Comments from CEO Adrian Orr on the Guardians' use of CIVs in tax-neutral jurisdictions:

"The Guardians has a comprehensive tax risk management framework designed to ensure that the Fund meets its worldwide tax obligations. We explicitly rule out aggressive tax positions. The Fund does not invest in schemes or arrangements that use secrecy laws to conceal assets and income that are subject to tax, or which create false tax deductions.

The Fund requires collective investment vehicles (CIVs) in which it invests to provide full tax transparency and information exchange for tax purposes, and compliance with all relevant laws.

The use of CIVs is common and legal practice internationally among institutional investors such as the Fund, and is widely considered best-practice portfolio management. In most cases, non-US resident investors such as the Fund would not be able to access these investments without using a collective investment vehicle."

By way of background, the Fund pays tax at source (e.g. United States) on the underlying investments within the CIV. The CIV then provides a tax-neutral jurisdiction that ensures its collective income does not then pay an additional layer of foreign tax in relation to the same income. New Zealand income tax is then paid by the Fund on income from the investments. (Unlike most sovereign wealth funds the Fund pays income tax in its home country, New Zealand. The Fund has paid $3 billion in tax since inception).

As at 30 June 2013 approximately 7% of the Fund was invested in this way. The Fund holds investments in CIVs domiciled in the following low-tax jurisdictions: Cayman Islands, Isle of Man, British Virgin Islands and Mauritius.

The IRD is aware of the Fund's investments in CIVs and we note that New Zealand has signed tax exchange of information agreements with the majority of these jurisdictions.