Smart NZ Bond ETF — Fund Information / Factsheet 2019

Jun 5, 2019

6 June 2019

Smartshares Exchange Traded Funds

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 the product disclosure statement dated 8 February 2019.

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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 covers 23 of the funds in the Smartshares Exchange Traded Funds (Scheme).

A Product Disclosure Statement – Smartshares Exchange Traded Funds – Smartshares ETFs built with iShares[®] Series covering eight other funds in the Scheme, each of which invest in an exchange traded fund (ETF) managed by BlackRock Investment Management (Australia) Limited or its related entities, is available at www.smartshares.co.nz.

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 each fund, less tax, fees and costs, will be paid to you as distributions. Any distributions will be automatically reinvested as additional units, unless you choose to have the distributions paid out as cash. Distributions are paid quarterly for some funds and six-monthly for others. See section 3 for when each fund pays distributions.

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 (and the investment managers’) 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.

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 23 of those funds, each of which are summarised on pages 3 to 5. More information about the investment target and strategy for each of these investment options is provided in section 3.

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.

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.

Smartshares Exchange Traded Funds

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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)
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SmartLARGE

The SmartLARGE funds focus on some of the largest companies listed in New Zealand and offshore.

										*
Smartshares NZ	Invests in fnancial products listed on the NZX Main	Lower risk							Higher	risk	0.60%
Top 10 ETF (TNZ)	Board and is designed to track the return on the S&P/NZX 10 Index.	1 Potentially lower 2			return 3	4	Potentially higher return 6 7 5
										*
Smartshares NZ	Invests in fnancial products listed on the NZX Main	Lower risk							Higher	risk	0.50%
Top 50 ETF (FNZ)	Board and is designed to track the return on the		1	2	3	4	5	6	7
	S&P/NZX 50 Portfolio Index.	Potentially lower			return		Potentially higher return
										*
Smartshares	Invests in fnancial products listed on the Australian	Lower risk							Higher	risk	0.60%
Australian Top 20	Securities Exchange (ASX) and is designed to track the		1	2	3	4	5	6	7
ETF (OZY)	return on the S&P/ASX 20 Index.	Potentially lower			return		Potentially higher return
										*
Smartshares Asia Pacifc ETF (APA)	Invests in the Vanguard FTSE Pacifc ETF, which is designed to track the return on the FTSE Developed Asia Pacifc All Cap Index.	1 Potentially lower Lower risk 2			return 3	4	Potentially higher return Higher risk 6 7 5				0.55%
										*
Smartshares	Invests in the Vanguard FTSE Emerging Markets ETF,	Lower risk							Higher	risk	0.59%
Emerging Markets	which is designed to track the return on the FTSE		1	2	3	4	5	6	7
ETF (EMF)	Emerging Markets All Cap China A Inclusion Index.	Potentially lower			return		Potentially higher return
										*
Smartshares	Invests in the Vanguard FTSE Europe ETF, which is	Lower risk							Higher	risk	0.55%
Europe ETF (EUF)	designed to track the return on the FTSE Developed		1	2	3	4	5	6	7
	Europe All Cap Index.	Potentially lower			return		Potentially higher return
										*
Smartshares Total	Invests in the Vanguard Total World Stock ETF, which	Lower risk							Higher	risk	0.56%
World ETF (TWF)	is designed to track the return on the FTSE Global All		1	2	3	4	5	6	7
	Cap Index.	Potentially lower			return		Potentially higher return
										*
Smartshares US	Invests in the Vanguard S&P 500 ETF, which is	Lower risk							Higher	risk	0.34%
500 ETF (USF)	designed to track the return on the S&P 500 Index.		1	2	3	4	5	6	7
		Potentially lower			return		Potentially higher return
										*
Smartshares US	Invests in the Vanguard Growth ETF, which is designed	Lower risk							Higher	risk	0.51%
Large Growth ETF	to track the return on the CRSP US Large Cap Growth		1	2	3	4	5	6	7
(USG)	Index.	Potentially lower			return		Potentially higher return
										*
Smartshares US	Invests in the Vanguard Value ETF, which is designed to	Lower risk							Higher	risk	0.51%
Large Value ETF	track the return on the CRSP US Large Cap Value Index.		1	2	3	4	5	6	7
(USV)		Potentially lower			return		Potentially higher return

Smartshares Exchange Traded Funds

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

SmartMEDIUM

The SmartMEDIUM funds focus on a selection of medium sized companies listed in New Zealand, Australia and the United States.

										*
Smartshares NZ Mid Cap ETF	Invests in fnancial products listed on the NZX Main Board and is designed to track the return on the	1 Lower risk 2			3	4	5	6	Higher 7	risk	0.60%
(MDZ)	S&P/NZX Mid Cap Index.	Potentially lower			return		Potentially higher return
										*
Smartshares Australian Mid	Invests in fnancial products listed on the ASX and is designed to track the return on the S&P/ASX Mid Cap	1 Lower risk 2			3	4	5	6	Higher 7	risk	0.75%
Cap ETF (MZY)	50 Index.	Potentially lower			return		Potentially higher return
										*
Smartshares	Invests in the Vanguard Mid Cap ETF, which is	Lower risk							Higher	risk	0.51%
US Mid Cap ETF	designed to track the return on the CRSP US Mid Cap		1	2	3	4	5	6	7
(USM)	Index.	Potentially lower			return		Potentially higher return

SmartSMALL

The SmartSMALL fund focuses on a selection of smaller companies listed in the United States.

										*
Smartshares US	Invests in the Vanguard Small Cap ETF, which is	Lower risk						Higher		risk	0.51%
Small Cap ETF	designed to track the return on the CRSP US Small Cap		1	2	3	4	5	6	7
(USS)	Index.	Potentially lower			return		Potentially higher return

SmartDIVIDEND

The SmartDIVIDEND funds are made up of some of the highest dividend paying companies listed in New Zealand and Australia.

										*
Smartshares NZ Dividend ETF	Invests in fnancial products listed on the NZX Main Board and is designed to track the return on the	1 Lower risk 2			3	4	5	6	Higher 7	risk	0.54%
(DIV)	S&P/NZX 50 High Dividend Index.	Potentially lower			return		Potentially higher return
										*
Smartshares Australian	Invests in fnancial products listed on the ASX and is designed to track the return on the S&P/ASX Dividend	1 Lower risk 2			3	4	5	6	Higher 7	risk	0.54%
Dividend ETF	Opportunities Index.	Potentially lower			return		Potentially higher return
(ASD)

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Fund Description and investment objective Risk indicator Fund charges (% per annum of
the fund’s net asset value)
SmartINCOME
The SmartINCOME funds are actively managed and made up of interest bearing assets, bonds and other fixed interest assets across New Zealand
and a range of global markets.

Smartshares NZ Invests in cash and cash equivalents, with the objective Lower risk Higher risk 0.33%
Cash ETF (NZC) of outperforming the S&P/NZX Bank Bills 90-Day Index 1 2 3 4 5 6 7
over rolling 1-year periods. The investment manager is Potentially lower return Potentially higher return
Nikko Asset Management New Zealand Limited.

Smartshares NZ Invests in New Zealand fixed interest assets, with Lower risk Higher risk 0.54%
Bond ETF (NZB) the objective of outperforming the S&P/NZX A-Grade 1 2 3 4 5 6 7
Corporate Bond Index over rolling 3-year periods. Potentially lower return Potentially higher return
The investment manager is Nikko Asset Management
New Zealand Limited.

Smartshares Invests in international fixed interest assets, with Lower risk Higher risk 0.54%
Global Bond ETF the objective of outperforming the Barclays Global 1 2 3 4 5 6 7
(GBF) Aggregate Index by 1% per annum over rolling 3-year Potentially lower return Potentially higher return
periods, hedged against the New Zealand dollar.
The investment manager is PIMCO Australia Pty Ltd.
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SmartSECTOR

The SmartSECTOR funds are comprised of some of the largest companies in the property, financial or resources sectors that are listed in New Zealand and Australia.

Smartshares NZ Property ETF (NPF)	Invests in property assets listed on the NZX Main Board and is designed to track the return on the	1 Lower risk 2	3	4	Higher risk 5 6 7 *	0.54%
	S&P/NZX Real Estate Select Index.	Potentially lower	return		Potentially higher return
Smartshares Australian Financials	Invests in fnancial products listed on the ASX and is designed to track the return on the S&P/ASX 200	1 Lower risk 2	3	4	Higher risk 5 7 6 *	0.54%
ETF (ASF)	Financials Ex-A-REIT Index.	Potentially lower	return		Potentially higher return
Smartshares Australian Property	Invests in property assets listed on the ASX and is designed to track the return on the S&P/ASX 200	1 Lower risk 2	3	4	Higher risk 6 7 5 *	0.54%
ETF (ASP)	A-REIT Equal Weight Index.	Potentially lower	return		Potentially higher return
Smartshares Australian Resources	Invests in fnancial products listed on the ASX and is designed to track the return on the S&P/ASX 200	1 Lower risk 2	3	4	Higher risk 5 7 6 *	0.54%
ETF (ASR)	Resources Index.	Potentially lower	return		Potentially higher return

• The risk indicators are based on returns data for the 5 years to 31 March 2019. 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 NZ Top 10 ETF, Smartshares NZ Top 50 ETF, Smartshares Australian Top 20 ETF, Smartshares NZ Mid Cap ETF and Smartshares Australian Mid Cap ETF use 2 years and 8 months of market index returns, the risk indicators for the Smartshares Asia Pacific ETF, Smartshares Emerging Markets ETF, Smartshares Europe ETF, Smartshares Total World ETF, Smartshares US 500 ETF, Smartshares US Large Growth ETF, Smartshares US Large Value ETF, Smartshares US Mid Cap ETF and Smartshares US Small Cap ETF use 1 years and 4 months of market index returns, the risk indicators for the Smartshares NZ Dividend ETF, Smartshares Australian Financials ETF and Smartshares Australian Resources ETF use 1 year and 1 month of market index returns, the risk indicators for the Smartshares Australian Dividend ETF and Smartshares Australian Property ETF use 9 months of market index returns and the risk indicators for the Smartshares NZ Cash ETF, Smartshares NZ Bond ETF, Smartshares Global Bond ETF and Smartshares NZ Property ETF use 1 years and 8 months of market index returns.

Smartshares Exchange Traded Funds

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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.

Smartshares Exchange Traded Funds

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Table of Contents

1.	Key information summary	2
2.	How does this investment work?	8
3.	Description of your investment options	10
4.	What are the risks of investing?	14
5.	What are the fees?	16
6.	What taxes will you pay?	19
7.	Who is involved?	20
8.	How to complain	21
9.	Where you can fnd more information	22
10.	How to apply	23

Smartshares Exchange Traded Funds

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2. How does this investment work?

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

• [ Diversification][: With one simple purchase you get ] an investment in a range of securities, such as listed companies or bonds, spreading your risk more broadly.

• [ Lower fees][: The funds keep costs down because in ] most cases we do not need to make active investment decisions, which may require spending on research and analytical expertise.

• [Flexibility][: Smartshares units trade like individual ] shares.

• [Convenience][: The funds enable you to build a global ] portfolio, without having to worry about the complexity of managing overseas tax. Distributions are paid in New Zealand dollars and automatically reinvested for you, unless you choose to receive them in cash.

Twenty 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 ETFs managed by ] The Vanguard Group Inc (Vanguard).

The three SmartINCOME funds are actively managed. This means the investment managers for these funds seek to provide a better return than the market by buying and selling financial products based on their own 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 independent custodians, 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 each fund, less tax, fees and costs, will be paid to you as distributions. Any distributions will be automatically reinvested as additional units, unless you choose to have the distributions paid out as cash. Distributions are paid quarterly for some funds and six-monthly for others. See section 3 for when each fund pays distributions.

Smartshares Exchange Traded Funds

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The Smartshares NZ Top 10 ETF, Smartshares NZ Top 50 ETF, Smartshares NZ Mid Cap ETF and Smartshares NZ Dividend ETF may undertake financial product lending (which generates additional revenue for the benefit of investors). We typically lend financial products to a financial institution (borrower) that does not have sufficient financial products to complete a sale that it has agreed to. The borrower therefore borrows financial products from one of the funds listed above to meet its obligations. After completion of the sale, the borrower returns replacement financial products to the fund, together with an amount equal to any dividends that may have become payable over the loan period and a financial product lending fee.

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.

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.

Institutional investors can make basket withdrawals (or, in the case of the Smartshares NZ Cash ETF, Smartshares NZ Bond ETF and Smartshares Global Bond ETF, institutional investor withdrawals).

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.

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

• [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).

Institutional investors can make basket contributions (or, in the case of the Smartshares NZ Cash ETF, Smartshares NZ Bond ETF and Smartshares Global Bond ETF, institutional investor contributions).

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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
SmartLARGE
The SmartLARGE funds focus on some of the largest companies listed in New Zealand and offshore.
Smartshares NZ Top 10 ETF (TNZ) Lower risk Higher risk 5–10 years June and
December
Invests in financial products listed on the NZX Main Board and is 1 2 3 4 5 6 7
designed to track the return on the S&P/NZX 10 Index.
Potentially lower return Potentially higher return
▶ [ 100% Australasian equities]
Smartshares NZ Top 50 ETF (FNZ) Lower risk Higher risk 5–10 years June and
December
Invests in financial products listed on the NZX Main Board and is 1 2 3 4 5 6 7
designed to track the return on the S&P/NZX 50 Portfolio Index.
Potentially lower return Potentially higher return
▶ [ 100% Australasian equities]
Smartshares Australian Top 20 ETF (OZY) Lower risk Higher risk 5–10 years June and
December
Invests in financial products listed on the ASX and is designed to track 1 2 3 4 5 6 7
the return on the S&P/ASX 20 Index.
Potentially lower return Potentially higher return
▶ [ 100% Australasian equities]

Smartshares Asia Pacific ETF (APA) Lower risk Higher risk 5–10 years June and
December
Invests in the Vanguard FTSE Pacific ETF, which is designed to track 1 2 3 4 5 6 7
the return on the FTSE Developed Asia Pacific All Cap Index. Potentially lower return Potentially higher return
▶ [ 100% International equities]
Smartshares Emerging Markets ETF (EMF) Lower risk Higher risk 7–12 years June and
December
Invests in the Vanguard FTSE Emerging Markets ETF, which is designed 1 2 3 4 5 6 7
to track the return on the FTSE Emerging Markets All Cap China A
Potentially lower return Potentially higher return
Inclusion Index.
▶ [ 100% International equities]
Smartshares Europe ETF (EUF) Lower risk Higher risk 5–10 years June and
December
Invests in the Vanguard FTSE Europe ETF, which is designed to track 1 2 3 4 5 6 7
the return on the FTSE Developed Europe All Cap Index.
Potentially lower return Potentially higher return
▶ [ 100% International equities]
Smartshares Total World ETF (TWF) Lower risk Higher risk 5–10 years June and
December
Invests in the Vanguard Total World Stock ETF, which is designed to 1 2 3 4 5 6 7
track the return on the FTSE Global All Cap Index.
Potentially lower return Potentially higher return
▶ [ 100% International equities]
Smartshares US 500 ETF (USF) Lower risk Higher risk 5–10 years June and
December
Invests in the Vanguard S&P 500 ETF, which is designed to track the 1 2 3 4 5 6 7
return on the S&P 500 Index.
Potentially lower return Potentially higher return
▶ [ 100% International equities]
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Description, investment objective and target investment mix Risk indicator Minimum suggested investor timeframe Distributions
SmartLARGE (continued)

Smartshares US Large Growth ETF (USG) Lower risk Higher risk 5–10 years June and
1 2 3 4 5 6 7 December
Invests in the Vanguard Growth ETF, which is designed to track the
return on the CRSP US Large Cap Growth Index. Potentially lower return Potentially higher return
▶ [ 100% International equities]

Smartshares US Large Value ETF (USV) Lower risk Higher risk 5–10 years June and
1 2 3 4 5 6 7 December
Invests in the Vanguard Value ETF, which is designed to track the return
on the CRSP US Large Cap Value Index. Potentially lower return Potentially higher return
▶ [ 100% International equities]
SmartMEDIUM
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The SmartMEDIUM funds focus on a selection of medium sized companies listed in New Zealand, Australia and the United States.

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|---|---|---|---|---|---|---|---|---|
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|Smartshares NZ Mid Cap ETF (MDZ)|Lower risk|Higher risk|5–10 years|June and|
|Invests in financial products listed on the NZX Main Board and is|1|2|3|4|5|6|7|December|
|designed to track the return on the S&P/NZX Mid Cap Index.|Potentially lower return|Potentially higher return|
|▶|[ 100% Australasian equities]|
||
|Smartshares Australian Mid Cap ETF (MZY)|Lower risk|Higher risk|5–10 years|June and|
|Invests in financial products listed on the ASX and is designed to track|1|2|3|4|5|6|7|December|
|the return on the S&P/ASX Mid Cap 50 Index.|Potentially lower return|Potentially higher return|
|▶|[ 100% Australasian equities]|
|*|
|Smartshares US Mid Cap ETF (USM)|Lower risk|Higher risk|5–10 years|June and|
|1|2|3|4|5|6|7|December|
|Invests in the Vanguard Mid Cap ETF, which is designed to track the|
|return on the CRSP US Mid Cap Index.|Potentially lower return|Potentially higher return|
|▶|[ 100% International equities]|
|SmartSMALL|

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The SmartSMALL fund focuses on a selection of smaller companies listed in the United States.

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|---|---|---|---|---|---|---|---|
|*|
|Smartshares US Small Cap ETF (USS)|Lower risk|Higher risk|5–10 years|June and|
|1|2|3|4|5|6|7|December|
|Invests in the Vanguard Small Cap ETF, which is designed to track the|
|return on the CRSP US Small Cap Index.|Potentially lower return|Potentially higher return|
|▶|[ 100% International equities]|

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Description, investment objective and target investment mix Risk indicator Minimum suggested investor timeframe Distributions
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SmartDIVIDEND

The SmartDIVIDEND funds are made up of some of the highest dividend paying companies listed in New Zealand and Australia.

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|---|---|---|---|---|---|---|---|---|
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|Smartshares NZ Dividend ETF (DIV)|Lower risk|Higher risk|5–10 years|June and|
|Invests in financial products listed on the NZX Main Board and is|1|2|3|4|5|6|7|December|
|designed to track the return on the S&P/NZX 50 High Dividend Index.|Potentially lower return|Potentially higher return|
|▶|[ 100% Australasian equities]|
||
|Smartshares Australian Dividend ETF (ASD)|Lower risk|Higher risk|5–10 years|June and|
|Invests in financial products listed on the ASX and is designed to track|1|2|3|4|5|6|7|December|
|the return on the S&P/ASX Dividend Opportunities Index.|Potentially lower return|Potentially higher return|
|▶|[ 100% Australasian equities]|

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SmartINCOME

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|---|---|---|---|---|---|---|---|---|
|The SmartINCOME funds are actively managed and made up of interest bearing assets, bonds and other fixed interest assets across New Zealand|
|and a range of global markets.|
||
|Smartshares NZ Cash ETF (NZC)|Lower risk|Higher risk|Less than 1 year|March, June,|
|1|2|3|4|5|6|7|September|
|Invests in cash and cash equivalents, with the objective of outperforming|
|the S&P/NZX Bank Bills 90-Day Index over rolling 1-year periods. The|Potentially lower return|Potentially higher return|and|
|December|
|investment manager is Nikko Asset Management New Zealand Limited.|
|▶|[ 100% Cash and cash equivalents]|
||
|Smartshares NZ Bond ETF (NZB)|Lower risk|Higher risk|1–3 years|March, June,|
|Invests in New Zealand fixed interest assets, with the objective of|1|2|3|4|5|6|7|September|
|outperforming the S&P/NZX A-Grade Corporate Bond Index over rolling|Potentially lower return|Potentially higher return|and|
|December|
|3-year periods. The investment manager is Nikko Asset Management|
|New Zealand Limited.|
|▶|[ 100% New Zealand fixed interest]|
|*|
|Smartshares Global Bond ETF (GBF)|Lower risk|Higher risk|2–4 years|March, June,|
|Invests in international fixed interest assets, with the objective of|1|2|3|4|5|6|7|September|
|outperforming the Barclays Global Aggregate Index by 1% per annum|Potentially lower return|Potentially higher return|and|
|December|
|over rolling 3-year periods, hedged against the New Zealand dollar.|
|The investment manager is PIMCO Australia Pty Ltd.|
|▶|[ 100% International fixed interest]|

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Description, investment objective and target investment mix Risk indicator Minimum suggested investor timeframe Distributions
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SmartSECTOR

The SmartSECTOR funds are comprised of some of the largest companies in the property, financial or resources sectors that are listed in New Zealand and Australia.

									*
Smartshares NZ Property ETF (NPF)	Lower risk						Higher		risk	5–7 years	June and
Invests in property assets listed on the NZX Main Board and is		1	2	3	4	5	6	7			December
designed to track the return on the S&P/NZX Real Estate Select Index.	Potentially lower			return		Potentially higher return
▶100% Listed property
									*
Smartshares Australian Financials ETF (ASF)	Lower risk						Higher		risk	5–10 years	March and
Invests in fnancial products listed on the ASX and is designed to track		1	2	3	4	5	6	7			September
the return on the S&P/ASX 200 Financials Ex-A-REIT Index.	Potentially lower			return		Potentially higher return
▶100% Australasian equities
									*
Smartshares Australian Property ETF (ASP)	Lower risk						Higher		risk	5–10 years	June and
Invests in property assets listed on the ASX and is designed to track the		1	2	3	4	5	6	7			December
return on the S&P/ASX 200 A-REIT Equal Weight Index.	Potentially lower			return		Potentially higher return
▶100% Listed property
									*
Smartshares Australian Resources ETF (ASR)	Lower risk						Higher		risk	5–10 years	June and
Invests in fnancial products listed on the ASX and is designed to track		1	2	3	4	5	6	7			December
the return on the S&P/ASX 200 Resources Index.	Potentially lower			return		Potentially higher return
▶100% Australasian equities

• The risk indicators are based on returns data for the 5 years to 31 March 2019. 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 NZ Top 10 ETF, Smartshares NZ Top 50 ETF, Smartshares Australian Top 20 ETF, Smartshares NZ Mid Cap ETF and Smartshares Australian Mid Cap ETF use 2 years and 8 months of market index returns, the risk indicators for the Smartshares Asia Pacific ETF, Smartshares Emerging Markets ETF, Smartshares Europe Fund, Smartshares Total World ETF, Smartshares US 500 ETF, Smartshares US Large Growth ETF, Smartshares US Large Value ETF, Smartshares US Mid Cap ETF and Smartshares US Small Cap ETF use 1 years and 4 months of market index returns, the risk indicators for the Smartshares NZ Dividend ETF, Smartshares Australian Financials ETF and Smartshares Australian Resources ETF use 1 year and 1 month of market index returns, the risk indicators for the Smartshares Australian Dividend ETF and Smartshares Australian Property ETF use 9 months of market index returns and the risk indicators for the Smartshares NZ Cash ETF, Smartshares NZ Bond ETF, Smartshares Global Bond ETF and Smartshares NZ Property ETF use 1 years and 8 months of market index returns.

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 above (including the S&P Dow Jones Indices general disclaimer).

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.

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.

• [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.

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 31 March 2019. 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.

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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 (or underlying fund) tracking risk: ][The ] funds (other than the Smartshares NZ Cash ETF, Smartshares NZ Bond ETF and Smartshares Global Bond ETF) are designed to track specific indices (or invest in ETFs managed by Vanguard which 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.

• [Investment management risk:][ The Smartshares NZ ] Cash ETF, Smartshares NZ Bond ETF and Smartshares Global Bond ETF are actively managed. This means the investment managers for these funds buy and sell financial products based on their own assessment of what is happening in the market. There is a risk that an investment manager selects investments that result in a fund achieving a return that is lower than the investment objective for 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.

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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 of the fund’s net asset value) Individual action fees
SmartLARGE Establishment fee: $30. This one-off fee
applies when you first invest in the Scheme.
It does not apply to further investments
Smartshares NZ Top 10 ETF (TNZ) 0.60% in the Scheme (including when you invest
in additional funds in the Scheme) or if
you buy units in a fund through an NZX
Smartshares NZ Top 50 ETF (FNZ) 0.50% Participant (such as a broker) or financial
adviser (although the NZX Participant or
Smartshares Australian Top 20 ETF (OZY) 0.60% financial adviser may charge you a fee for its
services).
Smartshares Asia Pacific ETF (APA) 0.55%
Smartshares Emerging Markets ETF (EMF) 0.59%
Smartshares Europe ETF (EUF) 0.55%
Smartshares Total World ETF (TWF) 0.56%
Smartshares US 500 ETF (USF) 0.34%
Smartshares US Large Growth ETF (USG) 0.51%
Smartshares US Large Value ETF (USV) 0.51%
SmartMEDIUM
Smartshares NZ Mid Cap ETF (MDZ) 0.60%
Smartshares Australian Mid Cap ETF (MZY) 0.75%
Smartshares US Mid Cap ETF (USM) 0.51%
SmartSMALL
Smartshares US Small Cap ETF (USS) 0.51%
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Fund	Fund charges (% per annum of the fund’s net asset value)	Individual action fees
SmartDIVIDEND		Establishment fee: $30. This one-off fee applies when you frst invest in the Scheme.
Smartshares NZ Dividend ETF (DIV)	0.54%	It does not apply to further investments in the Scheme (including when you invest in additional funds in the Scheme) or if
Smartshares Australian Dividend ETF (ASD)	0.54%	you buy units in a fund through an NZX Participant (such as a broker) or fnancial adviser (although the NZX Participant or
SmartINCOME		fnancial adviser may charge you a fee for its services).
Smartshares NZ Cash ETF (NZC)	0.33%
Smartshares NZ Bond ETF (NZB)	0.54%
Smartshares Global Bond ETF (GBF)	0.54%
SmartSECTOR
Smartshares NZ Property ETF (NPF)	0.54%
Smartshares Australian Financials ETF (ASF)	0.54%
Smartshares Australian Property ETF (ASP)	0.54%
Smartshares Australian Resources ETF (ASR)	0.54%

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, custodians, investment managers, administration manager and unit registrar (together with the fees and costs charged by the ETFs managed by Vanguard we 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, 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).

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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.

The revenue earned from financial product 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). Financial product lending is discussed in section 2.

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.

Example of how fees apply to an investor

Tara invests $10,000 in the Smartshares NZ Dividend 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).

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

She is also charged fund charges, which work out to about $53.84 (0.54% of $9,970). These fees might be more or less if her account balance has increased or decreased over the year.

Estimated total fees for the first year

Individual action fees: $30

Fund charges: $53.84

See the latest fund update for the Smartshares NZ Dividend ETF for an example of the actual returns and fees investors were charged over the past year.

This example applies only to the Smartshares NZ Dividend 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.

See the ‘Other Material Information’ document on the offer register at www.disclose-register.companiesoffice.govt.nz for further information.

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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 our operations to protect the interests of investors.
Custodians	BNP Paribas Fund Services	Hold the Scheme’s assets on behalf of investors.
	Australasia Pty Ltd and JBWere (NZ)
	Nominees Limited
Investment managers	Nikko Asset Management	Provides investment management services in respect of the
	New Zealand Limited	Smartshares NZ Cash ETF and Smartshares NZ Bond ETF.
	PIMCO Australia Pty Ltd	Provides investment management services in respect of the
		Smartshares Global Bond ETF.
Administration manager	BNP Paribas Fund Services Australasia	Provides asset valuation, unit pricing and fund accounting services.
	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: smartshares@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@trustee.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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