National Bank Term Fund has been designed for customers who want a tax effective* investment, don't need on-call access to their investment, and want to know exactly what their return will be.

The National Bank Term Fund has a guarantee under the New Zealand Deposit Guarantee Scheme. The Fund only invests in deposits with ANZ National Bank Limited, which are guaranteed under the scheme.

Full details of the New Zealand retail deposit guarantee scheme, the conditions (including investor eligibility criteria, a maximum guarantee limit per investor and a guarantee termination date of 12 October 2010) and a copy of the deed of guarantee and deed of nomination are available, free of charge on www.treasury.govt.nz.

Features are:

• It's a unit trust with Portfolio Investment Entity (PIE) status, so tax is effectively paid at your elected Prescribed Investor Rate (PIR)to a maximum of 30%
• Each investment in the Fund must be for a minimum of $5,000
• You pay no entry or exit fees
• Each investment earns a daily return on every dollar invested, paid out or compounded quarterly
• Income on each investment you make is distributed quarterly
• Your rate of return is locked for the term, so you know exactly how much income your investment will generate
• When an investment matures you can reinvest your funds (net of PIE tax) or have those funds paid out (net of PIE tax)
• The Fund invests in Term Deposits with ANZ National Bank Limited.

This information is intended to get you thinking about your investment goals. It is not intended as investment advice tailored to your personal financial circumstances. Before making investment decisions, you should consider your individual circumstances and seek assistance from other resources, for example financial planning services.

A copy of our National Bank Term Fund Investment Statement is available as a PDF, or you can request one to be sent to you by calling us on 0800 18 18 18.

You'll need Adobe Acrobat Reader to read the PDF version. If you don't have it, don't worry - it's free. Just follow this link to the Adobe site to download a copy.

The National Bank Term Fund is a tax effective* PIE with fixed terms and returns.

What is a Portfolio Investment Entity?

A Portfolio Investment Entity (PIE) is a managed fund that has tax benefits for certain investors. Certain managed funds (like the National Bank Term Fund) can apply to become a PIE and apply the tax benefits.

To explain the benefits of PIEs, let's look at managed funds before and after PIEs.

Before PIEs

• All managed funds had to pay tax on both income and capital gains at a flat rate of 33%. So even if your personal tax rate was 19.5%, you had to pay 33% tax on your managed fund investment.

After PIEs

• PIEs pay no tax on capital gains on all New Zealand and most Australian listed investments.
• Income earned by individual investors from a PIE is taxed at 12.5%, 21% or 30%, depending on each investor's own circumstances.
• Tax on PIE income is capped at 30%, which directly benefits investors on a personal tax rate of 33% or 38%.

For most people, this means paying less tax on an investment in a PIE, which means a better overall return - and more money in your pocket.

An example of how you could benefit from investing in a PIE.

Hamish earns a salary of $95,000 a year and pays income tax at 38%. He also has $100,000 invested in a term deposit paying 4.00% p.a., which earns interest of $2,480 after tax ($4,000 interest less $1,520 RWT = $2,480). If Hamish moved his investment from the term deposit to the National Bank Term Fund the tax on the income from the $100,000 invested would be capped at 30%, and there would be no further tax payable on this income. This increases his net return to $2,800 a year ($4,000 interest less $1,200 PIE tax = $2,800). To achieve a similar return by investing in a term deposit, Hamish would have to invest in a bank account paying 4.52% p.a. interest.

What tax rate applies to your investment?

Your investment in the National Bank Term Fund is taxed according to your Prescribed Investor Rate (PIR). The PIR can be 0% for charities, trusts or companies and for individual New Zealand residents will be either 12.5%, 21% or 30% (trusts can also choose between PIRs of 21% and 30% if they wish).

The PIR information at Inland Revenue can help you to determine your applicable PIR. If in doubt, prospective investors should seek their own independent tax advice on their applicable PIR.

*The taxation treatment of Portfolio Investment Entities is covered in the Investment Statement.

The information detailed above does not constitute tax advice. Prospective investors should seek their own independent tax advice in relation to their own situation prior to investing into the National Bank Term Fund.

Read our General Disclosure Statement and our Disclosure Statement prepared under the Securities Markets Act 1988.

Read the National Bank Term Fund Investment Statement(PDF 180KB) and come into any branch of The National Bank.

You'll need Adobe Acrobat Reader to read the PDF version. If you don't have it, don't worry - it's free. Just follow this link to the Adobe site to download a copy.