Investment guide (TPS.02) Issued: 1 July 2014 The Portfolio Service Super Essentials The Portfolio Service Superannuation Plan The Portfolio Service Retirement Income Plan This guide contains important information not included in The Portfolio Service (TPS) Super Essentials, Superannuation Plan and Retirement Income Plan Product Disclosure Statements (PDSs). We recommend that you read this entire guide as it contains information about the range of available investment strategies and options you can select. You should consult with your financial planner about your investment strategy before selecting the investment options that you would like to invest in. This guide is divided into the following sections. Investment strategies and options... 2 Investing in term... 12 Investing in listed... 13 General advice warning... 14 This guide forms part of TPS Super Essentials, Superannuation Plan and Retirement Income Plan PDSs. Together with the TPS general reference guide (TPS.01) and the TPS insurance guide (TPS.03), these documents should be considered before making a decision to acquire any of these products. Issuer: Questor Financial Services Limited ABN 33 078 662 718 AFSL No. 240829 as Trustee of The Portfolio Service Retirement Fund ABN 92 861 884 632. Part of the IOOF group
Investment strategies and options Which investment strategies and options are suitable for you? Everyone has different financial needs and objectives. When selecting your investment strategy and choosing investment options, the factors you should consider include: the level of risk you are willing to accept the level of returns you are seeking the period of time you expect to hold your your personal circumstances, including your financial position. When considering your investment options, you should take into account that different investment options have different indirect cost ratios. Before making any decisions regarding an investment option, please read this guide and the relevant product disclosure statement. All are available free of charge from your financial planner. Investment options - product disclosure statements Your financial planner is required to provide you with a product disclosure statement for the investment options you choose to invest in. A separate product disclosure statement is available for each of the investment options in the current list of investment strategies. You can also access the product disclosure statements for the available investment option through our website (www.theportfolioservice.com.au). These documents will help you to evaluate each investment option and include: investment objectives and risk profile information about the investment manager historical performance (where available) investment risks indirect cost ratios, fees and expenses. What investment options can you choose? The investment options you can choose from will depend on which product you select within TPS. The list of available investment options is set out in the list of investment strategies available from your financial planner, our website (www.theportfolioservice.com.au) or by calling Client Advisory Services on 1800 221 151. This list may change from time to time. The range of investment options available includes: Managed Diversified strategies Share strategies Property strategies Fixed interest strategies Cash strategies 2
Listed (not available in Super Essentials) shares convertible/preference shares Listed investment companies shares Listed investment companies international shares listed property trusts yielding Listed Exchange-traded shares property Fixed income International and regional shares Other (for example, gold) Term Term deposits Annuities Choose what is right for you The investment options available vary in risk, investment objectives (goals), strategies (ways of achieving those goals) and the types of assets in which are made. This allows you to invest in a range of investment options that may be diversified across different asset classes, investment managers and investment styles. You can normally switch between different managed at any time. You can also select diversified managed managed by a range of leading and international investment managers. We carefully research leading and international investment managers before selecting managed to be included in the list of investment strategies. We also monitor and review the investment managers and managed periodically and may add or remove managed from time to time. The process undertaken by the Trustee in establishing the list of investment strategies is explained below. Selection of by the Trustee The Questor Board is ultimately responsible for the selection, management and monitoring of in a prudent and independent manner, having regard to legal and regulatory requirements and corporate governance standards. A Product Investment Committee has been established to assist the Board in fulfilling its investment responsibilities, by approving the appointment and termination of investment options. The current Committee consists entirely of six internal members and meets four times per year in order to review the investment menu. The construction of the list of investment strategies takes into account factors including: recommendations made by our Research department the needs, goals and objectives of members diversification by asset class, investment style and investment management groups constraints including capacity, liquidity, transparency, diversification and management accessibility cost-efficient fee alternatives. This selection process employs both quantitative and qualitative assessments, which are used to identify investment options that our Research department considers are most likely to achieve their investment objectives. Their due diligence process encompasses criteria including operational factors, financial viability of the manager, investment process, portfolio structure and performance. 3
Termination or change of status of an investment option Our Research department reviews the list of investment strategies periodically to identify investment options that may no longer meet the needs, goals and objectives of investors. The considerations for removal include (but are not limited to): a change in their research rating resulting in a lower probability that the investment option will meet its stated objectives (factors may include a material personnel change or a change in operational risk, structural risk, underperformance or governance) an elevated probability of the investment option closing (potentially due to declining profitability driven by low levels of under management) insufficient demand termination by the manager or the listed investment is delisted from the ASX. Managing conflicts of interest As IOOF is a large financial institution that participates in both domestic and international markets both real and perceived conflicts of interest may arise when adding to or removing from the list of investment strategies. For example, IIML acts as the Responsible Entity for a number of on our list of investment strategies. The same process is applied in selecting both related and unrelated managed to the list of investment strategies. We will only add a managed investment of a related party if it is in the best interests of investors. Managing risks How you can manage your risk Risk management is an important part of meeting your financial goals. We recommend that you discuss your investment strategy with your financial planner to make sure that your investment in the Plan is appropriate given your investment objectives, financial situation and risk tolerance. Diversification Diversification means spreading your investment across a range of asset classes, assets within an asset class and/or different investment managers in order to reduce overall risk and increase the potential for more consistent returns. Investment history shows that no single investment produces consistently above average returns for its asset class over all time periods. If your investment is diversified across a range of asset classes, assets and/or different investment managers, the poor performance of one particular asset class or investment manager is less likely to have a major impact on the value of your overall investment. Investment options that provide little diversification are marked in the list of investment strategies by the symbol (S). The list of investment strategies is available from your financial planner, our website or by calling Client Advisory Services. In general, to achieve diversification, we recommend that you: invest in investment options classified (S) on the list of investment strategies only if four or more such options are selected invest in one or more investment options classified (S) on the list of investment strategies where the selection also includes one or more diversified managed options. The investment options classified (S) should not represent a significant proportion of your total investment portfolio. Please discuss with your financial planner whether your selection of investment strategies and investment options will provide you with adequate diversification. 4
Risk bands The Standard Risk Measure is based on industry guidance to allow people to compare investment options that are expected to deliver a similar number of negative annual returns over any 20 year period. The Standard Risk Measure is not a complete assessment of all forms of investment risk. For instance, it does not detail what size of negative return there could be or the potential for a positive return to be less than a member may require to meet their objectives. Further, it does not take into account the impact of administration fees and tax on the likelihood of a negative return. You should still ensure you are comfortable with the risks and potential losses associated with your chosen investment option/s. Investment options are grouped into seven risk bands as follows: Risk band Risk label Estimated number of negative annual returns over any 20 year period 1 Very low Less than 0.5 2 Low 0.5 to less than 1 3 Low to medium 1 to less than 2 4 Medium 2 to less than 3 5 Medium to high 3 to less than 4 6 4 to less than 6 7 6 or greater Labour standards, environmental, social and ethical considerations Different investment managers have different policies regarding the extent to which they take into account labour standards, environmental, social or ethical considerations. Information regarding these policies is disclosed in the product disclosure statement for each managed investment. As Trustee of the Fund, we do not currently take into account labour standards, environmental, social or ethical considerations when selecting, retaining or removing investment managers and investment options from the list of investment strategies. 5
Investment strategies you can choose Managed Diversified strategies Growth Moderate growth Balanced Moderately conservative Conservative Investment objective To achieve higher returns than balanced strategies over the long-term by investing in a diversified portfolio with an emphasis on growth assets. To achieve higher returns than balanced and conservative strategies over the medium to long-term by investing in a broadly diversified portfolio across both growth and defensive assets. To achieve higher returns than conservative strategies over the medium to longterm by investing in a broadly diversified portfolio across both growth and income assets. To achieve a return higher than cash and other short-term securities through a diversified portfolio which favours less volatile assets. There is potential for some capital growth from the small component of shares and property securities. To achieve returns above the cash rate by investing in a range of growth and income assets, while providing a measure of protection for the capital value of. Underlying A mix of cash, securities, shares and property securities. Shares and property securities will generally represent more than three quarters of the portfolio. A mix of cash, securities, shares and property securities. Shares and property securities will usually represent more than half of the portfolio. An equal spread between growth assets such as shares and property securities and fixed income assets such as cash and bonds. A wide range of assets, including cash, securities, shares and property securities. Fixed interest securities and cash will usually make up more than half of the portfolio. A range of cash, securities, shares and property securities. Fixed interest securities and cash will represent at least three quarters of the portfolio. Risk level (Risk band 6) (Risk band 6) Medium to high (Risk band 5) Low to medium (Risk band 3) Low (Risk band 2) A negative annual return is not expected more frequently than Four but less than six times in every 20 years Four but less than six times in every 20 years Three but less than four times in every 20 years One but less than two times in every 20 years 0.5 but less than one time in every 20 years Risk profile An emphasis on growth assets introduces the potential for a high level of volatility particularly over the short-term. Medium to high An exposure to growth assets introduces the potential for medium to high volatility over the short-term. Medium An exposure equally spread between growth assets and income assets introduces the potential for medium volatility over the shorter time periods. Low to medium Investment in longer term securities, shares and property securities introduces the potential for low to medium volatility in the short-term. Low to medium The are largely fixed interest and cash with modest exposure to growth, as such volatility is low to medium but the fund s capital value may fluctuate as interest rates vary. Usually held for a minimum of: 7 years+ 6 years+ Medium term 5 years+ Medium term 4 years+ Short medium term 3 years+ The table above outlines the general characteristics of the investment strategies available through the Plan. You may choose investment options from within these strategies. A list of the investment options available is contained in our current list of investment strategies which can be obtained from your financial planner or from our website (www.theportfolioservice.com.au). The investment objectives are not intended to be a forecast. They merely provide an indication of what the managed aim to achieve over the medium to long-term on the assumption that share and bond markets remain relatively stable throughout that time. The may not be successful in meeting these objectives. The details of a particular investment option may vary from the information above. You should read the product disclosure statement for an investment option before investing. Product disclosure statements are available on our website (www.theportfolioservice.com.au) or from your financial planner. 6
Managed (continued) Diversified strategies (cont) Share strategies Property strategies Diversifying share International share property International property Investment objective To achieve moderate returns over the medium to long-term with low correlation to traditional assets by investing in a range of alternative investment strategies operated by professional investment managers. To achieve high returns over the long-term by investing in a variety of companies. To achieve high returns over the longer term from a portfolio of international shares. To provide a moderately high return over time through investment in a range of property securities. To provide a moderately high return over time through investment in a range of international property securities. Underlying All asset classes may be utilised, including derivatives. Internal leverage may also be incorporated in some. A range of shares in listed companies which operate in different industries. A range of shares in companies listed on world stockmarkets. A range of property securities listed on the Securities Exchange. A range of property securities listed on international stock exchanges. Risk level Medium (Risk band 4) A negative annual return is not expected more frequently than Two but less than three times in every 20 years Six or more times in every 20 years Six or more times in every 20 years Six or more times in every 20 years Six or more times in every 20 years Risk profile Medium The investment has the potential for medium volatility over the investment s time horizon. An exposure to shares introduces the potential for considerable short-term volatility as the price of the underlying shares may rise or fall. An exposure to shares introduces the potential for considerable shortterm volatility as the price of the underlying shares may rise and fall. Total returns may be affected by currency gains and losses resulting from being in currencies other than dollars. An exposure to property securities introduces the potential for medium to high volatility over the short-term. An exposure to property securities introduces the potential for medium to high volatility over the short-term. Usually held for a minimum of: Medium term 5 years+ 7 years+ 7 years+ 7 years+ 7 years+ The table above outlines the general characteristics of the investment strategies available through the Plan. You may choose investment options from within these strategies. A list of the investment options available is contained in our current list of investment strategies which can be obtained from your financial planner or from our website (www.theportfolioservice.com.au). The investment objectives are not intended to be a forecast. They merely provide an indication of what the managed aim to achieve over the medium to long-term on the assumption that share and bond markets remain relatively stable throughout that time. The may not be successful in meeting these objectives.the details of a particular investment option may vary from the information above. You should read the product disclosure statement for an investment option before investing. Product disclosure statements are available on our website (www.theportfolioservice.com.au) or from your financial planner. 7
Managed (continued) Fixed interest strategies (cont) Cash strategies International Diversified fixed interest yielding Cash Investment objective To achieve a return higher than cash over the medium-term by investing in fixed interest securities. To achieve a return higher than cash by investing in international over the mediumterm. To achieve a return higher than cash over the medium-term by investing in a diversified range of securities. To achieve a higher return than securities issued by governments and banks. To provide interest income at a rate higher than that of an at call bank account with a high level of capital security. Underlying A range of fixed interest securities issued by governments, banks, other financial institutions and corporate borrowers. A range of international securities issued by both governments and corporate borrowers. A range of fixed interest securities issued by governments, banks, other financial institutions and corporate borrowers. A range of listed and unlisted securities issued by banks, other financial institutions or corporate borrowers. A range of shortterm money market securities issued by governments, banks, high quality corporate borrowers and credit union deposits. Risk level Medium to Medium to Medium Very low (Risk band 5) (Risk band 5) (Risk band 4) (Risk band 6) (Risk band 1) A negative annual return is not expected more frequently than Three but less than four times in every 20 years Three but less than four times in every 20 years Two but less than three times in every 20 years Four but less than six times in every 20 years Less than 0.5 times in every 20 years Risk profile Medium Medium Medium Low The capital value of underlying can vary as interest rates and credit risk fluctuates. The capital value of underlying can vary as interest rates and credit risk fluctuates. International may be more volatile than given a longer duration. The capital value of underlying can vary as interest rates and credit risk fluctuates. The capital value may vary with share market movements if the invest in listed debt securities. These are moderately sensitive to changes in interest rates however they are more sensitive to changes in credit ratings. Usually held for a minimum of: Medium term 4 years+ Medium term 4 years+ Medium term 4 years+ 6 years+ No minimum The table above outlines the general characteristics of the investment options available through the Plan. You may choose investment options from within these strategies. A list of the investment options available is contained in our current list of investment strategies which can be obtained from your financial planner or from our website (www.theportfolioservice.com.au). The investment objectives are not intended to be a forecast. They merely provide an indication of what the managed aim to achieve over the medium to long-term on the assumption that share and bond markets remain relatively stable throughout that time. The may not be successful in meeting these objectives. The details of a particular investment option may vary from the information above. You should read the product disclosure statement for an investment option before 8
investing. Product disclosure statements are available on our website (www.theportfolioservice.com.au) or from your financial planner. Cash strategies (cont) Listed * Term shares Listed investment companies International shares Listed investment companies - shares Investment objective To provide a known rate of interest income for a term ranging from 6 months up to 5 years with a high level of capital security. To achieve high returns over the long-term by investing in companies. To achieve high returns over the long-term from a portfolio of international shares. To achieve high returns over the long-term from a portfolio of shares in a variety of companies. Underlying A range of fixed term with selected credit unions, banks or government authorities. A range of companies listed on the Securities Exchange which operate in different industries. A range of shares in companies listed on international stockmarkets. A range of shares in listed companies which operate in different industries. Risk level Very low (Risk band 1) A negative annual return is not expected more frequently than Less than 0.5 times in every 20 years Six or more times in every 20 years Six or more times in every 20 years Six or more times in every 20 years Risk profile Low An exposure to shares introduces the potential for considerable short-term volatility as the share price may rise or fall. An exposure to shares introduces the potential for considerable shortterm volatility as the share price may rise or fall. The share price of the companies may, at times, vary from the total value of the companies. Total returns may be affected by currency gains and losses. An exposure to shares introduces the potential for considerable shortterm volatility as the share prices may rise or fall. The share prices may, at times, vary from the total value of the companies. Usually held for a minimum of: As selected 6 years+ 6 years+ 6 years+ * Super Essentials only offers a limited range of listed such as exchange-traded. The table above outlines the general characteristics of the investment options available through the Plan. You may choose investment options from within these strategies. A list of the investment options available is contained in our current list of investment strategies which can be obtained from your financial planner or from our website (www.theportfolioservice.com.au). The investment objectives are not intended to be a forecast. They merely provide an indication of what the managed aim to achieve over the medium to long-term on the assumption that share and bond markets remain relatively stable throughout that time. The may not be successful in meeting these objectives. 9
The details of a particular investment option may vary from the information above. You should read the product disclosure statement for an investment option before investing. Product disclosure statements are available on our website (www.theportfolioservice.com.au) or from your financial planner. Listed (continued)* Exchange-traded (ETFs) Listed property trusts yielding Investment objective To achieve returns in line with market indices. To provide a moderately high return over time through investment in a range of listed property trusts. To achieve a return above that of securities issued by governments and banks. Underlying A range of managed listed on the Securities Exchange with exposure to different markets and assets. A range of property trusts and companies listed on the Securities Exchange with interests in the commercial, industrial, retail and leisure property sectors. A range of listed debt securities issued by corporate borrowers. Risk level As per underlying pool of (Risk band 6) A negative annual return is not expected more frequently than As per underlying pool of Six or more times in every 20 years Four but less than six times in every 20 years Risk profile Medium to high Volatility will depend on the exposure to the underlying assets and market. ETFs generally track the market in which they invest. An exposure to property securities introduces the potential for medium to high volatility over the short-term. Historically, listed property securities have been less volatile than shares in the longterm. As listed, there is the potential for some volatility over the short-term. The value of these will vary as interest rates and market supply and demand fluctuate. Usually held for a minimum of: Medium to long term 3-6 years 7 years+ 6 years+ * Super Essentials only offers a limited range of listed such as exchange-traded. The table above outlines the general characteristics of the investment options available through the Plan. You may choose investment options from within these strategies. A list of the investment options available is contained in our current list of investment strategies which can be obtained from your financial planner or from our website (www.theportfolioservice.com.au). The investment objectives are not intended to be a forecast. They merely provide an indication of what the managed aim to achieve over the medium to long-term on the assumption that share and bond markets remain relatively stable throughout that time. The may not be successful in meeting these objectives. The details of a particular investment option may vary from the information above. You should read the product disclosure statement for an investment option before investing. Product disclosure statements are available on our website (www.theportfolioservice.com.au) or from your financial planner. 10
Differences between investing in a managed investment directly and investing through a super fund If you are investing through a super (or pension) product in the Fund, there are a number of differences in the rights you might have if you had invested directly and hold the managed investment in your own name: All through a super product are held in the name of the trustee, not in your name. This means that you will not receive communications from the underlying investment managers in relation to your managed. You do not have the right to call, attend or vote at meetings of investors in a managed investment because the trustee is the legal owner of the units in the managed investment. If you invest directly in a managed investment and not through a super product, you can withdraw your money without the legislative restrictions and other limitations affecting access to super benefits. However, you are not able to transfer preserved super money into a managed investment directly. You are also not eligible for concessional tax treatment available to super contributions. If you invest directly in a managed investment, you only incur the fees and costs applicable to the managed investment and not the fees and costs applicable to the super product. But you might not be entitled to any wholesale discounts or rebates that a trustee can usually negotiate with an investment manager. The time for processing transactions may be quicker if you are a direct investor because the trustee may be required to deal with several investment managers to process a single investor s request. If you invest directly in a managed investment, you usually have the benefit of a 14-day cooling-off period. The trustee is not entitled to any cooling-off period because it is a wholesale investor. If you invest directly in a managed investment, any queries or complaints are handled by the inquiry and dispute resolution mechanisms of the managed investment. As a super investor, any queries or complaints must be handled by the trustee s inquiry and dispute resolution mechanisms, even if they relate to a managed investment. 11
Investing in term Term are available during each monthly offer period. Details of a term investment buy order window (including rates, commencement and maturity dates) for both a new 6 and 12 month term, are communicated to your financial planner every month. A minimum of $1,000 per term investment applies. The rates quoted are gross of fees. Adequate to purchase a term investment must be available in your Cash Management Account at the commencement of the term. Interest on the 6 month term is generally paid at maturity, whilst interest on the 12 month term is generally paid quarterly. Following maturity, both the principal and final interest proceeds are credited to your Cash Management Account. You can also rollover your term investment principal or a new amount into a new term investment by providing a request to your financial planner before maturity. Additional term investment options may be offered outside of these standard opportunities. These offers will be communicated to your financial planner. Speak to your financial planner to find out more about term. 12
Investing in listed A wide range of traded on the Securities Exchange are available to you through the Plan and provide you with additional investment opportunities. The types of include a selection of: shares in companies shares in listed investment companies units in listed property trusts and other trusts listed higher yielding securities exchange-traded (ETFs). Orders to buy or sell listed investment options are placed as soon as practicable after we receive them. The time to execute a transaction depends on factors such as price, availability of stock and other market conditions. Settlement of a purchase or sale currently occurs three business days (T+3) after the execution date. A stockbroking fee is charged in addition to the transaction fee for each purchase and sale of a listed investment. This fee is included in the purchase and sale price applicable to your listed investment. You may also in specie transfer listed into the Plan where approved. Transaction fees and stamp duty costs may apply and the in specie transfer may trigger a capital gains tax event. You should discuss any in specie transfer with your financial planner. Adequate to purchase a listed investment, including any fees and charges, (directly or via a corporate action) must be available in your Cash Management Account to facilitate the transaction. Corporate Actions Corporate actions for listed securities will generally be made available on your account, and processed according to your instructions. We will send your financial planner any corporate action notices that we receive. Corporate actions include (but are not limited to): entitlement offers, renounceable and non-renounceable rights, share purchase plans, initial public offerings, takeovers, mergers, de-mergers, re-investment offers, consolidations and redemptions. In some circumstances, the Trustee may decide to participate in a corporate action on behalf of all members of the Plan if it believes the transaction is in the best interest of all investors and/or the action cannot be administered on an individual basis. There may be circumstances where we may not process corporate actions (such as, where it is not administratively possible to do so). Differences between investing in listed directly and through your account in the Plan Investing in listed in your own name You are the legal and beneficial owner of the listed and the listed will be held in your name in the issuer s share registry. Investing in listed through your super or pension account The Trustee is the legal and beneficial owner of the listed you have directed us to purchase and the securities are held in the name of the Trustee. The listed investment is held in Trust in the Plan. You receive and are responsible for responding to all communications from the listed entity in relation to your investment holding, including corporate action notices. We will receive and review all communications received in relation to the investment holding. All responses to these communications will be completed by us, in accordance with the terms outlined in this guide. You are entitled to voting rights and to any additional benefits associated with your holding of the listed investment (for example shareholder discount cards and special offers). You have no entitlement to vote or to any additional benefits associated with the investment holding. You receive a contract note for each order executed by your broker. You do not receive a contract note for each order you place with us. The broker sends the contract note to the Trustee who is the broker s client. 13
General advice warning The information contained in this guide: does not and is not intended to contain any recommendations, statements of opinion or advice is of a general nature only and does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of this information having regard to your objectives, financial situation and needs and you may want to seek advice before deciding whether to acquire this product. Important notice This guide has been prepared and issued by Questor Financial Services Limited (Questor) ABN 33 078 662 718 AFSL No. 240829. Questor is a company in the IOOF group comprising IOOF Holdings Ltd ABN 49 100 103 722 and its related bodies corporate. The Portfolio Service Super Essentials, Superannuation Plan and Retirement Income Plan are issued by Questor as Trustee of The Portfolio Service Retirement Fund ABN 92 861 884 632. PDSs for these products are available from your financial planner, our website (www.theportfolioservice.com.au) or by calling Client Advisory Services on 1800 221 151. You should consider the PDS for the relevant product before making an investment decision. 14