Eligibility
To be eligible for Kauri Currency Hedge Units subscribers must be a client of a financial Intermediary which has been previously approved by the Trustee and Currency Hedge Provider - termed an "Approved Financial Intermediary".
Summary of Kauri Currency Hedge Units
Subscription to Kauri Currency Hedge Units offers retail investors a flexible and efficient currency hedging solution. In simple terms they protect the Unitholder from a risk associated with holding an investment portfolio in foreign currency.
In this sense, the hedging profits or losses realised each 31 March which arise from holding the Units are likely to be offset to some extent by revaluations or devaluations in the Unitholder's international investment portfolio caused by the NZD's volatility. The degree of offset will depend on the size and composition of the investor's foreign currency securities. The hedges will originate cash inflows and cash outflows which may be offset to some extent by the portfolio's NZD valuation, but that once a year and at redemption will have to be settled. The size of the hedge profit or loss cannot be known in advance and it is not in any way limited. It must be settled in cash and in the case of a hedge loss this may require sale of some of the foreign currency securities held in the Unitholder's portfolio if cash is not available from other sources. Your Approved Financial Intermediary may, in these circumstances, have the right to sell some of your portfolio securities if you do not make cash payment when required.
The reasons to include foreign currency denominated assets in a portfolio are well known. Currency Units are a tool to stabilize your portfolio returns in NZ$ and have been conceived for this purpose. Currency Units will not provide an exact hedge. Speculating on currency movements is a highly risky activity and is not the purpose of Currency Units, which is why you will be required to subscribe through an Approved Financial Intermediary and a Performance Bond will be provided by a Bond Provider. The Bond Provider is likely to require the securities you intend to hedge to be held as security with them.
Currency Units are tied to an equity Index for a major stock exchange in the currency or currencies in which the relevant securities in your foreign currency portfolio are denominated. This ensures the hedge relationship takes into account movements in the market value of your foreign currency securities. Always check with your advisor to ensure the appropriate Unit class for your portfolio and the appropriateness of the equity Index.
In the past over a number of years Currency Hedge Units would have provided an enhanced return on an international portfolio of between 2% p.a. and 4% p.a. In any one year a hedge loss can occur. There is no guarantee of future performance.
Again, always remember that all the times as a Unitholder where you see the words profit or loss; you are likely to have a corresponding opposite variation in your international portfolio valuation. Hedging is taxed as a "financial arrangement". Hedge profits are considered income and losses are an expense. Typically profits will attract tax and losses will be deductable or receive a tax credit. These are likely to be included in your annual tax return by your tax advisor. You are invited to check the tax implications in hedging your portfolio with your advisor.
The Unit Trust offer five different Classes of Units for subscription. Each Class offer an investor the ability to hedge their exposure to certain foreign currencies and equity Indexes, namely:
Global Units: linked to the MSCI World Index
Asia Units: linked to the MSCI Asia APEX Index
USD Units: linked to the S&P 500 Index
GBP Units: linked to the FTSE 100 Index
AUD Units: linked to the S&P/ASX 200 Index
Interested? Ask your Financial Intermediary if you are eligible to subscribe for currency hedge units. Alternatively, you can contact Savings & Investments on 09 820 5281 or mail@savingsandinvestments.co.nz.
Explanations:
1. The hedge value per client is : (Current NAV - Subscription Date NAV) x no. of Units
e.g. (1.0358-1.0000) x 250,000 Units =$8,950;
2. A positive hedge value is offsetting an equal and opposite currency loss on the related international securities arising from a NZD appreciation;
3. A negative hedge value is offsetting an equal and opposite currency gain on the related international securities arising from a NZD depreciation.
Subscriptions and Redemptions
Kauri Currency Hedge Units are, with notice, subscribed for and redeemed at NAV on Rebalance Date each month.
Subscription Procedure
No subscription monies are required.
Eligible subscribers indicate the NZD value of each Unit class for which they wish to receive the benefit of currency hedging.
Fees
Establishment fee 0.5% which is paid into the Trust Administration Account. From this account Trustee, Audit/accounting, Registry and a monthly Management fee of 0.35% p.a. up to NZ $50 million (with a minimum of $8,000 per month) and 0.25% p.a. thereafter are paid. If required, Unitholders will be levied by the Trustee to replenish the Trust Administration Account so that the Trust's operating expenses can be paid.
Currency hedge provider fee of 0.15% p.a. This is paid annually in arrears as an inclusion in the settlement of hedge profits and losses on 31 March each year.
Disclaimer: This website provides information only and does not purport to give investment advice. While this website has been prepared by Savings & Investments Limited with all reasonable care, Savings & Investments accepts no responsibility or liability for any errors and omissions.
Disclosure Statement: The most recent Prospectus for this current offer was registered on 27 June 2011 (as amended by a memorandum dated 30 November 2011). A copy of the Prospectus and the documents attached to it when it was registered (being copies of all material contracts and the Trust Deed) can be viewed at any time on the Companies Office website, www.companies.govt.nz. Where the relevant documents are not available on line, they can be requested by contacting the Companies Office – Business Centre at telephone 0508 266 726. The Companies Office may charge a fee for inspection of certain documents. You can also obtain further copies of this document free of charge, on request in writing or by telephone, from the Manager. |
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