Dow Australia Superannuation Fund

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1 Dow Australia Superannuation Fund Investment Guide ISSUED: 1 JULY 2016 The information in this document forms part of: the Product Disclosure Statement for Employee members (including Insurance Only members), Version 7, dated 1 July 2016; and the Product Disclosure Statement for Spouse members, Version 6, dated 1 July Important information This information should be read in conjunction with the other documents which form part of the relevant Product Disclosure Statement (PDS). You should consider this information before making a decision about the product. Information in the PDS is general information only and does not take account of your personal financial situation or needs. Any examples included are for illustration only and are not intended to be recommendations or preferred courses of action. You should obtain financial advice tailored to your personal circumstances. Investment returns can be positive or negative and are not guaranteed by the Trustee or the Company. Information on tax and superannuation legislation is current as at 1 July The Trustee reserves the right to correct any errors or omissions. Information contained in this document that is not materially adverse may be updated if it changes. Updated information can be found on the Fund s website at In addition, we will provide a hard copy free of charge on request, by contacting the Fund Administrator on Contact us The Fund Administrator Dow Australia Superannuation Fund PO Box 1442 Parramatta NSW 2124 Phone: Website: Dow Chemical or Dow Agro employees can also contact: James Foster Human Resources Generalist Dow Chemical (Australia) Pty Ltd Level 17, 8 Exhibition Street Melbourne VIC 3000 Phone: Issued by Towers Watson Superannuation Pty Ltd (ABN , AFSL ) as Trustee of the Dow Australia Superannuation Fund (ABN ). 1

2 Investing for your future One of the most important choices you make as a member of the Dow Australia Superannuation Fund is how you invest your super. There are eight different investment options in the Fund, which cater for a wide range of people with differing financial needs and goals. But you basically have two choices: 1 2 You can either keep it simple by investing in one of the Fund s three packaged investment options; or You can do it yourself by building your own portfolio across any number of the eight options listed on page 3. Your choice will depend on your circumstances as well as your interest in investing. If you would like to know more about investing, please refer to the following pages on investment basics. We also encourage you to speak to a licensed financial adviser (see the back cover if you need an adviser). In this booklet, we refer to the Company. This is the employer for employees of Dow Chemical (Australia) Pty Ltd, Dow AgroSciences Australia Limited, Rohm and Haas Australia Pty Ltd and affiliated companies. Inside... Investing for your future 2 Start with the basics: asset classes 4 Risk and return 5 Three key investment concepts 7 Making your choice 9 Comparing investment options 10 Your questions answered 14 Monitoring your super 15 Managing your super investments Back cover 2

3 Your investment options Packaged options keep it simple Assertive 100% in shares, half in Australian and half in international shares Growth around 72% in growth assets and 28% in income assets Conservative around 39% in growth assets and 61% in income assets Asset class options do it yourself International Shares approximately 50% hedged in Australian dollars Australian Shares 100% in Australian shares Property 100% in global listed property (includes Australia) Fixed Interest 75% in Australian assets and 25% in international assets Cash You must make an investment choice on joining the Fund or you will become an Insurance Only member (Employee members) or your application for membership cannot be processed (Spouse members). You can read about the packaged and asset class options on pages 10 to 13. Weighing up your choices We encourage you to read all the information in this booklet, but here is a summary of the pros and cons of keeping it simple or doing it yourself. Keep it simple approach Invest in one packaged option Simple choice choose a packaged option designed by the Trustee and its expert advisers. Instant diversification two of the packaged options invest across a broad range of asset classes. Less monitoring as long as your investment needs don t change, there is no need to change your investment choice or rebalance your portfolio. BUT You have one option only: You can only pick one of the three packaged options. You must be satisfied that it meets your investment needs. Do it yourself approach Tailor your investment portfolio from any of the eight investment options More choice you have the ability to create your own investment strategy to meet your needs. More flexibility you can choose a different strategy for your past and future contributions, or keep them the same. You can also change your investment mix as your circumstances change. BUT You have more responsibility: You should regularly monitor and assess whether to rebalance your portfolio. You should ensure your portfolio is adequately diversified across the asset classes to meet your needs. How to make your investment choice Make your choice online directly from the "Member Centre" on the Fund's website. You will receive confirmation of your choice by . Visit the Fund's website to download and print an Application & Change form or an Application for Spouse Membership and Contributions form, as applicable. Ask Human Resources for an Application & Change form. You can change your investment choice at any time. Instructions received by the Fund Administrator before the end of the month will take effect from the start of the next month. 3

4 Start with the basics: asset classes The assets in which super is invested are typically cash, fixed interest investments, property and shares. This section provides a brief overview of the four main types of asset classes, plus alternative assets. Selecting the right mix of assets can make a huge impact on the amount of super you have when you retire. While there are many different individual investments, there are only four key asset classes or investment sectors (plus alternative assets) that you need to understand for your investment in the Fund. Cash Cash investments are often placed in a cash management trust. Cash can also be invested in short-term government bonds and company debentures for periods of less than 90 days. Cash typically brings the lowest returns of the asset classes over the longer term. But it is also the lowest-risk investment. Alternative assets This is a broad category of investments and investment strategies that sit outside the traditional asset classes of shares, property, fixed interest and cash. They include individual hedge funds, structured beta funds and derivatives. Alternative assets will typically perform differently to traditional asset classes. This means that investors often use alternative assets to help diversify their investment portfolios. On their own, alternative assets can produce high returns, but with the risk of high short-term volatility. However, when combined with traditional asset classes, their unique risk and return characteristics can help smooth longer-term returns and reduce volatility. The Fund currently invests in real return funds and risk parity (structured beta) funds (see pages 10 to 13). 4 Fixed interest investments Corporate and government bonds offer financing through sophisticated loan structures. When institutions like governments or companies want to borrow money, they can offer fixed interest investments, such as bonds (government and semi-government bodies) and debentures (companies), for different lengths of time sometimes for 10 years or more. Fixed interest investments offer a return to the investor of the money invested (the capital), plus any interest earnings. Over the long term, investment earnings tend to be lower than those possible from shares or property investments. It is important to know that the value of a bond will change as the interest rate changes. Property Investing in property generally means investing in industrial or commercial real estate or through a property trust. Like shares, property will produce both income and capital growth. And the value of the property can move up and down depending on the market. Over the long term, property is expected to produce higher returns than fixed interest investments, but lower than shares. Shares A share is a unit of ownership in a company it gives ownership of a real asset. Owning shares or stock gives an investor a share of the profits the company earns a dividend. A company raises money according to how many shares it can sell and at what price. If the value of the share goes up, shareholders receive a capital gain. If the value of a share goes down, there is a capital loss. Key terms Asset classes are different types of investments. For super, that generally means: Cash; Fixed interest investments; Property (or real estate); and Shares (or equities). The Fund also invests in alternative assets.

5 Risk and return Understanding risk Risk and return are at the centre of all talk about investments. Investments are not neatly divided into safe or risky. In fact, there are many levels and types of risks that you need to be aware of before you make your investment choice. While some investments may be considered safe because they will not actually decline in value, no investment is 100 percent safe. With any investment, there is a level of risk that you have to accept. If you want higher potential returns, you must be willing to accept more volatility it s a trade off you have to be willing to make. Three types of risk you should know about market risk and inflation risk and liquidity risk are described below. Market risk One type of risk is market risk. Market risk is short-term volatility or ups and downs in the return of an investment. A risky investment typically means that the value of the investment will vary over short periods. A less risky investment does not fluctuate as much over the short term. Your ability to invest aggressively is directly related to the amount of time you have until you will need to use your savings. Over time, market risk will go down, because the ups and downs of the market start to even out. Inflation risk While you may not hear as much about inflation risk, it is just as important to understand. Inflation risk is the risk that your investment may not keep pace with inflation over time. If your investment is growing at less than the average rate of inflation, you will end up with less buying power because your investment will not be worth as much. So, the longer you hold on to an investment, the greater your exposure to inflation risk if your investment does not produce a return that beats the rate of inflation over the long term. Market risk vs. inflation risk The chart below illustrates how market risk and inflation risk work over time. You ll notice that, over time, market risk goes down because you have the time to ride out the ups and downs of the market. However, if investments are too conservative, there is a risk that the investment will not keep up with inflation and will not be worth as much over time. Risk Liquidity risk Market risk Inflation risk Time Liquid assets are assets that can be readily converted to cash. Liquidity risk is the risk that some assets may not be able to be converted to cash when needed to pay benefits or process investment switches. Key terms Risk The ups and downs in the return on your investments. There is a certain amount of risk that applies to every investment. Return The amount of money an investment earns. 5

6 Return The return on an investment is simply the amount of money the investment earns or loses. The return can be income, in the form of interest. The return can also be an increase or a reduction in the value of an investment. For example, if the value of your shares increase over time, then the shares become a more valuable asset while you own them. When you sell the shares, you receive more than you paid for them. Generally, the longer you hold shares, the more likely they are to increase in value. It s important to know that a return can also be negative. If an investment return is negative or an investment loses value over time when you sell the investment, you will receive less than you paid for it. Why would anybody want to invest in a riskier investment? Because they also tend to produce a higher return over the longer term. Investments with the most potential for return have greater market risk. As an investor, you have to decide how much risk you are prepared to take to get a potentially higher level of long-term return. It s your choice. Risk and return summary Market risk is short term. There s a trade off between risk and return. If you want a higher return, you have to be willing to take more risk. The investments with the most potential for higher returns over the long term will also be the most unpredictable over the short term. Inflation risk is just as important to consider as market risk. Market risk can be reduced through diversification. Only you can decide how comfortable you are with the level of investment risk you choose. 6

7 Three key investment concepts There are three key concepts or principles that will help you make an educated investment choice and begin to control the risk you assume when you invest. These concepts are diversification, asset allocation and time horizon. Diversification One important thing to know about business cycles is that, generally, while one type of investment or asset is doing poorly, others can be doing well. That s why it s smart to diversify your investments. To diversify simply means spreading your investments over different kinds of assets in other words, not keeping all your eggs in one basket. For example, if you have your entire investment portfolio invested in a single company and the value of that company s shares fall, the value of your portfolio will decline by exactly as much as the stock fell. Likewise, if you are equally diversified across two stocks and one declines, you will only have a 50% exposure to that loss. And so on. Diversification is one way to help you reduce investment risk and improve the consistency of your returns. Diversification in the Dow Fund The Fund s packaged investment options Assertive, Growth and Conservative are diversified across different asset classes or are invested in shares that have different levels of risk. For example, the Assertive option is made up entirely of shares, and is divided into roughly equal proportions of Australian and international shares. And within each of these asset classes, your super is invested across shares in different industries, and many different companies. At any one time, some of those companies may be doing very well and producing good returns, while others may be lagging behind. The Growth and Conservative options also invest to varying degrees in fixed interest, alternative assets and property investments, which spread the risk even more widely. Generally, when shares as a whole aren t doing well, fixed interest investments are likely to produce a good income. DIY diversification You also have the flexibility to choose your own level of diversification across asset classes by combining any number of the Fund s packaged options and asset class options. You should keep in mind that if you decide to do it yourself, you may need to rebalance your portfolio from time to time. See page 15 for information about rebalancing. Asset allocation Asset allocation means investing across a range of asset classes that offer different levels of risk. You can do this by choosing shares from different industries. But, the most important way to take advantage of a diversified portfolio is to invest in different types of assets. You may want to look at the total asset allocation of your investment portfolio, including your super and any other outside investments you may have. Asset allocation in the Dow Fund Each of the Fund s investment options has a pre-determined target or benchmark asset allocation. You need to choose an option or a combination of options that is consistent with your investment objectives and time horizon. See pages 10 to 13 for details of the benchmark asset allocations for the options. The actual allocations are shown in the Fund s latest Annual Report. 7

8 Time horizon The most important thing to consider when you are determining how much risk you can take is your time horizon or the amount of time you have until you will need your savings. If you are investing for the long term generally, more than seven years you might be more comfortable with a more risky portfolio. If you are making a short-term investment generally, one to three years you might need to consider building a less risky portfolio. Either way, the key is to develop a portfolio with a degree of risk that is appropriate for your needs. Again, the choice is yours. To help you understand your time horizon or how many years you have until you need your savings ask yourself the questions below. How many years do you have before you want to retire? years Will you need your savings immediately when you retire? No Yes How many years of retirement do you expect to enjoy? years Your investment options See pages 10 and 13 to learn more about the Fund s investment options. You can also see up-to-date investment information by visiting the Fund's website. Did you know? Australians can expect to spend an average of over 20 years in retirement. You might need to consider investing a portion of your savings with a long-term approach so that you will not lose the value of your savings to inflation. 8

9 Making your choice After you ve taken the time to read this guide and understand the basics of investing and the investment options that are available through the Fund, it s time to make your choice. How to make your choice Once you decide on an option, you have three ways to make your investment choice: Go online and make your choice electronically. You will receive a confirmation of your choice via ; Visit the Fund's website and download an Application & Change form (or an Application for Spouse Membership and Contributions form, as applicable); or Obtain an Application & Change form (or an Application for Spouse Membership and Contributions form, as applicable) from Human Resources. The super in your current accounts and all future contributions made by you and the Company will be invested according to the choice you make. Ask for advice Remember, super is only one part of your financial portfolio. You may want to seek assistance from a licensed financial adviser to help you make a choice that is best for you. You can change your option Your super is generally a long-term investment that shouldn t necessarily be influenced by short-term fluctuations in investment returns. However, if your financial situation changes, you might want to discuss investment changes with a licensed financial adviser before you decide to do anything. You can change or switch your choice of investment option at any time. Simply complete and submit your form to the Fund Administrator so that they receive it before the end of the month and your new choice will take effect from the first day of the following month. Once your switch has been processed, you will be sent confirmation of the transaction. Cost to switch There are some costs associated with changing or switching your option, namely: A switching fee, for the work involved in rearranging investments and producing a confirmation statement. This fee is waived for your first switch in each calendar year, but applies for subsequent switches in the same Fund year; and A buy-sell spread, to cover costs charged by the Fund s investment managers. This includes the stamp duty and brokerage fees involved in buying and selling assets. Costs vary depending on the type of assets you re investing in. Currently you are not charged a buy-sell spread in the Fund. For information on the current fees that apply, see the Fees and Tax Sheet or visit the Fund's website. Accessing the Fund's website You can visit the Fund's website through the Company intranet at work or from any computer with internet access at 9

10 Comparing investment options Your packaged options Assertive Investment objectives To achieve a return (after tax and investment fees) that is at least 4% per year more than movements in the Consumer Price Index (CPI) over moving 10-year periods. To limit the probability of achieving a gross of tax negative return over moving 1 year periods to approximately 6 years in 20. Investment strategy To invest totally in shares with about 50% in Australian shares and 50% in international shares, with half the international shares currency hedged into Australian dollars. Who does this option suit?* This option may suit members who: aim to achieve a high return over the long term by investing purely in shares. will not be concerned with potentially significant fluctuations in returns over shorter time periods. may not need immediate access to their benefit. Benchmark asset allocation# 50% 50% Minimum suggested investment horizon* 7 years or more Estimated number of negative annual returns over the next 20 year period** 6 or greater Volatility level** Very High Expected investment returns # Long term expected return 9.3% per year Likely range of one year returns Likely range of 20 year average returns (per year) Australian shares International shares Property Risk parity (structured beta) Real return Australian fixed interest International fixed interest Cash * Note that the information about the suitability of particular options is general in nature and is included as required by law. It is not intended to be a recommendation or statement of opinion in relation to any particular option. Members are encouraged to seek their own advice if they are uncertain as to which option might be most appropriate for them. ** The volatility level shown is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. It is based on the Standard Risk Measure developed by the industry and is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return 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. Members should still ensure they are comfortable with the range of risks and potential losses and gains associated with their chosen investment options. # The actual mix of assets may change over time based on short-term market movements. See the Fund's latest Annual Report for details of the current mix for each option. The investment mix of an option will determine how much its returns vary in the short term (say one year). Over the long term, returns from an option will vary, possibly quite widely. The expected investment return tables indicate the likely range of investment returns (expected in 90% of cases) over a one year period and over a 20 year period and the option s longterm expected average return. These figures are based on best estimate assumptions, are only illustrative, and are neither guarantees nor predictions of what will occur. Expected returns are net of approximate fees and tax. 10

11 Growth Investment objectives To achieve a return (after tax and investment fees) that is at least 3% per year more than movements in CPI over moving 10-year periods. To limit the probability of achieving a gross of tax negative return over moving 1 year periods to approximately 5 years in 20. Investment strategy To invest about 72% in growth assets and about 28% in income assets. Who does this option suit?* This option may suit members who: aim to achieve a reasonably high return over the medium to long term by investing in a broadly diversified range of investments. will not be concerned with potentially moderate fluctuations in returns over shorter time periods. may not need immediate access to their benefit. Benchmark asset allocation# 21.0% 8.0% 8.0% 7.0% 5.0% 25.5% 25.5% Australian shares International shares Property Risk parity (structured beta) Real return Australian fixed interest International fixed interest Cash Minimum suggested investment horizon* 5 years or more Estimated number of negative annual returns over the next 20 year period** 4 to less than 6 Volatility level** High Expected investment returns# Long term expected return 7.5% per year Likely range of one year returns Likely range of 20 year average returns (per year) * Note that the information about the suitability of particular options is general in nature and is included as required by law. It is not intended to be a recommendation or statement of opinion in relation to any particular option. Members are encouraged to seek their own advice if they are uncertain as to which option might be most appropriate for them. ** The volatility level shown is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. It is based on the Standard Risk Measure developed by the industry and is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return 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. Members should still ensure they are comfortable with the range of risks and potential losses and gains associated with their chosen investment options. # The actual mix of assets may change over time based on short-term market movements. See the Fund's latest Annual Report for details of the current mix for each option. The investment mix of an option will determine how much its returns vary in the short term (say one year). Over the long term, returns from an option will vary, possibly quite widely. The expected investment return tables indicate the likely range of investment returns (expected in 90% of cases) over a one year period and over a 20 year period and the option s longterm expected average return. These figures are based on best estimate assumptions, are only illustrative, and are neither guarantees nor predictions of what will occur. Expected returns are net of approximate fees and tax. 11

12 Conservative Investment objectives To achieve a return (after tax and investment fees) that is at least 1.5% per year more than movements in CPI over moving 10-year periods. To limit the probability of achieving a gross of tax negative return over moving 1 year periods to approximately 3 years in 20. Investment strategy To invest about 61% in income assets and about 39% in growth assets. Who does this option suit?* This option may suit members who: aim to achieve a modest return ahead of inflation over the medium to long term by investing in a broadly diversified range of investments. are concerned with relative consistency in returns but not with an occasional negative return over shorter time periods. accept that returns may be lower than those achieved by other investment options in the long term. might potentially need access to their benefit in the near future. Benchmark asset allocation# 11.0% 10.0% 17.0% 10.0% 33.0% Minimum suggested investment horizon* 3 years or more Estimated number of negative annual returns over the next 20 year period** 3 to less than 4 Volatility level** Medium to High Expected investment returns# Long term expected return 5.8% per year 8.0% 8.0% 3.0% Likely range of one year returns Australian shares International shares Property Risk parity (structured beta) Real return Australian fixed interest International fixed interest Cash Likely range of 20 year average returns (per year * Note that the information about the suitability of particular options is general in nature and is included as required by law. It is not intended to be a recommendation or statement of opinion in relation to any particular option. Members are encouraged to seek their own advice if they are uncertain as to which option might be most appropriate for them. ** The volatility level shown is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. It is based on the Standard Risk Measure developed by the industry and is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return 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. Members should still ensure they are comfortable with the range of risks and potential losses and gains associated with their chosen investment options. # The actual mix of assets may change over time based on short-term market movements. See the Fund's latest Annual Report for details of the current mix for each option. The investment mix of an option will determine how much its returns vary in the short term (say one year). Over the long term, returns from an option will vary, possibly quite widely. The expected investment return tables indicate the likely range of investment returns (expected in 90% of cases) over a one year period and over a 20 year period and the option s long-term expected average return. These figures are based on best estimate assumptions, are only illustrative, and are neither guarantees nor predictions of what will occur. Expected returns are net of approximate fees and tax. 12

13 Your asset class options International Shares Investment objectives To achieve a return (after tax and investment fees) that is at least 4% per year more than movements in CPI over moving 10-year periods. To limit the probability of achieving a gross of tax negative return over moving 1 year periods to approximately 6 years in 20. Investment strategy To invest totally in a diversified portfolio of international shares, with approximately half currency hedged into Australian dollars. Who does this option suit?* This option may suit members who: aim to achieve a high return over the long term by investing in a diversified portfolio of International shares only. will not be concerned with potentially significant fluctuations in returns over shorter time periods. want to build their own investment strategy when combined with other single asset class options. may not need immediate access to their benefit. Benchmark asset allocation# Minimum suggested investment horizon* 7 years or more Estimated number of negative annual returns over the next 20 year period** 4 to less than 6 Volatility level** High 100% Expected investment returns# Long term expected return 9.2% per year Likely range of one year returns Australian shares International shares Property Risk parity (structured beta) Real return Australian fixed interest International fixed interest Cash Likely range of 20 year average returns (per year) * Note that the information about the suitability of particular options is general in nature and is included as required by law. It is not intended to be a recommendation or statement of opinion in relation to any particular option. Members are encouraged to seek their own advice if they are uncertain as to which option might be most appropriate for them. ** The volatility level shown is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. It is based on the Standard Risk Measure developed by the industry and is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return 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. Members should still ensure they are comfortable with the range of risks and potential losses and gains associated with their chosen investment options. # The actual mix of assets may change over time based on short-term market movements. See the Fund's latest Annual Report for details of the current mix for each option. The investment mix of an option will determine how much its returns vary in the short term (say one year). Over the long term, returns from an option will vary, possibly quite widely. The expected investment return tables indicate the likely range of investment returns (expected in 90% of cases) over a one year period and over a 20 year period and the option s long-term expected average return. These figures are based on best estimate assumptions, are only illustrative, and are neither guarantees nor predictions of what will occur. Expected returns are net of approximate fees and tax. 13

14 Australian Shares Investment objectives To achieve a return (after tax and investment fees) that is at least 4% per year more than movements in CPI over moving 10-year periods. To limit the probability of achieving a gross of tax negative return over moving 1 year periods to approximately 7 years in 20 Investment strategy To invest totally in a diversified portfolio of Australian shares. Who does this option suit?* This option may suit members who: aim to achieve a high return over the long term by investing in a diversified portfolio of Australian shares only. will not be concerned with potentially significant fluctuations in returns over shorter time periods. want to build their own investment strategy when combined with other single asset class options. may not need immediate access to their benefit. Benchmark asset allocation# 100% Australian shares International shares Property Risk parity (structured beta) Real return Australian fixed interest International fixed interest Cash Minimum suggested investment horizon* 7 years or more Estimated number of negative annual returns over the next 20 year period** 6 or greater Volatility level** Very High Expected investment returns# Long term expected return 9.4% per year Likely range of one year returns Likely range of 20 year average returns (per year) * Note that the information about the suitability of particular options is general in nature and is included as required by law. It is not intended to be a recommendation or statement of opinion in relation to any particular option. Members are encouraged to seek their own advice if they are uncertain as to which option might be most appropriate for them. ** The volatility level shown is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. It is based on the Standard Risk Measure developed by the industry and is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return 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. Members should still ensure they are comfortable with the range of risks and potential losses and gains associated with their chosen investment options. # The actual mix of assets may change over time based on short-term market movements. See the Fund's latest Annual Report for details of the current mix for each option. The investment mix of an option will determine how much its returns vary in the short term (say one year). Over the long term, returns from an option will vary, possibly quite widely. The expected investment return tables indicate the likely range of investment returns (expected in 90% of cases) over a one year period and over a 20 year period and the option s long-term expected average return. These figures are based on best estimate assumptions, are only illustrative, and are neither guarantees nor predictions of what will occur. Expected returns are net of approximate fees and tax. 14

15 Property Investment objectives To achieve a return (after tax and investment fees) that is at least 3% per year more than movements in CPI over moving 10-year periods. To limit the probability of achieving a gross of tax negative return over moving 1 year periods to approximately 6 years in 20 Investment strategy To invest totally in global listed property trusts (including listed property in Australia) which is totally currency hedged into Australian dollars. Who does this option suit?* This option may suit members who: aim to achieve a reasonably high return over the long term by investing in a diversified portfolio of global listed property only. will not be concerned with potentially significant fluctuations in returns over shorter time periods. want to build their own investment strategy when combined with other single asset class options. may not need immediate access to their benefit. Benchmark asset allocation# Australian shares International shares Property Risk parity (structured beta) Real return Australian fixed interest International fixed interest Cash Minimum suggested investment horizon* 7 years or more Estimated number of negative annual returns over the next 20 year period** 6 or greater Volatility level** Very High 100% Expected investment returns# Long term expected return 7.8% per year Likely range of one year returns Likely range of 20 year average returns (per year) * Note that the information about the suitability of particular options is general in nature and is included as required by law. It is not intended to be a recommendation or statement of opinion in relation to any particular option. Members are encouraged to seek their own advice if they are uncertain as to which option might be most appropriate for them. ** The volatility level shown is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. It is based on the Standard Risk Measure developed by the industry and is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return 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. Members should still ensure they are comfortable with the range of risks and potential losses and gains associated with their chosen investment options. # The actual mix of assets may change over time based on short-term market movements. See the Fund's latest Annual Report for details of the current mix for each option. The investment mix of an option will determine how much its returns vary in the short term (say one year). Over the long term, returns from an option will vary, possibly quite widely. The expected investment return tables indicate the likely range of investment returns (expected in 90% of cases) over a one year period and over a 20 year period and the option s long-term expected average return. These figures are based on best estimate assumptions, are only illustrative, and are neither guarantees nor predictions of what will occur. Expected returns are net of approximate fees and tax. 15

16 Fixed Interest Investment objectives To achieve a return (after tax and investment fees) that is at least 1% per year more than movements in CPI over moving 10-year periods. To limit the probability of achieving a gross of tax negative return over moving 1 year periods to approximately 3 years in 20 Investment strategy To invest totally in a diversified portfolio of government and non-government bond investments, including about three quarters in Australian and a quarter in international bond securities. The currency exposure for the international bond securities is fully hedged into Australian dollars. Who does this option suit?* This option may suit members who: aim to achieve a modest return ahead of inflation over the medium to long term by investing in a diversified portfolio of bonds only. are concerned with relative consistency in returns but not with an occasional negative return over shorter time periods. accept that returns may be lower than those achieved by other investment options in the long term. want to build their own investment strategy when combined with other single asset class options. might potentially need access to their benefit in the near future. Benchmark asset allocation# 25% 75% Australian shares International shares Property Risk parity (structured beta) Real return Australian fixed interest International fixed interest Cash Minimum suggested investment horizon* 3 years or more Estimated number of negative annual returns over the next 20 year period** 3 to less than 4 Volatility level** Medium to High Expected investment returns# Long term expected return 4.7% per year Likely range of one year returns Likely range of 20 year average returns (per year) * Note that the information about the suitability of particular options is general in nature and is included as required by law. It is not intended to be a recommendation or statement of opinion in relation to any particular option. Members are encouraged to seek their own advice if they are uncertain as to which option might be most appropriate for them. ** The volatility level shown is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. It is based on the Standard Risk Measure developed by the industry and is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return 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. Members should still ensure they are comfortable with the range of risks and potential losses and gains associated with their chosen investment options. # The actual mix of assets may change over time based on short-term market movements. See the Fund's latest Annual Report for details of the current mix for each option. The investment mix of an option will determine how much its returns vary in the short term (say one year). Over the long term, returns from an option will vary, possibly quite widely. The expected investment return tables indicate the likely range of investment returns (expected in 90% of cases) over a one year period and over a 20 year period and the option s long-term expected average return. These figures are based on best estimate assumptions, are only illustrative, and are neither guarantees nor predictions of what will occur. Expected returns are net of approximate fees and tax. 16

17 Cash Investment objectives To achieve a return (after tax and investment fees) that is at least 0.5% per year more than movements in CPI over moving 10-year periods. To minimise the probability of a gross of tax negative annual return. Investment strategy To invest totally in cash investments such as bank deposits, bank bills, and short-dated securities. Who does this option suit?* This option may suit members who: aim to achieve a low-risk stable investment return over the short term by investing in cash investments. are concerned about protecting capital and therefore have a low tolerance to any negative returns, even over short time periods. accept that returns may be lower than those achieved by other investment options in the long term and are not seeking to increase the real value (or spending power) of their retirement savings. want to build their own investment strategy when combined with other single asset class options. are likely to need access to their benefit in the near future. Benchmark asset allocation# Australian shares International shares Property Risk parity (structured beta) Real return Australian fixed interest International fixed interest Cash Minimum suggested investment horizon* Up to 3 years Estimated number of negative annual returns over the next 20 year period** Less than 0.5 Volatility level** Very Low 100% Expected investment returns# Long term expected return 3.9% per year Likely range of one year returns Likely range of 20 year average returns (per year) * Note that the information about the suitability of particular options is general in nature and is included as required by law. It is not intended to be a recommendation or statement of opinion in relation to any particular option. Members are encouraged to seek their own advice if they are uncertain as to which option might be most appropriate for them. ** The volatility level shown is based on industry guidance to allow members to compare investment options that are expected to deliver a similar number of negative annual returns over any 20-year period. It is based on the Standard Risk Measure developed by the industry and is not a complete assessment of all forms of investment risk, for instance it does not detail what the size of a negative return 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. Members should still ensure they are comfortable with the range of risks and potential losses and gains associated with their chosen investment options. # The actual mix of assets may change over time based on short-term market movements. See the Fund's latest Annual Report for details of the current mix for each option. The investment mix of an option will determine how much its returns vary in the short term (say one year). Over the long term, returns from an option will vary, possibly quite widely. The expected investment return tables indicate the likely range of investment returns (expected in 90% of cases) over a one year period and over a 20 year period and the option s long-term expected average return. These figures are based on best estimate assumptions, are only illustrative, and are neither guarantees nor predictions of what will occur. Expected returns are net of approximate fees and tax. 17

18 Your questions answered What are my investment options? You can choose from eight investment options. See pages 10 to 13 for more information about these options. Can anyone help me make my investment choice? Only you can decide which investment option(s) are best for you. It is recommended that you consult a licensed financial adviser to discuss your overall financial goals before deciding. See the back cover for more information. Under no circumstances will the Trustee, the Company or the Fund Administrator provide you with personal advice in relation to your investment choice. Will I be charged any fees to make or change my investment choice? You don t have to pay a fee to make your initial investment choice. Fees may apply each time you change your investment option, although the switching fee is waived for your first switch in any calendar year. See page 9 and the Fees and Tax Sheet for more information. Can I change my mind later? Yes, you have the opportunity to switch your investment option each month, however, you may incur fees. See above, page 9 and the Fees and Tax Sheet for more information. Under what circumstances would I change my investment option? Generally, most people change their investment option in response to a change in their personal or financial situation. Continually changing options to chase short-term returns (e.g. in response to improved share market performance) could mean that your super earns less over time. You may wish to consult a licensed financial adviser for more information. Can I choose more than one option for my super? Yes. You can keep it simple by investing in one of the three packaged options, or you can do it yourself by investing in any combination of the packaged options and the five asset class options. What investment fees apply and how are they charged? The Fund s investment managers charge fees for managing the Fund s investments which are passed on to members. The actual investment fees for each investment option vary depending on the type of assets in which the option is invested. Refer to the Fees and Tax Sheet which includes the current level of fees for each option. Investment fees are deducted from each option s investment returns before they are applied to your account. How do investment returns affect my super? It is important to understand that the Fund's investment returns can be positive or negative, depending on market performance and the nature of the investment option. The Declared Earning Rate(s) of your chosen investment option(s) will be applied to your super accounts each year. The Declared Earning Rate is the actual investment return for an investment option after the deduction of tax, investment fees and administration fees. When the Declared Earning Rate(s) earned by your chosen investment option(s) are positive, your super will increase in value. When the Declared Earning Rates are negative, the value of your super will decrease. Regardless of which option you choose, neither returns nor your capital are guaranteed. Interim rate for withdrawals or switches Earning rates are calculated each month. If your super needs to be paid out before monthly earning rates have been calculated, or if you switch investment options, an interim earning rate will be used. This will cover the period from the date that investment earnings were last calculated until the date your benefit is paid or your transfer request is processed. The interim rates for each investment option are based on the Fund s estimated monthly net investment returns. 18

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