Betashares Australia 200 ETF (ASX Ticker: A200)

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BetaShares Australia 200 ETF (ASX Ticker: A200)

Contents IMPORTANT NOTICE

This document is intended for “wholesale clients” only and must be kept confidential to the recipient and its professional advisers. This is not a recommendation to buy units or adopt any particular strategy. You should make your own assessment of the suitability of this information. Actual events may differ materially from those reflected in any opinions or other forward-looking statements. Any opinions are subject to change without notice. Any tax information in this document should not be construed as tax advice and you should obtain professional, independent tax advice before making an investment decision. BetaShares Capital Ltd (ACN 139 566 868 AFS Licence 341181) (“BetaShares”) is the product issuer. This is general information only and does not take into account any person’s particular circumstances. Investors should read the PDS (at www.betashares.com.au) before deciding to buy or hold units. Only investors who are authorised as trading participants under the ASX Operating Rules may invest through the PDS. Other investors may buy units in the Fund on the ASX through a stockbroker or financial adviser. To the extent permitted by law BetaShares accepts no liability for any loss from reliance on this information.

An investment in any BetaShares Fund is subject to investment risk including possible delays in repayment and loss of income and principal invested. Past performance information shown herein is not indicative of future performance.

The Fund is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Index at any time or in any other respect. The Index is calculated and published by Solactive AG. Neither publication of the Index by Solactive AG nor the licensing of the Index for the purpose of use in connection with the Fund constitutes a recommendation by Solactive AG to invest capital in the Fund nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in the Fund. This document is dated April 2018.

Contents

1. BetaShares Australia 200 ETF (ASX: A200) ...... 3 2. A200 Index Construction & Methodology ...... 5 3. Historical Performance of the A200 Index ...... 9 4. Institutional Case for A200 ...... 10 5. BetaShares – Corporate Overview ...... 11 6. Market Makers and Authorised Participants ...... 12 7. Appendix ………………………………………………………………………………………………………………………………….13

1. BetaShares Australia 200 ETF (ASX: A200)

1.1 INVESTMENT OBJECTIVE AND STRATEGY

The Fund aims to track the performance of an index (before fees and expenses) that provides exposure to the largest 200 companies listed on the ASX, based on their market capitalisation.

At 0.07% management fee A200 is the lowest cost Australian broad market equity ETF (as represented by the 200 largest companies by their free float-adjusted market capitalisation) that is listed on the ASX. The Fund will seek to achieve this investment objective by adopting a “full replication” strategy.

1.2. MANAGEMENT FEES

The management fee for A200 is 0.07%.

1.3 DISTRIBUTIONS

Distributions will be made quarterly in respect of periods ending in March, June, September and December of each year.

1.4 LEGAL STRUCTURE ETFs are conventional unit trust structures, just like any other registered managed fund. They are subject to the highest level of investor protection regulation available in the Australian market, however rather than investing by filling out application forms, ETF units can simply be bought or sold on the ASX like any share.

1.5 SECURITIES LENDING

BetaShares does not intend to engage in securities lending in connection with a Fund, although it may do so in the future provided that any such change is notified in advance to investors and potential investors via a supplementary or new PDS accessible through the ASX Market Announcements Platform.

2. A200 Index Construction & Methodology

2.1 INDEX SPECIFICATIONS

The Index belongs to the Solactive Australia Benchmark Index Series and is calculated and distributed by Solactive AG. The Index tracks the various segments of the Australian stock market and Index Components are selected and weighted according to their Free Float Market Capitalization. The Index is adjusted quarterly in March, June, September, and December.

Short name and ISIN

The Solactive Australia Benchmark Index Series is distributed under the following identifiers. Name Characteristic Reuters Bloomberg Solactive Australia 200 Index (PR) Price Return .SOLAUBMP SOLAUBMP

Solactive Australia 200 Index (GTR) Gross Total Return .SOLAUBMG SOLAUBMG

2.2 INDEX PROVIDER – SOLACTIVE

Since its founding in 2007, Solactive has grown to be one of the market leaders in the indexing industry. Solactive is headquartered in Frankfurt and employs in excess of 85 people. Solactive is organised in two business units; Research and Indexing, with the Indexing unit divided into Product Development and Operations.

Solactive has over 350 ETFs globally linked to indices they calculate, 400 international clients and over USD 200 billion is invested in products linked to indices calculated by Solactive. Some of Solactive’s clients include:

Source: Solactive AG - German Index Engineering Company Presentation, April 2018

Solactive focuses on tailor-made indices across all asset classes, which are developed, calculated and distributed worldwide for major investment banks, ETF providers, structured products desks and other financial institutions. Solactive base their index calculation services on two pillars: data from well-known providers and a solid infrastructure with stable backups. Solactive is compliant with the IOSCO Principles for Financial Benchmarks as well as with the ESMA-EBA Principles for Benchmark-Setting Processes in the EU.

2.3 COMPOSITION OF THE INDEX

Quarterly selection of the Index Components On the Selection Days, the Index Committee defines the Index Universe according to the following criteria: 1. Listed on the Australian Securities Exchange (ASX). This includes foreign domiciled companies listed on the ASX. 2. Average Daily Value Traded (ADV) of 100,000 AUD over the past month and the past 6 months 3. Median Daily Value Traded (MDV) of 100,000 AUD over the past month and the past 6 months 4. Minimum ratio between Free Float Market Capitalization and Average Daily Value Traded of 1,000 and 1,100 for current Index Components 5. Minimum ratio between Free Float Market Capitalization and Median Daily Value Traded of 1,000 and 1,300 for current Index Components 6. Ordinary shares (including foreign domiciled), REITs and other stapled securities, and CDI’s are eligible for index inclusion 7. Free Float Percentage of at least 10% for stocks not classified as foreign entities.

8. Traded for a minimum period of 1 month prior to the Selection Day

9. Buffer rules:

 a company that is currently included in the Index is only excluded if the Float Market Capitalization of the company is lower than the Float Market Capitalization of the company ranked 225 at any Selection Day  a company that is currently not included in the Index is only included if the Float Market Capitalization of the company is higher than the Float Market Capitalization of the company ranked 175 at any Selection Day  If the application of the buffer rule results in less than 200 companies entering the Index, additional companies will be added from the Index Universe according to highest Free Float Market Capitalization. If more than 200 companies end up in the Index, companies with the lowest Free Float Market Capitalization will be removed until a total of 200 Index constituents is reached.

Weighting On a quarterly basis, all eligible companies in the Index universe are ranked according to Free Float Market Capitalization. The 200 largest companies, subject to the buffer rules highlighted above, are added to the Solactive Australia 200 Index. The Index Components are then weighted according to Free-Float Market Capitalization. Rebalancing The composition of the Indices are adjusted on a quarterly basis. The composition of the Indices is reviewed on the Selection Day and necessary changes are announced. The changes are then made effective after the close of the third Friday of March, June, September, and December.

For further information on the index methodology please visit the BetaShares website.

3. Historical Performance of the A200 Index

The below chart compares the Solactive Australia 200 Index with other broad market Australian indices.

Solactive Australia 200 Index vs S&P/ASX 200 Index vs MSCI Australia 200 Index (Indexed to 1000): to 30 April 2018

A historical data series can be accessed on Bloomberg or Reuters, please refer to page 5 for the Solactive index information. Additionally we are able to provide a data series in an Excel spreadsheet for further analysis.

4. Institutional case for A200

1. Low cost access to Australian broad equity exposure - at 0.07% p.a. A200 is currently the lowest cost Australian broad equity market ETF

2. Ease of access to a core equity exposure – Access a core allocation to Australian equities with a single trade on the ASX. Institutions can utilise a variety of execution techniques in order implement large trades. BetaShares also has a dedicated Capital Markets team that can assist with queries regarding trading best practices and execution. Please see Section 6 for our panel of Market Makers and Authorised Participants for A200.

3. High level of Liquidity – on market liquidity is offered by Market Makers and other natural buyers and sellers. However, due to the open-ended structure of ETFs, the best measure of an ETF’s liquidity is the liquidity of the underlying assets it holds. In the case of A200 this consists of the 200 largest ASX listed stocks by Free-Float Market Capitalization and weighted accordingly.

4. Transparency – portfolio holdings, the value of the Fund’s assets and net asset value per unit available daily on our website.

5. ETF versus Index Futures – certain institutional investors access Australian broad equity exposure via index futures rather than directly through buying an ETF. Taking into consideration the low fee for A200, accessing franking credits (where the investor qualifies for franking credits), and the roll costs of futures may leave a number of institutions better off if they access the exposure directly via the ETF.

5. BetaShares – Corporate Overview

BetaShares Capital Limited (“BetaShares” or "BCL") is a leading fund manager that specialises in Exchange Traded Funds (“ETFs”) and Exchange Traded Managed Funds (“ETMFs”) in Australia. BetaShares is a member of the Mirae Asset Global Investments Group, one of Asia’s largest asset management firms. As at December 2017, Mirae manages approximately US$122 billion globally. BetaShares offers investment exposures that span across:

- Asset class exposures - Passive and Smart Beta - Strategy/outcomes based - Active management

With a broad range of products now trading on the ASX, BetaShares’ range of Funds is one of the largest (currently 44 funds) and most diverse available in the market with exposures to equities, cash, currencies, commodities and alternative strategies. As at April 2018, BetaShares manages over $5.3 billion in assets.

We are able to provide a detailed BetaShares Corporate Due Diligence document (FSC equivalent) if required. 11

6. Market Makers and Authorised Participants

BetaShares has appointed several liquidity providers for the A200 ETF. They include the following:

Authorised Participants:

- Morgan Stanley Australia Securities Limited - Merrill Lynch Equities (Australia) Limited - Goldman Sachs Australia Pty Ltd - Citigroup Global Markets Australia Pty Ltd - Deutsche Securities Australia Ltd - Jane Street Capital

Market makers:

- Deutsche Securities Australia Ltd - Susquehanna International Group - Vivienne Court Trading Pty Ltd

BetaShares has a dedicated Capital Markets team that can assist with queries regarding trading best practices and execution. Our capital markets team can be contacted on 1300 487 577.

Additionally BetaShares has collated a detailed Capital Markets Guide to assist institutional investors in understanding ETF trading and liquidity, we are able to provide this on request.

7. Appendix

HOLDING FUTURES VS A200 COMPARISON

We provide the following indicative comparison between holding SPI futures vs the physical (A200). The assumptions are:

- 1 year holding period - 4 separate roll periods on the futures (includes cost of spreads, commissions and any market impact) - Management fee of the A200 ETF

Indicative costs and benefits of utilising A200 vs SPI futures for a one year holding period

Source: Bloomberg. Data as at 20/4/18 Note: This information includes the use of estimates and certain assumptions, which may not prove to be accurate. Actual events or results may differ, positively or negatively, from those reflected or contemplated in this information. You should therefore not place undue reliance on it. You should make your own assessment regarding the suitability of this information.

Please note these values may vary on a daily basis. An up to date indicative analysis can be provided on request.