Bank of New Zealand Officers’ Provident Association Staff Superannuation Scheme

You now have a choice

Member Choice You now have a choice The aim of this presentation is to introduce you to Member Choice investment options Member Choice

Member Choice You now have a choice Hover over the bottom left corner of the screen for arrows that allow movement between slides. If you wish to exit the presentation at any time, simply press ‘ESC’ on your keyboard Member Choice

What should you consider? What you should consider What should you consider? Member Choice

What are your investment options? What you should consider The options - what are they? What are your investment options? Member Choice

How do you choose the right option for you? What you should consider The options - what are they? How do you choose? How do you choose the right option for you? Member Choice

First, let’s think about what you should consider during this process. The options - what are they? How do you choose? First, let’s think about what you should consider during this process. Member Choice

Consideration of these factors will in part determine Every Member is different - You should consider - other investment assets/liabilities - your age - level/security of income Consideration of these factors will in part determine

Every Member is different - You should consider - your approach to volatility of returns - other investment assets/liabilities - level/security of income - your age

Every Member is different - You should consider - your age - your approach to volatility of returns - other investment assets/liabilities - level/security of income Do you prefer consistency in your return or will you accept ‘ups and downs’ in the return to achieve a higher return over time

Every Member is different - You should consider - your age - your approach to volatility of returns - other investment assets/liabilities - level/security of income Let’s look at the relationship between an asset class and its volatility of return

As you can see there are four main asset classes Volatility vs Return High Shares Property Risk Fixed Income As you can see there are four main asset classes Cash Low Low High Return

Volatility vs Return High Cash investments offer a lower level of volatility of return than the other asset classes Shares Property Risk Fixed Income Cash Low Low High Return

Volatility vs Return High Shares Cash carries less risk than the other asset classes, but the return is expected to be lower. Property Risk Fixed Income Cash Low Low High Return

Let’s look at some past OPA gross returns from cash. Volatility vs Return High Shares Let’s look at some past OPA gross returns from cash. Property Risk Fixed Income Cash Low Low High Return

As you can see the returns were positive within a range of about CASH OPA gross returns 1993 - 2012 As you can see the returns were positive within a range of about 5% – 10% Expectation is that the return will be in line with a 90 day Bank bill rate Past performance should not be taken as an indicator of future performance

Volatility vs Return High Fixed income offers moderate potential return and less volatility in return than shares. Shares Property Risk Fixed Income Cash Low Low High Return

suggesting a higher degree of volatility of return than cash FIXED INTEREST OPA gross returns 1993 - 2012 The return is more up and down than cash. The range in which it fell is between -10% & 20% suggesting a higher degree of volatility of return than cash Global returns include a hedge (100%) to 2008 Past performance should not be taken as an indicator of future performance

Shares offer a higher potential return but with greater volatility Volatility vs Return High Shares Property Shares offer a higher potential return but with greater volatility Risk Fixed Income Cash Low Low High Return

SHARES OPA gross returns 1993 - 2012 As you can see shares can offer a high return but also a negative return. The range these returns fell into were as low as –37.9% and as high as 51.8% Overseas returns include the hedge at various levels Past performance should not be taken as an indicator of future performance

Volatility vs Return High If we show the returns together we can see how each asset class varies in its returns Shares Property Risk Fixed Income Cash Low Low High Return

Volatility vs Return In summary High Shares Property Fixed Income Cash Risk In summary Fixed Income Cash Low Low High Return

Volatility vs Return High The higher the expected return, the greater the volatility and the higher the risk Shares Property Risk Fixed Income Cash Low Low High Return

Volatility vs Return High Shares So if you’re risk averse, you’ll accept more cash and fixed interest in your investment Property Risk Fixed Income Cash Low Low High Return

Volatility vs Return If you’re willing to take a higher level of risk you’ll accept more shares in your investment High Shares Property Risk Fixed Income Cash Low Low High Return

Member Choice gives you an opportunity to select a risk / return profile that fits with your circumstances

So what are the options available

CONSERVATIVE/CONSERVATIVE 17.5 Your Investment Options: CASH/CASH 17.5 CONSERVATIVE/CONSERVATIVE 17.5 BALANCED/BALANCED 17.5 GROWTH/GROWTH 17.5 There are eight options – The 17.5 options are income tax related (per PIE/PIR rules; refer Investment Statement)

Your Investment Options: CASH/CASH 17.5 CONSERVATIVE/CONSERVATIVE 17.5 BALANCED/BALANCED 17.5 GROWTH/GROWTH 17.5 We’ll examine CASH/CASH 17.5 first

Neutral Asset Allocation CASH/CASH 17.5 As the name suggests these options invests in cash. Neutral Asset Allocation

With a lower risk of negative returns Volatility vs Return With a lower risk of negative returns High Shares Property Risk Fixed Income Cash CASH/CASH 17.5 Low Low High Return

Neutral Asset Allocation CONSERVATIVE/CONSERVATIVE 17.5 These options invest predominately in Income Assets – i.e., Cash and Fixed Interest. Neutral Asset Allocation

CONSERVATIVE/CONSERVATIVE 17.5 Volatility vs Return Expect a lower return over the longer term than the Balanced and Growth options High Shares Property Risk Fixed Income Cash CONSERVATIVE/CONSERVATIVE 17.5 Low Low High Return

Volatility vs Return Expected chance of a negative return in this option is 1 in 75 High Shares Property Risk Fixed Income Cash CONSERVATIVE/CONSERVATIVE 17.5 Low Low High Return

Neutral Asset Allocation BALANCED/BALANCED 17.5 These options includes investments in all asset classes Neutral Asset Allocation

Neutral Asset Allocation BALANCED/BALANCED 17.5 It will provide both income and capital growth. These options should provide a higher return than cash over the medium term (5 – 7 years, but expect ups and downs in returns including some years of negativity Neutral Asset Allocation

These options offer medium risk and return Volatility vs Return These options offer medium risk and return High Shares Property Risk BALANCED/BALANCED 17.5 Fixed Income Cash Low Low High Return

Volatility vs Return Expected chance of a negative return in these options are, on average 1 out of every 10 years High Shares Property Risk BALANCED/BALANCED 17.5 Fixed Income Cash Low Low High Return

Neutral Asset Allocation GROWTH/GROWTH 17.5 Investment predominantly in growth assets – i.e., shares and property Neutral Asset Allocation

Neutral Asset Allocation GROWTH/GROWTH 17.5 These options suit members who are looking for high returns over the long term and accept that returns will be volatile Neutral Asset Allocation

Volatility vs Return GROWTH/GROWTH 17.5 High Expected chance of a negative return in these options are, on average 1 out of every 5 years Shares Property Risk Fixed Income Cash Low Low High Return

Investment Choice It’s important that you choose the right option for you But be aware, a 2% or 3% difference in return can mean a lot For example:

Investment Choice Assume a current entitlement of $55,000 (an OPA average) with regular contributions of $4,000 p.a. for 10 years (compounded monthly) Future lump sum at 4% net of tax/fees $129,438 Future lump sum at 6% net of tax/fees $151,220 Future lump sum at 7% net of tax/fees $163,459 Lump sums include contributions only; not employer contribution

So what next? Decide how much risk you’re willing to take. Use the calculator provided to help get an indication of what risk profile suits you. If you’re still uncertain seek independent financial advice Once you’ve decided on an option, complete the option form If you don’t select an option you will be assigned to the Balanced/Balanced 17.5.

Remember, we are available to answer any questions you may have. Thank you for taking time to look at Member Choice