Lifestages KiwiSaver Scheme Investment Statement

Transcription

1 22 September 2016 The is brought to you by Funds Administration New Zealand Limited (FANZ). Investment Statement

2 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? 7 Who is involved in providing it for me? 10 How much do I pay? 11 What are the charges? 13 What returns will I get? 14 What are my risks? 19 Can the investment be altered? 21 How do I cash in my investment? 23 Who do I contact with inquiries about my investment? 23 Is there anyone to whom I can complain if I have problems with the investment? 24 What other information can I obtain about this investment? 24 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: > The type of adviser you are dealing with: > The services the adviser can provide you with: > 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 document is an investment statement for the purposes of the Securities Act 1978, which, pursuant to the transitional provisions of the Financial Markets Conduct Act 2013, continues to apply to the offer of membership in this investment statement. This investment statement is prepared at 22 September There is a registered prospectus containing the offer of securities to which this investment statement relates. DISCLAIMER: Neither Funds Administration New Zealand Limited nor its parent Southland Building Society (SBS Bank) guarantees (either partially or fully) the capital value or performance of the securities. The principal and returns of the are not guaranteed or secured in any way by Funds Administration New Zealand Limited or its parent SBS Bank (or any other member of the SBS Bank group), Trustees Executors Limited, or any other person. Investments in the Scheme do not represent deposits or other liabilities of Funds Administration New Zealand Limited or its parent SBS Bank and are subject to investment risk, including possible delays in repayment and loss of income and principal invested. A disclosure statement is available from each FANZ Private Wealth adviser, on request and free of charge. 2 3

3 Key information about the This section provides a snapshot of key information about the. You should read it in conjunction with the detailed information set out elsewhere in this investment statement, and with the Scheme s prospectus. Scheme overview The is a KiwiSaver scheme managed by Funds Administration New Zealand Limited (FANZ), a subsidiary of Southland Building Society (SBS Bank). Its trustee is Trustees Executors Limited. The Scheme is a PIE for tax purposes, meaning that tax is usually paid on your behalf at a rate approximating your marginal tax rate (but capped at 28%). For more information see page 17. Investment funds Two investment funds are currently offered, the Lifestages Income Fund, and the Lifestages High Growth Fund. You can choose to invest in one or both of these funds. Your contributions are applied towards units in the fund(s) you choose, and the value of those units change to reflect the returns attributed to those funds (either positive or negative), as well as the Scheme s fees and expenses. The Lifestages Income Fund aims to provide a low risk investment option. It is generally suitable if you want to have a low risk investment portfolio which invests solely in income producing assets, such as New Zealand cash and fixed interest investments and global fixed interest investments. The Lifestages High Growth Fund aims to provide capital growth over the long term. The majority of the Lifestages High Growth Fund is invested in a broad spread of New Zealand and international growth assets and as such its return is likely to fluctuate depending on market conditions. It has a high risk profile. You can also choose to invest through the Lifestages Auto option. If you select the Lifestages Auto option, your contributions and accumulated balance(s) will be allocated between the Lifestages Income Fund and the Lifestages High Growth Fund based on your age. For more information see pages 7 to 9. Contributions If you are employed, contributions are normally deducted from your salary or wages at a rate you select either 3%, 4%, or 8%. You can also make additional contributions directly to us, or via Inland Revenue. Most employees are also entitled to a 3% employer contribution. If you are self-employed or not working you can make contributions directly to us, or via Inland Revenue. New Zealand residents aged between 18 and the age you become eligible to withdraw (see the next page) are usually entitled to receive contributions from the Government to match their own contributions, at the rate of 50 cents for each dollar contributed, up to a maximum of $ per year. For more information see pages 11 and 12. Withdrawals Because the Scheme is a KiwiSaver scheme, your investment cannot normally be withdrawn until you reach age 65 (subject to you first having been a member of a KiwiSaver scheme or complying superannuation fund for five years). Early withdrawals are permitted for serious illness, significant financial hardship, permanent emigration, paying certain tax and student loan liabilities that have arisen on a transfer from an overseas pension scheme, and for the purchase of a first home. A benefit is also payable to your estate if you die. For more information see pages 14 to 18. Fees and expenses The following fees are payable from the Scheme: Management Fee: Trustee Fee: General There are no switching fees, entry fees, transfer fees or exit fees. Expenses incurred in operating the Scheme are usually deducted from the Scheme. These include audit, legal, and custody fees, and the costs of buying and selling the Scheme s investments. These fees may change in the future. GST would be charged on these fees, if applicable. Principal risks The principal risks applying to the Scheme that could affect your returns are the Lifestages Income Fund s exposure to SBS Bank, investment risk, counterparty risk, risks relating to the collection and payment of contributions by employers, and regulatory risk. Investments in the Scheme are not guaranteed. For more information see pages 19 to 21. Related Party Transactions A large proportion of the cash exposure of the Lifestages Income Fund and the Lifestages High Growth Fund is obtained through direct or indirect unsecured deposits and/or redeemable preference shares with SBS Bank. For more information refer to the Scheme s prospectus. Lifestages Income Fund: 0.65% per annum Lifestages High Growth Fund: 0.85% per annum Up to 0.06% per annum The following fee is payable by members from their KiwiSaver accounts: Administration Fee: $2.00 per member per month Fees are also charged and expenses incurred in underlying funds which the Scheme invests in, impacting on returns to the Scheme. For more information see page

4 Underlying fund manager profiles What sort of investment is this? Income Fund Cash: SBS Bank New Zealand Fixed Interest: Harbour Asset Management Limited International Fixed Interest: Dimensional Fund Advisors Listed Property: FANZ, Vanguard Infrastructure: Vanguard Dimensional Fund Advisers Dimensional Fund Advisers ( DFA ) manages $522 billion for investors worldwide, with 11 offices around the globe. They offer investment solutions across asset classes, including global equities, fixed interest and REITS. Their goal is to add value over benchmarks and peers through an integrated and flexible approach that considers the interactions among premiums, market frictions, and costs. Harbour Asset Management Harbour Asset Management ( Harbour ) is a Wellington based investment management company with funds under management (fum) in excess of $1bn. Harbour s core competencies are in New Zealand Equities and New Zealand Fixed Interest. BlackRock BlackRock is the world s largest asset management firm with fum of over US $4.77tn as at 31st December High Growth Fund Cash: SBS Bank New Zealand Equities: Harbour Asset Management Limited Australian Equities: Dimensional Fund Advisors, BlackRock International Equities: Dimensional Fund Advisors, BlackRock Listed Property: FANZ, Vanguard Infrastructure: Vanguard Vanguard Vanguard is the one of the largest investment managers in the world with over US $2tn of assets under management. Notes: > Australian foreign currency exposures are unhedged other than Australian dollar exposures arising through investments in Global Bonds through underlying funds managed by DFA. > Other international foreign currency exposures are hedged as follows: > Income Fund: 100% hedged > High Growth Fund: 50% hedged, 50% unhedged > The information in this section is current as at 22 September 2016 and may change without notice. For information on the current managers accessed via the Scheme at any time please call us. The is brought to you by Funds Administration New Zealand Limited, a New Zealand owned and operated organisation. FANZ has over 12,000 clients and over $500m of funds under advice and/or management as at the date of this investment statement. Asset Allocation The offers two investment funds with differing benchmarks or allocations to different asset classes. You can choose one of these portfolios or blend them together to help you reach your investment goals. We employ a multi-manager, multi-style investment philosophy that accesses a range of investment management firms in New Zealand and from around the world. The securities offered in this investment statement are interests in the ( the Scheme ). The Scheme is a registered KiwiSaver scheme under the KiwiSaver Act 2006 ( the Act ). As a KiwiSaver scheme, the Scheme is subject to the Act and certain other laws and agreements. In this investment statement these are referred to as the Governing Requirements. The Scheme is a pooled investment. By investing in the Scheme you are pooling your investment with other investors. In doing so, you gain access to a wider range of wholesale investments than would be possible for most investors. You are issued units in the relevant fund(s) to reflect your contributions and other amounts received for you (such as the Government tax credit contributions, if you qualify). Units are issued at the next unit price following receipt of the relevant amount. The funds assets are valued on a regular basis, and any change in value, less fees and expenses, will be reflected in the unit price. Tax is deducted from your interest in the Scheme at the prescribed investor rate advised by you. Benefits are based on the number of units you hold at the time the benefit is paid. KiwiSaver schemes are designed for long term savings, so there are restrictions on the circumstances where you can withdraw see pages 14 to 16. Investment Options The Trust Deed allows the Scheme to have a number of investment portfolios or funds for you to invest in, each with separate investment objectives and asset allocations. Two funds are currently offered. These are the: > Lifestages Income Fund > Lifestages High Growth Fund. The Lifestages Income Fund aims to provide a low risk investment option. It is generally suitable if you want to have a low risk investment portfolio which invests solely in income producing assets such as New Zealand cash and fixed interest investments and global fixed interest investments. The Lifestages Income Fund is expected to provide a more stable return than the Lifestages High Growth Fund. The Lifestages Income Fund has a significant exposure to SBS Bank. At least 10% of its investments are in cash, a large proportion of which is invested directly or indirectly in unsecured deposits and/or redeemable preference shares with SBS Bank. Any event or circumstance affecting SBS Bank s ability to pay interest on, or repay the principal amount of, those investments (such as the insolvency, receivership, liquidation, voluntary administration or statutory management of SBS Bank) could mean that SBS Bank is unable to make interest payments, or is unable to repay those investments when they mature (or at all). For more information on this and other risks see pages 19 to 21. The Lifestages High Growth Fund aims to provide capital growth over the long term. The majority of the Lifestages High Growth Fund is invested in a broad spread of New Zealand and international growth assets and as such its return is likely to fluctuate depending on market conditions. The Lifestages High Growth Fund is likely to have greater volatility in its return than the Lifestages Income Fund. It has a high risk profile. You can choose to invest in one or both of these funds to suit your investment profile. You can also choose to invest through the Lifestages Auto option. 6 7

5 The Lifestages Auto option allocates your contributions and accumulated balances between the Lifestages Income Fund and the Lifestages High Growth Fund based on your age see page 9. If you do not select a fund, or a combination of funds, your contributions will be invested in the Lifestages Income Fund. Exposure to the various asset classes is obtained in part through arrangements with underlying fund managers see page 6. Automatic Rebalancing The current strategic ranges and benchmarks of the Lifestages Income Fund are: If you choose to invest in both funds or if you choose to invest through the Lifestages Auto option, we will rebalance your contributions and accumulated balance(s) back to your chosen allocations on an annual basis (unless we notify you otherwise). This is to ensure that any movements from your selected investment strategy can be rebalanced to your chosen allocations. As at the date of this investment statement, we intend to conduct an annual rebalancing on or about 15 August each year. Our current intention is for the assets of the Scheme to continue to be invested in accordance with these strategic ranges and benchmarks. However, the investment guidelines for either fund may change in the future. What is the Lifestages Auto option? No Guarantee Your investment in the Scheme, and any returns, are not guaranteed or secured in any way by us, the Trustee, the Crown, SBS Bank or any other person. Because unit prices move in line with market values, the value of your investment may go down or up. The Lifestages Auto option is not a separate fund. As at the date of this investment statement, if you choose to invest through the Lifestages Auto option, your contributions and accumulated balance(s) will be allocated to the Lifestages Income Fund and the Lifestages High Growth Fund as follows: Lifestages Income Fund Age group Age Lifestages KiwiSaver Income Fund Lifestages KiwiSaver High Growth Fund Ranges NZ Cash 10 20% NZ Fixed Interest 15 35% Global Bonds 30 50% Benchmark Weightings NZ Fixed Interest (25%) NZ Cash (15%) 1 Up to 34 0% 100% 2 35 to 44 30% 70% 3 45 to 54 50% 50% Listed Property 5 15% Infrastructure Assets 5 15% Infrastucture Assets (10%) % 30% Listed Property (10%) Lifestages High Growth Fund Ranges NZ Cash 1 10% NZ Equities 5 25% Australian Equities 5 25% Global Equities 40 60% Infrastructure Assets 2 13% Listed Property 2 13% Investments in the Lifestages High Growth Fund (other than through the "Lifestages Auto" option) can only be made if you join the Scheme through a FANZ Private Wealth adviser. Benchmark Weightings Global Bonds (40%) Global Equities (50%) Listed Property (7.5%) Infrastructure Assets (7.5%) NZ Cash (2%) Australian Equities (16.5%) New Zealand Equities (16.5%) As at the date of this investment statement, the Lifestages Auto option automatically adjusts your contributions and accumulated balance(s) in accordance with the table above on 30 June each year, based on your age at that time. For example, if you were aged 34 or less when you selected Lifestages Auto, 30% of your contributions and accumulated balance in the Scheme will be switched from the Lifestages High Growth Fund to the Lifestages Income Fund on the 30 June following the date you turn 35, or on your 35th birthday if you were born on 30 June. We can change the age ranges and the fund exposures for the Lifestages Auto option at any time and, if you have selected the Lifestages Auto option, will notify you of any such change and adjust your contributions and accumulated balance(s) accordingly. The Lifestages Auto option aims to provide you with appropriate levels of risk and expected returns for an average person of your age. However, it is based on predetermined exposures which do not take your personal circumstances into account. You will need to decide whether the Lifestages Auto option is right for you and seek financial advice if you are unsure. Alternatively you can also choose your own fund mix by completing the Asset Allocation Investment Profile process included in the application form at the back of this investment statement and selecting your preferred investment strategy. We will rebalance your contributions and accumulated balance(s) back to your chosen allocations on an annual basis (unless we notify you otherwise). As at the date of this investment statement, we intend to have one annual rebalancing event on or about 15 August yearly. 8 9

6 Who is involved in providing it for me? How much do I pay? The name of the Scheme is the Lifestages KiwiSaver Scheme. The Scheme was established on 1 June 2007, and is currently governed by a consolidated trust deed dated 20 September 2012 ( Trust Deed ). The Scheme is a registered KiwiSaver scheme under the Act. Manager Funds Administration New Zealand Limited ( we, us and our ) is the manager of the Scheme and its issuer for Securities Act purposes. Our address is 51 Don Street, PO Box 835, Invercargill. As at the date of this investment statement, our directors are: > Graham David Duston > Gregory John Mulvey > Jeffrey Bernard Walker > Derek Richmond Young. > Michael James Skilling. More information about our directors is set out on our website, and in the Scheme s prospectus. If you would like a copy please call us on Our directors and our address may change from time to time. You can obtain our current address and directors by calling us on We operate a financial advisory business and are an approved unit trust manager. As at the date of this investment statement, we have over $500 million of funds under advice and/or management. We are a subsidiary of SBS Bank, a registered building society established in 1869, and a registered bank. Trustee Trustees Executors Limited ( Trustee ) is the trustee of the Scheme. Its address is Level 5, 10 Customhouse Quay, PO Box 3222, Wellington The Trustee was the first trustee company established in New Zealand, in It has been granted a full licence under the Financial Markets Supervisors Act 2011 to act as a KiwiSaver trustee. Administration Manager We have appointed Trustees Executors Limited as administration manager to provide registry services and some administrative functions for the Scheme. The securities services division of Trustees Executors Limited provides these services. Its address is Level 5, 10 Customhouse Quay, PO Box 409, Wellington The administration manager s address may change from time to time. You can obtain the current address by calling the administration manager on Responsible Investment Policy As the Scheme does not take responsible investment (as that concept is understood for the purposes of the Act) into account in its investment guidelines, we are required to provide the following statement: Responsible investment, including environmental, social, and governance considerations, is not taken into account in the investment policies and procedures of the Scheme as at the date of this investment statement. Contributions by Salary or Wage Earners Subject to the Act, if you are in paid employment you can choose to contribute to the Scheme from your after-tax pay an amount equal to 3%, 4%, or 8% of your gross salary or wages. You can also make contributions via Inland Revenue or directly to us (see Other Contributions ). The minimum contribution required is 3% of gross salary or wages. If an employed person joins KiwiSaver and does not choose a contribution rate (or starts new employment and does not notify their new employer of a contribution rate) then their contribution rate will be 3%. You do not need to contribute if you take a contributions holiday, or if you have reached the Qualifying Date (see page 14) and have given your employer a non-deduction notice. For more information, see page 22. In most circumstances, employers are required to make contributions for their employees who are KiwiSaver scheme members and contributing to the scheme. Under current law, the compulsory employer contribution is 3% of your gross salary or wages. Employers can contribute additional amounts on top of any compulsory employer contributions. Employer contributions are subject to tax at a rate approximating your marginal tax rate. Refer to the prospectus for more information. Other Contributions (Lump Sum, Self Employed and Non-Waged Workers) You can also make contributions to the Scheme via Inland Revenue, or directly to us. This flexibility could be used to make a one off payment, or to make regular contributions. As at the date of this investment statement, there is a minimum contribution level of $50 for the initial lump sum but no minimum for regular monthly and ad hoc contributions. Subject to meeting these minimum requirements, and any other requirements imposed by us from time to time, you can make direct contributions at any time. You can transfer amounts to the Scheme from other superannuation or KiwiSaver schemes. You can also transfer amounts from an Australian complying superannuation fund, and may be able to transfer amounts from other foreign superannuation schemes. The amount received will be treated as a contribution to the Scheme. To the extent permitted by the Governing Requirements, we are entitled to impose terms and conditions on transfers to the Scheme. If you make a transfer from a foreign superannuation scheme you may have to pay New Zealand tax and additional New Zealand student loan repayment obligations may arise from the transfer. We recommend that you seek professional tax advice. If we offer insurance benefits in the future, and you take them up, you may need to make additional payments to the Scheme to cover the relevant premiums. The amount will depend on your particular circumstances as well as the type and amount of cover selected and you would be advised when known. The Trustee's address may change from time to time. You can obtain the current address by calling the Trustee on

7 What are the charges? Tax Credit Contributions You qualify to receive a Government tax credit contribution to supplement your own contributions if you: > are aged 18 or over and have not reached your Qualifying Date (see page 14), and > have your principal place of residence in New Zealand (although this requirement does not apply to certain state sector employees serving outside New Zealand who provide the necessary supporting evidence). The tax credit is set at half of your contributions to the Scheme and any complying superannuation funds you contribute to each year commencing from 1 July, capped at $ per year (around $10 per week). If you do not qualify for the full year the formula changes. The tax credit will generally be paid annually and will be allocated pro-rata in accordance with your current investment fund choice (or to the default fund, if applicable) or as required by law. If you are a member of one or more complying superannuation funds, as well as the Scheme, the tax credit will be spread across the Scheme and those fund(s) in the manner required by law. The rules regarding this tax credit are prescribed by law and are subject to change. Opting out of KiwiSaver If your employer has chosen the Scheme as its preferred KiwiSaver scheme you may have been automatically enrolled in the Scheme if you are a new employee. If you wish to opt out you can do this after you have been in your job for two weeks but before the start of your ninth week. That is, you can opt out between 14 to 56 days from the day you start your new job. If you do not opt out within this timeframe you will become a member of the Scheme. General Information Units in the relevant investment fund(s) are allocated to reflect a contribution received after the next valuation of the fund(s) at the unit price applicable at that time. The investment funds are currently valued on a weekly basis (on a Thursday), and the unit price reflects the net value of the underlying assets of the relevant fund, less fees and certain costs and liabilities (including potential costs and liabilities). The unit price struck will apply to transaction requests received since the unit price was last struck. The dollar value of your investment is therefore always an estimate based on the most up-to-date unit price. Contributions from your pay are deducted from your after-tax salary or wages by your employer and paid to Inland Revenue. Inland Revenue then forwards the contributions to the Scheme. Direct contributions to the Scheme can be made by cheque or electronic payment. If paying by cheque, please make the cheque payable to Trustees Executors Limited. Cross the cheque not transferable account payee only. Payments must be in New Zealand dollars. If contributions have been deducted from your pay in excess of the required amount Inland Revenue may require a refund of the excess amount. This will generally be done so that you can be refunded. If a refund is required (or if we have an option to refund and decide to do so) units with an aggregate unit value equal to the amount of the refund will be treated as void and the proceeds will be used to repay Inland Revenue. If the aggregate value of all of your units is less than the amount to be refunded, then subject to the Governing Requirements and any other rule of law, we are entitled to recover the shortfall from you personally. The following fees are payable from the Scheme: Management Fee Trustee Fee The management fee is calculated as a percentage of gross asset value and the trustee fee is calculated as a percentage of net asset value. They are deducted from the Scheme s returns before they are allocated to members. The administration fee is charged to members accounts. The administration fee is set at a level that reflects the fee Trustees Executors Limited, in its capacity as administration manager, charges us for those services. In addition to these fees, we and the Trustee recover expenses from the Scheme. These expenses include audit, custody, administration management and legal fees, and transaction costs such as brokerage incurred in buying and selling investments. There is no limit in the Trust Deed on the amount of expenses that can be recovered from the scheme. However, the amount of expenses recovered from the Scheme cannot be unreasonable and we have Lifestages Income Fund: 0.65% per annum Lifestages High Growth Fund: 0.85% per annum Up to 0.06% per annum The following fee is payable by members from their KiwiSaver accounts: Administration Fee $2.00 per member per month There are no entry, exit, transfer or switching fees These fees are current as at the date of this investment statement. We can change the amount of any fees (with the Trustee s agreement, in the case of its fee) and introduce new fees. We do not need to notify you of fee changes, although all fees charged are required to be reasonable. implemented a policy that the amount recovered in any one year will be limited to a maximum of 0.2% of the Scheme's gross asset value. If the Scheme expenses incurred in any year exceed this maximum, they may be recovered in subsequent years, subject to the maximum of 0.2% of the Scheme's gross asset value per year. We may change this policy in the future. The amount of expenses charged for the previous financial year are disclosed each year in the Scheme s financial statements, and details can be obtained at any time by calling us on GST would be charged on these fees, if applicable. Fees are also charged and expenses incurred at underlying fund level, impacting on returns paid to the Scheme. All fees that are deducted will be offset against income attributed to you by the Scheme and under current law cannot be deducted in your personal tax return

8 What returns will I get? Returns from the Scheme are payable in the circumstances set out in the Act. As at the date of this investment statement, you can apply for payment of part or all of the value of your interest in the Scheme if you: > Reach the age of entitlement to New Zealand Superannuation (currently 65), provided you have been a member of a KiwiSaver scheme or complying superannuation fund (if you transferred to a KiwiSaver scheme from a complying superannuation fund) for five years (the date you qualify for this is called your Qualifying Date ). > Die in which case your personal representatives are entitled to apply for a withdrawal. Alternatively, if your interest is less than a prescribed amount (currently $15,000) and other requirements are met, we can pay it to a surviving partner, caregiver of your children, or other permitted recipient. Partial withdrawals must be for at least $400, and must not reduce the remaining balance of your interest in the Scheme below $500 (or $1,000 if the withdrawal is made for the purpose of a first home purchase). In addition, once you reach the Qualifying Date, you may set up a regular withdrawal to be paid to you on a regular basis. As at the date of this investment statement, regular withdrawals can only be made on a monthly basis and must be for a minimum amount of $400 per withdrawal. These amounts may change in the future. If you have transferred any savings from an Australian complying superannuation fund to a KiwiSaver scheme you can withdraw them when you reach age 60, if you have retired in terms of the relevant Australian legislation. As at the date of this investment statement, you are also able to apply for a benefit in the following circumstances: Serious Illness: Where the Trustee is reasonably satisfied that you are suffering from serious illness. Under the Act, serious illness is currently defined as an injury, illness or disability that results in you being totally and permanently unable to engage in work for which you are suited by reason of experience, education or 14 training or any combination of those things, or that poses a serious and imminent risk of death. In the event of serious illness you can withdraw some or all of your interest in the Scheme. The Trustee can require any medical matter to be verified by medical evidence and can require other documents in support of an application. Significant Financial Hardship: Where the Trustee determines that you are suffering, or are likely to suffer, significant financial hardship. Under the Act, significant financial hardship is currently defined as including significant financial difficulties that arise because of: > your inability to meet minimum living expenses > your inability to meet mortgage repayments on your principal family residence, resulting in the mortgagee seeking to enforce the mortgage > the cost of modifying a residence to meet special needs arising from your or a dependant s disability > the cost of medical treatment for your or a dependant s illness or injury > the cost of palliative care for you or a dependant > the cost of a funeral for a dependant > you suffering from a serious illness. In the event of significant financial hardship you can withdraw some or all of your interest in the Scheme, excluding the initial crown contribution and any tax credit contributions (although investment returns on those amounts can be withdrawn). Currently the Act requires a completed statutory declaration as to assets and liabilities as a condition of applying for a significant financial hardship benefit. The Trustee must also be satisfied that reasonable alternate sources of funding have been explored and exhausted. The Trustee may require other documents in support of an application. First Home: For the purchase of a first home located in New Zealand where you meet the eligibility requirements of the Act. You are currently eligible to withdraw for this purpose if you have not made a first home withdrawal from any KiwiSaver scheme before and three years have expired since Inland Revenue received the first contribution in respect of you, or if you have been a member of a complying superannuation fund for a period of three years or more, or if you have been a member of one or more KiwiSaver schemes for a total period of three years or more. You can withdraw some or all of your interest in the Scheme, although you must leave at least $1,000 in your Scheme account after the withdrawal and cannot withdraw any amount you have transferred from an Australian complying superannuation fund (although investment returns on those amounts can be withdrawn). You are permitted to withdraw your member tax credits, provided you meet the eligibility criteria for withdrawing them see page 16. A purchase currently qualifies if it is of an estate in land you are either purchasing on your own, or as a joint tenant or tenant in common with someone else, or if it is of an interest in a dwellinghouse on Maori land and: > the land or the dwellinghouse is, or is intended to be, your principal place of residence and you have not previously held an estate in land (either alone, as a joint tenant or as a tenant in common); > the land or the dwellinghouse is, or is intended to be, your principal place of residence and despite you having had an estate in land in the past, Housing New Zealand has notified us that your financial position is what would be expected of a person who has never held an estate in land; or > the purchase is otherwise made in circumstances prescribed in any regulations made under the Act (there are no such regulations as at the date of this investment statement). First home withdrawals will be paid to your solicitor. We will ask your solicitor to give us a copy of the agreement for sale and purchase showing you as the purchaser and, if the purchase is of an interest in a dwellinghouse on Maori land, evidence of your right to occupy the Maori land. We will also ask your solicitor for undertakings that: > the agreement is unconditional and that the benefit will be paid to the vendor as part of the purchase price and will be repaid to the Scheme if settlement is not completed by the due date or any extended date; or > if the agreement is conditional, the benefit will be held by a stakeholder while the agreement is conditional and that the benefit will be repaid to your solicitor for repayment to the Scheme if settlement is not completed by the due date or any extended date (unless settlement is not completed due to your default). If you are eligible to make a withdrawal for your first home, you may also be eligible to receive a first home deposit subsidy from the Government, if you meet the applicable criteria. Currently, those criteria include a requirement that you have made contributions to a KiwiSaver scheme, complying superannuation fund or exempt employer scheme at a minimum rate for at least three years. Income caps and regional house price caps also apply. For details see Permanent emigration to Australia: If you move to Australia permanently you can transfer the full value of your investment in the Scheme (net of taxes and fees) to an Australian complying superannuation fund. You cannot make a cash withdrawal. We will require proof from you that you have permanently moved to Australia, including confirmed travel arrangements, passport evidence, evidence of any necessary visas and proof that you have resided at an Australian address following your departure from New Zealand. These documents may need to be formally verified by oath, declaration or otherwise. If you transfer your investment to Australia you may have Australian tax to pay. We recommend that you seek professional advice. Permanent emigration other than to Australia: If you move to somewhere other than Australia permanently you can withdraw the value of your interest in the Scheme (less the member tax credits and any amounts transferred from an Australian complying superannuation fund) one year after you have permanently left New Zealand. Any member tax credits withdrawn as part of a first home withdrawal do not need to be repaid. We will require proof from you that you have permanently emigrated from New Zealand, including confirmed travel arrangements, passport evidence, 15

9 evidence of any necessary visas and proof that you have resided at an overseas address at some time during the year following your departure from New Zealand. These documents may need to be formally verified by oath, declaration or otherwise. Alternatively, you can apply immediately to have the value of your interest in the Scheme (less the member tax credits and any amounts transferred from an Australian complying superannuation fund) transferred to any foreign superannuation or pension scheme authorised by the KiwiSaver regulations. As at the date of this investment statement, there are no foreign superannuation or pension schemes that have been authorised by the KiwiSaver regulations. Other Withdrawals or Returns: A withdrawal from the Scheme can be made to comply with any enactment or Court order requiring the release of funds from the Scheme. This includes a Court order made under the Property (Relationships) Act If you make a transfer from a foreign superannuation scheme and New Zealand tax is payable, or additional New Zealand student loan repayment obligations arise from the transfer, you may be able to make a withdrawal from the Scheme to pay those amounts. Please contact us for further information if this might apply to you. If you are offered, and take out, insurance benefits you may be entitled to receive a benefit on the occurrence of an event covered by the relevant insurance policy. The amount of the benefit will be limited to the amount (if any) that is received from the insurer. As at the date of this investment statement, insured benefits are not offered. If you transferred money from a UK Pension Scheme after 8 April 2006, early withdrawal could result in tax obligations in the United Kingdom. We recommend seeking independent tax advice before applying to make an early withdrawal. Transfers: You are entitled to transfer the full value of your interest in the Scheme (net of taxes and fees) to another KiwiSaver scheme that you join. The Governing Requirements could also result in you being required to transfer to another KiwiSaver scheme. Subject to complying with the Governing Requirements we may, following consultation with the Trustee, transfer the value of your interest in the Scheme to another KiwiSaver scheme. Your consent would not be required if the Financial Markets Authority approves the transfer, which it can only do if (amongst other things) the terms and conditions of the other scheme are no less favourable than those of the Scheme. Factors Impacting Returns The actual amount of the benefit you receive from the Scheme will depend on the aggregate value of your units on the date the benefit is paid. The aggregate value of your units will depend on the contributions made (which in turn depend on the rate you contribute at, whether you have taken a contributions holiday, and whether you have been eligible to receive employer contributions or Government tax credits), the fees and expenses charged, tax deducted and the returns achieved by the Scheme (which are reflected in unit prices). Because unit prices move in line with market values, at any time the value of your interest in the Scheme may go down or up. Unit prices are affected by, amongst other things: > the performance of individual investments made > changes (positive or negative) in the investment markets generally > movements in interest rates and currency exchange rates > political and other economic events. General We are legally liable to pay your benefits. Because payments can be made in a variety of circumstances, the date when a benefit will be paid is unknown. No amount of return is promised or guaranteed. You can request payment of a benefit by contacting us. We (or the Trustee, if applicable) can require you to provide evidence of your entitlement to a withdrawal, and payment may be deferred until that evidence is provided. Government tax credit contributions cannot be withdrawn until you provide a statutory declaration to our or the Trustee s satisfaction (as applicable) stating the periods that you had your principal place of residence in New Zealand. Unless you advise us otherwise, and subject to the Governing Requirements, any partial withdrawal will be deducted proportionately from each investment fund that you are invested in. Your contributions and accumulated balance(s) will be rebalanced back to your chosen allocations (unless we notify you otherwise) on the next annual rebalancing, regardless of any partial withdrawal you make. Tax Tax will affect your returns. Tax laws are complex and can have different or further consequences The prescribed investor rates for New Zealand resident individuals are: If your taxable income 1 was: $0 $14,000 $14,001 $48,000 $48,001 or more Any amount And your income plus your PIE income/loss was: $0 $48,000 $48,001 $70,000 $0 $70,000 Any amount $70,001 or more 1 Your taxable income is your worldwide income including income earned during any period you were not tax resident in New Zealand. 2 An income year is usually the period from 1 April to 31 March the following year, although Inland Revenue can approve alternative dates. than those described in this section. In addition, the information in this section is based on tax laws in force as at the date of this investment statement and is subject to change. You should seek independent professional tax advice before investing or withdrawing. Portfolio investment entity tax The Scheme is a portfolio investment entity. All of the Scheme s taxable income (or loss) will be allocated between members based on their proportionate interest in the Scheme. We calculate tax payable on income allocated to each member at their nominated prescribed investor rate. Tax is then paid as described in this section. You need to give us your IRD number and applicable prescribed investor rate when you join the Scheme. If you don t, you will be taxed on income allocated to you at the default rate of 28%. In the two years 2 before the relevant tax year 3 for: Either year Either year 4 Either year Each year Each year Your PIR is: 10.5% 17.5% 17.5% 28% 28% 3 A tax year is always the period from 1 April to 31 March the following year. 4 If you are eligible for more than one prescribed investor rate you can choose the lowest rate

10 What are my risks? Subject to the Governing Requirements, we can suspend paying benefits from the Scheme for up to six months if we reasonably form the opinion that it would not be practicable or would be materially prejudicial to the interests of members to realise investments, or to borrow, in order to pay benefits because of: > a decision to terminate the Scheme > financial, political or economic conditions in any relevant market > the nature of any investment > the occurrence or existence of any other circumstance or event relating to the Scheme. Inland Revenue may tell us to disregard a prescribed investor rate you have given us and apply a different rate instead. The Scheme s tax liability on PIE income allocated to you each year will ordinarily be deducted at the earliest of the following three times by cancelling units equal to the value of the tax liability: > at the end of the income year (that is, after 31 March) > if you make a full withdrawal or switch to a different investment portfolio > if at any time (and especially if you make a partial withdrawal or switch) when the balance of your remaining investment is, or could potentially become, insufficient to cover the Scheme s accrued tax liability on income allocated to you (we will consider potential market movements when determining whether your remaining investment is of sufficient value), in which case if you are making a partial withdrawal or switch a full withdrawal or switch will be required. Your share of any tax credits for PIE tax losses or other excess tax credits the Scheme receives will usually be allocated to you by the issue of additional units. If you have given us the correct prescribed investor rate, the tax paid on income allocated to you will be a final tax and no obligation to file a tax return will arise in respect of this investment. PIE income from the Scheme may affect assistance provided by Work and Income, but is excluded from your income for the purposes of Working for Families tax credits and student loan repayment obligations. If you are required to include PIE income in your tax return it will be taken into account in determining child support payments. Each year we will give you an annual tax statement, which will include the amount of PIE income allocated to you and the amount of tax paid at your chosen prescribed investor rate. We will also ask you to confirm your IRD number and prescribed investor rate. You need to tell us if your correct prescribed investor rate changes or if you cease to be a New Zealand resident, as the rate for non-residents is 28%. If you do not do so, or if you give us a rate that is lower than it should be, you will be personally liable to pay any resulting tax shortfall, including any penalties or interest, and may need to file a tax return. If tax is overpaid because you have given us the wrong prescribed investor rate the overpaid tax is not refundable or creditable. Withdrawals from the Scheme are not taxed as they are excluded income. Tax on investments made by the Scheme Investments made by the Scheme are taxed according to the relevant tax rules, and the impact of those taxes is reflected in each portfolio s unit price. More information on tax on the Scheme s investments can be found in the prospectus. All investments involve some degree of risk that can affect your ability to recover the full amount of your investment or impact on the level of return. The principal risks associated with an investment in the Scheme are: > the Lifestages Income Fund s exposure to SBS Bank > investment risk > counterparty risk and risks relating to the performance of the parties involved in the Scheme > risks relating to the collection and payment of contributions by employers > regulatory risk. Lifestages Income Fund s exposure to SBS Bank A large proportion of the Lifestages Income Fund's cash exposure is with SBS Bank through its investments in unsecured deposits and/or redeemable preference shares issued by SBS Bank. Any event or circumstance affecting SBS Bank s ability to pay interest on, or repay the principal amount of, those investments (such as the insolvency, receivership, liquidation, voluntary administration or statutory management of SBS Bank) could mean that SBS Bank is unable to make interest payments, or is unable to repay an investment when it matures (or at all). Redeemable preference shares issued by SBS Bank rank behind deposits with SBS Bank. This in turn may mean that we are unable to pay a withdrawal from the Lifestages Income Fund in full when requested. It may also mean that some of your investment is lost. Investment risk Investment risk is the risk that returns from the Scheme s investments will be negative or lower than expected, affecting the value of your investment in the Scheme. These risks are explained in more detail below. Because of these risks, it is reasonably foreseeable that you may receive a lower return than expected, or potentially lose some or all of the value of your investment. No person guarantees the payment of any money payable from the Scheme, including the repayment of any investment in the Scheme or the payment of any return on it. Investments are often divided into five major investment classes cash, fixed interest, property, shares, and alternative assets which generally have differing levels of risk. Determining how much risk to take should be related to the length of time the investment is for. Generally, if investing for a longer period of time, a portfolio should hold more growth assets. Returns are expected to be higher and there is a longer time period in which to balance out any negative returns received against positive returns. Lower risk investments are usually more suitable for someone with a shorter time horizon, as greater stability in returns is required with less risk of loss of capital. The Scheme offers two investment funds which have different levels of exposure to the various asset classes (see pages 7 and 8 for details). You can choose to invest in one or both of these funds or through the Lifestages Auto option. The Lifestages High Growth Fund may use derivatives to gain exposure to shares as well as in relation to currency hedging