predicted with any accuracy. None of the Manager, the Underlying Fund Manager, the Trustee, NZX, the Custodian, the Unit Registrar and Administration Manager nor any other person guarantees a particular level of Return on your investment in Smartshares Units. No Returns are promised.

Distributions

Distributions are currently made directly from each Smartshares Fund within 20 Business Days of the Record Date and are paid to Unitholders whose names are on the register in respect of Units held on the Record Date. The Record Date is on or about the last Business Day in January, April, July and October in each year.

Unitholders who sell Units or redeem Units (via Basket withdrawal) from a Smartshares Fund before a Distribution Ex Date for a Record Date will not receive any distributions from that Smartshares Fund in respect of that Record Date.

These distributions comprise Underlying Fund distributions or any other income, less fees and other expenses. Income paid into a Smartshares Fund in foreign currency (which is expected to be all distributions received from the Underlying Funds) will not be available for distribution to Unitholders until it has been exchanged for New Zealand dollars. Unitholders will automatically have their distributions reinvested as

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Smartshares Units unless they elect to have them paid directly to a nominated New Zealand bank account.

The Manager may, at its discretion, deduct from any distribution an amount of cash if, and to the extent that, the Manager reasonably considers that such a deduction is required to meet any outgoings that become payable in the next (or later) distribution period. Such deductions will be retained in the Smartshares Fund.


Taxation

The following comments are intended to be only a general summary and indication of the Manager's understanding of relevant New Zealand and United States tax law as at the date of this Investment Statement. There may be other consequences which affect the Smartshares Funds or the Unitholders. Neither the Trustee nor the Manager accepts any responsibility for the taxation consequences of an investment in the Smartshares Funds.

The Underlying Funds are based in the United States. There is a risk that US tax and other laws will apply to the Underlying Funds, the Smartshares Funds and/or investors in a way that the Manager did not anticipate or that such laws change in a way that adversely affects the Underlying Funds, the Smartshares Funds and/or investors.

Unitholders who buy or sell Smartshares Units may have different taxation positions. Consequently, each Unitholder should consider their own taxation position and if necessary seek professional advice before investing in Smartshares Units.

Taxation may affect the Returns on the Smartshares Funds and investing in each of the Smartshares Funds may have varying tax implications. The taxation summary below is based on the Manager's understanding of New Zealand tax law as at the date of this Investment Statement.

The Smartshares Funds are Listed PIEs. As Listed PIEs the Smartshares Funds pay tax on income derived by the Smartshares Funds at a rate of 28%.

New Zealand Taxation of investments of the Smartshares Fund

The Smartshares Funds will apply the “fair dividend rate” (“FDR”) method to calculate the amount of the taxable income in relation to their investment in the Underlying Funds. Under the FDR method, each Smartshares Fund will have taxable income in each income year (1 April to 31 March) calculated with reference to 5% of the average daily opening market value of the Underlying Shares held by the relevant Smartshares Funds.

Distributions received by the Smartshares Funds in relation to these Underlying Shares should not be subject to further tax. The Smartshares Funds may be entitled to a credit for any withholding tax paid on distributions received from the Underlying Funds subject to certain limits. No tax deduction may be claimed for any losses in respect of the applicable equities under the FDR method.



The Smartshares Funds will attach Imputation Credits to distributions to Unitholders to the extent that Imputation Credits are available.

To the extent that distributions are not fully imputed New Zealand resident Unitholders will not be taxed on distributions that they receive from the Smartshares Funds. The effect of this is that non-taxable income (e.g. income that a Smartshares Fund receives in excess of the amount of the taxable income as calculated under the FDR method) derived by the Smartshares Funds can be distributed to such Unitholders free from tax.

Natural person Unitholders and trustee Unitholders (other than a trustee of a unit trust) subject to a tax rate

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below the corporate tax rate (currently 28%) may choose to treat distributions that are fully imputed as assessable income by including that amount in their tax return. This allows such Unitholders to use Imputation Credits attached to distributions in excess of what is necessary to fully satisfy the income tax liability in relation to those distributions, to offset against the tax on their other taxable income. How Unitholders should treat distributions from the Smartshares Funds for tax purposes will depend on their personal tax circumstances and as such it is recommended that all Unitholders should seek independent tax advice.



The Smartshares Funds will attach Imputation Credits to distributions to Unitholders to the extent that Imputation Credits are available.




New Zealand also has a foreign investor tax credit regime whereby the impact of NRWT on dividends is reduced by the payment of a supplementary dividend for investors holding less than 10% of the Smartshares Units in a Smartshares Fund and if the NRWT rate is 15% or more. The Smartshares Funds intend to pay supplementary dividends to non-resident Unitholders wherever possible, provided that payment meets the Trust Deeds' requirements and does not disadvantage other Unitholders.


Benefits of PIE

A benefit of the PIE regime is that tax payable on distributions made by a Smartshares Fund to Unitholders is effectively capped at 28%. If you are currently paying tax at a rate less than 28% then the excess tax paid by the Smartshares Funds can be used to reduce the tax liabilities of Unitholders in respect of other income that they derive at the end of each income year by including the distributions from the Smartshares Fund(s) in your tax return.

PIE Eligibility

The Manager has the discretion to take any steps the Manager considers necessary or desirable to ensure that each Smartshares Fund is eligible to be enrolled and remain as a PIE. This includes replacing an Underlying Fund with a fund that is materially the same if the Smartshares Fund can no longer invest in the Underlying Fund without compromising its PIE status or ensuring that any one Unitholder’s unit holding does not exceed the maximum investor interest size requirement in the Tax Act, which is a number of Smartshares Units not exceeding 20% of the total issued Smartshares Units of each Smartshares Fund (for these purposes, the Smartshares Units held by the relevant Unitholder’s “associated persons” that are not Exempt Investors and who, themselves, hold Smartshares Units amounting to 5% or more of the units on issue will also be taken into account in determining whether the 20% threshold has been exceeded).

There is no investor interest size requirement for a Unitholder that is an Exempt Investor. Any such exempted Unitholder may hold up to 100% of the Smartshares Units in the Smartshares Fund.



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• the Unitholder acquired the Smartshares Units for the purpose of sale or other disposal; or

• the Unitholder carries on a business involving dealing in the Smartshares Units or other similar property; or

• the disposal of the Smartshares Units occurs as an act done in the carrying on of a profit-making scheme or undertaking.

As a general comment, most PIEs that invest in a Smartshares Fund should not be subject to tax on any gains made on the disposal of Units in the Smartshares Fund, and other Unitholders which are resident in a country with which New Zealand has a double tax agreement may qualify for tax relief so that they are also not subject to tax on any gains made on the disposal of Units in the Smartshares Fund.

Other Tax Considerations

Distributions received by the Smartshares Fund from the Underlying Fund may be subject to US withholding tax. The Manager will manage the completion of a W8-BEN-E form for each Smartshares Fund in order to benefit from the reduced withholding tax rate available under the double tax agreement between New Zealand and the US (which, as at the date of this Investment Statement, is 15%). The Smartshares Funds may be entitled to a credit for any withholding tax paid on distributions received from the relevant Underlying Fund subject to certain limits.

US capital gains tax is not expected to apply in respect of any gains derived by the Smartshares Funds on the disposal of units in the Underlying Fund on the basis that the Smartshares Funds will not have a permanent establishment in the US and should therefore be treated as ‘non-resident’ for US tax purposes.

No credit will be available to the Smartshares Funds in respect of taxes withheld at source on distributions received by the Underlying Fund.




Notice of election for the Distribution Reinvestment Plan (forms are available from Smartshares Limited) received by the Unit Registrar at least 10 Business Days prior to a Distribution Date will be effective in respect of that distribution, otherwise such notice will be effective in respect of the next distribution. Once you have elected to reinvest your distributions, reinvestment will continue until you advise the Unit Registrar otherwise. Fees for the Distribution Reinvestment Plan are set out on page 27.



What are my risks?

Risks that are likely to be material to an investor considering an investment in the Smartshares Fund are set out below. Some of the risks arise due to the structure of the Smartshares Fund that invests in the

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Underlying Funds, others arise due to the nature of the Underlying Funds themselves.

Market risk

The Underlying Funds invest in broadly based portfolios of securities and there is a risk that the general level of the securities’ prices may decline, thereby adversely affecting the value of such an investment. The level of distributions that the Smartshares Funds receive from the Underlying Funds is dependent on the level of distributions paid by Index Issuers (because distributions paid by Index Issuers to each Underlying Fund are passed on to holders of the relevant Underlying Shares (including the relevant Smartshares Fund) less certain fees and costs). The Manager has no influence over the dividend policies of Index Issuers or the Underlying Funds or over anything else that may affect the level of distributions paid by them. Accordingly, there is no guarantee of any particular level of distributions.

Securities are susceptible to general sharemarket fluctuations and to volatile increases and decreases in price as market confidence in and perceptions of issuers change. These investor perceptions are unpredictable and may be based on various factors including expectations regarding government, economic, monetary and fiscal policies, inflation and interest rates, economic expansion or contraction, and global or regional political, economic, banking or financial market crises.

The value of securities can also be affected by their liquidity. For smaller stocks, where there can often be limited liquidity, a change in their indices weightings could have an effect on the level of demand in the market place. This in turn may impact the price an Underlying Fund has to trade at to track the relevant Underlying Index and the fluctuation in the price of the security may ultimately affect the Return received by the relevant Smartshares Fund.

Returns on Index Securities and thereby the Units may also be affected by sector risks, regional risks and index issuer risk.

Sector Risk

Other than the Vanguard Total World Stock Index Fund ETF Shares, each of the Underlying Funds invests in a particular market sector (either a subset of the United States stock market or a particular international region). That sector may be more volatile and less liquid than the market as a whole.

Country / Regional Risk

This is the risk that world events, such as political upheaval, financial troubles or natural disasters, will adversely affect the value of securities issued by companies in certain countries or regions. Most of the Underlying Funds have heavy exposure to certain countries or regions and will face a higher degree of country risk than that of a more geographically diversified international fund.

The Vanguard Emerging Markets Stock Index Fund ETF Shares and the Vanguard Total World Stock Index Fund ETF Shares are susceptible to emerging markets risk. This means there is a chance that the value of the securities of companies located in emerging markets will be substantially more volatile, and substantially less liquid, than the securities of companies located in more developed markets because, among other factors, emerging markets can have greater custodial and operational risks, less developed legal, regulatory and accounting systems and greater political, social and economic instability than developed markets.

Index Issuer Risk

Index Issuer risk occurs where the individual assets of an Underlying Fund fluctuate in value due to circumstances specifically applicable to a particular Index Issuer. This risk is mitigated to an extent because the Underlying Funds invest in a number of Index Issuers across a number of industries (and in some cases countries and regions) at approximately their relevant index weight. Therefore, the fluctuation in value of a single Index Issuer has a diluted effect on overall performance.

Foreign currency risk

The Smartshares Funds acquire investments and receive returns in US dollars. Fluctuations in the value of the New Zealand dollar versus the US dollar may affect the returns received by the Smartshares Funds. This is because the value of the Underlying Shares and any distributions received in respect of the Underlying

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Shares must be converted back into New Zealand dollars by the Smartshares Funds. The Smartshares Funds do not hedge any of their indirect exposure to the US dollar or any other foreign currencies.

The Underlying Funds pay distributions in US Dollars and the Underlying Shares are denominated in US Dollars. However, several of the Underlying Funds invest in entities domiciled outside of the US. These funds may be exposed to a currency risk based on the exchange rate between the currency the returns are received in and the US dollar.

Tracking risk

Manager’s ability to acquire Underlying Shares

Each Smartshares Fund may not always be able to provide a return to Unitholders that closely tracks the Return on the Underlying Index. The Underlying Shares are listed for trading on NYSE Arca (an exchange) and are bought and sold by the Manager on the secondary market at market prices. Although it is expected that the market price of an Underlying Share typically will approximate its net asset value, there may be times when the market prices and the net asset value differ. Accordingly, the Smartshares Funds may pay more or less than the net asset value when buying Underlying Shares and may receive more or less than the net asset value when selling Underlying Shares. Trading in the Underlying Shares may also be halted or suspended or the Underlying Shares may be delisted which may mean the Manager is unable to trade Underlying Shares either temporarily or permanently.

Underlying Fund Manager’s ability to track Underlying Index

For a variety of reasons the Underlying Fund Manager is unlikely to track the Underlying Indices exactly. As a result of this, the Index Securities held by an Underlying Fund may, over time, not exactly track the investment performance of the Underlying Index that the Underlying Fund tracks.

Even where the Underlying Fund uses index replication to track an Underlying Index (described on page 21 and used by all Underlying Funds other than the Vanguard Emerging Markets Stock Index Fund ETF Shares and the Vanguard Total World Stock Index Fund ETF Shares), it is likely that the Underlying Fund Manager will not be able to exactly track changes to the Underlying Indices by buying and selling Index Securities, because the prices it pays and receives for Index Securities may not exactly track the prices used to calculate an Underlying Index. For example, there may be limited liquidity in relation to securities the Underlying Fund Manager is attempting to buy that pushes up the purchase price of those securities after an adjustment to the relevant Underlying Index, but before the Underlying Fund Manager can buy.

Where the Underlying Fund uses index sampling to track an Underlying Index (described on page and used by the Vanguard Emerging Markets Stock Index Fund ETF Shares and the Vanguard Total World Stock Index Fund ETF Shares), there is a risk that the Index Securities selected by the Underlying Fund Manager (using its computer programs) will not provide the same investment performance as the Underlying Index.

There is also a risk that tracking errors arise due to human or systems errors, as index tracking is a complex exercise.

Some tracking errors may result in the net asset value of an Underlying Fund's Index Securities increasing in relation to the value of the relevant Underlying Index. However, other tracking errors may result in the net asset value of an Underlying Fund's Index Securities reducing in relation to the value of the Underlying Index. When the latter is the case, the Return generated by the Underlying Fund may be less than the Return on the relevant Underlying Index.


The Smartshares Funds are passive investments. The Manager will not react to events that affect the value of its investments in the Underlying Funds (such as poor performance of Index Issuers in the Underlying Indices that the Underlying Funds track) and will continue to hold and purchase the relevant Underlying Shares

Traditional methods of investment management for an actively managed fund typically involve deliberate changes to a portfolio of securities based on judgement of economic, financial and market conditions, as well as factors specific to individual issuers. In contrast, the Underlying Funds are passive investments, meaning

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that the Underlying Fund Manager does not make active investment decisions in relation to the Index Issuers it invests in. The prospectus of each Underlying Fund states that the Underlying Fund Manager aims to buy and sell Index Securities in order to track the relevant Underlying Index, rather than making judgments about Index Issuers or wider market conditions. If an Index Issuer (or Index Issuers generally) were to perform poorly, the Underlying Fund Manager would not take any action, unless and until action would be required to ensure that the Underlying Fund continues to track the relevant Underlying Index.

Operational Risk

There is a risk that errors (including improperly analysing the effect of tax laws), fraud or misconduct may cause a loss to a Smartshares Fund or otherwise affect Unitholders' Returns. In order to mitigate this risk the Manager has adopted a set of internal policies and procedures and also outsources some aspects of its operations to the Administration Manager to draw on the Administration Manager's systems and expertise. The Manager has also insured, subject to normal commercial excesses, against losses arising from fraud and misconduct.

Third Party Operational Risk

As noted above, the Manager manages some of its operational risk by outsourcing some functions, such as the calculation of Current Unit Values, to the Administration Manager. However, while that gives the Smartshares Funds the benefit of the Administration Manager's expertise, it also creates some risk because it means the Manager has less direct control and oversight of those functions. The Manager has satisfied itself of the reliability and expertise of the Administration Manager, but there is still a risk that the Administration Manager may not perform its functions properly (which the Manager may not immediately become aware of), or may become unable to perform these functions (for example because of its insolvency). Such a failure could have a material adverse effect on Unitholders.

Underlying Fund Operational Risk

The Smartshares Funds rely on the Underlying Fund Manager to properly manage the Underlying Funds and accurately track the Underlying Indices. The Manager does not have control over the Underlying Fund Manager's functions or direct oversight of the Underlying Fund Manager's tracking performance. There is a risk that the Underlying Fund Manager will not perform its functions properly (which the Manager may not become aware of). In particular, tracking an index and assessing the reasons for imperfect tracking performance is very complex and some errors may occasionally be made. Such performance failures could have a material adverse effect on the value of a Smartshares Fund's investment in an Underlying Fund, and thus Unitholders. The Underlying Fund Manager does not owe any obligations to Unitholders and only owes obligations to each Smartshares Fund as a shareholder in the relevant Underlying Fund.

Liquidity Risk

Unitholders are only able to cash in their investments by selling their Units on market (although the Manager reserves the right to, at its sole discretion, allow large Unitholders to redeem Units via Basket withdrawal, which is described on page 39. The market price per Unit may vary from the Current Unit Value of a Smartshares Fund due to supply and demand factors. Applications were made to the Special Division that regulates the Manager (in the place of NZX) for permission to quote the Units on the NZX Main Board. These applications were accepted, and Units in the Smartshares Funds are quoted on the NZX Main Board. In the opinion of the Manager, there is an established market for sales of Units. However, although the Units are quoted on the NZX Main Board, the fact that investors can apply to purchase Units directly from the Manager may result in a reduced number of buyers of Units on the NZX Main Board.

Tax Risk

Taxation laws, their interpretation, or the Inland Revenue Department’s application of those laws may change during the period of an investor’s investment in a Smartshares Fund, in a way which has an adverse impact on the Returns to that investor.

Each Smartshares Fund is registered as a PIE, and as such there are tax risks that need to be managed in relation to the Smartshares Funds continuing to be eligible to be a PIE, including (but not limited to):

If a Smartshares Fund fails to meet the required criteria and therefore ceases to be a PIE, it will not

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be able to re-elect to be a PIE for the succeeding five years.

If a Unitholder who is not an Exempt Investor (including all associates) holds more than 20% of the Units in a Smartshares Fund that Smartshares Fund may not qualify to be a PIE.

Although the Manager has put processes in place designed to ensure that each Smartshares Fund complies with all requirements to be a PIE, there is a risk that a Smartshares Fund could lose PIE status if there is a breach of those requirements which is not remedied within the time permitted under the PIE Rules. If PIE status of a Smartshares Fund is lost that Smartshares Fund will be taxed as a company and distributions to investors will be dividends taxable at the investor’s marginal tax rate and potentially will be subject to withholding tax. No compensation will be paid to investors in the event that PIE status is lost.

For further information on the PIE tax regime please contact your tax advisor or the Manager.

Regulatory Risk

Regulatory risk is the risk that a Smartshares Fund may be adversely affected by future changes in applicable laws or by decisions taken by regulatory agencies enforcing those laws. Among the regulatory risks that the Manager faces is the risk that the Manager’s application for a market services licence under the FMC Act (described below in more detail in paragraph 20 of the statutory information) is declined by the FMA or overly stringent conditions are imposed on its licence.

The Underlying Funds may be adversely affected by future changes in applicable laws, including tax laws, or by decisions taken by regulatory agencies enforcing those laws, which may affect the value of Underlying Shares or distributions made to holders of Underlying Shares (including the relevant Smartshares Fund).

US Legal Risk

The Underlying Funds are based in the United States. There is a risk that US tax and other laws will apply to the Smartshares Funds and/or investors in a way that the Manager did not anticipate or that such laws change in a way that adversely affects the Underlying Funds, the Smartshares Funds and/or investors.

Custodian Risk

Legal title to the assets of each Smartshares Fund is held by the Custodian. That means there is a risk that if the Custodian becomes insolvent, this could temporarily or permanently deprive the Smartshares Funds of their assets. This risk is managed by having the Custodian hold the assets of each Smartshares Fund as a bare trustee and keep each Smartshares Fund's assets separately identifiable from each other's assets and other assets it holds. This should mean that, if the Custodian ever does become insolvent, the assets it is holding for each Smartshares Fund will not form a part of the pool of assets to be liquidated for the benefit of the Custodian's creditors.

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Unitholders are not liable to make any payments to third parties upon the winding up of Smartshares Funds, or as a result of the insolvency of the Manager or Trustee. However, in the event that a wind-up proves necessary, the Manager and/or Trustee shall be entitled to recover from the relevant Smartshares Fund all costs and expenses, which are incurred in connection with or arising out of the winding up of the Smartshares Fund. This will be done prior to distributing money (or assets) to Unitholders. Claims of Unitholders in respect of their Smartshares Units will rank equally among themselves in such circumstances.

In the event that an Underlying Fund is wound up, its winding-up (and therefore any distributions that may be made to the relevant Smartshares Fund as an investor in the Underlying Fund) will be governed by US law.

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Unitholders may at any time initiate or cease the Distribution Reinvestment Plan by notifying the Unit Registrar. However, Unitholders will need to give the Unit Registrar at least 10 Business Days' notice prior to the next Distribution Ex Date to enable the change to be made for that distribution period.

Fees











(d) if the same is required or desirable because of any amendment or repeal and/or replacement of the Unit Trusts Act 1960 or any other relevant legislation (including, without limitation, provisions of the FMC Act, or regulations under that Act, which will become applicable to the Smartshares Funds when the Manager opts into the FMC Act regime before the relevant statutory transition period ends on 1 December 2016 and may require changes to the Trust Deed), or otherwise permitted or required under any relevant law; or




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Replacement of an Underlying Fund

In addition, the Manager may, after consultation with the Trustee, replace an Underlying Fund with a different fund that is materially the same if the Underlying Fund that a Smartshares Fund invests in is discontinued or the Manager is no longer satisfied that the Underlying Fund is appropriately tracking the Underlying Index, or the Fund can no longer invest in the Underlying Fund without compromising its PIE status, or the Manager considers it appropriate to change the Underlying Fund for any other reason.

In such circumstances, the Manager may, after consultation with the Trustee, make any amendments to the Investment Policy that are necessary or desirable in connection with the replacement of the Underlying Fund and must notify Unitholders of the relevant Smartshares Fund of such replacement as soon as is reasonably practicable.



1. Market sale

Each Smartshares Fund is listed on the NZX Main Board and, in the opinion of the Manager, there is an established market for sales of Units. Smartshares units are able to be sold on market through NZX firms (no written redemption notice is required). The market price per Smartshares Unit may vary from the Current Unit Value due to supply and demand factors. The costs involved in a sale on the NZX Main Board is normal sharemarket brokerage, which may vary between NZX Firms. The Manager may decline to register a transfer of Smartshares Units if it would result in a transferee holding less than the Minimum Holding (provided that doing so would not breach the Listing Rules).


The Manager may, at its sole discretion, allow some investors to redeem Units by withdrawing a Basket of Underlying Shares and a Cash Amount (which is the income accrued in the relevant Smartshares Fund that is attributable to the Units being redeemed).

The Manager will decide the number of Underlying Shares that constitute a Basket, the Cash Amount per Basket and the number of Units that will be redeemed in exchange for a Basket at the time the Manager is approached by an investor about making a Basket withdrawal. While the Manager has not set a minimum Basket size, it anticipates that it will only allow investors to make a Basket withdrawal in limited circumstances.

There is no Basket withdrawal fee.

Basket withdrawal requests must be made through an NZX Firm on the Basket application form available from the Manager or any NZX Firm. The Manager may, at its sole discretion, either refuse or accept a Basket withdrawal request.


In some circumstances the Manager may be required to take action to ensure that the Smartshares Funds retain their PIE status. The Manager has been granted a waiver by the Special Division to enable it to do so.

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For further information about the waiver see the registered prospectus for the Smartshares Funds.






(ii) neither the Manager nor the Trustee is required to maximise the Smartshares Fund unit price for any disposal and in any event, shall not be liable to any Unitholders for any loss on disposal.


The Manager has the power to wind up any Smartshares Fund (after giving three months’ notice to the Trustee). The Trustee shall give Unitholders notice that the Trustee has received a notice from the Manager terminating the relevant Smartshares Fund. The Trustee shall then distribute the balance, after payment of any costs, charges, expenses, claims and liabilities (including tax and contingent liabilities) incurred in connection with the relevant Smartshares Fund, or arising out of the liquidation of the Smartshares Fund, amongst the Unitholders in proportion to the number of Units held by them. The Trustee shall retain such amount as the Manager considers necessary or appropriate to meet all the above costs, charges, expenses, claims and liabilities (including contingent liabilities and tax) that are not paid prior to distribution.






http://www.nzx.com/

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The Manager Manager Smartshares Smartshares Limited Level 1, NZX Centre 11 Cable Street PO Box 2959 WELLINGTON Tel: 0800 80 87 80 Email: [email protected]

















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Up-to-date information on the performance of Smartshares Funds is available through various sources, including the daily newspapers and on NZX's website (www.nzx.com). Announcements to NZX can be found at www.nzx.com under the ticker symbols "USF" for the US 500 Trust, "EUF" for the Europe Trust, "APA" Asia Pacific Trust, "EMF" for the Emerging Markets Trust, "TWF" for the Total World Trust, "USV" for the US Large Value Trust, "USG" for the US Large Growth Trust, "USM" for the US Mid-Cap Trust and "USS" for the US Small-Cap-Trust.






Request information


details as set out on page 22 above, and the Manager will be able to let Unitholders know what the fee is (if

any) prior to actioning their request.








(g) if prospective financial information about the Smartshares Fund was contained in any prospectus or advertisement, a comparison (if practicable, in the same form and for the same period as the prospective financial information) of the actual results against the prospective financial information.


http://www.nzx.com/


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Privacy





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GLOSSARY OF TERMS

“Administration Manager” BNP Paribas Fund Services Australasia Pty Limited, acting through its New Zealand branch, or any other administration manager appointed from time to time.

“Announcement” a market announcement to NZX that can be viewed on nzx.com under the ticker symbols "USF" for the US 500 Trust, "EUF" for the Europe Trust, "APA" Asia Pacific Trust, "EMF" for the Emerging Markets Trust, "TWF" for the Total World Trust, "USV" for the US Large Value Trust, "USG" for the US Large Growth Trust, "USM" for the US Mid-Cap Trust and "USS" for the US Small-Cap-Trust (and Announce and Announced have corresponding meanings).

“Appendix 7 Date” means, the date on which a distribution is announced to NZX which shall not be less than 10 Business Days before the Record Date.


“Basket” means the number of Underlying Shares that the Manager may agree to (together with a Cash Amount):

(a) accept as consideration for subscription by an investor of a certain number of Smartshares Units;

(b) give as consideration for redemption by a Unitholder of a certain number of Smartshares Units.



(a) in relation to a person subscribing for Units via Basket delivery, a proportionate share of the income accrued and held in the particular Smartshares Fund that will be attributable to the Smartshares Units issued to the Basket applicant; and

(b) in relation to a person redeeming Units via Basket withdrawal, the income accrued and held in the particular Smartshares Fund that is attributable to the Units being redeemed.

“Cash Application” an application for Units that is made for cash and is not made under the Regular Savings Plan or the Distribution Reinvestment Plan.

“Current Unit Value” the market value (in New Zealand Dollars) of all Underlying Shares held by the relevant Smartshares Fund (plus any received and accrued income) less liabilities or provisions (including accrued liabilities and expenses) properly to be taken into account in determining the NAV of the relevant Smartshares Fund, divided by the number of Units on issue for that Fund.

“Custodian” Means BNP Paribas Fund Services Australasia Pty Limited, acting through its New Zealand branch or any other custodian appointed (by the Trustee) from time to time.

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“Distribution Calculation Date”

means, in relation to a distribution Period, a date not more than three Business Days before the Appendix 7 Date for that distribution.

“Distribution Date” each date on which distributions are paid to Unitholders, which will be within 20 Business Days after each Record Date. Currently, distributions are made quarterly.

“Distribution Ex Date” in relation to a distribution, the date on which NZX quotes the Units on an "ex" basis under the NZX Participant Rules.


means the plan currently provided for in the prospectus for the Smartshares Funds under which Unitholders may automatically invest their dividends and other distributions in the relevant Smartshares Fund.

“Establishment Deed” an establishment deed establishing a Smartshares Fund between the Manager and the Trustee.

“Exempt Investor” a Unitholder that is an investor of the type listed in section HM 21(2) of the Tax Act (including Parts A and B of Schedule 29 of that act), or equivalent provision.

“FMA” the Financial Markets Authority.

“FMC Act” the Financial Markets Conduct Act 2013.


“Index Issuer” an issuer whose securities are included from time to time in the relevant Underlying Index.

“Index Securities” securities issued by an Index Issuer that are held or to be acquired by an Underlying Fund.

“Investment Policy” means an investment policy that is developed by the Manager in accordance with the relevant Trust Deed (and which may not be inconsistent with the investment objective for the relevant Smartshares Fund set out in the relevant Establishment Deed) and sets out how the Manager will invest on behalf of the relevant Smartshares Fund

“Investment Statement” this investment statement.

“Listed” listed on the NZX Main Board.

“Listing Rules” the NZX Main Board listing rules that regulate issuers listed on the NZX Main Board.



“Master Trust Deed” the master trust deed between the Manager and the Trustee dated 24 June 2014.

“Minimum Holding” the minimum number of Smartshares Units in a Smartshares Fund that a Unitholder must hold at all times. Currently this is 50 Units in the US 500 Trust and 100 Units in the Europe Trust, Asia Pacific Trust, Emerging Markets Trust, Total World Trust, US Large Value Trust, US Large Growth Trust, US Mid-Cap Trust and the US

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Small-Cap Trust.

“NAV” the net asset value of the relevant Smartshares Fund.


“NZX Firm” a Market Participant accredited by NZX pursuant to the NZX Participant Rules to provide advice and trade on behalf of a client or as a principal (a list of which can be found on www.nzx.com).


“NZX Participant Rules” means the rules regulating Market Participants of NZX.


“Record Date” the time and date on or about the last Business Day in each of January, April, July and October in each year fixed by the Manager for the determination of the Unitholders to whom a distribution will be paid.


“Return” in relation to Units, Underlying Shares, and other securities means the amounts distributed to holders of them together with any increase in their capital value and, in relation to an Underlying Index, means the amounts that would be distributed to a person that held the Index Securities used to calculate the value of the relevant Underlying Index and any increase in the value of such a holding.

“Smartshares Funds” US 500 Trust, Europe Trust, Asia Pacific Trust, Emerging Markets Trust, Total World Trust, US Large Value Trust, US Large Growth Trust, US Mid-Cap Trust and the US Small-Cap Trust.

“Smartshares Unit” or “Unit” a unit in one of the Smartshares Funds.

“Special Division” the division of the NZ Markets Disciplinary Tribunal constituted under the NZ Markets Disciplinary Tribunal Rules, that regulates the Manager (in the place of NZX), for compliance with the Listing Rules.



“Trust Deed” in respect of any particular Smartshares Fund, the Master Trust Deed and the relevant Establishment Deed (as may be supplemented or amended by any supplementary deeds or deeds of modifications).

“Trustee” Trustees Executors Limited.

“Underlying Fund” the fund that a Smartshares Fund invests in.

“Underlying Index” the index that an Underlying Fund tracks (which may change from time to time) and "Underlying Indices" has a corresponding meaning.

“Underlying Fund Manager” means the investment adviser to an Underlying Fund (which for each Underlying Fund is currently The Vanguard Group, Inc.).

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“Underlying Shares” shares in the Underlying Fund that a Smartshares Fund invests in.



“US” United States of America.

“US Dollar” or “USD” United States dollar.

“You” A potential investor or a Unitholder.

“$” New Zealand dollar.




GLOBAL BOND TRUST NEW ZEALAND BOND TRUST NEW ZEALAND CASH TRUST

Investment Statement for the purposes of the Securities Act 1978. Dated 27 October 2015

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Contents


SUMMARY OF INVESTMENT POLICIES 10

HOW DO I APPLY? 16

ANSWERS TO IMPORTANT QUESTIONS 20 What sort of investment is this? 20 Who is involved in providing it for me? 20 How much do I pay? 23 What are the charges? 26 What returns will I get? 27 What are my risks? 31 Can the investment be altered? 35 How do I cash in my investment? 36 Who do I contact with inquiries about my investment? 37 Is there anyone to whom I can complain if I have problems with the investment? 38 What other information can I obtain about this investment? 38


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(The information in this section is required under the Securities Act 1978.) Investment decisions are very important. They often have long-term consequences. Read all documents carefully. Ask questions. Seek advice before committing yourself. Choosing an investment When deciding whether to invest, consider carefully the answers to the following questions that can be found on the pages noted below:

Page











What other information can I obtain about this investment? 38 In addition to the information in this document, important information can be found in the current registered prospectus for the investment. You are entitled to a copy of that prospectus on request. The Financial Markets Authority regulates conduct in financial markets

The Financial Markets Authority regulates conduct in New Zealand’s financial markets. The Financial Markets Authority’s main objective is to promote and facilitate the development of fair, efficient, and transparent financial markets. For more information about investing, go to http://www.fma.govt.nz. Financial advisers can help you make investment decisions

Using a financial adviser cannot prevent you from losing money, but it should be able to help you make better investment decisions. Financial advisers are regulated by the Financial Markets Authority to varying levels, depending on the type of adviser and the nature of the services they provide. Some financial advisers are only allowed to provide advice on a limited range of products. When seeking or receiving financial advice, you should check—

• the type of adviser you are dealing with;

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• the services the adviser can provide you with;

• the products the adviser can advise you on.

A financial adviser who provides you with personalised financial adviser services may be required to give you a disclosure statement covering these and other matters. You should ask your adviser about how he or she is paid and any conflicts of interest he or she may have. Financial advisers must have a complaints process in place and they, or the financial services provider they work for, must belong to a dispute resolution scheme if they provide services to retail clients. So if there is a dispute over an investment, you can ask someone independent to resolve it. Most financial advisers, or the financial services provider they work for, must also be registered on the financial service providers register. You can search for information about registered financial service providers at http://www.fspr.govt.nz. You can also complain to the Financial Markets Authority if you have concerns about the behaviour of a financial adviser. NZX Main Board Listing & Quotation Applications have been made to the Special Division that regulates the Manager (in the place of NZX) for permission to quote the units in the Smartshares Funds (Units) on the NZX Main Board and all the requirements of the Special Division relating thereto that can be complied with on or before the date of this Investment Statement have been duly complied with. However, the Special Division accepts no responsibility for any statement in this Investment Statement. The NZX Main Board is a licensed market operated by NZX, a licensed market operator regulated under the FMC Act. Disclaimer None of the Trustee, the Manager, the Custodian, the Administration Manager, the Investment Managers, NZX, nor any other person guarantees the Return on Smartshares Units or investment in each Smartshares Fund. No warranty expressed or implied is given as to the results to be obtained by the Manager or any Smartshares Fund, or as to the liquidity of an investment in any Smartshares Fund or the fitness of any Smartshares Fund for any Unitholder’s purposes. The offer set out in this Investment Statement is only made in New Zealand. No person may offer, sell or deliver Smartshares Units or distribute any documents in relation to the offer (including any copy or extract from this Investment Statement) to any person in any jurisdiction other than in compliance with any applicable laws and regulations.

S&P Dow Jones Indices and NZX Disclaimer

The "S&P/NZX A-Grade Corporate Bond Index" is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and NZX Limited, and has been licensed for use by Smartshares Limited. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). NZX Limited’s trademark is a registered trademark of NZX Limited. The trademarks have been licensed to SPDJI and have been sublicensed for use for certain purposes by Smartshares Limited. Smartshares Limited’s products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”) or NZX Limited. Neither S&P Dow Jones Indices nor NZX Limited make any representation or warranty, express or implied, to the owners of the Smartshares Limited’s products or any member of the public regarding the advisability of investing in securities generally or in Smartshares Limited’s products particularly or the ability of the S&P/NZX A-Grade Corporate Bond Index to track general market performance. S&P Dow Jones Indices and NZX Limited only relationship to Smartshares Limited with respect to the S&P/NZX A-Grade Corporate Bond Index is the licensing of the Index and certain

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trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P/NZX A-Grade Corporate Bond Index is determined, composed and calculated by S&P Dow Jones Indices or NZX Limited without regard to Smartshares Limited or the Smartshares Limited’s products. S&P Dow Jones Indices and NZX Limited have no obligation to take the needs of Smartshares Limited or the owners of Smartshares Limited’s products into consideration in determining, composing or calculating the S&P/NZX A-Grade Corporate Bond Index. Neither S&P Dow Jones Indices nor NZX Limited are responsible for and have not participated in the determination of the prices, and amount of Smartshares Limited’s products or the timing of the issuance or sale of Smartshares Limited’s products or in the determination or calculation of the equation by which Smartshares Limited’s products are to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and NZX Limited have no obligation or liability in connection with the administration, marketing or trading of Smartshares Limited’s products. There is no assurance that investment products based on the S&P/NZX A-Grade Corporate Bond Index will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice.

NEITHER S&P DOW JONES INDICES NOR THIRD PARTY LICENSOR GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P/NZX A-GRADE CORPORATE BOND INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND NZX LIMITED SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND NZX LIMITED MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY SMARTSHARES LIMITED, OWNERS OF THE SMARTSHARES LIMITED’S PRODUCTS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P/NZX A-GRADE CORPORATE BOND INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR NZX LIMITED BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBLITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND SMARTSHARES LIMITED, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

Definitions Defined terms in this Investment Statement have the meaning set out in the Glossary of Terms on pages 41 to 43.

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KEY INFORMATION SUMMARY This section provides a summary of the key information relating to this offer. The rest of this Investment Statement contains important information. You should read all of it before deciding whether to invest in each Smartshares Fund. What is this? Each Smartshares Fund is a unit trust. Your money will be pooled with other investors’ money and invested in various investments. The Manager will invest your money and charge you a fee for its services. The Returns you receive are dependent on the investment decisions of the Manager and of the relevant Investment Manager and the performance of the investments. The value of those investments may go up or down. The types of investments and the fees you will be charged are described in this document.

What will your money be invested in? The Manager offers three funds for you to invest in. You can invest in all or any of the Smartshares Funds. These investment options are summarised below. More information about the investment target and strategy for each investment option is provided at page 10.

Global Bond Trust

Description A vehicle for investors to invest capital in global interest bearing assets, bonds and other global securities.

The Investment Manager currently appointed by the Manager is PIMCO.

Investment Objective To outperform the Barclays Global Aggregate Index by 100 basis points (1%) over a rolling three-year period, hedged in New Zealand dollars.

Risks The principal risks involved in investing in the Global Bond Trust are set out on pages 31 to 34.

Fees Fund charges 0.54% of the NAV (the management fee).

Contribution fees $30 on Establishment Contributions of less than $20,000 and 0.2% of the full Establishment Contribution on Establishment Contributions equal to or greater than $20,000.

$0 for subsequent Cash Contributions and Contributions made under the Distribution Reinvestment Plan or Regular Savings Plan.

$800 per Institutional Investor Contribution.

Withdrawal fees N/A for cash withdrawals.

$800 per Institutional Investor Withdrawal.

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New Zealand Bond Trust

Description A vehicle for investors to invest capital in interest bearing assets and other New Zealand bond investments.

The Investment Manager currently appointed by the Manager is Nikko Asset Management.

Investment Objective To outperform the S&P/NZX A-Grade Corporate Bond Index over a rolling three-year period.

Risks The principal risks involved in investing in the New Zealand Bond Trust are set out on pages 31 to 34.







New Zealand Cash Trust

Description A vehicle for investors to invest capital in short term interest bearing assets and other cash and cash equivalent investments.

The Investment Manager currently appointed by the Manager is Nikko Asset Management.

Investment Objective To outperform the NZX 90-Day Bank Bill Index over a rolling one-year period.

Risks The principal risks involved in investing in the New Zealand Cash Trust are set out on pages 31 to 34.

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Who manages the Funds? Smartshares Limited is the manager of the Smartshares Funds (the Manager). The Manager has outsourced the investment management of the Global Bond Trust to PIMCO, the investment management of the New Zealand Bond Trust and New Zealand Cash Trust to Nikko Asset Management, and the administration management of each Smartshares Fund to BNP Paribas Fund Services Australasia Pty Ltd (acting through its New Zealand branch). There is further information about the persons involved in providing the Smartshares Funds on page 23.

What are the Returns? Each Smartshares Fund will make quarterly distributions to its Unitholders. These distributions represent income that the Smartshares Fund has received from its investments (such as interest), together with any other income such as tax credits, less expenses such as tax expenses, management fees and allowances for future liabilities. Amounts that the Smartshares Fund receives when an investment matures are not considered income for this purpose and will be reinvested in Authorised Investments rather than distributed to Unitholders.

Income from a Fund's investments will be credited directly to, and retained in, the Fund that the income is generated from (and reflected in the Unit price) and similarly fees and any expenses will be deducted directly from the Fund that incurs them (where applicable, and as set out in this Investment Statement). Distributions are then paid out on each Distribution Date to Unitholders. Income paid into a Smartshares Fund in a foreign currency will not be available for distribution to Unitholders until it has been converted into New Zealand dollars. Distributions will be automatically reinvested in new Units, unless Unitholders elect to have them paid to a nominated New Zealand bank account. This is under the Distribution Reinvestment Plan, which is discussed on page 31.

A Unitholder’s distribution entitlement will be determined based on that Unitholder's Unit holding as at the Record Date for the relevant Smartshares Fund's distribution.

Further information on distributions is provided on page 28.

What are the risks? There are a number of risks involved in investing in the Smartshares Funds, relating to both the nature of the underlying Authorised Investments held by the Smartshares Funds and the nature of the Smartshares Funds themselves. The principal risks are set out on pages 31 to 34.

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How can you get your money out? The Manager intends to quote the Units on the NZX Main Board so you can sell your investment if there are interested buyers. The amount you get may be less than the amount that you invested.

To the extent permissible under the Listing Rules, the Manager may refuse to allow you to transfer your Units (through a sale) if, following the transfer, the proposed purchaser of the Units would have less than the Minimum Holding in the relevant Smartshares Fund.

Units can only be redeemed by making an Institutional Investor Withdrawal, which requires Unitholders to redeem a minimum of 250,000 Smartshares Units. Further information on Institutional Investor Withdrawals is provided on page 36.

How will your investment be taxed? Each Smartshares Fund will be a PIE (specifically a Listed PIE). Each Smartshares Fund will pay tax on its income at a rate of 28%. You should have no further tax to pay on the Returns that you receive from your Units.

This means that if you are subject to a marginal tax rate that is higher than 28%, the tax rate that applies on the Returns from your Units will effectively be capped at 28%. On the other hand, if you are subject to a lower marginal tax rate, you can use any excess tax paid by the Smartshares Fund on your Returns to reduce tax on other income that you receive. See pages 37 to 40 for more information.

Timetable

Opening of the Offer Smartshares anticipates that the public will be able to subscribe for Units from Thursday 12 November 2015.

Closing of the Offer The offer will not have a set closing date.

Allotment of the Units For Cash Contributions Units will be allotted after the end of each month. This is further described on page 23.

Quotation of the Units An application for quotation of the Units has been made to the Special Division. While Smartshares has complied with all necessary steps as at the date of this Investment Statement it cannot give a set date for quotation of the Units, although it is expected to be 12 November 2015.

Payments of Distributions Any distributions will be payable within 20 Business Days of on or about the last Business Day in each of March, June, September, and December, as described on page 28.

Note: this timetable is indicative only and may be changed at Smartshares' discretion.

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SUMMARY OF INVESTMENT POLICIES

Under each Investment Management Agreement, the relevant Investment Manager is required to manage the investments of the relevant Smartshares Fund in accordance with an Investment Policy.

The Investment Policy for each Smartshares Fund is summarised below:

INVESTMENT POLICIES

Global Bond Trust

Description

A vehicle for investors to invest capital in global interest bearing assets, bonds and other global securities.

The Investment Manager currently appointed by the Manager is PIMCO, although the Manager may, in its discretion, replace the Investment Manager.

Investment Objective To outperform the Barclays Global Aggregate Index by 100 basis points (1%) over a rolling three-year period, hedged in New Zealand dollars.

Authorised Investments

The Smartshares Fund may invest in:

• Securities of all types represented in the Barclays Global Aggregate Index;

• Securities of all types issued by a Government, Supranational, Agency, Local Authority, corporate entity, money market, or bank;

• Securities that are asset-backed, mortgage-backed, or hold short or long positions;

• Any derivatives products including swaps, options, forwards and futures contracts;

• Any convertible or non-convertible securities of an organisation;

• Cash and cash equivalents;

• Any other investment that is consistent with the objectives of the Smartshares Fund and is agreed to by the Manager.

Investment Guidelines and Constraints

• Securities must have a duration within +/- 3 years of the

Barclays Global Aggregate Index (calculated using the weighted average duration of securities in the index, based on the Investment Manager’s duration models)

• The Investment Manager will apply quality ratings using the

higher of Moody’s, S&P or Fitch. If an issue is not rated by one of these rating agencies, the Investment Manager will determine a rating. The Smartshares Fund must have investments that meet the following criteria:

- Minimum average portfolio quality across all investments:

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A- Rating - For investments in short term securities, minimum issue

quality: B- Rating - For investments in short term commercial paper,

minimum commercial paper quality: A2/P2

However, if an investment is downgraded and these minimums are breached as a result, the Investment Manager is not required to immediately rectify the issue and must instead take the action it considers appropriate based on the perceived risk and expected return from the possible courses of action.

• The Investment Manager will limit the concentration of investments in the Smartshares Fund to the following:

Investments Concentration

Limit* Issue / Issuer** 5% Issuer of Asset-Backed Securities and Mortgage-Backed Securities (excluding agency mortgage)

2%

High Yield Securities (rated below BBB-)

10%

Emerging Market Securities (as defined by the World Bank)

15%

Certain Private Placements 10% Mortgage Derivatives 10% Structured Notes 5% Preferred Securities 5% Bank Loans 10% Asset-Backed Securities and Mortgage-Backed Securities (excluding agency mortgage)

15%

* Maximum proportion of the Smartshares Fund’s net asset value (NAV) that a particular investment may represent ** Excludes (1) issuer of Asset-Backed Securities and Mortgage-Backed Securities (excluding agency mortgage) and (2) sovereign debt of OECD governments and US agencies (to which no limit applies) and supranational issuers (25% limitation applies). Specific mortgage pools and trusts are considered separate issuers, and each tranche within a Collateralised Mortgage Obligation is considered a separate issue.

New Zealand Bond Trust

Description A vehicle for investors to invest capital in interest bearing assets and other New Zealand bond investments.

The Investment Manager currently appointed by the Manager is Nikko Asset Management, although the Manager may, in its discretion, replace the Investment Manager.

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Investment Objective To outperform the S&P/NZX A-Grade Corporate Bond Index over a rolling three-year period.



• Cash, deposits and debt securities issued or guaranteed by:

- The New Zealand Government or Government Departments;

- Any New Zealand Registered Bank;

- Any New Zealand State Owned Enterprise;

- Any New Zealand Local Authority or Local Government Funding Agency (LGFA);

- Any Corporations incorporated, constituted or registered in either New Zealand or overseas that meet the minimum credit rating criteria.

• New Zealand dollar debt securities issued or guaranteed by foreign Governments and Supranationals.

• Any equity security listed on any New Zealand securities exchange that has a fixed dividend and a fixed redemption date.

• New Zealand financial futures contracts, options, and swap contracts, both ‘exchange traded’ and ‘over the counter’.

• Underwriting and sub-underwriting contracts for issues of authorised debt securities and equity securities that are authorised investments.

• Any instrument or arrangement for hedging or reducing interest rate risk or market movement or other financial risk.

• Investment in New Zealand collective investment vehicles that meet or exceed in part or in full the objectives and risk characteristics of this Smartshares Fund.

• Cash balances held by the Smartshares Fund’s Custodian or agents.

• Cash and cash equivalents.



• The Investment Manager will apply quality ratings and

investment limits as follows:

Rating Fund exposure range*

Maximum issuer exposure *

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AAA 10 – 100% 12.5% AA- to AA+ 0 – 100% 10.0% A- to A+ 0 – 80% 7.5% BBB- to BBB+ 0 – 60% 5.0% BB+ and lower 0 % 0% Investment

NZ Government 10-70% 70.0% NZ Local Government Funding Agency

15.0%

* Expressed as a proportion of the Smartshares Fund’s net asset value (NAV).

• The Investment Manager will ensure the Smartshares Fund’s investments in the sectors below fall within the following ranges:

Sector Range

New Zealand Government 10 – 70% New Zealand Banks 0 – 70% Local Government 0 – 50% Corporates 0 – 50% Foreign Government and Supranationals

0 – 30%

• The average duration of the portfolio of securities must be within +/- 1.5 years of the S&P/NZX A-Grade Corporate Bond Index (calculated using the weighted average duration of securities in the index).

• The minimum issuer credit rating is A3 short-term or BBB- long-term or their equivalent by at least one of S&P, Moody or Fitch.

• Investment is not permitted in any managed investment scheme that is not a portfolio investment entity (PIE) for the purposes of Section HM 2 of the Tax Act.

• No borrowing is permitted by the Smartshares Fund; however, the Smartshares Fund is permitted to maintain an overdraft facility for the purposes of the administration of cash flow.

• Over-the-counter derivative counterparties are to have a minimum A- credit rating.

• All investments are to be denominated in New Zealand dollars.

• Financial futures contracts, options and swap contracts must be backed by physical assets.

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New Zealand Cash Trust

Description To provide a vehicle for investors to invest capital in short term interest bearing assets and other cash and cash equivalent investments.

The Investment Manager currently appointed by the Manager is Nikko Asset Management, although the Manager may, in its discretion, replace the Investment Manager.

Investment Objective To outperform the NZX 90-Day Bank Bill Index over a rolling one-year period.



• Cash, deposits and debt securities issued or guaranteed by:

- The New Zealand Government or Government Departments;

- Any New Zealand Registered Bank;

- Any New Zealand State Owned Enterprise;

- Any New Zealand Local Authority or Local Government Funding Agency (LGFA);

- Any Corporations incorporated, constituted or registered in either New Zealand or overseas that meet the minimum credit rating criteria;

• New Zealand dollar debt securities issued or guaranteed by foreign Governments and Supranationals.

• Any instrument or arrangement for hedging or reducing interest rate risk or market movement or other financial risk.

• Cash balances held by the Smartshares Fund’s Custodian or agents.

• Cash and cash equivalents.



• The Investment Manager will ensure the Smartshares Fund’s

investments in the sectors below fall within the following ranges:

Sector Range

New Zealand Government 0 – 100% Local Authority 0 – 50% New Zealand Banks 0 – 80% Corporates 0 – 80% Foreign Government and Supranationals

0 – 20%

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• The maximum exposure to any one issuer (excluding New Zealand Government or Government Department securities) must be no greater than 25% of the Smartshares Fund.

• The maximum exposure to New Zealand Government or Government Department Securities is 100%.

• The maximum interest rate duration of each security is 365 days.

• The maximum credit duration of the Smartshares Fund is 365 days.

• The maximum Smartshares Fund exposure to Floating Rate Notes (FRNs) is 35%.

• The maximum maturity date of individual FRNs is 3 years.

• The minimum issuer credit rating is A3 short-term or BBB- long-term or their equivalent by at least one of S&P, Moody or Fitch.

• No subordinated debt is permitted.

• Investment is not permitted in any managed investment scheme that is not a portfolio investment entity (PIE) for the purposes of Section HM 2 of the Tax Act.

• No borrowing is permitted by the Smartshares Fund, however the Smartshares Fund is permitted to maintain an overdraft facility for the purposes of the administration of cash flow.

• All investments are to be denominated in New Zealand dollars.

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HOW DO I APPLY?

How to get started with Smartshares You can start your investment in a Smartshares Fund by making an Establishment Contribution of as little as $500. If you wish to make an Establishment Contribution, send in your completed Application Form, together with the full amount of the Establishment Contribution, to Link Market Services Limited, PO Box 91976, Auckland 1142. Alternatively, you can send it to the Manager, an NZX Firm, or you can apply online at www.smartshares.co.nz/invest-now or through any other channel approved by NZX (of which there are currently none).

The Manager may suspend the acceptance of applications to make Establishment Contributions at any time by way of an Announcement to NZX. The Manager may also reject any application for any reason. If the Manager decides that an investor’s application to make an Establishment Contribution will not be accepted, the Establishment Contribution will be returned to the investor within 20 Business Days of making that decision (such decision to be made within seven days after receiving the application). No interest will be paid on amounts refunded.

Alternatively following quotation of the Units, you can invest in a Smartshares Fund by purchasing existing Units on market through an NZX Firm.

Make sure you read all the information contained in this Investment Statement before deciding whether to invest and which Smartshares Fund to invest in. There is also additional information in the registered prospectus for the Smartshares Funds.


Further investments Once you've made the initial investment, you can make further investments, either:

• by making a Cash Contribution (for a minimum of $250);

• through the Regular Savings Plan (for a minimum contribution of $50 per month);

• through the Distribution Reinvestment Plan; or

• by making an Institutional Investor Contribution.



Cash Contributions As with Establishment Contributions, a Cash Contribution for further Units can be made by completing the Application Form attached to the back of this Investment Statement and sending it with the full amount of the Cash Contribution to Link Market Services Limited, PO Box 91976, Auckland 1142. Alternatively, you can send it to the Manager, an NZX Firm, or you can apply online at www.smartshares.co.nz/invest-now or through any other channel approved by NZX (of which there are currently none).

The Manager may suspend the acceptance of applications to make Cash Contributions at any time by way of an Announcement to NZX. The Manager may also reject any application for any reason. If the Manager decides that an investor’s application to make a Cash Contribution will not be accepted, the Cash Contribution will be returned to the investor within 20 Business Days of making that decision (such decision to be made within seven days after receiving the application). No interest will be paid on amounts refunded.

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The Regular Savings Plan You can currently make a regular monthly investment directly from your bank account with no transaction fees charged by the Manager.

Every month for an amount you choose (minimum contribution $50 per month) the Manager will add Smartshares Units to your investment. Simply complete the Application Form and direct debit authority included in this Investment Statement or you can apply online at www.smartshares.co.nz/invest-now. Your payments will then be automatically withdrawn from your nominated bank account on a monthly basis.



Think about how much you can afford to invest each month. Keep in mind that you can stop, restart, increase or decrease (so long as you don't decrease your Contribution to below $50 per month unless you are completely stopping Contributions) your Contributions at any time by contacting the Unit Registrar. Specify that amount in your application. The Unit Registrar will require notice to change Contributions by at least ten Business Days before the 20th of the month.


To join the Smartshares Regular Savings Plan, you must already have the Minimum Holding of 100 Smartshares Units for the Smartshares Fund that you wish to invest in on a regular basis or you must make a Cash Contribution that, if accepted, would mean you held at least 100 Units in the Smartshares Fund you want to invest in.



• Zero transaction cost – no transaction fees charged by the Manager at present

• Affordable – Contributions from just $50 per month

• Flexible – you can stop, restart, increase or decrease (subject to maintaining a minimum Contribution of $50 per month) your regular Contributions

• Helps you accumulate Smartshares Units – every month you acquire additional Smartshares Units automatically without needing to think about it.

The Distribution Reinvestment Plan Each Smartshares Fund may receive distributions from the Authorised Investments in which it invests. These distributions and other income are retained in the Smartshares Fund (and reflected in the Current Unit Value) and the Smartshares Fund makes distributions to Unitholders periodically, with each Unitholder’s entitlement based on the Unitholder’s holding as at the Record Date for that distribution.


Institutional Investor Contributions For large investment amounts, Smartshares Units can be acquired by way of an Institutional Investor Contribution. Applications to subscribe for Units in multiples of 250,000 Units through an Institutional Investor Contribution must be made through an NZX Firm on the Institutional Investor Contribution

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application form available from the Manager or any NZX Firm or by applying online at www.smartshares.co.nz/invest-now.

The Manager may suspend the acceptance of applications to make Institutional Investor Contributions at any time by way of an Announcement to NZX. The Manager may also reject any application for any reason.

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BOARD OF DIRECTORS

The directors of the Manager are Bevan Miller (Chair), Tim Bennett and Kristin Brandon. The funds operated by the Manager are passively managed funds or have their investment management function outsourced (like the Funds). Consequently, the board has been constructed to provide a mix of operational, financial and legal skills rather than specific funds management experience. Brief profiles for each of the directors, detailing their experience and qualifications, are set out below.

Bevan Miller

Bevan is the Chief Financial Officer of NZX. He has extensive financial experience in both the corporate and accounting sectors, previously working as CFO for Acurity Health Group Limited. Prior to that Bevan held a number of senior finance roles at Telecom New Zealand, now Spark, having started his career in the audit division of global accounting firm KPMG. Bevan is a Chartered Accountant and holds a Bachelor of Commerce and Administration with Honours from Victoria University of Wellington.

Tim Bennett

Tim is the Chief Executive Officer of NZX. He has extensive capital markets and commodity market development experience in Asia, the Middle East and North America. Prior to joining NZX, Tim was a partner at Oliver Wyman in Singapore, and previously was a partner with the Boston Consulting Group in Asia and Australia. Tim holds an MBA in Strategy and Finance from Wharton School, University of Pennsylvania, and a Bachelor of Commerce and Administration in Computer Science and Business Administration from Victoria University of Wellington.

Kristin Brandon

Kristin is Head of Compliance at NZX and has worked at NZX since 2007. Kristin has significant legal experience working at Chapman Tripp Wellington and Dechert LLP London where she specialised in company and securities law, including advising in relation to capital raisings, mergers and acquisitions and acting for fund managers. Prior to joining NZX, Kristin was Assistant Company Secretary at Telecom New Zealand Limited (now Spark). Kristin holds a Bachelor of Laws with Honours and a Bachelor of Commerce and Administration from Victoria University of Wellington and is both a barrister and solicitor.

It is intended that the composition of the board of directors will change prior to the quotation date of the Smartshares Units. The Manager will make an Announcement as to the persons to be appointed to the Smartshares board on the date of quotation of the Smartshares Units.

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What sort of investment is this? Each Smartshares Fund is a unit trust constituted under the Unit Trusts Act 1960 and, accordingly, the Units offered in this Investment Statement are units in a unit trust. Each Smartshares Fund was established on 15 October 2015 under the relevant Trust Deed.

When you buy Smartshares Units you become a Unitholder in the relevant Smartshares Fund you have chosen to invest in.

Applications have been made to the Special Division that regulates the Manager (in the place of NZX) for permission to quote Smartshares Units on the NZX Main Board so that the Smartshares Funds are exchange traded funds.

Who is involved in providing it for me? Names of Smartshares Funds The names of the Smartshares Funds in which Units are offered in this Investment Statement are:

- GLOBAL BOND TRUST - NEW ZEALAND BOND TRUST - NEW ZEALAND CASH TRUST

The Manager The manager of the Smartshares Funds is Smartshares Limited, a wholly-owned subsidiary of NZX.

None of the Manager, any of its directors, any person associated with this offer, or NZX guarantees the Smartshares Units, repayment of Smartshares Units, or the payment of any distributions on Smartshares Units.

The principal activity of the Manager is to manage funds, including the Smartshares Funds. The Manager led the development of exchange traded funds in New Zealand with the launch of the NZX 10 Fund (formerly “The NZSE TeNZ Fund”) in 1996. The NZX 10 Fund remains the longest standing exchange traded fund listed on the NZX Main Board.

The FMC Act requires managers who act as the manager of a registered scheme to be licensed by the FMA before they can make offers under the new disclosure regime in the FMC Act. The Manager has begun the application process with FMA to obtain the necessary licence. Licences will be issued at the discretion of the FMA. As the Manager does not yet hold a licence, it offers the Units under the Securities Act 1978, which will apply to this offer.



The Manager's address may change from time to time. You can find up-to-date details at any time by searching "Smartshares" at www.business.govt.nz/companies.

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The directors of the Manager, and their respective addresses, may change from time to time without notice to you. You can find up-to-date details of the directors, and their respective addresses, at any time, by searching "Smartshares" at www.business.govt.nz/companies. Profiles for each of the directors are set out on page 19.

It is intended that the composition of the board of directors will change prior to the quotation date of the Smartshares Units. The Manager will make an Announcement as to the persons to be appointed to the Smartshares board on the date of quotation of the Smartshares Units.


Summary of Duties

The Manager is responsible for investing in Authorised Investments, the maintenance of accounting records of the Smartshares Funds, communication with Unitholders, supervision of the Unit Registrar, oversight of the Investment Managers and the payment of distributions to Unitholders. Some of these responsibilities are delegated to the Investment Manager, the Administration Manager, the Custodian and the Unit Registrar.

The Trustee The Trustee is: Trustees Executors Limited Level 5, 10 Customhouse Quay PO Box 3222 Wellington Tel: (04) 495 0999 Fax: (04) 496 2952 Email: [email protected]

The Trustee's address may change from time to time. You can find up-to-date details at any time by searching "Trustee Executors" at www.business.govt.nz/companies.



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The Investment Manager The Investment Manager for the Global Bond Trust is: PIMCO Australia Pty Limited Level 19, 363 George Street Sydney, New South Wales 2000 Australia Tel: +61 2 9279-1771 www.pimco.com.au The Investment Manager for the New Zealand Bond Trust and the New Zealand Cash Trust is: Nikko Asset Management New Zealand Limited Level 9, Vero Centre 48 Shortland Street Auckland, 1010 New Zealand Tel: (09) 307-6363 www.nikkoam.co.nz/

The Investment Managers' addresses may change from time to time. You can find up-to-date details at any time by searching "Nikko" at www.business.govt.nz/companies (for Nikko Asset Management) and www.pimco.com.au (for PIMCO).

The Investment Managers provide investment management services as delegated to them by the Manager.

The Administration Manager The Administration Manager for the Smartshares Funds is: BNP Paribas Fund Services Australasia Pty Ltd, New Zealand branch Level 18, State Insurance Tower, 1 Willis Street PO Box 3299, Wellington www.securities.bnpparibas.com

The Administration Manager's address may change from time to time. You can find up-to-date details at any time by searching "BNP" at www.business.govt.nz/companies.


The Custodian The Custodian for the Smartshares Funds is: BNP Paribas Fund Services Australasia Pty Ltd, New Zealand branch Level 18, State Insurance Tower, 1 Willis Street PO Box 3299, Wellington www.securities.bnpparibas.com

The Custodian's address may change from time to time. You can find up-to-date details at any time by

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searching "BNP" at www.business.govt.nz/companies.

The Custodian provides custodial services, including holding assets of each Smartshares Fund in custody for safekeeping and separate from the personal assets of the Trustee or Manager.

Unit Registrar The Unit Registrar for the Smartshares Funds is:


The Unit Registrar's address may change from time to time. You can find up-to-date details at any time by searching "Link" at www.business.govt.nz/companies.

None of the Trustee, the Investment Managers, the Administration Manager, the Custodian, the Unit Registrar nor any of their directors nor any other persons associated with the offer guarantees the Smartshares Units, repayment of the Smartshares Units, or the payment of any distributions on Smartshares Units.

Nature and duration of Smartshares Funds The Smartshares Funds are unit trusts constituted under the Unit Trusts Act 1960. The Smartshares Funds were established on 15 October 2015 under the Trust Deeds. For more information regarding the Trust Deeds see the "Summary of the Trust Deeds" section in the registered prospectus for the Smartshares Funds.

How much do I pay? There are four ways in which you can subscribe for Smartshares Units, and the method you choose affects how many Units you must subscribe for.

1. Cash Contributions Cash Contributions for Smartshares Units can be made by completing the Application Form attached to this Investment Statement and sending it with the full amount of the Cash Contribution to Smartshares Limited at the address of the Unit Registrar or to any NZX Firm. Investors can also apply online at www.smartshares.co.nz/invest-now.

The minimum Establishment Contribution is $500 (which includes the Establishment Contribution fee, which is deducted from the Establishment Contribution and paid to the Manager).

For all other Cash Contributions, the minimum Cash Contribution is $250.

Cash Contributions need to be received by the Unit Registrar, Link Market Services, by the 20th of the month so Smartshares Units can be priced at the end of the month by the Manager. There is no maximum Cash Contribution. No interest will be paid to investors on their Cash Contributions.

The Manager will, at its discretion, use a Cash Contribution either to purchase Authorised Investments and then issue new Units to the investor or to purchase existing Units on market through an NZX Firm and pass those existing Units on to the investor. In either case, Smartshares Units will be issued to the investor at the NAV per Smartshares Unit determined by the Manager on or about the last Business Day of the month. Smartshares Units will not be allocated until after the end of the month in which the Cash Contribution is received.

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If the Manager decides that an investor’s application to make a Cash Contribution will not be accepted, the Cash Contribution will be returned to the investor within 20 Business Days of making that decision (such decision to be made within seven days after receiving the application). No interest will be paid on amounts refunded.

2. Regular Savings Plan Once you have the Minimum Holding of 100 Smartshares Units, investing regularly can be a very effective way to accumulate Smartshares Units over the long term. Even small amounts saved on a regular basis have the potential to grow into a significant number of Smartshares Units over a number of years.

The Regular Savings Plan lets Unitholders make a regular investment on or about the 20th of each month, directly from their nominated New Zealand bank account. Provided Unitholders hold the Minimum Holding, or if they make a Cash Contribution that, if accepted, would mean they hold the Minimum Holding, they can choose to participate in the Regular Savings Plan and start saving with Contributions as low as $50 per month. Simply complete the Application Form and direct debit authority included in this Investment Statement or by applying online at www.smartshares.co.nz/invest-now. Unitholders’ payments will be automatically withdrawn from their nominated bank account on a monthly basis. Unitholders can add an additional lump sum payment ($250 minimum value), or increase or decrease their Contribution at any time (subject to providing the Unit Registrar with ten Business Days' notice prior to the 20th of a month and, unless Contributions are being completely stopped, maintaining a minimum Contribution of $50 per month).

If Unitholders enter the Regular Savings Plan and then fail to make payments, no additional Smartshares Units will be allocated to their investment. If Unitholders fail to make payments for three consecutive months, their access to the Regular Savings Plan may be discontinued. Unitholders may at any time, by giving the Unit Registrar ten Business Days' notice prior to the 20th of a month, cease their payments into the Regular Savings Plan. The Manager will, at its discretion, use the Regular Savings Plan monies either to purchase Authorised Investments and then issue new Units to the Unitholder or to purchase existing Units and pass those existing Units on to the Unitholder. In either case, Smartshares Units will be issued to the investor at the NAV per Smartshares Unit determined by the Manager on or about the last Business Day of the month. Smartshares Units will not be allocated until after the end of the month in which the Contribution under the Regular Savings Plan is received.

Any interest earned on the Regular Savings Plan monies prior to the purchase of Smartshares Units or Authorised Investments each month will be retained by the Manager. These amounts will be used to cover the cost of operating the Regular Savings Plan and other administrative costs. Any amount left over after this will go to the Manager.

3. Institutional Investor Contributions For large investment amounts, Smartshares Units can be acquired by way of an Institutional Investor Contribution. Applications to subscribe for Units in multiples of 250,000 Units through an Institutional Investor Contribution must be made through an NZX Firm on the Institutional Investor Contribution application form available from the Manager or any NZX Firm or by applying online at www.smartshares.co.nz/invest-now.

Units will be issued upon delivery to the Manager of the cash amount and/or Authorised Investments that the Manager agrees to accept as consideration for, and determines to have a value equal to, the price of the Units to be issued.

Any Authorised Investments must be delivered for registration by the applicant into the name of the relevant Custodian. Charges for Institutional Investor Contributions are explained under the section entitled “What are the charges?” on page 26.


Each Smartshares Fund receives distributions from the Authorised Investments in which it invests. As described on page 28 these distributions and other income are retained within the relevant Smartshares Fund and then allocated to Unitholders for distribution. Such distributions are automatically reinvested on each Distribution Date (after the deduction of Distribution Reinvestment Plan fees (if any)) to provide you

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with additional Smartshares Units, unless you choose to have these paid out to you by direct credit.

On each Distribution Date, the Manager will, at its discretion, use the reinvestment monies for Unitholders who have their distributions reinvested either to purchase Authorised Investments and then issue new Units to those Unitholders or to purchase existing Units and pass those existing Units on to those Unitholders. In either case, Smartshares Units will be issued to the investor at the NAV per Smartshares Unit.

The Distribution Reinvestment Plan described in the prospectus for the Smartshares Funds constitutes the description of the "dividend reinvestment plan" for the purposes of the FMC Act and Financial Markets Conduct Regulations 2014.

Minimum Holding Unitholders should maintain a minimum of 100 Smartshares Units at all times (Minimum Holding). If you fail to maintain the Minimum Holding, the Manager reserves the right to purchase your Units or instruct the Trustee to redeem them (provided that the exercise of that right would not breach the Listing Rules).

Smartshares Unit Issue Price Smartshares Units are issued at the Current Unit Value applying at the relevant time for Cash Contributions and Contributions under the Regular Savings Plan and Distribution Reinvestment Plan.

The Current Unit Value of a Smartshares Unit is determined by dividing the total value of the Smartshares Fund’s NAV by the total number of Smartshares Units on issue. The Current Unit Value of a Smartshares Unit includes not only the value of the underlying Authorised Investments held in a Smartshares Fund, but also accrued income in relation to the portfolio (for example, interest and tax credits) less liabilities (for example, tax expenses and management fees). Please note that these examples of income and liabilities are not exhaustive and other types of income may be received and liabilities incurred from time to time.

Oversubscription There is no limit on the total number of Smartshares Units that may be subscribed for and accordingly none of the Smartshares Funds have a policy providing for oversubscription. However, the Manager may reject an application for Units or require redemption of Units to maintain the Fund’s PIE status where there is a risk that a Unitholder will exceed the maximum investor interest size requirement prescribed in the Tax Act (and as set out in the “PIE Eligibility” section at page 30 below).

Suspension of Issues and Withdrawals The Manager is not obliged to issue Smartshares Units (or redeem Units via Institutional Investor Withdrawals) in a Smartshares Fund in the period from (and including) the Distribution Calculation Date to (and including) the Distribution Ex Date for that distribution. Refunds The Trustee will not refund any Contribution, except where the Trustee, on the advice of the Manager, decides that an investor’s Contribution will not be accepted. In such situations the Contribution will be returned to the investor within 20 Business Days of making that decision (such decision to be made within seven days of receiving the application). No interest will be paid on amounts refunded.

No Cooling-off Period There is no cooling-off period in respect of the Smartshares Units. An investor may not withdraw their application to make a Contribution.

Manager may request information The Manager may request any Unitholder to provide information to the Manager to enable the Manager to determine whether a Smartshares Fund can continue to meet the PIE eligibility requirements (further details are provided in the "Taxation" section on page 28).

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The Manager may also ask a Unitholder to provide any other information that the Manager reasonably requires in order to manage its obligation to comply with any laws or regulations in New Zealand or any other country in relation to the Smartshares Funds, including in relation to the Anti-Money Laundering and Countering of Financing Terrorism Act 2009.


What are the charges? Unless otherwise specified all fees are inclusive of GST.

Entry and Exit charges For Establishment Contributions (as described on page 23 above) you pay a flat Establishment Contribution fee to the Manager of $30 for Contributions of less than $20,000, or 0.20% of the Contribution for Contributions equal to or greater than $20,000. There is no fee for all other Cash Contributions or Contributions made under the Regular Savings Plan or Distribution Reinvestment Plan. The Establishment Contribution fee may be increased by the Manager by giving ten Business Days' notice of the change to the Trustee. The Establishment Contribution fee may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.

The Manager may impose a Contribution fee for Cash Contributions, other than Establishment Contributions, and Contributions made under the Regular Savings Plan or the Distribution Reinvestment by giving ten Business Days' notice of the change to the Trustee and Unitholders of the relevant Smartshares Fund. There is no limit to the fee that may be imposed.


Charges for Institutional Investor Contributions and Institutional Investor Withdrawal The following charges are payable to the Manager in respect of Institutional Investor Contributions and Institutional Investor Withdrawals, as at the date of this Investment Statement:

Smartshares Fund Institutional Investor Contributions Institutional Investor Withdrawals

Global Bond Trust $800 $800

New Zealand Bond Trust $400 $400

New Zealand Cash Trust $250 $250 The Institutional Investor Contribution fees may be increased by the Manager by giving ten Business Days' notice of the change to the Trustee or the fees may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.

The Institutional Investor Withdrawal fees may be increased by the Manager by giving three months' notice of the change to the Trustee and, if the change is material (as determined by the Manager in its reasonable discretion), to Unitholders of the relevant Smartshares Fund. The Institutional Investor Withdrawal fees may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.


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Management charges Management fees are charged to the Smartshares Funds. The management fee for each Fund is currently:

Global Bond Trust 0.54% per annum of the NAV of the Fund New Zealand Bond Trust 0.54% per annum of the NAV of the Fund New Zealand Cash Trust 0.33% per annum of the NAV of the Fund

These management fees are accrued daily and payable monthly. The Manager may agree payments to individual Unitholders that are the equivalent of management fee rebates (in the form of additional Smartshares Units or cash, as agreed between the Manager and the Unitholder).

The fee charged by the Manager may be increased by the Manager by giving three months’ notice of the change to the Trustee and, if the change is material (as determined by the Manager in its reasonable discretion), to Unitholders of the relevant Smartshares Fund. The fee may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.

In addition to the management fee, the Manager is entitled to interest on amounts held including in respect of distributions and other income received by the Smartshares Funds and on cash Contributions between the date on which they are received and the date of issue of Units.



The management fees cover the expenses for the ongoing operation of the Smartshares Funds (excluding brokerage fees for purchasing Authorised Investments, which are paid from the relevant Smartshares Fund). These include reporting, the custodian fees, investment management fees, administration fees, trustee fees and registry costs. The Manager reserves the right, however, to have these amounts, and any other expenses that arise, paid from the Smartshares Funds.


What returns will I get? Nature of the returns Any Returns you get from your Smartshares Units will be a combination of:

(a) any increase in the price of Smartshares Units at the time you sell, relative to the price at which you purchased the Smartshares Units (whether through a Contribution or on market); and

(b) any distributions or other income received by the Smartshares Fund. Smartshares Funds distribute all income received (for example, interest and tax credits) less liabilities (for example, tax expenses and management fees). Please note that these examples of income and liabilities are not exhaustive and other types of income may be received and liabilities incurred from time to time. You will automatically have your distributions re-invested as Smartshares Units unless you elect to have them paid directly to a nominated bank account.

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Key factors that determine returns for Smartshares Funds The Returns for the Smartshares Funds are subject to the general fluctuations and direction of the markets that Authorised Investments are listed or otherwise bought and sold on and the performance of the issuers of those Authorised Investments, which includes changes in their security prices and the value of any distributions paid. Both of these factors are influenced by the New Zealand and global economies.

In addition, the Returns for the Global Bond Trust may be affected by currency fluctuations between the New Zealand dollar and other currencies. To mitigate the currency fluctuations (albeit not entirely), the Investment Manager for the Global Bond Trust will use hedging instruments to actively manage the foreign currency exposure.

Amount of the returns The amount of the Returns you get from your investment in a Smartshares Fund will vary from time to time, depending on the factors above. Returns cannot be predicted with any accuracy. None of the Manager, the Trustee, NZX, the Investment Manager, the Custodian and Administration Manager nor any other person guarantees a particular level of Return on your investment in a Smartshares Fund. No Returns are promised.

Distributions Distributions are currently made directly from each Smartshares Fund within 20 Business Days of the Record Date and are paid to Unitholders whose names are on the register in respect of Units held on the Record Date. The Record Date for the Smartshares Funds is on or around the last Business Day of each of March, June, September and December in any year. However, the Manager may choose not to make distributions for a quarter if it considers that the income received by the relevant Smartshares Fund in that quarter is not substantial enough to distribute. In such circumstances, such income will be held in the relevant Smartshares Fund until the Distribution Date for the following quarter, at which point it will be distributed to Unitholders along with any further income received by the Smartshares Fund during that following quarter. This is most likely to occur in December 2015, because the Smartshares Funds will, at that point, have been accruing income for less than a full quarter.

Unitholders who sell Units or redeem Units (via Institutional Investor Withdrawals) from a Smartshares Fund before a Distribution Ex Date for a Record Date will not receive any distributions from that Smartshares Fund in respect of that Record Date.

These distributions comprise income of the relevant Smartshares Fund, less fees and other expenses. Amounts that the Smartshares Fund receives when an investment matures are not considered income for this purpose and will be reinvested in Authorised Investments rather than distributed to Unitholders. Income paid into a Smartshares Fund in foreign currency will not be available for distribution to Unitholders until it has been converted into New Zealand dollars. Unitholders will automatically have their distributions reinvested as Smartshares Units unless they elect to have them paid directly to a nominated New Zealand bank account.

The Manager may, at its discretion, deduct from any distribution an amount of cash if, and to the extent that, the Manager reasonably considers that such a deduction is required to meet any liabilities that become payable in the next (or later) distribution period. Such deductions will be retained in the Smartshares Fund.


Taxation The following comments are intended to be only a general summary and indication of the Manager's understanding of the relevant New Zealand tax law as at the date of this Investment Statement. There may be non-New Zealand tax consequences which affect the Smartshares Funds or the Unitholders. Neither the Trustee nor the Manager accepts any responsibility for the taxation consequences of an investment in the Smartshares Funds. Unitholders who buy or sell Smartshares Units may have different taxation positions. Consequently, each Unitholder should consider their own taxation position and if necessary seek

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professional advice before investing in Smartshares Units.

Taxation may affect the Returns on the Smartshares Funds and each of the Smartshares Funds may have varying tax implications. The taxation summary below is based on the Manager's understanding of New Zealand tax law as at the date of this Investment Statement.

The Smartshares Funds will elect to become PIEs that are Listed PIEs from the date the Smartshares Funds are Listed. As Listed PIEs the Smartshares Funds pay tax on income derived by the Smartshares Funds at a rate of 28%.


The manner in which the Smartshares Funds will be taxed on their investments will depend on the nature of the relevant investment.

In respect of investments that are bonds or other investments that are treated as financial arrangements under the Tax Act, the Smartshares Funds will pay tax on any interest income that they derive from such investments. The Smartshares Fund will also pay tax on any amount deemed to be income under the Tax Act (including potentially changes in the value of such investments, gains from the disposal or redemption of such investments and realised or unrealised foreign exchange gains in relation to foreign currency denominated bonds). The timing at which the Smartshares Funds will pay tax on their income can differ depending on the nature of the relevant investment. In some cases, a Smartshares Fund may be required to pay tax on interest income even if such income has not been paid or credited to the Smartshares Fund. On the other hand, if the Smartshares Funds incur foreign exchange losses or losses from disposal or redemption of these investments, they will be able to claim a deduction for such losses.

The Smartshares Funds may also invest in shares. In general, the Smartshares Funds are not subject to tax on gains that they derive from the sale of shares in most New Zealand resident companies and most companies resident in Australia that are listed under the ASX Market Rules. Losses incurred on the disposal of such shares are not deductible. Dividends from such shares are usually fully taxable to the Smartshares Funds, with a credit allowed for any Imputation Credits attached, and any withholding tax deducted from such dividends subject to certain limits.

The tax treatment will differ where the Smartshares Fund holds non-New Zealand and certain Australian securities (including any NZX listed securities consisting of shares in non-New Zealand resident entities). The Funds will apply the fair dividend rate ("FDR") method to calculate the amount of any taxable income in respect of the applicable equities. Under the FDR method, the Smartshares Funds will generally have taxable income in each income year (1 April to 31 March) in relation to the applicable equities calculated by reference to 5% of the average daily opening market value of the applicable equities. Dividends or sales proceeds received by the Smartshares Funds in relation to these shares should not be subject to further tax. The Smartshares Funds may be entitled to a credit for any withholding tax paid on dividends received from the applicable equities subject to certain limits. No tax deduction may be claimed for any losses in respect of the applicable equities under the FDR method.

The Smartshares Funds will accumulate Imputation Credits from tax that they paid on their taxable income.




To the extent that distributions are not fully imputed New Zealand resident Unitholders will not be taxed on distributions that they receive from the Smartshares Funds. The effect of this is that non-taxable income derived by the Smartshares Funds can be distributed to such Unitholders free from tax.

Natural person Unitholders and trustee Unitholders (other than a trustee of a unit trust) subject to a tax rate below the corporate tax rate (currently 28%) may choose to treat distributions that are fully imputed as assessable income by including that amount in their tax return. This allows such Unitholders to use

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Imputation Credits attached to distributions in excess of what is necessary to fully satisfy the income tax liability in relation to those distributions, to offset against the tax on their other taxable income. How Unitholders should treat distributions from the Smartshares Funds for tax purposes will depend on their personal tax circumstances and as such it is recommended that all Unitholders should seek independent tax advice.

Benefits of PIE

A potential benefit is that tax payable on distributions made by a Smartshares Fund to Unitholders is effectively capped at 28%. If you are currently paying tax at a rate less than 28% then the excess tax paid by the Smartshares Funds can be used to reduce the tax liabilities of Unitholders in respect of other income that they derive at the end of each income year by including the distributions from the Fund(s) in your tax return.

PIE Eligibility

The Manager has the discretion to take any steps the Manager considers necessary or desirable to ensure that each Smartshares Fund is eligible to be enrolled and remain as a PIE. This includes ensuring that any one Unitholder’s unit holding does not exceed the maximum investor interest size requirement in the Tax Act, which is a number of Smartshares Units not exceeding 20% of the total issued Smartshares Units of each Smartshares Fund (for these purposes, the Smartshares Units held by the relevant Unitholder’s “associated persons” that are not Exempt Investors and who, themselves, hold Smartshares Units amounting to 5% or more of the units on issue will also be taken into account in determining whether the 20% threshold has been exceeded).




Contributions of Authorised Investments

The tax status of some Unitholders may be such that they are liable for tax on profits derived from the disposal of Authorised Investments. In the case of the Smartshares Funds, contributing Authorised Investments in exchange for Smartshares Units will constitute a realisation of the securities for tax purposes for those Unitholders.



• the Unitholder acquired the Smartshares Units for the purpose of sale or other disposal; or

• the Unitholder carries on a business involving dealing in the Smartshares Units or other similar property; or

• the disposal of the Smartshares Units occurs as an act done in the carrying on of a profit-making scheme or undertaking.


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Reinvestment of distributions Unitholders will automatically have their distributions reinvested in Smartshares Units under the Distribution Reinvestment Plan unless they elect to have them paid directly to a nominated New Zealand bank account. A Unitholder may opt out of (or if not currently a member of the Distribution Reinvestment Plan because the Unitholder previously opted out, elect to join) the Distribution Reinvestment Plan by returning the applicable form (forms are available from the Manager) to:


Notices of election out of or into the Distribution Reinvestment Plan received by the Unit Registrar at least 10 Business Days prior to a Distribution Date will be effective in respect of that distribution, otherwise such notice will be effective in respect of the next distribution. Fees for the Distribution Reinvestment Plan are set out on page 26.

Liability to pay returns The Trustee is the person legally liable to pay Returns (if any).

What are my risks? When you invest, there are always risks that the outcome is not what you expected. There is no guarantee of the Returns you will receive and your risks include all the normal risks associated with investments, legislative change and reliance on third parties.

The principal risks of investing in the Smartshares Funds are set out below:

Risks arising because of investment in securities

Issuer Risk

The Smartshares Funds are subject to the risk of volatility in the value of the underlying securities in which they invest, which may arise due to changes in the creditworthiness of a specific issuer or issuers generally. Even in relation to fixed income products that normally pay a fixed return, the market’s confidence in and perception of an issuer’s creditworthiness could affect the value that a Smartshares Fund would receive for that issuer's securities if it exited its position on the secondary market.

Further, if an issuer became insolvent, it may not be able to fulfil its obligations to repay the capital value of or the coupons on the securities held by the Smartshares Funds, which could also affect the value of the Smartshares Funds.

Creditworthiness of issuers may change due to a wide range of circumstances, including:

(a) in relation to a single issuer, circumstances relevant only to that issuer's activities, such as the loss of a major source of revenue;

(b) in relation to all issuers in a particular sector, circumstances affecting that sector, such as changes in input or output prices;

(c) in relation to all issuers in a particular country or region, circumstances affecting that country or region, such as political upheaval or financial troubles in that country or region; or

(d) in relation to all or most issuers a change in general market conditions.

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These risks are relevant to all of the Smartshares Funds, but the risk of events in a particular country or region affecting the Smartshares Funds has varying significance for each Smartshares Fund. The New Zealand Bond Trust and the New Zealand Cash Trust invest primarily in New Zealand, so are likely to be materially affected by events in New Zealand (although events in another country, region or a global event may materially affect the New Zealand market and therefore these Funds). The Global Bond Trust's investments will be geographically diversified and events in any number of countries or regions (including countries or regions in which the Fund does not invest) may adversely impact the total returns of that Fund. However, the geographical diversification also means that events in a single country or region are likely to be less material.

Interest Rate Risk

All of the Smartshares Funds will invest in some products that pay a return based on interest rates.

In some cases the products that a Smartshares Fund has invested in will have floating interest rates. Floating interest rates can change due to general market conditions or conditions specific to a particular industry sector or issuer, and such changes could affect the returns on such products and thereby affect the value of the relevant Smartshares Units.

In other cases the products that a Smartshares Fund has invested in will have fixed interest rates. Although the returns paid on such products stay fixed, the value of an investment in fixed interest products is not fixed, and will fluctuate as a result of movements in market interest rates. For example, if market interest rates rise, an existing fixed interest rate investment may become less valuable (or in the case of declining market interest rates; more valuable). This is because a fixed interest product becomes less desirable (and therefore less valuable) when other products with higher interest rates become available.

Factors that affect market interest rates include global and domestic governments’ economic, monetary and fiscal policies (including decisions made by the Reserve Bank of New Zealand, or another jurisdiction’s central bank), inflation, economic expansion or contraction, liquidity and crises including political and banking.

Liquidity of Authorised Investments

There may be times when a Smartshares Fund is unable to sell certain underlying securities or is required to do so at a value that is lower than expected. This may be due to low levels of liquidity of an underlying security, by virtue of having limited time available to sell an underlying security, or a change in market conditions. These circumstances may result in a decline in value of the Smartshares Fund or an inability for the Smartshares Fund to make payments to investors as required.

Derivatives Risk

Derivatives are contracts between two parties that usually derive their value from the amount or value of an underlying asset, rate or index. Derivatives may be used by a Smartshares Fund to gain, reduce or modify exposure to foreign currency, interest rates or credit. The use of such products to gain exposure is often a leveraged investment, and may cause a Smartshares Fund to incur significant gains or losses in proportion to the value of the investment, thereby causing Returns to become more volatile and increasing the risk of any loss.

Risks arising because of investment through the Smartshares Funds

Investment Manager Risk

While Smartshares chooses appropriately experienced investment managers, there is no guarantee that an Investment Manager will achieve the investment objectives of a Smartshares Fund or provide a certain level of Return. In particular, the relevant Investment Manager’s active decisions to allocate assets of the relevant Smartshares Fund between Authorised Investments could adversely affect the performance of that Smartshares Fund.

The Investment Manager for each Smartshares Fund seeks to achieve the investment objectives as stated in

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the Smartshares Fund’s Investment Policy. These objectives differ for each Smartshares Fund and can be found on page 10. As the investment objectives of the Smartshares Funds are to outperform benchmark indices, this could incentivise active investment decisions that mirror the benchmark index even where the index is performing poorly.

Liquidity of Units

Investors are only able to cash in their investment by selling their Units on market unless they have enough Units to redeem their Units through an Institutional Investor Withdrawal (described on page 36). The market price per Unit may vary from the Current Unit Value due to supply and demand factors. Units in each Smartshares Fund are expected to be quoted on the NZX Main Board and, in the opinion of the Manager, a market will develop for sales of Units. However, although the Smartshares Funds are expected to be listed on the NZX Main Board, the fact that investors can apply to purchase Units directly from the Manager may mean there are fewer buyers of Units on the NZX Main Board.

Operational Risk

There is a risk that the operational procedures adopted by the Manager, the Investment Manager or the Custodian could result in errors, fraud or misconduct that cause a loss to a Smartshares Fund or otherwise affect Returns. In order to mitigate this risk the Manager, the relevant Investment Manager and the Custodian each follow a set of internal policies and procedures. Some aspects of the Manager’s operations are also outsourced to the Administration Manager to draw on the Administration Manager’s systems and expertise. The Manager has also insured, subject to normal commercial excesses, against losses arising from fraud and misconduct.

Custodian Risk

The assets of each Smartshares Fund are legally held by the Custodian. That means there is a risk that if the Custodian becomes insolvent, this could temporarily or permanently deprive a Smartshares Fund of assets. This risk is managed by having the Custodian hold the assets of the Smartshares Fund on trust and by keeping those assets separately identifiable from other assets it holds. This should mean that, if the Custodian ever does become insolvent, the assets it is holding for the Smartshares Fund will not form a part of the pool of assets to be liquidated for the benefit of the Custodian’s creditors.

Foreign Currency Risk

The Smartshares Funds may invest in underlying securities denominated in foreign currencies. Fluctuations in a foreign currency relative to the New Zealand dollar may increase or decrease the value of a Smartshares Fund. An Investment Manager may or may not hedge a security's foreign currency exposure and there is therefore a risk that changes to foreign currencies affect your Return.

This risk is greater for the Global Bond Trust than for the other Smartshares Funds, because the Global Bond Trust is expected to extensively invest in investments that are not denominated in New Zealand dollars. In contrast, the other Smartshares Funds are only permitted to invest in New Zealand denominated investments, so direct foreign currency exposures are unlikely.

Key Personnel Risk

If key personnel at the Manager or the relevant Investment Manager leave at any time, there is an increased risk of disruption or loss of investment professionals that may negatively impact the performance of the Smartshares Funds. This risk is mitigated, to some extent, by the Manager's appointment of the Administration Manager to the Smartshares Funds. As the Administration Manager will be responsible for the day-to-day administration of the Smartshares Funds, this should minimise the risk of disruption if any of the Manager's key personnel leave.

Any changes to an Investment Manager or its key personnel can also affect Returns.

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Regulatory Risk

Regulatory risk is the risk that a Smartshares Fund may be adversely affected by future changes in applicable laws or regulations, including tax laws, or by decisions taken by regulatory agencies enforcing those laws.

Among the regulatory risks that the Manager faces is the risk that when it applies for a market services licence under the FMC Act its application is delayed, declined by the FMA or overly stringent conditions are imposed on its licence. The Funds are required to have a manager with a market services licence by 30 November 2016 at the latest, and so the Manager will need to be replaced as manager of the Funds if it is not able to obtain a licence on acceptable terms by that date.

Tax Risk

Taxation laws, their interpretation, or the IRD’s application of those laws may change during the period of an investor’s investment in a Smartshares Fund, in a way that has an adverse impact on the Returns to that investor.


• If a Smartshares Fund fails to meet the required criteria and therefore ceases to be a PIE, it will not be able to re-elect to be a PIE for the succeeding five years.

• If an investor who is not an Exempt Investor (including all associates) holds more than 20% of the Units in a Fund, that Fund may not qualify to be a PIE.

Although the Manager has put processes in place designed to ensure that each Smartshares Fund complies with all requirements to be a PIE, there is a risk that a Smartshares Fund could lose PIE status if there is a breach of those requirements which is not remedied within the time permitted under the PIE Rules. If PIE status of a Smartshares Fund is lost that Smartshares Fund will be taxed as a company and distributions to investors will be dividends taxable at the investor’s marginal tax rate and potentially will be subject to withholding tax to the extent that there are insufficient imputation credits generated by tax payments made by the Fund. No compensation will be paid to investors in the event that PIE status is lost. Unitholder Liability No Unitholder shall be personally liable in respect of any debt or liability of the relevant Smartshares Fund, nor be personally liable to indemnify the Trustee or the Manager in respect of any such debt or liability, except for any tax liability paid by the Smartshares Funds that is attributable to that Unitholder. The Trustee and Manager, except in the case of wilful default, wilful breach of trust or dishonesty, are indemnified out of the assets of the relevant Smartshares Fund.

Consequences of Insolvency Unitholders are not liable to make any payments to third parties upon the winding up of Smartshares Funds, or as a result of the insolvency of the Manager or Trustee. However, in the event that a wind-up proves necessary, the Manager and/or Trustee shall be entitled to recover from the relevant Smartshares Fund all costs and expenses, which are incurred in connection with or arising out of the winding up of the Smartshares Fund. This will be done prior to distributing money (or assets) to Unitholders. Claims of Unitholders in respect of their Smartshares Units will rank equally among themselves in such circumstances.

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Can the investment be altered? Regular Savings Plan Unitholders may at any time initiate, cease or alter (subject to maintaining a minimum Contribution of $50 per month unless Contributions are being completely stopped) the monthly Regular Savings Plan payments by giving ten Business Days’ notice to the Unit Registrar prior to the Direct Debit Date.

Distribution Reinvestment Plan Unitholders may at any time initiate or cease the Distribution Reinvestment Plan by notifying the Unit Registrar. However, Unitholders will need to give the Unit Registrar at least 10 Business Days' notice prior to the next Distribution Ex Date to enable the change to be made for that distribution period.

Fees The Manager is entitled to increase the amount of any fee (including by adding a fee not currently charged) payable in respect of a Smartshares Fund. To do this it must:

(a) give at least ten Business Days' prior notice of any such increase of any Contribution fee to the Trustee;




Amendments to the relevant trust deed and issue terms The Manager and the Trustee may amend the relevant Trust Deed for a Smartshares Fund in any of the following cases:




(d) if the same is required or desirable because of any amendment or repeal and/or replacement of the Unit Trusts Act 1960 or any other relevant legislation (including, without limitation, provisions of the FMC Act, or regulations under the FMC Act, which will become applicable to the Smartshares Funds when the Manager opts into the FMC Act regime before the relevant statutory transition period ends on 30 November 2016 and may require changes to the Trust Deed), or otherwise permitted or required under any relevant law; or



In addition, where the Trustee and the Manager agree that it is in the interests of the Unitholders to vary the definition of ‘authorised investments’ (as defined in the Trust Deeds) in respect of the relevant Smartshares Fund then the proposed variation will be notified to all Unitholders no later than three months prior to the variation taking effect.

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Amendments to an Investment Policy The Investment Policy of each Smartshares Fund may be amended or replaced from time to time by the Manager in consultation with the Trustee. If the Manager proposes to amend or replace an Investment Policy in a manner that materially affects existing Unitholders, the Manager shall, prior to effecting any such amendment or replacement, give at least 30 days' written notice to the Unitholders and if such notice is required, the relevant amendment or replacement shall not be effective until such notice period has expired.

Change of Investment Manager The Manager may also, in its discretion, replace the Investment Managers. How do I cash in my investment? Smartshares Units can be cashed up in two ways:

1. Market sale Applications have been made to the Special Division that regulates the Manager (in the place of NZX) for permission to quote the Units on the NZX Main Board and all the requirements of the Special Division relating thereto that can be complied with on or before the date of this Investment Statement have been duly complied with. However the Special Division accepts no responsibility for any statement in this Investment Statement.

Once the applications made to the Special Division for permission to quote the Units on the NZX Main Board are accepted, Units in each Smartshares Fund will be quoted on the NZX Main Board and, in the opinion of the Manager, a market will develop for sales of Units. Then Smartshares Units will be able to be sold on market through NZX Firms (no written redemption notice will be required). The market price per Smartshares Unit may vary from the Current Unit Value due to supply and demand factors. The costs involved in a sale on the NZX Main Board is normal sharemarket brokerage, which may vary between NZX Firms. The Manager may decline to register a transfer of Smartshares Units if it would result in a transferee holding less than the Minimum Holding (provided that doing so would not breach the Listing Rules).

2. Institutional Investor Withdrawals The Trust Deeds allow for the redemption of Units in multiples of 250,000 Units by way of an Institutional Investor Withdrawal.

All Institutional Investor Withdrawal requests must be made through an NZX Firm to the Manager by completing an Institutional Investor Withdrawal notice available from the Manager or any NZX Firm.

Units will be redeemed under an Institutional Investor Withdrawal upon delivery to the investor of the cash amount and/or Authorised Investments that the Manager agrees to give as consideration for, and determines to have a value equal to, the price of the Units to be redeemed. Charges in relation to Institutional Investor Withdrawals are explained under “What are the charges?” on page 26. The Manager is not obliged to redeem Smartshares Units (via Institutional Investor Withdrawals) in any of the Smartshares Funds in the period from (and including) the Announcement of a distribution to (and including) the Distribution Ex Date (as redemptions during that period could result in a decreased number of Smartshares Units on issue, which would in turn result in an increase in the announced distribution on a per unit basis).

Sale to retain PIE status In some circumstances the Manager may be required to take action to ensure that the Smartshares Funds retain their PIE status. The Manager has been granted a waiver by the Special Division to enable it to do so. For further information about the waiver see the registered prospectus for the Smartshares Funds.

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(ii) neither the Manager nor the Trustee is required to maximise the Smartshares Fund unit price for any disposal and in any event, shall not be liable to any Unitholders for any loss on disposal.

Winding up of Smartshares Funds The Manager has the power to wind up any Smartshares Fund (after giving three months’ notice to the Trustee). The Trustee shall give Unitholders notice that the Trustee has received a notice from the Manager terminating the relevant Smartshares Fund. The Trustee shall then distribute the balance, after payment of any costs, charges, expenses, claims and liabilities (including tax and contingent liabilities) incurred in connection with the relevant Smartshares Fund, or arising out of the liquidation of the Smartshares Fund, amongst the Unitholders in proportion to the number of Units held by them. The Trustee shall retain such amount as the Manager considers necessary or appropriate to meet all the above costs, charges, expenses, claims and liabilities (including contingent liabilities and tax) that are not paid prior to distribution.

Who do I contact with inquiries about my investment? If you require any information about your investment in Smartshares Units, you should first contact:



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Is there anyone to whom I can complain if I have problems with the investment? Complaints can be made to any of the following:

The Manager Manager Smartshares Smartshares Limited Level 1, NZX Centre 11 Cable Street PO Box 2959 WELLINGTON Tel: 0800 80 87 80 Email: [email protected]






What other information can I obtain about this investment? Further information about the Smartshares Funds, and Smartshares Limited, is contained in or referred to in:

• The latest registered prospectus for the Smartshares Funds

• The latest annual report (including financial statements) of the Smartshares Funds (when prepared).




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Up-to-date information on the performance of Smartshares Funds and the relevant indices is available in the daily newspapers and on NZX's website (www.nzx.com). Announcements to NZX, including Announcements of the tracking differences for the Smartshares Funds can be found at www.nzx.com under the ticker symbols "GBF" for the Global Bond Trust, "NZB" for the New Zealand Bond Trust and "NZC" for the New Zealand Cash Trust.

Information to the Unitholder The annual report and half year report is made available to every investor on the Smartshares website within 90 days of the end of the relevant period. Notification of the availability of this annual report is sent to all investors by mail and a hard copy of the report can be posted to any Unitholder, if requested.




Request information Investors may also request from the Manager, in accordance with section 54B of the Securities Act 1978 and regulation 44 of the Securities Regulations 2009, the information required by those provisions to be made available. A prescribed fee may be payable (but not for a copy of the registered prospectus, a copy of the financial statements or a copy of any document extending the period during which allotments may be made under the registered prospectus). Such a request may be made by contacting the Manager, on the contact details as set out on page 20 above, and the Manager will be able to let Unitholders know what the fee is (if any) prior to actioning their request.








(g) if prospective financial information about the Smartshares Fund was contained in any prospectus or advertisement, a comparison (if practicable, in the same form and for the same period as the prospective financial information) of the actual results against the prospective financial information.

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Privacy The Manager, through the Unit Registrar, collects and holds personal information about you for the purposes of managing your investment and advising you of other investment opportunities. You may request access to personal information held about you in relation to your investment. You may make such request by writing to the Unit Registrar at:




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GLOSSARY OF TERMS


Announcement a market announcement to NZX that can be viewed on nzx.com under the ticker symbols "GBF" for the Global Bond Trust, "NZB" for the New Zealand Bond Trust and "NZC" for the New Zealand Cash Trust (and Announce and Announced have corresponding meanings).

Appendix 7 Date the date on which a distribution is announced to NZX which shall not be less than 10 Business Days before the Record Date.


Authorised Investments securities, assets and/or investment vehicles that the relevant Investment Manager is authorised to invest in under the Investment Policy of the relevant Smartshares Fund.


Cash Contribution a cash Contribution that is not an Institutional Investor Contribution or a Contribution made under the Regular Savings Plan or the Distribution Reinvestment Plan.

Contribution a contribution of cash and/or Authorised Investments to a Smartshares Fund in exchange for Units in that Fund.

Current Unit Value the market value (in New Zealand dollars) of all Authorised Investments held by the relevant Smartshares Fund (plus any income received and accrued since the last Distribution Calculation Date) less liabilities or provisions (including expenses paid since the last Distribution Calculation Date) properly to be taken into account in determining the NAV of the relevant Smartshares Fund, divided by the number of Units on issue for that Smartshares Fund.

Custodian BNP Paribas Fund Services Australasia Pty Limited, acting through its New Zealand branch, or any other custodian appointed (by the Trustee) from time to time.

Direct Debit Date on or about the 20th of every month.

Distribution Calculation Date in relation to a distribution period, a date specified by the Manager that is not more than three Business Days before the Appendix 7 Date for that distribution.

Distribution Date each date on which distributions are paid to Unitholders, which will be within 20 Business Days after each Record Date. Currently, distributions are made quarterly, although a distribution may not be made for a quarter if the Manager determines that the income is not substantial enough to distribute.


Distribution Reinvestment Plan means the plan currently provided for in the prospectus for the Smartshares Funds under which Unitholders may automatically invest their distributions in the relevant Smartshares Fund.

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Establishment Contribution means a Cash Contribution made by an investor that is not already a Unitholder in the Smartshares Fund that the investor wishes to invest in.

Establishment Deed an establishment deed establishing a Smartshares Fund between the Manager and the Trustee.



FMC Act the Financial Markets Conduct Act 2013.


Institutional Investor Contribution

a Contribution for a multiple of 250,000 Units.

Institutional Investor Withdrawal

the redemption of a multiple of 250,000 Units by withdrawing cash and/or Authorised Investments held by a Fund.

Investment Management Agreement

(a) for the Global Bond Trust, the investment management agreement between the Manager and PIMCO dated 23 October 2015.

(b) for the New Zealand Bond Trust and the New Zealand Cash Trust, the investment management agreement between the Manager and Nikko Asset Management dated 19 October 2015.

Investment Manager (a) for the Global Bond Trust, PIMCO, or any other investment manager appointed by the Manager from time to time; or

(b) for the New Zealand Bond Trust and the New Zealand Cash Trust, Nikko Asset Management, or any other investment manager appointed by the Manager from time to time.

Investment Policy a statement of the investment policy and objectives for the relevant Smartshares Fund agreed between the Manager and the relevant Investment Manager (and set out in the relevant Investment Management Agreement) that sets out how the Investment Manager will invest on behalf of the Manager in relation to the relevant Smartshares Fund.







Minimum Holding the minimum number of Smartshares Units in a Smartshares Fund that a Unitholder must hold at all times. Currently this is 100 Smartshares Units.

NAV the net asset value of the relevant Smartshares Fund.

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Nikko Asset Management Nikko Asset Management New Zealand Limited.

NZX NZX Limited.



NZX Participant Rules the rules regulating Market Participants of NZX.


PIMCO PIMCO Australian Pty Limited.

Record Date in relation to a distribution to Unitholders, the time and date fixed by the Manager for the determination of the Unitholders to whom a distribution will be paid, which is currently on or about the last Business Day in March, June, September and December in each year, although the Manager may not fix a Record Date for a quarter if the Manager determines that the income is not substantial enough to distribute.

Regular Savings Plan the scheme under which Unitholders may make monthly payments of at least NZ$50 to the Smartshares Funds in order to purchase further Smartshares Units on an ongoing basis.

Return in relation to Units and other securities means the amounts distributed to holders of them together with any increase in their capital value.

Smartshares Funds or Funds the Global Bond Trust, New Zealand Bond Trust and the New Zealand Cash Trust.

Smartshares Unit or Unit a unit in one of the Smartshares Funds.

Special Division means the division of the NZ Markets Disciplinary Tribunal constituted under the NZ Markets Disciplinary Tribunal Rules, that regulates the Manager (in the place of NZX), for compliance with the Listing Rules.


Trust Deed in respect of any particular Smartshares Fund, the Master Trust Deed and the relevant Establishment Deed (as may be supplemented or amended by any supplementary deeds or deeds of modifications).


Unitholder a holder of Smartshares Units.



$ New Zealand dollar.



NEW ZEALAND PROPERTY TRUST

Investment Statement for the purposes of the Securities Act 1978. Dated 27 October 2015

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Contents


HOW DO I APPLY? 11

NEW ZEALAND PROPERTY TRUST 14

ANSWERS TO IMPORTANT QUESTIONS 15 What sort of investment is this? 15 Who is involved in providing it for me? 15 How much do I pay? 17 What are the charges? 20 What returns will I get? 21 What are my risks? 24 Can the investment be altered? 29 How do I cash in my investment? 30 Who do I contact with inquiries about my investment? 31 Is there anyone to whom I can complain if I have problems with the investment? 32 What other information can I obtain about this investment? 32


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(The information in this section is required under the Securities Act 1978.) Investment decisions are very important. They often have long-term consequences. Read all documents carefully. Ask questions. Seek advice before committing yourself. Choosing an investment When deciding whether to invest, consider carefully the answers to the following questions that can be found on the pages noted below:

Page











What other information can I obtain about this investment? 32 In addition to the information in this document, important information can be found in the current registered prospectus for the investment. You are entitled to a copy of that prospectus on request. The Financial Markets Authority regulates conduct in financial markets

The Financial Markets Authority regulates conduct in New Zealand’s financial markets. The Financial Markets Authority’s main objective is to promote and facilitate the development of fair, efficient, and transparent financial markets. For more information about investing, go to http://www.fma.govt.nz. Financial advisers can help you make investment decisions

Using a financial adviser cannot prevent you from losing money, but it should be able to help you make better investment decisions. Financial advisers are regulated by the Financial Markets Authority to varying levels, depending on the type of adviser and the nature of the services they provide. Some financial advisers are only allowed to provide advice on a limited range of products. When seeking or receiving financial advice, you should check—

• the type of adviser you are dealing with;

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• the services the adviser can provide you with;

• the products the adviser can advise you on.

A financial adviser who provides you with personalised financial adviser services may be required to give you a disclosure statement covering these and other matters. You should ask your adviser about how he or she is paid and any conflicts of interest he or she may have. Financial advisers must have a complaints process in place and they, or the financial services provider they work for, must belong to a dispute resolution scheme if they provide services to retail clients. So if there is a dispute over an investment, you can ask someone independent to resolve it. Most financial advisers, or the financial services provider they work for, must also be registered on the financial service providers register. You can search for information about registered financial service providers at http://www.fspr.govt.nz. You can also complain to the Financial Markets Authority if you have concerns about the behaviour of a financial adviser. NZX Main Board Listing & Quotation Application has been made to the Special Division that regulates Smartshares Limited (the Manager) (in the place of NZX) for permission to quote the units in the New Zealand Property Trust (Units) on the NZX Main Board and all the requirements of the Special Division relating thereto that can be complied with on or before the date of this Investment Statement have been duly complied with. However, the Special Division accepts no responsibility for any statement in this Investment Statement. The NZX Main Board is a licensed market operated by NZX, a licensed market operator regulated under the FMC Act. Disclaimer The Return on the Fund is intended to closely match the Return on the S&P/NZX Real Estate Select Index (the Index). The Index rises and falls according to market events and conditions. None of the Trustee, the Manager, the Custodian, the Administration Manager, NZX, or any other person guarantees the Return on the Index or the Return on Units or investment in the Fund. No warranty expressed or implied is given as to the results to be obtained by the Manager or the Fund from the use of the Index or any data included in it, or as to the liquidity of investment in the Fund, Units or the fitness of the Fund for any Unitholder’s purposes. The offer set out in this Investment Statement is only made in New Zealand. No person may offer, sell or deliver Units or distribute any documents in relation to the offer (including any copy or extract from this Investment Statement) to any person in any jurisdiction other than in compliance with any applicable laws and regulations. S&P Dow Jones Indices and NZX Disclaimer

The "S&P/NZX Real Estate Select Index" is a product of S&P Dow Jones Indices LLC or its affiliates (“SPDJI”) and NZX Limited, and has been licensed for use by Smartshares Limited. Standard & Poor’s® and S&P® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”). NZX Limited’s trademark is a registered trademark of NZX Limited. The trademarks have been licensed to SPDJI and have been sublicensed for use for certain purposes by Smartshares Limited. Smartshares Limited’s products are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively, “S&P Dow Jones Indices”) or NZX Limited. Neither S&P Dow Jones Indices nor NZX Limited make any representation or warranty, express or implied, to the owners of the Smartshares Limited’s products or any member of the public regarding the advisability of investing in securities generally or in Smartshares Limited’s products particularly or the ability of the S&P/NZX Real Estate Select Index to track general

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market performance. S&P Dow Jones Indices and NZX Limited only relationship to Smartshares Limited with respect to the S&P/NZX Real Estate Select Index is the licensing of the Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P/NZX Real Estate Select Index is determined, composed and calculated by S&P Dow Jones Indices or NZX Limited without regard to Smartshares Limited or the Smartshares Limited’s products. S&P Dow Jones Indices and NZX Limited have no obligation to take the needs of Smartshares Limited or the owners of Smartshares Limited’s products into consideration in determining, composing or calculating the S&P/NZX Real Estate Select Index. Neither S&P Dow Jones Indices nor NZX Limited are responsible for and have not participated in the determination of the prices, and amount of Smartshares Limited’s products or the timing of the issuance or sale of Smartshares Limited’s products or in the determination or calculation of the equation by which Smartshares Limited’s products are to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and NZX Limited have no obligation or liability in connection with the administration, marketing or trading of Smartshares Limited’s products. There is no assurance that investment products based on the S&P/NZX Real Estate Select Index will accurately track index performance or provide positive investment returns. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within an index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice. NEITHER S&P DOW JONES INDICES NOR NZX LIMITED GUARANTEES THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P/NZX REAL ESTATE SELECT INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES AND NZX LIMITED SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND NZX LIMITED MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY SMARTSHARES LIMITED, OWNERS OF THE SMARTSHARES LIMITED’S PRODUCTS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P/NZX REAL ESTATE SELECT INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR NZX LIMITED BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBLITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND SMARTSHARES LIMITED, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

Definitions Defined terms in this Investment Statement have the meaning set out in the Glossary of Terms on pages 35 to 37.

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KEY INFORMATION SUMMARY This section of the Investment Statement contains a summary of the key information relating to this offer. The rest of this Investment Statement contains important information. You should read all of it before deciding whether to invest. How does the Fund work? The basic concept

The objective of the Fund is to invest in a portfolio of NZX-listed entities to provide a Return to Unitholders that closely matches the Return on the Index. The Fund tracks the S&P/NZX Real Estate Select Index, which is comprised of the largest companies in the property sector listed on the NZX. To meet this objective, the Fund aims to hold securities (Index Securities) of the entities that are part of the Index (Index Issuers) in proportions that match their weightings in the Index. This is called index tracking, and there is further information about it below on this page and on page 25.


Application has been made to the Special Division that regulates the Manager (in the place of NZX) for permission to quote the Units on the NZX Main Board. Once the application has been accepted, your Units will be quoted on a stock exchange, in this case on the NZX Main Board. As quoted securities, Units can be traded like shares in Listed companies (subject to liquidity). For most investors, trading their Units on market through an NZX Firm will be the only way of redeeming their investment, because there is no general right to redeem Units.

Unit Trust

The Fund is a unit trust, as defined in the Unit Trusts Act 1960 and was established in accordance with the Trust Deed. The beneficial interest in the Fund is divided into Units with each Unit representing an equal interest in the assets of the Fund, but not conferring any interest in any specific asset of the Fund. The Unit Trusts Act 1960 has been replaced by provisions in the FMC Act that will become applicable when the Fund transitions to become (or become part of) a registered scheme under the FMC Act, which must occur before the statutory transition period ends on 30 November 2016. Differences from direct investment

Although investing in the Fund is similar to a direct investment in the relevant Index Securities, you will not have any rights in relation to specific Index Securities held by the Fund. There are also some differences between the Returns you will receive on Units. The principal differences are as follows:

• Tracking differences – The Manager aims to track the Index by investing in the Index Issuers in proportions that match their weightings in the Index. However, there will inevitably be some differences. For example, the makeup of the Index may be changed, and the Manager may not be able to exactly match the change by buying and selling Index Securities because the prices it pays and receives for the Index Securities may not exactly match the prices used to adjust the Index. This means that the net asset value (NAV) of the Index Securities held by the Fund diverges over time from the value of the Index (and therefore from the value of an equivalent direct investment in the Index Issuers).

• Liquidity differences – Units may be more or less liquid than Index Securities due to differences in supply and demand (and other market forces). Accordingly, Units may be more difficult to sell than some Index Securities. There is further information about liquidity risk on page 26.

• Distribution differences – An investor that invests directly in Index Securities will receive distributions in relation to those Index Securities when they are paid by the Index Issuers. In contrast, distributions that are received by the Fund from the Index Issuers will be held by the Fund (and included in the Fund's NAV) until the next Distribution Date. It is only on that Distribution Date that distributions received during the months following the previous Distribution Calculation Date will be reinvested for you (or paid out) in one lump sum. Any interest earned on distributions prior to the

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Distribution Date will be retained by the Manager. Currently, distributions received are automatically reinvested for you or you may elect to have them paid out quarterly.

• Management fees – Management fees charged by the Manager are deducted before distributions are paid to you, meaning you get less than the full distributions paid on the Index Securities the Fund invests in. However, if you invested in the Index Securities directly it is likely that you would have to pay the equivalent of some or part of these fees, such as brokerage and potentially other investment fees, to third parties.

• Market price differences – Units trade at the market price for Units. The price at which they trade will be set by market forces such as supply and demand relevant to their market rather than by direct reference to the market price of the Index Securities. Consequently, while the market price of Index Securities (which will be set by market forces relevant to Index Securities' markets) is likely to affect the market price of Units, the two may not exactly correlate.

Distributions

Distributions to Unitholders are currently made directly from the Fund within 20 Business Days of each Record Date. Currently, the Record Date is on or around the last Business Day of each of March, June, September and December in any year. However, the Manager may choose not to make distributions for a quarter if it considers that the income received by the Fund in that quarter is not substantial enough to distribute. In such circumstances, such income will be held in the Fund until the Distribution Date for the following quarter, at which point it will be distributed to Unitholders along with any further income received by the Fund during that following quarter.

These distributions comprise dividends or any other income received by the Fund, less fees and other expenses. Unitholders will automatically have their distributions re-invested for Units unless they elect to have them paid directly to a nominated New Zealand bank account in New Zealand dollars. There is further information about distributions on page 22.

Who is involved in providing the Fund? Smartshares Limited (the Manager) is a wholly owned subsidiary of NZX Limited (NZX). Smartshares Limited offers a range of funds.

The Manager is responsible for all adjustments to the Fund's portfolios, the maintenance of accounting records of the Fund, communication with Unitholders, supervision of the Unit Registrar, and payment of distributions to Unitholders. Some of these duties are delegated to the Administration Manager, the Custodian and the Unit Registrar.

The other principal persons involved in providing the Fund are:

• Trustees Executors Limited (the Trustee);

• BNP Paribas Fund Services Australasia Pty Ltd, acting through its New Zealand branch (the Administration Manager and the Custodian); and

• Link Market Services Limited (the Unit Registrar).

None of the Manager, Trustee, Administration Manager, Custodian, Unit Registrar or NZX (as the parent company of the Manager) provide any guarantee in relation to the Fund.

There is further information about the persons involved in providing the Fund on pages 15 to 17.

Benefits of Smartshares Flexibility

The Fund provides the diversification of a fund investment while giving you similar transparency and convenience to an investment in individual shares – the ability to know the value of your investment at any moment, and the flexibility to trade your investment quickly (subject to liquidity risk). This is because the Units are expected to trade like individual shares; with their prices published in the newspapers and on-line

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(www.nzx.com) so you can track the progress of your investment at any time. Application has been made to the Special Division for permission to quote the Units on the NZX Main Board. If the application is accepted, you will be able to trade your Units on market at any point (subject to liquidity), just like a share in a Listed company.


Once you hold the Minimum Holding of 100 Units in the Fund, you can make regular contributions from as little as $50 per month by way of the Regular Savings Plan. And you can stop, restart, increase or decrease your regular contributions whenever you like (subject to providing the Unit Registrar with ten Business Days' notice prior to the 20th of a month and, unless you are completely stopping contributions, maintaining a minimum contribution of $50 per month). You can also add to your investment through the Distribution Reinvestment Plan – where your distributions are automatically reinvested as additional Units or you can choose to have your distributions paid directly to you by direct credit.

Transparency

The Fund is transparent because the Fund's holdings are always known to the market. Unitholders will know that whenever there is a change to the Index (which will be announced by the Index Administrator) the Manager will buy and sell the Index Securities to adjust the Fund's holdings, with the intention of matching that change to the Index.

Lower Fees

The Fund is able to offer lower fees because the Manager does not make active investment decisions, which may require expensive research, analytical and trading expertise. Trading only occurs to rebalance the Fund's holdings to match the weighting of each entity’s shares in the Index. By contrast, actively managed funds, where the manager makes active investment decisions, generally incur higher costs and therefore may charge a higher management fee.


When you invest in the Fund, you get an indirect investment in a range of issuers, providing you with a more diversified investment than an investment in a single issuer. Diversification may reduce risk. This is because it is unlikely that all the entities in the Fund will perform similarly at the same time. For example, the losses from entities performing poorly may be balanced by the gains from those performing well. However, the Fund only allows diversification within the asset class (property) represented in the Index. The issuers that would have been included in the Index as at 30 September 2015 are set out on page 14.

What types of risks are involved with the Fund? In summary, some of the principal risks are:


• Market risk – Fluctuations in the security price of, and distributions paid by, the Index Issuers will lead to fluctuations in the Returns on Units. Such fluctuations could be related to the circumstances of an individual Index Issuer and affect the share price or distributions of that Index Issuer only, or could be related to circumstances with more widespread effects and affect a number of, or all, Index Issuers.

• Property market risk – The Index Issuers are all investors in the New Zealand property market. Consequently, conditions that adversely affect the New Zealand property market are likely to adversely affect the Fund.

Risks arising because of investment through the Fund

• Tracking risk – For a variety of reasons, including those described on page 6, the Manager will not always manage to exactly track the Index for the Fund. As a result of this, the Index Securities held by the Fund may, over time, not exactly match the composition of the Index. Of course, investors investing directly in order to track an index are likely to face the same issues as the Manager in trying to exactly track the Index. There is further information about index tracking on page 25.

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• Operational risk – Tracking an index is complex and, as a result, operational errors can occur. Such errors could potentially affect Unitholders' Returns.

• Passive management risk – The Fund is a passive investment, which means the Manager will not react to events that affect the value of particular Index Issuers unless and until those events lead to a change in the composition of the Index.

• Liquidity risk – Investors are only able to cash in their investment by selling their Units on market unless they have enough Units to do a Basket withdrawal. (Basket withdrawals are described on page 30.) The market price per Unit may vary from the Current Unit Value due to supply and demand factors. An application has been made to the Special Division for permission to quote the Units of the Fund on the NZX Main Board. Once the application has been accepted, Units in the Fund will be quoted on the NZX Main Board and, in the opinion of the Manager, a market will develop for sales of Units. However, although the Fund is expected to be listed on the NZX Main Board, the fact that investors can apply to purchase Units directly from the Manager may mean there are fewer buyers of Units on the NZX Main Board.

• Regulatory and tax risk – The Fund is subject to an ongoing risk that regulatory or tax law requirements may change, and that this may have an adverse effect on Unitholders' Returns. In particular, there is a risk that when the Manager applies for a market services licence under the FMC Act its application is delayed, declined by the FMA or overly stringent conditions are imposed on its licence. Also, the Fund is a Portfolio Investment Entity (PIE), with benefits for Unitholders, and there is a risk that this status may be lost, as discussed on pages 22 to 24 below.


What charges do Unitholders pay directly? When Unitholders first subscribe for Units they will pay an application fee to the Manager, which will be deducted from their Subscription Amount. For Subscription Amounts of less than $20,000 this will be a flat fee of $30, and for Subscription Amounts equal to or greater than $20,000 the subscription fee will be 0.2% of the full Subscription Amount. This fee is not payable for subsequent Cash Applications, subscriptions under the Regular Savings Plan or the Distribution Reinvestment Plan, or in relation to a Basket application. (Basket applications are for large investors, and are discussed on page 19.)

The application fees for initial Cash Applications and Baskets may be increased and an application fee for subsequent Cash Applications may be added by the Manager by giving ten Business Days' notice of the change to the Trustee. The other fees referred to above may be increased or imposed by the Manager by giving three months' notice to the Trustee and, if the Manager determines in its reasonable discretion that the increase or imposition is material, Unitholders. All fees may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the amount by which fees may be increased or imposed.



What charges does the Fund pay? The Fund pays a management fee to the Manager. This is currently 0.54% per annum (inclusive of GST) of the NAV, and is accrued daily and paid to the Manager on a monthly basis in arrear.

The management fee is currently used by the Manager to pay the expenses of the Fund including the Trustee, the Administration Manager, the Custodian, the Unit Registrar, any penalties and interest charged by the Inland Revenue and any bank fees, although the Manager reserves the right to have such amounts paid out of the Fund. If the Manager does exercise its right to have such amounts paid out of the Fund, it will first notify the Trustee and Unitholders but the Manager is not required to notify potential investors. Other expenses that arise, such as operating expenses that do not arise in the ordinary course of business, will be paid out of the Fund.

The Manager may increase its fees, but must give three months' notice of the change to the Trustee and, if

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the change is material (as determined by the Manager in its reasonable discretion), to Unitholders or the fees may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit on the changes that the Manager may make to fees charged.

The Manager is also entitled to interest on amounts held including in respect of distributions and other income received by the Fund and on Subscription Amounts (received as Cash Applications or under the Regular Savings Plan or Distribution Reinvestment Plan) between the date on which they are received and the date of issue of Units.

Further information about the Manager's fees can be found on pages 21.

Timetable

Opening of the Offer Smartshares anticipates that the public will be able to subscribe for Units from Thursday 12 November 2015.

Closing of the Offer The offer will not have a set closing date.

Allotment of the Units For Cash Applications Units will be allotted just after the end of the month in which the application is received, unless it is received on or after the 20th of the month, in which case Units may not be allotted until just after the end of the following month.

Quotation of the Units An application for quotation of the Units has been made to the Special Division. While Smartshares has complied with all necessary steps as at the date of this Investment Statement it cannot give a set date for quotation of the Units, although it is expected to be 12 November 2015.

Payments of Distributions Any distributions will be payable within 20 Business Days of on or about the last Business Day in each of March, June, September, and December.

Note: this timetable is indicative only and may be changed at Smartshares' discretion.

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HOW DO I APPLY?

How to get started with Smartshares You can start your investment in the Fund by making an initial Cash Application from as little as $500. You can do this by completing the Application Form for new Units at the back of this Investment Statement, or by applying online at http://smartshares.co.nz/invest-now.

Alternatively following quotation of the Units, you can obtain an investment by purchasing existing Units on market through an NZX Firm.

If you are buying new Units, send in your completed Application Form, together with the full amount of the application payment, to Link Market Services Limited, PO Box 91976, Auckland 1142. Alternatively, you can send it to the Manager, an NZX Firm, through any other channel approved by NZX (of which there are currently none), or investors can also apply online at http://smartshares.co.nz/invest-now.

Make sure you read all the information contained in this Investment Statement before deciding whether to invest in the Fund. There is also additional information that you may find helpful in the registered prospectus for the Fund.


Further investments Once you've made the initial investment, you can make further investments, either:

• through a further Cash Application (for a minimum of $250);

• through the Regular Savings Plan;

• through the Distribution Reinvestment Plan; or

• through a Basket application.



Cash Application Investment As with the initial Cash Application, a Cash Application for further Units can be made by completing the Application Form attached to the back of this Investment Statement and sending it with the full amount of the application payment to Link Market Services Limited, PO Box 91976, Auckland 1142. Alternatively, you can send it to the Manager, an NZX Firm, or through any other channel approved by NZX (of which there are currently none). Investors can also apply online at http://smartshares.co.nz/invest-now.


The Regular Savings Plan You can currently make a regular monthly investment directly from your bank account with no transaction fees charged by the Manager.

Every month for an amount you choose (minimum contribution $50 per month) the Manager will add Units to your investment. Simply complete the Application Form and direct debit authority included in this Investment Statement, or apply online at http://smartshares.co.nz/invest-now. Your payments will then be automatically withdrawn from your nominated bank account on a monthly basis.

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On or about the 20th of each month your bank account will be direct debited and the money will then be invested in Units on or around the end of each month. The Unit Registrar will send you a statement each month confirming your new Unit holding(s).

To join the Smartshares Regular Savings Plan, you must already have the Minimum Holding of 100 Units or you must make a Cash Application that, if accepted, would mean you held at least 100 Units in the Fund.



• Zero transaction cost – no transaction fees charged by the Manager at present

• Affordable – contributions from just $50 per month

• Flexible – you can stop, restart, increase or decrease (subject to maintaining a minimum contribution of $50 per month) your regular contributions

• Investing regularly provides dollar cost averaging (which is described on page 18)

• Helps you accumulate Units – every month you acquire additional Units automatically without needing to think about it.

The Distribution Reinvestment Plan The Fund may receive dividends from the Index Issuers in which it invests. These dividends and other income are retained in the Fund (and reflected in the Current Unit Value) and the Fund makes distributions to Unitholders periodically, with each Unitholder’s entitlement based on the Unitholder’s holding as at the Record Date for that distribution.

Your share of each distribution by the Fund will be automatically reinvested as additional Units on each Distribution Date unless you choose to have distributions paid out to you by direct credit. By having these payments automatically reinvested, you are increasing your unitholding without having to do anything. Compounding distributions can work in your favour if you want to accumulate Units over the longer term. See page 24 for more details.

Basket applications Units can also be acquired by way of Basket creation. Subscriptions for Units by Basket creation may only be made in multiples of 250,000 Units.

Basket applications must be made directly to the Manager by delivery through an NZX Firm. Each delivery of a Basket must be accompanied by a completed Basket Application Form (not attached to this Investment Statement, but available from the Manager or any NZX Firm).

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BOARD OF DIRECTORS The directors of the Manager are Bevan Miller (Chair), Tim Bennett and Kristin Brandon. The funds operated by the Manager are passively managed funds (like the Fund) or have their investment management function outsourced. Consequently, the board has been constructed to provide a mix of operational, financial and legal skills rather than specific funds management experience. Brief profiles for each of the directors, detailing their experience and qualifications, are set out below.

Bevan Miller

Bevan is the Chief Financial Officer of NZX. He has extensive financial experience in both the corporate and accounting sectors, previously working as CFO for Acurity Health Group Limited. Prior to that Bevan held a number of senior finance roles at Telecom New Zealand, now Spark, having started his career in the audit division of global accounting firm KPMG. Bevan is a Chartered Accountant and holds a Bachelor of Commerce and Administration with Honours from Victoria University of Wellington.

Tim Bennett

Tim is the Chief Executive Officer of NZX. He has extensive capital markets and commodity market development experience in Asia, the Middle East and North America. Prior to joining NZX, Tim was a partner at Oliver Wyman in Singapore, and previously was a partner with the Boston Consulting Group in Asia and Australia. Tim holds an MBA in Strategy and Finance from Wharton School, University of Pennsylvania, and a Bachelor of Commerce and Administration in Computer Science and Business Administration from Victoria University of Wellington.

Kristin Brandon

Kristin is Head of Compliance at NZX and has worked at NZX since 2007. Kristin has significant legal experience working at Chapman Tripp Wellington and Dechert LLP London where she specialised in company and securities law, including advising in relation to capital raisings, mergers and acquisitions and acting for fund managers. Prior to joining NZX, Kristin was Assistant Company Secretary at Telecom New Zealand Limited (now Spark). Kristin holds a Bachelor of Laws with Honours and a Bachelor of Commerce and Administration from Victoria University of Wellington and is both a barrister and solicitor.

It is intended that the composition of the board of directors will change prior to the quotation date of the Units. The Manager will make an Announcement as to the persons to be appointed to the Smartshares board on the date of quotation of the Units.

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NEW ZEALAND PROPERTY TRUST

The Fund tracks the S&P/NZX Real Estate Select Index, which gives investors exposure to entities listed on the NZX that are included in the S&P/NZX All Index classified as GICS Real Estate Industry Group and meet a minimum float adjusted market capitalization and average daily trading volumes, as defined in the Index methodology.

The S&P/NZX Real Estate Select Index is rebalanced semi-annually with each constituent allocated a weight based on its float-adjusted market cap subject to a single stock cap of 17.5% at the time of the rebalance.

A link to the index methodology for the S&P/NZX Real Estate Select Index can be found at www.spindices.com/indices/equity/sp-nzx-real-estate-select. The methodology for constructing the index may change from time to time.

The S&P/NZX Real Estate Select Index will be established prior to the offer opening. The specific entities included in the index may change over time. If the Index had existed as at 30 September 2015, the following entities would have been included in the Fund at that time:

Kiwi Property Group Limited

Goodman Property Trust

Precinct Properties New Zealand Limited

Argosy Property Ltd

Property for Industry Ltd

DNZ Property Fund Limited

Vital Healthcare Property Trust

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What sort of investment is this? The Fund is a unit trust constituted under the Unit Trusts Act 1960 and, accordingly, the Units offered in this Investment Statement are units in a unit trust. The Fund was established on 15 October 2015 under the Trust Deed. When you buy Units you become a Unitholder. The Fund is passively managed and its objective is to provide Returns that track the Return on the Index. The Fund owns a portfolio of securities in a proportion that is as close as possible to the weightings of the securities in the Index.

Who is involved in providing it for me? Name of Fund The name of the Fund in which Units are offered in this Investment Statement is the New Zealand Property Trust.

The Manager The Manager for the Fund is Smartshares Limited, a wholly-owned subsidiary of NZX.

None of the Manager, any of its directors, any person associated with this offer, or NZX guarantees the Units, repayment of Units, or the payment of any dividends or distributions on Units.

The principal activity of the Manager is to manage funds, including the Fund. The Manager led the development of index tracking funds in New Zealand with the launch of the NZX 10 Fund (formerly “The NZSE TeNZ Fund”) in 1996. The NZX 10 Fund remains the longest standing exchange traded index tracking fund listed on the NZX Main Board.

The Financial Markets Conduct Act 2013 requires managers who act as the manager of a registered scheme to be licensed by the FMA before they can make offers under the new disclosure regime in the Financial Markets Conduct Act 2013. The Manager has begun the application process with the FMA to obtain the necessary licence. Licences will be issued at the discretion of the FMA. As the Manager does not yet hold a licence, it offers units under the Securities Act 1978, which will apply to this offer.



The Manager's address may change from time to time. You can find up-to-date details at any time by searching "Smartshares" at www.business.govt.nz/companies.

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The directors of the Manager, and their respective addresses, may change from time to time without notice to you. You can find up-to-date details of the directors, and their respective addresses, at any time, by searching "Smartshares" at www.business.govt.nz/companies. Profiles for each of the directors are set out on page 13.

It is intended that the composition of the board of directors will change prior to the quotation date of the Units. The Manager will make an Announcement as to the persons to be appointed to the Smartshares board on the date of quotation of the Units.

The powers of the Manager are set out in the “Summary of the Trust Deed” in the registered prospectus for the Fund.

Summary of Duties

The Manager is responsible for all adjustments to the Fund's portfolio of Index Securities, including the purchase or sale of Index Securities in the event of any required adjustments as a result of changes to the Index or corporate actions, the maintenance of accounting records of the Fund, communication with Unitholders, supervision of the Unit Registrar and the payment of distributions to Unitholders. Some of these responsibilities are delegated to the Administration Manager, the Custodian and the Unit Registrar.

The Trustee The Trustee is: Trustees Executors Limited Level 5, 10 Customhouse Quay PO Box 3222 Wellington Tel: (04) 495 0999 Fax: (04) 496 2952 Email: [email protected] The Trustee's address may change from time to time. You can find up-to-date details at any time by searching "Trustees Executors" at www.business.govt.nz/companies.



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The Administration Manager The Administration Manager for the Fund is: BNP Paribas Fund Services Australasia Pty Ltd, New Zealand branch Level 18, State Insurance Tower, 1 Willis Street PO Box 3299, Wellington www.securities.bnpparibas.com The Administration Manager's address may change from time to time. You can find up-to-date details at any time by searching "BNP" at www.business.govt.nz/companies.


The Custodian The Custodian for the Fund is: BNP Paribas Fund Services Australasia Pty Ltd, New Zealand branch Level 18, State Insurance Tower, 1 Willis Street PO Box 3299, Wellington www.securities.bnpparibas.com

The Custodian's address may change from time to time. You can find up-to-date details at any time by searching "BNP" at www.business.govt.nz/companies.

The Custodian provides custodial services, including holding assets of the Fund in custody for safekeeping and separate from the personal assets of the Trustee or Manager.

Unit Registrar The Unit Registrar for the Fund is:


The Unit Registrar's address may change from time to time. You can find up-to-date details at any time by searching "Link" at www.business.govt.nz/companies.

None of the Trustee, the Administration Manager, the Custodian, the Unit Registrar nor any of their directors nor any other persons associated with the offer guarantees the Units, repayment of the Units, or the payment of any dividends or distributions on Units.

Nature and duration of Fund The Fund is a unit trust constituted under the Unit Trusts Act 1960. The Fund was established on 15 October 2015 under the Trust Deed. For more information regarding the Trust Deed see the "Summary of the Trust Deed" section in the registered prospectus for the Fund.

How much do I pay? There are four ways in which you can subscribe for Units, and the method you choose affects how many Units you must subscribe for.

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1. Cash Applications Subscriptions for Units can be made by completing the Application Form attached to this Investment Statement and sending it with the full amount of the application payment to Smartshares Limited at the address of the Unit Registrar or to any NZX Firm. Alternatively, investors can apply online at www.smartshares.co.nz/invest-now.

The minimum cash Subscription Amount for investors who do not already have the Minimum Holding of 100 Units in the Fund is $500 (which includes a flat application fee of $30 for amounts of less than $20,000 or 0.20% of the full Subscription Amount for Subscription Amounts equal to or greater than $20,000, which is deducted from the application amount and paid to the Manager).

For investors who already have the Minimum Holding in the Fund, the minimum cash Subscription Amount is $250.

Subscription Amounts for Cash Applications need to be received by the Unit Registrar, Link Market Services, by the 20th of the month so Units can be allocated and priced at or around the end of the month by the Manager. There is no maximum Subscription Amount. No interest will be paid to subscribers on Subscription Amounts.

The Manager will, at its discretion, use a Subscription Amount either to purchase Index Securities and then issue new Units to the investor or to purchase existing Units on market through an NZX Firm and pass those existing Units on to the investor. In either case, Units will be issued to the investor at the NAV per Unit determined by the Manager on or about the last Business Day of the month.


2. Regular Savings Plan Once you have the Minimum Holding of 100 Units, investing regularly can be a very effective way to accumulate Units over the long term. Even small amounts saved on a regular basis have the potential to grow into a significant number of Units over a number of years.


The Regular Savings Plan lets Unitholders make a regular investment on or about the 20th of each month, directly from their nominated New Zealand bank account. Provided Unitholders hold the Minimum Holding, or if a they make a Cash Application that, if accepted, would mean they hold the Minimum Holding, they can choose to participate in the Regular Savings Plan and start saving with contributions as low as $50 per month. Simply complete the Application Form and direct debit authority included in this Investment Statement, or apply online at http://smartshares.co.nz/invest-now. Unitholders’ payments will be automatically withdrawn from their nominated bank account on a monthly basis. Unitholders can add an additional lump sum payment ($250 minimum value), or increase or decrease their contribution at any time (subject to providing the Unit Registrar with ten Business Days' notice prior to the 20th of a month and, unless contributions are being completely stopped, maintaining a minimum contribution of $50 per month).

If Unitholders enter the Regular Savings Plan and then fail to make payments, no additional Units will be allocated to their investment. If Unitholders fail to make payments for three consecutive months, their access to the Regular Savings Plan may be discontinued. Unitholders may at any time, by giving the Unit Registrar ten Business Days' notice prior to the 20th of a month, cease their payments into the Regular Savings Plan. The Manager will, at its discretion, use the Regular Savings Plan monies either to purchase Index Securities and then issue new Units to the Unitholder or to purchase existing Units and pass those existing Units on to the Unitholder. In either case, Units will be issued to the investor at the NAV per Unit determined by the Manager on or about the last Business Day of the month.

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Any interest earned on the Regular Savings Plan monies prior to the purchase of Units or Index Issuer securities each month will be retained by the Manager. These amounts will be used to cover the cost of operating the Regular Savings Plan and other administrative costs. Any amount left over after this will go to the Manager.

3. Basket Investments For large investment amounts, Units can be acquired by way of Basket creation. Baskets may be created by way of delivery of the proportionate amounts of the securities of the Index Issuers (plus any applicable Cash Amount). The Cash Amount is to ensure that each existing Unitholder’s proportionate interest in the income held within the Fund prior to the issue of Units to the Basket applicant, is not diluted on a per unit basis by the creation of additional Units issued to the Basket applicant.

This should result in the aggregate value of the Basket securities and the Cash Amount being equal to the aggregate Current Unit Value of the Units issued. The securities and Cash Amount are then exchanged for Units. Subscriptions for Units by Basket creation may only be made in multiples of 250,000 Units.

Basket applications must be made directly to the Manager by delivery through an NZX Firm. Each delivery of a Basket must be accompanied by a completed Basket Application Form (not attached to this Investment Statement, but available from the Manager or any NZX Firm). Charges for Basket investments are explained under the section entitled “What are the charges?” on page 20.

4. Distribution Reinvestment Plan The Fund receives dividends from the Index Issuers in which it invests. As described on page 22 these dividends and other income are retained within the Fund and then allocated to Unitholders for distribution. Such distributions are automatically reinvested on each Distribution Date (after the deduction of Distribution Reinvestment Plan fees (if any)) to provide you with additional Units, unless you choose to have these paid out to you by direct credit.

On or around each Distribution Date, the Manager will, at its discretion, use the reinvestment monies for Unitholders who have their distributions reinvested either to purchase Index Securities and then issue new Units to those Unitholders or to purchase existing Units and pass those existing Units on to those Unitholders. In either case, Units will be issued to the investor at the NAV per Unit.

The Distribution Reinvestment Plan described in the Prospectus for the Fund constitutes the description of the "dividend reinvestment plan" for the purposes of the Financial Markets Conduct Act 2013 and Financial Markets Conduct Regulations 2014.

Minimum Holding Unitholders should maintain a minimum number of Units at all times (Minimum Holding). If you fail to maintain the minimum number of Units, the Manager reserves the right to purchase your Units or instruct the Trustee to redeem them (provided that the exercise of that right would not breach the Listing Rules). The Minimum Holding of Units is 100.

Unit Issue Price Units are issued at the Current Unit Value applying at the relevant time for Cash Applications, the Regular Savings Plan and the Distribution Reinvestment Plan.

The Current Unit Value of a Unit is determined by dividing the total value of the Fund’s NAV by the total number of Units on issue. The Current Unit Value of a Unit includes not only the value of the underlying Index Securities held in the Fund, but also accrued income in relation to the portfolio (for example, dividends and tax credits) less liabilities (for example, tax expenses and management fees). Please note that these examples of income and liabilities are not exhaustive and other types of income may be received and liabilities incurred from time to time.

Oversubscription There is no limit on the total number of Units that may be subscribed for and accordingly the Fund does not

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have a policy providing for oversubscription. However, the Manager may reject an application for Units or require redemption of Units to maintain the Fund’s PIE status where there is a risk that a Unitholder will exceed the maximum investor interest size requirement prescribed in the Tax Act (and as set out in the “PIE Eligibility” section at page 23 below).

Suspension of Issues and Withdrawals The Manager is not obliged to issue Units (or redeem Baskets) in the Fund in the period from (and including) the date of the Announcement of a distribution to (and including) the Distribution Ex Date for that distribution. Refunds The Trustee will not refund any Subscription Amount, except where the Trustee, on the advice of the Manager, decides that an investor’s application will not be accepted. In such situations the Subscription Amount will be returned to the investor within 20 Business Days of making that decision (such decision to be made within seven days of receiving the application). No interest will be paid on amounts refunded.

No Cooling-off Period There is no cooling-off period in respect of the Units. An investor may not withdraw their application.

Manager may request information The Manager may request any Unitholder to provide information to the Manager to enable the Manager to determine whether the Fund can continue to meet the PIE eligibility requirements (further details are provided in the "Taxation" section on page 22).

The Manager may also ask a Unitholder to provide any other information that the Manager reasonably requires in order to manage its obligation to comply with any laws or regulations in New Zealand or any other country in relation to the Fund, including to enable the Manager to meet its requirements under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009.


What are the charges? Unless otherwise specified all fees are inclusive of GST.

Entry and Exit charges If you buy Units directly from the Manager through a Cash Application (as described on page 18 above) you pay a flat application fee to the Manager of $30 for Subscription Amounts of less than $20,000, or 0.20% of the full Subscription Amount for Subscription Amounts equal to or greater than $20,000. However, this application fee is not payable if you already hold the Minimum Holding of 100 Units. The application fee may be increased by the Manager by giving ten Business Days' notice of the change to the Trustee. The application fee may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.

The Manager may impose an application fee for subsequent Cash Applications, subscriptions under the Regular Savings Plan or the Distribution Reinvestment Plan, or in relation to a Basket application by giving ten Business Days' notice of the change to the Trustee and Unitholders of the Fund. There is no limit to the fee that may be imposed.

If you buy or sell Units via the NZX Main Board you may be charged a brokerage fee by the NZX Firm with whom you are dealing. The brokerage fee is likely to vary between NZX Firms.

Basket creation and withdrawal charges When subscribing via Basket creation and withdrawing via Basket redemption, a charge of $250 is payable

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to the Manager.


The Basket withdrawal fees may be increased by the Manager by giving three months' notice of the change to the Trustee and, if the change is material (as determined by the Manager in its reasonable discretion), to Unitholders. The Basket withdrawal fees may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.


Other management charges Management fees are charged to the Fund and are currently 0.54% of the NAV of the Fund and are accrued daily and payable monthly in arrear. The Manager may agree payments to individual Unitholders that are the equivalent of management fee rebates (in the form of additional Units or cash, as agreed between the Manager and the Unitholder).

The fee charged by the Manager may be increased by the Manager by giving three months’ notice of the change to the Trustee and, if the change is material (as determined by the Manager in its reasonable discretion), to Unitholders or the fee may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.

In addition to the management fee, the Manager is entitled to interest on amounts held in respect of distributions and other income received by the Fund and on cash Subscription Amounts (including amounts received under the Regular Savings Plan or Distribution Reinvestment Plan) between the date on which they are received and the date of issue of Units.


The Trustee receives fees for the services it provides. The Trustee’s fees are currently met by the Manager out of the management fee and not from the assets of the Fund. The Manager is entitled however, in the future to seek to have the Trustee's fees charged to the Fund. The Manager would notify Unitholders if such a change was adopted. The amount of the fees payable to the Trustee shall be agreed by the Manager and the Trustee.

The management fees cover the expenses for the ongoing operation of the Fund. These include reporting, the custodian fees, administration fees, trustee fees, registry costs, brokerage fees for purchasing securities in the Fund and index licensing fees. The Manager reserves the right, however, to have these amounts paid from the Fund.

By investing in the Fund investors accept and authorise these deductions and fees to occur and understand that these fees can be altered on the terms set out in this Investment Statement and the Trust Deed.

What returns will I get? Nature of the returns Any Returns you get from your Units will be a combination of:

(a) any change in the price of Units at the time you sell, relative to the price at which you bought on market, or subscribed if an application was made directly; and

(b) the distribution of dividends or other income received by the Fund. The Fund distributes all income received (for example, dividends and tax credits) less liabilities (for example, tax expenses and management fees). Please note that these examples of income and liabilities are not exhaustive and other types of income may be received and liabilities incurred from time to time. You will

22

automatically have your distributions re-invested as Units unless you elect to have them paid directly to a nominated bank account.

Key factors that determine returns for the Fund The Returns for the Fund are subject to the general fluctuations and direction of the New Zealand sharemarket, up or down, and the performance of the Index Issuers, which includes changes in their security prices and the value of any dividends or other distributions paid. Both of these factors are influenced by New Zealand and global economies.

Amount of the returns The amount of the Returns you get from your investment in Units will vary from time to time, depending on the factors above. Returns cannot be predicted with any accuracy. None of the Manager, the Trustee, NZX, the Custodian and Administration Manager nor any other person guarantees a particular level of Return on your investment in Units. No Returns are promised.

Distributions Distributions are currently made directly from the Fund within 20 Business Days of the Record Date and are paid to Unitholders whose names are on the register in respect of Units held on the Record Date. The Record Date is on or around the last Business Day of each of March, June, September and December in any year. However, the Manager may choose not to make distributions for a quarter if it considers that the income received by the Fund in that quarter is not substantial enough to distribute. In such circumstances, such income will be held in the Fund until the Distribution Date for the following quarter, at which point it will be distributed to Unitholders along with any further income received by the Fund during that following quarter.

Unitholders who sell Units or withdraw Baskets from the Fund before a Distribution Ex Date for a Record Date will not receive any distributions from the Fund in respect of that Record Date.

These distributions comprise dividends or any other income, less fees and other expenses. Unitholders will automatically have their distributions reinvested as Units unless they elect to have them paid directly to a nominated New Zealand bank account.

The Manager may, at its discretion, deduct from any distribution an amount of cash if, and to the extent that, the Manager reasonably considers that such a deduction is required to meet any liabilities that become payable in the next (or later) distribution period. Such deductions will be retained in the Fund.


Taxation The following comments are intended to be only a general summary and indication of the Manager's understanding of the relevant New Zealand tax law as at the date of this Investment Statement. There may be non-New Zealand tax consequences which affect the Fund or the Unitholders. Neither the Trustee nor the Manager accepts any responsibility for the taxation consequences of an investment in the Fund. Unitholders who buy or sell Units may have different taxation positions. Consequently, each Unitholder should consider their own taxation position and if necessary seek professional advice before investing in Units.

Taxation may affect the Returns on the Fund. The taxation summary below is based on the Manager’s understanding of the New Zealand tax law as at the date of this Investment Statement.

The Fund will elect to become a PIE that is a Listed PIE from the date that the Fund is Listed. As a Listed PIE the Fund pays tax on income derived by the Fund at a rate of 28%.


The Fund is generally not subject to tax on gains that it derives from the sale of shares in New Zealand

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resident companies. Losses incurred on the disposal of such shares are not deductible. Dividends from such shares are usually fully taxable to the Fund, with a credit allowed for any Imputation Credits attached, and any withholding tax deducted from such dividends subject to certain limits. Most, if not all, of the shares that the Fund invests in are expected to consist of this type of shares.


The following summarises the New Zealand taxation of distributions made by the Fund to Unitholders who are resident in New Zealand for New Zealand income tax purposes.

To the extent that Imputation Credits are available, the Fund will fully impute distributions to Unitholders by attaching Imputation Credits to the distribution at the maximum permitted ratio.

To the extent that distributions are not fully imputed New Zealand resident Unitholders will not be taxed on distributions that they receive from the Fund. The effect of this is that non-taxable income (e.g. capital gains from the sale of investments) derived by the Fund can be distributed to such Unitholders free from tax.

Natural person Unitholders and trustee Unitholders (other than a trustee of a unit trust) subject to a tax rate below the corporate tax rate (currently 28%) may choose to treat distributions that are fully imputed as assessable income by including that amount in their tax return. This allows such Unitholders to use Imputation Credits attached to distributions in excess of what is necessary to fully satisfy the income tax liability in relation to those distributions, to offset against their other taxable income. How Unitholders should treat distributions from the Fund for tax purposes will depend on their personal tax circumstances and as such it is recommended that all Unitholders should seek independent tax advice.

Benefits of PIE

A benefit of the PIE regime is that the Fund is not expected to be taxed on any gains derived from the sale of the securities that they trade.

The other benefit is that tax payable on distributions made by the Fund to Unitholders is effectively capped at 28%. If you are currently paying tax at a rate less than 28% then the excess tax paid by the Fund can be used to reduce the tax payable on other income that you derive at the end of each income year by including the distributions from the Fund in your tax return.

PIE Eligibility

The Manager has the discretion to take any steps the Manager considers necessary or desirable to ensure that the Fund is eligible to be enrolled and remain as a PIE. This includes ensuring that any one Unitholder’s unit holding does not exceed the maximum investor interest size requirement in the Tax Act, which is a number of Units not exceeding 20% of the total issued Units of the Fund (for these purposes, the Units held by the relevant Unitholder’s “associated persons” that are not Exempt Investors and who, themselves, hold Units amounting to 5% or more of the units on issue will also be taken into account in determining whether the 20% threshold has been exceeded).

There is no investor interest size requirement for a Unitholder that is an Exempt Investor. Any such exempted Unitholder may hold up to 100% of the Units in the Fund.

The Manager also has the ability to request any relevant information from Unitholders to endeavour to ensure compliance with the PIE rules and the Trust Deed. Additionally, the Manager has the ability to rectify any breach of the PIE holding restrictions in accordance with the PIE rules and the Trust Deed.

For further information regarding the eligibility of the Fund to operate as a PIE within the PIE requirements please refer to the Fund's prospectus or contact the Manager.

Basket Investments

The tax status of some Unitholders may be such that they are liable for tax on profits derived from the disposal of Index Securities. In the case of the Fund, contributing securities in exchange for Units will constitute a realisation of the securities for tax purposes for those Unitholders.

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New Zealand Taxation Treatment on Disposal of Units in the Fund

The New Zealand tax treatment of profits realised or losses incurred on the disposal of Units will depend upon the tax position of the Unitholder. Generally speaking, profits from the disposal of Units will be subject to tax or a deduction will be allowed for losses incurred if:

• the Unitholder acquired the Units for the purpose of sale or other disposal; or

• the Unitholder carries on a business involving dealing in the Units or other similar property; or

• the disposal of the Units occurs as an act done in the carrying on of a profit-making scheme or undertaking.

As a general comment, most PIEs that invest should not be subject to tax on any gains made on the disposal of Units in the Fund, and other Unitholders which are resident in a country with which New Zealand has a double tax agreement may qualify for tax relief so that they are also not subject to tax on any gains made on the disposal of Units.

Reinvestment of distributions Unitholders will automatically have their distributions reinvested in Units under the Distribution Reinvestment Plan unless they elect to have them paid directly to a nominated New Zealand bank account. A Unitholder may opt out of (or if not currently a member of the Distribution Reinvestment Plan, because the Unitholder previously opted, elect to join) the Distribution Reinvestment Plan by returning the applicable form (forms are available from the Manager) to:


Notices of election out of or into the Distribution Reinvestment Plan received by the Unit Registrar at least 10 Business Days prior to a Distribution Date will be effective in respect of that distribution, otherwise such notice will be effective in respect of the next distribution. Fees for the Distribution Reinvestment Plan are set out on page 20.

Liability to pay returns The Trustee is the person legally liable to pay Returns (if any).

What are my risks? The principal risks of an investment in the Fund are:

Risks arising because of investment in Index Securities Market Risk

Units are subject to the risks of an investment in a portfolio of securities, including the risk that the general level of security prices may decline, thereby adversely affecting the value of the investment in the Fund. Securities are susceptible to general market fluctuations and to volatile increases and decreases in price due to changes in market confidence in, and investor perception of, the issuer of those securities. These investor perceptions are unpredictable and may be based on various factors including expectations regarding government, economic, monetary and fiscal policies, inflation and interest rates, economic expansion or contraction, and global or regional political, economic and banking crises. This may result in a Unitholder being unable to recover the full amount or any of their investment and/or any Returns relating to such investment in the Fund.

An investment in the Fund should be made with the understanding of the risks inherent in an investment in securities, including the risk that the financial condition of the Index Issuers may become impaired or that the

25

general condition of the market may deteriorate (either of which may cause a decrease in the value of the Index Securities of the Index Issuers and thus in the value of Units).

The value of securities can also be affected by their liquidity. For smaller stocks, where there can often be limited liquidity, a change in their weighting on an Index could have an effect on the level of demand in the marketplace. This in turn may impact the price the Fund has to trade at to track the relevant Index and the fluctuation in the price of the Index Securities may ultimately affect the Return an investor receives.

Property market risk

The Index Issuers are all investors in the New Zealand property market. Consequently, conditions that adversely affect the New Zealand property market are likely to adversely affect the Fund.

Distributions Risk


Index Issuer Risk

Index Issuer risk occurs where the individual assets of the Fund fluctuate in value due to circumstances specifically applicable to a particular Index Issuer. There are likely to be few Index Issuers, so circumstances affecting one Index Issuer are likely to have a greater effect on the Fund than for a similar Fund with a larger number of Index Issuers.

Risks arising because of investment through the Fund Tracking Risk

For a variety of reasons the Manager will not always manage to exactly track the Index for the Fund. As a result of this, the Index Securities held by the Fund may, over time, be less than a portfolio of securities that exactly matches the composition of the Index. Of course, investors investing directly in order to track an index are likely to face the same issues as the Manager in trying to exactly track the Index.

The Manager measures its tracking performance as follows. On the date on which the Fund is launched, there is a mathematical relationship between the NAV of the Index Securities held in the Fund and the value of the Index, which can be expressed as:

If the Manager was able to perfectly track the Index, this relationship would continue. However, for the reasons explained below, this is not always possible and so a difference between the number on the left-hand side and the number on the right-hand side develops over time. To measure its tracking performance:

(a) First, the Manager calculates the difference between the left-hand side of the equation and the right-hand side of the equation, with that difference being expressed as a positive number if the left-hand side is greater and a negative number if the right-hand side is greater.1

(b) Next the Manager compares the difference calculated in (a) with the equivalent difference at the start of the year to calculate the change in that difference over the year.

The number calculated in (b) is the Manager's measure of its tracking performance over the year. The closer

1 If at any time the Manager subdivides or consolidates Units, it will adjust the "1,000" referred to in the right-hand side of the equation so that this action, which has nothing to do with tracking difference, does not affect the mathematical relationship. For example, if the Manager subdivides all Units in two, which will halve the left-hand side of the equation, it will change the "1,000" to "2,000" to also halve the right-hand side of the equation.

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that number is to zero, the more closely the Manager has tracked the Index during the year.


First, it may not be possible for the Manager to exactly match changes to the Index by buying and selling Index Securities, because the prices it pays and receives for the Index Securities may not exactly match the prices used to adjust the Index. For example, there may be limited liquidity in relation to securities the Manager is attempting to buy that pushes up the purchase price of those securities after an adjustment to the Index, but before the Manager can buy. In some cases the relevant adjustment to the Index may even cause such limited liquidity as it could affect the level of demand for the securities in the market place. As the Index is likely to have few constituents, difficulties in buying or selling a particular Index Security (such as difficulties caused by a lack of liquidity) could have a significant effect. This is because, with so few constituents, each individual Index Security is likely to make up a significant proportion of the Fund's assets and distortions in its price could significantly affect the Manager's ability to adjust its holdings to match the Index.

Second, tracking is a complex exercise, and errors may arise due to human or systems errors. Some tracking imperfections mean the value of the Fund's Index Securities increases in relation to the value of the Index. This causes no detriment to Unitholders. However, some tracking imperfections mean the value of the Fund's Index Securities reduces in relation to the value of the Index. When this is the case, the Return generated by the Fund may be less than the Return on the Index, which is detrimental to Unitholders.

Operational Risk

There is a risk that operational errors (including improperly analysing the effect of tax laws), fraud or misconduct may cause a loss to the Fund or otherwise affect Unitholders' Returns. In particular, tracking an index and assessing the reasons for tracking differences (that is, differences between the NAV of the Fund and the value of the Index) is very complex and some errors are occasionally made.

In order to mitigate this risk the Manager has adopted a set of internal policies and procedures and also outsources some aspects of its operations to the Administration Manager to draw on the Administration Manager's systems and expertise. The Manager has also insured against losses arising from fraud and misconduct.

Third Party Operational Risk

As noted above, the Manager manages some of its operational risk by outsourcing some complex functions, such as the calculation of Current Unit Values to the Administration Manager. However, while that gives the Fund the benefit of the Administration Manager's expertise, it also creates some risk because it means the Manager has less direct control and oversight of those functions. The Manager has satisfied itself of the reliability and expertise of the Administration Manager, but there is still a risk that the Administration Manager may not perform its functions properly (which the Manager may not immediately become aware of). Such a failure could have a material adverse effect on Unitholders.


Traditional methods of investment management for an actively managed fund typically involve deliberate changes to a portfolio of securities based on judgement of economic, financial and market conditions. No attempt will be made to actively manage the Fund in the traditional sense, and the Manager and Trustee do not monitor the performance of Index Issuers.

The adverse financial condition of an Index Issuer or the industry it is in will not be a reason for the Manager to direct the Trustee to cause the Fund to dispose of that Fund’s investments in the Index Securities of that Index Issuer unless the Index Issuer is removed from the Index. Nor will Index Securities held in the Fund be disposed of as a result of fluctuations in the market unless they are removed from the Index.

Market fluctuations and such adverse conditions may affect the value of a Unitholder’s investment and/or any Returns either positively or negatively. Neither the Manager nor the Trustee may delay decisions to re-weight the Fund to reflect the Index to enhance the Returns on particular Units.

Liquidity Risk

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Investors are only able to cash in their investment by selling their Units on market unless they have enough Units to do a Basket withdrawal (Basket withdrawals are described on page 30). The market price per Unit may vary from the Current Unit Value due to supply and demand factors. Application has been made to the Special Division for permission to quote the Smartshares Units on the NZX Main Board. Once the application has been accepted, Units will be quoted on the NZX Main Board and, in the opinion of the Manager, a market for sales of Units will develop. However, although the Units are expected to be quoted on the NZX Main Board, the fact that investors can apply to purchase Units directly from the Manager may result in a reduced number of buyers of Units on the NZX Main Board.

Regulatory Risk

Regulatory risk is the risk that a Fund may be adversely affected by future changes in applicable laws or regulations, including tax laws, or by decisions taken by regulatory agencies enforcing those laws.

Among the regulatory risks that the Manager faces is the risk that when it applies for a market services licence under the FMC Act its application is delayed, declined by the FMA or overly stringent conditions are imposed on its licence. The Funds are required to have a manager with a market services licence by 30 November 2016 at the latest, and so the Manager will need to be replaced as manager of the Funds if it is not able to obtain a licence on acceptable terms by that date.

Tax Risk

Taxation laws, their interpretation, or the Inland Revenue Department's application of those laws may change during the period of a Unitholder’s investment in the Fund, in a way which has an adverse impact on the Returns to that Unitholder.

There are tax risks that need to be managed in relation to the Fund continuing to be eligible to be a PIE, including (but not limited to):

• If the Fund fails to meet the required criteria and therefore ceases to be a PIE, it will not be able to re-elect to be a PIE for the succeeding five years.

• If a Unitholder who is not an Exempt Investor (including all associates) holds more than 20% of the Units in the Fund, then the Fund may not qualify to be a PIE.

Although the Manager has put processes in place designed to ensure that the Fund complies with all requirements to be a PIE, there is a risk that the Fund could lose PIE status if there is a breach of those requirements which is not remedied within the time permitted under the PIE Rules. If PIE status of the Fund is lost then the Fund will be taxed as a company and distributions to Unitholders will be dividends taxable at the Unitholder’s marginal tax rate and potentially will be subject to withholding tax. No compensation will be paid to Unitholders in the event that PIE status is lost. For further information on PIE Tax risk please refer to the Fund's prospectus.

Custodian Risk

Legal title to the assets of the Fund is held by the Custodian. That means there is a risk that if the Custodian becomes insolvent, this could temporarily or permanently deprive the Fund of its assets. This risk is managed by having the Custodian hold the assets of the Fund as a bare trustee and by keeping those assets separately identifiable from other assets it holds (for itself and others). This should mean that, if the Custodian ever does become insolvent, the assets it is holding for the Fund will not form a part of the pool of assets to be liquidated for the benefit of the Custodian's creditors.

Key Personnel Risk

The management of the Fund is complex and many of the tasks associated with that management require considerable experience in relation to exchange traded funds. Consequently, there is a risk that if any of the Manager's key personnel leave, there is an increased risk of disruption and potential calculation errors. Among other things, such calculation errors could lead to unintended tracking differences. This risk is mitigated, to some extent, by the Manager's appointment of the Administration manager to the Fund. As the Administration Manager will be responsible for the day to day administration of the Fund, this should minimise the risk of disruption if any of the Manager's key personnel leave.

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Unitholder Liability No Unitholder shall be personally liable in respect of any debt or liability of the Fund, nor be personally liable to indemnify the Trustee or the Manager in respect of any such debt or liability, except for any tax liability paid by the Fund that is attributable to that Unitholder. The Trustee and Manager, except in the case of wilful default, wilful breach of trust or dishonesty, are indemnified out of the assets of the Fund.

Consequences of Insolvency Unitholders are not liable to make any payments to third parties upon the winding up of the Fund, or as a result of the insolvency of the Manager or Trustee. However, in the event that a wind-up proves necessary, the Manager and/or Trustee shall be entitled to recover from the Fund all costs and expenses, which are incurred in connection with or arising out of the winding up of the Fund. This will be done prior to distributing money (or assets) to Unitholders. Claims of Unitholders in respect of their Units will rank equally among themselves in such circumstances.

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Can the investment be altered? Regular Savings Plan Unitholders may at any time initiate, cease or alter (subject to maintaining a minimum contribution of $50 per month unless contributions are being completely stopped) the monthly Regular Savings Plan payments by giving ten Business Days’ notice to the Unit Registrar prior to the Direct Debit Date.

Distribution Reinvestment Plan Unitholders may at any time initiate or cease the Distribution Reinvestment Plan by notifying the Unit Registrar. However, Unitholders will need to give the Unit Registrar at least 10 Business Days' notice prior to the next Distribution Ex Date to enable the change to be made for that distribution period.

Fees The Manager is entitled to increase the amount of any fee (including by adding a fee not currently charged) payable in respect of the Fund. To do this it must:



(c) if such increase is material for Unitholders (as determined by the Manager in its reasonable discretion), give at least three months' prior notice of any such increase of any fee not referred to in paragraph (a) to all Unitholders.

The Manager is entitled to decrease the amount of any fee payable by giving notice to the Trustee (and such decrease may have immediate effect).

Amendments to the Trust Deed and issue terms The Manager and the Trustee may amend the Trust Deed for the Fund in any of the following cases:



(c) if, at any time while the Units of the Trust are listed on an exchange, the same is requested or recommended by that exchange because of a change to the rules of that exchange;

(d) if the same is required or desirable because of any amendment or repeal and/or replacement of the Unit Trusts Act 1960 or any other relevant legislation (including, without limitation, provisions of the Financial Markets Conduct Act 2013, or regulations under that Act, which will become applicable to the Fund when the Manager opts into the Financial Markets Conduct Act regime before the relevant statutory transition period ends on 30 November 2016 and may require changes to the Trust Deed), or otherwise permitted or required under any relevant law; or



In addition, where the Trustee and the Manager agree that it is in the interests of the Unitholders to vary the definition of ‘Authorised Investments’ (as defined in the Trust Deed) then the proposed variation will be notified to all Unitholders no later than three months prior to the variation taking effect.

Further details on the Trust Deed and issue terms are provided in the registered Prospectus.

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Amendments to an Investment Policy The Investment Policy may be amended or replaced from time to time by the Manager in consultation with the Trustee. If the Manager proposes to amend or replace an Investment Policy in a manner that materially affects existing Unitholders, the Manager shall, prior to effecting any such amendment or replacement, give at least 30 days' written notice to the Unitholders and if such notice is required, the relevant amendment or replacement shall not be effective until such notice period has expired. Replacement of an index The Manager may, with the Trustee's prior written consent, replace the Index with a different index that is materially the same if the Index that the Fund tracks is discontinued or the Index methodology is changed in a way that means, in the Manager's opinion, continuing to track that Index would materially change an investment in Units. In such circumstances, the Manager may, with the Trustee's prior written consent, make any amendments to the Investment Policy that are necessary or desirable in connection with the replacement of the Index and must give ten Business Days' notice (or such alternative notice period agreed with the Trustee) of such replacement to Unitholders. After the notice period has passed the Index will be deemed to be so replaced.

How do I cash in my investment? Smartshares Units can be cashed up in two ways:

1. Market sale Application has been made to the Special Division that regulates the Manager (in the place of NZX) for permission to quote the Units on the NZX Main Board and all the requirements of the Special Division relating thereto that can be complied with on or before the date of this Investment Statement have been duly complied with. However the Special Division accepts no responsibility for any statement in this Investment Statement.

Once the applications made to the Special Division for permission to quote the Units on the NZX Main Board are accepted, Units will be quoted on the NZX Main Board and, in the opinion of the Manager, a market will develop for sales of Units. Units will then be able to be sold on market through NZX Firms (no written redemption notice will be required). The market price per Unit may vary from the Current Unit Value due to supply and demand factors. The costs involved in a sale on the NZX Main Board is normal share-market brokerage, which may vary between NZX Firms. The Manager may decline to register a transfer of Units if it would result in a transferee holding less than the Minimum Holding (provided that doing so would not breach the Listing Rules).

2. Basket withdrawal Basket withdrawals are for holdings in multiples of 250,000 Units. A Unitholder can surrender Units and receive equivalent Index Securities and a Cash Amount representing any accrued income applicable from the relevant Index Securities of Index Issuers. All withdrawal requests should be made through an NZX Firm to the Manager after completing a Basket withdrawal notice. Charges in relation to Basket withdrawals are explained under “What are the charges?” on page 20.

The Manager is not obliged to redeem Units in the Fund in response to a Basket withdrawal request in the period from (and including) the Announcement of a distribution to (and including) the Distribution Ex Date (as redemptions during that period could result in a decreased number of Units on issue, which would in turn result in an increase in the announced distribution on a per unit basis).

Sale to retain PIE status In some circumstances the Manager may be required to take action to ensure that the Fund retains its PIE status. The Manager has been granted a waiver by the Special Division to enable it to do so. For further information about the waiver see the registered prospectus for the Fund.

If a Unitholder exceeds the investor interest size requirement prescribed in the Tax Act (the “Breach”), the Manager may take the following steps to ensure that the Breach is remedied:

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(a) as soon as practicable after the Manager becomes aware of the Breach, the Manager shall give written notice to the relevant Unitholder(s) of the Breach, including details of the number of Units (the “Excess Units”) giving rise to the Breach;





Winding up of the Fund The Manager has the power to wind up the Fund (after giving three months’ notice to the Trustee). The Trustee shall give Unitholders notice that the Trustee has received a notice from the Manager terminating the Fund. The Trustee shall then distribute the balance, after payment of any costs, charges, expenses, claims and liabilities (including tax and contingent liabilities) incurred in connection with the Fund, or arising out of the liquidation of the Fund, amongst the Unitholders in proportion to the number of Units held by them. The Trustee shall retain such amount as the Manager considers necessary or appropriate to meet all the above costs, charges, expenses, claims and liabilities (including contingent liabilities and tax) that are not paid prior to distribution.

Who do I contact with inquiries about my investment? If you require any information about your investment, you should first contact:



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Is there anyone to whom I can complain if I have problems with the investment? Complaints can be made to any of the following:







What other information can I obtain about this investment? Further information about the Fund, and Smartshares Limited, is contained in or referred to in:

• The latest registered prospectus for the Fund

• The latest annual report (including financial statements) of the Fund (when prepared).


The Trust Deed for the Fund may be inspected, without fee, by any person at the registered office of the Manager. A copy of the Trust Deed will be sent (electronically where possible) to prospective and current investors, free of charge, on request to the Manager.

A Unitholder (or his/her/its representative) may inspect that part of the register of Units kept by the Unit Registrar that relates to his/her/its Units, except when the register is duly closed (and subject to any

33

reasonable restrictions that the Manager may impose so that not less than two hours in each working day is allowed for inspection). A copy of that part of the register of Units relating to a Unitholder may be obtained on payment of a reasonable fee.

Up-to-date information on the performance of the Fund and the Index is available in the daily newspapers and on NZX's website (www.nzx.com). Announcements to NZX, including Announcements of the tracking differences for the Fund can be found at www.nzx.com under the ticker symbol "NPF".

Information to the Unitholder The annual report and half year report is made available to every investor on the Smartshares website within 90 days of the end of the relevant period. Notification of the availability of this annual report is sent to all investors by mail and a hard copy of the report can be posted to any Unitholder, if requested.

Investors will also receive a distribution notice in respect of each Distribution Date, as well as confirmation of Units allocated if they are members of the Distribution Reinvestment Plan.

Unitholders who are members of the Regular Savings Plan will receive a monthly statement confirming the price and number of Units allocated for each contribution made.


Request information Investors may also request from the Manager, in accordance with section 54B of the Securities Act 1978 and regulation 44 of the Securities Regulations 2009, the information required by those provisions to be made available. A prescribed fee may be payable (but not for a copy of the registered prospectus, a copy of the financial statements or a copy of any document extending the period during which allotments may be made under the registered prospectus). Such a request may be made by contacting the Manager, on the contact details as set out on page 15 above, and the Manager will be able to let Unitholders know what the fee is (if any) prior to actioning their request.


(a) a copy of the most recent annual report of the Fund (when prepared);

(b) a copy of the most recent financial statements of the Fund, together with a copy of the auditor's report on those statements (when prepared);

(c) a copy of the Trust Deed;

(d) a copy of the Fund's prospectus, together with copies of any documents registered under the Securities Act 1978 for the purpose of extending the period during which allotments may be made under that prospectus;



(g) if prospective financial information about the Fund was contained in any prospectus or advertisement, a comparison (if practicable, in the same form and for the same period as the prospective financial information) of the actual results against the prospective financial information.

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Privacy The Manager, through the Unit Registrar, collects and holds personal information about you for the purposes of managing your investment and advising you of other investment opportunities. You may request access to personal information held about you in relation to your investment. You may make such request by writing to the Unit Registrar at:




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GLOSSARY OF TERMS


Announcement a market announcement to NZX that can be viewed on nzx.com under the ticker symbols "NPF" (and Announce and Announced have corresponding meanings).


Basket a proportionate amount of the securities of the Index Issuers determined from time to time by the Manager as equivalent to 250,000 Units.


Cash Amount a cash amount determined by the Manager as being equal to:

(a) in relation to a person subscribing for Units via Basket creation, a proportionate share of the income accrued and held in the Fund that will be attributable to the Units issued to the Basket applicant; and

(b) in relation to a person redeeming Units via Basket withdrawal, the income accrued and held in the Fund that is attributable to the Basket of securities being redeemed.

Cash Application an application for Units that is made for cash and is not made under the Regular Savings Plan or the Distribution Reinvestment Plan.

Current Unit Value the market value (in New Zealand dollars) of all securities held by the Fund (plus any income received and accrued since the last Distribution Calculation Date) less liabilities or provisions (including expenses paid since the last Distribution Calculation Date) properly to be taken into account in determining the NAV of the Fund, divided by the number of Units on issue for the Fund.

Custodian means BNP Paribas Fund Services Australasia Pty Limited, acting through its New Zealand branch, or any other custodian appointed (by the Trustee) from time to time.

Direct Debit Date on or about the 20th of every month.

Distribution Calculation Date means, in relation to a distribution period, a date selected by the Manager that is not more than three Business Days before the Appendix 7 Date for that distribution.

Distribution Date each date on which distributions are paid to Unitholders, which will be within 20 Business Days after each Record Date. Currently, distributions are made quarterly, although a distribution may not be made for a quarter if the Manager determines that the income is not substantial enough to distribute.


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means the plan currently provided for in the prospectus for the Fund under which Unitholders may automatically invest their dividends and other distributions in the Fund.

Establishment Deed an establishment deed establishing the Fund between the Manager and the Trustee.



Fund the New Zealand Property Trust.


Index the S&P/NZX Real Estate Select Index.

Index Administrator S&P Dow Jones Indices.

Index Issuer in respect of the Fund, an issuer whose securities are included from time to time in the Index.

Index Securities securities issued by an Index Issuer that are held or to be acquired by the Fund.

Investment Policy an investment policy that is developed by the Manager in accordance with the Trust Deed (and which may not be inconsistent with the index tracking objective for the Fund set out in the Establishment Deed) and sets out how the Manager will invest on behalf of the Fund.







Minimum Holding the minimum number of Units that a Unitholder must hold at all times. Currently this is 100 Units.

NAV the net asset value of the Fund.

NZX NZX Limited.



NZX Participant Rules means the rules regulating Market Participants of NZX.


Record Date in relation to a distribution to Unitholders, means the time and date on or about the last Business Day in each of

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March, June, September and December in each year fixed by the Manager for the determination of the Unitholders to whom a distribution will be paid, although the Manager may not fix a Record Date for a quarter if the Manager determines that the income is not substantial enough to distribute.

Regular Savings Plan the scheme under which Unitholders may make monthly payments of at least NZ$50 to the Fund in order to purchase further Units on an ongoing basis.

Return in relation to Units and other securities means the amounts distributed to holders of them together with any increase in their capital value and, in relation to the Index, means the amounts that would be distributed to a person that held the Index Securities used to calculate the value of the Index and any increase in the value of such a holding.

Unit a unit in the Fund.

Special Division means the division of the NZ Markets Disciplinary Tribunal constituted under the NZ Markets Disciplinary Tribunal Rules, that regulates the Manager (in the place of NZX), for compliance with the Listing Rules.

Subscription Amount the amount of money that is being provided for investing in the Fund (which includes the application fee).


Trust Deed includes both the Master Trust Deed and the Establishment Deed (as may be supplemented or amended by any supplementary deeds or deeds of modifications).


Unitholder a holder of Units.




SMARTSHARES APPLICATION CHECKLIST

Completed application form - Signed by each applicant

Identity verification documents as outlined under section 6 of the application (for all persons associated with the application). Ensure proof of residential address as outlined under section 6 is included also.

SMARTSHARESa Member of the NZX Group

Please ensure that your application is completed in full and all relevant documentation is attached to enable your application to be processed successfully.

All applicants must provide:

For New Investor’s in Smartshares funds:

Please Note - If you are an existing investor, but have not provided identity documentation previously, you are also required to provide these as outlined under section 6 of the application.

Direct Debit Authority form(s) for the Smartshares fund(s) you are applying for.

Attached cheque for application amount.

For applicants paying by Direct Debit:

For applicants paying by Cheque:

Return your completed application form to:

Link Market ServicesMail: PO Box 91976, Auckland, 1142 Fax: (09) 375 5990 (Application with payment by direct debit only)Delivery: Level 7, Zurich House, 21 Queen Street, AucklandEmail: [email protected] (Application with payment by direct debit only)

Your application needs to be received by Link Market Services Limited by the 20th of the month so that the units you receive can be priced at that month end.

If you have any questions in relation to your application please contact Link Market Services by phone 09 375 5998 or email [email protected]

Proof of Bank Account for Direct Debit - as outlined under section 6 of the application.

Please where applicable

SMARTSHARES APPLICATION FORM

1. INVESTOR DETAILS (please print in block letters)

Are you a - (please tick one)

First Name(s):

INVESTORS

ELECTRONIC CORRESPONDENCE AND REPORTING

IRD NUMBER/TAX FILE NUMBER OR RWT EXEMPTION

Please note that New Investors (and all persons associated with the application) will be required to provide identityverification documents as outlined under section 6 below.If you are an existing investor but have not provided identity documentation previously, please provide this as outlinedunder section 6 below.

Applications must be in the name(s) of natural persons, companies or incorporated bodies. In the case of applications fora minor, trust fund or estate, business firm or partnership, club or other incorporated body applications must be made inthe name(s) of the person(s) who is/are legal guardian(s), trustee(s), proprietor(s) or office bearer(s) as appropriate. Amaximum of three applicants may apply jointly.

New Investor in Smartshares FundsorExisting Investor in Smartshares Funds

BROKER STAMP

If you do not provide an email address investor correspondence will be mailed to you at the address provided on this Application Form

Only one IRD number is required in respect of a joint application

Please tick this box if you hold a RWT exemption certificate from the IRD and attach a copy of your RWT exemption certificate.

Family Name:

First Name(s): Family Name:

First Name(s): Family Name:

Corporate Name or On Account:

Postal Address:(for correspondence on

this account)

Mobile Telephone:

IRD Number

OR

Please tick this box if you are a non-resident for New Zealand tax purposes under the Income Tax Act 2007. You will be treatedas a New Zealand tax resident unless this box has been ticked

Please advise your country of residence for Tax purposes if not New Zealand

OR

Email Address:

Daytime Telephone:

By supplying your mobile number you will enable the Registry, Link Market Services, to advise you by TXT Alerts (post-allotment) ofany changes on your holding balance, or if your bank account details or address on register change, or if a new / replacement Authorisation Code (FIN) has been requested. This feature provides additional security to you as an investor.

By supplying your email address the Company will be able to deliver your investor correspondence to you electronically wherepossible. This is a much more environmentally friendly, cost-effective and timely option than paper based investor mail outs.

SMARTSHARESa Member of the NZX Group

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Smartshares form 150716 V2.pdf 1 30/10/15 11:10 am

2. COMMON SHAREHOLDER NUMBER (CSN)

PLEASE PROVIDE YOUR CSN BELOW

3. INVESTMENT OPTIONS & PAYMENT

Please note that the application must be in the same name(s) as the CSN you give above otherwise the application will be deemed to be made without a CSN. If you do not have a CSN please leave this section blank and a CSN and Authorisation Code (FIN) will be allocated.

Subscription Amounts for cash applications must be for a minimum of $500 (for initial applications) and $250 (for subsequent cash applications). Applicants must hold a minimum holding in each of the Smartshares Funds the applicant chooses to invest in (see the applicable funds Investment Statement for further information). Regular Savings Plan amounts must be for a minimum amount of $50 per month.

Please complete the following:

• Minimum initial investment $500 per fund • Minimum of $50.00 per month per fund• Minimum lump sum investment for Unitholders with a minimum holding $250 per fund

Fund Cash Applications Regular Savings Plan

TOTAL

SMARTLARGE

NZX 10 Fund - smartTENZ (TNZ)

NZX 50 Portfolio Index Fund - smartFONZ (FNZ)

NZX Australian 20 Leaders Index Fund - smartOZZY (OZY)

US 500 (USF)

Europe (EUF)

Asia Pacific (APA)

Emerging Markets (EMF)

Total World (TWF)

US Large Value (USV)

US Large Growth (USG)

SMARTMEDIUM

NZX MidCap Index Fund - smartMIDZ (MDZ)

NZX Australian MidCap Index Fund - smartMOZY (MZY)

US Mid-Cap (USM)

SMARTSMALL

US Small-Cap (USS)

SMARTSECTOR

New Zealand Property (NPF)

Australian Property (ASP)

Australian Resources (ASR)

Australian Financials (ASF)

SMARTDIVIDEND

Australian Dividend (ASD)

New Zealand Dividend (DIV)

SMARTINCOME

Global Bond (GBF)

New Zealand Bond (NZB)

New Zealand Cash (NZC)

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Please note that all distributions will be automatically reinvested on behalf of the subscriber unless payment by direct credit is elected byticking the box below.

You will be deemed to have subscribed to the distribution reinvestment plan unless and until such time as valid bank account detailshave been received.If you elect to have your distributions paid to you instead of subscribing to the distribution reinvestment plan please provide details below

Bank Branch Account Suffix

Name of Bank

Choose only ONE of the payment options below. Please tick the box next to your selected option.

Option 1 - New Zealand investors only. Please direct debit my bank account stated on the enclosed direct debit authority for the fund I/we are investing in, for the amount applied for above (or any lesser amount as determined by the Issuer). By ticking this box and signing this Application Form I agree that Smartshares is authorised to direct debit my bank account for the full amount (applied for or any lesser amount as determined by the Issuer.)

Option 2 - Please find attached my payment by cheque or bank draft.

Account Number

Name of Account

Please pay distributions to me by direct credit

4. ELECTION FOR PAYMENT OF DISTRIBUTIONS

5. ADDITIONAL TAXATION INFORMATION

INDIVIDUAL INVESTORSPlease complete this section if you are an individual investor.

NON - INDIVIDUAL INVESTORSPlease complete this section if the investor is not an individual.

5.1.1 Are you a United States (US) citizen or resident for US tax purposes?

5.2.1 Is the investor a US company, US partnership or US trust for US tax purposes?

5.2.2.1 Please provide the investor's Global Intermediary Identification Number (GIIN) or specify the status under the FATCA status* if you have ticked "yes":

5.2.2 Is the investor a financial institution (a custodial or depository institution, an investment entity or a specified insurance company for the Foreign Account Tax Compliance Act (FATCA) purposes)*?

5.2.1.1 Please provide the entity’s TIN if you have ticked “yes”

Investor 1 Yes No

5.1.2 Please provide your US Taxpayer Identification Number (TIN) if you have ticked “yes”):

5.1.3 Investor 2(if applicable)

5.1.3.1 Please provide your TIN if you have ticket “yes”

Yes No

5.1.4 Investor 3(if applicable)

5.1.4.1 Please provide your TIN if you have ticket “yes”

Yes No

Yes No

Yes No

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6. IDENTITY DOCUMENTS

The Financial Transactions Reporting Act 1996 and Anti Money Laundering and Countering Financing of Terrorism Act 2009 requireSmartshares to verify the identify of new investors. The following sets out suitable forms of identification as at the date of this OfferDocument. These may change from time-to-time and accordingly Smartshares reserves the right to require further information.

All applicants must provide a copy of one of the following forms of proof of residential address:

• Bank Statement dated within the last three months; or• Any New Zealand Government Department statement dated within the last three months; or• A New Zealand utility company statement, i.e. electricity, gas, phone dated within the last three months.

All copies of identity documents required to be certified must be completely legible with clear photos and must be certified by a TrustedReferee. A Trusted Referee must be over the age of 16 and must not be related to you, your spouse or partner or a person with whomyou share the same address. The following are categories of people who qualify as Trusted Referees:

Please provide one of the following identity options plus proof of your residential address:

Identify Documents (must be certified copies*)

Proof of residential address (do not need to be certified)

*Certified copies of your identity documents

OPTION 1 OPTION 2 OPTION 3

The identity page of a current New Zealand passport; or

A New Zealand certificate of the identity issued under the Passports Act 1992; or

A New Zealand Firearms license; or

An overseas passport or similar document issued for the purpose of international travel which contains the name, date of birth, a photograph and the signature of the person in whose name the document is issued and is issued by a foreign government, the United Nations or an agency of the United Nations.

New Zealand Full Birth certificate; or

Certificate of New Zealand Citizenship.

Together with one of the following:

Current New Zealand drivers license; or

HANZ 18+ Card; or

Valid and current international driving permit.

Together with one of the following:

Confirmation that the information presented on the drivers license is consistent with records held in the National Register of driver licenses; or

A certified copy of ATM(Eftpos), debit or credit card issued by a New Zealand registered bank (provided your name and signature is on the card); or

Bank account statement issued to you by a registered New Zealand bank in the last 12 months; or

A statement issued to you in the last 12 months by a government agency that contains your name.

A current New Zealand drivers license.

If you have ticked "no" to both Questions 5.2.1 and 5.2.2, please advise if the investor have one or more individuals who areUS citizens or residents for tax purposes who directly or indirectly:

US Person 1

If you have ticked “yes” to Question 5.2.2 please provide the following information about the US citizen or resident.

5.3.1 Have a controlling interest in the company or partnership

If there are more than 2 US Persons, please write their details on a separate page and attach to this form.* Please visit the Inland Revenue's website (http://www.ird.govt.nz/taxagents/taxtechnical/fatca/) for more information regarding themeaning of a "financial institution" or your FATCA status.

Full Name :

Postal Address :

TIN (if available) :

US Person 2

Full Name :

Postal Address :

TIN (if available) :

Yes No

5.3.2 Is/are a trustee, beneficiary or otherwise control(s) the trust?

Yes No

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When verifying your identity documents, a Trusted Referee must sight the original identity document before writing their name,occupation, date and signature and a statement to the effect that, “I certify this to be a true copy of the original document and confirmthat it represents the identity of (full name)”. Certification may only be valid for up to three months.

If you are investing under a Power of Attorney for an applicant, we are required to verify the identity of the Power of Attorney as wellas the applicant. We also need to check that the person signing the application has Power of Attorney. Please provide:

Certified copies of:

• The personal identity documents and proof of residential address for you, and

• The personal identity documents and proof of residential address for the applicant;

Together with:

• The Power of Attorney and a certificate of non-revocation.

• Commonwealth representative (as defined in the Oaths and Declarations Act 1957)

• New Zealand Honorary Consul

• An employee of the Police who holds the office of constable (as defined in section 4 of the Policing Act 2008)

• Justice of the Peace or Notary Public

• Registered medical doctor

• Kaumatua

• A member of the New Zealand Institute of Chartered Accountants

• A Lawyer (as defined in the Lawyers and Conveyancers Act 2006)

• Registered Teacher

• Minister of religion

• Member of Parliament

Identity verification when investing under Power of Attorney

If you are setting up a direct debit you will need to provide one of the following in the name of the account holder:

• Bank Statement dated within the last three months; or

• A bank generated deposit slip; or

• A printed copy of an online bank statement dated within the last three months and showing the name of the bank account, the bank account number and the name of the bank.

Proof of Bank Account for Direct Debits

If you are investing on behalf of a Company, Trust, Partnership, Incorporated Society or Association, the following documents (whereapplicable) must be submitted with your application:

• Trust Deed (including amendments and subsequent trustee appointments);

• If the trust is a discretionary trust, charitable trust or any type of trust that has more than 10 beneficiaries, please provide a description of each class or type of beneficiary and for a charitable trust, the objects of the trust. For other trusts, please provide the names and dates of births of all trust beneficiaries;

• Partnership agreement;

• Company certificate of incorporation;

• Constitution, charter or rules for an incorporated society or association.

Additional documents when investing for a Company, Trust, Partnership, Incorporated Society or a Association

7. PRIVACY POLICY

The personal information collected on this form and provided with your application will be used to:

• evaluate and process your application;

• administer the Smartshares funds;

• maintain relevant statistical records; and

• comply with any laws in New Zealand or overseas;

• provide you with information about other products and services offered by Smartshares; and update other information held about you by Smartshares and Link Market Services

In signing this application form you authorise the use of your personal information for these purposes.

The personal information will be held by Link Market Services New Zealand at Level 7, Zurich House, 21 Queen Street, Auckland. For more informationon the registry provider please contact Smartshares. Under the Privacy Act 1993 you have the right to access, and to request correction ofpersonal information about you held by Link Market Services by writing to Link Market Services at PO Box 91976, Auckland 1142 or by telephoning LinkMarket Services on (09) 375 5998. Your personal information will only be disclosed to another party to the extent necessary for one or more of thepurposes set out above, where required by law, or as otherwise authorised by you. Smartshares may disclose information about you to anygovernment authority in New Zealand or overseas to comply with law in New Zealand or overseas or to determine what action Smartshares needs totake to comply with the law in New Zealand or overseas.

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8. FOR FINANCIAL ADVISORS ONLY

9. INVESTOR(S) DECLARATION(S)

► I/we understand that the terms and conditions of the Investment Statement, Prospectus and Trust Deed as amended reinvestment from time to time will bind all Unitholders.

► I/we agree to accept the Smartshares Units allocated, including any Smartshares Units obtained as a result of reinvestment income.

► I/we understand that by completing this Application Form I/we will be providing personal information about me/us which will be held by the NZX Limited group of companies (”the Group”), as well as the Registrar, the Trustee and Custodian for the relevant Funds and may be used to make available the full range of services offered by the Group. I/we have the right to access and correct this information subject to the provisions of the Privacy Act 1993. This information may be used to update other information about me/us held by the Group.

► I/we appoint the Trustee(s) as my/our agent to hold and invest the funds and assets the subject of this application on trust on the terms and conditions of the Trust Deed and authorise the Trustee(s) to invest such funds through, and transfer such assets to, the Fund as if they were trust funds.

► I/we direct that the powers conferred by the Trust Deed on the Trustee(s) are available to the Trustee(s) in respect of the funds and assets the subject of this application, and that the Trustee’s appointment in the Trust Deed is authorised by me/us and is not to be revoked other than in accordance with the Trust Deed.

Each Applicant must sign the Application Form. Applications made on behalf of a Company, Trust, Partnership, Incorporated Society orAssociation must be signed by a properly authorised signatory. The Applicant only may sign the Application Form, unless anotherperson has been duly appointed as the attorney of the Applicant. If an attorney signs, he/she must complete section 10 on the bottomof the application and enclose his/her power of attorney.

MAIL : PO Box 91976, Auckland, 1142FAX : +64 9 375 5990 (Applications with payment by direct debit only)DELIVERY : Level 7, Zurich House, 21 Queen Street AucklandEMAIL : [email protected] (Applications with payments by direct debit only)

Signature of Applicant Date



Return your completed application form to : Link Market Services

► I/we have received and read the Investment Statement and I/we apply for units in the selected Smartshares Fund(s) and apply for apply for them as described.

► I/we appoint the Trustee(s) as my/our agent to acquire the assets required to obtain units in the selected Fund(s) and vest them in the Trustee(s) as described in the Investment Statement, Prospectus and Trust Deed and thereafter to perform the duties set out in the Trust Deed.

► I/we agree that this offer to acquire Smartshares Units (or any lesser number allocated) may not be revoked.

Broker / Advisor Name

Company Name

Address

Phone Number

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Complete this section if you are acting on behalf of the Application Form for whom you have power of attorney.CERTIFICATE OF NON - REVOCATION OF POWER OF ATTORNEY

10. TERMS & CONDITIONS OF APPLICATIONS

11. APPLICATIONS UNDER POWER OF ATTORNEY OR AGENT

I,

Of,

Hereby Certify:

1. THAT by a Power of Attorney dated the day of

The Donor,

Of,

appointment me his/her/its Attorney on the terms and conditions set out in the Power of Attorney.

2. THAT I have executed the application for Shares printed on this Application Form under that appointment and pursuant to the powers thereby conferred on me.

3. THAT at the date of this certificate I have not received notice of any event revoking that Power of Attorney.

Signed at :

This day of

Signature Of Attorney :

Complete this section if you are acting as Agent on behalf of the Applicant on this Application Form.CERTIFICATE OF NON-REVOCATION OF AGENT

I,

Of,

Hereby Certify:

1. THAT by the Agency Agreement dated the day of

The Donor,

Of,

appointment me his/her/its Agent on the terms and conditions set out in the Agreement.2. THAT I have executed the application for Shares printed on this Application Form under that appointment and pursuant to the powers thereby conferred on me.

3. THAT at the date of this certificate I have not received notice or information of the revocation of my Appointment as Agent.

Signed at :

This day of

Signature Of Agent :

► The Manager, reserves the right to allot any lesser number of Smartshares Units, or to decline any application. Where the number of new Smartshares Units allotted is less than the amount applied for, or no new Smartshares Units are allotted, surplus application monies will be applied on the next Regular Savings Plan Direct Debit Date.

► Security Transaction Statements will be dispatched to Unitholders as soon as practicable after allotment.

Applicants agree that once lodged with the Unit Registrar, applications for new Smartshares Units cannot be revoked orwithdrawn.

► By signing the Application Form, Applicants acknowledge that the Application Form was distributed with the Investment Statement and that their application for Smartshares Units is made subject to the terms and conditions set out in the Investment Statement, Prospectus and Trust Deed.

► Upon receipt, application monies will be banked or direct debited pending allotment. The banking of such monies shall not constitute allotment of any new Smartshares Units.

For advice on investing consult your NZX Advisor (i.e. sharebroker) or financial advisor. Read the Investment Statement carefully beforeapplying for Smartshares Units. Applications must be made on the Application Form contained in the Investment Statement(Photocopies will not be accepted)

Terms and Conditions of Applicants

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