Managed Portfolio Service. Investment Statement 27 November for information only

Transcription

1 Managed Portfolio Service Investment Statement 27 November 2015

2 This document is an Investment Statement for the purposes of the Securities Act 1978.

3 Important information (The information in this section is required under the Securities Act 1978). Investment decisions are very important. They often have long-term consequences. Read all documents carefully. Ask questions. Seek advice before committing yourself. Choosing an investment When deciding whether to invest, consider carefully the answers to the following questions that can be found on the pages noted below: Page What sort of investment is this? 48 Who is involved in providing it for me? 48 How much do I pay? 49 What are the charges? 50 When seeking or receiving financial advice, you should check: What returns will I get? 53 What are my risks? 54 the type of adviser you are dealing with; Can the investment be altered? 56 the services the adviser can provide you with; and How do I cash in my investment? 57 the products the adviser can advise you on. for information A financial adviser who provides you only with personalised Who do I contact with inquiries about my investment? 59 financial adviser services may be required to give you a Is there anyone to whom I can complain if I have disclosure statement covering these and other matters. You problems with the investment? 59 should ask your adviser about how he or she is paid and any conflicts of interest he or she may have. What other information can I obtain about this investment? 60 In addition to the information in this document, important information can be found in the current registered Prospectus for the investment. You are entitled to a copy of that Prospectus on request. The Financial Markets Authority regulates conduct in financial markets The Financial Markets Authority regulates conduct in New Zealand s financial markets. The Financial Markets Authority s main objective is to promote and facilitate the development of fair, efficient, and transparent financial markets. For more information about investing, go to Financial advisers can help you make investment decisions Using a financial adviser cannot prevent you from losing money, but it should be able to help you make better investment decisions. Financial advisers are regulated by the Financial Markets Authority to varying levels, depending on the type of adviser and the nature of the services they provide. Some financial advisers are only allowed to provide advice on a limited range of products. Financial advisers must have a complaints process in place and they, or the financial services provider they work for, must belong to a dispute resolution scheme if they provide services to retail clients. So if there is a dispute over an investment, you can ask someone independent to resolve it. Most financial advisers, or the financial services provider they work for, must also be registered on the financial service providers register. You can search for information about registered financial service providers at You can also complain to the Financial Markets Authority if you have concerns about the behaviour of a financial adviser. Important changes may be made to this Investment Statement from time to time. There is a registered Prospectus containing an offer of securities to which this Investment Statement relates. You can obtain a copy of the latest Investment Statement and the relevant Prospectus at any time from either your Authorised Financial Adviser or NZ Funds. The terms NZ Funds, we, us or our used throughout this Investment Statement refer to New Zealand Funds Management Limited as manager of the Portfolios. Other terms used in this Investment Statement are defined in the Glossary on page 62.

4 Contents section 1: Overview of the NZ Funds Managed Portfolio Service key information 3 about nz funds 6 how we manage investments 8 time frame, volatility and risk 10 the portfolios 12 section 2: Details of the NZ Funds Managed Portfolio Service what sort of investment is this? 48 who is involved in providing it for me? 48 how much do i pay? 49 what are the charges? 50 what returns will i get? 53 for what are my risks? information only 54 can the investment be altered? 56 how do i cash in my investment? 57 who do i contact with inquiries about my investment? 59 is there anyone to whom i can complain if i have problems with the investment? 59 what other information can i obtain about this investment? 60 how do i apply? 60 glossary 62 section 3: Application Forms and AML Forms application form 67 existing client application form 73 switch application form 77 direct debit form 81 aml forms why every investor must complete aml 83 for an individual 85 for a representative acting on behalf of a client 87 for a trust 89 for a company 91

5 section 1 Overview of the NZ Funds Managed Portfolio Service key 3 about nz funds 6 how we manage investments 8 time frame, volatility and risk 10 the portfolios overview 12 core cash portfolio 14 core income portfolio 17 global income portfolio 20 core inflation portfolio 23 property inflation portfolio 26 equity inflation portfolio 29 core growth portfolio 32 global multi-asset growth portfolio 35 global equity growth portfolio 38 dividend and growth portfolio 41 capital opportunities portfolio 44

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7 Key information Investment decisions are very important. They have long-term consequences. You should read all documents, including this Investment Statement, very carefully. We encourage you to ask questions of your Authorised Financial Adviser and/or seek other professional advice. What is the NZ Funds Managed Portfolio Service? The NZ Funds Managed Portfolio Service is a series of actively managed Portfolios offered and managed by New Zealand Funds Management Limited (NZ Funds). The Portfolios are designed to be used in combination, and not as stand-alone investments. It is generally intended that an investor will allocate their investment across all or a majority of the Portfolios within each investment category rather than investing in a single Portfolio or a single investment category. The Portfolios are designed to be used in conjunction with a financial planning process. The NZ Funds Managed Portfolio Service consists of the following 11 Portfolios: Core Cash Portfolio; Core Income Portfolio; Global Income Portfolio; Core Inflation Portfolio; Property Inflation Portfolio; Equity Inflation Portfolio; Core Growth Portfolio; Global Multi-Asset Growth Portfolio; Global Equity Growth Portfolio; Dividend and Growth Portfolio; and Capital Opportunities Portfolio. Each of the Portfolios is a collective investment vehicle. The money you invest into a Portfolio is combined with other investors money to purchase assets. A collective investment means your Portfolio holding represents a proportionate holding in the underlying assets of the Portfolio. This is not the same as direct ownership of the underlying assets. You will be allocated units in the Portfolio(s). The units represent your proportionate holding in the Portfolio(s). The number of units you are allocated is based on the price per unit, called the unit price. The performance of your investment will be measured by the rise or fall of the unit price. As the combined value of the assets owned by the Portfolio(s) increases or decreases, so too will the unit price. For more on the Portfolios, see the Overview on page 12 and pages 14 to 46. What are the key elements of the NZ Funds Managed Portfolio Service? contributions You may make lump-sum and/or regular contributions. There is no obligation for you to make any ongoing regular contributions once you have made your initial investment. issue of units The number of units issued will depend on the issue price for units of the relevant Portfolio. The issue price is essentially the net asset value of the Portfolio, plus an amount being NZ Funds estimate of the costs of acquiring the assets of that Portfolio, divided by the number of units on issue in that Portfolio. Further details on the calculation of the issue price are set out in the Prospectus for the relevant Portfolio. nz funds managed portfolio service : : investment statement : : 27 november

8 withdrawals You can cash in your investment in any of the following ways: Switching between Portfolios (subject to redemption restrictions); Transferring your investments to another party; Redeeming units from the Portfolio by way of regular withdrawals (subject to redemption restrictions); or Redeeming units from the Portfolio by way of a lump-sum withdrawal (subject to redemption restrictions). The amount received for units on redemption is essentially the net asset value of the Portfolio plus an amount being NZ Funds estimate of the costs of disposing of the assets of that Portfolio divided by the number of units on issue in that Portfolio. For more on withdrawals, see How do I cash in my investment? on page 57. Who is involved in providing the NZ Funds Managed Portfolio Service? NZ Funds, who is the manager (the Manager) of the Portfolios; and The New Zealand Guardian Trust Company Limited, who is the trustee (the Trustee) of the Portfolios. For more on NZ Funds or the Trustee, see Who is involved in providing it for me? on page 48. What are the fees? investor fees No entry, exit or switching fees are currently charged. portfolio fees for target base fee information only NZ Funds has set a target base fee each Portfolio. The target base fee is not a separate fee, but a means of providing an indication of the level of fees and expenses that each Portfolio is expected to incur (excluding transaction costs, extraordinary fees and expenses, and performance fees charged by NZ Funds and external underlying investment managers). The fees and expenses that make up the target base fee are: trustee fee; management fee; and other fees and expenses. Each of these is discussed in more detail on page 51. The fees and expenses making up the target base fee are accrued and are reflected in the daily unit price of each Portfolio. At least once a quarter, the target base fee is compared to the actual fees and expenses and any necessary adjustments are made. This ensures that as much as possible all investors bear their fair share of the fees and expenses making up the target base fee. As at the date of this Investment Statement, the target base fees for the Portfolios (expressed as a percentage of the gross asset value of the relevant Portfolio) range from 0.40% to 2.99% per annum. For more on the target base fee and the fees and expenses that make up the target base fee, see What are the charges? on page 50. nz funds performance fee The following Portfolios may be charged a performance fee by NZ Funds. The performance fee is equivalent to 10% of the returns of a Portfolio in a financial year that exceed the current performance target of 8%. Core Growth Portfolio; Global Multi-Asset Growth Portfolio; Global Equity Growth Portfolio; Dividend and Growth Portfolio; and Capital Opportunities Portfolio. For more on the NZ Funds performance fee, see What are the charges? on page 50. authorised financial adviser fees Your Authorised Financial Adviser may charge fees for financial advisory services or other services they provide. Details of these fees are required to be outlined in their disclosure statements. Any fees related to financial advisory services or other services should be agreed between you and your Authorised Financial Adviser before an investment is made. For more on Authorised Financial Adviser fees, see What are the charges? on page 50. 4

9 What are the key factors affecting returns? Some of the key factors that can affect returns include: Investment performance; Fees and expenses; Portfolio size; Allocation of your investment between the Portfolios; The timing of contributions and/or withdrawals made by you; and Tax. A key factor influencing the returns of a Portfolio is the performance of the investment markets and the performance of the underlying investment assets chosen which can be influenced by many factors, including economic, political and other international events such as acts of terrorism or natural disasters. Neither NZ Funds nor any external underlying investment manager can control or guarantee the performance of investment markets or the performance of the underlying investment assets chosen. For more on returns, see What returns will I get? on page 53. What are my risks? Some of the primary risks of investing in a Portfolio include: Not getting back some (or all) of your money; Not getting the returns you expected; Not being able to leave a Portfolio when you want to; and Experiencing periods where your investment is worth less than it had been previously. for what are the key information factors affecting risk? only Some of the key factors affecting the primary risks of investing a Portfolio include: Market risk; Illiquid securities; NZ Funds active investment management approach; Wide investment mandates; Certain investment instruments and techniques; Investment in certain asset classes and/or collective investment vehicles; Key personnel of NZ Funds; Exposure to involved parties; and Insolvency or winding up. The above factors may adversely affect a Portfolio. If the impact of these factors causes a negative effect on unit price, you could receive back less than the amount of your investment. There are also other factors that may affect the risk of investing in a Portfolio (including factors that are unknown at the date of this Investment Statement). You should be aware that there is no promise or guarantee made by any person as to the performance of the Portfolios. For more on risk and the factors affecting it, see What are my risks? on page 54. Where to learn more Further information on topics covered in this Investment Statement is available where the following icons appear: Further information is provided elsewhere in this Investment Statement and/or in the relevant Prospectus. Further information is provided on our website or is available by contacting NZ Funds. There is also a Glossary on page 62 which has definitions of terms used in this Investment Statement. nz funds managed portfolio service : : investment statement : : 27 november

10 About NZ Funds NZ Funds is a wealth management company founded in We are a New Zealand firm focused on managing New Zealanders investments. Our goal is to help you make better financial decisions. We work with New Zealanders accumulating wealth for retirement, and then help manage that wealth in retirement. We take an integrated approach to wealth management. We believe the most reliable way to achieve your wealth objectives is through the integration of advice and investment management, supported by independent client-focused for research, local information and international specialist investment managers, and proprietary wealth technology. only Our Authorised Financial Advisers and the Authorised Financial Advisers that we partner with are focused designing a financial strategy that meets your objectives and ensuring that you make good financial decisions along the way. We do not believe that they also have the time to pick shares, bonds or investment managers. Instead your Authorised Financial Adviser is focused on ensuring your financial strategy is well documented and regularly discussed. Our portfolio management team manages the Portfolios you invest in. As an independent wealth manager we are not distracted by the requirement to manage bank or insurance money, nor are we involved in raising money from the public through bond or share issues. In seeking to meet the objectives of the Portfolios, we employ the services of a range of international specialist investment managers. Our integrated wealth management approach is delivered using our independent research and proprietary technology. Over the last twenty years we have developed NZ Funds Wealth Technology to help you model and understand the merits of different financial decisions. We have also built a library of independent research with topics as diverse as how your emotional temperament may alter the probability of you achieving your financial objectives and what elements of retirement lifestyle commonly cause over (and under) spending. NZ Funds senior management are significant indirect shareholders of NZ Funds. This means that they are shareholders of the company that owns NZ Funds. Many of our senior management team have been with the firm for a decade or more and bring significant tenure and experience to their roles. 6

11 Directors Our Directors are responsible for ensuring that this offer complies with the legal requirements regulating collective investment vehicles. Along with the senior management they ensure the Portfolios are appropriately governed, managed and administered. richard james chairman and chief executive dip.bus (finance), authorised financial adviser Richard joined NZ Funds in 1993 and has worked in a number of areas within the NZ Funds business over that time. Richard became a director of NZ Funds in August 2006 and was appointed Chief Executive in Richard is not an independent director as he is an employee of NZ Funds and has an indirect ownership interest in NZ Funds as the beneficiary of a trust. michael lang director and chief investment officer ba (econ), llb (hons) for Michael joined NZ Funds information He left NZ Funds to work overseas 2003 and returned Michael only was appointed Chief Investment Officer in 2009 and became a director of NZ Funds January Michael is not an independent director as he is an employee of NZ Funds and has an indirect ownership interest in NZ Funds as the beneficiary of a trust. philip doak director and principal, chief operating officer bcom. (ag), dip. applied finance & investment, ffin, authorised financial adviser Philip joined NZ Funds in 2005 and is responsible for NZ Funds operational functions and capabilities. He became a director of NZ Funds in September Before joining NZ Funds, Philip spent 16 years with Westpac where he held executive and general management roles. Philip is not an independent director as he is an employee of NZ Funds and has an indirect ownership interest in NZ Funds through the IGHL Trust. glenn wright director and principal bcom., bsc., dip.bus. (mktg), authorised financial adviser Glenn joined NZ Funds in 1988 when it commenced business. He currently leads NZ Funds adviser business. He became a director of NZ Funds in September Glenn is not an independent director as he is an employee of NZ Funds and has an indirect ownership interest in NZ Funds through the IGHL Trust. gregory horton independent director llb (hons), bcom. Gregory was appointed a director in May Gregory is a partner and a director of Harmos Horton Lusk Limited, a law firm based in Auckland. He has practiced law both in New Zealand and overseas. NZ Funds Directors and their details are correct as at the date of this Investment Statement. The Directors and/or their details may change. You may contact NZ Funds on or info@nzfunds.co.nz to check NZ Funds current Directors and their details. For more on the team at NZ Funds, go to nz funds managed portfolio service : : investment statement : : 27 november

12 How we manage investments Investment Categories Each Portfolio in the Managed Portfolio Service is designed to meet the requirements of the relevant investment category. The broad objective of each investment category is as follows: Investment Category Objective Portfolios Cash To provide a source of capital, by primarily investing in incomeorientated assets using an active investment management approach. Core Cash Portfolio Income To provide exposure to income-orientated assets using an active investment management approach. Core Income Portfolio Global Income Portfolio Inflation To mitigate the impact of inflation on your investment over the Core Inflation Portfolio medium and/or long-term by investing in income-orientated Property Inflation Portfolio assets and growth-orientated assets using an active investment Equity Inflation Portfolio management approach. Core Growth Portfolio To grow your investment over the long-term by investing incomeorientated assets and growth-orientated assets using an active Global Equity Growth Portfolio Global Multi-Asset Growth Portfolio Growth investment management approach. Dividend and Growth Portfolio Capital Opportunities Portfolio The Portfolios are designed to be used in combination and not as stand-alone investments. It is generally intended that an investor will allocate their investment across all or a majority of the Portfolios within each investment category rather than investing in a single Portfolio or a single investment category. The Portfolios are designed to be used in conjunction with a financial planning process. We strongly encourage you to work with an Authorised Financial Adviser to develop a financial plan and a corresponding investment portfolio specific to your goals, investing time frame and attitude towards risk, and to regularly review your financial plan and investment portfolio with your Authorised Financial Adviser. Our active investment management approach We use an active investment management approach. Our active investment management approach seeks to maintain a balance between preserving your capital and growing your wealth in a manner that is consistent with each Portfolio s objective. In the investment management of the Portfolios, we may take a wide variety of actions. These actions may include, but are not limited to: altering the proportion invested in each security or asset class; altering the manner in which a Portfolio is exposed to each security or asset class; investing directly or indirectly; using derivatives and/or collective investment vehicles; applying hedging; taking short positions; or using leverage. An active investment management approach is subject to different risks (which may be considered higher risks) than a non-active investment management approach. As a result, our active investment management approach may cause the returns and capital stability of a Portfolio to significantly differ from the returns and capital stability of the underlying securities or asset classes utilised, and/or any benchmark index. The way in which our active investment management approach is implemented will change. This will result in the Portfolios being constructed with different combinations of assets, underlying investment managers and investment strategies. In order to allow these changes to occur, each Portfolio has a wide investment mandate. The Trust Deeds provide that the Portfolios may invest in a very wide range of assets. 8

13 NZ Funds has developed internal investment guidelines as part of its investment management process which assist in the oversight of each Portfolio. These guidelines are designed to ensure that each Portfolio invests in accordance with its investment objective and risk profile. Due to NZ Funds active investment management approach, the guidelines may be exceeded from time to time. Where this occurs, the Portfolio is either realigned to come within the guidelines, or the guidelines are changed to reflect a change in the implementation of NZ Funds active investment management of the Portfolio. It is therefore anticipated that the guidelines will change. You should be both aware of, and be comfortable with, NZ Funds active investment management approach before you invest in the Portfolios. If you do not feel comfortable you should not invest. For more on the Portfolios and NZ Funds investment management approach, see pages 12 to 46. For more on the internal investment guidelines, contact NZ Funds on or info@nzfunds.co.nz The investment managers we work with The Portfolios may invest directly, or indirectly via Wholesale Trusts. A Wholesale Trust is a wholesale fund managed by NZ Funds which holds investments. Those investments may include directly held securities and/or investments in funds managed by either NZ Funds or external underlying investment managers. As at the date of this Investment Statement, the Portfolios only invest in Wholesale Trusts (with the exception of Cash and cash equivalents and derivatives). The Portfolios may invest directly in other asset classes or assets without notice to investors. The investments in the Wholesale Trusts are managed by NZ Funds and a range of specialist investment managers selected by NZ Funds. We refer to these specialist investment managers as external underlying investment managers. Different external underlying investment managers are selected where NZ Funds considers their investment approach will help meet the objectives of the Portfolios. The external underlying investment managers are monitored and reviewed, and are expected to change over time as part of our active investment management approach. For more on the external underlying investment managers, see pages 14 to 46 and Our use of derivatives and leverage In addition to understanding how we manage investments and our use of external underlying investment managers, it is important that you know that each Portfolio has the ability to use derivatives and leverage (other than the Core Cash Portfolio which is permitted to use derivatives but not leverage). Both NZ Funds, and many of the external underlying investment managers we work with, use these investment instruments and techniques. derivatives NZ Funds active investment management approach makes use of derivatives (for example, futures, options, forwards and swaps). A derivative is a financial instrument, the value of which is derived from changes in the value of another asset (for example, a share market index or a commodity index, an interest rate, or an exchange rate). Some examples of how derivatives may be used in a Portfolio include: to hedge or seek to mitigate unwanted risks; to modify a Portfolio s exposure to an asset and/or asset class; and to gain exposure to an asset and/or asset class in order to seek to enhance returns. The use of derivatives may increase the volatility of a Portfolio, and may also significantly increase the risk and extent of any loss. leverage NZ Funds active investment management approach makes use of leverage. Leverage occurs where a Portfolio s economic exposure to assets is greater than the amount invested. Leverage occurs by borrowing to invest, or through the use of derivatives. The Portfolios may use leverage to seek to enhance returns and/or to seek to mitigate risk. Leverage can assist in mitigating risk where, for example, an investment is made in order to reduce the risk of potential adverse price movements in a security by taking an offsetting position in the same security or another security, the price of which is expected to move in the opposite direction. The use of leverage may increase the volatility of a Portfolio, and may also significantly increase the risk and extent of any loss. For more on the use of derivatives and leverage by the Portfolios, see pages 12 to 46. nz funds managed portfolio service : : investment statement : : 27 november

14 Time frame, volatility and risk Make sure you invest for an appropriate period of time, Each Portfolio has a recommended investment time frame. In general, the more volatile the investments in a Portfolio, the longer the time frame you should be invested. This is because over longer time frames you are more likely, but not certain, to achieve an outcome consistent with the objective of the Portfolio. NZ Funds endeavours to manage the Portfolios so that the time frame of each Portfolio is consistent with the Portfolio s objective. It is however important to understand that the actual time frame required for you to achieve the objective may be shorter or longer than the recommended investment time frame. There is also the potential that any or all of the objectives may not be achieved over any time frame. In addition, NZ Funds active investment management approach may have either a positive or negative impact on the achievement of the objective over the recommended investment time frame. understand your investment will be exposed to volatility... Volatility is the variation value of your investment either up down. Each Portfolio has volatility. Where volatility results in a decline in value, this does not necessarily mean you will experience a permanent loss of capital. A permanent loss of capital can occur if the unit price of a Portfolio you have invested in does not recover, or if you choose to withdraw your investment following a period of loss. When considering an investment it is important to understand that the volatility of a Portfolio is not constant. None of the Portfolios are immune from a sudden increase in volatility. Portfolios that have historically exhibited a low level of volatility may experience a sudden increase in volatility. In addition, NZ Funds active investment management approach may increase or decrease the volatility of the Portfolios. and be aware that you risk a permanent loss of your investment. All investments, including the Portfolios, are exposed to risk. Risk is the possibility of loss of some or all of your investment. A Portfolio that has a higher possibility of loss is defined as higher risk. Conversely, a Portfolio that has a lower possibility of loss is defined as lower risk. Just because a Portfolio is described as lower risk does not mean that, should a loss occur, the size of that loss will be lower compared to a Portfolio that is described as higher risk. A Portfolio with a high possibility of loss is defined as higher risk because losses can be expected more frequently compared to a Portfolio described as lower risk. In addition, NZ Funds active investment management approach may increase, rather than decrease, the potential for a permanent loss of your investment. You are encouraged to discuss your time frames and attitude to volatility and risk with your Authorised Financial Adviser before making an investment. It is important to bear in mind that your attitude toward risk is used to determine the proportion of your investment portfolio that is invested in higher risk Portfolios not the presence or absence of higher risk securities within each of the Portfolios. For more on the risks associated with investing in the Portfolios, see What are my risks? on page

15 The Portfolios overview 12 core cash portfolio 14 core income portfolio 17 global income portfolio 20 core inflation portfolio 23 property inflation portfolio 26 equity inflation portfolio 29 core growth portfolio 32 global multi-asset growth portfolio 35 global equity growth portfolio 38 dividend and growth portfolio 41 capital opportunities portfolio 44

16 Overview Investment Category Portfolio Objective Risk & volatility characteristics Cash Core Cash Portfolio To provide a source of capital by primarily investing in income-orientated assets using an active investment management approach Low Income Core Income Portfolio Global Income Portfolio To provide exposure to income-orientated assets using an active investment management approach Medium Core Inflation Portfolio To mitigate the impact of inflation on your investment over the medium and/ or long-term by investing in incomeorientated assets and growth-orientated assets using an active investment management approach Medium Inflation Property Inflation Portfolio to High Equity Inflation Portfolio Core Growth Portfolio Global Multi-Asset Growth Portfolio Growth Global Equity Growth Portfolio To grow your investment over the longterm by investing in income-orientated assets and growth-orientated assets using an active investment management approach High Dividend and Growth Portfolio Capital Opportunities Portfolio Very High 1 This is based on the anticipated investment approach for each Portfolio as at the date of this Investment Statement. The anticipated investment approach may change over time. The assets listed do not represent the only assets that a Portfolio invests in, or may invest in. Each Portfolio has a wide investment mandate which means the Portfolios can invest in a wide range of assets. For further information on the assets that a Portfolio can invest in, see pages 14 to The Core Cash Portfolio is permitted to use derivatives but not leverage. 12

17 What assets do we primarily anticipate investing in over the economic cycle? 1 Recommended investment time frame Anticipated use of derivatives & leverage Primarily Cash and cash equivalents 1 month + Low 2 Primarily New Zealand and International fixed interest Primarily International fixed interest 2 years + Medium Primarily a diversified range of inflation-sensitive assets Primarily Listed property and property and/or infrastructure 5 years + Medium for related equities and fixed information interest only Primarily inflation-sensitive equities and fixed interest Primarily International equities with opportunistic allocations to other assets Primarily Commodities with high allocations to other assets Primarily International equities 10 years + High Primarily Australasian equities Opportunistically from the full range of asset classes nz funds managed portfolio service : : investment statement : : 27 november

18 Core Cash Portfolio Objective The objective of the Portfolio is to provide a source of capital by primarily investing in income-orientated assets using an active investment management approach. Investment category Cash Risk and volatility The Portfolio is likely to exhibit low risk and volatility characteristics. Recommended investment 1 month + time frame The Portfolio may invest in securities in the following asset classes: Permitted Cash and cash equivalents International fixed interest investments New Zealand fixed interest Foreign currency Anticipated investment approach Over the course of an economic cycle, which may last between three and seven years (or longer), it is anticipated that the Portfolio would hold a significant exposure to Cash and cash equivalents (for example short-term money market securities issued by registered banks). From time to time the Portfolio may invest in New Zealand fixed interest (for example government bonds and/or short-term money market securities issued by corporations) and/or International fixed interest (for example government bonds and/or short-term money market securities issued by corporations). Redemption restriction The Portfolio has no redemption restrictions. 14

19 Core Cash Portfolio Additional important information While the Portfolio has a low risk profile, you should be aware of the following: NZ Funds uses an active investment management approach. This approach combined with the ability to invest widely, is a unique feature of NZ Funds investment approach. Active investment management may be considered higher risk than non-active investment management. The Portfolio can invest in permitted asset classes and securities in any proportion. This means that the Portfolio may hold concentrated positions and may not always be diversified. Holding concentrated positions can be a high risk investment technique. The Portfolio may invest in each asset class directly or indirectly through derivatives or collective investment vehicles. Derivatives, collective investment vehicles and short positions can be used to increase or decrease an allocation to an asset class, for hedging exposures or for seeking to enhance returns. It is anticipated that derivatives may be used for risk management purposes and to seek to enhance returns. The use of derivatives and short positions can be high risk investment techniques. For more on derivatives and NZ Funds investment management approach, see pages 8 and 9. Historic monthly investment returns The graph above shows the performance of the Portfolio (after fees and expenses but before PIE tax) over time. This may help illustrate the volatility of the Portfolio. Past performance is not indicative of future performance. Further, there is no promise or guarantee made by any person as to the performance of the Portfolio. nz funds managed portfolio service : : investment statement : : 27 november

20 Core Cash Portfolio Historic asset allocation January 2014 Cash and cash equivalents 100 % Total 100 % January 2015 Cash and cash equivalents 100 % Total 100 % October 2015 Cash and cash equivalents 56 % New Zealand fixed interest 44 % Total 100 % The graphs above show the Portfolio s asset allocation over time. The graphs may not show material differences in asset allocation. However, it is important to note that the Portfolio s asset allocation is expected to change in the future and that changes may be material. Historic underlying investment managers January 2014 January 2015 October 2015 NZ Funds 100 % NZ Funds 100 % NZ Funds 100 % Total 100 % Total 100 % Total 100 % The graphs above show the Portfolio s underlying investment managers over time. In addition to managing part of the Portfolio s assets, NZ Funds may select external underlying investment managers where we consider their investment approach will help meet the objective of the Portfolio. The external underlying investment managers used are expected to change over time as part of our active investment management approach. For more on the Portfolio, go to 16

21 Core Income Portfolio Objective The objective of the Portfolio is to provide exposure to income-orientated assets using an active investment management approach. Investment category Income Risk and volatility The Portfolio is likely to exhibit medium risk and volatility characteristics. Recommended for investment information 2 years + only time frame The Portfolio may invest in securities in the following asset classes: Permitted investments Cash and cash equivalents New Zealand fixed interest International fixed interest Foreign currency Alternative securities Anticipated investment approach Over the course of an economic cycle, which may last between three and seven years (or longer), it is anticipated that the Portfolio would hold a significant exposure to Cash and cash equivalents, and/or New Zealand fixed interest (for example government bonds and/ or corporate bonds) and/or International fixed interest (for example government bonds and/or corporate bonds and/or high yield debt securities). Redemption restriction The Portfolio has a 63-day notice period. nz funds managed portfolio service : : investment statement : : 27 november

22 Core Income Portfolio Additional important information While the Portfolio has a medium risk profile, you should be aware of the following: NZ Funds uses an active investment management approach. This approach, combined with the ability to invest widely, is a unique feature of NZ Funds investment approach. Active investment management may be considered higher risk than non-active investment management. The Portfolio can invest in permitted asset classes and securities in any proportion. This means that the Portfolio may hold concentrated positions and may not always be diversified. Holding concentrated positions can be a high risk investment technique. The Portfolio may invest in each asset class directly or indirectly through derivatives or collective investment vehicles. Derivatives, collective investment vehicles and short positions can be used to increase or decrease an allocation to an asset class, for hedging exposures or for seeking to enhance returns. It is anticipated that derivatives would be used for risk management purposes and to seek to enhance returns. The use of derivatives and short positions can be high risk investment techniques. The Portfolio may be leveraged. The maximum amount of leverage that may be used is up to two times the Portfolio s prevailing net asset value. The use of leverage may increase positive or negative returns. The use of leverage can be a high risk investment technique. For more on derivatives and leverage and NZ Funds investment management approach, see pages 8 and 9. Historic monthly investment returns The graph above shows the performance of the Portfolio (after fees and expenses but before PIE tax) over time. This may help illustrate the volatility of the Portfolio. Past performance is not indicative of future performance. Further, there is no promise or guarantee made by any person as to the performance of the Portfolio. 18

23 Core Income Portfolio Historic asset allocation January 2014 Cash and cash equivalents 25 % New Zealand fixed interest 36 % International fixed interest 37 % Foreign currency 3 % Total 101 % January 2015 Cash and cash equivalents 22 % New Zealand fixed interest 36 % International fixed interest 41 % Foreign currency 2 % Total 101 % October 2015 Cash and cash equivalents 13 % New Zealand fixed interest 33 % International fixed interest 54 % Foreign currency 1 % Total 101 % The graphs above show the Portfolio s asset allocation over time. They take into account the effect of leverage. As a result, the total allocation may be greater than 100%. The graphs may not show material differences in asset allocation. However, it is important to note that the Portfolio s asset allocation is expected to change in the future and that changes may be material. Historic underlying investment managers January 2014 NZ Funds 96 % Invesco 5 % Total 101 % January 2015 NZ Funds 101 % Total 101 % October 2015 NZ Funds 101 % Total 101 % The graphs above show the Portfolio s underlying investment managers over time. In addition to managing part of the Portfolio s assets, NZ Funds may select external underlying investment managers where we consider their investment approach will help meet the objective of the Portfolio. The external underlying investment managers used are expected to change over time as part of our active investment management approach. For more on the Portfolio, go to nz funds managed portfolio service : : investment statement : : 27 november

24 Global Income Portfolio Objective The objective of the Portfolio is to provide exposure to income-orientated assets using an active investment management approach. Investment category Income Risk and volatility The Portfolio is likely to exhibit medium risk and volatility characteristics. Recommended investment 2 years + time frame The Portfolio may invest in securities in the following asset classes: Permitted investments Cash and cash equivalents New Zealand fixed interest International fixed interest Foreign currency Alternative securities Anticipated investment approach Over the course of an economic cycle, which may last between three and seven years (or longer), it is anticipated that the Portfolio would hold a significant exposure to Cash and cash equivalents, and/or New Zealand fixed interest (for example government bonds and/ or corporate bonds) and/or International fixed interest (for example government bonds and/or corporate bonds and/or high yield debt securities). Redemption restriction The Portfolio has a 63-day notice period. 20

25 Global Income Portfolio Additional important information While the Portfolio has a medium risk profile, you should be aware of the following: NZ Funds uses an active investment management approach. This approach, combined with the ability to invest widely, is a unique feature of NZ Funds investment approach. Active investment management may be considered higher risk than non-active investment management. The Portfolio can invest in permitted asset classes and securities in any proportion. This means that the Portfolio may hold concentrated positions and may not always be diversified. Holding concentrated positions can be a high risk investment technique. The Portfolio may invest in each asset class directly or indirectly through derivatives or collective investment vehicles. Derivatives, collective investment vehicles and short positions can be used to increase or decrease an allocation to an asset class, for hedging exposures or for seeking to enhance returns. It is anticipated that derivatives would be used for risk management purposes and to seek to enhance returns. The use of derivatives and short positions can be high risk investment techniques. The Portfolio may be leveraged. The maximum amount of leverage that may be used is up to two times the Portfolio s prevailing net asset value. The use of leverage may increase positive or negative returns. The use of leverage can be a high risk investment technique. For more on derivatives and leverage and NZ Funds investment management approach, see pages 8 and 9. Historic monthly investment returns The graph above shows the performance of the Portfolio (after fees and expenses but before PIE tax) over time. This may help illustrate the volatility of the Portfolio. Past performance is not indicative of future performance. Further, there is no promise or guarantee made by any person as to the performance of the Portfolio. nz funds managed portfolio service : : investment statement : : 27 november

26 Global Income Portfolio Historic asset allocation January 2014 Cash and cash equivalents 31 % New Zealand fixed interest 36 % International fixed interest 33 % Foreign currency 10 % Total 110 % January 2015 Cash and cash equivalents 51 % New Zealand fixed interest 4 % International fixed interest 36 % Foreign currency 1 % Alternative Securities 8 % Total 100 % October 2015 Cash and cash equivalents 1 % New Zealand fixed interest 7 % International fixed interest 86 % Foreign currency 1 % Alternative Securities 9 % Total 104 % The graphs above show the Portfolio s asset allocation over time. They take into account the effect of leverage. As a result, the total allocation may be greater than 100%. The graphs may not show material differences in asset allocation. However, it is important to note that the Portfolio s asset allocation is expected to change in the future and that changes may be material. Historic underlying investment managers January 2014 NZ Funds 77 % BlackRock Advisors 6 % Franklin Templeton Investments 8 % Nordea/Doubleline 8 % PIMCO 11 % Total 110 % January 2015 NZ Funds 61 % BlackRock Advisors 6 % Civic Capital Advisors 4 % Harness Investment 4 % Nordea/Doubleline 11 % Wellington Management 14 % Total 100 % October 2015 NZ Funds 35 % BlackRock Advisors 5 % Doubleline 9 % Harness Investment 9 % Semper Capital Management 9 % Wellington Management 37 % Total 104 % The graphs above show the Portfolio s underlying investment managers over time. In addition to managing part of the Portfolio s assets, NZ Funds may select external underlying investment managers where we consider their investment approach will help meet the objective of the Portfolio. The external underlying investment managers used are expected to change over time as part of our active investment management approach. For more on the Portfolio, go to 22

27 Core Inflation Portfolio Objective The objective of the Portfolio is to mitigate the impact of inflation on your investment over the medium and/or long-term by investing in income-orientated assets and growthorientated assets using an active investment management approach. Investment category Inflation Risk and volatility The Portfolio is likely to exhibit medium to high risk and volatility characteristics. Recommended investment 5 years + time frame The Portfolio may invest in securities in the following asset classes: Permitted investments Cash and cash equivalents New Zealand fixed interest International fixed interest Australasian equities International equities Listed property Foreign currency Commodities Alternative securities Over the course of an economic cycle, which may last between three and seven years (or longer), it is anticipated that the Portfolio would hold a diversified range of assets. Anticipated investment approach Income-orientated assets are expected to include Cash and cash equivalents, and/ or New Zealand fixed interest (for example inflation-linked bonds and/or corporate bonds) and/or International fixed interest (for example corporate bonds and/or high yield debt securities). Growth-orientated assets are expected to include Australasian equities and/or International equities and/or Commodities. Redemption restriction The Portfolio has a 63-day notice period. nz funds managed portfolio service : : investment statement : : 27 november

28 Core Inflation Portfolio Additional important information While the Portfolio has a medium to high risk profile, you should be aware of the following: NZ Funds uses an active investment management approach. This approach, combined with the ability to invest widely, is a unique feature of NZ Funds investment approach. Active investment management may be considered higher risk than non-active investment management. The Portfolio can invest in permitted asset classes and securities in any proportion. This means that the Portfolio may hold concentrated positions and may not always be diversified. Holding concentrated positions can be a high risk investment technique. The Portfolio may invest in each asset class directly or indirectly through derivatives or collective investment vehicles. Derivatives, collective investment vehicles and short positions can be used to increase or decrease an allocation to an asset class, for hedging exposures or for seeking to enhance returns. It is anticipated that derivatives would be used for risk management purposes and to seek to enhance returns. The use of derivatives and short positions can be high risk investment techniques. The Portfolio may be leveraged. The maximum amount of leverage that may be used is up to two times the Portfolio s prevailing net asset value. The use of leverage may increase positive or negative returns. The use of leverage can be a high risk investment technique. For more on derivatives and leverage and NZ Funds investment management approach, see pages 8 and 9. Historic monthly investment returns The graph above shows the performance of the Portfolio (after fees and expenses but before PIE tax) over time. This may help illustrate the volatility of the Portfolio. Past performance is not indicative of future performance. Further, there is no promise or guarantee made by any person as to the performance of the Portfolio. 24