Separately Managed Account

Transcription

1 Separately Managed Account Supplementary Product Disclosure Statement Preparation date 19 March 2018 This is a Supplementary Product Disclosure Statement (SPDS) that supplements the information contained in the Product Disclosure Statement (PDS) dated 20 November 2017 and should be read in conjunction with the PDS. Please read this SPDS carefully to make sure you understand the changes described and how they affect you. Changes to the Preferred broker The following text will be added to the end of the section titled 'Related party transactions and conflicts of interest' on page 32: WealthHub Securities Limited is a member of the NAB group of companies and provides trading services to NAL. Under the heading Transaction costs for managed investment schemes' on page 34 the 'default broker' is to be replaced with the 'preferred broker' so it reads as follows: The brokerage currently charged by the preferred broker is 0.21% of the total trade amount subject to a minimum of $5.13. Under the heading Transaction costs for managed investment schemes' on page 34 delete the following paragraph: An investment manager can use a different broker which may result in different brokerage costs being charged. And replace with: The preferred broker is WealthHub Securities Limited (a NAB Group company). For more information For more information please call MLC between 8am and 6pm (AEST/AEDT) Monday to Friday, on or contact your financial adviser. Postal address GPO Box 2567 Melbourne VIC 3001 Issuer Navigator Australia Limited (NAL) ABN AFSL GPO Box 2567 Melbourne VIC 3001 Tel Fax mlc.com.au Navigator Australia Limited (NAL) ABN AFSL Part of the National Australia Bank Group of Companies. An investment with NAL is not a deposit or liability of, and is not guaranteed by, NAB. OBJA

2 Separately Managed Account Product Disclosure Statement Preparation date 20 November 2017 Issued by Navigator Australia Limited (NAL) ABN AFSL

3 The information in this Product Disclosure Statement is general and doesn t take into account your personal objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation and needs. A financial adviser can help you decide if this is the right product for you.

4 Contents About the SMA 4 Summary of the Model Portfolios 5 Investment Manager Profiles 7 Things to consider before you invest 11 Model Portfolios 17 How the SMA is managed 30 Fees and other costs 33 The purpose of this Product Disclosure Statement (PDS) is to give you the information you need when investing in the Integrated Separately Managed Account (SMA) which is a Registered Managed Investment Scheme. ARSN In this PDS, NAL is referred to as us, we, our, responsible entity. This Product Disclosure Statement (PDS) is issued by Navigator Australia Limited ABN AFSL (NAL), the responsible entity of the Integrated Separately Managed Account ARSN (SMA). The SMA is a registered managed investment scheme, and the purpose of this PDS is to provide you with information that may assist you in making a decision as to whether to invest in the SMA. Investment through the SMA, and the information in this PDS, is only intended to be accessed by persons who hold an account in an investor directed portfolio service, a master trust or a superannuation fund (each referred to in this PDS as a platform ) that is administered or operated by a NAB Group company (referred to in this PDS as the platform operator ). When you apply to invest in the SMA via the relevant platform, the platform operator will hold the relevant interest in the SMA on your behalf according to the terms of that platform. The information in this PDS is subject to change. Changes to the SMA and the Model Portfolios will be made from time to time and we may add or remove Model Portfolios. The Platform operator will advise you of changes to information in this PDS that are materially adverse. We may provide this information to you by mail, or by making the information available on mlc.com.au. We ll let you know when information about your Model Portfolio has been made available online. If you prefer to receive updates about your account by mail, please let us know. Information in relation to changes that are not materially adverse will be made available on mlc.com.au but you may not be directly notified of these updates. You may, however, obtain a paper copy of any updated information on request free of charge. For more information please speak with your financial adviser. You can get a free copy of the latest PDS on mlc.com.au/forms_and_brochures or by contacting us. Please read the latest PDS before making an investment. References to mlc.com.au in the online copy of this document link directly to the additional information available. NAL is a subsidiary of National Australia Bank Limited (ABN AFSL and Australian Credit Licence (NAB) and is part of the National Australia Bank Group of Companies (NAB Group). An investment in the SMA or in the Model Portfolios that are made available via the SMA from time to time is not a deposit with, or liability of, NAB or any other member of the NAB Group. Neither NAL, NAB nor any other company in the NAB Group stands behind or otherwise guarantees the capital value or investment performance of the SMA or any Model Portfolio. Separately Managed Account Product Disclosure Statement 3

5 About the SMA The SMA allows you to access an extensive range of professionally constructed Model Portfolios made up of: securities listed on the Australian securities exchange and cash investments; or securities listed on the Australian securities exchange, managed funds and cash investments so you can choose the Model Portfolio you want to suit your needs. Benefits of the SMA Individual accounts When you invest in the SMA through a platform, a separate interest will be issued to the platform operator in relation to each Model Portfolio you choose, and any assets we hold in relation to that separate interest will be accounted for separately. Asset holdings that relate to a Managed Portfolio that you select are referred to in this PDS as your account or your Managed Portfolio. You (or the trustee in the case of a superannuation investment) retain beneficial ownership of the assets held in your account. Transparency You can view the assets that you hold within your chosen Model Portfolio through your platform reports and facilities. Portability You can transfer Australian securities and units in managed funds that are held by (or for) you into the Wrap platform before transfer into the SMA and still retain the beneficial interest in those assets. You can also transfer your securities and units in managed funds between your Model Portfolios within the SMA. Please see page 29 for more details. No inherited capital gains When you transfer assets into your account, or assets are acquired by us and held as part of your account, an individual cost base is established in relation to that Model Portfolio. For securities this means there are no tax consequences for you as a result of other investors transactions. Professional investment management You can benefit from the services provided to NAL by investment professionals who monitor and manage Model Portfolios on our behalf. NAL, as responsible entity for the SMA, has appointed a number of investment managers to provide NAL with a range of investment and advisory services in connection with the Model Portfolios that you can select when investing in the SMA. Information about these investment managers is detailed on the following pages. Consolidated reporting Because the SMA is fully integrated with the technology systems of the platform through which you access the SMA, you will be able to have a comprehensive view of your Model Portfolio. This means you can view the breakdown of securities, managed funds and cash investments in your Model Portfolio keep track of your investments, and transact between the SMA and other investments on your platform easily. The diagram below shows how the SMA works. Investor Platform Cash Account Managed Fund Direct Equities SMA Model Portfolio manages Investment Manager in specie transfer Individual Model Portfolio 4 Separately Managed Account Product Disclosure Statement

6 Summary of the Model Portfolios Who can invest If you want to start an investment in the SMA, you must do so through an Investor Directed Portfolio Service (IDPS), a master trust, a superannuation fund or Wrap account collectively known as a platform, administered or operated by NAL or another NAB group company. Please make sure that you have the latest copy of the PDS or in the case of an IDPS, the IDPS Guide for the platform that you are invested in. These documents are referred to in this PDS as your platform offer documents. You can obtain the latest copy of the platform offer documents on mlc.com.au or you can request a copy by calling us. Investments into the SMA via your platform account can be made in the following ways: cash investment; transfer of securities and/or units in managed funds; or a combination of both. The minimum initial investment is different for each Model Portfolio, minimum investment amounts for listed securities only Model Portfolios is $10,000 and for multi-asset model portfolios is $100,000. There is no minimum for additional investments you may choose to make in your Model Portfolio. You can monitor your investment through your Adviser who will have access to reporting and performance related to your investments in the SMA Listed security Model Portfolios Investment manager Indicative number of securities held Investment approach Automatic payment of investment income Benchmark index Model management fee (% pa) Index Blue Chip Top 20 Antares 20 Index Yes S&P/ASX 20 Accumulation Index 0.21 Value/Income Antares Dividend Builder Antares Listed Property Antares Income Yes S&P/ASX 200 Industrials Accumulation Index Antares Income Yes S&P/ASX 200 A-REIT Accumulation Index JBWere Income JBWere Income Yes S&P/ASX 200 Accumulation Index 0.55 JBWere Listed Fixed Income JBWere Income Yes Benchmark unaware 0.55 Perennial Value Shares for Income Zurich Australian Listed Property Perennial Value Value/Income Yes S&P/ASX 300 Accumulation Index (gross dividend yield) Zurich Income Yes S&P/ASX 300 AREIT Accumulation Index Separately Managed Account Product Disclosure Statement 5

7 Summary of the Model Portfolios Listed security Model Portfolios Investment manager Indicative number of securities held Investment approach Automatic payment of investment income Benchmark index Model management fee (% pa) Core/Growth Antares Core Opportunities Antares Ex-20 Australian Equities Ausbil Australian Concentrated Equities BT Australian Share Perpetual Direct Equity Alpha Antares Core Yes S&P/ASX 200 Accumulation Index Antares Growth No S&P/ASX 200 Accumulation Index excluding the S&P/ASX 20 Accumulation Index Ausbil Core No S&P/ASX 300 Accumulation Index BT Investment Management Core Yes S&P/ASX 300 Accumulation Index Perpetual Growth Yes S&P/ASX 300 Accumulation Index Redpoint Industrials Redpoint Core Yes S&P/ASX 100 Industrials Accumulation Index Janus Henderson Australian Equity Janus Henderson Investors Growth No S&P/ASX 300 Accumulation Index Multi-Asset Model Portfolios Investment manager Indicative number of investments held+ Investment approach Automatic payment of investment income Estimated Buy-Sell Spread range (%) Estimated ICR (% pa)* Model Management Fee (% pa) Growth PIC Lifecycle Growth Moderate PIC Lifecycle Growth Assertive PIC Lifecycle Growth Aggressive Income PIC Lifecycle Income Conservative PIC Lifecycle Income Moderate PIC Lifecycle Income Assertive Lonsec Investment Solutions Lonsec Investment Solutions Lonsec Investment Solutions Lonsec Investment Solutions Lonsec Investment Solutions Lonsec Investment Solutions 8-18 Growth Yes % Growth Yes % Growth Yes % Income Yes % Income Yes % Income Yes % * The Indirect Costs are an estimation of the costs that will be incurred through investing in the underlying managed investment schemes. The actual costs incurred may vary. These costs include any applicable expense recovery and performance fee payable to the investment manager of the underlying managed investment schemes. We expect the Indirect Costs to be -0.10% to +0.10% of this estimate. For example, in the case of Indirect Costs of 0.40%, the range would be between 0.30% and 0.50% + Multi-Asset Model Portfolios may invest in managed investment schemes which expand your breadth of investment over additional securities and trusts increasing diversification The Private Investment Consulting (PIC) Lifecycle Model Portfolios may be selected only by PIC Accredit Advisers. A PIC Accredited Adviser is an authorised representative of a licensee who has retrieved accredited approval from PIC to access their services and the PIC labeled investment options 6 Separately Managed Account Product Disclosure Statement

8 Investment Manager Profiles Antares is a wholly owned asset management business that is a partner of NAB Asset Management. Antares manages more than $33.9 billion in equities and fixed income (as at 30 June 2017). Antares believes that the pricing of individual companies and sectors in the Australian share market is at times inefficient. This mispricing occurs because investors tend to take a shortterm view, over-react or under-react to changes in a company s operating environment, and make unwarranted generalisations about similar companies. As a consequence, stocks sometimes trade away from their underlying valuation. Antares seeks to identify and exploit these mispricing opportunities by taking a longer-term view and detailed research of individual stocks. Underpinning the approach to stock selection is a large and experienced team of analysts that gather information through financial analysis, peer company comparisons and company visits to gain a true understanding of the business and the issues it faces. Antares depth of knowledge of Australian listed companies is the foundation for all investment decisions. Antares stock selection process has no inherent style, size or sector bias. Rather, it aims to ensure Antares portfolios reflect the mispricing opportunities identified through rigorous stock research. Ausbil s core business is the management of Australian securities for major superannuation funds, institutional investors, master trust and retail clients as well as being the responsible entity of several registered managed investment schemes. Ausbil is owned by its employees and indirectly by New York Life Investment Management Holdings LLC (New York Life Investments), a wholly owned subsidiary of New York Life Insurance Company. New York Life Investments, through its multi-boutique investment structure, offers a broad array of investment capabilities. From equity to debt or fixed income, domestic to international, growth to value, indexed to active, large cap to small cap and publicly traded securities to private placements, New York Life Investments, through its multi-boutique investment structure, has a team of investment professionals focused on virtually every sector of the capital markets. BT Investment Management (Institutional) Limited referred to as BT Investment Management or ( BTIM ) follows a multi-boutique business model, where teams of investment professionals focus exclusively on asset management while distribution, compliance, business and general management functions are delivered centrally. BTIM offers investors a range of investment choices including Australian shares and property securities, fixed income and cash, absolute return investments, international shares and property securities. To complement its in-house expertise, BTIM also partners with leading global and domestic managers. BTIM is a wholly owned subsidiary of BT Investment Management Limited which is one of the largest ASX-listed pure investment managers (ASX:BTT). Separately Managed Account Product Disclosure Statement 7

9 Investment Manager Profiles Janus Henderson Investors exists to help clients achieve their long-term financial goals. Formed in 2017 from the merger between Janus Capital Group and Henderson Global Investors, we are committed to adding value through active management. For us, active is more than our investment approach it is the way we translate ideas into action, how we communicate our views and the partnerships we build in order to create the best outcomes for clients. We are proud to offer a highly diversified range of products, harnessing the intellectual capital of some of the industry s most innovative and formative thinkers. Our expertise encompasses the major asset classes, we have investment teams situated around the world, and we serve individual and institutional investors globally. As of 30 June 2017 we have $449.7bn in assets under management, more than 2000 employees and offices in 27 cities worldwide*. Headquartered in London, we are an independent asset manager that is dual-listed on the New York Stock Exchange and the Australian Securities Exchange. JBWere was established in 1840 and is a highly regarded Private Wealth brand across the Australian wealth management industry. The management of intergenerational, family and institutional wealth has been the cornerstone of the JBWere business since inception. JBWere Limited is a wholly owned subsidiary of the NAB Group and provides clients with an extensive array of investment options. The organisation is focused on delivering leading investment research insights, solutions and portfolio management services to an extensive range of retail and sophisticated investors. JBWere, through its financial networks, provides specialised research capabilities across a diversified suite of asset classes including Australian equities, global equities, Australian and international fixed interest and property. The JBWere Investment Strategy Group (ISG) is focused on identifying companies with high quality earnings growth that can be purchased at a reasonable price and those companies that have identifiable and sustainable business models. The ISG team adheres to a well-defined portfolio construction methodology with extensive risk management tools. Perennial Value is a specialist, active investment management firm. Formed in 2000 and led by well-known Value investor John Murray, Perennial Value s sole focus is to deliver excellence in funds management through equity ownership and the alignment of interests between key investment management staff and our clients. As at 30 September 2016 Perennial Value managed over $8.7 billion on behalf of institutional and retail clients. Perennial Value seeks to buy shares in good businesses that are undervalued by the market, with a belief that good businesses are eventually recognised by markets and are positively revalued. 8 Separately Managed Account Product Disclosure Statement

10 The PIC Lifecycle portfolios are managed by Lonsec Investment Solutions Pty Ltd (LIS), and incorporate advice and input from nabinvest Capital Partners Pty Ltd (part of the NAB Group) in areas such as asset allocation, to provide a blend of ideas from different sources to structure portfolios tailored specifically to the needs of NAB s licensee network. Lonsec Investment Solutions Pty Ltd is a wholly owned subsidiary of Lonsec Fiscal Holdings Pty Ltd. Drawing on Lonsec Research s established research and portfolio construction expertise and deep resources LIS provides access to a range of model portfolio solutions across listed and unlisted investments. nabinvest Capital Partners licenses NAB Asset Management s Private Investment Consulting (PIC) group to provide specialist asset consulting and implemented services to HNW individuals and smaller institutional clients including family offices, foundations, endowments, insurance companies and businesses. PIC has been providing those services since PIC will provide the insights of JANA Investment Advisors as the source of primary capital markets research and asset allocation views that are considered by the joint Lonsec/PIC investment committee responsible for the PIC Lifecycle portfolios. JANA is a leading Australian investment consultant with extensive experience in dynamic asset allocation. Perpetual Investment Management Limited ( Perpetual Investments ) (ABN ; AFSL ) is the Investment Manager in relation to the establishment and implementation of the Perpetual Direct Equity Alpha Portfolio. Perpetual Investments is one of Australia s leading investment managers. Perpetual Investments is part of the Perpetual Group, which has been in operation for 130 years. By employing some of the industry s best investment specialists and applying a proven investment philosophy, Perpetual Investments has been able to help generations of Australians manage their wealth. Perpetual Investments investment style is first and foremost based on bottom-up fundamental analysis. This approach firstly selects stocks based on company specific fundamentals, and then by the relative attractiveness of their value. The outcome of this investment process is that Perpetual Investments share portfolios demonstrate value characteristics. Stocks are bought only if they have passed rigid stock selection criteria and are deemed to be quality companies, and then only if they are found to be attractive on a valuation basis. In determining investment quality, investments are carefully selected on four criteria: conservative debt levels sound management quality business; and in the case of industrial shares, recurring earnings. Redpoint is a boutique fund manager specialising in listed asset classes including Australian equities, international equities, global infrastructure and global property. As a boutique that s majority-owned by its employees, Redpoint s interests are closely aligned with its clients. Redpoint s partnership with NAB Asset Management provides them with strength and support so they can remain focused on what they do best delivering enduring investment outcomes for their clients. The Redpoint team applies their knowledge of equity markets and deep understanding of risk with the aim of delivering investment solutions that are cost efficient, well-diversified and meet their investment objectives. Separately Managed Account Product Disclosure Statement 9

11 Zurich Financial Services Australia is part of the worldwide Zurich Financial Services Group, an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets. Zurich Investments is the funds management arm of Zurich Financial Services Australia. Through Zurich Investments, investors can gain exclusive access to a range of specialist managers. Rather than managing money in-house, Zurich Investments forms long-term strategic investment partnerships with specialist investment managers who possess a successful performance track record and adhere to a disciplined investment style. Zurich Investments has appointed Renaissance Property Securities Pty Ltd (Renaissance) as its strategic investment partner for Australian Property Securities investments. Renaissance was established in April 2003 as a division of Renaissance Asset Management and combines over 40 years of Australian property securities investment management experience. 10 Separately Managed Account Product Disclosure Statement

12 Things to consider before you invest Each Model Portfolio may be invested in: securities listed, or about to be listed, on the Australian Securities Exchange; units in managed funds; and cash investments. Having a small number of securities or interests in managed funds in a Model Portfolio, enables the investment manager to focus and keep up to date on the chosen product issuers. However there can be greater volatility in returns because the performance of a few assets can impact the performance of the Model Portfolio as a whole. Before you do any investing, there are some things you need to consider, including the level of risk you are prepared to accept. Factors that will affect your decision include: your investment goals the savings you ll need to reach your goals your age and how many years you have to invest where other parts of your wealth are invested the return you may expect from your investments, and how comfortable you are with investment risk. Investment risk Even the simplest investment comes with a level of risk. Different investments have different levels of risk, depending on the assets that make up the investment. While the idea of investment risk can be confronting, it s a normal part of investing. Without it, you may not get the returns you need to reach your financial goals. This is known as the risk/return trade-off. There is also a risk that investing through the SMA may give different results than self-directed investment Many factors influence an investment s value. These include, but aren t limited to: market sentiment changes in inflation growth and contraction in Australian and overseas economies changes in interest rates defaults on loans company specific issues liquidity (the ability to buy or sell investments when you want to) changes in the value of the Australian dollar changes in Australian laws and those of overseas jurisdictions, and a counterparty not meeting its obligations eg. when buying securities the seller may not deliver on the contract by failing to provide the securities. Other risks The significant risks of investing in the SMA are typical of the risks of making a similar investment in listed securities and managed funds. In addition to the risks explained above, the following may influence a Model Portfolio s value: risk: a manager s investment approach directly impacts the value of its Model Portfolio and performance is likely to vary in different market conditions. No single investment approach performs better than all others in all market conditions. Changes in the investment manager s key personnel may also affect performance. Scheme risk: risks specific to the SMA include the risk that the SMA, or a particular Model Portfolio, or an Investment Managers services could be terminated and that the fees and costs could change. Where an Investment Manager is replaced the we may appoint a replacement Investment Manager and pay fees to that Investment Manager including where the Investment Manager appointed is a related party to NAB. There is also a risk that investing through the SMA may give different results than self-directed investing because of the impact of fees and other costs. Liquidity risk: this is the risk that a security or managed fund may not be able to be sold quickly enough to prevent or minimise a loss (for example if a security is suspended from trading on the market or a managed fund is frozen or has redemptions suspended). A lack of liquidity may also affect our ability to rebalance a Model Portfolio or the amount of time it takes us to satisfy withdrawal requests. Separately Managed Account Product Disclosure Statement 11

13 Things to consider before you invest Concentration Risk: in a concentrated portfolio of up to 40 equities, a Model Portfolio s returns may be more volatile than those of a more diversified portfolio. Its exposure to a smaller number of investments means it is more sensitive to changes in the value of those investments. Small company risk: shares in small and medium sized companies trade less frequently and in lower volumes and therefore generally experience greater price volatility than shares in large companies. They may also underperform large companies for many years. Compared with larger companies, small companies, may also have: limited public information due to shorter operating histories smaller markets for their products new to market product concepts fewer product lines heavier dependence on key personnel, and less financial resources. Implementation risk: the performance of your Model Portfolio may differ to the reported performance of the relevant Model Portfolio due to a number of factors such as cash flows, portfolio reweighting and timing difference. Valuation risk: is the risk that assets held by you in the Model Portfolio cannot be valued due to delays in receiving unit prices or asset values for your investment in a timely manner. Types of assets Asset classes are generally grouped as defensive, growth or alternatives (which can be either defensive or growth) depending on their characteristics. Multi-asset portfolios include defensive, growth and alternative assets because they generally perform differently. For example, defensive assets may be in a portfolio to provide returns when share markets are weak. And growth assets may be included because of their potential to produce higher returns than cash in the long term. However, in some market conditions, all types of assets may deliver low or negative returns at the same time. The main differences between these types of assets are: Assets classes included How they are generally used Risk and return characteristics Defensive Growth Alternatives Cash and fixed income securities To generate income and stabilise returns. Expected to produce lower returns, and be less volatile, than growth assets over the long term. Shares and property securities To provide long-term capital growth and income. Expected to produce higher returns, and be more volatile, than defensive assets over the long term. A very diverse group of assets and strategies. Some examples include private assets and hedge funds. Because alternatives are diverse, they may be included in defensive or growth assets. To provide returns that aren t strongly linked with those of mainstream assets. They may be included for their defensive or growth characteristics. Expected to produce returns and volatility that aren t strongly linked to mainstream assets such as shares. Risk and return characteristics of different alternative investments can vary significantly. 12 Separately Managed Account Product Disclosure Statement

14 Indicative returns Indicative returns and volatility over a market cycle Higher Lower Volatility Alternatives Cash The value of an investment with a higher level of risk will tend to rise and fall more often and by greater amounts than investments with lower levels of risk, that is, it is more volatile. Periods of volatility can be unsettling and may occur regularly. You may find it useful to know that often investments that produce higher returns and growth in value over long periods tend to be more volatile in the short term. By accepting that volatility will occur, you ll be better able to manage your reaction to short-term movements. This will help you stay true to your long-term investment strategy. When considering your investment, it s important to understand that: Alternatives Fixed income its value will vary over time investments with higher return potential usually have higher levels of risk Alternatives Indicative volatility Shares Listed property securities Alternatives Alternatives Alternatives Higher returns aren t guaranteed, and you may lose some of your money, and previous returns shouldn t be used to predict future returns. Diversify to reduce volatility and other risks Diversification investing in a range of investments is a sound way to reduce short-term volatility of a portfolio s returns. That s because different types of investments perform well in different times and circumstances. When some are providing good returns, others may not be. Portfolios can be diversified across different asset classes, industries and countries as well as across investment managers with different approaches. The more you diversify, the less impact any one investment can have on your overall returns. One of the most effective ways of reducing volatility is to diversify across a range of asset classes. Asset classes Asset classes are groups of similar types of investments. Each class has its risks and benefits, and goes through its own market cycle. A market cycle can take a couple of years or many years as prices rise, peak, fall and stabilise. Through investing for the long term, at least through a whole market cycle, you improve your chance of benefiting from a period of strong returns and growth to offset periods of weakness. The illustration on page 11 shows indicative expectations of returns and volatility for the main asset classes over a whole market cycle. But each market cycle is different, so unfortunately it isn t possible to accurately predict asset class returns or their volatility. Depending on the conditions at the time, actual returns could be significantly different from those shown. Here are the main asset class risks and benefits. Cash Cash is generally a low risk investment. Things to consider: Cash is often included in a portfolio to meet liquidity needs and to stabilise returns. The return is typically all income and is referred to as interest or yield. Cash is usually the least volatile type of investment. It also tends to have the lowest return over a market cycle. Separately Managed Account Product Disclosure Statement 13

15 Things to consider before you invest The market value tends not to change. However, when you invest in cash, you re effectively lending money to businesses or governments that could default on the loans, resulting in a loss on your investment. Many cash funds invest in fixed income securities that have a very short term until maturity. Fixed income When investing in fixed income, you re effectively lending money to businesses or governments. Bonds are are a common form of fixed income security. Things to consider: Fixed income securities are usually included in a portfolio for their relatively stable return characteristics. Returns typically comprise interest and changes in the market value of the security. Interest rates and values tend to move in opposite directions. Therefore when interest rates rise, market values can fall and when interest rates fall, market values can rise. While income from fixed income securities usually stabilises returns, falls in their market value may result in a loss on your investment. Market values may fall due to concern about defaults on loans or an increase in interest rates. When interest rates are low, the risk of rates rising, and market values falling is greatest. There are different types of fixed income securities and these will have different returns and volatility. Investing in fixed income securities outside of Australia may expose your portfolio to movements in exchange rates. Property securities Investing in property securities gives you exposure to listed property securities in Australia and around the world. These are also referred to as Real Estate Investment Trusts (REITs). Things to consider: Property securities are usually included in a portfolio for their income and growth characteristics. Returns typically comprise income (such as distributions from REITs) and changes in REIT values. Returns are driven by many factors including the economic environment in various countries. The global REIT market is far more diversified than the Australian REIT market. Property securities returns can be volatile. Investing outside Australia may expose your portfolio to movements in exchange rates. Australian shares This asset class consists of investments in companies listed on the Australian Securities Exchange (and other regulated exchanges). Shares are also known as equities. Things to consider: Australian shares can be volatile and are usually included in a portfolio for their growth and income characteristics. The Australian share market is less diversified than the global market because Australia is currently dominated by a few industries such as Financials and Resources. Returns usually comprise dividend income and changes in share prices. Dividends may have the benefit of tax credits attached to them (known as franking or imputation credits). Returns are driven by many factors including the performance of the Australian economy. Global shares Global shares consist of investments in companies listed on securities exchanges around the world. Things to consider: Global shares can be volatile and are usually included in a portfolio for their growth characteristics. The number of potential investments is far greater than in Australian shares. Returns usually comprise dividend income and changes in share prices. Returns are driven by many factors including the economic environment in various countries. When you invest globally, you re less exposed to the risks associated with investing in just one economy. Investing outside Australia means you re exposed to movements in exchange rates. Alternatives These are a very diverse group of assets. Some examples include private assets, hedge funds, real return strategies, gold, 14 Separately Managed Account Product Disclosure Statement

16 listed infrastructure securities and unlisted infrastructure. Things to consider: Because alternatives are diverse, they may be included in a portfolio for their defensive or growth characteristics. Alternative investments are usually included in portfolios to increase diversification and provide returns that aren t strongly linked with the performance of mainstream assets. s include alternative investments in a portfolio because they generally expect the return and diversification benefits of alternative investments to outweigh the higher costs that tend to be associated with them. Some alternative strategies are managed to deliver a targeted outcome. For example, real return strategies aim to produce returns that exceed increases in the costs of living (ie inflation). For some alternatives, such as hedge funds, derivatives may be used extensively and it can be less obvious what assets you re investing in than with other asset classes. Some alternative investments are illiquid, which makes them difficult to buy or sell. To access alternative investments you generally need to invest in a managed fund that, in turn, invests in alternatives. Because most alternative investments aren t listed on an exchange, determining their value for a fund s unit price can be difficult and may involve a considerable time lag. Alternatives invested outside of Australia may expose your portfolio to movements in exchange rates. Investment approaches s have different approaches to selecting investments. There are generally two broad approaches: passive and active management. Passive management Passive, or index managers, choose investments to form a portfolio which will deliver a return that closely tracks a market benchmark (or index). Passive managers tend to have lower costs because they don t require extensive resources to select investments. Active management Active managers select investments they believe, based on research, will perform better than a market benchmark over the long term. They buy or sell investments when their market outlook alters or their investment insights change. The degree of active management affects returns. Less active managers take small positions away from the market benchmark and more active managers take larger positions. Generally, the larger an investment manager s positions away from the benchmark, the more their returns will differ from the benchmark. Active managers have different investment styles that also affect their returns. Some common investment styles are: Bottom-up focuses on forecasting returns for individual companies, rather than the market as a whole. Top-down focuses on forecasting broad macroeconomic trends and their effect on the market, rather than returns for individual companies. Growth focuses on companies they expect will have strong earnings growth. Value focuses on companies they believe are undervalued (their price doesn t reflect earning potential). Income focuses on generating a regular income stream through selecting companies, trusts and other securities they believe will deliver income, or through using derivatives and other strategies. Core aims to produce competitive returns in all periods. Investment techniques s may use different investment techniques that can change the value of an investment. Some of the main investment techniques are explained below. Derivatives Derivatives are contracts that have a value derived from another source suchas an asset, market index or interestrate. There are many types of derivatives including swaps, options and futures. They are a common tool used to manage risk or improve returns. Some derivatives allow investment managers to earn large returns from small movements in the underlying asset s price. However, they can lose large amounts if the price movement in the underlying asset is unfavourable. Separately Managed Account Product Disclosure Statement 15

17 Things to consider before you invest Risks particular to derivatives include the risk that the value of a derivative may not move in line with the underlying asset, the risk that counterparties to the derivative may not be able to meet payment obligations and the risk that a particular derivative may be difficult or costly to trade. s have derivatives policies which outline how derivatives are managed. Currency management If an investment manager invests in assets in other countries, their returns in Australian dollars will be affected by movements in exchange rates (as well as changes in the value of the assets). A manager of international assets may choose to protect Australian investors against movements in foreign currency. This is known as hedging. Alternatively, the manager may choose to keep the assets exposed to foreign currency movements, or un-hedged. This exposure to foreign currency can increase diversification in a portfolio. Gearing Gearing can be achieved by using loans (borrowing to invest), or through investing in certain derivatives, such as futures. Gearing magnifies exposure to potential gains and losses of an investment. As a result, you can expect larger fluctuations (both up and down) in the value of your investment compared to the same investment which is not geared. s can take different approaches to gearing. Some change the gearing level to suit different market conditions. Others maintain a target level of gearing. It s important to understand the potential risks of gearing, as well as its potential benefits. When asset values are rising by more than the costs of gearing, the returns will generally be higher than if the investment wasn t geared. When asset values are falling, gearing can multiply the capital loss. If the fall is dramatic there can be even more implications for geared investments. For example, where the lender requires the gearing level to be maintained below a predetermined limit, if asset values fall dramatically, the gearing level may rise above the limit, forcing assets to be sold when values may be continuing to fall. In turn, this could lead to more assets having to be sold and more losses realised. Withdrawals (and applications) may be suspended in such circumstances, preventing you from accessing your investments at a time when values are continuing to fall. Although this is an extreme example, significant market falls have occurred in the past. Recovering from such falls can take many years and the geared investment s unit price may not return to its previous high. Other circumstances (such as the lender requiring the loan to be repaid for other reasons) may also prevent a geared investment from being managed as planned, leading to losses. You need to be prepared for all types of environments and understand their impact on your geared investment. Short selling Short selling is used by an investment manager when it has a view that an asset s price will fall. The manager borrows the asset from a lender, usually a broker, and sells it with the intention of buying it back at a lower price. If all goes to plan, a profit is made. The key risk of short selling is that, if the price of the asset increases, the loss could be significant. Ethical investing s may take into account labour standards, environmental, social or ethical considerations when making decisions to buy or sell investments. We expect our active investment managers to consider any material effect these factors may have on the returns from their investments, however we don t require them to. The RE does not take into account ethical investing when implementing Investment Managers transactions. 16 Separately Managed Account Product Disclosure Statement

18 Model Portfolios Blue Chip Top 20 Model Portfolio Index Benchmark Indicative number of different securities Antares To deliver similar returns to the S&P/ASX 20 Accumulation Index before fees and costs. The Model Portfolio passively invests in securities included, or that are expected to be included, in the Benchmark. The Model Portfolio aims to maintain the security s Benchmark weighting as accurately as possible at all times. S&P/ASX 20 Accumulation Index 20 Indicative cash holding (%) 1 10 Automatic payment of investment income Yes Model management fee (% pa) 0.21 Antares Dividend Builder Model Portfolio Value Benchmark Indicative number of different listed securities Antares The primary objective is to regularly deliver higher levels of dividend income on a tax effective basis than the Benchmark. The other objective is to achieve moderate capital growth in a tax effective manner over a rolling 5 year period. The Model Portfolio invests in a diversified portfolio of high yielding Australian securities that aim to grow their dividends over time. Emphasis is placed on securing franked income and minimising security turnover to keep net realised capital gains low. Securities with a dividend yield return in the top quartile of the Index are generally selected S&P/ASX 200 Industrials Accumulation Index Indicative cash holding (%) 1 10 Automatic payment of investment income Yes Model management fee (% pa) 0.46 Separately Managed Account Product Disclosure Statement 17

19 Model Portfolios Antares Listed Property Model Portfolio Value Benchmark Indicative number of different listed securities Antares The Model Portfolio s aim is to outperform the S&P/ASX 200 A-REIT Accumulation Index (before fees and costs) with an expected lower volatility, over a rolling 5 year period. Antares follows a bottom-up investment process, which means investment decisions are made by undertaking in-depth proprietary research and analysis of individual REITs, companies and securities. Antares aims to invest in REITs and companies where the current security s price does not fully reflect their view of its potential value. Through company contact and detailed financial and non-financial analysis, Antares research analysts gain a first hand understanding of Australian businesses and the industries in which they operate. S&P/ASX 200 A-REIT Accumulation Index Indicative cash holding (%) 1 10 Automatic payment of investment income Yes Model management fee (% pa) 0.67 JBWere Income Model Portfolio Value Benchmark Indicative number of different listed securities JBWere To enhance the value of investment capital by generating combined capital and income returns that exceed the rate of inflation over the longer term (5 years plus). The Model Portfolio aims to produce a consistent income stream, with a dividend yield target of 1% per annum higher than that of the S&P/ASX 200 Accumulation Index. The targeted volatility of the Model Portfolio is at or below the Benchmark volatility over a rolling 5 year period. The Model Portfolio is Benchmark aware and JBWere uses stock selection and Model Portfolio construction to obtain an outcome that is defensive in nature with a dividend yield higher than the Benchmark. Reflecting the nature and focus on delivering a consistent income stream, the Model Portfolio is likely to have a greater component of income relative to capital gain in comparison to the S&P/ASX 200 Accumulation Index. S&P/ASX 200 Accumulation Index Indicative cash holding (%) 1 10 Automatic payment of investment income Yes Model management fee (% pa) Separately Managed Account Product Disclosure Statement

20 JBWere Listed Fixed Income Model Portfolio Value Benchmark JBWere To outperform the RBA Cash rate after fees and costs by 200 basis points over a rolling 5 year period. Further, the risk objective of the manager is to have no more than 3 negative annual investment returns over a rolling 20 year period. The Model Portfolio invests in ASX-listed securities which may include corporate and government bonds, hybrids and convertible notes recommended by JBWere Limited. While the Model Portfolio aims to be fully invested at all times, short-term allocations to cash may occur. The Model Portfolio s target credit quality is investment-grade. Areas that JBWere focuses on within their investment selection criteria include credit quality, the expected level and reliability of coupon payments, adequacy of the trading margin, liquidity, visibility of maturity, and a value-triggering event. Reflective of its focus on risk, this Model Portfolio is not expected to be a heavily-traded Model Portfolio. Moreover, the general approach is to hold instruments to maturity; however, Model Portfolio changes will be made in response in market movements and/or changes in credit quality. Benchmark unaware Indicative number of different listed securities Indicative cash holding (%) 1 15 Automatic payment of investment income Yes Model management fee (% pa) 0.55 Perennial Value Shares for Income Model Portfolio Value Benchmark Indicative number of different listed securities Perennial Value To provide investors a dividend yield, adjusted for applicable franking credits and before fees and costs, above the S&P/ASX 300 Accumulation Index over a rolling 3 year period. The Model Portfolio invests in a well diversified range of Australian listed companies, which Perennial Value believes have the ability to pay a consistent level of dividends and which demonstrate financial soundness. Fundamental company research is applied to select a portfolio of companies that have a track record of paying a consistent level of cash dividends (including franking credits, where applicable) and demonstrate a sound financial position. S&P/ASX 300 Accumulation Index (gross dividend yield) Indicative cash holding (%) 1-5 Automatic payment of investment income Yes Model management fee (% pa) 0.77 Separately Managed Account Product Disclosure Statement 19