What Your KiwiSaver Reports Mean

MONTHLY REPORTS SUMMARISED

Your personal details: Information about you. Use this page to keep us up-to-date when you change address, phone numbers, email addresses, etc. You can also update your investment direction and PIR here as well.

Your contributions: This report shows cash payments into your Gareth Morgan Kiwisaver Scheme account during the month. These contributions include IRD payments, employee contributions, employer contributions, cheque or direct debit payments and the interest earned while these contributions were held at IRD. It does not include money sent to the IRD for you but not yet forwarded to GMK.

Your investment position: This report is a snapshot of your investment at the end of the reporting month. It shows the quantity of each asset held, the end-of-month price of that asset, and the total value in NZ dollars. Details on how to read this report follow.

Your investment and performance commentry: This monthly report details the performance of your account compared to the benchmark. It also includes a commentary from the investment strategy on what has happened with GMK and markets for that month.

Your account movement report: This report shows the movement in your account balance from month to month –how it got from point A to point B. The report shows how much of the change in your account value was due to:

• contributions and withdrawals
• interest and dividends received,
• changes in the values of your investments, and
• expenses and taxes incurred.

Details on how to read your reports follows.

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HOW TO READ YOUR INVESTMENT POSITION REPORT

What does this report show?  It shows where your money is invested at the end of each month, and the value of those investments.  It shows the number of each security (asset) you hold, the currency in which the security is measured, the price and market value of each security in that currency; the exchange rate used to convert it to NZ dollars, and the value in NZ dollars.

Here is an explanation of what‘s covered in each column and row. A glossary of terms follows this section.

The Columns

• Security: This shows the currencies, bonds, investment trusts and shares in which your savings are invested.
• Currency:  This is the country in which the investment is listed.
• Quantity:  The number of each security held in your Kiwisaver account, rounded to two decimal places.
• Price:  The closing price on the last business day of the month of the securities you hold.  The price is in the local currency – so for a US share, the price is in US dollars.
• Local Market Value:  How much your investment is worth in local currency terms (so for your US shares, this value shows how much they are worth in US dollars).  It is equal to the quantity times the price.
• FX Rate:  The closing foreign exchange rate (versus the NZ dollar) on the last business day of the month.  So for your US shares, this will show the NZD/USD exchange rate. 
• NZD Market Value:  What each security is worth in NZ dollars.  It is equal to the local market value divided by the FX rate.
• Percentage of Assets:  How much of your total investment balance each security represents, expressed as a percentage.

The Rows

• Cash: On-call deposits held across various currencies. Cash is the most liquid asset in your portfolio.
• Fixed Interest: Usually a fixed term investment bond in government, local authority, banks or corporations returning a specified interest rate. However, these investments may also be perpetual, have a floating interest rate, or convert to shares upon maturity.
• Income Shares: A capital (or equity) interest in a company. Income shares pay a relatively high and consistent dividend.
• Growth Shares: A capital (or equity) interest in a company. Growth shares (either held directly or in a fund) that we expect will grow in value.
• Management Fee Payable to GMK: This represents the fee for managing and administering your savings. This has been calculated for the current month based on your account’s closing balance. It is deducted from your account the following month.
• Tax Payable: This represents your tax liability at the end of the current month. Your tax payable will go up month on month if your account generated taxable income. Tax payable will go down if there was a taxable loss, or we made a tax payment to the IRD. We accrue tax monthly, and pay it to the IRD quarterly.

INVESTMENT POSITION FAQ

What’s the difference between the GMK Cash account and the NZ account? 
When we receive a contribution from the IRD, a direct debit or a cheque, we hold the funds in the GMK Cash account. At the end of the month, the balance is transferred to GMK’s investment manager, Gareth Morgan Investments (GMI), to be invested on your behalf in either cash or securities.

The GMK Cash account balance is how much you have sitting in the ‘holding pen’ after fees and taxes due for the month have been taken account of. This money will be invested over the next month. The NZ Account is how many NZ dollars you hold as part of your invested funds. 

When I multiply quantity by price, I don’t get the same local market value that is shown in the report.  How come?
This is due to rounding. The report shows the quantity to only two decimal places, but we calculate your quantity with a much larger degree of precision. If you want to get an idea of the exact number of units you own of each security, you can divide the local market value by the price.

How come my quantity is showing as zero for a particular stock, but it still has a market value? This is due to rounding – if you hold less than 0.005 of a security, the report rounds the quantity down to 0.00.  This is more prevalent for high-priced securities, such as Google shares.  Over time, provided you are contributing regularly, your quantity of each security will increase to more significant levels.

If you have another question about understanding this report, please email us here and we’ll post the answer here shortly. We will not respond personally to these emails.

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HOW TO READ YOUR ACCOUNT MOVEMENT REPORT

Here is what each line in the reconciliation report means.

Opening Account Value.  Your account balance at the start of the month.

Contributions.  All contributions made into your account over the month, identified by contribution type. Any withdrawals from your account.

Investment Income.  The interest and dividends your investments earned during the month.

Movement in Value of Investments.  The realised and unrealised gains or losses made on your investments during the month.  (A realised gain is how much profit or loss you made when an investment was sold.  An unrealised gain is how much profit or loss you would have made if the investments had been sold.

• Cash.  The change in the value of cash that is due to realised and unrealised gains on the foreign  currency in your account. If the NZ dollar goes down, then the value of your cash held in foreign currency will go up; if the NZ$ goes up, the value of your cash held in foreign currency will go down.
• Fixed Interest.  The value of fixed interest investments can go up or down, depending on movements in interest rates and credit risk.  
• Shares.  How much you made or lost due to the movements in the value of your shares over the month.  This also includes gains and losses on currency hedging.

Expenses

• Management Fee.  The single fee paid to GMK to cover our costs for administering and managing your savings in the Gareth Morgan KiwiSaver Scheme.
• Accrued Tax.  This represents the tax charge that has been accrued for the current month, which is based on the taxable income generated on your investment account over the month. Taxable income includes not only income from interest and dividends, but also realised and unrealised gains/losses on fixed interest, foreign currency cash accounts & forward currency contracts (i.e. hedging), and Foreign Investment Fund (FIF) income calculated under the Fair Dividend Rate (FDR) or Comparative Value (CV) regimes. Expenses, such as the management fee, are deducted from taxable income. A negative accrued tax number indicates you’ve got taxable income for the month; a positive accrued tax number indicates a taxable loss for the month.

End Account Value. Your account balance at the end of the month, net of all expenses including third party costs and expenses not otherwise identified.

BENCHMARK FAQ

What is a benchmark?
A benchmark is a standard against which the performance of your investments can be measured.

To be meaningful, the benchmark must be appropriate to the market you’re investing in. The appropriate benchmark for a global share portfolio is a measure of how the world share market performs; for bonds, how the bond market performs; for cash, the return on world cash.

There’s no point in comparing a global share portfolio against the performance of a term deposit, or a bond portfolio against a property trust.

Why are benchmarks important?
Benchmarks are a useful tool for investors to judge whether or not their investment manager is adding value; that is, are returns higher than the benchmark and, therefore, is the manager adding value or not? As we and others have emphasised there are real dangers in focusing on short-term comparisons of investment performance; even the very best investment managers fail to deliver benchmark performance in some years.

Why have we changed our benchmarks?
There are two reasons we have changed our benchmarks.

As you have seen in your monthly reports, over the past 18 months we have steadily increased our default NZD exposure, which means our original benchmarks no longer accurately reflected how we invest. Also, our GIPS (Global Investment Performance Standards) verification process involves a review of benchmarks. This review identified a couple of changes that would better align our benchmark to our investment strategy.

We have made the following changes:

• changed the NZ currency exposure in the benchmarks to accurately reflect the higher NZD exposure in growth and balanced portfolios.
• reduced the benchmark weighting for shares in all three portfolios
• changed from the MSCI index for shares to the MSCI All Country index – the latter includes emerging country share markets

The exact changes are:

*    Benchmark changed at 31 March 2011 and figures calculated from 1 January 2011.
**     The MSCI AC World Index 100% Hedged to NZD Index is a custom index calculated by MSCI for, and as requested by, GMI.

 If you have any questions about benchmarks, please contact us by email or call us during office hours on 0800 427 384.

THE JARGON DEMYSTIFIED

Asset: Cash, bonds, shares… the things you “own” (just another word for security).

Accrued Dividend: A dividend that has been declared by a company, but has not yet been paid to shareholders.

Accrued Interest:  This is interest that has been earned but has not yet been paid.  E.g. interest that is paid quarterly will ‘accrue’ from the first day of the quarter until the end of the quarter when it will be paid.

Benchmark: A benchmark is a standard against which the performance of your investments can be measured. Click here for details about benchmarks.

Brokerage: Charges by a broker firm for the purchase and sale on market of bonds and shares. Brokerage is normally an agreed percentage of the transaction value.

Currency hedging: This helps to reduce the impact of movements in the value of the New Zealand dollar on the value of your portfolio—which is always reported in New Zealand dollars. The degree to which your portfolio is hedged will vary according to our view on the NZ dollar’

Dividend: A distribution of profits made by a company to their shareholders. The amount is decided by the company’s board of directors and is usually paid periodically (either quarterly, half-yearly or annually). Note – not all companies pay dividends.

Exchange:  A market where investment securities (assets) are traded (bought and sold).  E.g. the NZX is the New Zealand Exchange for buying and selling NZ listed bonds and shares.

Exchange Rate:  The rate used to convert one currency into another currency.  E.g. to convert the value of your US shares into NZ dollars we have to apply the USD/NZD exchange rate for the end of the reporting month. Or, if we are selling NZD and buying British pounds (GBP) we have to apply the NZD/GBP exchange rate quoted by the bank conducting the transaction.

Index: A pre-decided group of assets (securities) that represent a particular market or a portion of it. E.g. The NZX 50 Index comprises the top NZ shares by market value listed on the NZX (New Zealand Exchange).

Interest: A cash return on deposits with banks or other financial institutions or on bonds or other fixed interest assets.

Investment Trust: Collective investment vehicles, often specialising in particular sectors, themes or countries.

Liquidity: The ability to convert an asset to cash quickly. E.g. bonds and shares that can be sold on the sharemarket daily are more liquid than a house, which takes time to advertise, secure a buyer and complete settlement.

Market Value: The current quoted price at which investors buy or sell a share, bond, or currency multiplied by your holding of that investment security. The market prices quoted in your GMK portfolio are the closing values published on the last business day of the reporting month, converted to NZ dollars using the relevant exchange rates for the last day of the month.

Security: just another word for asset.


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