Portfolios & Performance

Core Cash Portfolio

Insights

Managed Portfolios Core Cash Insights Graph

A surprise, but no shock

Inflation data for the March quarter surprised markets on the upside on 20 April, driving March-year price rises to 2.2%, above the mid-point of the Reserve Bank of New Zealand’s 1-3% target range.

This was the highest annual increase since the September 2011 quarter, which included the rise in GST from 12.5% to 15%.

Part of the March 2017 rise was expected, comprising the automatic annual lift in tax on cigarettes and tobacco.

Housing-related prices made the largest upward contribution. Prices for newly-built houses, excluding land, rose by 6.7% nationally and by 8% in Auckland. Housing rentals were up 2.3% annually, although in the March quarter 84% of the sample showed no change.

Petrol prices were up 12%, offset partly within the transport prices category by falls in vehicle relicensing fees. Excluding petrol, cigarettes and tobacco, the Consumers Price Index (CPI) increase was 1.5%.

In recent months the RBNZ has stated consistently that monetary policy will remain accommodative “for a considerable period.” We don’t believe the latest CPI number will materially affect the RBNZ’s stance, which has been influenced more by geopolitical risk than by short-term domestic economic data.

We do not expect an OCR raise until February 2018 at the earliest.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Bloomberg, NZ Funds.

Performance

Performance since inception (28 February 2008) to 30 April 2017
Managed Portfolios Core Cash Performance Graph Managed Portfolios Core Cash Performance Table

Core Cash Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is based on the 'S&P/NZX Call Deposit Total Return Index'.

    The after tax comparative index has been calculated by applying the highest PIR rate (currently 28%) to the comparative index.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Core Cash Portfolio

Complete Portfolio as at 30 April 2017
Managed Portoflios Core Cash Portfolio Table

1. The yield is not the actual return of the portfolio, nor is it a projection or forecast. Details of the yield calculation are available on request from NZ Funds.
2. Net receivables include unrealised profit and loss and net receivables/payables.
3. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to provide a source of capital by primarily investing in income-orientated assets using an active investment management approach.
Investment category Cash
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 1 month +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Foreign currency
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to cash and cash equivalents. From time to time the Portfolio may invest in New Zealand fixed interest and/or international fixed interest.
Redemption restriction The Portfolio has no redemption restrictions.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Core Income Portfolio

Insights

Managed Portfolio Core Income Graph

Stars aligned for banking

Historically, our Income portfolios have been somewhat shy of the bonds issued by banks. The principal reason has been that they were expected to be frequent debt issuers.

Globally, the Wall Street excesses that contributed to the 2008 Global Financial Crisis undermined confidence in banks’ ability to manage their exposure and liquidity, triggering a sharp regulatory response. The primary regulatory action was the expansion of the capital buffers banks are required to hold against their loan exposures, cutting the returns available to bondholders and shareholders.

The recent global shift from extraordinary monetary policy easing to reflationary fiscal policy has presented banks in a new light. Banking stocks are highly interest-rate sensitive as their margins contract during falling interest rate cycles and expand as interest rates start to rise again.

However, that is not the only reason why banking looks like an attractive sector in which to invest.

From a debt security investor’s perspective, banks’ capital requirements are generally very well-supported, and they have money to lend at a point in the cycle when other corporates are beginning to take on more leverage.

In this Portfolio, we hold debt securities issued by ANZ, Bank of New Zealand, and Westpac.

Among international banks, we hold debt securities of Banco Santander, one of Spain’s largest banks, and Wells Fargo.

We have a positive view of the potential of Spain’s banks to benefit from the nascent recovery of the property sector, while United States banks stand to benefit from deregulation, tax cuts, strong deposit growth, higher interest margins and higher non-interest income.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Bloomberg.

Performance

Performance since inception (23 July 2008) to 30 April 2017
Core Income Performance Graph Core Income Performance Table

Core Income Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the 'S&P/NZX 90 Day Bank Bills Total Return Index'.

    The after tax comparative index has been calculated by applying the highest PIR rate (currently 28%) to the comparative index.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Core Income Portfolio

Complete Portfolio as at 30 April 2017
Core Income Portfolio Table

1. The yield is not the actual return of the portfolio, nor is it a projection or forecast. Details of the yield calculation are available on request from NZ Funds.
2. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
3. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to provide exposure to income-orientated assets using an active investment management approach.
Investment category Income
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 2 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Foreign currency
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to cash and cash equivalents, New Zealand fixed interest, and/or international fixed interest.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Global Income Portfolio

Insights

Global Income Insights Graph

Engineering aluminium

Arconic, the metals engineering and manufacturing spin-off from United States-based aluminium giant Alcoa, has been much in the news recently as activist investor Elliott Management ousted former Chairman and Chief Executive Klaus Kleinfeld.

His likely successor is Larry Lawson, former CEO of Arconic competitor Spirit AeroSystems, once a non-compete clause expires next year.

The Portfolio invested in Arconic’s 2027 bonds in March, and the ongoing leadership battle does not dent our faith in the stability of the underlying business.

Alcoa split into two publicly-traded companies in November last-year – Alcoa Upstream, a commodity aluminium producer, and Arconic.

Arconic is the downstream business, making sheet and rolled aluminium and higher value-added engineered products for aerospace, transportation, construction and power generation end users. Revenue for the 2016 financial year was US$12.4 billion and was concentrated in North America and Europe.

Arconic has strong relationships with the leaderships of its biggest customers which include Boeing, Ford, General Electric, and United Technologies. These companies are reportedly drawn to Arconic’s commitment to research and development1.

For Arconic, these relationships buy long life cycles for its products. It supplies parts for the next generation of aeroplanes and motor vehicles, which could be on the market for decades.

The company has stable, moderate sales growth. Management has committed to a business improvement programme which will, over the current year, focus on improving its EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) margin, lifting return on net assets, repaying debt and limiting capital expenditure.

The 2027 bonds are currently yielding 5.75% in New Zealand dollar terms. Their inclusion in the Portfolio adds exposure to a company with a diverse business base, and stable and improving sales and earnings margins.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
1. Inside the activist battle that felled Arconic’s Klaus Kleinfeld, The Wall St Journal, 17 April 2017.
* Source: Bloomberg.

Performance

Performance since inception (31 October 2008) to 30 April 2017
Global Income Performance Graph Global Income Performance Table

Global Income Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the 'S&P/NZX 90 Day Bank Bills Total Return Index'.

    The after tax comparative index has been calculated by applying the highest PIR rate (currently 28%) to the comparative index.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Global Income Portfolio

Indicative Portfolio as at 30 April 2017
Global Income Insights Table

1. The yield is not the actual return of the portfolio, nor is it a projection or forecast. Details of the yield calculation are available on request from NZ Funds.
2. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
3. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to provide exposure to income-orientated assets using an active investment management approach.
Investment category Income
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 2 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Foreign currency
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to cash and cash equivalents, international fixed interest, and/or New Zealand fixed interest.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Core Inflation Portfolio

Insights

Core Inflation Insights Graph

Interest rates remain low despite higher inflation

As the September general election approaches, the monetary policy targets of the Reserve Bank of New Zealand (RBNZ) are once again coming under scrutiny. Both Labour and New Zealand First want the central bank to include the unemployment rate alongside its current focus on price stability.

The RBNZ operates under a Policy Targets Agreement with the Government, defining price stability as annual increases in the Consumers Price Index of between 1% and 3% on average over the medium term, with a focus on keeping future average inflation near the 2% target midpoint. The RBNZ has worked under this framework since the Reserve Bank of New Zealand Act 1989 was passed. Over this near thirty year period, they have been broadly successful. The days of high inflation and price freezes have been consigned to the history books.

As people have become used to low inflation, interest rates have fallen. This has been most notable over the last ten years where interest rates are at their lowest for over fifty years. Today, the Official Cash Rate (OCR) is at its lowest level since it was introduced in 1999. While we generally expect the next move in the OCR to be up, we do not think this will occur until next year, and then any cycle of increasing interest rates is likely to be reasonably muted. For example, we now feel the top of the next interest rate cycle may be 4.5%. Ten years ago this was considered the lowest the OCR could go.

This is good news for borrowers, such as mortgage holders, but bad news for savers.

In this Portfolio, we have around a 15% exposure to interest rate sensitive assets. The returns we will get from this portion of the Portfolio are in part dependent on the OCR, although we are able to achieve a higher return though detailed research. Nevertheless, there is a limit to the return we are able to generate from fixed interest. Reflecting this, the Portfolio also has exposure to Australasian shares, and in particular to shares which pay stable dividends. The dividend return we are able to achieve from these companies is currently considerably higher than the OCR. In addition, we also receive capital gains as the shares appreciate over the long term. In a low interest rate environment this continues to be one of the most reliable ways of achieving stable income.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Bloomberg, NZ Funds calculations.

Performance

Performance since inception (31 October 2008) to 30 April 2017
Core Inflation Performance Graph Core Inflation Performance Table

Core Inflation Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is made up of 50% of the ‘S&P/NZX 90 Day Bank Bills Total Return Index’ and 50% of the ‘MSCI All Countries World Index with net dividends in local currency’.

    A fee of 1.0% pa is deducted which is an estimate of the cost of obtaining a passive exposure through a Portfolio Investment Entity (PIE).

    The after tax comparative index is calculated by applying the appropriate tax calculation for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graph for the Core Inflation Portfolio and the comparative index is calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Core Inflation Portfolio

Complete Portfolio as at 30 April 2017
Core Inflation Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to mitigate the impact of inflation on your investment over the medium and/or long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Inflation
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 5 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets expected to include cash and cash equivalents, New Zealand fixed interest, international fixed interest, Australasian equities, international equities, commodities, foreign currency, and/or alternative securities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Property Inflation Portfolio

Insights

Property Inflation Insights Graph

Cloud control

As a rule of thumb, a rising interest rate environment is negative for property values. This is because property is a ‘bond-like’ investment – the rental income stream represents the yield achieved on the dollar amount invested, and becomes relatively less attractive as market interest rates rise.

In some property sectors, this dynamic is exacerbated by consumer and technology trends. In the United States, store closures by ‘bricks and mortar’ retailers have accelerated recently as losses to online retail take their toll. Forbes Magazine reported on 20 March 2017 that 21 retail chains had announced 3,591 store closures for the current year1.

In this Portfolio our strategy is to look for ‘Property Plus’ – companies which offer exposure to property, but with characteristics or sectoral advantages that will allow them to swim against the tide. In previous editions of Portfolio Insights we have discussed our investments in CaixaBank and Sky City.

Another good example held within the Portfolio is Digital Realty Trust, a company whose properties are in strong and growing demand. Digital Realty provides housing for the hardware that supports cloud computing. The company, a United States-based real estate investment trust (REIT), owns 145 properties (90% owned and 10% leased) comprising two million rentable square metres in 30 metropolitan areas in Europe, North America and Asia Pacific.

The properties house the offsite centralised computer systems operated by companies such as Facebook, Microsoft, IBM, AT&T, JP Morgan Chase and Morgan Stanley. The properties need to be clean, temperature and humidity-controlled, close to a power station and, above all, practically uninterruptible – vast inbuilt redundancies are necessary in power capability.

As the digital economy grows, demand for specialised owned and managed properties that can house supporting hardware will also increase, which provides a positive tailwind for Digital Realty.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
1. These 21 retailers are closing 3591 stores – Who is next?, Forbes, 20 March 2017.
* Source: Bloomberg.

Performance

Performance since inception (31 October 2008) to 30 April 2017
Property Inflation Performance Graph Property Inflation Performance Table

Property Inflation Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is made up of 50% of the ‘S&P/NZX 90 Day Bank Bills Total Return Index’ and 50% of the ‘MSCI All Countries World Index with net dividends in local currency’.

    A fee of 1.0% pa is deducted which is an estimate of the cost of obtaining a passive exposure through a Portfolio Investment Entity (PIE).

    The after tax comparative index is calculated by applying the appropriate tax calculation for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graph for the Property Inflation Portfolio and the comparative index is calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Property Inflation Portfolio

Complete Portfolio as at 30 April 2017
Property Inflation Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated 'as at' any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio's return could be less than the Portfolio's yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to mitigate the impact of inflation on your investment over the medium and/or long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Inflation
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 5 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to property and/or property related securities including infrastructure assets.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Equity Inflation Portfolio

Insights

Equity Inflation Insights Graph

Oil interrupted

Oil company shares have in the past shown a strong correlation with inflation, somewhat unsurprisingly, as oil prices are often the root cause of inflation.

In this Portfolio, within our Global Energy Strategy, we invest across the full spectrum of the oil industry. The Portfolio currently holds shares in 13 companies ranging from huge diversified operators like Exxon Mobil, to United States specialist oil pipeline company Magellan Midstream Partners.

Earlier this year we added three companies – RPC Inc, Keane Group, and C&J Energy Services - that provide services to United States oil producers and in particular to shale oil producers.

These companies’ earnings are highly sensitive to demand for their services, which is, in turn, sensitive to the oil price – meaning their share prices are a volatile, ‘high beta’ play. Unfortunately, since we took these positions the oil price has weakened somewhat, and this has flowed through to a material drop in their share prices.

However, the fundamental demand for their services is undiminished. The number of rigs in place, a reliable barometer of demand for oil services, continues to rebound strongly.

Market forecasts are for strong sales growth this year and next - the average forecast for the three companies in 2018 is for 45% sales growth. If correct, this will flow through to even stronger earnings growth, and corresponding share price appreciation.

We chose these companies as they are the largest specialist providers of services to shale oil producers and have strong balance sheets with spare cash.

We are confident they will rebound from the short-term setback and will add value to the Portfolio in the longer term.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Baker Hughes.

Performance

Performance since inception (31 October 2008) to 30 April 2017
Equity Inflation Performance Graph Equity Inflation Performance Table

Equity Inflation Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is made up of 50% of the ‘S&P/NZX 90 Day Bank Bills Total Return Index’ and 50% of the ‘MSCI All Countries World Index with net dividends in local currency’.

    A fee of 1.0% pa is deducted which is an estimate of the cost of obtaining a passive exposure through a Portfolio Investment Entity (PIE).

    The after tax comparative index is calculated by applying the appropriate tax calculation for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graph for the Equity Inflation Portfolio and the comparative index is calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Equity Inflation Portfolio

Complete Portfolio as at 30 April 2017
Equity Inflation Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to mitigate the impact of inflation on your investment over the medium and/or long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Inflation
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 5 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a significant exposure to Australasian equities, international equities, and/or alternative securities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Core Growth Portfolio

Insights

Core Growth Insights Graph

The true end of the GFC?

This Portfolio is currently positioned to take advantage of the ‘new regime’ taking the place of the fiscal restraint and extraordinary monetary policy that have ruled since the 2008 Global Financial Crisis.

However, the past month has seen some temporary setbacks that have affected the value of the postions within the Portfolio.

In the United States, markets were surprised by the largest month-on-month decline in core inflation data in 35 years. President Donald Trump’s proposed healthcare reforms ran into early troubles, and markets drew breath ahead of the French presidential election on (unrealised) fears the result would deliver another Brexit-style shock.

Our view is that the longer-term reflationary case remains in place. The United States inflation number is likely to prove to have been a ‘rogue’ data point. One underlying measure is the Federal Reserve’s ‘sticky’ Consumer Price Index series, which includes goods and services whose prices change less frequently than the overall basket’s median. For the last 18 months, this has barely deviated from the 2.5% annual rate.

Similarly, Eurozone inflation – when calculated giving greater weight to less price-volatile items – hit a three-year high last month.

And President Trump’s legislative difficulties do not affect the underlying strength of the United States economy, where consumer confidence recently hit a 16-year high.

Our stance - predicated on synchronised global growth, falling unemployment, and diminishing concern about possible deflation – remains intact. In this Portfolio we are holding our positions in reflationary plays such as Metals & Mining and Financials, and expect these to perform well over the next 12 to 18 months.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Bloomberg, NZ Funds calculations.

Performance

Performance since inception (31 October 2008) to 30 April 2017
Core Growth Performance Graph Core Growth Performance Table

Core Growth Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the ‘MSCI All Country World Index with net dividends in local currency’.

    Since October 2015, a fee of 1.00% pa has been deducted to reflect the cost of obtaining a passive global share market exposure through a Portfolio Investment Entity (PIE). Prior to October 2015, a fee of 1.75% was used.

    The after tax comparative index is calculated by applying the appropriate tax calculations for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graphs for the Core Growth Portfolio and the comparative index are calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Core Growth Portfolio

Complete Portfolio as at 30 April 2017
Core Growth Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to grow your investment over the long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Growth
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 10 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets with a significant exposure to growth-orientated assets.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Global Multi-Asset Growth Portfolio

Insights

Global Multi Asset Growth Insights Graph

Playing the odds

ISAM Systematic Management is a London-based manager with assets under management of around US$2.5 billion, but it attends no company investor briefings and rarely calls a broker.

ISAM is an alternative investment manager specialising in quantitative investing using a ‘pure trend following programme.’ To give a simple idea of how this works, behavioural science tells us that if an index rose yesterday, there is a more than 50% chance it will rise again today. The variance from 50/50 may be small, but it is statistically reliable enough to allow traders to play the odds.

ISAM’s trades are for the most part computerised, running 24 hours a day in markets around the world. It trades in over 125 financial, commodity and currency futures contracts, from mainstream products such as United States equities to the more esoteric corners of derivatives markets such as European carbon credits.

The programme’s underlying thesis is that markets are fundamentally inefficient. Applying scientific analysis across markets allows ISAM to capture those inefficiencies, over time and on average, managing risk by using proprietary mathematical techniques. Their payoff profile is a bit like owning a casino; the house doesn’t always win but the odds are in their favour.

The flagship programme, ISAM Systematic Trend, was launched in 1981 within the Man International group. ISAM acquired the rights to the programme and its 30-year history in 2010, and the Chief Investment Officer is expatriate New Zealander Darren Upton.

The system, of course, does not produce stellar returns every year. In the year-to-date, returns are negative 3.4%. But a particular strength is its ability to produce strong returns in falling markets. During the 2009 equity bear market the return was 78% and in 2014, commodities’ most recent black year, the programme produced a 62% gain. This holding is a good fit with the Portfolio’s aims, providing a different return profile to equities.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: ISAM.

Performance

Performance since inception (7 November 2011) to 30 April 2017
Global Multi Asset Growth Performance Graph Global Multi Asset Growth Performance Table

Global Multi-Asset Growth Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the ‘Bloomberg Commodity Total Return Index’.

    Since October 2015, a fee of 1.00% pa has been deducted to reflect the cost of obtaining a passive global commodity exposure through a Portfolio Investment Entity (PIE). Prior to October 2015, a fee of 1.75% was used.

    The after tax comparative index is calculated by applying the appropriate tax calculations for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graph for the Global Multi-Asset Growth Portfolio and the comparative index is calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Global Multi-Asset Growth Portfolio

Complete Portfolio as at 30 April 2017
Global Multi Asset Growth Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
3. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
4. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to grow your investment over the long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Growth
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 10 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets with a significant exposure to commodities and/or alternative securities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Global Equity Growth Portfolio

Insights

Global Equity Growth Insights Graph

Absolutely active

Devon Funds Management is a New Zealand-based manager headed by experienced investors Paul Glass and Slade Robertson.

Devon’s Absolute Fund is closed to new investors with NZ Funds being one of the few institutional investors in the fund. It has an ‘alpha’ approach – the antithesis of index investing – taking concentrated positions in Australasian shares, often mid-cap in size, on a ‘best ideas’ basis.

March was a good month for the fund, with two of its positions in lesser-known companies rallying strongly.

Devon has been a shareholder of Vista Group since it floated on the NZX in August 2014, at which time it already had revenues of $47 million. Vista got ‘a foot in the door’ of the global film industry with its cornerstone ticket sales software for cinemas. It has leveraged this into nine businesses supplying software for cinema management, film distribution, customer analytics, business intelligence, and predictive analytics. Revenue for the 2016 year grew by 35%, to $88.6 million.

The Vista shareholding in March comprised 9.1% of the Devon Absolute Fund.

GTN Limited (Global Traffic Network) is a Sydney-based broadcast media advertising platform that listed on the ASX in June 2016. It is one of the largest platforms in its three core geographies of Australia, Canada, and the United Kingdom, and is expanding into the United States and Brazil. GTN provides traffic reports to radio stations for broadcast during their news segments, in return for advertising slots before and after the report. In this way they are able to deliver large and frequent audiences to advertisers.

Revenue for the June 2016 year was A$166 million, and has increased 12% in the six months to December 2016. In March, the GTN holding comprised 6.2% of the Devon Absolute Fund.

The allocation to Devon complements the NZ Funds Dividend & Growth Portfolio approach of focusing on companies with high dividend payments.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Bloomberg.

Performance

Performance since inception (31 October 2008) to 30 April 2017
Global Equity Growth Performance Graph Global Equity Growth Performance Table

Global Equity Growth Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is the ‘MSCI All Country World Index with net dividends in local currency’.

    Since October 2015, a fee of 1.00% pa has been deducted to reflect the cost of obtaining a passive global share market exposure through a Portfolio Investment Entity (PIE). Prior to October 2015, a fee of 1.75% was used.

    The after tax comparative index is calculated by applying the appropriate tax calculations for the asset class and the highest PIR tax rate (currently 28%).

Different calculation methodology

  • The performance graphs for the Global Equity Growth Portfolio and the comparative index are calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Global Equity Growth Portfolio

Complete Portfolio as at 30 April 2017
Global Equity Growth Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Where a strategy is shown, the asset class reflects the predominant assets in the strategy. The strategy may include other assets including cash.
4. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
5. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portfolio is to grow your investment over the long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Growth
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 10 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
• Commodities
• Alternative securities *

* 'Alternative securities' means asset classes not usually accessed by retail investors, for example, private equity, venture capital and hedge funds. These tend to be asset classes where valuation and liquidity may be uncertain and returns may be volatile.
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets with a significant exposure to Australasian equities, international equities, and/or alternative securities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

Dividend and Growth Portfolio

Insights

Dividend And Growth Insights Graph

Interesting times for Crown

This Portfolio has held shares in Crown Resorts since 2011. Crown is a dynamic company, and 2016 was one of its most interesting years yet.

The company, controlled by James Packer, owns and operates Crown casino resorts in Melbourne and Perth, and is developing another in Sydney.

Last year Crown signalled a dramatic overhaul of strategy to refocus on Australia. It indicated it would spin-off its stake in Melco Crown, one of Macau’s largest casino operators, and would seek a buyer for a large block of land on the Las Vegas strip previously earmarked for a casino resort development.

Crown also announced a plan, now abandoned, to float its Australian property assets to raise cash for the Sydney development.

Then came the October arrests of 18 Crown employees in China, which knocked Crown’s share price back. This accelerated some of the strategic changes, and the bulk of the Melco stake has since been sold for A$1.9 billion.

Refocusing on Australia will allow operating expenses to be cut and will enable the company to return cash to shareholders via a share buyback, a special dividend, and an increase in dividend payout policy to 100% of earnings.

We remain positive on Crown, which has high-quality, long-life assets with monopoly characteristics. As the market absorbs Crown’s new domestically focused strategy, we believe the shares should move towards the earnings multiple (enterprise value 10 times earnings before interest, tax, depreciation and amortisation) of its Australasian peers, Sky City and Star Entertainment.

This would imply share price appreciation of around 16%, on top of the 4.7% dividend yield the shares currently offer.

NZ Funds is an active investment manager. Accordingly, any securities discussed above may or may not be held by the Portfolio at any given point in time.
* Source: Bloomberg, NZ Funds Calculations. EV/EBITDA is Enterprise Value/Earnings Before Interest, Tax, Depreciation And Amortization.

Performance

Performance since inception (31 October 2008) to 30 April 2017
Dividend And Growth Performance Graph Dividend And Growth Performance Table

Dividend and Growth Portfolio

  • Pre tax returns are stated after Portfolio fees and expenses, but before any advisory fees or investor tax. Post tax returns are stated after Portfolio fees and expenses and investor tax at the highest Prescribed Investor Rate (PIR). Past performance is not necessarily an indication of future returns.

Comparative Index

  • The comparative index is made up of 70% of the ‘NZX 50 Portfolio Index Gross with imputation credits’ (or its predecessor index) and 30% of the ‘S&P/ASX 200 Accumulation Index’.

    Since October 2015, a fee of 1.00% pa has been deducted to reflect the cost of obtaining a passive market exposure through a Portfolio Investment Entity (PIE). Prior to October 2015, a fee of 1.75% was used.

    The after tax comparative index is calculated by applying the tax rules and the highest PIR tax rate (currently 28%). It has been assumed that New Zealand dividends are fully imputed and Australian dividend yields are 5% pa.

Different calculation methodology

  • The performance graphs for the Dividend and Growth Portfolio and the comparative index are calculated and displayed on a pre tax, post Portfolio fees basis.

    With regard to the comparative index, this is calculated on a different basis from that used in the Quarterly Fund Updates published for the Portfolio. The calculation for the Quarterly Fund Update requires that the comparative index be calculated and displayed on a gross (before tax and Portfolio fees and expenses) basis.

Maximum Decline and Volatility

  • Returns should be looked at in conjunction with the level of risk associated with an investment. 'Maximum decline' is a measure of risk. It represents the largest decline in value experienced during the last 12 months.
  • For more information on risk including the Portfolio's risk indicator please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates.

Note: Rounding may affect some numbers.

Portfolios


Dividend and Growth Portfolio

Complete Portfolio as at 30 April 2017
Dividend And Growth Portfolio Table

1. The yield calculation represents an estimate of the yield on the Portfolio, calculated using the most recent information provided by the external investment managers involved in managing the Portfolio, hedged back to New Zealand dollars where appropriate. It is not calculated ‘as at’ any particular date as different external investment managers provide data at varying dates. As a result, in some instances the yields may lag the date of this Portfolio summary. The yield is not the actual return on the Portfolio, nor is it a projection or forecast. The Portfolio’s return could be less than the Portfolio’s yield. Details of the yield calculation are available on request from NZ Funds.
2. Price/Earnings is based on next year’s forecast earnings (NPAT) Source: Bloomberg.
3. Net receivables include unrealised profit and loss and net receivables/payables. Although full cash backing is not required under the current futures exchange requirements, these figures assume that derivatives contracts are fully backed by cash unless used for leverage.
4. Total economic exposure represents the total economic value of a Portfolio, which is the net asset value of the Portfolio adjusted for the effect of direct derivative positions taken by the Portfolio and indirect derivative positions taken other than via a fund including hedge funds. For more details on economic exposure, see the Other Material Information document on the Offer Register at www.companiesoffice.govt.nz/disclose.
Note: Rounding may affect any subtotals and totals.

Overview

Objective The objective of the Portoflio is to grow your investment over the long-term by investing in income-orientated assets and growth-orientated assets using an active investment management approach.
Investment category Growth
Risk & volatility Please see the NZ Funds Managed Portfolio Service Product Disclosure Statement or the latest Fund Updates for information on risk.
Minimum suggested investment timeframe 10 years +
Permitted investments The Portfolio may invest in securities in the following asset classes:

• Cash and cash equivalents
• New Zealand fixed interest
• International fixed interest
• Australasian equities
• International equities
• Listed property
• Foreign currency
Anticipated investment approach Over time, it is anticipated that the Portfolio will hold a diversified range of assets with a significant exposure to Australasian equities.
Redemption restriction The Portfolio has a 63-day notice period.
Further information Further information is contained in the NZ Funds Managed Portfolio Service Product Disclosure Statement.

TERMS & CONDITIONS

By accessing and/or using www.nzfunds.co.nz (the "NZ Funds Website") you agree to be bound by the Terms and Conditions set out below.

These Terms and Conditions are in addition to and do not replace, any specific terms and conditions applicable to any New Zealand Funds Management product or service. To the extent that there is any conflict between these Terms and Conditions and those of any specific products or services, the terms applicable to those products or services will prevail.

Any reference to "NZ Funds", "we", "us" and "our" is a reference to New Zealand Funds Management Limited, its directors, employees and related parties.

Disclaimer

The content of the NZ Funds Website is general in nature, and for information purposes only. While care has been taken to supply information on the NZ Funds Website that is correct, accurate and up to date, we do not guarantee that this is the case, or that the information is relevant or suitable for your intended use. NZ Funds is not liable for any loss, liability or damage suffered by any person that may result from any errors, omissions, recommendations or opinions expressed on the NZ Funds Website. Accordingly, before making any investment or taking or refraining from taking any action based upon this information, we recommend that you first consult with an Authorised Financial Adviser.

Further, we do not guarantee the relevance or accuracy of any information in any other websites accessed through the NZ Funds Website or any information, opinions or projections included in articles sourced from third parties.

Neither NZ Funds nor any other party guarantees the performance of any product included on the NZ Funds Website. Any predictions or projections (including those made in any article that appears on the NZ Funds Website) are an expression of opinion only. Any information about past performance is not necessarily an indication as to future performance.

While care has been taken to prevent the introduction of viruses on this website, we do not guarantee that it is free of viruses and we accept no responsibility or liability for any harm attributable to such destructive features.

For further information on any of the Portfolios included on the NZ Funds Website or to request a copy of either the NZ Funds Managed Portfolio Service Product Disclosure Statement or the NZ Funds KiwiSaver Scheme Product Disclosure Statement, you should contact NZ Funds on
0508 733 337 or by email to info@nzfunds.co.nz.

Copyright

Unless otherwise specified, the copyright in information, images, texts and screens on the NZ Funds Website is owned by NZ Funds or its suppliers and may not be altered, copied, published, reposted or reused without our prior consent. This includes, but is not limited to, the NZ Funds Website's content, text, graphics, logos, images, audio clips and software. You may not create a hyperlink to the NZ Funds Website without our consent.

Privacy

We may collect information provided by you when using the NZ Funds Website, including where we authenticate you as part of a log on process and through the use of cookies. Cookies are a small file stored on your computer that enables us to identify your computer. Cookies do not read your hard drive and cannot be used to personally identify you. They are designed to facilitate easier website use by registering information about your preferences.

Any personal information that you may provide to us on the NZ Funds Website will be held at our offices at Level 16, Zurich House, 21 Queen Street, Auckland and may be used by us to provide or communicate information about our products and services to you. Personal information may also be shared with relevant authorities, including the IRD. You have the right to access and correct any personal information that NZ Funds holds by contacting us on 0508 733 337.

Jurisdiction

These terms and conditions are governed by the laws of New Zealand and are subject to the non-exclusive jurisdiction of the Courts of New Zealand.



OUR OFFICES

Auckland

Level 16
Zurich House
21 Queen Street
Auckland 1010

Private Bag 92163
Auckland 1142

09 377 2277
0508 693 8637

Wellington

Level 3
Central on Midland Park
40 Johnston Street
Wellington 6011

PO Box 2697
Wellington 6140

04 473 7701
0800 850 000

Christchurch

Unit 7A
9 Sir Gil Simpson Drive
Burnside
Christchurch 8053

PO Box 1686
Christchurch Mail Centre
Christchurch 8140

03 366 9088
0800 697 526

Timaru

Level 1
2 Sefton Street East
Timaru 7940

PO Box 85
Timaru 7940

03 683 1989

Wanaka

Level 2
Brownston House
21 Brownston Street Wanaka 9305
PO Box 769
Wanaka 9343

03 443 2300
0800 697 526

Dunedin

Level 2
Bracken Court
480 Moray Place
Dunedin 9016

PO Box 5215
Dunedin 9058

03 477 4647
0800 697 526

Invercargill

98C Yarrow Street
Invercargill 9810

PO Box 364
Invercargill 9840

03 218 2895
0800 697 526

Complaints


Client complaints

Our business philosophy is to establish and enhance long-term, positive relationships with all of our clients. We recognise though that from time to time, despite our very best efforts, clients may wish to make a complaint. It is important in such instances that clients have an efficient mechanism through which they can receive a fair consideration of their concerns.

If you have a complaint contact us:


Complaints Handling Officer
New Zealand Funds Management Limited
Private Bag 92163
Auckland 1142

0508 733 337
info@nzfunds.co.nz

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How we deal with complaints

Upon receipt of your complaint we will immediately log it into our complaints register and it will be forwarded to the appropriate staff member for consideration.

Within five working days of receipt, we will provide you with a letter of acknowledgement that your complaint has been received. We will endeavour to keep you notified and updated on the progress of our consideration.

If your complaint cannot be resolved to your satisfaction through our internal complaints process you can elect to take it up with NZ Funds' independent dispute resolutions scheme.


Financial Services Complaints Limited
PO Box 5967
Wellington 6011

0800 347 257
info@fscl.org.nz