Pathfinder Asset Management Limited Pathfinder World Equity Fund. Investment Statement 17 December 2013

Transcription

1 Pathfinder Asset Management Limited Pathfinder World Equity Fund Investment Statement 17 December 2013

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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: Section Page What sort of investment is this? 5 Who is involved in providing it for me? 6 How much do I pay? 9 What are the charges? 10 What returns will I get? 12 What are my risks? 13 Can the investment be altered? 15 How do I cash in my investment? 16 Who do I contact with enquiries about my investment? Is there anyone to whom I can complain if I have problems with the investment? What other information can I obtain about this investment? 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. When seeking or receiving financial advice, you should check n the type of adviser you are dealing with; n the services the adviser can provide you with; n the products the adviser can advise you on. A financial adviser who provides you with personalised financial adviser services may be required to give you a disclosure statement covering these and other matters. You should ask your adviser about how he or she is paid and any conflicts of interest he or she may have. 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. This Investment Statement is dated 17 December 2013 and was prepared for the purposes of the Securities Act

4 Overview Part 1: Key Information Section An Investment Statement describes an investment opportunity. This is an Investment Statement for the Pathfinder World Equity Fund. The manager World Equity Fund Returns Risk factors Liquidity (buying and selling your units) Reporting (information available to you) Management fees and other costs (what we charge) Making an Application We (Pathfinder Asset Management Limited) are the manager of the Fund. We have been an investment manager since May The Fund aims to provide cost efficient and diversified access to global equities (across both developed and emerging markets) with flexible currency hedging. The Fund is a New Zealand registered unit trust with PIE status (for an explanation of the term PIE please see page 3). Returns from an investment in the Fund will be determined by many factors. These will include the performance of global share prices (which may go down as well as up). We do not expect the Fund to make any distributions. Any returns on Fund investments will be reinvested. An investment in the Fund will expose investors to general economic risks as well as specific risks related to the Fund and its investments. Key risks include: n operational risks and the loss of key personnel by the manager n risks relating to investing in equities n potential volatility and losses from movements in the New Zealand dollar You may subscribe for (buy) or redeem (sell) units on the last business day of any month (subject to certain restrictions). We may in future choose to issue or redeem units more frequently. The unit price on buying or selling is based on the net assets of the Fund. The net asset value of each Fund unit and our monthly report are published on our website at Annual reports will be sent to investors. We receive a base management fee but do not charge any performance fees. An investment in the Fund also incurs certain other costs such as fees for the trustee (Public Trust) and administration manager (MMC Limited). Applications for units will only be accepted on the application form included with this Investment Statement. Instructions on how to make an application are set out in the section entitled How to Invest. Page 6 Page 4 Pages 12, 14 Pages 13, 14 Pages 9, 16 Page 20 Pages 10, 11 Pages 23, 24 Minimum Investment No Guarantee (there is no guaranteed return) The minimum initial investment in the Fund is $10,000. Any subsequent investment by you must be for at least $1,000 and you must maintain a minimum investment balance of $10,000. We may vary any of these minimum amounts at any time. None of Pathfinder (as manager), Public Trust (as trustee) or any other person guarantees the performance of the Fund or any return from an investment in the Fund. Page 9 Page 13 This Key Information Section provides a general overview of the Fund. Before making a decision to invest you should: n read all sections of this Investment Statement thoroughly, and n consult your financial adviser. Any investment you may make in the Fund should be part of an overall diversified investment program. 2

5 Overview Part 2: Key Definitions Here are some key terms used in this Investment Statement: n Where the words us, we, our, Pathfinder or the manager are used they refer to Pathfinder Asset Management Limited. n Where the words you, your, investor or unitholder are used they refer to you as an investor in the Fund. Please familiarise yourself with this short glossary of defined terms. These terms are used throughout this Investment Statement: Term Meaning Key pages with more information Fund PIE PIE tax PIR or Prescribed Investor Rate The Pathfinder World Equity Fund (formerly known as the Pathfinder World Equity (Unhedged) Fund). The Fund is a unit trust investment vehicle that has a special designation for tax purposes called a portfolio investment entity (or PIE ). This term is defined in the Income Tax Act PIE tax is tax on income allocated to you as an investor in a PIE fund. This will be determined by reference to the PIR you nominate and is generally paid by the fund (and not by you). This is the tax rate an investor may elect under the Income Tax Act 2007 to calculate their tax obligations on income allocated to them by a PIE. Fund description: 4 Risks: 13, 14 Tax section: 21 Tax risks: 14 Tax section: 21, 22 Tax risks: 14 Tax section: 21, 22 Tax risks: 14 Investment through a custodial service This Investment Statement is prepared for investors who invest directly in units in the Fund. It is also possible to invest indirectly in the Fund through a custodial service. You may be directed to do this by your financial adviser. A custodial service (also known as a wrap platform ) aggregates holdings of units for investors. If you invest through a custodial service then it is the custodial service (and not you) that we recognise as the unitholder. The custodial service may specify a minimum investment amount that you must hold. 3

6 Overview Part 3: The World Equity Fund Objective: The Fund aims to provide investors with cost efficient and diversified access to global equities (across both developed and emerging markets) with flexible currency hedging. Global equities: The Fund invests in global equities by holding a range of exchange traded funds (known as ETFs ). It will only invest in ETFs that hold shares and not ETFs that obtain exposure to shares via derivative transactions. Tactical tilts : We adopt tactical tilts meaning that from time to time we adjust weightings to particular equities based on (a) their geographic region (for instance the United States, Europe, Asia or emerging markets), (b) their size (known as small, mid and large capitalisation companies), (c) their sector (such as infrastructure, technology or healthcare) or (d) some other grouping (such as high dividend yielding stocks). Equity hedging: We may use certain strategies to mitigate (or hedge ) the risk of loss from investing in international shares. These strategies include holding cash or using futures and/or options to reduce exposure to equity markets. Currency hedging: Exchange traded funds held by the Fund are likely to be denominated in a currency other than New Zealand dollars. As manager, we implement a currency hedging program intending to reduce volatility and losses due to movements in the New Zealand dollar. We cannot, however, eliminate the risk of currency volatility or losses and cannot predict the extent to which these may affect your returns. The Fund will adopt a currency hedge target set by us between 0% and 100%. We will vary the target from time to time depending on our NZ dollar currency view. Currency hedging is introduced by a change to the Fund s investment policy effective from 31 December Borrowing restrictions: The Fund may borrow money but only in very limited circumstances. These are to buy investments (but only where the Fund also has cash equivalent assets at least equal to the amount being borrowed) and to pay fund expenses. There are also restrictions on the amount that may be borrowed. 4

7 What sort of investment is this? This Investment Statement relates to the offer of units in the Pathfinder World Equity Fund. The Fund was established under the Unit Trusts Act 1960 and under a master trust deed dated 1 April 2009 and an establishment deed 7 October 2011 (as amended by a Deed of Amendment dated 16 December 2013). Each of these documents was entered into by us (as manager) and Public Trust (as trustee). Amounts held on trust Subscription money held on trust: Your subscription amount will be held on trust for you until your units are allotted. Any interest earned on moneys in the bank account, less bank fees and charges, will be credited to the Fund. Investment money held on trust: Your money is held on trust and pooled together with money from other investors in the Fund. It is invested in assets that are held in the name of the trustee (Public Trust) or its nominee. These assets are managed by us within the Fund s investment policy which is described below. Important information on units Issue dates for units: Units are issued once a month on the last business day of the month. We may in future choose to issue units more frequently. We have an absolute discretion whether or not to accept an application without giving any reason. Applications must be received prior to 2:00 pm on the 3rd business day before the issue date. We may vary this cut-off date. PIE tax: Unit prices are calculated gross of PIE tax. For general information about tax please refer to the section General Taxation Information on page 21. Distributions: We do not expect the Fund to make any distributions. Any returns on Fund investments will be reinvested. Change of Fund name: The Fund changed its name from the Pathfinder World Equity (Unhedged) Fund to the Pathfinder World Equity Fund on 16 December Investment by the Fund Investment policy: The Fund aims to provide investors with cost efficient and diversified access to global equities (across both developed and emerging markets) with flexible currency hedging. Changes to investment policy: We must manage the Fund in accordance with the investment policy and guidelines. These may change please refer to the heading Changes to the investment policy in the section Can the investment be altered? on page 15. Description of authorised investments: The Fund may only be invested in authorised investments which are described in the establishment deed for the Fund. While authorised investments are widely defined, we confirm that for the life of this Investment Statement the authorised investments of the Fund will be limited to: n exchange traded funds (known as ETFs ) n currency exchange and hedging contracts (including currency swaps and forwards) n protection strategies such as equity futures and options n cash holdings and investments 5

8 Who is involved in providing it for me? The Pathfinder World Equity Fund was established on 7 October 2011 to provide investors with cost efficient and diversified access to global equities. The following people are involved in the Fund and their details are set out in this section: n the manager (Pathfinder Asset Management Limited) and its directors n the trustee (Public Trust) n the auditor (PricewaterhouseCoopers) and n the administration manager (MMC Limited) Please note that Public Trust, PricewaterhouseCoopers and MMC Limited are all independent and are not related to us (Pathfinder). For example they do not have the same shareholders or directors as us. Manager: We (Pathfinder Asset Management Limited) are the manager of the Fund. We have been granted powers of investment, administration and management under the trust deed and establishment deed. This includes the power to invest the assets in accordance with the investment policy for the Fund. We are based in Auckland and our address is 17 Lake View Road, Takapuna, Auckland Our principal business is to manage PIE unit trusts in New Zealand which we have done since May Our directors are: n Samford (Sandy) Maier of Auckland n Catherine Savage of Wellington n John Berry of Auckland n Paul Brownsey of Auckland Biographies of our four directors are set out below. Samford (Sandy) Maier Independent Director and Chairman Member of the Audit Risk and Compliance Committee Sandy worked in international commercial and investment banking with Citicorp/Citibank from 1975 to 1990, including as the New Zealand CEO. He came to NZ in 1986 and has worked with companies ranging from high growth start-ups to problem situations and turnarounds. For the past 18 years Sandy has headed his own international management consulting firm specialising in strategic financial and human resource matters and corporate governance. He has also served as chief executive and/or board member of a number of public and private companies. Current appointments: Sandy is a professional director. Other than Pathfinder, he is on boards of 9 New Zealand corporate groups. Within some of these groups he is a director of more than one company. He also has separate directorships relating to his family companies. His current appointments include acting as an independent director of Taranaki Investment Management Limited (investment advisory services), Ngai Tahu Holdings Corporation Limited (iwi), Lumley General Insurance (NZ) Limited (insurance) and McConnell Limited (construction). He is also Chairman of Perpetual Capital Management Limited (investment advisory services) and Radius Properties Limited (rest homes). Past appointments: In the past Sandy has served on the boards of the Bank of New Zealand (1991 to 1992), Mighty River Power (2002 to 2012) and Oyster Bay Marlborough Limited (2008 to 2011). He was also the statutory manager of DFC New Zealand Limited (1990 to 1992) and Chief Executive Officer of South Canterbury Finance (December 2010 to October 2011). Sandy has worked with (or held directorships at) other troubled companies and groups which have subsequently undergone some form of restructuring or insolvency (including GEON, 3Media and the Equitable Group). Sandy has a B.A. from Yale University and a J.D. from Harvard Law School. He is a dual citizen of New Zealand and the United States. Sandy has a 2% shareholding in Pathfinder. 6

9 Catherine Savage Independent Director Chair of the Audit Risk and Compliance Committee Catherine has been involved in New Zealand funds management and private equity for over 20 years. Catherine was Managing Director of AMP Capital Investors from 2000 to 2007, and was responsible for over $11 billion under management. Catherine oversaw all activities in New Zealand, including risk management, strategic development and a diverse range of funds (such as equities, fixed interest, property, infrastructure and private equity). In 2007 Catherine left AMP to pursue a range of private equity interests both in New Zealand and offshore. She is a director of CMS Capital Limited, Savage Group Limited and The Griffin Savage COY Limited as well as a number of related companies. Catherine remains active in New Zealand funds management, finance and investment. She is on the Board of the Guardians of the New Zealand Superannuation Fund, Kiwibank Limited, the Todd Family Office Limited and the New Zealand Institute of Chartered Accountants. She is also chair of the National Provident Fund. Catherine is a qualified accountant and is a member of the New Zealand Institute of Chartered Accountants and the Institute of Finance Professionals New Zealand Inc (INFINZ). Catherine has a BCA from Victoria University. John Berry Executive Director Head of Operations John has 19 years involvement with investment and finance products. He initially trained as a lawyer and worked in banking and capital markets in both Auckland and London. In 2000 he was made Head of European Execution for the Structured Capital Markets group at Deutsche Bank. In that role he oversaw the design, execution and management of a range of financial products, and was also responsible for legal, compliance and governance risks. John was a director of a number of companies in the Deutsche Bank group. After leaving London in 2004 John was a consultant to the London, Sydney and Auckland offices of Deutsche Bank until This involved work on a range of fund and index based products. During this time he was also a director of Winchester Group Limited (an industrial property investor). John has a BCom/LLB(Hons) from Auckland University. He is currently on the Board of the Men s Health Trust New Zealand and is a member of both the Institute of Finance Professionals New Zealand Inc (INFINZ) and the Responsible Investment Association Australasia. John is a shareholder in Pathfinder Asset Management Limited which he co-founded in John invests in all of Pathfinder s funds. 7

10 Paul Brownsey Executive Director Head of Investments Paul has 23 years experience in financial markets with extensive structuring, financial modelling and product expertise. Prior to Pathfinder he worked for the Reserve Bank of New Zealand, Salomon Brothers/Citibank (in Singapore, London and Sydney) and with Deutsche Bank (in Auckland). His experience includes trading, selling and structuring various instruments including Government Bonds, Futures, Corporate Securities, Index Swaps, Asset Backed Securities and Structured Products. Paul has a B.Sc from Canterbury University majoring in Operations Research. He was a member of the Deutsche Bank New Zealand Management Committee from 2003 to 2008 and is a member of the Investment Committee for Arthritis New Zealand. Paul is a shareholder in Pathfinder Asset Management Limited which he co-founded in Paul invests in all of Pathfinder s funds. Trustee: Public Trust is the trustee of the Fund. It is appointed under the trust deed and establishment deed. The address of the trustee is Level 10, 141 Willis Street, Wellington. Public Trust is licensed under the Securities Trustees and Statutory Supervisors Act 2011 to act as a unit trust trustee. Auditor: PricewaterhouseCoopers is the auditor of the Fund. The address of the auditor is PricewaterhouseCoopers Tower, 188 Quay Street, Auckland. Administration Manager: We (as manager) have delegated certain administrative functions for the Fund to an administration manager (MMC Limited). These functions include fund accounting and registry services. The address of MMC Limited is Level 13, 23 Customs Street, PO Box , Auckland No guarantee: None of Pathfinder (as manager), Public Trust (as trustee) or any other person guarantees the performance of the Fund or any return from an investment in the Fund. Details may change: The addresses stated above for Pathfinder (manager), MMC Limited (administration manager) and Public Trust (trustee) may change after the date of this Investment Statement. Our directors may also change. Obtaining current details: For our current address and list of directors visit For the current addresses of MMC Limited (administration manager) and Public Trust (trustee) us at info@pfam.co.nz. 8

11 How much do I pay? Application form: You will need to complete the application form attached to this Investment Statement in order to initially invest in the Fund. When you invest you are applying for (buying) units in the Fund. Minimum investment amounts: The minimum initial investment for the Fund is $10,000. Any subsequent investment by you must be for at least $1,000 and you must maintain a minimum investment balance of $10,000. We may vary any of these minimum amounts at any time (this is at our discretion and we are not required to give prior notice). The issue price: The amount you pay for each unit is called the issue price. This reflects the net asset value of each unit which is the Fund assets minus the Fund liabilities for each unit on issue. The issue price will also take account of transaction costs for issuing your units (which are explained under the heading What are the charges? on page 10). The issue price will fluctuate based on the changing values of the investments held by the Fund. Issue dates for units: Units are issued once a month on the last business day of the month. We may in future choose to issue units more frequently. We have an absolute discretion whether or not to accept an application without giving any reason. Applications must be received prior to 2:00 pm on the 3rd business day before the issue date. We may vary this cut-off date. Obligation to pay further amounts: In relation to units in the Fund you must pay the issue price and any money required to be paid in relation to your personal tax obligations (for more information on tax obligations, please refer to the section General Taxation Information on page 21). There are no circumstances in which you will be liable as a unitholder to pay any further money to the Fund. Payment of application amount: Your total issue price (also known as the application amount) will equal the issue price for each unit multiplied by the number of units you subscribe for. Your application amount must be paid either: n by direct credit to Pathfinder Nominees Limited at ANZ Bank, 1 Victoria Street, Wellington, account number , or n by cheque made payable to Pathfinder Nominees Limited and sent to MMC Limited at Level 13, 23 Customs Street, PO Box , Auckland Please mark cheques as not transferable. 9

12 What are the charges? Services provided: The following are entitled to claim fees from the Commodity Fund: Person Capacity Nature of services Pathfinder Manager Manager of the Fund and its investments. Public Trust MMC Limited Trustee Administration manager Trustee supervision and monitoring as set out in trust documents and as required by law. Also acts as custodian. Fund accounting and registry. GST: The fees, charges and expenses referred to below are all exclusive of GST (unless stated otherwise). The current GST rate is 15% which may change after the date of this Investment Statement. Fees charged: We charge a base management fee which we regard as having two parts: n firstly a portion representing a fee for our management services, and n secondly a portion that we believe fairly reflects other expenses incurred by us over time in connection with the Fund. Note that other expenses do not include trustee fees (Public Trust) or administration manager fees (MMC Limited). These fees are calculated based on the size of the Fund and are set out in the table below: Fee type Pathfinder base fee portion for management services and other expenses Trustee and custody fee (Public Trust) Administration manager fee (MMC Limited) Fund fee (% p.a. of fund size 1 ) 0.89% 0.08% 0.13% TOTAL FUND FEES (EXCL GST) 1.10% 1 Note: Fund size is the aggregate value of all of the Fund s assets. Minimum and maximum base management fee: The base management fee reflects a portion for management services and a portion for other expenses. We are entitled to increase our base management fee to up to 2.50% p.a. (plus GST) of the Fund value. During the life of this Investment Statement we will not increase the base management fee for the Fund above 0.89% p.a. plus GST. The Fund does not have a minimum base management fee. Minimum and maximum trustee and administration manager fees: The trustee and custody fee (Public Trust) has a minimum of $15,000 p.a. in aggregate across all of Pathfinder s funds. There is no maximum. The administration manager (MMC Limited) does not currently charge a minimum or maximum fee to the Fund. Trustee s other charges: The trustee (Public Trust) is entitled to be reimbursed from the Fund for all costs and expenses incurred by it acting as trustee. This could include costs of legal or other professional advisers. In addition it is entitled to charge special fees for services of an unusual or onerous nature outside its regular services. This could include costs of holding unitholder meetings. There is no limit to the amount of expenses and special fees that may be charged. It may, in its discretion, choose to recover these amounts from the Fund over a period of time. Performance fees: We do not charge performance fees for the Fund. Fee cap: We set a cap (or maximum) for the management and administration fees charged to the Fund during any 12 month period. This fee cap includes all usual fees and charges of Public Trust (as trustee), MMC Limited (as administration manager) and Pathfinder (as manager). The cap does not apply to special fees of Public Trust (as referred to above) or to external costs (as referred to below). The current fee cap is 1.10% excluding GST. Changes to fee cap: We may change the fee cap for the Fund but do not expect to do so during the life of this Investment Statement. 10

13 External costs: These are third party charges incurred in connection with an investment made by the Fund. These are not included in the Fund fee cap. External costs will include brokerage fees, bid/offer spreads and underlying security costs such as management fees in the exchange traded funds (ETFs). We estimate these amount to around 0.20% per annum for the Fund. Price of Units: The amount you pay for each unit is called the issue price. The amount you receive when you redeem a unit is called the redemption price. These prices will change and at the date of this Investment Statement are calculated as follows: Issue price: Net Asset Value plus 0.05% Redemption price: Net Asset Value minus 0.05% The Net Asset Value is the Fund assets minus the Fund liabilities for each unit on issue. You will see from the table above that: n issue price: an additional amount is paid by you above Net Asset Value when units are issued to you; and n redemption price: a lower amount than Net Asset Value is received by you when you redeem your units. This is called the spread and is applied to cover the Fund s transaction costs for issuing or redeeming your units. We may change the spread amounts from time to time. The Net Asset Value will fluctuate based on the changing values of the investments held by the Fund. Transfer fee: The registrar (MMC Limited) may charge a fee to process transfers (at the date of this Investment Statement no fee is charged). 11

14 What returns will I get? Returns - overview Understanding returns: Returns from an investment in the Fund may be positive or negative. Returns will be derived from the increase (or decrease) in the value of Fund units, which will reflect changes in the value of the underlying Fund investments. It is important to be aware that past returns are not a reliable indicator of future results. Distributions: We do not expect the Fund to make any distributions and we expect returns on Fund investments will be reinvested. However, if distributions are made a statement setting out the distributions paid will be sent to you within three months of the relevant financial year end. Realising your return: You will realise the gain or loss when you redeem your units. You may redeem units on the last business day of any month after having given the required notice (see the section How do I cash in my Investment? on page 16 for further details). We may in future choose to issue units more frequently. Under the terms of the trust deed and establishment deed, Public Trust (as trustee) is legally liable to pay returns to you to the extent of the available assets in the Fund. Key factors that determine returns Returns on units in the Fund will be determined by many factors. Some of these can have a significant impact on returns. Below we set out what we see as key factors that determine returns and where you can find out more information on each: Factor Pages with more information Performance of global share prices 4, 13 Movements in the NZ dollar against other currencies and currency hedging implemented for the Fund The use of protection strategies ( hedging ) by us such as equity futures and options 4, 13 Fees charged to the Fund 10 The impact of PIE tax on Fund returns 4 14, 21 12

15 What are my risks? Understand the risks of investing: Before making a decision to apply for units, you should consult your financial adviser. You should only invest in the Fund if you are willing to undertake the risks involved. You should carefully consider each of the key risks set out below and should also be aware that there will be other risks that are not detailed here. Investments can go up and down: The value of an investment in the Fund will fluctuate and will go down as well as up. Returns will vary from year to year. It is possible you may not recover your initial investment in full. No performance guarantees: None of Pathfinder (as manager), Public Trust (as trustee) or any other person guarantees the performance of the Fund or any return from an investment in the Fund. Your payment obligations: You must pay (a) the issue price for units in the Fund and (b) any money required to be paid in relation to your personal tax obligations. There are no circumstances in which you will be liable as a unitholder to pay any further money to the Fund. Risks associated with the Manager n Loss of key personnel: Pathfinder is a boutique fund manager. There is a risk that the loss of key Pathfinder personnel could adversely affect its performance (and therefore the Fund s performance). n Operating risk: There is a risk of technological or other failure impacting on the Fund. This could include performance failure by a third party that Pathfinder has engaged to provide services. Risks relating to the Fund n Equities as an investment: Returns from equities are generally more volatile (fluctuate more) than fixed income assets. Shares can go down in value as well as up. n Investment tilts : We adjust Fund weightings for equity exposures to particular geographic regions, company sizes, industry sectors or other groupings (we call this process tactical tilts ). There is no guarantee that the returns generated by our tactical tilts will be higher than market returns (in fact they could be lower). n Exchange rate risks: Exchange traded funds ( ETFs ) held by the Fund are likely to be denominated in a currency other than New Zealand dollars. We will implement a currency hedging program intended to reduce volatility and losses due to movements in the New Zealand dollar. We cannot, however, eliminate the risk of currency volatility or losses and cannot predict the extent to which these may affect your returns. n Suspension or deferral of redemptions: There are some circumstances in which we may defer or suspend Fund redemptions. This means you may not be able to redeem your units when you want to. We do not believe that this is a significant risk for investors provided the Fund has liquid assets that can be readily sold or traded. However you should refer to the section How do I cash in my investment? on page 16 which outlines when suspension or deferral of redemptions could occur. n Credit risk: This is the risk that the financial strength of a party to a contract with the Fund worsens. If such a party becomes insolvent or is unable to meet its obligations to the Fund then the value of your investment will be adversely affected. n General market risks: Global markets can be severely impacted by events such as recession, political instability, economic uncertainty, financial market disruption or instability within particular industries. Any of these could cause losses for the Fund. 13

16 Taxation risks for investors (As well as these tax risks please read the section General Taxation Information on pages 21 and 22.) n Cancellation of units: If you are a tax-paying investor and the value of your units is not likely to be sufficient to fund the PIE tax liability on income allocated to you, the units will be redeemed to fund that liability. n PIE restrictions: PIEs have restrictions on the percentage of units any one investor and associated parties (each holding interests of 5% or more) can hold. Generally no investor, together with such associates can hold more than 20% of a PIE fund. The exceptions to this are very limited. We may redeem or cancel units where the 20% threshold is exceeded to ensure PIE status can be maintained. If your units are cancelled, you could receive back less than your subscription monies. n Incorrect PIR: If you advise a PIR lower than that applicable (or do not advise a change to a higher rate) you are obliged to pay the tax shortfall plus any interest and penalties. You may also be required to file a tax return. If you advise a PIR higher than that applicable, the excess tax paid cannot be claimed back since PIE tax is a final tax. Zero-rated investors may however obtain a credit for any PIE tax paid on income allocated to them. Additional risks Further risks outlined in the Prospectus: Please refer to the Fund Prospectus for a description of additional risks. Separation of Fund assets: Money invested in the Fund is held by the trustee (Public Trust) separately from assets of both the manager (Pathfinder) and the trustee. Such money invested would not be affected by the insolvency of the manager or the trustee. Appointment of new manager: If the manager (Pathfinder) becomes insolvent, is put into liquidation or has a receiver appointed, the trustee is able to remove the manager and appoint another manager. Insolvency of the Fund: As a unitholder you will not be liable to pay money to any person as a result of the insolvency of the Fund. In the event of the Fund being wound up or put into liquidation, its creditors (including the manager, trustee and custodian) will rank ahead of your claim as a unitholder. Claims by you and other unitholders will rank equally. n Future changes: Any future change in taxation legislation could impact on the Fund s returns. This could include changes to PIE tax rates, the GST rate or the interpretation of tax legislation. 14

17 Can the investment be altered? Changes to the investment policy Changes to investment policy: We may change the investment policy for the Fund after consultation with the trustee (Public Trust). We may also change the Fund s investment policy if the change has been approved by a 75% majority of unitholders (known as an extraordinary resolution ). Such a change is not currently forseen by us. Notice of proposed change: Details of any material change to the investment policy must generally be given to all unitholders at least one month before the change is to be effective. Any such change will then only be effective after all requests to redeem units received in the one month period have been actioned. Permitted adjustments: We may make certain adjustments to the investment policy without notifying unitholders. These include adjustments that are of a minor nature or are required because of a change in law. Compulsory redemption of units PIE tax: We may (on dates we determine) redeem units or make deductions from redemption proceeds or distributions to fund PIE tax on income allocated to you as a unitholder. PIE status: We may also redeem or void your units if the number of units you and your associated persons (as defined in the Income Tax Act 2007) hold would cause the Fund to lose its status as a PIE. Suspension and deferral of redemptions We may in certain circumstances suspend or defer redemptions. These circumstances are set out in detail in the section How do I cash in my investment? on page 16. Changes to the master trust deed and establishment deed The Fund is constituted under a master trust deed dated 1 April 2009 and an establishment deed dated 7 October 2011 (as amended by a Deed of Amendment dated 16 December 2013). Each of these is made between us and the trustee (Public Trust). Together with the trustee we may make an amendment to the master trust deed or the establishment deed in some circumstances. These include where the amendment is: n to correct an obvious error n of a formal or technical nature; n for the more convenient or economical management of the Fund n to safeguard or enhance the interests of the Fund or unitholders n approved by a resolution passed by a majority of 75% of unitholders (known as an extraordinary resolution ); or n required to make any provision of the master trust deed or establishment deed consistent with any change in the law affecting unit trusts. Other changes Minimum investment amounts: We may change any of the following: (a) the minimum investment amounts, (b) the minimum number or value of units that must be maintained in the Fund and (c) the minimum redemption or transfer amount. Fees and charges: We may also change the fees and charges in relation to the Fund, subject to permitted maximum amounts. Please refer to the section What are the charges? on page 10 above for more detail. 15

18 How do I cash in my investment? Redeeming your investment When you can redeem units: You can invest in Fund units for any period. You may only redeem units on the last business day of a month. We may (in our discretion) redeem units on an earlier day or more than one day in any month. Notice to redeem required: If you want to redeem units you must give written notice to the administration manager (MMC Limited). This must be given before 2:00 pm on the 3rd business day before the redemption date. We may (in our discretion) vary this cut-off date. Minimum redemption amount: Redemptions must be for a minimum amount of $1,000 and you must maintain a minimum investment of $10,000 after any redemption. We may vary any of these minimum amounts at any time (this is at our discretion and we are not required to give prior notice). Redemption payment: We will pay the redemption amount to you within 10 business days of the relevant redemption day. Suspension of redemptions Temporary suspension of redemptions: There are some circumstances in which we may suspend redemptions of the Fund for up to 90 days (or longer with the trustee s consent). These are where redeeming units would not be practical or would prejudice the interests of unitholders for reasons including (but not limited to): (a) because of financial, political or economic conditions, or (b) because of requests to redeem more than 5% of the Fund within any 3 month period. In this case we may choose to redeem units by instalments in the future. Unlimited deferral of redemptions: There are some circumstances in which we may defer redemptions of the Fund for an unlimited period. This is when redemptions of more than 20% of units are received within any 3 month period. In this case we must (a) notify the trustee (Public Trust) of suspension and (b) call a meeting of unitholders to wind up the Fund or take other action which we or unitholders decide is appropriate. Your redemption value Redemption price: The redemption price reflects the Net Asset Value of each unit which is the Fund assets minus the Fund liabilities for each unit on issue. The redemption price will also take account of transaction costs for redeeming your units (these are explained in the section What are the charges? on page 10). The redemption price will fluctuate based on the changing values of the investments held by the Fund. Calculating your redemption value: The realisable value of your investment at any time is the number of units you hold multiplied by the redemption price. From this amount we may, at the time of redemption, deduct PIE tax on income allocated to you. If you want to know the current redemption price, contact us at the address shown under Who do I contact with enquiries about my investment? on page 18. No performance guarantees: None of Pathfinder (as manager), Public Trust (as trustee) or any other person guarantees the performance of the Fund or any return from an investment in the Fund. 16

19 Transfers of Units Transfer form: To transfer units you must use a transfer form approved by us. There is no established secondary market for the transfer (buying and selling) of units. Registration of transfers: Every transfer must be registered in the unit register. For this reason the transfer, together with the transfer fee (if any), must be sent to the office of the registrar (MMC Limited): MMC Limited Level Customs Street PO Box Auckland City 1143 You will remain the unitholder until the transfer is registered in the unit register. The registrar (MMC Limited) may charge a fee to process transfers please refer to the section What are the charges? on page 10. We have the right to decline a transfer if it would result in an investor holding less than the minimum investment. Days register open: The unit register will only be open for the purpose of registering transfers on business days. We may decline to register transfers of units for up to 28 days in each year. Transfers and PIE tax: If you transfer units we may redeem units to pay your PIE tax liability. We also have the right to decline a transfer if it would result in the loss of PIE status for the Fund. 17

20 Who do I contact with inquiries about my investment? Inquiries about your investment in the Fund can be made to us in writing or by telephone: The Directors Pathfinder Asset Management Limited 17 Lake View Road Takapuna Auckland 0622 Telephone: John Berry (09) Paul Brownsey (09) Alternatively you may contact your financial adviser with any queries about this investment. 18

21 Is there anyone to whom I can complain if I have problems with the investment? Complaints about an investment in the Fund can be made to the manager: The Directors Pathfinder Asset Management Limited 17 Lake View Road Takapuna Auckland 0622 Telephone: John Berry (09) Paul Brownsey (09) or to the trustee: Public Trust Level Willis Street Wellington Telephone: (04) enquiry@trustee.co.nz Complaints may also be made to the Insurance & Savings Ombudsman (ISO Scheme) which is an approved disputes resolution scheme. We are a member of this scheme which can be contacted as follows: Post: PO Box Wellington 6143 Address: Level 11, Classic House, Murphy Street, Wellington 6011 Telephone: (04) or freephone info@iombudsman.org.nz 19

22 What other information can I obtain about this investment? Key documents: All of the currently available material information relating to the Fund and an investment in units is contained in the following documents: n the registered prospectus (which contains the offer to which this Investment Statement relates) n the master trust deed, the establishment deed and the deed of amendment for the Fund n the financial statements for the Fund you may at any time request us to advise the redemption price. Our contact details are set out above. Please also see our website for our monthly reports. Distributions: We do not expect the Fund to make any distributions and we expect returns on Fund investments will be reinvested. However, if distributions are made a statement setting out the distributions paid will be sent to you. This will be done within three months of the relevant financial year end. If you are a unitholder you may request us to provide you (free of charge) a copy of these documents. You may also inspect copies of these documents at our office as follows: Pathfinder Asset Management Limited 17 Lake View Road Takapuna Auckland 0622 Telephone: John Berry (09) Paul Brownsey (09) Financial statements: Other information about the units, the Fund and the manager (Pathfinder) is contained in the financial statements for the Fund. A summarised set of the financial statements is contained in the registered prospectus. Public register: The registered prospectus, the master trust deed, the establishment deed and the financial statements are filed on a public register at the Companies Office of the Ministry of Business, Innovation and Employment. This register is available for public inspection (on request and payment of the relevant fee) by telephoning the Ministry s Contact Centre on and quoting references (for the manager) and (for the Fund). Companies Office website: The documents are also available on the Companies Office s website under the manager s and the Fund s references. Confirmation of your investment: Following the issue of units to you we will (within one month) send you a confirmation letter setting out the details of your investment in the Fund. Further information from us: Further information about the Fund and your investment in units is available by writing to us as manager. For example Unit register: If you are a unitholder you may also inspect and obtain a copy of that part of the unit register for the Fund that relates to your units. Annual information: Each year we will send you (a) a copy of the auditor s report and (b) an annual tax certificate as described in the section General Taxation Information on page 21. Privacy: As manager of the Fund we collect and hold personal information about you. We do this for the purposes of administering your investment. You may request access to any personal information we hold about you. To do this you should write to us at Pathfinder Asset Management Limited, 17 Lake View Road, Takapuna, Auckland Providing and correcting personal information: You may request correction of any personal information we hold about you. Depending on the nature of your request, we may impose a charge for providing or correcting any personal information. Please note that if you fail to provide the requested personal information then your application for units could be declined. No charge: At the date of this Investment Statement we do not charge for providing any of the above information to you. 20

23 General Taxation Information In this section the terms PIE (Portfolio Investment Entity) and PIR (Prescribed Investor Rate) are used extensively. These are defined in the glossary on page 3. Pathfinder (as manager) and Public Trust (as trustee) do not take any responsibility for your taxation liabilities. You are encouraged to seek professional financial and tax advice. Background: Your returns from the Fund will be affected by taxation. The following statements in relation to taxation are of a general nature only. They are based on current tax legislation which may change. The impact of taxation will vary depending upon your individual circumstances. PIE status: The taxation rules applying to the Fund are set out below. These assume the Fund remains a PIE under the Income Tax Act Should it cease to be a PIE, the taxation rules applying may change. Allocation of income: As a PIE the Fund will allocate all its taxable income (or losses) between investors based on the number of units held by them. We will calculate tax payable on this income allocated to an investor at their nominated PIR. Tax is then paid as described under the Tax-paying investors heading below. Notification of IRD number and PIR: Each investor must notify to us their IRD number and their nominated PIR when they join the Fund (and when these details change). If you do not notify both your IRD number and PIR then tax on income allocated to you by the Fund will be at the default rate of 28%. We will seek reconfirmation of these details annually and will apply the last notified PIR (unless a different PIR is nominated). Explanation of PIRs: The PIRs are as follows: (1) 10.5% and 17.5%: New Zealand resident individual investors have the following PIRs dependent on their taxable and net PIE income (i.e. PIE income less PIE losses) in one of the two previous income years: Taxable income $0 $14,000 $0 $48,000 Taxable + Net PIE income $0 $48,000 $0 $70,000 Prescribed Investor Rate 10.5% 17.5% New Zealand resident trusts (excluding unit trusts and charitable trusts) can elect to be taxed at 17.5%. Some New Zealand resident trusts (i.e. testamentary trusts other than charitable trusts) can elect to be taxed at 10.5%. (2) 28%: This rate applies for all other New Zealand individuals, all non-residents and all New Zealand resident trusts (excluding unit trusts and charitable trusts) who have elected to be taxed at this rate. (Note that a trust that elects a PIR of 28% will be unable to pass the PIE income through to beneficiaries at rates lower than 28%). (3) 0% (or zero-rated ): This rate applies to New Zealand resident entities such as companies, unit trusts, other PIEs, charities, superannuation funds and trusts that have not elected the 10.5%, 17.5% or 28% rates. It also applies to nominees and wrap providers that elect to become proxies for PIE investors (as defined in the Income Tax Act 2007). Tax-paying investors Background: Investors with a nominated PIR greater than 0% are referred to as tax-paying investors. Tax will be deducted by cancelling units (or deduction from distributions, if any) equal to the value of the tax liability. The Fund s tax liability on PIE income allocated to its tax-paying investors will be deducted at the earliest of the following times: n at the end of the income year (following 31 March), or n upon any full or partial withdrawal or transfer. Tax refunds: A refund of tax will be provided to the Fund to compensate for any PIE tax losses or excess tax credits relating to tax-paying investors. This is then allocated to such investors by issuing additional units. Final tax: If you nominate the correct PIR then the tax paid on income allocated to you as a tax-paying investor will be a final tax. This means there is no obligation for you to file a tax return in respect of this investment. Also, it will not impact on your student loan repayment obligations or child support payment obligations (PIE income may however impact on your family assistance entitlements). Advise correct PIR: Tax-paying investors must advise us if their PIR increases (or reduces) and nominate their new correct tax rate. Failure to advise, or providing a lower rate than that applicable, will mean you are personally liable to 21

24 pay any resulting tax shortfall (including penalties and interest). It may also mean you are required to file a tax return. We cannot change your nominated PIR in respect of PIE tax that has already been calculated and deducted from the Fund. If the nominated PIR is too high please note that PIE tax is a final tax and no credit or refund is available if too much tax has been paid. Cancellation of units: If you are a tax-paying investor and the value of your units is not likely to be sufficient to fund the PIE tax liability on income allocated to you, the units will be redeemed to fund that liability. PIE tax on transfers: If you transfer your units prior to 1 April in any year you will bear the cost of PIE tax on income allocated to those units. This will be calculated from the beginning of the income year to the date of transfer by you. Zero-rated investors Background: Investors with a nominated PIR of 0% are referred to as zero-rated investors. If this applies you must return the PIE income/(loss) and tax credits (if any) and pay tax yourself. You will have a tax liability in respect of the PIE income allocated to you, regardless of whether the Fund makes any distributions to you. Transitional residents Background: Special rules also apply from 1 April 2012 for investors who meet the definition of a transitional resident (in the Income Tax Act 2007). Calculation of PIR: If this applies you must include all foreign sourced income (which may include amounts that are not New Zealand taxable income) when calculating your PIR. Joint investors (this applies to individuals only) First named person: For joint investors who are New Zealand resident individuals, income is allocated only to the first named person in the register. Select highest PIR: Any joint individual investor can be selected as the first named for the register if the nominated PIRs are the same. But if the PIRs are different then you must select the investor with the highest nominated PIR. (Note you may be required to nominate 28% depending on the individual PIRs of the joint holders. This may impact on your ability to nominate a 10.5% or 17.5% PIR). Default rate: If you do not notify the relevant PIRs to us then income will be allocated to the first named person at the default rate of 28%. Tax credits and losses: Because the Fund does not pay tax on the income allocated to zero-rated investors it will not cancel your units or otherwise adjust your holdings for PIE tax. As a zero-rated investor you will be entitled to claim your share of tax credits or PIE tax losses directly. You may also claim as a credit any PIE tax paid by the Fund on income allocated to you, including at the default rate of 28%. New residents Background: Special rules apply from 1 April 2012 for investors (who are individuals) that have newly become New Zealand tax resident. Calculation of PIR: This will apply if you do not have New Zealand taxable income in one of the two income years prior to the income year in which you became New Zealand tax resident. Therefore you must take into account your non-resident foreign sourced income when calculating your PIR. The exception is where you reasonably expect that your actual income (in the first income year you become New Zealand tax resident or the following income year) will be significantly less than your total nonresident foreign sourced income (in the income year prior to becoming resident). Other important taxation information Tax certificate: We are required to provide every investor with an annual tax certificate. This will include the PIE income allocated to you and the amount of tax paid at your nominated PIR. This information will be needed for determining your PIR in the future. Gains and distributions: Redemption gains and distributions (if any) from the Fund will generally not be taxable to you. Holding restrictions: PIEs have restrictions on the percentage of units you and any associated parties can hold (generally no more than 20%). As manager we may redeem or cancel units held by investors exceeding the permitted threshold to ensure PIE status is maintained. If units are cancelled you will receive a refund of subscription moneys plus or minus any amount which the trustee (Public Trust) deems appropriate, in consultation with us. 22

25 How to invest Before making a decision to invest you should: n read all sections of this Investment Statement thoroughly, and n consult your financial adviser. Any investment you may make in the Fund should be part of an overall diversified investment program. The instructions for investing are set out below: 1. Application form You will need to complete the application form attached to this Investment Statement in order to initially invest in the Fund. We have an absolute discretion whether or not to accept an application without giving any reason. 2. Identity documents Verification of identity: Please provide a certified copy of your passport or firearms license. If you are unable to do this then you need to provide certified copies of two other forms of identification as follows: n New Zealand birth (or citizenship) certificate AND driver s license; or 3. Companies and trusts Companies: We will require a copy of the Certificate of Incorporation. We also require verification of identity for all company directors, substantial shareholders and authorised signatories (see 2. Identity documents above). Trusts: We require verification of identity for the settlor, each trustee and each named beneficiary (see 2. Identity documents above). We also require a copy of the trust deed, deeds of amendment and expressions of wishes. 4. Documents originals or certified copies only For all documents (including the application form) you must produce originals or copies that have been formally certified within the last 3 months by any one of the following people: n lawyer, accountant, doctor, teacher, police constable, qualified financial adviser n justice of the peace, minister of religion, kaumātua n member of parliament, commonwealth representative, honorary consul n New Zealand driver s license AND bank or government agency documents that have your name, address and signature. Verification of bank account: You will need to provide originals or certified copies of a bank statement or printed bank deposit slip to verify your nominated bank account. Verification of address: You will need to provide evidence of your residential address. This can be originals or certified copies of your driver s license, utility bill, bank statement or government agency statement. Each of these (other than the driver s license) cannot be more than 12 months old. If you are uncertain on the requirements for identity documents please check with us before sending your application. We can provide a more detailed list of acceptable forms of identification. You must provide originals or certified copies (see below). 23

26 5. Your authorised financial adviser You must provide details of your financial adviser. If you cannot provide this then you must contact us before making an investment. We will send you an additional form to complete. 6. Sending your application and making payment Posting your application: Please send the following to Pathfinder Asset Management, c/o MMC Limited PO Box , Auckland 1143: n your application form, n verification of identity documents, n verification of address document, n bank statement or printed deposit slip, and n your cheque for the subscription amount (unless you are paying by direct credit). All of these must be originals or certified copies. If you are not using a financial adviser then you must contact us as there will be an additional form for you to complete. Paying your subscription amount: The amount to be invested must be paid either: n by direct credit to Pathfinder Nominees Limited at ANZ Bank, 1 Victoria Street, Wellington, account number , or n by cheque made payable to Pathfinder Nominees Limited 24