Alternative Product Disclosure Statement

ALTERNATIVE PRODUCT DISCLOSURE STATEMENT

Name of Scheme

Note: the purpose of this document is to illustrateour thinking on the high level design of the PDS. It is not intended to be a template. It does not reflect amendments to the fund update that are included in this exposure draft.

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Section One

KEY INFORMATION SUMMARY

Name of scheme

What is this?

Prescribed statement, for example: “This is a managed investment scheme. Your money will be pooled with other investors’ money and invested in various investments. [Name of manager]will investyour money and charge you a fee for its services. The returns you receive are dependent on the investment decisions of [Name of manager]and the performance of the investments. The value of those investments may go up or down. The types of investments and the fees you will be charged are described in this document.”

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What will your money be invested in?

Will include a statement as to how many investment options are offered under the PDS,a prescribed statement referring to the investment options summarisedin the tables below in the KIS and where more information can be found.

name of fund
Completed risk indicator and a brief description of the specified fund and its investment objectives
Fund charges (estimated)
Performance-based fees
Contribution fee
Withdrawal fee
Other charges?

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name of fund
Completed risk indicator and a brief description of the specified fund and its investment objectives
Fund charges (estimated)
Performance-based fees
Contribution fee
Withdrawal fee
Other charges?

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• A statement that the information about fund charges does not include information about some underlying fund charges because the manager cannot make a reasonable estimate of those charges as a result of a lack of information; and a cross reference to where information about those fund charges can be found
• A statement referring to a section in the PDS that provides an explanation of the risk indicator and information about other risks that are not included in the risk indicator. To help you clarify your own attitude to risk, you can seek financial advice or work out your risk profile at an appropriate page on an internet site.

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Who manages name of scheme/funds?

Name of the manager of the scheme, and a reference to section 7 of the PDS (who is involved?).

What are the returns?

A summary of the nature and frequency of distributions to investors, and a reference to the place in the PDS that provides more detail.

How can you get your money out?

A statement as to whether the investment is redeemable,a brief description of any restrictions and include a reference to the section of the PDS where more information can be found.

Prescribed text, for example: Your investment in the units in [name of managed investment products] can be sold but there is no established market for trading these financial products. This means that you may not be able to find a buyer for your investment.

How will yourinvestment be taxed?

If the scheme is a PIE, include the statement “The amount of tax you pay in respect of a PIE is based on your prescribed investor rate (PIR). This can be [specify current rates]. See section 6 of the PDS (what taxes will you pay?) on [PDS cross-reference] for more information”

Where can you find more key information?

[Name of manager] is required to publish either quarterly or annual (as the case may be) updates for each fund/each investment option. The updates show the returns, and the total fees actually charged to investors, during the previous year. The latest fund updates are available at a specified Internet site address. The manager will also give you copies of those documents on request.

Table of contents

Section No / Section Heading / Page No or cross reference

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Section Two

How does this investment work?

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A description of how the scheme works, and the significant benefits of investing in the scheme or in the funds covered by the PDS.

Will include:

• summary of the significant features of the scheme
• nature and frequency of distributions (if any) and how those distributions are made
• if no distributions are expected to be made, a statement to that effect
• nature of interests that investors acquire
• brief description of the legal structure of the scheme (for example, whether the scheme is established as a trust)
• statement of whether any assets of a fund are available to be applied to meet the liabilities of any other fund in the scheme
• and the following subheadings:

Joining the scheme

A summary of how to become a scheme participant and any conditions of entry of scheme participants (including any minimum amounts

Making investments

A statement as to how investors can make investments, or increase their investment, by acquiring interests or making further contributions (for example, one-off lump sum purchases of units or regular contributions), and any requirements or conditions relating to those matters.

Withdrawing your investments

A statement as to how investors can decrease their investment by disposing of interests or making withdrawals, and any requirements or conditions relating to those matters

How to switch between funds

A statement as to how an investor may switch funds, and any requirements or conditions relating to those matters

Section Three

Description of your investment options

Name of fund

Description of the fund

A brief description of the specified fund and its investment objective.

A table containing the following information:

Total value of the fund
Number of investors in the fund (if applicable)
The date the fund started
The minimum suggested timeframe for holding the investment
A summary of investments policies and/or statement as to the suitability of the fund for particular classes of investors (if applicable)

A summary of how changes can be made to the SIPO for the fund, including whether investors will be notified of those changes and how investors can otherwise obtain information about those changes.

A statement about further information about the assets in the fund being found in the fund updates and their location.

What are the risks of investing?

A completed risk indicator:

A description of the specific risks for investing in the specified fund
An explanation of the nature of the use of market index returns in accordance with clause 7(b) of Schedule 4 of the regulations, if required.

How has the fund performed?

A table containing the following information:

Average over past five years / Past year
Annual return
(after deductions for charges and tax)
Annual return (after deductions for charges but before tax)
Market index annual return (reflects no deduction for charges and tax)

A brief description of the market index on which the market index annual return is based

A statement to the effect that the market index has changed since the last fund update and the reasons for the change(if relevant).

A statement about additional information about the market index being available on the offer register.

Annual return graph

A statement explaining that the graph shows the return after fund charges and tax for either each year ending 31 March since the fund started or for each of the last 10 years ending 31 March.The last bar shows the average annual return since the fund started, up to a specified date.

Important: This does not tell you how the fund will perform in the future.

If relevant (for PIE), a statement that returns are after tax at the highest prescribed investor rate (PIR) of tax for an individual New Zealand resident. Your tax may be lower.

What fees are investors charged?

A statement about investors being charged are charged fund charges, and a table of those charges:

% of net asset value
Total fund charges
Which are made up of:
Total management and administration charges
Including
Manager’s basic fee
Other management and administration charges
Total performance-based fees
Calculation / (basis of which the performance-based fees portion of the fund charges is charged)
Actual last year
Other charges
specify: for example, administration and member fees
Basis or method of calculating the charge, if relevant

If relevant: state that the total fund charges shown above do not include all fund charges incurred by the fund as the manager was unable to determine the total amount of fund charges incurred by the fund as a result of investing in the following investment(s)

Name of investment / % of net asset value (if available) / [Specify: type of fund charge(s) (if known) that has/have been omitted in the calculation of fund charges]

If relevant, state thatthe manager expects that some/all of the fund charges will be materially different in the next year. Below are the fund charges expected to be different in –the next scheme year.

Type of fund charge / Expected for the next year
% of net assets / Year endedor PDS dated
% of net assets

Various individual action fees

The amount of the following fees:

• any contribution fees
• any establishment fees
• any termination fees
• any withdrawal fees.

A statement to the effect that an investor may be charged other fees on an individual basis for investor-specific decisions or actions

Incorporate by reference a publicly available document that contains information about those fees (including a description of the fee, the minimum or maximum amount of the fee or how the fee is ascertained, and how and when the fee is payable).

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What does the fund invest in?

This shows the types of assets that the fund invests in.

Actual investment mix

/

Target investment mix

Either table or piegraph (omitting any categories not required) for example:
Asset type / Target allocation
Australasian equities / [specify]%
International equities / [specify]%
Listed property / [specify]%
Unlisted property / [specify]%
New Zealand fixed Interest / [specify]%
International Fixed Interest / [specify]%
Cash and cash equivalents / [specify]%
Other* / [specify]%

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Section Four

What are the risks of investing?

Understanding the risk indicator

Prescribed text to explain risk, for example:

Managed funds in New Zealand must have a standard risk indicator. The risk indicator is designed to help investors understand the uncertainties both for loss and growth that may affect their investment. You can compare funds using the risk indicator.

The risk indicator is rated from 1 (low) to 7 (high). The rating reflects how much the value of the fund’s assets goes up and down (volatility). A higher risk generally means higher potential returns over time, but more ups and downs along the way.

To help you clarify your own attitude to risk, you can seek financial advice or work out your risk profile at a specified Internet site maintained by, or on behalf of, the manager or the Retirement Commissioner.

Note that even the lowest category does not mean a risk-free investment, and there are other risks (described under the heading ‘Other specific risks’ that are not captured by this rating.

This risk indicator is not a guarantee of a fund’s future performance. The risk indicator is based on the returns data for a specified time period. While risk indicators are usually relatively stable, they do shift from time to time. You can see the most recent risk indicator in the latest fund update for this fund.

General investment risks

A summary of some of the things that may cause the fund’s value to move up and down, which affect the indicator. For example, investment return risk, market risk, company risk, credit risk and currency risk

Section Five

What are the fees?

Prescribed text on fees: You will be charged fees for investing in the scheme/fund. Fees are deducted from your investment and will reduce your returns. If the manager invests in other funds, those funds may also charge fees. The fees you pay will be charged in two ways-

• regular charges (for example, annual fund charges). Small differences in these fees can have a big impact on your investment over the long term.
• one-off fees (provide example).

A brief description ofwhat each fee category covers, how it is charged, and if it is not part of the fund charges, when the fee is charged to investors.

The fees can be changed

A statement as to whether fees can be changed and if so, how they may change.

If a fee is increased or a new fee is brought in, we must update the Register and tell you at least three months before the change takes place.

Include prescribed text stating that the manager must publish a fund update for each fund showing the fees actually charged during the most recent year. Fund updates, including past reports, are available at

Include the following example:

Example of how this applies to an investor

[name] had $[specify] in the fund at the start of the [select one: year/period] and did not make any further contributions. At the end of the [select one: year/period], [name] received a [select one: return/incurred a loss] after fund charges were deducted or $[specify] (that is [specify]% of [select one: his/her] initial $[specify]). [name] also paid $[specify] in other charges. This gives [name] a total [select one: return/loss] after tax of $[specify] for the [select one: year/period].

This example applies only to the specified fund. If you are considering investing in other funds or investment options in the scheme, this example may not be representative of the actual fees you may be charged.

Section Six

What taxes will you pay?

If the scheme is a PIE, PDS to include following statement

The scheme is a portfolio investment entity. The amount of tax you pay is based on your prescribed investor rate (PIR). To determine your PIR, go to [refer to an application form (if it contains information about how a person can work out his or her PIR) or specify a URL for the page on the Inland Revenue Department’s Internet site on which a person can work out his or her PIR]. If you are unsure of your PIR, we recommend you seek professional or contact the Inland Revenue Department. It is your responsibility to tell [name of manager] your PIR when you invest or if your PIR changes. If you do not tell [name of manager], a default rate may be applied. If the advised PIR is lower than the correct PIR, you will need to complete a personal tax return and pay any tax shortfall, interest, and penalties. If the default rate or the advised PIR is higher than the correct PIR, you will not get a refund of any overpaid tax.

If the scheme is not a PIE, the PDS must include a statement to the effect that tax can have significant consequences for investments, and if an investor has queries relating to the tax consequences of the investment, the investor should obtain professional advice on those consequences.

Section Seven

Who is involved?

About [name of manager]

Optional description of the manager and its business to the extent that that information is material information.

State the managers contact details including an address and a business telephone number.

Who else is involved?

A table of the following parties:

Name / Role
Supervisor
Custodian
Other person(s) involved in the scheme eg investment manager or administration manager

Section Eight

How to complain

State whether complaints about the managed investment products or the scheme can be made to 1 or more of the following and, if so, the contact details of the person or scheme to which complaints may be made:

• the manager
• the supervisor
• an approved dispute resolution scheme.

Contact details to include address and business telephone number.

Include reference to an approved dispute resolution scheme and a statement that the scheme will not charge a fee to any complainant to investigate or resolve a complaint.

Section Nine

Where you can find more information

A statement to the effect that further information relating to the scheme and managed investment products is available on the offer register and the scheme register, and a copy of information on the offer register or scheme register is available on request to the Registrar.

Include reference to the Internet site for the offer register.

Abrief description of any information relating to the scheme or managed investment products that is required to be, or otherwise will be, available to the public or on request to the manager. Explain how the information can be obtained and how a request for the information should be made. Specify whether any charges may be made for the information requested and the amount of the charge.

Section Ten

How to apply

A statement explaining how to apply for the managed investment products.

Notes

If relevant:

1. briefly describe those matters (including how) that significantly affect the comparability of returns in the bar graph
2. state that estimates have been used in calculating some/all of the fees and costs and describe the information and assumptions used to make the estimate
3. explanation of the nature of the assets in the “other” or “unknown” category
4. explanation of the nature of the assets in the “other” category

If relevant, an explanation of the nature of the assets in the “other” category

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