The Crediting Rate is defined as the investment earnings applied to Member account balances after a particular period.
Ideally, the Members’ earning rate is equal to the gross investment earnings of the Fund for that period (expressed as a percentage) less the investment management expenses, administration expenses, and taxes, and after allowing for any reserves (if applicable) during the same period.
This is hereafter referred to as Net Surplus Available to Members. If reserves are funded by Nambawan Super Limited (NSL), they represent reductions in the Annual Crediting Rate.
When is interest applied?
NSL determines an Annual Crediting Rate early each calendar year which is applied to the Member account balances retrospectively for the period from 1 January to 31 December of the previous year. NSL also determines and applies an Interim Crediting Rate in the event that a Member exits the Fund, such that the Member’s final entitlement includes an earnings rate for the period from the most recent Annual Crediting Rate till the date of exit.
Crediting Rates can be either positive or negative (as stipulated in the current Trust Deed), as they primarily depend on investment performance.
What is NSL’s Interim Crediting Rate Policy?
Because Members can leave the Fund at any point during the year, NSL estimates an Interim Crediting Rate. This rate is reviewed and agreed upon by the NSL Board, or delegated Committee throughout each year.
The Interim Crediting Rate is a ‘best estimate’ only and is subject to change. It is used to ensure exiting Members’ final entitlements include interest earned from the year to date, and reflect as closely as possible
The NSL Board recognises that some Members join or leave the Fund during the year, and also recognises that Fund earnings accrue at varying rates throughout the year. The NSL Board (through the Investment Committee and in consultation with the Licensed Investment Manager) regularly reviews (at least quarterly) current period investment returns of the Fund, and estimates the likely full-year investment return. The NSL Board realises this is a “best estimate” only and is subject to material changes.
Interim Crediting Rates are notional, and only apply when a Member exits the Fund. Interim Crediting Rates can be either negative or positive, as they primarily depend on investment performance.
The Licensed Fund Administrator is advised of the Interim Crediting Rate to be applied to exiting Member entitlements. In line with international practice, the Licensed Fund Administrator applies the Interim Crediting Rate using a time-weighted rate of return basis.
How is NSL’s Annual Crediting rate determined?
The NSL Board, in consultation with the Licensed Investment Manager, determines an Annual Crediting Rate once per annum. Only after the Net Surplus Available to Members has been calculated, can the Annual Crediting Rate be determined and returns credited to Member accounts. Determining Net Surplus Available to Members usually occurs early each calendar year, with draft financial accounts for the Financial Year ending the previous 31st December.
In determining the Annual Crediting Rate, the assets of the Fund are valued in line with international standards, using a hierarchy of valuation methods.
The overall net investment performance of the Fund plus general reserves is used to determine the Gross Surplus Available to Members. A deduction will be made for an amount required to be held for any future reserves arriving at the Net Surplus Available to Members. The Annual Crediting Rate reflects the distribution of the Net Surplus Available to Members as a percentage rate over the value of the Members’ account.
Once the crediting rate has been applied to Members’ accounts, the financial records maintained by the Fund are reconciled to the Member records maintained by the Licensed Fund Administrator.
