Hipótesis y probables variables

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

Refunds

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

No Cooling-off Period

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

Manager may request information

The Manager may request any Unitholder to provide information to the Manager to enable the Manager to determine whether a Smartshares Fund can continue to meet the PIE eligibility requirements (further details are provided in the "Taxation" section on page 29).

The Manager may also ask a Unitholder to provide any other information that the Manager reasonably requires in order to manage its obligation to comply with any laws or regulations in New Zealand or any other country in relation to the Smartshares Funds (including in relation to anti-money laundering and countering financing of terrorism).

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

What are the charges?

Unless otherwise specified all fees are inclusive of GST.

Entry and Exit charges

27 24 above) you pay a flat application fee to the Manager of $30 for Subscription Amounts of less than $20,000, or 0.20% of the full Subscription Amount for Subscription Amounts equal to or greater than $20,000. However, this application fee is not payable if you already hold the Minimum Holding of 100 Smartshares Units in the relevant Smartshares Fund. The application fee may be increased by the Manager by giving ten Business Days' notice of the change to the Trustee. The application fee may be decreased by the Manager by giving notice to the Trustee (and such decrease may have immediate effect). There is no limit to the altered fee that may be charged.

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

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

Other management charges

Management fees are charged to the Smartshares Funds and is currently, for the US 500 Trust, 0.30% per annum of the NAV of the US 500 Trust and, for all other Smartshares Fund, 0.45% per annum of the NAV of the relevant Smartshares Fund, and is accrued daily and paid to the Manager on a monthly basis in arrear. The Manager may agree payments to individual Unitholders that are the equivalent of management fee rebates (in the form of additional Smartshares Units or cash, as agreed between the Manager and the Unitholder).

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

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

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

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

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

Underlying Fund Fees and Charges

The Underlying Fund Manager charges its operating expenses (including management fees) to the Underlying Funds. The current annual operating expenses in relation to each Underlying Fund are set out on pages 17 to 19, but these may change without notification to Unitholders or the Manager. Unlike the Manager, the Underlying Fund Manager charges transaction fees (such as trading and brokerage costs) directly to the relevant Underlying Fund (rather than including them in its operating expenses). These costs will affect the Return received by shareholders of the Underlying Funds (including the relevant Smartshares Fund and therefore Unitholders).

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

What returns will I get?

Nature of the returns

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

(a) any increase in the price of Smartshares Units at the time you sell, relative to the price at which you bought on market, or subscribed if an application was made directly; and

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

Key factors that determine returns for Smartshares Funds

The Returns for the Smartshares Funds are dependent on the Returns of the relevant Underlying Fund. The Returns for the Underlying Funds are subject to the general fluctuations and direction of the sharemarkets that Index Securities are listed in and the performance of the Index Issuers, which includes changes in their security prices and the value of any dividends or other distributions paid. Both of these factors are influenced by global economies.

The Returns for the Underlying Fund are also affected by increases or decreases in the Underlying Fund Manager's operating expenses (including management fees) in respect of that Underlying Fund, currency fluctuations where the Underlying Fund has investments that are not denominated in US Dollars and other events such as changes in relevant tax laws.

In addition, the Returns for the Smartshares Funds may be affected by currency fluctuations between the New Zealand and US Dollar (as the Manager does not currently take steps to hedge against currency fluctuations) and the application of US law to the Smartshares Funds or investors.

Amount of the returns

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

Distributions

Distributions are currently made directly from each Smartshares Fund within 20 Business Days of the Record Date and are paid to Unitholders whose names are on the register in respect of Units held on the Record Date. The Record Date is on or about the last Business Day in January, April, July and October in each year.

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

29 These distributions comprise Underlying Fund distributions or any other income, less fees and other expenses. Income paid into a Smartshares Fund in foreign currency (which is expected to be all distributions received from the Underlying Funds) will not be available for distribution to Unitholders until it has been exchanged for New Zealand dollars. Unitholders will automatically have their distributions reinvested as Smartshares Units unless they elect to have them paid directly to a nominated New Zealand bank account. The Manager may, at its discretion, deduct from any distribution an amount of cash if, and to the extent that, the Manager reasonably considers that such a deduction is required to meet any liabilities that become payable in the next (or later) distribution period. Such deductions will be retained in the Smartshares Fund. The Manager receives and retains any interest earned on income held prior to distribution. The directors of the Manager expect to continue with this distribution policy.

Taxation

The following comments are intended to be only a general summary and indication of the Manager's understanding of relevant New Zealand and United States tax law as at the date of this Investment Statement. There may be other consequences which affect the Smartshares Funds or the Unitholders. Neither the Trustee nor the Manager accepts any responsibility for the taxation consequences of an investment in the Smartshares Funds.

The Underlying Funds are based in the United States. There is a risk that US tax and other laws will apply to the Underlying Funds, the Smartshares Funds and/or investors in a way that the Manager did not anticipate or that such laws change in a way that adversely affects the Underlying Funds, the Smartshares Funds and/or investors.

Unitholders who buy or sell Smartshares Units may have different taxation positions. Consequently, each Unitholder should consider their own taxation position and if necessary seek professional advice before investing in Smartshares Units.

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

The Smartshares Funds will elect to become PIEs that are Listed PIEs from the date the Smartshares Funds are Listed. As Listed PIEs the Smartshares Funds pay tax on income derived by the Smartshares Funds at a rate of 28%.

New Zealand Taxation of investments of the Smartshares Fund

The Smartshares Funds will apply the “fair dividend rate” (“FDR”) method to calculate the amount of the taxable income in relation to their investment in the Underlying Funds. Under the FDR method, each Smartshares Fund will have taxable income in each income year (1 April to 31 March) calculated with reference to 5% of the average daily opening market value of the Underlying Shares held by the relevant Smartshares Funds.

Distributions received by the Smartshares Funds in relation to these Underlying Shares should not be subject to further tax. The Smartshares Funds may be entitled to a credit for any withholding tax paid on distributions received from the Underlying Funds subject to certain limits. No tax deduction may be claimed for any losses in respect of the applicable equities under the FDR method.

New Zealand Taxation Liability of New Zealand resident investors - distributions

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

The Smartshares Funds will attach Imputation Credits to distributions to Unitholders to the extent that Imputation Credits are available.

To the extent that distributions are not fully imputed New Zealand resident Unitholders will not be taxed on distributions that they receive from the Smartshares Funds. The effect of this is that non-taxable income

30 (e.g. income that a Smartshares Fund receives in excess of the amount of the taxable income as calculated under the FDR method) derived by the Smartshares Funds can be distributed to such Unitholders free from tax.

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

New Zealand Taxation Liability of non-resident investors - distributions

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

The Smartshares Funds will attach Imputation Credits to distributions to Unitholders to the extent that Imputation Credits are available.

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

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

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

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

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

Benefits of PIE

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

PIE Eligibility

The Manager has the discretion to take any steps the Manager considers necessary or desirable to ensure that each Smartshares Fund is eligible to be enrolled and remain as a PIE. This includes replacing an Underlying Fund with a fund that is materially the same if the Smartshares Fund can no longer invest in the Underlying Fund without compromising its PIE status or ensuring that any one Unitholder’s unit holding does not exceed the maximum investor interest size requirement in the Tax Act, which is a number of Smartshares Units not exceeding 20% of the total issued Smartshares Units of each Smartshares Fund (for these purposes, the Smartshares Units held by the relevant Unitholder’s “associated persons” that are not Exempt Investors and who, themselves, hold Smartshares Units amounting to 5% or more of the units on issue will also be taken into account in determining whether the 20% threshold has been exceeded).

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

31 ensure compliance with the PIE rules and the Trust Deeds. Additionally, the Manager has the ability to rectify any breach of the PIE holding restrictions in accordance with the PIE rules and the Trust Deeds. For further information regarding the eligibility of a Smartshares Fund to operate as a PIE within the PIE requirements please refer to the Smartshares Funds' prospectus or contact the Manager.

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

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

• the Unitholder acquired the Smartshares Units for the purpose of sale or other disposal; or • the Unitholder carries on a business involving dealing in the Smartshares Units or other similar

property; or

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

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