Separately Managed Account · there are no tax consequences for you as a result of other...

Separately Managed AccountProduct Disclosure Statement

ABN 45 006 302 987AFSL 236466

Issued by NavigatorAustralia Limited (NAL)

Preparation date1 October 2019

The information in thisProduct Disclosure Statement is general

and doesn’t take into accountyour personal objectives,

financial situation or needs. Before acting on this information,

you should consider its appropriatenesshaving regard to your objectives,

financial situation and needs.A financial adviser can help you decide

if this is the right product for you.

Contents

4About the SMA

5Summary of the Model Portfolios

7Investment Manager Profiles

10Things to consider before you invest

16Model Portfolios

27How the SMA is managed

30Fees and other costs

The purpose of this ProductDisclosure Statement (PDS) is togive you the information youneed when investing in theIntegrated Separately ManagedAccount (SMA) which is aRegistered Managed InvestmentScheme. ARSN 138 086 889.

In this PDS, NAL is referred toas ‘us’, ‘we’, ‘our’, ‘responsibleentity’.

This Product Disclosure Statement (PDS) is issued by Navigator Australia Limited (NAL) ABN 45 006 302 987 AFSL 236466 (NAL), the responsibleentity of the Integrated Separately Managed Account ARSN 138 086 889 (SMA). The SMA is a registered managed investment scheme, and thepurpose 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 investordirected portfolio service, a master trust or a superannuation fund (each referred to in this PDS as a “platform”) that is administered or operatedby 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 addor remove Model Portfolios. The Platform operator will advise you of changes to information in this PDS that are materially adverse. We mayprovide this information to you by mail, email or by making the information available on mlc.com.au. We’ll let you know when informationabout your Model Portfolio has been made available online. If you prefer to receive updates about your account by mail, please let us know.

The information in this document may change from time to time. Any updates that aren’t materially adverse will be available at mlc.com.au.You can obtain a paper copy of any of these changes at no additional cost by contacting us.

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 orby 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 12 004 044 937 AFSL and Australian Credit Licence 230686 (NAB) and is part ofthe National Australia Bank Group of Companies (NAB Group). An investment in the SMA or in the Model Portfolios that are made availablevia 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 anyother company in the NAB Group stands behind or otherwise guarantees the capital value or investment performance of the SMA or any ModelPortfolio.

Separately Managed Account Product Disclosure Statement | 3

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The SMA allows you to access anextensive range of professionallyconstructed Model Portfolios made up of:

securities listed on the Australiansecurities exchange and cashinvestments; or

securities listed on the Australiansecurities exchange, managed fundsand cash investments

so you can choose the Model Portfolio youwant to suit your needs.

Benefits of the SMA

Individual accounts

When you invest in the SMA through aplatform, a separate interest will be issuedto the platform operator in relation toeach Model Portfolio you choose, and anyassets we hold in relation to that separateinterest will be accounted for separately.Asset holdings that relate to a ManagedPortfolio that you select are referred to inthis PDS as “your account” or “yourManaged Portfolio”.

You (or the trustee in the case of asuperannuation investment) retainbeneficial ownership of the assets held inyour account.

Transparency

You can view the assets that you holdwithin your chosen Model Portfoliothrough your platform reports andfacilities.

Portability

You can transfer Australian securities andunits in managed funds that are held by(or for) you into the Wrap platform beforetransfer into the SMA and still retain thebeneficial interest in those assets. Youcan also transfer your securities and unitsin managed funds between your ModelPortfolios within the SMA. Please see page27 for more details.

No inherited capital gains

When you transfer assets into youraccount, or assets are acquired by us andheld as part of your account, an individualcost base is established in relation to thatModel Portfolio. For securities this meansthere are no tax consequences for you asa result of other investors’ transactions.

Professional investmentmanagement

You can benefit from the servicesprovided to NAL by investmentprofessionals who monitor and manage

Model Portfolios on our behalf.

NAL, as responsible entity for the SMA,has appointed a number of investmentmanagers to provide NAL with a range ofinvestment and advisory services inconnection with the Model Portfolios thatyou can select when investing in the SMA.Information about these investmentmanagers is detailed on the followingpages.

Consolidated reporting

Because the SMA is fully integrated withthe technology systems of the platformthrough which you access the SMA, youwill be able to have a comprehensive viewof your Model Portfolio. This means youcan:

view the breakdown of securities,managed funds and cash investmentsin your Model Portfolio

keep track of your investments, and

transact between the SMA and otherinvestments on your platform easily.

The diagram below shows how the SMAworks.

Investor

Individual Model Portfolio

Platform

manages

in specie transfer

Cash Account

Managed Fund

Direct Equities

SMA Model Portfolio

Investment Manager

4 | Separately Managed Account Product Disclosure Statement

About the SMA

Who can invest

If you want to start an investment in theSMA, you must do so through an InvestorDirected Portfolio Service (IDPS), a mastertrust, a superannuation fund or Wrapaccount – collectively known as a‘platform’, administered or operated byNAL or another NAB group company.

Please make sure that you have the latestcopy of the PDS or in the case of an IDPS,the IDPS Guide for the platform that youare invested in. These documents are

referred to in this PDS as your ‘platformoffer documents’. You can obtain thelatest copy of the platform offerdocuments on mlc.com.au or you canrequest a copy by calling us.

Investments into the SMA via yourplatform account can be made in thefollowing ways:

cash investment;

transfer of securities and/or units inmanaged funds; or

a combination of both.

The minimum initial investment isdifferent for each Model Portfolio,minimum investment amounts for listedsecurities only Model Portfolios is $10,000and for multi-asset model portfolios is$100,000. There is no minimum foradditional investments you may chooseto make in your Model Portfolio.

You can monitor your investmentthrough your Adviser who will have accessto reporting and performance related toyour investments in the SMA.

Modelmanagementfee (% pa)

Benchmark indexAutomaticpayment ofinvestmentincome

Investmentapproach

Indicativenumberofsecuritiesheld

Investmentmanager

Listed security ModelPortfolios

Index

0.21S&P/ASX 20YesIndex20AntaresBlue Chip Top 20Accumulation Index

Value/Income

0.46S&P/ASX 200YesIncome15–25AntaresAntares Dividend BuilderIndustrials AccumulationIndex

0.67S&P/ASX 200 A-REITYesIncome10–30AntaresAntares Listed PropertyAccumulation Index

0.55S&P/ASX 200YesIncome15-25JBWereJBWere IncomeAccumulation Index

0.55Benchmark unawareYesIncome10-25JBWereJBWere Listed FixedIncome

0.77S&P/ASX 300YesValue/Income25–30PerennialValue

Perennial Value Sharesfor Income Total Return Index (gross

dividend yield)

0.81S&P/ASX 300 AREITYesIncome15-30ZurichZurich Australian ListedProperty Accumulation Index

Core/Growth

0.62S&P/ASX 200YesCoreUp to 30AntaresAntares CoreOpportunities Accumulation Index

0.75S&P/ASX 200NoGrowth15-30AntaresAntares Ex-20 AustralianEquities Accumulation Index excluding

the S&P/ASX 20 AccumulationIndex


Summary of the Model Portfolios


Modelmanagementfee (% pa)

Benchmark indexAutomaticpayment ofinvestmentincome

Investmentapproach

Indicativenumberofsecuritiesheld

Investmentmanager

Listed security ModelPortfolios

0.92S&P/ASX 300NoCore20–30AusbilAusbil AustralianConcentrated Equities Total Return Index

0.60S&P/ASX 300YesCore15-35PendalPendal Australian ShareTotal Return Index

0.80S&P/ASX 300YesGrowth10-25PerpetualPerpetual Direct EquityAlpha Total Return Index

0.40S&P/ASX 100YesCore30–40RedpointRedpoint IndustrialsIndustrials AccumulationIndex

ModelManagementFee (% pa)

EstimatedICR(% pa)*

EstimatedBuy-SellSpread range(%)

Automaticpayment ofinvestmentincome

Investmentapproach

Indicativenumber ofinvestmentsheld⁺

Investmentmanager

Multi-Asset ModelPortfolios

Growth

0.3050.5220.00 -0.40%YesGrowth8-18Lonsec InvestmentSolutions

PIC Lifecycle GrowthModerate


PIC Lifecycle GrowthAssertive


PIC Lifecycle GrowthAggressive

Income

0.3050.5480.00 -0.40%YesIncome8-18Lonsec InvestmentSolutions

PIC Lifecycle IncomeConservative


PIC Lifecycle IncomeModerate


PIC Lifecycle IncomeAssertive

The estimated ICR and model management fees make up the total cost for investing in these options. More detail can be found onpage 30 - Fees and other costs.

The Indirect Costs are an estimation of the costs that will be incurred through investing in the underlying managed investment schemes. Theactual costs incurred may vary. These costs include any applicable expense recovery and performance fee payable to the investment manager ofthe underlying managed investment schemes. We expect the Indirect Costs to be between-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 securitiesand trusts increasing diversification.

+

The Private Investment Consulting (PIC) Lifecycle Model Portfolios may be selected only by PIC Accredited Advisers. A PIC Accredited Adviser isan authorised representative of a licensee who has retrieved accredited approval from PIC to access their services and the PIC labeled investmentoptions.


Summary of the Model Portfolios

Antares Capital Partners Ltd (‘Antares’)specialises in the active management ofAustralian shares and listed propertysecurities. Since its inception in 1994, theAntares Equities team has establisheditself as a specialist in the activemanagement of Australian equities. Keyto Antares’ success is the experience,stability and judgment of its investmentteam. Antares is dedicated to providinginvestment solutions to both institutionaland retail clients. Antares aims to have adynamic culture and quality investmentteam that can deliver a range ofinvestment solutions.

The Antares Equities team believes thatsuperior investment performance canonly be achieved through a disciplinedand sceptical approach to investing.Fundamental bottom up research that isdetailed, style agnostic and systematicunderpins Antares stock selection. Thisenables the conviction and courage tomove against markets and exploit theirinefficiencies.

Antares believes that the pricing of sharesin the Australian share market is at timesinefficient. This mispricing occurs for anumber of reasons:

Investors take a short term view;

Investors under or over react to changesin a company’s operating environment;and

Investors make incorrectgeneralisations about similarcompanies.

Antares believes these inefficiencies canbe exploited through fundamentalcompany analysis.

Ausbil’s core business is the managementof Australian securities for majorsuperannuation funds, institutionalinvestors, master trust and retail clientsas well as being the responsible entity ofseveral registered managed investmentschemes. Ausbil is owned by itsemployees and indirectly by New YorkLife Investment Management HoldingsLLC (New York Life Investments), awholly owned subsidiary of New York LifeInsurance Company.

New York Life Investments, through itsmulti-boutique investment structure,offers a broad array of investmentcapabilities. From equity to debt or fixedincome, domestic to international, growthto value, indexed to active, large cap tosmall cap and publicly traded securitiesto private placements, New York LifeInvestments, through its multi-boutiqueinvestment structure, has a team ofinvestment professionals focused onvirtually every sector of the capitalmarkets.

Pendal Institutional Limited (Pendal) isa global investment managementbusiness focused on delivering superiorinvestment returns for their clientsthrough active management.

Pendal offers investors a range ofAustralian and international investmentchoices including shares, propertysecurities, fixed income and cashstrategies, as well as multi-asset andresponsible investments. To complementits in-house expertise, Pendal alsopartners with leading global investmentmanagers.

Pendal does not have a ‘house view’ andoperates a multi-boutique style business.Their proven and experienced fundmanagers have the autonomy to makedecisions with conviction, built on aphilosophy of meritocracy that fosterssuccess from a diversity of insights andapproaches to investment. Pendal strivesfor superior results through aperformance culture that backsindependent actions.

Pendal’s investment teams are supportedby a strong operational platform acrossrisk and compliance, sales, and marketingand operations, allowing their fundmanagers to focus on generating returnsfor their clients.

Pendal is a wholly owned subsidiary ofPendal Group Limited and is one ofAustralia’s largest and most enduring pureinvestment managers (ASX: PDL).


Investment Manager Profiles

JBWere was established in 1840 and is ahighly regarded Private Wealth brandacross the Australian wealth managementindustry.

The management of intergenerational,family and institutional wealth has beenthe cornerstone of the JBWere businesssince inception.

JBWere Limited is a wholly ownedsubsidiary of the NAB Group and providesclients with an extensive array ofinvestment options.

The organisation is focused on deliveringleading investment research insights,solutions and portfolio managementservices to an extensive range of retailand sophisticated investors. JBWere,through its financial networks, providesspecialised research capabilities across adiversified suite of asset classes includingAustralian equities, global equities,Australian and international fixed interestand property. The JBWere InvestmentStrategy Group (ISG) is focused onidentifying companies with high qualityearnings growth that can be purchased ata reasonable price and those companiesthat have identifiable and sustainablebusiness models.

The ISG team adheres to a well-definedportfolio construction methodology withextensive risk management tools.

Perennial Value is a specialist, activeinvestment management firm. Formedin 2000 and led by well-known Valueinvestor John Murray, Perennial Value’ssole focus is to deliver excellence in fundsmanagement through equity ownershipand the alignment of interests betweenkey investment management staff andour clients.

Perennial Value seeks to buy shares ingood businesses that are undervalued bythe market, with a belief that goodbusinesses are eventually recognised bymarkets and are positively revalued.

The PIC Lifecycle portfolios are managedby Lonsec Investment Solutions Pty Ltd(LIS), and incorporate advice and inputfrom MLC Asset Management Pty Ltd inareas such as asset allocation, to providea blend of ideas from different sources tostructure portfolios.

LIS provides extensive expertise inportfolio construction and managerselection in the construction of the PICLifecycle portfolios. Drawing on Lonsec’sin-depth investment product research,LIS provides access to a range ofinvestment solutions across managedfunds, listed products and alternativeassets. LIS is owned by Lonsec HoldingsPty Ltd.

MLC Asset Management licenses PrivateInvestment Consulting (PIC) to providespecialist asset consulting services to LIS.PIC provides the insights of JANAInvestment Advisors as the source ofprimary capital markets research andasset allocation views that are consideredby the joint Lonsec/PIC investmentcommittee responsible for the PICLifecycle portfolios. JANA is a leadingAustralian investment consultant withextensive experience in dynamic assetallocation.



Perpetual Investment ManagementLimited ABN 18 000 866 535, AFSL234426 (Perpetual), provides a broadrange of products for personalinvestment, superannuation andretirement to individuals, advisers andinstitutions. Perpetual Investments is oneof Australia’s leading investmentmanagers offering investment capabilitiesacross a range of asset classes, includingAustralian and international equities,fixed income, and multi-sector strategies.

Perpetual Investments’ investment styleis first and foremost based on bottom-upfundamental analysis. This approachfirstly selects stocks based on companyspecific fundamentals, and then by therelative attractiveness of their value. Theoutcome of this investment process isthat Perpetual Investments’ shareportfolios demonstrate ‘value’characteristics. Stocks are bought only ifthey have passed rigid stock selectioncriteria and are deemed to be qualitycompanies, and then only if they arefound to be attractive on a valuationbasis. In determining investment quality,investments are carefully selected on fourcriteria:

conservative debt levels

sound management

quality business; and

in the case of industrial shares,recurring earnings.

Redpoint is a boutique fund managerspecialising in listed asset classesincluding Australian equities,international equities, globalinfrastructure and global property.

As a boutique that’s majority-ownedby its employees, Redpoint’s interestsare closely aligned with its clients.Redpoint’s partnership with MLC AssetManagement provides them with strengthand support so they can remain focusedon what they do best – deliveringenduring investment outcomes for theirclients.

The Redpoint team applies theirknowledge of equity markets and deepunderstanding of risk with the aim ofdelivering investment solutions that arecost efficient, well-diversified and meettheir investment objectives.

Zurich Financial Services Australia is partof the worldwide Zurich Financial ServicesGroup, an insurance-based financialservices provider with a global networkof subsidiaries and offices in NorthAmerica and Europe as well as in AsiaPacific, Latin America and other markets.

Zurich Investments is the fundsmanagement arm of Zurich FinancialServices Australia. Through ZurichInvestments, investors can gain exclusiveaccess to a range of specialist managers.Rather than managing money in-house,Zurich Investments forms long-termstrategic investment partnerships withspecialist investment managers whopossess a successful performance trackrecord and adhere to a disciplinedinvestment style.

Zurich Investments has appointedRenaissance Property Securities Pty Ltd(Renaissance) as its strategic investmentpartner for Australian Property Securitiesinvestments. Renaissance was establishedin April 2003 as a division of RenaissanceAsset Management and combines over 40years of Australian property securitiesinvestment management experience.



Each Model Portfolio may be investedin:

securities listed, or about to be listed,on the Australian SecuritiesExchange;

units in managed funds; and

cash investments.

However there can be greater volatilityin returns because the performance ofa few assets can impact theperformance of the Model Portfolio asa whole.

Before you invest, there are some thingsyou need to consider, including howmuch risk you're prepared to accept.

This is determined by various factors,including:

your investment goals

the savings you'll need to reach thesegoals

your age and how many years you haveto invest

where your other assets are invested

the return you may expect from yourinvestments, and

how comfortable you are withinvestment risk.

Investment risk

All investments come with some risk.Some investment options will have morerisk than others, as it depends on anoption’s investment strategy and assets.

The value of an investment with a higherlevel of risk will tend to rise and fall moreoften and by greater amounts thaninvestments with lower levels of risk, ieit’s more volatile.

While it may seem confronting,investment risk is a normal part ofinvesting. Without it, you may not get thereturns you need to reach yourinvestment goals. This is known as therisk/return trade-off.

Many factors influence an investment’svalue. These include, but aren’t limitedto:

market sentiment

changes in inflation

growth and contraction in Australianand overseas economies

changes in interest rates

defaults on loans

company specific issues

liquidity (the ability to buy or sellinvestments when you want to)

changes in the value of the Australiandollar

investments and withdrawals by otherinvestors

changes in Australian and overseaslaws, and

a counterparty not meeting itsobligations eg when buying securities,the seller may not deliver on thecontract by failing to provide thesecurities.

Other SMA risks

The significant risks of investing in theSMA are typical of the risks of making asimilar investment in listed securities andmanaged funds. In addition to the risksexplained above, the following mayinfluence a Model Portfolio’s value:

Investment manager risk: a manager’sinvestment approach directly impactsthe value of its Model Portfolio andperformance is likely to vary indifferent market conditions. No singleinvestment approach performs betterthan all others in all market conditions.Changes in the investment manager’skey personnel may also affectperformance.

Scheme risk: risks specific to the SMAinclude the risk that the SMA, or aparticular Model Portfolio, or anInvestment Managers services could beterminated and that the fees and costscould change. Where an InvestmentManager is replaced then we mayappoint a replacement InvestmentManager and pay fees to thatInvestment Manager, including wherethe Investment Manager appointed isa related party to NAB. There is also arisk that investing through the SMAmay give different results thanself-directed investing.

Liquidity risk: this is the risk that asecurity or managed fund may not beable to be sold quickly enough toprevent or minimise a loss (for exampleif a security is suspended from tradingon the market or a managed fund isfrozen or has redemptions suspended).A lack of liquidity may affect our abilityto rebalance a Model Portfolio or theamount of time it takes us to satisfywithdrawal requests.


Things to consider before you invest

Concentration Risk: in a concentratedportfolio of up to 40 equities, a ModelPortfolio’s returns may be more volatilethan those of a more diversifiedportfolio. Its exposure to a smallernumber of investments means it ismore sensitive to changes in the valueof those investments.

Implementation risk: the performanceof your Model Portfolio may differ tothe reported performance of therelevant Model Portfolio due to anumber of factors such as cash flows,portfolio reweighting and timingdifferences.

Valuation risk: is the risk that assetsheld by you in the Model Portfoliocannot be valued due to delays inreceiving unit prices or asset values ina timely manner.

Types of assets

Asset classes are generally grouped as defensive, growth or alternatives based on their different characteristics.Multi-asset portfolios are usually invested across all these groups because each has different return and volatility characteristics.For example, defensive assets may help to provide returns in a portfolio when share markets are weak. On the other hand, growthassets may be included in a portfolio because of their potential to produce higher returns than cash in the long term. However, in some market conditions, all types of assets may move in the same direction, delivering low or negative returns at thesame time.The main differences between these types of assets are:

AlternativesGrowthDefensiveA very diverse group of assets andstrategies. Some examples includeprivate assets and hedge funds.Because alternatives are diverse,they may be income, defensive orgrowth assets.

Shares and listed property securities.Cash and fixed income securities.Asset classesincluded

To provide returns that aren’tstrongly linked with those ofmainstream assets. They may beincluded for their defensive orgrowth characteristics.

To provide long-term capitalgrowth and income.

To generate income and stabilisereturns.

How they aregenerally used

Expected to produce returns andvolatility that aren’t strongly linkedto mainstream assets such as shares.Risk and return characteristics ofdifferent alternative investmentscan vary significantly.

Expected to produce higher returns,and be more volatile, than defensiveassets over the long term.

Expected to produce lower returns,and be less volatile, than growthassets over the long term.

Risk and returncharacteristics



Indicative volatility

Lower Higher

Higher

Shares

Fixed income

Indi

cati

ve re

turn

s

Listed property securities

Cash

Indicative returns and volatility over a market cycle

Defensive alternatives

Growth alternatives

Source: MLC Asset Management Services Limited

Volatility

The value of an investment with a higherlevel of risk will tend to rise and fall moreoften and by greater amounts thaninvestments with lower levels of risk, ieit's more volatile.

Periods of volatility can be unsettling andmay occur regularly. You may find itreassuring to know that, ofteninvestments that produce higher returnsand growth over long periods tend to bemore volatile in the short term.

By accepting that volatility will occur,you’ll be better able to manage yourreaction to short-term movements. Thiswill help you stay true to your long-terminvestment strategy.

When choosing your investment, it’simportant to understand that:

its value and returns will vary over time

assets with higher long-term returnpotential usually have higher levels ofshort-term risk

returns aren’t guaranteed, and you maylose some of your money, and

future returns will differ from pastreturns.

Diversify to reduce volatilityand other risks

Diversification – investing in a range ofinvestments – is a sound way to reducethe short-term volatility of a portfolio’sreturns. That’s because different types ofinvestments perform well in differenttimes and circumstances. When some areproviding good returns, others may notbe.

Portfolios can be diversified acrossdifferent asset classes, industries,securities and countries, as well as acrossinvestment managers with differentapproaches.

The more you diversify, the less impactany one investment can have on youroverall returns.

One of the most effective ways ofreducing volatility is to diversify across arange of asset classes.

A financial adviser can help you clarifygoals and assist with creating afinancial plan which helps you managerisk and consider issues such as:

how many years you have to invest

the savings you'll need to reach yourgoals

the return you may expect fromyour investments, and

how comfortable you are withvolatility.



Asset classes

Asset classes are groups of similar typesof investments. Each class has its risksand benefits, and goes through its ownmarket cycle.

A market cycle can take a couple of yearsor many years as prices rise, peak, fall andstabilise. Through investing for the longterm, at least through a whole marketcycle, you can improve your chance ofbenefiting from a period of strong returnsand growth to offset periods of weakness.

The illustration on the previous pageshows indicative returns and volatilityfor the main asset classes over a wholemarket cycle. But each market cycle isdifferent, so unfortunately it isn’t possibleto accurately predict asset class returnsor their volatility. Depending on theconditions at the time, actual returnscould be significantly different from thoseshown.

Here are the main asset class risks andbenefits.

Cash

Cash is generally a low risk investment.

Things to consider:

Cash is often included in a portfolio tomeet liquidity needs and stabilisereturns.

The return is typically all income andis referred to as interest or yield.

Cash is usually the least volatile typeof investment. It also tends to have thelowest return over a market cycle.

The market value tends not to change.However, when you invest in cash,you’re effectively lending money tobusinesses or governments that coulddefault on the loans, resulting in a losson your investment.

Many cash funds invest in fixed incomesecurities that have a very short termuntil maturity.

Fixed income

When investing in fixed income you’reeffectively lending money to businessesor governments. Bonds are a commonform of fixed income security. Fixed

income is also known as fixed interest.

Things to consider:

Fixed income securities are usuallyincluded in a portfolio for theirrelatively stable return characteristics.

Returns typically comprise interest andchanges in the market value of the fixedincome security. Fixed incomesecurities’ values tend to move inopposite directions to interest rates. Sowhen interest rates rise, fixed incomesecurities’ values tend to fall and wheninterest rates fall, values can rise.Short-term fixed income securities aregenerally less sensitive to interest ratechanges than longer-term securities.

While income from fixed incomesecurities usually stabilises returns,falls in their market value may resultin a loss on your investment. Marketvalues may fall due to concern aboutdefaults on loans or an increase ininterest rates. When interest rates arelow, the risk of rates rising and marketvalues falling, is greatest.

There are different types of fixedincome securities and these will havedifferent returns and volatility.

Investing in fixed income securitiesoutside Australia may expose yourportfolio to movements in exchangerates.

Listed property securities

Property securities are listed on sharemarkets in Australia and around theworld. Listed property securities are alsoreferred to as Real Estate InvestmentTrusts (REITs).

Things to consider:

Listed property securities areusually included in a portfolio for theirincome and growth characteristics.

Returns typically comprise income(such as distributions from REITs) andchanges in REIT values.

Returns are driven by many factorsincluding the economic environmentin various countries.

The global REIT market is far morediversified than the Australian REITmarket.

Listed property securities' returns canbe volatile.

Investing outside Australia may exposeyour portfolio to movements inexchange rates.

Australian shares

This asset class consists of investmentsin companies listed on the AustralianSecurities Exchange (and other regulatedexchanges). Shares are also known asequities.

Things to consider:

Australian shares can be volatile andare usually included in a portfolio fortheir growth and incomecharacteristics.

The Australian share market is lessdiversified than the global marketbecause Australia is currentlydominated by a few industries such asFinancials and Resources.

Returns usually comprise dividendincome and changes in share prices.

Dividends may have the benefit of taxcredits attached to them (known asfranking or imputation credits).

Returns are driven by many factorsincluding the performance of theAustralian economy.

Companies listed on the Australianshare market can be grouped as small,medium and large capitalisation (cap)based on factors including the totalmarket value of their listed shares andliquidity. Investors in small capcompanies generally experience greaterprice volatility than shares in large capcompanies because small capcompanies trade less frequently and inlower volumes. They may alsounderperform large cap companies formany years.

When investing in listed investmentssuch as direct shares you should beaware that a company’s share price isaffected by events within and outsideof the company. These events include:



– changes to management

– profit and loss announcements

– the expectations of investorsregarding the company

– competitive pressures

– legal action against the company

– social and government issues

– climate change, and

– environmental issues.

Global shares

Global shares consist of investments incompanies listed on securities exchangesaround the world.

Things to consider:

Global shares can be volatile and areusually included in a portfolio for theirgrowth characteristics.

The number of potential investmentsis far greater than in Australian shares.

Returns usually comprise dividendincome and changes in share prices.

Returns are driven by many factorsincluding the economic environmentin various countries.

When you invest globally, you’re lessexposed to the risks associated withinvesting in just one economy.

Investing outside Australia meansyou’re exposed to movements inexchange rates.

Alternatives

These are a very diverse group of assets.Some examples include private assets,hedge funds, real return strategies,gold, listed infrastructure securities andunlisted infrastructure.

Things to consider:

Because alternatives are diverse, theymay be included in a portfolio for theirdefensive or growth characteristics.

Alternative investments are usuallyincluded in portfolios to increasediversification and provide returns thataren’t strongly linked with theperformance of mainstream assets.

Investment managers includealternative investments in a portfoliobecause they generally expect thereturn and diversification benefits ofalternative investments to outweighthe higher costs often associated withthem.

Some alternative strategies aremanaged to deliver a targeted outcome.For example, real return strategies aimto produce returns exceeding increasesin the costs of living (ie inflation).

For some alternatives, such as hedgefunds, derivatives may be usedextensively and it can be less obviouswhich assets you’re investing incompared to other asset classes.

Some alternative investments areilliquid, which makes them difficult tobuy or sell.

To access alternative investments yougenerally need to invest in a managedfund that, in turn, invests inalternatives.

Because most alternative investmentsaren’t listed on an exchange,determining their value for a fund’sunit price can be difficult and mayinvolve a considerable time lag.

Alternatives invested outside Australiamay expose your portfolio tomovements in exchange rates.

Investment approaches

Investment managers have differentapproaches to selecting investments,which invariably results in differentreturns. No single investment approachis guaranteed to outperform all others inall market conditions.

There are generally two broad approaches:passive and active management.

Passive management

Passive, or index managers, chooseinvestments to form a portfolio whichwill deliver a return that closely tracks amarket benchmark (or index). Passivemanagers tend to have lower costsbecause they don’t require extensiveresources to select investments.

Active management

Active managers select investments theybelieve, based on research, will performbetter than a market benchmark over thelong term.

They buy or sell investments when theirmarket outlook alters or investmentinsights change.

The degree of active management affectsreturns. Less active managers take smallpositions away from the marketbenchmark and more active managerstake larger positions. Generally, the largeran investment manager's positions, themore their returns will differ from thebenchmark.

Active managers have differentinvestment styles that also affect theirreturns. Some common investment stylesare:

Bottom-up – focuses on forecastingreturns for individual companies, ratherthan the market as a whole.

Top-down – focuses on forecastingbroad macroeconomic trends and theireffect on the market, rather thanreturns for individual companies.

Growth – focuses on companies theyexpect will have strong earningsgrowth.

Value – focuses on companies theybelieve are undervalued (their pricedoesn’t reflect earning potential).

Income – focuses on generating aregular income stream throughselecting companies, trusts and othersecurities they believe will deliverincome, or through using derivativesand other strategies.

Core – aims to produce competitivereturns in all periods.



Investment techniques

Our investment managers may usedifferent investment techniques that canchange the value of an investment.

Some of the main investment techniquesare explained below.

Derivatives

Derivatives may be used in any of theinvestment options.

Derivatives are contracts that have a valuederived from another source such as anasset, market index or interest rate. Thereare many types of derivatives includingswaps, options and futures. They are acommon tool used to manage risk orimprove returns.

Some derivatives allow investmentmanagers to earn large returns from smallmovements in the underlying asset’sprice. However, they can lose largeamounts if the price movement in theunderlying asset is unfavourable.

Risks particular to derivatives include therisk that the value of a derivative may notmove in line with the underlying asset,the risk that counterparties to thederivative may not be able to meetpayment obligations and the risk that aparticular derivative may be difficult orcostly to trade.

Investment managers have derivativespolicies which outline how derivativesare managed.

Currency management

If an investment manager invests inassets in other countries, its returns inAustralian dollars will be affected bymovements in exchange rates (as well aschanges in the value of the assets).

A manager of international assets maychoose to protect Australian investorsagainst movements in foreign currency.This is known as ‘hedging’. Alternatively,the manager may choose to keep theassets exposed to foreign currencymovements, or ‘unhedged’.

Returns from exposure to foreigncurrency can increase diversification ina portfolio.

Gearing

Gearing can be achieved by using loans(borrowing to invest), or throughinvesting in certain derivatives, such asfutures.

Gearing magnifies exposure to potentialgains and losses of an investment. As aresult, you can expect larger fluctuations(both up and down) in the value of yourinvestment compared to the sameinvestment which is not geared.

Investment managers can take differentapproaches to gearing. Some change thegearing level to suit different marketconditions. Others maintain a target levelof gearing.

It’s important to understand the potentialrisks of gearing, as well as its potentialbenefits. When asset values are rising bymore than the costs of gearing, the returnswill generally be higher than if theinvestment wasn't geared. When assetvalues are falling, gearing can multiplythe capital loss. If the fall is dramaticthere can be even more implications forgeared investments. For example, wherethe lender requires the gearing level to bemaintained below a predetermined limit,if asset values fall dramatically, thegearing level may rise above the limit,forcing assets to be sold when values maybe continuing to fall.

In turn, this could lead to more assetshaving to be sold and more losses realised.Withdrawals (and applications) may besuspended in such circumstances,preventing you from accessing yourinvestments at a time when values arecontinuing to fall.

Although this is an extreme example,significant market falls have occurred inthe past. Recovering from such falls cantake many years and the gearedinvestment’s unit price may not returnto its previous high.

Other circumstances (such as the lenderrequiring the loan to be repaid for otherreasons) may also prevent a gearedinvestment from being managed asplanned, leading to losses.

You need to be prepared for all types ofenvironments and understand theirimpact on your geared investment.

Short selling

Short selling is used by an investmentmanager when it has a view that anasset’s price will fall. The managerborrows the asset from a lender, usuallya broker, and sells it with the intention ofbuying it back at a lower price. If all goesto plan, a profit is made. The key risk ofshort selling is that, if the price of theasset increases, the loss could besignificant.

Ethical investing

Investment managers may take intoaccount labour standards, environmental,social or ethical considerations whenmaking decisions to buy or sellinvestments. We expect our activeinvestment managers to consider anymaterial effect these factors may have onthe returns from their investments,however we don’t require them to.



Blue Chip Top 20 Model Portfolio

Index

AntaresInvestment manager

To deliver similar returns to the S&P/ASX 20 Accumulation Index before feesand costs.

Investment objectives

The Model Portfolio passively invests in securities included, or that are expectedto be included, in the Benchmark. The Model Portfolio aims to maintain thesecurity’s Benchmark weighting as accurately as possible at all times.

Investment strategy

S&P/ASX 20 Accumulation IndexBenchmark

20Indicative number of different securities

1–10Indicative cash holding (%)

YesAutomatic payment of investment income

0.21Model management fee (% pa)

Antares Dividend Builder Model Portfolio

Income


The primary objective is to regularly deliver higher levels of dividend incomeon a tax effective basis than the Benchmark. The other objective is to achievemoderate capital growth in a tax effective manner over a rolling 5 year period.


The Model Portfolio invests in a diversified portfolio of high yielding Australiansecurities that aim to grow their dividends over time. Emphasis is placed onsecuring franked income and minimising security turnover to keep net realised

Investment strategy

capital gains low. Securities with a dividend yield return in the top quartile ofthe Index are generally selected

S&P/ASX 200 Industrials Accumulation IndexBenchmark

15–25Indicative number of different listed securities





Model Portfolios

Antares Listed Property Model Portfolio

Income


The Model Portfolio’s aim is to outperform the S&P/ASX 200 A-REITAccumulation Index (after fees) over a rolling 5 year period.


Antares follows a bottom-up investment process, which means investmentdecisions are made by undertaking in-depth proprietary research and analysisof individual REITs, companies and securities.

Investment strategy

Antares aims to invest in REITs and companies where the current security’sprice does not fully reflect their view of its potential value. Through companycontact and detailed financial and non-financial analysis, Antares’ researchanalysts gain a first hand understanding of Australian businesses and theindustries in which they operate.

S&P/ASX 200 A-REIT Accumulation IndexBenchmark





JBWere Income Model Portfolio

Income

JBWereInvestment manager

To enhance the value of investment capital by generating combined capital andincome returns that exceed the rate of inflation over the longer term (5 yearsplus).


The Model Portfolio aims to produce a consistent income stream, with a dividendyield target of 1% per annum higher than that of the S&P/ASX 200 AccumulationIndex. The targeted volatility of the Model Portfolio is at or below the Benchmarkvolatility over a rolling 5 year period.

The Model Portfolio is Benchmark aware and JBWere uses stock selection andModel Portfolio construction to obtain an outcome that is defensive in naturewith a dividend yield higher than the Benchmark.

Investment strategy

Reflecting the nature and focus on delivering a consistent income stream, theModel Portfolio is likely to have a greater component of income relative to capitalgain in comparison to the S&P/ASX 200 Accumulation Index.

S&P/ASX 200 Accumulation Index.Benchmark

15-25Indicative number of different listed securities





Model Portfolios

JBWere Listed Fixed Income Model Portfolio

Income

JBWereInvestment manager

To outperform the RBA Cash rate after fees and costs by 200 basis points overa rolling 5 year period.


Further, the risk objective of the manager is to have no more than 3 negativeannual investment returns over a rolling 20 year period.

The Model Portfolio invests in ASX-listed securities which may include corporateand government bonds, hybrids and convertible notes recommended by JBWereLimited. While the Model Portfolio aims to be fully invested at all times,

Investment strategy

short-term allocations to cash may occur. The Model Portfolio’s target creditquality is investment-grade at the issuer level. Areas that JBWere focuses onwithin their investment selection criteria include credit quality, the expectedlevel 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 aheavily-traded Model Portfolio. Moreover, the general approach is to holdinstruments to maturity; however, Model Portfolio changes will be made inresponse in market movements and/or changes in credit quality.

Benchmark unawareBenchmark





Perennial Value Shares for Income Model Portfolio

Value

Perennial ValueInvestment manager

To provide investors a dividend yield, adjusted for applicable franking creditsand before fees and costs, above the S&P/ASX 300 Accumulation Index over arolling 3 year period.


The Model Portfolio invests in a well diversified range of Australian listedcompanies, which Perennial Value believes have the ability to pay a consistentlevel of dividends and which demonstrate financial soundness. Fundamental

Investment strategy

company research is applied to select a portfolio of companies that havea track record of paying a consistent level of cash dividends (including frankingcredits, where applicable) and demonstrate a sound financial position.

S&P/ASX 300 Accumulation Index (gross dividend yield)Benchmark


1-5Indicative cash holding (%)




Model Portfolios

Zurich Australian Listed Property Model Portfolio

Value

ZurichInvestment manager

To provide investors with an income stream and capital growth over the mediumto long term. The portfolio aims to outperform the S&P/ASX 300 AREITAccumulation Index over a period of five years.


In managing the Zurich Australian Listed Property Model Portfolio, ZurichInvestments aims to identify and invest in property securities whose marketprice is less than its intrinsic value, based on research and an assessment of

Investment strategy

their underlying value. The investment team conducts rigorous individual stockresearch with the choice of securities not limited to those represented in theindustry benchmark.

S&P/ASX 300 AREIT Accumulation IndexBenchmark





Antares Core Opportunities Model Portfolio

Core


The investment objective is to outperform the S&P/ASX 200 AccumulationIndex (Benchmark) (after fees) over a rolling 5 year period.


The Model Portfolio invests in a concentrated portfolio of typically no more than30 companies identified as having the potential to offer significant long-termvalue. Holdings of securities are not constrained by index weightings or by

Investment strategy

individual security and sector limits.


Up to 30Indicative number of different listed securities





Model Portfolios

Antares Ex-20 Australian Equities Model Portfolio

Growth


The investment objective is to outperform the S&P/ASX 200 AccumulationIndex excluding the S&P/ ASX 20 leaders Accumulation Index (Benchmark)(after fees) over a rolling 5 year period.


The Model Portfolio is an actively managed, highly concentrated portfolio ofAustralian equities. It invests in shares from outside of the largest 20 companiesby market capitalisation that Antares identifies as having the potential to offer

Investment strategy

significant long term capital growth. Holdings of securities are not constrainedby index weightings or by individual security and sector limits.

S&P/ASX 200 Accumulation Index excluding the S&P/ASX 20 AccumulationIndex

Benchmark



NoAutomatic payment of investment income



Model Portfolios

Ausbil Australian Concentrated Equity Model Portfolio

Core/Growth

AusbilInvestment manager

To outperform the S&P/ASX 300 Accumulation Index over the medium to longterm (5 years plus) by investing in a portfolio of listed Australian securities.


Ausbil’s broad investment philosophy is that active management of its portfoliosfacilitates consistent and risk controlled outperformance. Rather than focusingjust on growth or value investing, Ausbil’s investment approach allows it to

Investment strategy

exploit the inefficiencies across the entire market, at all stages ofthe cycle and across all market conditions. Ausbil is a top down, bottom upinvestment manager.It believes that the Australian equity market is relatively efficient, but not perfect.The combination of top down macroeconomic research with in-depth bottomup stock analysis gives Ausbil better insights into the earnings profile of theuniverse of companies during the various stages of the economic/investmentcycle.The basic premise of Ausbil’s philosophy is that stock prices ultimately followearnings and earnings revisions. Ausbil believes that the market places excessiveemphasis on the current situation and does not sufficiently take into accountthe likelihood of future changes to the earnings profile of individual companiesand sectors.Ausbil’s process seeks to identify earnings and earnings revisions at an earlystage, and hence to anticipate stock price movements. Ausbil seek to positionits portfolios towards those sectors and stocks which it believes will experiencepositive earnings revisions and away from those it believes will suffer negativerevisions. At any time, the portfolio will be tilted toward stocks which afford themost compelling opportunities for appreciation over the coming twelve months.




NoAutomatic payment of investment income



Model Portfolios

Pendal Australian Share Model Portfolio

Core/Growth

Pendal Institutional LimitedInvestment manager

The objective of the Model Portfolio is to outperform the S&P/ASX 300Accumulation index over a rolling 3 year period.


Pendal’s strategy employs a bottom up, fundamental approach to build adiversified portfolio of broad-cap Australian shares where the majority of activerisk and out-performance is driven by stock selection. Pendal’s core investment

Investment strategy

style is to select stocks based on its assessment of their long term worth andability to outperform the market, without being restricted by a growth or valuebias. Pendal’s fundamental company research focuses on valuation, franchise,management quality and risk factors (both financial and non-financial risk).






Perpetual Direct Equity Alpha Model Portfolio

Core/Growth

Perpetual InvestmentsInvestment manager

To provide investors with long-term capital growth and income through aninvestment in quality Australian shares that aims to outperform the returns ofthe S&P/ASX 300 Accumulation Index.


Perpetual Investments’ investment style is first and foremost based on bottom-up fundamental analysis. This approach firstly selects stocks based on companyspecific fundamentals, and then by the relative attractiveness of their value. The

Investment strategy

outcome of this investment process is that Perpetual Investments’ share portfoliosdemonstrate ‘value’ characteristics. Stocks are bought only if they have passedrigid stock selection criteria and are deemed to be quality companies, and thenonly if they are found to be attractive on a valuation basis. In determininginvestment quality, investments are carefully selected on the four criteria:

1 conservative debt levels

2 sound management

3 quality business; and

4 in the case of industrial shares, recurring earnings







Model Portfolios

Redpoint Industrials Model Portfolio

Core/Growth

RedpointInvestment manager

To provide a total return in line with the Benchmark after fees and costs, overa rolling 5 year period.


Redpoint employs a disciplined approach which seeks to construct a ModelPortfolio of better quality companies with more sustainable business practicesthat provides a return broadly comparable to that of the Benchmark. The

Investment strategy

approach is designed to provide a Model Portfolio with low turnover, appropriaterisk controls relative to the Benchmark and comparatively lower costs.Redpoint’s selection bias towards quality companies is expected to give theModel Portfolio a slight defensive tilt. This is expected to provide a modestoutperformance during periods of market stress but marginal underperformancewhen speculative stocks are in favour. Redpoint’s approach is aimed atde-selecting or, at least, underweighting poorer quality stocks. This approach isRedpoint’s preferred method for sensibly de-selecting stocks given the strategyis constrained to holding less than half the stocks in the Benchmark.

S&P/ASX 100 Industrials Accumulation IndexBenchmark





PIC Lifecycle Growth Moderate Model Portfolio

Growth

Lonsec Investment Solutions Pty LtdInvestment manager

Total return of CPI plus 3-4% pa (before fees and tax) over 5-7 years. Reviewedperiodically. Limit the expected incidence of negative annual returns in any 20year period to between 3 and 4 years.


We construct well diversified investment portfolios that are designed to achievethe investment objectives with minimum risk possible.

Investment strategy

8-18Indicative number of different investments

Asset class ranges 10% - 80%Shares & Property

0% - 30%Alternatives

20% - 88%Fixed income

2% - 90%Cash



0.522Estimated ICR fee (% pa) may include performancefees


Model Portfolios

PIC Lifecycle Growth Assertive Model Portfolio

Growth





Investment strategy





2% - 80%Cash




PIC Lifecycle Growth Aggressive Model Portfolio

Growth





Investment strategy





2% - 70%Cash





Model Portfolios

PIC Lifecycle Income Conservative Model Portfolio

Income





Investment strategy





2% - 100%Cash




PIC Lifecycle Income Moderate Model Portfolio

Income





Investment strategy





2% - 90%Cash





Model Portfolios

PIC Lifecycle Income Assertive Model Portfolio

Income





Investment strategy





2% - 80%Cash





Model Portfolios

Transacting

Moving securities or units inmanaged funds into the SMA

You can move securities or units inmanaged funds held in your platformaccount into the SMA without cashingthem in. Only securities and managedfunds currently available in the chosenModel Portfolio can be transferred. To findout which assets can be transferred youor your Adviser can find out more viamlc.com.au. Please note that we do notaccept transfer of NAB shares into theSMA.

If the securities or units in managed fundsthat you transfer into your ModelPortfolio result in that particular assethaving a greater weighting than therelevant allocation of that assetdetermined for the Model Portfolio, someof the securities or units will be sold topurchase other securities or units thatform part of the Model Portfolio.

All transaction requests have to bemade through your platform. Beforeyou transact, please make sure yourefer to your platform offer documents.

Moving securities or units inmanaged funds out of the SMA

You can also move securities out of theSMA.

If you only move some securities,managed fund units or cash out of aModel Portfolio, the remaining assets inyour Model Portfolio will be automaticallyrebalanced. This could result in the sameassets you’ve moved out beingrepurchased.

Frozen assets in Model Portfolios

From time to time, assets held in yourModel Portfolio may become subject totrading restrictions beyond our control(for instance, if the asset becomesilliquid). In these circumstances, we maydetermine that the relevant asset (frozenasset) is no longer available to form partof the Model Portfolio. If we make such adetermination, members of the SMA in

relation to whom the frozen asset is held(that is, the platform operator of yourplatform) will be taken to have given usa standing instruction to transfer (to theextent practicable) the frozen asset inspecie to the platform operator (or itsnominee). Following this transfer, thefrozen asset will no longer be held in yourModel Portfolio, and will instead be heldby (or for) the platform operator as partof your platform account

Switching between ModelPortfolios

You can switch between Model Portfolios.There are two ways you can do this:

selling securities or units of managedfunds in one Model Portfolio topurchase securities in a new ModelPortfolio

transferring securities or units ofmanaged funds that are common toboth Model Portfolios, and then sellingthe assets that are not common topurchase the assets needed to matchthe new Model Portfolio.

When you request to transfer a specifieddollar amount, the transaction will beinitiated using the market value of thesecurities on the date we receive yourinstruction. These values may changeduring the time it takes to complete thetransfer and your transfer amount maybe greater or less than the last reportedvalue.

Withdrawals

Withdrawals will be initiated within fivebusiness days of receipt of the platform’srequest to do so. The length of time ittakes to process your withdrawal willdepend on various factors, such as howoften the investment is priced or traded,the composition of your investment, howcomplex it is, and how liquid it is on theday we process your request. If yourmoney isn’t immediately available to us,it may take up to 30 business days ormore.

For partial withdrawals, you may receiveless than requested if there is anunexpected downward movement insecurity prices.

We require you to maintain a minimumof $10,000 in each Model Portfolio($100,000 for the multi-asset modelportfolios). If the balance falls below thisamount, we may close your investmentin the Model Portfolio, and transfer theamount to your platform Cash Account.

Investment income

The frequency and amount of income thatyou receive will depend on the ModelPortfolio/s that you have selected toinvest in.

Investment income is initially depositedinto the cash component of the ModelPortfolio.

Where a Model Portfolio has automaticpayment of investment income, dividendand interest income are automaticallypaid to your platform cash account afterthe initial deposit into the cashcomponent of the Model Portfolio. For allother model portfolios your dividend andinterest income will be paid into the cashallocation of your Model Portfolio and willbe re-invested when the Model Portfoliois rebalanced.

Any income received after you haveclosed your Model Portfolio, will beautomatically transferred to yourplatform Cash Account.


How the SMA is managed


Rebalancing

The Model Portfolios are monitored byprofessional investment managers thatprovide us with changes to asset selectionand weightings on a regular basis. Wethen generally rebalance the ModelPortfolios so that they are consistent withinvestment manager’s recommendedweightings.

Rebalancing will generally occur when:

an investment manager advises us tochange the holdings or weightings of aModel Portfolio

a new investment is made

a withdrawal is made, or

the balance of the cash component ofone of your Model Portfolios falls belowthe minimum required.

There may be some circumstances whenyour Model Portfolio doesn’t exactlymatch the weightings recommended bythe investment manager in relation toModel Portfolio. This may happen where:

a security is suspended from trading;

a trade doesn’t meet the minimumtrade size requirements;

units of assets are rounded to wholeunits;

there are differences in the timing of,and amounts paid or received inconnection with, transactions to buyor sell assets forming part of you ModelPortfolio.

These differences will mean that there isa difference in the performance of yourModel Portfolio and the performance ofthe portfolio of assets in relation to whichthe investment manager advises us.

Changes to, and termination of,model portfolios

Available Model Portfolios may changefrom time to time, and existing ModelPortfolio may be varied (for instance, tochange the investment mandate orcomposition, and changes to theinvestment manager appointed tomanage the Model Portfolio). We willnotify you of changes at the relevant time.

Model Portfolios may also be terminatedif we think this would be appropriate. Ifa Model Portfolio is to be terminated, wewill notify you in writing.

Where a Model Portfolio is terminated wewill provide you with written notice ofthe termination and your options in orderto manage your investment which mayinclude, transfer to an alternative ModelPortfolio, redeem your investments tocash or in-specie transfer your holdingsinto the Model Portfolio to single stockholdings in your platform account.

Minimum trade size

For listed securities only, the minimumtrade size is equal to the greater of:

0.10% of the balance of yourinvestment in a Model Portfolio, or

$250.

The minimum trade size may not beapplied for:

initial investments

withdrawals

trades as a result of a re-weightinitiated to bring the cash componentwithin a Model Portfolio back to theminimum, and

an investment manager has requestedan entire holding of a security to beremoved from the Model Portfolio.

Minimum cash balance

Each Listed Security Model Portfolio mustcontain a cash component of at least 1%,and each Multi-Asset Model Portfoliomust contain a cash component of at least2%. If the balance falls below theminimum, then the Model Portfolio willbe rebalanced. This means that securitieswould be sold to bring the cashcomponent back to the requiredminimum. This cash component is heldin your chosen platform’s Cash Account.This is currently allocated across a rangeof cash deposits managed by the NABGroup.

As tax is complex, we recommend thatyou contact your registered tax agentor the Australian Tax Office atato.gov.au

Tax considerations

While you may have to pay tax on yourinvestments, you could be eligible toclaim some of the fees as a tax deduction.

At the end of each financial year theplatform will send you a report to assistyou in completing your income tax return.

Reporting

The Platform provides reporting such asconfirmation of transaction reports(daily), distribution statements(quarterly), tax statements and financialstatements (annually). These are providedas outlined in your platform’s offerdocument.

Constitutions and CompliancePlans

Copies of the Constitutions andCompliance Plans for the SMA areavailable free of charge upon request.

Please call us to obtain a copy.



https://www.ato.gov.au/

Investors’ rights

Because investing in the SMA through aplatform is different to investing directly,there are some things you should beaware of:

you don’t have the right to attendmember meetings, vote or participatein such meetings, and

you won’t receive communicationsrelating to rights issues or corporateactions or provide us with any directionon how to act or vote. We will act inaccordance with the direction providedby the relevant investment manager,and

you don’t have access to the 14 daycooling-off period in the SMA, butplease seek advice from the platformoperator as to whether cooling-offrights apply to you, and

you generally can’t participate individend re-investment schemes.

Rights issues and corporateactions

Investors in the SMA will not receivecommunications relating to rights issuesor corporate actions or provide us withany direction on how to act or vote.

We will act in accordance with the adviceor recommendation provided by therelevant investment manager.

Investors’ liability

The SMA’s underlying assets are ownedby NAL on behalf of investors. TheConstitution limits investors’ liability totheir investment in the SMA. However,we cannot give an absolute assurance thatyour liability to the SMA is limited in allcircumstances, as the issue has not beenfinally determined by a superior court.

Consents

Each investment manager has given itswritten consent to being named andquoted in this PDS, and to the inclusionof statements made by it or said to bebased on statements made by it. As at thedate of this PDS these consents have notbeen withdrawn.

Eligibility

This offer is made in Australia in line withAustralian laws and will be regulated bythese laws.

Resolving complaints

It’s important to us to provide a high levelof service, so we value feedback on howwe can do things better. If you have acomplaint, we can usually resolve itquickly over the phone on 132 652, or ifyou’d prefer to put your complaint inwriting, you can email us or send us aletter.

We’ll conduct an internal review andprovide you with an outcome in writingwith the reasons for our decision. Formore information, visitmlc.com.au/complaint

If you’re not satisfied with our resolution,or we haven’t responded to you in 45days, you can lodge a complaint with theAustralian Financial ComplaintsAuthority (AFCA).

Website: afca.org.auEmail: [email protected]: 1800 931 678 (free call)In writing to: Australian FinancialComplaints Authority, GPO Box 3,Melbourne, VIC 3001

AFCA is an external dispute resolutionscheme that deals with complaints fromconsumers in the financial system. AFCAprovides fair and independent financialservices complaint resolution that’s freeto consumers.

If you have a complaint about financialadvice you receive, you should follow thecomplaint resolution explained in theFinancial Services Guide provided by yourfinancial adviser.

Related party transactions andconflicts of interest

The SMA may remunerate and use theservices of related companies where itmakes good business sense to do so andwill benefit our customers.

Amounts paid for these services arealways negotiated on an arm’s-lengthbasis and are included in all the feesdetailed in this document.

MLC Asset Management Pty Ltd is amember of the NAB Group and licensesPrivate Investment Consulting (PIC) toprovide specialist asset consultingservices to Lonsec Investment SolutionsPty Ltd. A representative of MLC AssetManagement Pty Ltd is a member of theLonsec/PIC investment committeeresponsible for the PIC Lifecycleportfolios.

Antares Capital Partners Ltd and JBWereLimited are members of the NAB groupof companies and provide investmentmanagement services directly toNavigator Australia Limited.

Redpoint is a boutique fund managerproviding investment managementservices to Navigator Australia Limitedand is majority-owned by its employees.The NAB Group owns a minority interestin Redpoint.

Ausmaq Limited is the custodian formanaged fund assets held on your behalf.NAL is the custodian for the remainderof the assets.

WealthHub Securities Limited is amember of the NAB group of companiesand provides trading services to NAL.



https://www.mlc.com.au/adviser/nav_top/contact-us

https://afca.org.au/

mailto:[email protected]

This will give you an understanding of the fees and costs you may pay.

DID YOU KNOW?Small differences in both investment performance and fees and costs can have a substantial impact on your long term returns.

For example, total annual fees and costs of 2% of your account balance rather than 1% could reduce your final return by up to20% over a 30 year period (for example, reduce it from $100,000 to $80,000).

You should consider whether features such as superior investment performance or the provision of better member servicesjustify higher fees and costs.

You may be able to negotiate to pay lower contribution fees and management costs where applicable. Ask the Service or yourfinancial adviser.

TO FIND OUT MOREIf you'd like to find out more, or see the impact of the fees based on your own circumstances, the Australian Securities andInvestments Commission (ASIC) website (www.moneysmart.gov.au) has a managed funds fee calculator to help you check outdifferent fee options.

This document shows fees and other costs that you may be charged. These fees and costs may be deducted from your money, from thereturns on your investment or from the assets of the managed investment scheme as a whole. Taxes are set out in another part of thisdocument.

You should read all the information about fees and costs because it is important to understand their impact on your investment. Feesand costs for particular investment options are set out on pages 16 to 26.

Fees and other costs

Separately Managed Account

How and when paidAmountType of fee or cost

Fees when your money moves in or out of the managed investment product

There is no establishment fee.NilEstablishment feeThe fee to open your investment

There is no contribution fee.NilContribution feeThe fee on each amount contributed to your investment

There is no withdrawal fee.NilWithdrawal feeThe fee on each amount you take out of your investment

There is no exit fee.NilExit feeThe fee to close your investment

Management costs

Calculated on your average monthly balanceand deducted from the cash component of yourModel Portfolio each month.

0.21% to1.05% pa

The fees and costs for managing your investmentThe amount you pay for specific Model Portfolios is shownon pages 16 to 26.

Service fees1

There is no switching fee.NilSwitching feeThe fee for changing investment options

1 Other service fees may apply. See the Additional explanation of fees and costs section on the following page.



https://www.moneysmart.gov.au

Additional explanation of feesand costs

You should refer to your platform offerdocuments for further informationregarding fees and costs.

Buy-sell Spreads

Buy-sell spreads are charged by theinvestment manager and not paid to us.

Negotiated fees

Investment in the SMA is only availablevia platforms, and the platform operators(or their appointed custodians) willtherefore be the members of the scheme.

We may negotiate fee arrangements onan individual basis with those platformoperators or custodians, such that the feesthat may be charged, rebated or waivedby us in relation to those wholesale clientsdiffers from the fee arrangementsapplying to other members.

Transaction costs

Transaction costs for listedsecurities

When shares within an SMA investmentoption are purchased and sold, brokerageand settlement costs will be incurred. Thebrokerage rates that apply will usually belower than the brokerage rates describedabove for listed investment options.

Transaction costs may also be incurredwhen the market process for purchasingassets causes the price paid to be higherthan the value of the assets immediatelyafter the purchase transaction, forexample where bid/ask spreads areincurred.

To minimise brokerage costs, trades areconsolidated and netted off across allaccounts invested in a particular ModelPortfolio. The total brokerage amount isthen pro-rated across all investors. Insome cases, we may not need to processa transaction as it may be possible to neta particular transaction againsttransactions for other investors in thesame Model Portfolio. In these cases, nobrokerage will be charged. The brokerage

currently charged by the preferred brokeris 0.21% of the total trade amount subjectto a minimum of $5.13. This is deductedfrom your cash holdings in the ModelPortfolio at the time of transaction.

This is an additional cost to you.

The preferred broker is WealthHubSecurities Limited (a NAB Groupcompany).

Transaction costs for managedinvestment schemes

When assets in a managed investmentproduct are bought or sold, costs such asbrokerage, stamp duty and settlementcosts are incurred. Costs may also beincurred when the market process forpurchasing assets causes the price paidto be higher than the value of the assetsimmediately after the purchasetransaction, for example where bid/ askspreads are incurred. Some or all of thesecosts may be met by a buy-sell spreadwhich is an additional cost to you whenyou add to or withdraw from theinvestment option or if you switchinvestment options. The remaining costsare met from assets of the investmentoption and reduce the return of theinvestment.

Performance fees

A performance fee may be paid wheninvestment returns exceed a specifiedlevel. Where any of the investmentmanagers of a managed investmentscheme in the multi-asset ModelPortfolios charge a performance fee, a feewhich is proportional to the assets heldwith that investment manager will becharged. These proportional fees areadded together to give one performancefee for the multi manager portfolio.

Where applicable, an estimate of this feeis included in the investment fees shownin the Summary of the Model Portfoliossection on page 5 of this PDS. The actualperformance fee charged in future periodsmay differ from the estimated fee.

Bank fees

Any bank fees associated with operatingthe cash component of a Model Portfolio,including an overdraft facility, will beoffset against any positive interest earnedon the cash balance during the samemonth.

Negative cash component fee

Generally the cash component in anyModel Portfolio will have a positivebalance. However a cash component canhave a negative balance if there areinsufficient funds to settle a trade. Thismay happen when we rebalance a ModelPortfolio. If this occurs a fee will becharged for the period the cashcomponent has a negative balance.

An overdraft facility is available if thebalance becomes negative. If this occursinvestors in the Model Portfolio will becharged any interest expense associatedwith their proportion of the overdraftfacility.

Tax

For information about tax and the SMA,see page 28 of this PDS.

Varying fees

Unless otherwise stated, we’ll give you noless than 30 days notice prior toincreasing or implementing a new fee orother charge.

No notice will be given in respect ofchanges to transaction costs.



Maximum fees and costs

The Constitution allows for additionalcharges to be imposed for each of theModel Portfolios. We have no presentintention to impose these charges.

If we subsequently decide to impose newcharges or increase in existing fees youwill be given 30 days prior written notice.The charges are a contribution fee(maximum of 5%), a transaction fee(maximum of 2% of the value of thetransactions executed), a withdrawal fee(maximum of 5%), a fee for transferringsecurities (maximum of $125 per holding)and a performance fee (maximum of 50%of out-performance of a Benchmark).

In addition, if you transfer securities inand out of the SMA, the Constitutionprovides that we can require you to payany stamp duty or other costs associatedwith the transfer.

Other fees we may charge

Fees may be charged if you request aservice not currently offered. We’ll agreeany additional fee with you beforeproviding the service.

We may pass on any costs we incur inimplementing Government legislation orfees charged by third parties.

Adviser remuneration

Currently your financial adviser does notreceive payments (remuneration) fromus in respect of any investments in theSMA.

However, subject to law, we may pay anAFSL holder, with whom your financialadviser is an authorised representative,remuneration based on the overall volumeof business they generate with us. Part ofthis remuneration may be passed ontoyour financial adviser. Any suchremuneration is not an additional chargeto you.

Subject to law, we may also provide yourfinancial adviser and/or AFSL holder withnon-monetary benefits (such asconferences and technical support etc),known as alternative forms ofremuneration.



Example of annual fees and costs for a balanced model portfolio or other model portfolio

This table gives an example of how the fees and costs in the Antares Dividend Builder Portfolio for this managed investment productcan affect your investment over a 1 year period. You should use this table to compare this product with other managed investmentproducts.

Balance of $50,000 with a contribution of $5,000 during year 1Example: Antares Dividend Builder Portfolio

For every additional $5,000 you put in, you will be charged $0.0%Contribution Fees

And, for every $50,000 you have in the Antares Dividend BuilderPortfolio you will be charged $230 each year.

$2300.46%Plus Management Costs

If you had an investment of $50,000 at the beginning of the yearand you put in an additional $5,000 during that year, you would becharged fees of:

$230Equals Cost of AntaresDividend Builder Portfolio

$230*What it costs you will depend on the investment option you chooseand the fees you negotiate.

* Additional fees may apply:1 This example assumes the $5,000 is contributed at the end of the year.



For more information call us fromanywhere in Australia on 132 652 orcontact your financial adviser.

Postal addressPO Box 200North Sydney NSW 2059

Registered officeGround Floor, MLC Building105–153 Miller StreetNorth Sydney NSW 2060

mlc.com.au

Navigator Australia Limited ABN 45 006 302 987 AFSL 236466. Part of the National Australia Bank Group ofCompanies. An investment with MLC is not a deposit or liability of, and is not guaranteed by, NAB. O

BJA

1272

53-1

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