Prospective Investors

Q: What is an Exchange Traded Fund?

A: ETF's are funds that trade like normal shares. They "track" an index through holding shares in the same proportion as the shares in the index. With ETFs, investors can buy a single unit that spreads their investments across a range of companies. Smartshares Funds are ETF's.

Q: Why invest in an index?

A: Indexing, often called "passive management", involves investing in a group of securities that represent the composition of a broad share market index. Index funds offer "market level" performance; they aim to generally match the performance of a specific index. Index funds generally have lower management fees and operating expenses than actively managed funds.

Q: How does the performance of a Smartshares Fund compare to the performance of the underlying index?

A: Smartshares Funds are designed to provide investment results that generally correspond to the underlying index by holding a portfolio of securities designed to give similar price and yield performance. In the secondary market, arbitrage helps keep the ETF trading at a price close to the underlying index.

Q: What is the significance of net asset value?

A: An ETF's value is based on the Net Asset Value (NAV) of the underlying shares that it represents. The NAV of an ETF is the total value of all the securities held within the ETF (the number of shares held, multiplied by the market price) divided by the total number of units of the fund on issue. The initial price of the ETF is usually the value of the index. This means that if the NAV of the ETF is different to the index value, the value of the constituents in the index is higher or lower than the constituents in the ETF. As the ETF tracks the index and holds exactly the same constituents, this means there may be arbitrage opportunities (the simultaneous purchase and selling of a security to profit from a difference in the price, usually on different exchanges or markets) which helps keep the market price of units very close to the NAV.

Q: Do I get paid dividends on Smartshares Funds?

A: Yes, Smartshares holders are eligible to receive their pro rata share of dividends half yearly, if any, accumulated on the securities held in the fund less fees and expenses.

Q:What are the benefits of Smartshares trading like shares?

A: The unique structure of ETFs offers several advantages to investors:

• Buy or sell at any time during the day
• Invest in a portfolio of many securities with one trade
• Track the price of ETFs at www.nzx.com or in the newspaper

Q: How do I buy Smartshares?

A: There are two ways to invest in Smartshares:

• Invest Direct

  Fill in the application form located on page 5 in the Investment Statement, attach a cheque and send it in to the registry, LINK Market Services Ltd.

• Purchase units on market through a broker.

  The broker must be an NZX advisor, a list of which can be found on the NZX website, http://www.nzx.com/market_participants/directories/firms. The trading codes for our Funds are FNZ (smartFONZ), TNZ (smartTENZ), MDZ (smartMIDZ), MZY (smartMOZY), OZY (smartOZZY).

Q: What are the costs involved?

A: Making a direct application through Smartshares incurs only a low application fee of $30 for amounts up to $20,000. For amounts of $20,000 and above, the application fee is charged at 0.20% of the amount invested.

When purchasing units on market a brokerage fee will be charged. Please contact the relevant NZX advisor to enquire about their charges.

Q: Once I make my initial investment can I make regular contributions?

A: Yes! Once you've made an initial investment we offer a Regular Savings Plan to all investors with a minimum holding. This gives you the ability to make monthly contributions toward your holding (minimum of $50 per month), which helps you to grow your investment even further. To join the Regular Savings Plan, simply fill in the relevant section of the application form (on page 5 of the Investment Statement) together with the corresponding direct debit form. Simple as that!

Q: Are there any negatives to investing in ETFs?

A: Investors should read the risks section in the Investment Statement.

Q: Where can I find out more?

A: More information about each of the funds can be found in the Investment Statement. These can be found on the Website in PDF format (you will require Adobe Reader to view). Or to request a hard copy simply fill in the ‘Apply Now' form found on the Smartshares Website or call Smartshares on free phone 0800 80 87 80. Further information can be found in the relevant prospectus for each fund. These can be provided upon request by contacting Smartshares directly.