OneAnswer and ANZ OneAnswer Investment Portfolio - capital gain distributions

• OneAnswer Investment Portfolio

• OneAnswer Frontier Investment Portfolio

• ANZ OneAnswer Investment Portfolio

There has been no distribution to OneAnswer or ANZ OneAnswer Personal Super and Pension clients as tax is provided for in the unit price of the super fund, and no tax is payable in the pension fund.

The following funds are impacted, together, known as ‘the Funds’:

• Bennelong Australian Equities - OneAnswer Investment Portfolio and Frontier only

• Fidelity Australian Equities

• Arrowstreet Global Equity (Hedged)

• Greencape Broadcap.

It is expected capital gain distributions will be processed on or around 15 January 2021.

Contact your OnePath Business Development Manager/ IOOF Client Solutions Manager for an impacted client listing. Included in these client listings is a flag to indicate clients who are receiving distributions via their bank accounts.

We will publish an update on our website to advise clients of the capital gain distributions.

The distributions are being paid for the period ending 31 December 2020. This means all investors in the Funds on that date will receive a distribution.

• For investors who reinvest their distributions, they will see the reinvested units noted on their Quarterly Transaction Statement for the December quarter which is mailed to investors late January 2021. The overall value of their investment does not change but the unit price will fall and the units on issue will increase. The vast majority of investors in the Funds have nominated this method.

• For investors who receive distribution payments into their bank account they will see the distribution amount in their financial institution account approximately two days after processing, i.e. approximately Tuesday 19 January 2021. These investors will also see the unit price and their account balance fall by the distributed amount.

• Capital gains are generally taxable in the hands of the investor at their marginal tax rate for the financial year in which the income is attributed, i.e. in this case 2020/2021. The tax implications for investors will depend on their individual circumstances and tax positions at the end of the current financial year.
• Individual investors are entitled to a 50% discount on the capital gains as the Funds have held the assets for more than 12 months.
• There may be further capital gains distributable from the Funds at 30 June 2021, depending on market conditions over the remainder of the financial year.
• The distributions will be reported to investors in their OnePath Tax Statement expected to be issued late July 2021.

In late 2020, certain investment funds offered through OneAnswer and ANZ OneAnswer were restructured at the underlying level. In respect of the four funds, this led to a material capital gains tax (CGT) event and the need to distribute realised capital gains to current investors to manage investor equity through the course of the tax year.

For example, if we did not distribute the capital gains soon after the restructure, and a large number of investors left the Funds during the second half of the financial year then the remaining investors would bear a larger share of the gains at year end. Conversely new investors to the Funds after the restructure would be subject to capital gains incurred prior to the time they entered the Funds.

By passing through the capital gain implications in January, investors have more than five months remaining in the financial year to prepare for their tax outcome.

The restructure was required to ensure OneAnswer and ANZ OneAnswer meet regulatory requirements associated with the Ending Grandfathered Conflicted Remuneration legislation, specifically to the way investments are accessed. There has been no change to the Fund’s Investment Strategy, Investment Objective or any other fund feature.

For some of the Funds we moved to a mandate arrangement. This means the Funds are now invested in direct assets with asset management instructions coming directly from the Fund Manager. Where this is the case, the new structure will result in greater efficiency and lead to service improvements for investors. For example, unit prices will be made available within one day instead of two days. Faster unit pricing means we can process transactions and distributions of income and capital more efficiently and quickly for our investors.

The restructure involved the sale of current units we held in an external unit trust and the repurchase of new units or new assets (depending on the Fund). As a result of the disposal of units, a capital gains tax event occurred. In the case of four Funds this led to realised capital gains. The capital gains were a result of strong investment market performance over preceding years.

There were other investment funds restructured in late 2020 however in those cases, there were either no capital gain implications or the amount of capital gain was considered not material enough to distribute mid-financial year.

• The Quarterly Transaction Statement for the December quarter will show the total amount distributed for the period ending December 2020. This is mailed to investors in late January 2021.
• The OnePath Consolidated Tax Statement will be mailed to investors in late July 2021 and will show the assessable amounts for the financial year.