Smart Global Aggregate Bond ETF — Fund Information / Factsheet 2020

Jul 15, 2020

15 July 2020

Smartshares Exchange Traded Funds – Core Series

Product Disclosure Statement

Offer of units in the Smartshares Exchange Traded Funds

Issued by Smartshares Limited.

This document gives you important information about this investment to help you decide whether you want to invest. There is other useful information about this offer on www.disclose-register.companiesoffice.govt.nz. Smartshares Limited has prepared this document in accordance with the Financial Markets Conduct Act 2013. You can also seek advice from a financial adviser to help you to make an investment decision.

This is a replacement product disclosure statement. It replaces product disclosure statements dated 21 February 2020 and 3 July 2020.

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SMARTSHARES

a Member of the NZX Group

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1. Key information summary

This Product Disclosure Statement – Smartshares Exchange Traded Funds – Core Series covers eight of the funds in the Smartshares Exchange Traded Funds (Scheme).

The Product Disclosure Statement – Smartshares Exchange Traded Funds – Specialist Series, which covers the 27 other funds in the Scheme, is available at www.smartshares.co.nz.

What is this?

This is a managed investment scheme. Your money will be pooled with other investors’ money and invested in various investments. Smartshares Limited (we, our or us) will invest your money and charge you a fee for our services. The returns you receive are dependent on our investment decisions 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.

Who manages the Scheme?

Smartshares Limited is the manager of the Scheme. See section 7 for more information.

What are the returns?

Any income (for example, dividends) received by a fund will be automatically reinvested as additional units. For some funds, you may choose to have the income (less tax, fees and costs) paid to you as distributions. See section 3 for whether a fund pays distributions and when.

How can you get your money out?

Units in the funds are quoted 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.

Investments in the Scheme are generally not redeemable for cash. See section 2 for more information.

What will your money be invested in?

The Scheme has a range of exchange traded funds (each listed on the NZX Main Board). This product disclosure statement covers eight of those funds, each of which are summarised on page 3. More information about the investment target and strategy for each of these funds is provided in section 3.

How will your investment be taxed?

Each fund is a listed portfolio investment entity (PIE).

As a listed PIE, each fund will pay tax on taxable income at the rate of 28%. See section 6 for more information.

Where can you find more key information?

We are required to publish quarterly updates for each fund. The updates show the returns, and the total fees and charges actually charged to investors, during the previous year. The latest fund updates are available at www.smartshares.co.nz. We will also give you copies of those documents on request.

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Investment options summarised in this product disclosure statement

Each fund aims to provide a return to investors that matches the investment objective for the fund, before taking into account tax, fees and costs.

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Fund Description and investment objective Risk indicator Fund charges (% per annum of
the fund’s net asset value)

Smartshares S&P/ Invests in New Zealand shares and is designed to track Lower risk Higher risk 0.20%
NZX 50 ETF (NZG) the return on the S&P/NZX 50 Index. 1 2 3 4 5 6 7
Potentially lower return Potentially higher return

Smartshares S&P/ Invests in Australian shares and is designed to track Lower risk Higher risk 0.30%
ASX 200 ETF the return on the S&P/ASX 200 Index. 1 2 3 4 5 6 7
(AUS)
Potentially lower return Potentially higher return

Smartshares US Invests in US shares and is designed to track the return Lower risk Higher risk 0.34%
500 ETF (USF) on the S&P 500 Index. 1 2 3 4 5 6 7
Potentially lower return Potentially higher return

Smartshares Total Invests in international shares and is designed to track Lower risk Higher risk 0.40%
World ETF (TWF) the return on the FTSE Global All Cap Index. 1 2 3 4 5 6 7
Potentially lower return Potentially higher return

Smartshares Invests in international shares and is designed to track Lower risk Higher risk 0.46%
Total World (NZD the return on the FTSE Global All Cap Index, hedged to 1 2 3 4 5 6 7
Hedged) ETF the New Zealand dollar.
(TWH) Potentially lower return Potentially higher return

Smartshares Invests in New Zealand bonds and is designed to Lower risk Higher risk 0.20%
S&P/NZX NZ track the return on the S&P/NZX NZ Government Bond 1 2 3 4 5 6 7
Government Bond Index.
ETF (NGB) Potentially lower return Potentially higher return

Smartshares Global Invests in international bonds and is designed to track the Lower risk Higher risk 0.30%
Aggregate Bond ETF return on the Bloomberg Barclays Global Aggregate Bond 1 2 3 4 5 6 7
(AGG) Index, hedged to the New Zealand dollar.
Potentially lower return Potentially higher return

Smartshares NZ Invests in New Zealand cash, with the objective of Lower risk Higher risk 0.20%
Cash ETF (NZC) outperforming the S&P/NZX Bank Bills 90-Day Index 1 2 3 4 5 6 7
over rolling 1-year periods.
Potentially lower return Potentially higher return
See the Product Disclosure Statement – Smartshares Exchange Traded Funds – Specialist Series available at www.smartshares.co.nz for information about the
27 other funds in the Scheme.
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• The risk indicators are based on returns data for the 5 years to 30 June 2020. Some of these funds have not been in existence for 5 years, so a combination of actual returns and market index returns have been used to complete the risk indicators. As a result, the risk indicators may provide a less reliable indicator of the potential future volatility of these funds. The risk indicators for the Smartshares S&P/NZX 50 ETF, Smartshares S&P/ASX 200 ETF, Smartshares Total World (NZD Hedged) ETF and Smartshares S&P/NZX NZ Government Bond ETF use 5 years of market index returns, the risk indicator for the Smartshares Global Aggregate Bond ETF uses 3 years and 11 months of market index returns, the risk indicator for the Smartshares NZ Cash ETF uses 5 months of market index returns and the risk indicators for the Smartshares US 500 ETF and Smartshares Total World ETF use 1 month of market index returns.

The Scheme has an establishment fee of $30. This one-off fee applies when you first invest in the Scheme. It does not apply to further investments in the Scheme (including when you invest in additional funds in the Scheme) or if you buy units in a fund through an NZX Participant (such as a broker) or financial adviser (although the NZX Participant or financial adviser may charge you a fee for its services).

See section 4 for an explanation of the risk indicator and for information about other risks that are not included in the risk indicator. To help you clarify your own attitude to risk, you can seek financial advice or work out your risk profile at www.sorted.org.nz/tools/investor-kickstarter.

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Table of Contents

1.	Key information summary	2
2.	How does this investment work?	5
3.	Description of your investment options	7
4.	What are the risks of investing?	9
5.	What are the fees?	10
6.	What taxes will you pay?	12
7.	Who is involved?	13
8.	How to complain	14
9.	Where you can fnd more information	15
10.	How to apply	16

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2. How does this investment work?

The Scheme offers access to a range of exchange traded funds across the investment asset classes of cash, fixed interest, shares and property. Each of the funds is listed on the NZX Main Board.

Seven of the funds covered by this product disclosure statement are passively managed and are designed to track the return on specific indices. We do this by either buying and selling financial products so that the financial products held by the fund closely match the financial products included in the index tracked by the fund or buying and selling interests in an exchange traded fund managed by another fund manager which is designed to track an index.

The Smartshares NZ Cash ETF is actively managed. This means we seek to provide a better return than the market by buying and selling financial products based on an assessment of what is happening in the market.

The Scheme is a managed investment scheme under the Financial Markets Conduct Act 2013. To protect the interests of investors, the Scheme’s investments are held by an independent custodian, BNP Paribas Fund Services Australasia Pty Ltd, and our operations are supervised by an independent supervisor, Public Trust. The Scheme is governed by a master trust deed between the supervisor and us, and each fund is established as a separate trust.

Your money is pooled and invested with other investors’ money.

Every time you pay money into the Scheme you will receive units in the funds you invest in. The number of units that you hold in a fund represents your proportionate interest in that fund. All units in a fund have equal value.

Units only give a beneficial interest in fund assets and do not give you any right to any particular asset of a fund.

All funds have assets (the investments of the fund) and liabilities (the taxes, fees and costs payable by the fund). All liabilities incurred in respect of a fund will be met from the assets of that fund. If the investments in a fund are not sufficient to meet its liabilities, the investments in another fund cannot be used to meet those liabilities.

Any income (for example, dividends) received by a fund will be automatically reinvested as additional units. For some funds, you may choose to have the income (less tax, fees and costs) paid to you as distributions. See section 3 for whether a fund pays distributions and when.

The Scheme may undertake securities lending (which generates additional revenue for the benefit of investors and us).

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Making investments

To invest in the Scheme, you can buy units in the funds through an NZX Participant (such as a broker) or financial adviser. Go to www.smartshares.co.nz for a list of NZX Participants.

You can also invest in the Scheme by applying at www.smartshares.co.nz or calling us on 0800 80 87 80 to ask for an application form. The minimum initial contribution amount is $500. After that, you can make further investments, either through:

• [a cash application for further units (the minimum ] contribution amount is $250);

• [the regular savings plan (the minimum contribution ] amount is $50 per month); or

Withdrawing your investments

Units in the funds are listed on the NZX Main Board, so you can sell your investment through an NZX Participant (such as a broker) or financial adviser if there are interested buyers.

Investments in the Scheme are generally not redeemable for cash.

How to switch between funds

You can invest in more than one fund at a time. However, you cannot switch from one fund to another fund. If you want to switch funds, you must first sell your existing investment in a fund and then buy an investment in another fund.

• [the reinvestment of distributions.]

Contributions will be direct debited from your bank account on or about the 20th day of the month and units will be allocated to you on or about the 3rd business day of the following month. You will receive a statement setting out details of your updated investments (you can also view this information at www.smartshares.co.nz).

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3. Description of your investment options

Each fund aims to provide a return to investors that matches the investment objective for the fund, before taking into account tax, fees and costs.

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Description, investment objective and target investment mix Risk indicator Minimum suggested investor timeframe Distributions
Smartshares S&P/NZX 50 ETF (NZG) Lower risk Higher risk 5-10 years June and
December
Invests in New Zealand shares and is designed to track the return on 1 2 3 4 5 6 7
the S&P/NZX 50 Index. Potentially lower return Potentially higher return
Smartshares S&P/ASX 200 ETF (AUS) Lower risk Higher risk 5-10 years June and
December
Invests in Australian shares and is designed to track the return on 1 2 3 4 5 6 7
the S&P/ASX 200 Index. Potentially lower return Potentially higher return
Smartshares US 500 ETF (USF) Lower risk Higher risk 5-10 years June and
December
Invests in US shares and is designed to track the return on the S&P 1 2 3 4 5 6 7
500 Index. Potentially lower return Potentially higher return
Smartshares Total World ETF (TWF) Lower risk Higher risk 5-10 years June and
December
Invests in international shares and is designed to track the return on 1 2 3 4 5 6 7
the FTSE Global All Cap Index. Potentially lower return Potentially higher return
Smartshares Total World (NZD Hedged) ETF (TWH) Lower risk Higher risk 5-10 years June and
December
Invests in international shares and is designed to track the return on 1 2 3 4 5 6 7
the FTSE Global All Cap Index, hedged to the New Zealand dollar. Potentially lower return Potentially higher return
Smartshares S&P/NZX NZ Government Bond ETF (NGB) Lower risk Higher risk 2-4 years March, June,
Invests in New Zealand bonds and is designed to track the return on 1 2 3 4 5 6 7 September and
December.
the S&P/NZX NZ Government Bond Index. Potentially lower return Potentially higher return
Smartshares Global Aggregate Bond ETF (AGG) Lower risk Higher risk 2-4 years March, June,
Invests in international bonds and is designed to track the return on 1 2 3 4 5 6 7 September and
December.
the Bloomberg Barclays Global Aggregate Bond Index, hedged to the Potentially lower return Potentially higher return
New Zealand dollar.
Smartshares NZ Cash ETF (NZC) Lower risk Higher risk Less than 1 year March, June,
Invests in New Zealand cash, with the objective of outperforming the 1 2 3 4 5 6 7 September and
December.
S&P/NZX Bank Bills 90-Day Index over rolling 1-year periods. Potentially lower return Potentially higher return
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See the Product Disclosure Statement – Smartshares Exchange Traded Funds – Specialist Series available at www.smartshares.co.nz for information about the 27 other funds in the Scheme.

• The risk indicators are based on returns data for the 5 years to 30 June 2020. Some of these funds have not been in existence for 5 years, so a combination of actual returns and market index returns have been used to complete the risk indicators. As a result, the risk indicators may provide a less reliable indicator of the potential future volatility of these funds. The risk indicators for the Smartshares S&P/NZX 50 ETF, Smartshares S&P/ASX 200 ETF, Smartshares Total World (NZD Hedged) ETF and Smartshares S&P/NZX NZ Government Bond ETF use 5 years of market index returns, the risk indicator for the Smartshares Global Aggregate Bond ETF uses 3 years and 11 months of market index returns, the risk indicator for the Smartshares NZ Cash ETF uses 5 months of market index returns and the risk indicators for the Smartshares US 500 ETF and Smartshares Total World ETF use 1 month of market index returns.

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See the ‘Other Material Information’ document on the offer register at www.disclose-register.companiesoffice.govt.nz for more information about the indices referred to on page 7.

The Statement of Investment Policy and Objectives (SIPO) for the Scheme sets out the investment policies and objectives for the Scheme. We may change the SIPO at any time following consultation with the supervisor. We will give you at least 30 days’ notice of any change that is expected to have a material effect on you.

The SIPO is available at www.smartshares.co.nz. Material changes to the SIPO will be described in the Scheme’s annual report.

Further information about the assets in each fund can be found in the fund updates at www.smartshares.co.nz.

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4. What are the risks of investing?

Understanding the risk indicator

Managed funds in New Zealand must have a standard risk indicator. The risk indicator is designed to help investors understand the uncertainties both for loss and growth that may affect their investment. You can compare funds using the risk indicator.

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Lower risk Higher risk
1 2 3 4 5 6 7
Potentially lower return Potentially higher return
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See section 3 for the risk indicators which have been calculated for each of the funds.

The risk indicator is rated from 1 (low) to 7 (high). The rating reflects how much the value of the fund’s assets goes up and down (volatility). A higher risk generally means higher potential returns over time, but more ups and downs along the way.

To help you clarify your own attitude to risk, you can seek financial advice or work out your risk profile at www.sorted.org.nz/tools/investor-kickstarter.

Note that even the lowest category does not mean a risk-free investment, and there are other risks (described under the heading ‘Other specific risks’) that are not captured by this rating.

This risk indicator is not a guarantee of a fund’s future performance. The risk indicator is based on the returns data for 5 years to 30 June 2020. While risk indicators are usually relatively stable, they do shift from time to time. You can see the most recent risk indicator in the latest fund update for each of the funds.

• [Liquidity risk:][ The risk that an investment is difficult to ] buy or sell and a fund suffers a loss as a result.

• [Currency risk: ][The risk that changes in exchange ] rates cause the value of an international investment to reduce.

• [Credit risk:][ The risk that issuers of fixed interest or ] cash investments do not pay interest and/or capital repayments when these are due.

• [ Interest rate risk:][ The risk that interest rates rise and ] the value of investments (in particular, fixed interest and cash investments) reduce.

Other specific risks

There are other risks that may affect returns for investors, which are not reflected in the risk indicator. These risks include fund tracking risk. In particular, the funds covered by this product disclosure statement (other than the Smartshares NZ Cash ETF) are designed to track specific indices. Tracking difference may occur when the weighting of each of the financial products included in an index changes, and the fund that tracks the index is not able to exactly match that change. There is a risk that this may result in the fund achieving a return that is lower than the index being tracked by the fund.

See the ‘Other Material Information’ document on the offer register at www.disclose-register.companiesoffice.govt.nz for further information about the risks of investing in the Scheme.

General investment risks

Some of the things that may cause a fund’s value to move up and down, which affect the risk indicator, are:

• [ Market risk:][ The risk that a market or a sector of a ] market that a fund invests in declines.

• [Individual financial product risk:][ The risk that changes ] in the financial condition or credit rating of an issuer of a financial product causes the value of a financial product held by a fund to decline.

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5. What are the fees?

You will be charged fees for investing in the Scheme. Fees are deducted from your investment and will reduce your returns. The fees you pay will be charged in two ways:

• [regular charges (for example, fund charges). Small ] differences in these fees can have a big impact on your investment over the long term; and

• [one-off fees (for example, an establishment fee).]

These are as follows:

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Fund Fund charges (% per annum Individual action fees
of the fund’s net asset value)
Smartshares S&P/NZX 50 ETF (NZG) 0.20% Establishment fee: $30. This one-off fee
applies when you first invest in the Scheme.
It does not apply to further investments
Smartshares S&P/ASX 200 ETF (AUS) 0.30%
in the Scheme (including when you invest
in additional funds in the Scheme) or if
Smartshares US 500 ETF (USF) 0.34% you buy units in a fund through an NZX
Participant (such as a broker) or financial
adviser (although the NZX Participant or
Smartshares Total World ETF (TWF) 0.40% financial adviser may charge you a fee for its
services).
Smartshares Total World (NZD Hedged) ETF (TWH) 0.46%
Smartshares S&P/NZX NZ Government Bond ETF (NGB) 0.20%
Smartshares Global Aggregate Bond ETF (AGG) 0.30%
Smartshares NZ Cash ETF (NZC) 0.20%
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See the Product Disclosure Statement – Smartshares Exchange Traded Funds – Specialist Series available at www.smartshares.co.nz for information about the 27 other funds in the Scheme.

The fund charges set out above are deducted from, and reflected in the value of, the fund. The fund charges include the fees and costs charged by the supervisor, custodian, administration manager and unit registrar (together with the fees and costs charged by the exchange traded funds managed by other fund managers that we may invest in).

The establishment fee is deducted from the initial contribution amount. We do not charge any other fees on an individual basis for investor-specific decisions or actions.

We may, in exceptional circumstances (for example, a meeting of investors of a fund is called), deduct costs that relate to the Scheme that arise outside the ordinary course of business from a fund (such occasions are likely to be very rare).

We retain any interest earned on: (a) the cash temporarily held by the funds between the date the cash is received by the funds and the date it is distributed; and (b) contributions between the date contributions are received by us and the date they are used to issue investors with units in the funds.

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The revenue earned from securities lending is shared equally, with 50% being paid to the fund the financial products were lent from, and 50% being paid to us (for administering the lending programme).

Example of how fees apply to an investor

Tara invests $10,000 in the Smartshares S&P/NZX 50 ETF. She is charged an establishment fee of $30 (this fee does not apply if Tara buys units in the fund through an NZX Participant or financial adviser).

The fees can be changed

We may change the fees and charges payable by an investor at any time. Where we materially increase a fee or charge, we will give you at least three months’ notice of the change.

We must publish a fund update for each fund showing the fees and charges actually charged during the most recent year. Fund updates, including past updates, are available at www.smartshares.co.nz.

This brings the starting value of her investment to $9,970.

She is also charged fund charges, which work out to about $19.94 (0.20% of $9,970). These fees might be more or less if her account balance has increased or decreased over the year.

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Estimated total fees for the first year

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Individual action fees: $30

Fund charges: $19.94

See the latest fund update for the Smartshares S&P/NZX 50 ETF for an example of the actual returns and fees investors were charged over the past year.

This example applies only to the Smartshares S&P/ NZX 50 ETF. If you are considering investing in other funds in the Scheme, this example may not be representative of the actual fees you may be charged.

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6. What taxes will you pay?

Each fund is a listed portfolio investment entity. The amount of tax that each fund pays is calculated at the rate of 28%. As a result, even if the rate of tax payable by a fund is higher than your marginal rate, you will not get a refund of any of the tax paid by the applicable fund. However, if you are currently paying tax at a rate less than 28%, the excess tax paid by a fund can be used to reduce the tax payable on the other income that you derive at the end of each income year by including the distributions (including any bonus issues) from the fund in your tax return.

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7. Who is involved?

About the manager

Smartshares Limited is a fund manager. It offers New Zealand’s broadest range of passive funds and is a wholly-owned subsidiary of NZX Limited.

Our contact details are:

Smartshares Limited PO Box 105262 Auckland 1143 Telephone: 0800 808 780 Email: smartshares@smartshares.co.nz

Who else is involved?

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Name Role
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Supervisor	Public Trust	Supervises how we manage the Scheme for the beneft of you and
		other investors.
Custodian	BNP Paribas Fund Services	Holds the assets of the Scheme on behalf of investors entirely separate
	Australasia Pty Ltd	from both its assets and other schemes’ assets.
Administration manager	BNP Paribas Fund Services	Provides asset valuation, unit pricing and fund accounting services.
	Australasia Pty Ltd
Unit registrar	Link Market Services Limited	Provides registry services.

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8. How to complain

Manager

Complaints about your investment or the Scheme can be made to us at:

Complaints Smartshares Limited PO Box 105262 Auckland 1143 Telephone: 0800 808 780 Email: complaints@smartshares.co.nz

Supervisor

If you make a complaint to us, and the complaint cannot be resolved, you may refer it to the supervisor at:

Complaints Public Trust PO Box 1598 Shortland Street Auckland 1140 Telephone: 0800 371 471 Email: cts.enquiry@publictrust.co.nz

Independent dispute resolution scheme

We are a member of the Financial Services Complaints Limited Scheme (the supervisor is also a member), which is an independent dispute resolution scheme. If you make a complaint to us (or the supervisor), and the complaint cannot be resolved, you may refer it to Financial Services Complaints Limited at:

Financial Services Complaints Limited PO Box 5967 Wellington 6140

Telephone: 0800 347 257 Email: complaints@fscl.org.nz

The Financial Services Complaints Limited Scheme will not charge you a fee to investigate or resolve a complaint.

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9. Where you can find more information

Further information relating to the Scheme and funds, including financial statements, annual reports, fund updates and the SIPO, is available on the offer register and the scheme register at www.disclose-register.companiesoffice.govt.nz. A copy of the information on the offer register or scheme register is available on request to the Registrar of Financial Service Providers.

The information set out above is available at www.smartshares.co.nz or by contacting us. You can obtain details of your investment at www.smartshares.co.nz or by contacting us. This information is available free of charge. See section 7 for our contact details.

You can obtain general information about the Scheme and funds at www.smartshares.co.nz.

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10. How to apply

To invest in the Scheme, you can buy units in the funds through an NZX Participant (such as a broker). Go to www.smartshares.co.nz for a list of NZX Participants.

You can also invest in the Scheme by applying at www.smartshares.co.nz or calling us on 0800 80 87 80 to ask for an application form.

You can also ask your financial adviser about the funds, as many financial advisers have arrangements for investing in the funds through us or buying units in the funds through an NZX Participant.

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