Smart Global Bond ETF — Interim / Quarterly Report 2018

Nov 23, 2017

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GLOBAL BOND FUND

FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

Presented by Smartshares Limited, Manager of the Global Bond Fund

GLOBAL BOND FUND

	TABLE OF CONTENTS
		Page
Directory		1
Statement by the Manager		2
Financial Statements
Statement of Comprehensive Income		3
Statement of Changes in Unitholders' Funds		4
Statement of Financial Position		5
Statement of Cash Flows		6
Notes to the Financial Statements		7 - 27
Unitholder Information		28

GLOBAL BOND FUND

DIRECTORY

THE MANAGER

Smartshares Limited Level 1, NZX Centre 11 Cable Street, Wellington 6140 New Zealand

THE SUPERVISOR

Public Trust Level 5, 40-42 Queens Drive Lower Hutt 5010, Wellington New Zealand

This is also the address of the registered office.

Phone: 0800 80 87 80 Email: smartshares@smartshares.co.nz Website: www.smartshares.co.nz

PRINCIPAL OFFICE OF THE MANAGER

Level 7, Zurich House 21 Queen Street, Auckland Central Auckland 1010 New Zealand

THE INVESTMENT MANAGER

PIMCO Australia Pty Limited Level 19, 363 George Street Sydney, New South Wales 2000 Australia

DIRECTORS OF THE MANAGER

Bevan K. Miller (resigned 27 October 2017) Guy R. Elliffe A. John Williams Paul J. Baldwin Mark J. Peterson (appointed 27 October 2017)

SOLICITOR

Buddle Findlay Level 17, State Insurance Tower 1 Willis Street, Wellington 6140 New Zealand

AUDITOR

KPMG 10 Customhouse Quay PO Box 996, Wellington 6140 New Zealand

REGISTRAR

Link Market Services Limited

INVESTMENT ADMINISTRATOR & CUSTODIAN

BNP Paribas Fund Services Australasia Pty Ltd, New Zealand branch

CORRESPONDENCE

All correspondence and enquiries to the Manager about the Fund should be addressed to the Manager, Smartshares Limited, at the above address.

• 1 -

GLOBAL BOND FUND

Smartshares Limited (the ‘Manager’) and Public Trust (the ‘Supervisor’) are parties to a master trust deed dated 24 June 2014 as amended and restated on 9 September 2016 (the 'Trust Deed'). The Trust Deed sets out the terms and conditions on which units in the funds within the Smartshares Exchange Traded Funds are offered for subscription, whether to the public or otherwise.

The Trust Deed provides that each fund is to be established by the Manager and the Supervisor entering into an establishment deed setting out the specific terms and conditions relating to that fund.

The Global Bond Fund (the 'Fund') was created by an establishment deed dated 15 October 2015 as amended and restated on 9 September 2016 between the Manager and the Supervisor.

STATEMENT BY THE MANAGER

In our opinion, the accompanying financial statements and notes are drawn up in accordance with Generally Accepted Accounting Practice in New Zealand ('NZ GAAP'), and fairly present the financial position of the Fund as at 30 September 2017, and the results of its financial performance and cash flows for the six months ended 30 September 2017 in accordance with the requirement of the Trust Deed.

It is believed that there are no circumstances that may materially and adversely affect any interest of the unitholders in the assets other than those already disclosed in this report.

For and on behalf of the Manager:

Smartshares Limited

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......................................................................................... ............................................................................................. Director Director

This statement was approved for signing at a meeting of the Directors on 23 November 2017.

• 2 -

GLOBAL BOND FUND

STATEMENT OF COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

Note INCOME Dividend income Interest income Net changes in fair value of financial assets and financial liabilities at fair value through profit or loss Foreign exchange gain Other income Total income EXPENSES Management fees expense 10 Foreign exchange loss Interest expense Miscellaneous expenses Total expenses Profit before tax Income tax expense 1 Profit after tax Other comprehensive income Total comprehensive income EARNINGS PER UNIT Basic and diluted earnings per unit (cents per unit) 6	Unaudited Six Months Ended 30 September 2017 $'000 - 1,611 2,254 554 2 4,421 (357) - (56) (16) (429) 3,992 (1,118) 2,874 - 2,874 6.78	Unaudited Six Months Ended 30 September 2016 $'000 - 1,752 4,680 606 - 7,038 (350) - (7) (8) (365) 6,673 (1,868) 4,805 - 4,805 11.56	Audited Year Ended 31 March 2017 $'000 2 2,427 5,253 - -
			7,682
			(699) (832) (25) (28)
			(1,584)
			6,098 (1,708)
			4,390 -
			4,390
			10.51

The accompanying notes form part of and should be read in conjunction with these financial statements.

• 3 -

GLOBAL BOND FUND

STATEMENT OF CHANGES IN UNITHOLDERS' FUNDS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

Note Unitholders' funds at the beginning of the period/year Total comprehensive income for the period/year Subscriptions from unitholders 8 Distributions to unitholders 7 Unitholders' funds at the end of the period/year	Unaudited Six Months Ended 30 September 2017 $'000 130,491 2,874 2,698 (995) 1,703 135,068	Unaudited Six Months Ended 30 September 2016 $'000 123,222 4,805 4,832 (1,863) 2,969 130,996	Audited Year Ended 31 March 2017 $'000 123,222 4,390
			5,782 (2,903)
			2,879
			130,491

The accompanying notes form part of and should be read in conjunction with these financial statements.

• 4 -

GLOBAL BOND FUND

STATEMENT OF FINANCIAL POSITION AS AT 30 SEPTEMBER 2017

Note ASSETS Cash at banks Balances due from brokers 5 Receivables Investment securities held at fair value through profit or loss 2 Equity securities held at fair value through profit or loss 2 Derivatives held for trading 3 Unsettled sales TOTAL ASSETS LIABILITIES Bank overdraft Interest payable Management fees payable 10 Taxation payable Derivatives held for trading 3 Distribution payable to unitholders 7 Funds held for unit purchases Unsettled purchases TOTAL LIABILITIES UNITHOLDERS' FUNDS TOTAL LIABILITIES AND UNITHOLDERS' FUNDS	Unaudited As At 30 September 2017 $'000 4,928 4,067 882 131,621 156 3,166 2,560 147,380 (20) - (6) (576) (5,225) - (22) (6,463) (12,312) 135,068 147,380	Unaudited As At 30 September 2016 $'000 2,710 4,706 832 132,925 - 3,319 675 145,167 (1,262) (2) (58) (393) (5,042) (1,263) (79) (6,072) (14,171) 130,996 145,167	Audited As At 31 March 2017 $'000 833 4,548 981 133,091 - 2,718 1,371
			143,542
			(63) - (6) (229) (6,639) - (83) (6,031)
			(13,051)
			130,491
			143,542

For and on behalf of the Manager, Smartshares Limited, who authorised the issue of the financial statements on 23 November 2017.

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--------------------------------------------------------------Director

-------------------------------------------------------------Director

The accompanying notes form part of and should be read in conjunction with these financial statements.

• 5 -

GLOBAL BOND FUND

STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

Note CASH FLOWS FROM OPERATING ACTIVITIES Cash was provided from: Dividend income received Interest income received Miscellaneous income received Cash was applied to: Management fees paid Taxation paid Interest paid Miscellaneous expenses paid Net cash flows from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Cash was provided from: Sale of investments Balance due from broker movement Cash was applied to: Purchase of investments Balance due to broker movement Net cash flows from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Cash was provided from: Subscriptions received from unitholders Cash was applied to: Distributions paid to unitholders Net cash flows from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period/year Effect of exchange rate fluctuations on cash and cash equivalents Cash and cash equivalents at the end of the period/year Reconciliation of profit after tax to net cash flows from operating activities Profit after tax Net changes in fair value of financial assets and financial liabilities at fair value through profit or loss Foreign exchange (gain)/loss Increase/(decrease) in taxation payable Increase/(decrease) in payables Decrease/(increase) in receivables Net cash flows from operating activities	Unaudited Six Months Ended 30 September 2017 $'000 - 1,709 2 (357) (770) (56) (16) 512 124,388 481 (122,833) - 2,036 2,698 (995) 1,703 4,251 770 (113) 4,908 2,874 (2,254) (554) 347 - 99 512	Unaudited Six Months Ended 30 September 2016 $'000 - 1,750 - (348) (2,535) (5) (8) (1,146) 130,491 - (131,913) (2,708) (4,130) 4,832 (1,205) 3,627 (1,649) 2,997 100 1,448 4,805 (4,680) (606) (670) 4 1 (1,146)	Audited Year Ended 31 March 2017 $'000 2 2,272 - (749) (2,535) (25) (28)
			(1,063)
			277,515 - (278,501) (2,550)
			(3,536)
			5,782 (3,508)
			2,274
			(2,325) 2,997 98
			770
			4,390 (5,253) 832 (834) (50) (148)
			(1,063)

The accompanying notes form part of and should be read in conjunction with these financial statements.

• 6 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

GENERAL INFORMATION

The Global Bond Fund (the 'Fund') is a for-profit fund registered in New Zealand and established under the Financial Markets Conduct Act 2013 ('FMC Act 2013'). It is offered under a registered managed investment scheme known as the Smartshares Exchange Traded Funds. Smartshares Limited, the Manager of the Fund is a FMC reporting entity for the purpose of the FMC Act 2013.

The Fund is governed by the Trust Deed dated 24 June 2014 as amended and restated on 9 September 2016 between the Manager and the Supervisor. The Fund was established on 15 October 2015 and commenced operations on 9 November 2015.

The Fund's units are quoted on the NZX Main Board. The Fund is an investment fund that aims to outperform the Barclays Global Aggregate Index (the 'Index') by 1% per annum over a rolling three-year period, hedged in NZ dollars. As prescribed by the Trust Deed, the Fund invests in securities of all types represented in the Index and any other investment that is consistent with the objectives of the Fund.

STATEMENT OF ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these financial statements are set out below. These accounting policies have been consistently applied to the periods/year presented.

Basis of preparation

The financial statements of the Fund have been prepared in accordance with the requirements of the FMC Act 2013, Financial Reporting Act 2013, New Zealand equivalents to International Financial Reporting Standards ('NZ IFRS') and International Financial Reporting Standards ('IFRS'). The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss. The functional currency of this entity is the same as the presentation currency of these financial statements being the New Zealand Dollar ('NZD'), rounded to the nearest thousand.

The preparation of financial statements in conformity with NZ IFRS requires the use of certain critical accounting estimates. It also requires the Smartshares Limited Board of Directors to exercise its judgement in the process of applying the Fund's Statement of Accounting Policies.

Income recognition

Income is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Fund and the income can be reliably measured. The following specific recognition criteria must also be met before income is recognised:

(a) Interest income

Interest income is recognised as the interest accrues (using the effective interest method, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument) to the net carrying amount of the financial asset.

(b) Changes in fair value of financial assets and financial liabilities

Changes in financial assets and financial liabilities at fair value through profit or loss are calculated as the difference between the fair value at sale, or at period/year end, and the fair value at the previous valuation point or cost. This includes both realised and unrealised gains and losses, but does not include interest income.

Financial assets and financial liabilities at fair value through profit or loss

(a) Classification

The Fund classifies its underlying investments and derivatives as financial assets and financial liabilities at fair value through profit or loss. This category has two sub-categories: financial assets or financial liabilities held for trading; and those held at fair value through profit or loss at inception.

(i) Financial assets and financial liabilities held for trading

Financial instruments held for trading are those acquired or incurred principally for the purposes of selling or repurchasing in the short term. Derivatives are categorised as held for trading. The Fund does not classify any derivatives as hedges in a hedging relationship.

• 7 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

(ii) Financial assets designated at fair value through profit or loss

Financial instruments designated at fair value through profit or loss at inception are those that are managed and their performance evaluated on a fair value basis in accordance with the Fund's documented investment strategy. The Fund's policy is for the Manager to evaluate the information about these financial instruments on a fair value basis together with other related financial information. The Manager has determined that investments are designated at fair value through profit or loss.

The Fund does not make short sales in which a borrowed security is sold in anticipation of a decline in the market value of that security, nor does it make use of short sales for arbitrage transactions.

(b) Recognition, derecognition and measurement

Purchases and sales of investments and derivatives are recognised on the trade date - the date on which the Fund commits to purchase or sell the investment or derivatives. Financial assets and financial liabilities designated at fair value through profit or loss are initially recognised at fair value, with transaction costs recognised in profit or loss.

Financial assets and financial liabilities are derecognised when the rights to receive cash flows from the investments have expired or the Fund has transferred substantially all risks and rewards of ownership.

Subsequent to initial recognition, all financial assets and financial liabilities at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the ‘financial assets or financial liabilities at fair value through profit or loss’ category are presented in the Statement of Comprehensive Income when they arise.

(c) Fair value determination

The fair value of financial instruments traded in active markets (such as trading securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets and financial liabilities held by the Fund is the last traded price.

For investments with no active markets, fair values are determined using valuation techniques. Such techniques include: using recent arm’s length transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models making as much use of available and supportable market data as possible and keeping judgmental inputs to a minimum.

(d) Offsetting financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Fund and counterparty.

Receivables

Trade receivables and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as ‘receivables’. Receivables are measured at amortised cost using the effective interest method less impairment.

Payables

Trade payables and other payables are recognised when the entity becomes obliged to make future payments resulting from the purchase of goods and services, and are measured at amortised cost.

Balance due from/to brokers

Balance due from/to brokers includes margin cash and cash collateral that are identified in the Statement of Financial Position and not included as a component of cash and cash equivalents.

Foreign currency transactions and balances

Foreign currency transactions are translated into the functional currency (NZD) using the exchange rate prevailing at the dates of the transactions. Foreign currency assets and liabilities are translated into the functional currency using the exchange rate prevailing at the Statement of Financial Position date. Foreign exchange gains and losses arising from translation are included in the Statement of Comprehensive Income.

Translation differences of non-monetary financial assets and financial liabilities held at fair value through profit or loss are recognised in the Statement of Comprehensive Income as part of the net changes in fair value on financial assets and financial liabilities at fair value through profit or loss.

• 8 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

Cash and cash equivalents

Cash and cash equivalents are considered to be cash at banks, net of bank overdrafts. Operating activities in the Statement of Cash Flows include all transactions or events that are not investing or financing activities. Investing activities are those activities that relate to the acquisition, holding and disposal of investments and securities not falling within the definition of cash. Financing activities relate to cash contributions, withdrawals and distributions.

Repurchase agreements

Securities subject to repurchase agreements are recognised within the investments in "investment securities held at fair value through profit or loss".

Units

The Fund issues units, which provide the holder with a beneficial interest in the Fund. The units can be put back to the Fund via a basket redemption, in accordance with the redemption rules as defined in the Trust Deed, by delivery to the investor 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 issued.

The units are issued and redeemed based on the Fund’s net asset value per unit at the time of issue or redemption. The Fund’s net asset value per unit is calculated by dividing the net assets attributable to the unitholders by the total number of outstanding units. In accordance with the provisions of the Trust Deed, investment positions are valued based on the last traded market price for the purpose of determining the net asset value per unit for subscriptions and redemptions.

Distributions to unitholders

Distributions are made up of income received from the investments less expenses paid and allowances for future liabilities. Income from investments held is attributed to unitholders on the basis of the number of units held on the record date of the distribution. To the extent that imputation credits are available, distributions to unitholders will be fully imputed. The record date for the distributions are on the last business day of February, May, August and November in each year. Currently, distributions are paid to unitholders within 20 business days of the record date.

Taxation

The Fund is domiciled in New Zealand and is registered as a Portfolio Investment Entity (‘PIE’).

The Fund is liable for tax at the prevailing company tax rate on taxable interest and gains and losses from its investments in securities outlined in Note 2 after the deduction of management fees and other deductible expenses. The Fund is able to utilise foreign withholding tax credits when they are available. The Fund pays tax to the extent that the foreign withholding tax credits do not cover the tax liability in full.

Deferred tax is recognised in respect of temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Current and deferred tax is measured using the tax rates enacted or substantively enacted at the reporting date.

Goods and services tax ('GST')

The Fund is not registered for GST and consequently all components of the financial statements are stated inclusive of GST where appropriate.

Segment information

The Fund operates solely in the business of investment management, investing in marketable and debt securities. The Fund receives all of its income from its investments. For the period ended 30 September 2017, no single marketable/debt security contributed more than 10% of the Fund's interest income. Note 12 has a breakdown of interest income by geographical location.

• 9 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

Changes in accounting policies and accounting standards adopted during the year

(a) Changes in accounting policies

There have been no significant changes in accounting policies during the period. All policies have been applied on a basis consistent with those used in the prior period.

(b) New accounting standards adopted

There were no new accounting standards adopted during the period that have a material impact to the financial statements of the Fund.

Issued but not yet effective accounting standards

A number of accounting standards have been issued or revised that are not yet effective as at 30 September 2017, and have not been applied in preparing the financial statements. The Fund does not plan to adopt these standards early. The standards which are relevant to the Fund are as follows:

• NZ IFRS 9 Financial Instruments - Effective for annual reporting periods beginning on or after 1 January 2018; The impact of any changes has not yet been determined.

• NZ IFRS 15 Revenue from Contracts with Customers - Effective for annual reporting periods beginning on or after 1 January 2018. The impact of any changes has not yet been determined.

1. TAXATION

Tax expense comprises: Current tax expense Total tax expense	30 September 2017 $'000 (1,118) (1,118)	30 September 2016 $'000 (1,868)	31 March 2016 $'000 (1,708)
		(1,868)	(1,708)

The prima facie income tax expense on profit before tax from operations reconciles to the income tax expense in the financial statements as follows:

Income tax expense

Profit before tax Income tax using the statutory income tax rate 28% Net changes in fair value of financial assets and financial liabilities Non taxable income Gross up of imputation credits Less imputation credits and other tax credits Income tax expense as per Statement of Comprehensive Income Imputation credit account (ICA) Imputation credits available for use in subsequent periods	30 September 2017 $'000 3,992 (1,118) - - - - - (1,118) 30 September 2017 $'000 2,540	30 September 2016 $'000 6,673 (1,868) - - - - - (1,868) 30 September 2016 $'000 2,378	31 March 2017 $'000 6,098 (1,707) - - - - (1) (1,708) 31 March 2017 $'000 1,811

• 10 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

2. INVESTMENTS SECURITIES

2. INVESTMENTS SECURITIES
Financial assets designated at fair value through profit or loss International interest-bearing securities Interest-bearing securities - repurchase agreements Preference shares	30 September 2017 $'000 150,903 (19,282) 156 131,777	30 September 2016 $'000 137,226 (4,301) - 132,925	31 March 2017 $'000 145,471 (12,380) -
			133,091

These investments are managed by PIMCO Australia Pty Limited and are registered in the name of BNP Paribas Fund Services Australasia Pty Limited, New Zealand branch, the custodian of the Fund.

3. DERIVATIVES HELD FOR TRADING

The Fund holds the following derivative instruments:

(a) Forward foreign exchange contracts

Forward foreign exchange contracts are contractual obligations to buy or sell foreign currencies on a future date at a specified price. Forward foreign exchange contracts are settled on a net basis.

(b) To-Be-Announced forwards (TBA)

To-Be-Announced forward contracts are contractual obligations to buy or sell mortgage-backed financial instruments on a future date at a specified price.

To-Be-Announced forward contracts are normally settled on a cash basis.

(c) Swaps

Swaps are contractual agreements between two parties to exchange streams of payments over time based on specified notional amounts.

Interest rate swaps (IRS) are contractual arrangements to receive or pay a net amount based on changes in interest rates at a future date at a specified price.

Credit default swaps (CDS) are contractual obligations to make payments over time based on specified notional amounts in return for payout in the case of default by the underlying financial instruments.

(d) Options

Options are contractual agreements that convey the right, but not the obligation, for the purchaser either to buy or sell a specific amount of financial instrument at a fixed price, either at fixed future date or at any time with a specified date or the current fair value of the instruments.

(e) Futures

Futures are exchange-traded derivatives which represent agreements to buy/sell some underlying asset in the future for a specified price, established in an organised market.

• 11 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

3. DERIVATIVES HELD FOR TRADING (Continued)

3. DERIVATIVES HELD FOR TRADING (Continued)
Derivative assets held for trading : Forward foreign exchange contracts To-Be-Announced forwards Interest rate swaps Credit default swaps Options Futures Derivative liabilities held for trading : Forward foreign exchange contracts To-Be-Announced forwards Interest rate swaps Credit default swaps Options Futures	30 September 2017 $'000 2,365 53 610 6 28 104 3,166 (2,403) (29) (982) (842) (246) (723) (5,225)	30 September 2016 $'000 1,646 119 915 356 92 191 3,319 (1,577) (11) (2,822) (184) (299) (149) (5,042)	31 March 2017 $'000 1,110 147 950 198 53 260
			2,718
			(4,365) (128) (1,369) (427) (237) (113)
			(6,639)

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

Financial instruments measured at fair value can be categorised across the following 3 levels based on the degree to which their fair value is ‘observable’:

Level 1 – Fair value measurements are derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – Fair value measurements are derived from inputs other than quoted prices included within level 1 that are observable either directly or indirectly;

Level 3 – Fair value measurements are derived from valuation methods that include inputs that are not based on observable market data.

There were no transfers between levels in the period ended 30 September 2017 (30 September 2016: none; 31 March 2017: none).

The following table analyses financial instruments measured at fair value at the reporting date by the level in the fair value hierarchy into which the fair value measured is categorised. The amounts are based on the values recognised in the Statement of Financial Position.

There are no financial instruments are categorised at level 3 (30 September 2016: none; 31 March 2017: none).

• 12 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

4. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Financial assets held at fair value through profit or loss Interest-bearing securities Investments in listed equity securities Derivative assets held for trading: Forward foreign exchange contracts To-Be-Announced forwards Interest rate swaps Credit default swaps Options Futures Derivative liabilities held for trading: Forward foreign exchange contracts To-Be-Announced forwards Interest rate swaps Credit default swaps Options Futures Financial assets held at fair value through profit or loss Interest-bearing securities Investments in listed equity securities Derivative assets held for trading: Forward foreign exchange contracts To-Be-Announced forwards Interest rate swaps Credit default swaps Options Futures Derivative liabilities held for trading: Forward foreign exchange contracts To-Be-Announced forwards Interest rate swaps Credit default swaps Options Futures		30 September 2017 Level 1 $'000 Level 2 $'000 Total $'000 - 131,621 131,621 156 - 156 156 131,621 131,777 - 2,365 2,365 - 53 53 - 610 610 - 6 6 - 28 28 104 - 104 104 3,062 3,166 - (2,403) (2,403) - (29) (29) - (982) (982) - (842) (842) - (246) (246) (723) - (723) (723) (4,502) (5,225) 31 March 2017 Level 1 $'000 Level 2 $'000 Total $'000 - 133,091 133,091 - - - - 133,091 133,091 - 1,110 1,110 - 147 147 - 950 950 - 198 198 - 53 53 260 - 260 260 2,458 2,718 - (4,365) (4,365) - (128) (128) - (1,369) (1,369) - (427) (427) - (237) (237) (113) - (113) (113) (6,526) (6,639)	30 September 2016 Level 1 $'000 Level 2 $'000 Total $'000 - 132,925 132,925 - - - - 132,925 132,925 - 1,646 1,646 - 119 119 - 915 915 - 356 356 - 92 92 191 - 191 191 3,128 3,319 - (1,577) (1,577) - (11) (11) - (2,822) (2,822) - (184) (184) - (299) (299) (149) - (149) (149) (4,893) (5,042)	30 September 2016 Level 1 $'000 Level 2 $'000 Total $'000 - 132,925 132,925 - - - - 132,925 132,925 - 1,646 1,646 - 119 119 - 915 915 - 356 356 - 92 92 191 - 191 191 3,128 3,319 - (1,577) (1,577) - (11) (11) - (2,822) (2,822) - (184) (184) - (299) (299) (149) - (149) (149) (4,893) (5,042)
				132,925
				1,646 119 915 356 92 191
				3,319
				(1,577) (11) (2,822) (184) (299) (149)
				(5,042)
		31 Level 1 $'000 - - - - - - - - 260 260 - - - - - (113) (113)

• 13 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

5. BALANCES DUE FROM BROKERS

Margin accounts Cash collateral	30 September 2017 $'000 1,035 3,032 4,067	30 September 2016 $'000 519 4,187 4,706	31 March 2017 $'000 427 4,121 4,548

Margin accounts represent cash deposits with brokers, transferred as collateral against open derivative contracts.

6. EARNINGS PER UNIT

The basic earnings per unit (EPU) is calculated by dividing the net profit/(loss) after tax attributable to the unitholders by the weighted average number of units on issue during the period.

The Fund’s diluted EPU is the same as the basic EPU since the Fund has not issued any instrument with dilutive potential.

Profit after tax ($'000) Weighted average number of units ('000) Basic and diluted earnings per unit (cents per unit)	30 September 2017 2,874 42,396 6.78	30 September 2016 4,805 41,555 11.56	31 March 2017 4,390 41,753
			10.51

7. DISTRIBUTION PAYABLE TO UNITHOLDERS

Opening distribution payable Distributions accrued to unitholders Distributed to unitholders Closing distribution payable Distributions declared and paid Year ended Distribution per unit (cents per unit) June 2016 (paid July 2016) 31/03/2017 1.44 September 2016 (paid October 2016) 31/03/2017 3.03 November 2016 (paid December 2016) 31/03/2017 1.30 February 2017 (paid March 2017) 31/03/2017 1.18 May 2017 (paid June 2017) 31/03/2018 1.20 August 2017 (paid September 2017) 31/03/2018 1.15	30 September 2017 $'000 - 995 (995) - 30 September 2017 $'000 - - - - 505 490 995	30 September 2016 $'000 605 1,863 (1,205) 1,263 30 September 2016 $'000 600 - - - - - 600	31 March 2017 $'000 605 2,903 (3,508) - 31 March 2017 $'000 600 1,264 544 495 - - 2,903

• 14 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

8. UNITHOLDERS' FUNDS

As at 30 September 2017 there were 42,931,000 units on issue (30 September 2016: 41,766,000; 31 March 2017: 42,071,000).

All issued units are fully paid and redeemable, and are quoted on the NZX Main Board. The Fund’s net asset attributable to unitholders are represented by these units. The relevant movements are shown on the Statement of Changes in Unitholders' Funds.

The number of units allotted during the period ended 30 September 2017 was 860,000 (30 September 2016: 1,570,000; 31 March 2017: 1,875,000) for total value of $2,698,000 (30 September 2016: $4,832,000; 31 March 2017: $5,782,000 ).

The number of units redeemed during the period ended 30 September 2017 was nil (30 September 2016: nil; 31 March 2017: nil) for total value of $nil (30 September 2016: $nil; 31 March 2017: $nil).

Movement in the number of units Balance at the beginning of the period/year Subscriptions received during the period/year Units on issue at the end of the period/year	30 September 2017 '000 42,071 860 42,931	30 September 2016 '000 40,196 1,570 41,766	31 March 2017 '000 40,196 1,875
			42,071

The net asset value of each unit per the financial statements is $3.14616 (30 September 2016: $3.13643; 31 March 2017: $3.10169). Any difference between the net asset value announced to the market for 29 September 2017 and the net asset value per the financial statements is due to different unit pricing methodology.

9. MATURITY ANALYSIS

The Fund invests in international interest-bearing assets and other fixed income securities.

The tables below show an analysis of financial assets and financial liabilities analysed according to when they are expected to be recovered or settled.

• 15 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

9. MATURITY ANALYSIS (Continued)

ASSETS Cash at banks Balances due from brokers Receivables Investment securities held at fair value through profit or loss Equity securities held at fair value through profit or loss Derivatives held for trading Unsettled sales Total assets LIABILITIES Bank overdraft Interest payable Management fees payable Taxation payable Derivatives held for trading Distribution payable to unitholders Funds held for unit purchases Unsettled purchases Total liabilities	30 September 2017 Within 12 months Over 12 months Total $'000 $'000 $'000 4,928 - 4,928 4,067 - 4,067 882 - 882 6,093 125,528 131,621 - 156 156 2,323 843 3,166 2,560 - 2,560 20,853 126,527 147,380 (20) - (20) - - - (6) - (6) (576) - (576) (3,376) (1,849) (5,225) - - - (22) - (22) (6,463) - (6,463) (10,463) (1,849) (12,312)	30 September 2016 Within 12 months Over 12 months Total $'000 $'000 $'000 2,710 - 2,710 4,706 - 4,706 832 - 832 31,264 101,661 132,925 - - - 1,973 1,346 3,319 675 - 675 42,160 103,007 145,167 (1,262) - (1,262) (2) - (2) (58) - (58) (393) - (393) (1,777) (3,265) (5,042) (1,263) - (1,263) (79) - (79) (6,072) - (6,072) (10,906) (3,265) (14,171)	30 September 2016 Within 12 months Over 12 months Total $'000 $'000 $'000 2,710 - 2,710 4,706 - 4,706 832 - 832 31,264 101,661 132,925 - - - 1,973 1,346 3,319 675 - 675 42,160 103,007 145,167 (1,262) - (1,262) (2) - (2) (58) - (58) (393) - (393) (1,777) (3,265) (5,042) (1,263) - (1,263) (79) - (79) (6,072) - (6,072) (10,906) (3,265) (14,171)
			145,167
			(1,262) (2) (58) (393) (5,042) (1,263) (79) (6,072)
			(14,171)

• 16 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

9. MATURITY ANALYSIS (Continued)

ASSETS Cash at banks Balances due from brokers Receivables Investment securities held at fair value through profit or loss Derivatives held for trading Unsettled sales Total assets LIABILITIES Bank overdraft Interest payable Management fees payable Taxation payable Derivatives held for trading Distribution payable to unitholders Funds held for unit purchases Unsettled purchases Total liabilities	31 March 2017 Within 12 months Over 12 months $'000 $'000 833 - 4,548 - 981 - 18,842 114,249 1,310 1,408 1,371 - 27,885 115,657 (63) - - - (6) - (229) - (4,508) (2,131) - - (83) - (6,031) - (10,920) (2,131)	Total $'000 833 4,548 981 133,091 2,718 1,371
		143,542
		(63) - (6) (229) (6,639) - (83) (6,031)
		(13,051)

10. RELATED PARTY TRANSACTIONS

Related party holdings

Key management personnel are the Directors of the Manager. There were no transactions with key management personnel during the period.

The Fund is managed by Smartshares Limited, which is a wholly owned subsidiary of NZX Limited, a company listed on the NZX Main Board.

SuperLife superannuation scheme (“SLSS”), a scheme managed by SuperLife Limited, a wholly owned subsidiary of NZX Limited, was an investor in the Fund until 27 October 2016. Effective 28 October 2016, the investments were transferred from SLSS to SuperLife Invest managed investment scheme (“SLI”), a scheme managed by the Manager, also a wholly owned subsidiary of NZX Limited. The transfer of assets and change of Manager was completed as part of the transition of the SuperLife scheme to comply with the Financial Markets Conduct Act 2013.

As at 30 September 2017, SLI held 40,099,789 units (31 March 2017: 40,091,479) valued at $126,121,000 (31 March 2017: $124,324,000) in the Fund. As at 30 September 2016, SLSS held 40,091,479 units valued at $125,757,000 in the Fund.

Distributions

The Fund paid distributions of $941,000 to SLI for the period ended 30 September 2017 (31 March 2017: $993,000). The balance remaining as payable at the end of the period is $nil (31 March 2017: $nil). The Fund paid distributions of $1,792,000 to SLSS for the period ending 30 September 2016 (31 March 2017: $1,792,000). The balance remaining as payable as at 30 September 2016 was $1,214,000. All distributions were settled prior to the transfer of investments from SLSS to SLI on 28 October 2016.

• 17 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

10. RELATED PARTY TRANSACTIONS (Continued)

Management fees

The Manager receives management fees from the Fund. Under the Trust Deed the Manager pays the supervisor, investment manager, custodian, registrar and auditor on behalf of the Fund and receives direct purchase application fees and interest earned on cash retained for the purpose of distribution prior to the distribution being made.

Total gross management fees excluding rebates for the period ended 30 September 2017 amounted to $357,000 (30 September 2016: $350,000; 31 March 2017: $699,000), with $6,000 (30 September 2016: $58,000; 31 March 2017: $6,000) of outstanding accrued management fees due to the Manager at the end of the period.

Total direct purchase application fees for the period ended 30 September 2017 amounted to $1,000 (30 September 2016: $1,000; 31 March 2017: $3,000).

The total interest earned on cash at banks for the period ended 30 September 2017 amounted to $1,000 (30 September 2016: $nil; 31 March 2017: $nil).

Other related party transactions

The audit fee paid by the Manager for the audit of the Fund for the period ended 30 September 2017 was $nil (30 September 2016: $2,000; 31 March 2017: $5,000).

11. FINANCIAL RISK MANAGEMENT

Strategy in using financial instruments

The Fund utilises a number of financial instruments in the course of its normal investing activities. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised in respect of each class of financial asset and financial liability are disclosed in the Statement of Accounting Policies.

The financial instruments not accounted for at fair value through the profit and loss are short-term financial assets and financial liabilities whose carrying amounts approximate fair value.

• 18 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

11. FINANCIAL RISK MANAGEMENT (Continued)

Financial instruments by category

Financial instruments by category
	30 September	30 September	31 March
	2017	2016	2017
	$'000	$'000	$'000
Loans and receivables
Cash at banks	4,928	2,710	833
Balances due from brokers	4,067	4,706	4,548
Receivables	882	832	981
Unsettled sales	2,560	675	1,371
Financial assets and financial liabilities at fair value through profit and loss
Investment securities held at fair value through profit or loss	131,621	132,925	133,091
Equity securities held at fair value through profit or loss	156	-	-
Derivatives held for trading (financial assets)	3,166	3,319	2,718
Derivatives held for trading (financial liabilities)	(5,225)	(5,042)	(6,639)
Other financial liabilities
Bank overdraft	(20)	(1,262)	(63)
Interest payable	-	(2)	-
Management fees payable	(6)	(58)	(6)
Distribution payable to unitholders	-	(1,263)	-
Funds held for unit purchases	(22)	(79)	(83)
Unsettled purchases	(6,463)	(6,072)	(6,031)

The Fund’s activities expose it to a variety of financial risks: market price risk, interest rate risk, credit risk, liquidity risk and currency risk. The risk management policies used by the Fund are detailed below:

11a. Market price risk

Market price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.

The Fund invests mainly in interest-bearing assets which are not directly subject to market price risk. However, the Fund holds futures contracts which are subject to market price risk. A 10% increase/decrease in market price will result in an increase/decrease in fair value on financial assets and financial liabilities through profit or loss of $11,398,000 (30 September 2016: $8,397,000; 31 March 2017: $8,865,000). The Fund also holds listed preference shares which are subject to market price risk, however this risk is not considered to be significant.

11b. Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Interest rate risk is a direct consequence of investing in fixed income securities (mainly debt securities) and derivatives (including interest rate swaps).

The Fund holds interest-bearing financial assets and liabilities - the values of which move up and down inversely to movements in market interest rates and is therefore exposed to interest rate risk.

The exposure of the Fund to interest rate risk is an investment decision taken by the Investment Manager and the size of that risk is limited in the mandate of the Investment Manager and is monitored and reviewed by the Manager on a regular basis.

• 19 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

11. FINANCIAL RISK MANAGEMENT (Continued)

The following table analyses the Fund's interest rate risk exposure. The analysis has been prepared on the basis of the remaining period to contractual repricing or maturity dates.

ASSETS Cash at banks International interest-bearing securities Interest-bearing securities - repurchase agreements Derivatives held for trading Total financial assets subject to interest rate risk LIABILITIES Bank overdraft Derivatives held for trading Total financial liabilities subject to interest rate risk ASSETS Cash at banks International interest-bearing securities Interest-bearing securities - repurchase agreements Derivatives held for trading Total financial assets subject to interest rate risk LIABILITIES Bank overdraft Derivatives held for trading Total financial liabilities subject to interest rate risk ASSETS Cash and Cash Equivalents International interest-bearing securities Interest-bearing securities - repurchase agreements Derivatives held for trading Total financial assets subject to interest rate risk LIABILITIES Overdraft Derivatives held for trading Total financial liabilities subject to interest rate risk	Within 6 months $'000 4,928 18,569 (19,282) 2 4,217 (20) - (20) Within 6 months $'000 2,710 23,436 (4,301) - 21,845 (1,262) - (1,262) Within 6 months $'000 833 24,312 (12,380) - 12,765 (63) - (63)	Between 6-12 months $'000 - 6,806 - - 6,806 - 12 12 Between 6-12 months $'000 - 3,527 - - 3,527 - - - Between 6-12 months $'000 - 6,756 - - 6,756 - - -	30 September 2017 Between 1-2 years Between 2-5 years $'000 $'000 - - 10,049 45,132 - - 143 96 10,192 45,228 - - 317 132 317 132 30 September 2016 Between 1-2 years Between 2-5 years $'000 $'000 - - 7,054 27,256 - - 11 10 7,065 27,266 - - (162) (95) (162) (95) 31 March 2017 Between 1-2 years Between 2-5 years $'000 $'000 - - 15,227 34,229 - - - 24 15,227 34,253 - - - (482) - (482)	Over 5 years $'000 - 70,347 - 369 70,716 - 521 521 Over 5 years $'000 - 67,351 - 894 68,245 - (2,565) (2,565) Over 5 years $'000 - 64,947 - 697 65,644 - (760) (760)	Total $'000 4,928 150,903 (19,282) 610
					137,159
					(20) 982
					962
					Total $'000 2,710 128,624 (4,301) 915
					127,948
					(1,262) (2,822)
					(4,084)
					Total $'000 833 145,471 (12,380) 721
					134,645
					(63) (1,242)
					(1,305)

• 20 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

11. FINANCIAL RISK MANAGEMENT (Continued)

The tables below show the sensitivity of the Fund's Statement of Comprehensive Income to a reasonably possible change in interest rates with all other variables remaining constant. The analysis is performed on the same basis for 30 September 2016 and 31 March 2017. The sensitivity of the Statement of Comprehensive Income is the effect of the assumed changes in interest rates on:

• 1) The interest income for the year based on floating rate financial assets held at 30 September 2017.

• 2) Changes in fair value of investments for the year based on revaluing fixed rate financial assets at 30 September 2017.

		30 September 2017	30 September 2017
	Sensitivity of	interest	Sensitivity of changes in
	income		fair value of investments
	100 basis	100 basis	100 basis	100 basis
	points	points	points	points
	increase	decrease	increase	decrease
	$'000	$'000	$'000	$'000
Cash at banks	49	(49)	-	-
International interest-bearing securities	58	(58)	(9,561)	10,766
Derivatives held for trading	-	-	3,391	(4,120)

30 September 2016

	Sensitivity of	interest	Sensitivity of changes in	Sensitivity of changes in
	income		fair value of investments
	100 basis	100 basis	100 basis	100 basis
	points	points	points	points
	increase	decrease	increase	decrease
	$'000	$'000	$'000	$'000
Cash at banks	14	(14)	-	-
International interest-bearing securities	28	(28)	(9,041)	9,640
Derivatives held for trading	-	-	3,644	(3,948)

31 March 2017

	Sensitivity of interest	Sensitivity of interest	Sensitivity of changes in	Sensitivity of changes in
	income		fair value of investments
	100 basis	100 basis	100 basis	100 basis
	points	points	points	points
	increase	decrease	increase	decrease
	$'000	$'000	$'000	$'000
Cash at banks	9	(9)	-	-
International interest-bearing securities	-	-	(8,393)	9,469
Derivatives held for trading	-	-	2,944	(2,864)

• 21 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

11. FINANCIAL RISK MANAGEMENT (Continued)

11c. Credit risk

Credit risk represents the risk that a counterparty to the financial instrument will fail to perform contractual obligations under a contract and cause the Fund to incur a loss.

With respect to credit risk arising from the financial assets (excluding repurchase agreements) of the Fund, the Fund's exposure to credit risk arises from the default of the counterparty, with the current exposure equal to the fair value of these instruments as disclosed in the Statement of Financial Position. This does not represent the maximum risk exposure that could arise in the future as a result of changes in values, but best represents the current maximum exposure at the reporting date.

Credit risk arising from derivative financial instruments, such as forward foreign exchange contracts, interest rate swaps and credit default swaps, at any time, is limited to those with net positive fair value (Note 3).

There are no financial assets that are past due or impaired, or would otherwise be past due or impaired except for the terms having been renegotiated.

The analysis below summarises the credit quality of the Fund's exposure rated externally by Standard & Poor's, Moody's or Fitch. In situations where a security has different ratings by the agencies, the highest credit rating applies. If a security is not rated by one of these agencies, the Investment Manager will assess what rating the security might attain if it were to seek an external rating.

AAA to AA- $'000 International interest-bearing securities 81,448 Derivatives held for trading 568 82,016 AAA to AA- $'000 International interest-bearing securities 55,043 Derivatives held for trading 330 55,373 AAA to AA- $'000 International interest-bearing securities 72,785 Derivatives held for trading 77 72,862		30 September 2017 A+ to A- BBB+ to B- CCC+ to C- $'000 $'000 $'000 23,326 41,948 4,181 2,413 - - 25,739 41,948 4,181 30 September 2016 A+ to A- BBB+ to B- CCC+ to C- $'000 $'000 $'000 39,973 33,355 8,855 2,587 - - 42,560 33,355 8,855 31 March 2017 A+ to A- BBB+ to B- CCC+ to C- $'000 $'000 $'000 25,276 43,285 4,125 2,181 - - 27,457 43,285 4,125	Total $'000 150,903 2,981
			153,884
			Total $'000 137,226 2,917 140,143 Total $'000 145,471 2,258
			147,729

Cash and cash equivalents

The Fund's cash and cash equivalents are held with ANZ Bank New Zealand Limited ('ANZ'), BNP Paribas Securities Services ('BNP Paribas') and Westpac New Zealand Limited ('Westpac').

• 22 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

11. FINANCIAL RISK MANAGEMENT (Continued)

The table below discloses the Standard & Poor's credit rating for the Fund's cash and cash equivalents balance excluding bank overdraft with each bank above at the reporting date.

ANZ BNP Paribas Westpac	30 September 2017 Balance $'000 Credit rating 22 AA- 4,906 A- - AA- 4,928	30 September 2016 Balance $'000 Credit rating 1,342 AA- 1,368 A- - AA- 2,710	31 March 2017 Balance $'000 Credit rating 83 AA- 750 A - AA- 833

Balances due from brokers

Balances due from brokers represent margin accounts and cash collaterals. At the reporting date, the Fund's futures margin accounts are held with Morgan Stanley (A+ S&P credit rating) (30 September 2016: A+; 31 March 2017: A+). The Fund's cash collateral balances are also mainly held with Morgan Stanley.

The Investment Manager is responsible for assessing and monitoring the creditworthiness of borrower, guarantors, issuers of debt securities, acceptors of bills of exchange, or other sources of credit risk.

11d. Liquidity risk

Liquidity risk is the risk that the Fund will encounter difficulty in meeting obligations associated with the financial liabilities that are settled by delivering cash or another financial asset.

The Fund is able to generate sufficient cash on a timely manner to meet its financial commitments and normal level of redemptions. The Investment Manager ensures that the Fund has appropriate liquidity levels within allowable benchmark ranges. In the event of abnormal levels of redemptions, timing of payments may depend on the ability of the Fund to realise its underlying investments on a timely basis, subject to provisions in the Trust Deed.

The table below analyses the net settled derivative financial assets and financial liabilities into relevant maturity groupings based on the remaining periods at balance date to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows.

The contractual cash flows are based on the spot rate at the reporting date.

30 September 2017	Statement of
	Financial	Contractual	Within 6	Between 6-	Between 1-	Over 5
	Position	cash flows	months	12 months	5 years	years
	$000	$000	$000	$000	$000	$000
Derivative assets held for trading	3,166
Inflow		307,584	297,491	1,185	8,354	554
Outflow		(301,873)	(294,007)	(532)	(7,072)	(262)
Derivative liabilities held for trading	(5,225)
Inflow		344,025	308,686	3,993	21,645	9,701
Outflow		(363,106)	(312,772)	(5,905)	(26,712)	(17,717)

• 23 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

11. FINANCIAL RISK MANAGEMENT (Continued)

30 September 2016	Statement
	of Financial	Contractual	Within 6	Between 6-	Between 1-	Over 5
	Position	cash flows	months	12 months	2 years	years
Derivatives Held for Trading	$000	$000	$000	$000	$000	$000
Assets
Foreign forward exchange contracts	3,319
Inflow		410,925	396,962	3,229	7,510	3,224
Outflow		(403,332)	(391,415)	(2,918)	(6,655)	(2,344)
Liabilities
Foreign forward exchange contracts	(5,042)
Inflow		231,649	219,968	492	7,459	3,730
Outflow		(246,023)	(225,894)	(1,125)	(10,847)	(8,157)
31 March 2017	Statement
	of Financial	Contractual	Within 6	Between 6-	Between 1-	Over 5
	Position	cash flows	months	12 months	5 years	years
	$000	$000	$000	$000	$000	$000
Derivative assets held for trading	2,718
Inflow		270,231	245,342	3,549	12,760	8,580
Outflow		(236,838)	(218,179)	(3,094)	(9,508)	(6,057)
Derivative liabilities held for trading	(6,639)
Inflow		387,166	356,925	1,239	22,591	6,411
Outflow		(408,360)	(362,895)	(3,094)	(30,496)	(11,875)

11e. Currency Risk

Currency risk is the risk that the value of the financial instruments will fluctuate due to changes in foreign exchange rates.

The Fund holds financial instruments denominated in currencies other than the New Zealand dollar, the functional currency, at period end. The Fund is therefore subject to risk due to fluctuations in the prevailing currency exchange rate. A change in exchange rates would impact the New Zealand dollar equivalent market price of the financial instruments in which the Fund invests.

The Fund enters into forward exchange contracts designed to economically hedge the foreign exposure of the underlying investments. The Fund is to be economically hedged to New Zealand dollars between 95% and 105%.

The currency risk disclosures have been prepared on the basis of the Fund’s direct investments.

The table below summaries the Fund's exposure to currency risk in New Zealand dollar value of the financial instruments.

Assets and liabilities Foreign currency cash balances held (NZD) Investment securities held at fair value through profit or loss Derivatives held for trading Receivables/(payables) Total financial assets and liabilities	AUD $'000 23 1,260 (1,230) 4	CAD $'000 195 4,212 (4,518) 41	30 September 2017 EUR GBP JPY $'000 $'000 $'000 593 348 107 11,990 10,016 14,666 (15,991) (9,418) (14,286) (646) 67 - (4,054) 1,013 487	30 September 2017 EUR GBP JPY $'000 $'000 $'000 593 348 107 11,990 10,016 14,666 (15,991) (9,418) (14,286) (646) 67 - (4,054) 1,013 487	30 September 2017 EUR GBP JPY $'000 $'000 $'000 593 348 107 11,990 10,016 14,666 (15,991) (9,418) (14,286) (646) 67 - (4,054) 1,013 487	USD $'000 7,582 66,333 (73,378) (2,943)	Other $'000 157 23,300 (18,635) 454
	57	(70)	(4,054)	1,013	487	(2,406)	5,276

• 24 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

11. FINANCIAL RISK MANAGEMENT (Continued)

Assets and liabilities Foreign currency cash balances held (NZD) Investment securities held at fair value through profit or loss Derivatives held for trading Receivables/(Payables) Total financial assets and liabilities Assets and liabilities Foreign currency cash balances held (NZD) Investment securities held at fair value through profit or loss Derivatives held for trading Receivables/(payables) Total financial assets and liabilities	AUD $'000 7 801 (837) -	CAD $'000 165 4,999 (5,117) 47	30 September 2016 EUR GBP JPY $'000 $'000 $'000 67 483 (43) 17,730 15,868 21,532 (18,235) (17,828) (21,447) 190 60 1 (248) (1,417) 43 31 March 2017 EUR GBP JPY $'000 $'000 $'000 456 379 167 14,391 10,373 22,746 (14,832) (10,033) (22,989) (1,118) (2,007) 1 (1,103) (1,288) (75)	30 September 2016 EUR GBP JPY $'000 $'000 $'000 67 483 (43) 17,730 15,868 21,532 (18,235) (17,828) (21,447) 190 60 1 (248) (1,417) 43 31 March 2017 EUR GBP JPY $'000 $'000 $'000 456 379 167 14,391 10,373 22,746 (14,832) (10,033) (22,989) (1,118) (2,007) 1 (1,103) (1,288) (75)	USD $'000 5,273 56,781 (53,100) (5,127)	Other $'000 123 15,210 (17,865) 144
	(29) AUD $'000 125 717 (1,137) (232) (527)	94 CAD $'000 62 4,198 (4,240) 40 60	(248) 31 EUR $'000 456 14,391 (14,832) (1,118) (1,103)	43	3,827 USD $'000 4,015 67,522 (71,736) 10 (189)	(2,388) Other $'000 97 13,150 (10,004) (606) 2,637

The table below summarises the sensitivity analysis in NZD currency to an increase or decrease in the exchange rate with all other variables remaining constant, where the Fund has significant currency risk exposure, based on an assumed increase/decrease by the percentage disclosed in the table.

Assets and liabilities Foreign currency cash balances held (NZD) Investment securities held at fair value through profit or loss Derivatives held for trading Receivables/(payables)	30 September 2017 Profit or loss and Unitholders' Funds 10% increase 10% decrease $'000 $'000 (900) 900 (13,175) 13,175 13,743 (13,743) 302 (302) (30) 30	30 September 2016 Profit or loss and Unitholders' Funds 10% increase 10% decrease $'000 $'000 (608) 608 (13,293) 13,293 13,444 (13,444) 468 (468) 11 (11)	30 September 2016 Profit or loss and Unitholders' Funds 10% increase 10% decrease $'000 $'000 (608) 608 (13,293) 13,293 13,444 (13,444) 468 (468) 11 (11)
			(11)

Assets and liabilities Foreign currency cash balances held (NZD) Investment securities held at fair value through profit or loss Derivatives held for trading Receivables/(payables)	31 March 2017 Profit or loss and Unit Holders' Funds 10% increase 10% decrease $'000 $'000 (530) 530 (13,310) 13,310 13,497 (13,497 391 (391 48 (48	31 March 2017 Profit or loss and Unit Holders' Funds 10% increase 10% decrease $'000 $'000 (530) 530 (13,310) 13,310 13,497 (13,497 391 (391 48 (48
		(48

• 25 -

GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

11. FINANCIAL RISK MANAGEMENT (Continued)

11f. Financial assets and liabilities subject to offsetting, enforceable master netting arrangements and similar agreements

The following table presents the recognised derivatives that are subject to offsetting, or other similar arrangements but not offset, as at 30 September 2017, 30 September 2016 and 31 March 2017.

	30 September 2017 Related amounts not set-off in the statement of financial position
	Gross amounts of recognised financial instruments Gross amounts of recognised financial instruments set-off in the statement of financial position Net amounts of financial instruments presented in the statement of financial position Financial instruments Cash collateral received/ pledged Net amount
Total derivative assets Total derivative liabilities	$'000 $'000 $'000 $'000 $'000 $'000 3,113 - 3,113 (1,797) - 1,316 (5,196) - (5,196) 1,797 - (3,399)

	30 September 2016 Related amounts not set-off in the statement of financial position
	Gross amounts of recognised financial instruments Gross amounts of recognised financial instruments set-off in the statement of financial position Net amounts of financial instruments presented in the statement of financial position Financial instruments Cash collateral received/ pledged Net amount
Total derivative assets Total derivative liabilities	$'000 $'000 $'000 $'000 $'000 $'000 3,200 - 3,200 (3,089) - 111 (5,031) - (5,031) 3,089 - (1,942)

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GLOBAL BOND FUND

NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2017

11. FINANCIAL RISK MANAGEMENT (Continued)

31 March 2017

	31 March 2017
	Related amounts not set-off in the statement of financial position
	Gross amounts of recognised financial instruments Gross amounts of recognised financial instruments set-off in the statement of financial position Net amounts of financial instruments presented in the statement of financial position Financial instruments Cash collateral received/ pledged Net amount
Total derivative assets Total derivative liabilities	$'000 $'000 $'000 $'000 $'000 $'000 2,571 - 2,571 (2,424) - 147 (6,511) - (6,511) 2,424 - (4,087)

12. SEGMENT INFORMATION

The table below analyses the Fund’s interest income grouped by geographical location.

United Kingdom Euro Zone United States of America (USA) Americas (excluding USA) Other	30 September 2017 $'000 151 265 1,021 161 13 1,611	30 September 2016 $'000 364 893 380 46 69 1,752	31 March 2017 $'000 (17) 625 1,836 (105) 88
			2,427

• Interest income includes mortgage-backed securities principal repayments.

13. COMMITMENTS AND CONTINGENCIES

The Fund had no commitments or contingencies as at 30 September 2017 (30 September 2016: none; 31 March 2017: none).

14. EVENTS AFTER THE REPORTING YEAR

Since 30 September 2017 there have been no matters or circumstances not otherwise dealt with in the financial statements that have significantly affected or may significantly affect the Fund.

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GLOBAL BOND FUND

UNITHOLDER INFORMATION

Distribution of security holders and security holdings as at 30 September 2017

No. of holders % of holders 1 - 1,000 88 41.31 1,001 - 5,000 70 32.86 5,001 - 10,000 21 9.86 10,001 - 50,000 28 13.15 50,001 - 100,000 2 0.94 Greater than 100,000 4 1.88 Totals 213 100.00 20 largest registered holders of quoted equity securities as at 2017 Full name SuperLife Nominees Limited FNZ Custodians Limited Investment Custodial Services Limited Forsyth Barr Custodians Ltd Rosalie Barnes Custodial Services Limited Maryanne Nola Gane & Marcia Clare Jasmine Fullam David Alan Shackleton & Scott Francis Whitaker FNZ Custodians Limited New Zealand Central Securities Depository Limited Robyn Elizabeth Taylor Jonathan Douglas Schwass & Ann Elizabeth Howarth Brendan Dennis Catchpole & Connie Yvonne Catchpole & Anthony Raymond Wentworth Anthony Smith & Barbara Smith John Huthwaite Ronaldson & Marian Elizabeth Ronaldson & Franklin Trustee Services Ltd Gavin Wallace Mcgougan & Charlotte Elizabeth Mcgougan & Focus Trustee Company Ltd Harsh & Emme Bhoopatkar Trustee Limited Jeffrey Graham Williamson Wendy Marie Williamson Jason Brigg Bedford & Janine Carol Bedford Totals	No. of securities 40,083 166,372 149,396 566,989 137,685 41,870,954 42,931,479 Total 40,089,789 1,229,765 451,130 100,270 81,800 55,885 47,455 41,207 37,039 34,815 32,408 28,503 24,800 23,374 21,800 19,281 19,145 16,850 16,600 16,528 42,388,444	% of securities 0.09 0.39 0.35 1.32 0.32 97.53
		100.00
		Percentage % 93.38 2.86 1.05 0.23 0.19 0.13 0.11 0.10 0.09 0.08 0.08 0.07 0.06 0.05 0.05 0.04 0.04 0.04 0.04 0.04
		98.73

Substantial security holdings

The following information has been given pursuant to section 293 of the Financial Markets Conduct Act 2013 (FMCA). According to Smartshares records and disclosures made under section 280(1)(b) of the FMCA, there were no substantial product holders in the Fund as at 30 September 2017. The total number of units on issue at 30 September 2017 was 42,931,479.

Directors' interest in units as at 30 September 2017

Directors' interest in units as at 30 September 2017
	Beneficial	Non - Beneficial
Bevan K. Miller	2,666*	-
Guy R. Elliffe	10,533*	-
A. John Williams	-	-
Paul J. Baldwin	-	-
*Beneficial interest in these units is indirectly held through the director’s interest in the SuperLife KiwiSaver scheme.
	Male	Female
Gender composition of Directors	4	-

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