Investment Guide. About this document. Contents. This document explains: Date of issue: 5 October mtaasuper.com.audate.

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1 Investment Guide Date of issue: 5 October 2015 mtaasuper.com.audate Phone: 1300December of issue: The information in this document forms part of the Product Disclosure Statement for MTAA Super dated 5 October 2015 issued by Motor Trades Association of Australia Superannuation Fund Pty Ltd (ABN , AFSL ) of Level 3, 39 Brisbane Avenue Barton ACT 2600, the Trustee of the MTAA Superannuation Fund (ABN ). About this document Contents MTAA Super s investment approach. 2 This document explains: This document explains the investment options currently offered by MTAA Super and the risks associated with investments. It also provides information about our investment approach and the asset classes in which we invest. To cater for people s different needs, MTAA Super offers members a choice in how their superannuation savings are invested. Member investment choice allows you to choose the options you would like to invest in, helping you stay on track with your long-term savings plan. MTAA Super s investment options are constantly subject to varying risk levels and changes in value. Particular asset classes perform differently at different times. While displaying a higher risk of volatility in the short term, some investments can offer high returns in the long term. Super is a long term investment with a range of potential risks that you should consider before making a decision about where you want your super invested. Because each investment option has a different investment mix, the levels of risk associated with each option differ. However, all options are subject to some level of risk. This document includes the Member Investment Choice form. MTAA Super members can choose from a mix of investments in different asset classes. You can choose between our professionally selected Pre-Mixed Options or the My Choice Options; alternatively, you can choose a combination. There are eight investment options: Pre-mixed options My choice options Conservative Cash Income-Focussed Diversified Fixed Interest My AutoSuper (Balanced) Australian Shares Growth International Shares These options allow you to allocate your superannuation money across a mix of some or all options or just one option. When you make your choice, you can then decide whether this choice applies to one or both of the following: your existing account balance future contributions including rollovers, salary-sacrifice contributions, and employer and voluntary contributions. Asset allocation for the Pre-mixed Options Asset allocations for the My Choice Option Understanding asset classes Making an informed choice Risks of super Member investment choice form.. 15

2 If you don t make a choice, your superannuation money will be allocated to My AutoSuper (Balanced Option). You should think carefully about your financial affairs and priorities. My AutoSuper (Balanced Option) might be suitable for most people, but your individual position might be different and other options could better suit your needs. MTAA Super s investment approach The Fund s overall objective is to maximise each member s returns during their working and retirement life while protecting their accumulated retirement savings from large fluctuations during the economic cycle. We aim to deliver solid returns with an acceptable level of risk. Our investment strategy is to build a diversified portfolio of assets that balances investment returns and risks. We achieve this by investing in a combination of growth investments (such as equity, infrastructure and property, where we expect to see growth in the capital value of the investments over time) and defensive investments (such as cash and fixed interest, where we focus on generating stable and predictable cash flows with a relatively low level of risk). The Fund s investment options have various exposures to assets traded frequently in domestic and international markets, as well as to alternative assets which are less frequently traded. Examples of asset classes in which we hold investments include: cash and fixed interest. These exposures seek to match the performance of the key market indices with minimal relative risk and cost; listed equities, which are listed on major stock market exchanges and so returns are subject to the usual market fluctuations and largely reflect the performance of the share market. These exposures seek to modestly outperform the key market indices with low relative risk and cost; infrastructure such as airports, tollways, ports and energy assets (held directly and through funds); property (e.g. landmark buildings); private equity (held directly and through funds); and alternatives credit. Many of the assets belonging to the latter four asset classes have long term leases and provide income streams to the Fund. These assets are not directly linked to share markets, so they are expected to provide a buffer against the short term ups and downs of such markets. Asset allocation for the Pre-Mixed Options Each of the pre-mixed options (Conservative, Income-Focussed, My AutoSuper (Balanced Option) and Growth Options) invest in a range of different asset classes. The asset allocation for each pre-mixed option is constructed with the purpose of achieving the option s investment return objective. For each investment option the Trustee sets a long term Strategic Asset Allocation (SAA) and ranges. The SAA and ranges are reviewed by the Trustee from time to time. However, MTAA Super s investment strategies allow the Trustee to adopt a tactical asset allocation within the SAA ranges. This means that the Trustee may adjust its target asset allocation and make consequent portfolio adjustments (within the SAA ranges). This approach enables the Trustee to respond more quickly to market movements. The actual asset allocations may vary The actual asset allocations for the pre-mixed options will not always align with their strategic asset allocations. They may differ from their strategic asset allocations from time to time because of market fluctuations, new investment opportunities and irregular levels of cash flows. Differences may also result from any tactical moves (within the SAA ranges) to position the portfolio for prevailing conditions. For example, when the share market falls, the proportion of the allocation to shares in these four investment options will decrease and the allocation to other assets classes in the options will correspondingly increase. While the Trustee seeks to ensure that such variations between the actual and strategic asset allocations of all investment options are managed within the ranges as outlined, in times of extreme market volatility the divergence between the actual and strategic asset allocations can be quite significant. The most recent actual asset allocation figures for all investment options are updated weekly and can be located on the MTAA Super website, mtaasuper.com.au 2

3 Investment details for the Conservative Option Overview The Conservative Option seeks stable returns in the short to medium term through reduced exposure to risk. It is intended to be suitable for members who are willing to take on an average level of risk. Objectives To out-perform (after tax and fees) the CPI by 1.25% a year over rolling five-year periods.! Mix of asset classes Standard Risk Measure* Summary risk level Strategic asset allocation (%) Range % Cash Australian Fixed Interest Overseas Fixed Interest Australian Equities International Equities Infrastructure Property Alternatives Credit Private Equity Other Risk Band: 3 very low low LOW TO MEDIUM Estimated number of negative annual returns over any 20 year period: medium medium to high high very high 1.3/20 Minimum suggested time frame 4 Investment details for the Income-Focussed Option Overview The Income-Focussed Option seeks to generate an appropriate income yield, along with a balance between stable returns and growth. Objectives To provide income yield of RBA Cash plus 2% per annum. Mix of asset classes Strategic asset allocation (%) Range % Cash Australian Fixed Interest Overseas Fixed Interest Australian Equities International Equities Infrastructure Property Alternatives Credit Private Equity Other Standard Risk Measure* Summary risk level Risk Band: 5 very low low low to medium medium MEDIUM TO HIGH Estimated number of negative annual returns over any 20 year period: 3.9/20 high very high Minimum suggested time frame 3 + Investments in this asset class may include natural resources, multi-asset class strategies and other alternative investments deemed appropriate. * The Standard Risk Measure 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. The Standard Risk Measure disclosed for a particular investment option is calculated on the basis of the Strategic Asset Allocation for that investment option current at the date of this PDS. It represents the Trustee s calculation of the Standard Risk Measure for that option over a 20 year period. However, over shorter periods, the risk associated with an investment option may differ from the Standard Risk Measure for that option. This can occur, for example, during transitional periods when changes are being made to the underlying assets of an option or when market movements mean that the day-to-day asset allocation of an investment option differs from the option s Strategic Asset Allocation. The Standard Risk Measure 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 not rely exclusively on the Standard Risk Measure and should still ensure they are comfortable with the risks and potential losses associated with their chosen investment option/s. 3

4 DEFAULT OPTION Investment details for the My AutoSuper (balanced option) Overview My AutoSuper (Balanced Option) seeks medium to high long-term returns through a balanced exposure to risk. It is intended to be suitable for members with moderate to high risk tolerance.! Objectives Mix of asset classes Standard Risk Measure* Summary risk level To out-perform (after tax and fees) the Consumer Price Index (CPI) by 3% a year over rolling seven-year periods. Strategic asset allocation (%) Range % Cash Australian Fixed Interest Overseas Fixed Interest Australian Equities International Equities Infrastructure Property Alternatives Credit Private Equity Other Risk Band: 5 very low low low to medium medium MEDIUM TO HIGH Estimated number of negative annual returns over any 20 year period: 3.9/20 high very high Minimum suggested time frame 7 Investment details for the Growth Option Overview The Growth Option seeks high long-term returns through a controlled exposure to specific risk. It is intended to be suitable for members who are willing to take on above-average risk with a ten-year or longer investment time horizon. Objectives To out-perform (after tax and fees) the CPI by 3.5% a year over rolling ten year periods. Mix of asset classes Standard Risk Measure* Strategic asset allocation (%) Range % Cash Australian Fixed Interest Overseas Fixed Interest Australian Equities International Equities Infrastructure Property Alternatives Credit Private Equity Other Risk Band: 6 very low low low to medium medium medium to high HIGH very high Summary risk level Estimated number of negative annual returns over any 20 year period: 4.7/20 Minimum suggested time frame 10 + Investments in this asset class may include natural resources, multi-asset class strategies and other alternative investments deemed appropriate. * The Standard Risk Measure 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. The Standard Risk Measure disclosed for a particular investment option is calculated on the basis of the Strategic Asset Allocation for that investment option current at the date of this PDS. It represents the Trustee s calculation of the Standard Risk Measure for that option over a 20 year period. However, over shorter periods, the risk associated with an investment option may differ from the Standard Risk Measure for that option. This can occur, for example, during transitional periods when changes are being made to the underlying assets of an option or when market movements mean that the day-to-day asset allocation of an investment option differs from the option s Strategic Asset Allocation. The Standard Risk Measure 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 not rely exclusively on the Standard Risk Measure and should still ensure they are comfortable with the risks and potential losses associated with their chosen investment option/s. 4

5 Asset allocation for the My Choice Options The My Choice Options are the Cash Options, Diversified Fixed Interest, Australian Shares and International Shares. The actual asset allocations of these investment options reflect each of their respective strategic asset allocations, as shown in the following tables. Investment details for the Cash Option Overview The Cash Option seeks stable returns through low exposure to risk. It is intended to be suitable for members who seek stable and secure investments without capital growth opportunity. Objectives To perform in line with (before tax and fees) the returns of the Bloomberg AusBond Bank Bill Index Strategic asset allocation (%) Cash 100 Mix of asset classes! Standard Risk Measure* Risk Band: 1 VERY LOW low low to medium medium medium to high high very high Summary risk level Estimated number of negative annual returns over any 20 year period: 0.4/20 Minimum suggested time frame 0.5 Investment details for the Diversified Fixed Interest Option Overview Objectives The Diversified Fixed Interest Option seeks stable returns over the short to medium term through reduced exposure to risk. It is intended to be suitable for members who seek stable investment with limited capital growth opportunity. To perform (before tax and fees) in line with a weighted average of the Bloomberg Ausbond Composite 0+Year Index, the Citigroup M1 Global Bond (ex-australia). Index hedged to Australian dollars and global floating rate credit targeting a return of 0.8% p.a. above the Bloomberg AusBond Bank Bill Index. Strategic asset allocation (%) Range % Australian Fixed Interest Overseas Fixed Interest Mix of asset classes! Standard Risk Measure* Risk Band: 4 very low low low to medium MEDIUM medium to high high very high Summary risk level Estimated number of negative annual returns over any 20 year period: 2.3/20 Minimum suggested time frame 3 * The Standard Risk Measure 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. The Standard Risk Measure disclosed for a particular investment option is calculated on the basis of the Strategic Asset Allocation for that investment option current at the date of this PDS. It represents the Trustee s calculation of the Standard Risk Measure for that option over a 20 year period. However, over shorter periods, the risk associated with an investment option may differ from the Standard Risk Measure for that option. This can occur, for example, during transitional periods when changes are being made to the underlying assets of an option or when market movements mean that the day-to-day asset allocation of an investment option differs from the option s Strategic Asset Allocation. The Standard Risk Measure 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 not rely exclusively on the Standard Risk Measure and should still ensure they are comfortable with the risks and potential losses associated with their chosen investment option/s. 5

6 Investment details for the Australian Shares Option Overview Objectives The Australian Shares Option seeks high returns in the long term through an exposure to market risk. It is intended to be suitable for members who are willing to take on above-average risk with an investment horizon of at least ten. To moderately out-perform (before tax and fees) the returns of the S&P ASX300 Accumulation Index including franking credits. Strategic asset allocation (%) Australian Shares 100 Mix of asset classes! Standard Risk Measure* Summary risk level Risk Band: 7 very low low low to medium medium medium to high high VERY HIGH Estimated number of negative annual returns over any 20 year period: 6.2/20 Minimum suggested time frame 10 Investment details for the International Shares Option Overview Objectives The International Shares Option seeks high returns in the long term through an exposure to global market risk. It is intended to be suitable for members who are willing to take on above average risk with an investment horizon of at least ten. To moderately out-perform the MSCI All Countries World (ex-australia) Index (before fees and taxes) in Australian dollar. Strategic asset allocation (%) International Shares 100 Mix of asset classes! Standard Risk Measure* Summary risk level Risk Band: 7 very low low low to medium medium medium to high high VERY HIGH Estimated number of negative annual returns over any 20 year period: 6.4/20 Minimum suggested time frame 10 * The Standard Risk Measure 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. The Standard Risk Measure disclosed for a particular investment option is calculated on the basis of the Strategic Asset Allocation for that investment option current at the date of this PDS. It represents the Trustee s calculation of the Standard Risk Measure for that option over a 20 year period. However, over shorter periods, the risk associated with an investment option may differ from the Standard Risk Measure for that option. This can occur, for example, during transitional periods when changes are being made to the underlying assets of an option or when market movements mean that the day-to-day asset allocation of an investment option differs from the option s Strategic Asset Allocation. The Standard Risk Measure 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 not rely exclusively on the Standard Risk Measure and should still ensure they are comfortable with the risks and potential losses associated with their chosen investment option/s. 6

7 Understanding asset classes MTAA Super invests across all major asset classes. An asset class is a grouping of similar financial/physical assets. The main asset classes are shares, property, fixed interest and cash; these in turn can be broken down to include Australian or international shares, unlisted shares and private equity, Australian or international fixed interest, and direct or indirect property investments, including infrastructure. All asset classes have different risk and return characteristics. Cash Cash is invested in term deposits, notice period accounts, bank bills, commercial paper and other money market instruments for short periods. This investment is one of the most stable because the returns are among the most predictable, but it generally earns the lowest rate of return, over the longer term. Fixed interest The common forms of fixed interest securities are loans to government bodies and companies. These typically provide to the owner of the security interest payments over the term of the security, as well as the return of the amount invested at the end of the security s life. The value of the security fluctuates during its lifetime in response to a variety of factors, including changes in market interest rates. This form of investment generally has a moderate level of risk and is expected to produce a moderate rate of return. Floating rate securities provide variable coupons paid at a specified spread over a money market reference rate. MTAA Super s investments in this asset class may include government and credit securities of both fixed and floating rate nature. Shares Shares, also known as equities, give you part-ownership of a company. They generally provide returns as dividends (income) and offer the potential for profit (or loss) through changes in their price on the share market. In the long term, shares are expected to provide higher returns than cash, fixed interest or property, but there is an associated higher risk, which can result in negative returns from time to time. Infrastructure Infrastructure includes roads, airports, ports, energy assets, and other important community projects and assets. Investment in infrastructure can take many forms, among them direct equity in a development or asset or a loan to a participant in a development. Infrastructure is a moderate to high risk investment that can produce strong returns. Property The property asset class consists of residential real estate and industrial and commercial property including office buildings, factories and shopping centres. Property not only generates rental income but can also increase (or decrease) in value over time. It normally generates better returns than cash or fixed interest, but it can be a more volatile investment and is usually considered a moderate to high risk investment. Private equity Private equity involves investment in private, or unlisted, companies. This form of investment can be used to expand or develop a business. With care and thorough research, private equity can provide high returns, but there is a correspondingly higher level of risk. Alternatives credit Investments held in the high-yield debt asset cluster include infrequently traded debt securities (such as corporate bonds and loans) that exhibit greater credit risk and higher expected returns relative to sovereign government debt. 7

8 Making an informed choice There is much to consider when making decisions about superannuation, and MTAA Super wants you to be well informed. We can help you with information and general advice, but we recommend that you also seek professional advice. We have a team of professionals called the Financial Education and Advice Team (FEAT). They can offer you more detailed general advice and limited personal advice about your super, including information about the Fund s investment options and the insurance options available to you. Alternatively, as an MTAA Super member you have access to fee-for-service financial planning advice through Industry Fund Financial Planning. Contact us on and we will put you in touch with an Industry Fund Financial Planning adviser. Socially responsible investment MTAA Super considers environmental, social and governance (ESG) risks, impacts and opportunities in its investment decision making and investment governance processes in order to protect and prudently manage the Fund s investments for the long term. This includes the selection, retention, or realisation of investments, as well as the discharge of its proxy voting entitlements and through company engagement efforts. This applies equally across all of the Fund s Member Investment Choice Options. Governance considerations may include board and director independence and executive remuneration, disclosure and transparency, environmental considerations will include climate change and pollution, and social considerations will include risks and impacts arising from labour standards and human rights. ESG principles are taken into account in the investment governance processes in the following ways: As a foundation member of the Australian Council of Superannuation Investors (ACSI), including involvement in its Member Council, MTAA Super seeks to act collectively with like-minded investors and take advantage of the strong collective voice on key governance issues impacting the listed companies in which the Fund invests. MTAA Super takes guidance from ACSI s various policies, guidelines and frameworks and supports its company engagement program. ACSI s role includes assisting member funds with the management of ESG risks and impacts. MTAA Super is active in the proxy voting process and strives to vote on every resolution for every listed portfolio company for which it is entitled to do so. The Trustee s voting actions are published on the Fund s website and updated twice per annum. For listed companies in which the Fund is an owner, through its proxy voting actions and through the engagement program conducted by ACSI. The majority of MTAA Super s investment managers in listed asset classes are signatories to the United Nations Principles of Responsible Investment and accordingly they take into account ESG factors in making investment decisions. MTAA Super considers prospective managers capabilities in respect of integrating ESG risks into their investment processes, and monitors investment managers activities in this regard once appointed. MTAA Super believes that the issue of corporate governance within the unlisted investment companies in which it directly holds stakes is equally important as for listed entities. Accordingly, when entering into unlisted investments, the Trustee seeks the strongest possible governance, information and representation rights. It will also take into account environmental, social and governance risks and impacts as one of many risks considered. The Trustee works with its advisers in assessing all reasonable risks when entering into new unlisted investments. 8

9 The assessment and monitoring of ESG risks and impacts is undertaken by the Trustee as well as by its investment advisers. While the Trustee will take advice from Management, ACSI, its asset consultant, investment managers and other professional advisers as required, it is ultimately the responsibility of the Trustee to ensure ESG risks and impacts are understood, managed, and taken into account in accordance with the Trustee s Investment Governance Framework and the Trustee s Investment Beliefs. ESG considerations will generally not be the only, or dominant, consideration taken into account when making investment decisions, but will be one of a series of risks taken into account when assessing the risks inherent in an investment and the impact on expected financial returns. In accordance with the Trustee s Investment Beliefs, ESG considerations are taken into account in making investment decisions wherever it is possible and practicable to do so. MTAA Super does not currently offer any products selected solely on the basis of ESG considerations. The Trustee does not have a pre-determined view about the extent to which ESG factors are taken into account, and there is therefore no specific methodology applied by the Trustee. ESG factors are considered along with other risks in assessing new investments and monitoring existing investments. MTAA Super seeks to exclude tobacco from its investment portfolio wherever possible. This portfolio wide exclusion relates to the manufacture of tobacco products as defined by the Global Industry Classification Standard. Illiquid assets and portability The investment portfolio contains exposure to illiquid assets. MTAA Super is, however, generally able to satisfy portability requirements from cash reserves. If you would like more information about the Fund s portfolio, please refer to the MTAA Super website, mtaasuper.com.au, or call us on

10 Frequently asked questions What is MTAA Super s investment objective? MTAA Super aims to maximise the investment return to members over the medium to long term. The main investment objective is to provide members with consistent returns that at least compare with, and are preferably higher than, the returns of similar funds on a rolling three to seven-year average. The Trustee sets medium to long term targets for each of the Fund s investment options, then sets a strategic asset allocation for each option. With the advice of professional asset consultants, the Trustee manages the Fund s investment in each asset class with a view to maximising crediting rates and meeting or exceeding performance targets. How often can I change my investment choice? You can change where your existing account balance is invested or where any future contributions that are made to your account are invested or both. For example, you may have $15,000 of super contributions in your MTAA Super account invested in My AutoSuper (Balanced Option). You may choose to keep that money invested in My AutoSuper (Balanced Option) but decide to instruct the Fund to invest any future contributions that come into your account in the Growth Option. Alternatively, you may decide to make a change to your existing balance and instruct the Fund to invest this money in 50% My AutoSuper (Balanced Option) and 50% Growth Option and keep all future contributions invested 100% in My AutoSuper (Balanced Option). There are different rules that apply to switching investments on your existing account balance and future contributions. Your existing account balance You can change (or switch) your investment options once a week. When you make a change to your existing account balance there is no switching fee applied. Switching applications are processed weekly and are effective from the Wednesday of each week. Your application must be received by Tuesday pm Sydney time to take effect on the Wednesday of that week. Applications received after pm Sydney time on a Tuesday will take effect on the Wednesday of the following week. Following the end of the financial year there may be a delay in processing an investment switch until the final annual crediting rate is declared. However, any switch request delayed as a result will still be effective from the date of the appropriate Wednesday as described above. Your future contributions When you request a change to the option(s) in which your future contributions are invested, this will take effect from the date the instructions are received by MTAA Super. There is no switching fee applied to these changes, however, deductions, such as the administration fee, insurance premium and contributions tax, will be taken from the investment option/s you select for your future contributions. If there are insufficient funds to cover deductions in the investment option/s you have nominated for future contributions, deductions will be taken from the balances of any other investment option in which you are invested. 10

11 How do I change my investment options? You can change your investment option(s) by: Logging onto Member SuperSite on the MTAA Super website mtaasuper.com.au; or Completing an Investment Choice form If more than one Investment Choice form or online request is received in the same week, the instructions contained in the Investment Choice form or online request received last, and before that week s deadline, will apply. To cancel a written switch or online instruction, you must contact MTAA Super on prior to 7.00 pm Sydney time on Tuesday of the week in which MTAA Super received your instruction. Alternatively you can contact us by logging into your Member SuperSite account and sending a message to MTAA Super through your account by no later than pm. A switch request is made on Friday, 2 December to switch from 100% My AutoSuper to 50% My AutoSuper and 50% Growth. The switch will be processed after pm Sydney time the following Tuesday, 6 December. Your switch into your new investment options (50% My AutoSuper and 50% Growth) will be effective from Wednesday, 7 December. Your switch will show on your online account generally from Friday, 9 December. Please contact us on if you require any assistance with making an investment switch. How are investment returns applied? Members accounts are credited (or debited) annually, after regard has been made to the earning rates (after relevant expenses), in line with the Fund s policies. Earnings are calculated daily from the day any rollovers are received or transactions occur. MTAA Super sets regular crediting rates applicable to each investment option for the purpose of applying earnings to members account balances where these balances are to be transferred between the Fund s investment options or where members exit the Fund. Crediting rates are also used to apply net investment earnings to members accounts when a member: exits the Fund; transfers the entire balance to MTAA Super Pension; switches between investment options; or makes a partial withdrawal Note that the crediting rate can be positive or negative. For more frequently asked questions about MTAA Super s investment options, including information about the Fund s Valuation Policy and Liquidity Policy, please refer to the MTAA Super website, mtaasuper.com.au Need more information? Contact us on and we will arrange for a member of the Financial Education Advice Team (FEAT) to speak to you. 11

12 Risks of super The key to choosing the right investment option for you is deciding on the rate of return you would like to achieve and balancing this against the degree of risk you are prepared to accept. So before making your investment choice, it is important to evaluate your risk profile that is, the extent to which you are prepared to accept low or even negative returns in any one year for the possibility of higher gains over the medium to long term. It is also important to balance the risk of short-term fluctuations in the value of your superannuation investment against the long-term retirement benefit that a well-diversified investment strategy including an investment in shares and property can provide. Your superannuation savings (including contributions and returns) may not be enough to adequately provide for your retirement needs. For example, this may occur if you select an investment strategy which yields returns that are very low relative to your retirement needs. Potential risks The following are among the potential risks you should consider. Counterparty and Credit risk Counterparty risk The risk to each party of a contract that the counterparty will not live up to its contractual obligations. Counterparty risk is a risk to both parties and should be considered when evaluating a contract. Credit risk There is a risk that a counterparty to an investment agreement for example, the seller of a bond or other product will fail to discharge an obligation and cause the Fund to incur a financial loss. The Trustee manages credit and counterparty risk using the following controls: drawdown limits for individual investments and use of asset class ranges due diligence analysis of all prospective investments performance monitoring of existing investments minimum credit ratings for fixed interest investments exposure limits and diversification rules for managing foreign exchange counterparty risk use of clearing house arrangements for foreign exchange transactions. 12

13 Currency risk MTAA Super invests in other countries, and if their currencies change in value relative to the Australian dollar the value of the investment changes. The Fund employs external currency managers with the aim of reducing the impact of adverse movements in the Australian dollar. Derivatives risk The Fund and its managers use derivatives to reduce risk or gain exposure to other types of investments when this is thought appropriate. Among the risks associated with derivatives are the value of the derivative failing to move in line with the value of the underlying assets, potential illiquidity of the derivative, the Fund being unable to meet payment obligations as they arise, and counterparty risk. MTAA Super aims to keep derivative risk to a minimum by constantly monitoring the Fund s exposure to derivative contracts and by entering into derivative contracts with reputable counterparties. Derivatives are not used by MTAA Super to produce leverage. Fund risk There is a risk that disruption to the Fund s operations may occur as a result of a breakdown in technological systems or material changes to staffing arrangements. MTAA Super aims to keep fund risk to a minimum by maintaining a risk management and compliance framework in accordance with legislative requirements. Additionally, changes to superannuation laws and the taxation regime can affect your investment. Inflation rate risk Inflation can exceed the return on your investment. The Fund aims to reduce this risk by investing a portion of the Pre-Mixed Options in assets that are expected to generate returns in excess of inflation in the medium term. Interest rate risk Changes in interest rates can have a positive or a negative effect directly or indirectly on investment value or returns. Liquidity risk There is a risk that assets, especially unlisted assets, may not be able to be sold in a relatively short period without affecting the price of the asset. The Fund monitors liquidity risk constantly and has a policy for managing it. 13

14 i Need more information? For more information about risk and investments, call us on to speak to a member of MTAA Super s Financial Education and Advice Team (FEAT). Market risk Economic, technological, political and legal conditions, and even market sentiment, can (and do) change, and this can mean that changes in the value of investment markets affect the value of investments in the Fund. MTAA Super aims to reduce market risk through diversification across asset classes, countries and investment managers. Specific risk Specific risk refers to the non-market risk exposure of assets. Individual assets the Fund purchases can (and do) fall in value for many reasons for example, changes in the internal operations or management of a fund or company, or in its business environment. The Fund aims to reduce this risk by having diversified holdings of carefully selected assets across asset classes to ensure appropriate risk exposure. Standard Risk Measure A rating ranging from very low to very high risk in relation to the probability of negative returns arising over a 20 year period. Risk Band Risk Label 1 Very low Less than Low 0.5 to less than 1 3 Low to medium 1 to less than 2 4 Medium 2 to less than 3 5 Medium to high 3 to less than 4 6 High 4 to less than 6 7 Very High 6 or greater Estimated Number of negative annual returns over any 20 year The information provided in this document is general only and does not take into account your personal financial situation or needs. You should therefore consider obtaining financial advice that is tailored to your personal circumstances from a licensed financial adviser. 14

15 MEMBER INVESTMENT CHOICE FORM To make your first investment choice or to switch an existing investment choice, please complete all sections of this form and return it to MTAA Super. Please complete this application using block letters. The instructions you provide on this form override any previous instructions you have given to MTAA Super. If you do not wish to make a choice, your existing account balance and all future contributions, earnings and rollovers will be invested in accordance with My AutoSuper (Balanced Option) (default). If this is the case, you do not need to complete this form. Section A Member details MTAA Superannuation member number (if known) Are you a new member? Yes No Title Miss Ms Mrs Mr Other (please specify) Given name(s) Family name Address Telephone (home) Date of birth / / Section B Existing account balance (existing members only) Please select the option or combination of options in which you wish to invest your existing account balance. I do not wish to change the way my existing balance is currently invested. (Please go to the next section Future contribution, rollovers and other amounts transferred in ) I would like my existing balance invested/switched in the way I have listed below I direct that my account balance be invested in the following investment option(s) in the proportions indicated: Conservative. Income-Focussed. My AutoSuper (Balanced). Growth. Cash. Diversified Fixed Interest. Australian Shares. International Shares. I understand that the total proportions must add up to 100%. Important: If you do not also complete Section C, future amounts received into your account will be invested in the same way you have indicated here. Section C Future contributions, rollovers and other amounts transferred in I would like my future contributions invested in the same way as indicated previously for the Existing account balance section. (Please sign the declaration in Section D and return the form to MTAA Super) I do not wish to change the way my future contributions are currently invested (Please sign the declaration in Section D and return the form to MTAA Super) I would like my future contributions invested in the way I have listed below. I direct that future amounts received into my account be invested in the following investment option(s) in the proportions indicated: Conservative. Income-Focussed. My AutoSuper (Balanced). Growth. Cash. Diversified Fixed Interest. Australian Shares. International Shares. I understand that the total proportions must add up to 100%. 15

16 How often can I change my investment choice? Members of MTAA Super have the ability to change their investment choice weekly. You can change your investment choice electronically via Member SuperSite at mtaasuper.com.au, by completing this form or by contacting us on If you are making an investment switch for: n Your existing account balance Switching applications are processed weekly and are effective from the Wednesday of each week. Your application must be received no later than pm Sydney time on a Tuesday to take effect on the Wednesday of that week. Applications received after pm Sydney time on a Tuesday will take effect on the Wednesday of the following week. Following the end of the financial year there may be a delay in processing an investment switch until the final annual crediting rate is declared. However, any switch request delayed as a result will still be effective from the date of the appropriate Wednesday as described above. n Your future contributions This will take effect from the date the instructions are received by MTAA Super. There is no switching fee applied to these changes Please contact if you require any assistance with making an investment switch. Section D Member declaration n I understand that MTAA Super has advised me to obtain professional financial advice and that the MTAA Super Member Product Disclosure Statement, which I have read and understood, is a general guide and does not constitute investment advice. n I acknowledge having read and understood the Privacy Statement in the Member Product Disclosure Statement and having access to the MTAA Super Privacy Policy located online at mtaasuper.com.au/privacy or otherwise provided, and consent to personal information being collected and used in accordance with these terms. n I understand that neither the Trustee nor my employer is responsible for, or able to influence, the investment performance of any of the appointed managers. n I advise that neither the Trustee, my employer nor MTAA Super has influenced my investment choice. n I acknowledge that the Trustee expressly disclaims all and any liability for any investment decisions taken by me. n I acknowledge that the Trustee can change its investment strategies, managers or underlying investments at any time. n If the options I have chosen do not add up to 100 per cent, I understand that the difference will be adjusted through My AutoSuper (Balanced Option). n I understand that all conditions are subject to variation from time to time at the discretion of the MTAA Super Trustee. n I understand that if there are insufficient funds to cover deductions in the investment option/s I have nominated for future contributions, deductions will be taken from the balances of any other investment option in which I am invested. n I understand that switching applications are processed weekly and are effective from the Wednesday of each week. My application must be received no later than pm Sydney time on a Tuesday to take effect on the Wednesday of that week. If my application is received after pm Sydney time on a Tuesday, it will take effect on the Wednesday of the following week. n I understand that this application for my future contributions will take effect from the date the application is received by the Fund. n I understand that if I do not complete Section B, my existing account balance will be invested in My AutoSuper (Balanced Option) or as otherwise nominated by me previously. n I understand that if I do not complete Section C, my future contributions will be invested in the same percentages I indicated for my existing account balance (Section B). Signature of member Date / / This application has no effect until it is fully completed, signed, dated and lodged with MTAA Super. Return the completed, signed and dated application to MTAA Super MIC, Locked Bag 5134, Parramatta NSW Telephone mtaasuper@mtaasuper.com.au Web mtaasuper.com.au Postal Address Locked Bag 5134, Parramatta NSW 2124 Trustee: Motor Trades Association of Australia Superannuation Fund Pty Ltd ABN AFSL MTAA Superannuation Fund ABN USI MTA0100AU /1510/15 ISS1