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ISSUE 12•2005

KEYNOTE

It’s time to get to know your super • TAP into a better retirement

Also inside:

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dvice

Save yourself a fortune

2 MLC KEYNOTE ISSUE 12 2005

KeyNote, issued February 2005, has been published by MLC Limited ABN 90 000 000 402, 105–153 Miller Street, North Sydney, NSW 2060. It is current as at February 2005. It is intended to provide general information only and has been prepared without taking intoaccount any particular person’s objectives, financial situation or needs. Investors should, before acting on any information in KeyNote,consider the appropriateness of this information having regard to their personal objectives, financial situation and needs. We recommendinvestors obtain financial advice specific to their situation before making any financial investment (or insurance) decision.

MLC Limited is the issuer of MLC MasterKey Investment Bond, Rainbow Protection and Savings, MLC MasterKey Protection Essentialsand MLC Personal Protection Portfolio. MLC Investments Limited (ABN 30 002 641 661) is the issuer of interests in the MLC MasterKeyUnit Trust. MLC Investments Limited is also the Operator of MLC MasterKey Custom Superannuation, MLC MasterKey Custom SelfManaged Super, and will be the Operator of the MLC MasterKey Investment Service upon its commencement. MLC Nominees PtyLimited (ABN 93 002 814 959) is the issuer of MLC MasterKey Superannuation, MLC MasterKey Business Super (including MLCMasterKey Personal Superannuation), The Employee Retirement Plan, MLC MasterKey Allocated Pension and MLC MasterKey TermAllocated Pension. National Margin Lending is facility offered by the National Australia Bank Limited (ABN 12 004 044 937). None of the MLC Group of companies is responsible for the National Margin Lending product.

You should obtain a Product Disclosure Statement (PDS) or other disclosure document relating to any financial products, financialservices or facilities that may be mentioned in KeyNote. The relevant disclosure document should be considered before making anydecision about whether to acquire, hold, invest through or establish any financial product, financial services or facilities featured inKeyNote. Copies of current disclosure documents are available upon request, or will soon be available, by phoning the MasterKeyService Centre on 1800 029 799 or on our website at mlc.com.au. The disclosure documents relevant to National Margin Lending can be obtained from the National Australia Bank Limited.

Taxation information is based on our interpretation of the relevant laws as at 31 January 2005. The information should not be relied on as a substitute for financial or other professional advice. All returns are expressed in Australian dollars, which is the base currency inwhich the funds are managed. New Zealand investors should be aware that a currency effect exists between the Australian dollar andNew Zealand dollar.

Historical performance is not indicative of future performance. KeyNote also contains hypothetical illustrations based onassumptions that may not reflect or be appropriate to a particular person’s circumstances, financial situation or needs. No responsibility is taken for any actions by any person based on the hypothetical material contained in KeyNote.

An investment in any MLC product does not represent a deposit with or a liability of National Australia Bank Limited or other member ofthe National Australia Bank Limited group of companies and is subject to investment risk including possible delays in repayment and lossof income and capital invested. None of National Australia Bank Limited, MLC Group or other member in the National Australia Bank Limited group of companies guarantee the repayment of capital, payment of income, tax status or theperformance of any MLC product, except to the extent specified in the relevant disclosure document. All applications for insurance coverare subject to acceptance by MLC Limited.

The Australian Securities and Investments Commission (ASIC) has not been involved in the publication of KeyNote and takes noresponsibility for its contents.

IMPORTANT INFORMATION

MLC KEYNOTE ISSUE 12 2005 3

8

KeyNote is the official publication of MLC Limited ABN 90 000 000 402, produced by MLC Enterprise Marketing,PO Box 200, North Sydney NSW 2059.

Questions or comments can be directed to the Editor KeynoteMagazine c/- MLC Enterprise Marketing at the above address.

contentsKey questions 5Finding answers to your personal investment questions.

The National Bank’s Junior Games – it’s child’s play! 6Children around Australia will be given an early taste of the 2006 Melbourne Commonwealth Games.

Through the keyhole 7We take a look at some recent changes in legislation and how they may affect you.

Top 10 tips 9

Some simple things you can do to make the most of your super.

Australia – a nation over-exposed 16How the ‘she’ll be right’ mentality may be leaving manyAustralians inadequately protected.

Market performance 18A market snapshot at 31 December 2004.

Half-yearly update 20How your MLC funds have performed in the last 12 months and beyond.

It’s time to get to know your superFund Choice legislation will take affect on 1 July 2005 – encouraging Australians to take an interest in their super, and theirfinances in general.

You’re never too young for good advicePutting off seeking advice could be costing you money – and lots of it!

14 TAP into a better retirementTerm Allocated Pensions can be used to widen your investment choice, but still receive favourable treatment for social security purposes.

11


Welcome to Issue 12 of KeyNote, coming to you during an exciting period of change in the financial services industry.

Not least of the changes is the introductionof Fund Choice – effective from 1 July 2005.This legislation gives many people theopportunity to choose their own super fundfor the first time. And while this mainlyaffects those in company funds, it’s a call to all Australians take more of an interest in their finances.

Selecting a super fund is only a small part of the equation when it comes to financialplanning. More important is the need tounderstand the bigger picture. This includesthe need for insurance that, as you can seeon page 16, is often badly underestimated.

Getting a good financial plan in place needsgood advice. On page 13 we look at wherepeople turn for advice, and find that manylook to family and friends for direction. Wealso examine an alarming statistic fromASIC estimating the costs of poor decisionmaking over a lifetime.

With so much at stake, it’s worth taking thetime to find a professional financial adviseryou’re comfortable with. If you already havean adviser, it might be worth meeting withthem again. Your circumstances changeover time, and your financial plan shouldchange with them.

MLC has itself undergone some changeslately, and you may notice the new face onthis page.

CEO of MLC Australia is a newly createdrole that I’m extremely proud to take on,having worked for this company for morethan 17 years. The role was created by theevolution of MLC into the National AustraliaGroup’s new regional structure – aimed atbetter servicing our customers.

After 6 years as CEO of MLC, Peter Scotthas decided to move on. I’d like to take thisopportunity to thank Peter for hisoutstanding service to MLC over this time.

I hope you enjoy this issue of KeyNote, and wish you all the best for a happy andprosperous 2005.

Regards

Steve Tucker CEO MLC Australia

CEOa note from the

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sMLC KEYNOTE ISSUE 12 2005 5

Question

Q1. Australian shares haveperformed better than globalmarkets lately. Why should I keepglobal shares in my portfolio?

Australian shares have produced higherreturns than global shares over the lastfew years, and many commentatorspredict Australia may continue to leaddeveloped country sharemarkets incoming years. But there are goodreasons why you should keep investingin global shares.

One of the major benefits is the extradiversification global shares offer.Australia typically represents about 2% of global sharemarkets, and byinvesting only in the Australiansharemarket you’re not only limitingyour options, but you’re moresusceptible to any future downturns.

Instead, a well-diversified portfolio willbe invested in all major countries andregions around the world – such as theUnited States, Europe, and Asia, aswell as emerging markets such asChina and India.

This reduces your exposure to any one region (reducing volatility), withoutnecessarily compromising returns. It also gives you access to keyinternational companies who may behousehold names, but are not otherwiseavailable to Australian investors, suchas Nokia, Vodafone, Microsoft, Toyota,Johnson & Johnson, and Nestle.

Global share markets may not have had returns as strong as the Australianshare market recently, but short-termdominance is rarely sustained. Bothmarkets will have their good and badyears, and picking these years isnotoriously difficult.

By not investing in global shares youcould be severely limiting your ability todiversify, and your opportunity to accessworld class companies – not to mentionhindering your potential returns. This iswhy all good diversified portfolios willhave an allocation to global shares.

Q2. Instead of risking negativereturns in a managed fund,wouldn’t I better off investing in something with consistentpositive returns?

The promise of consistent positivereturns may sound appealing, but itmust be considered within the overallcontext of your investment goals.

Generally, growth assets (such asshares, property securities and privatemarkets) have higher potential rates ofreturn over the long term than interest-bearing assets. But they are alsotypically more volatile – increasing thechance of negative returns.

Investing in ‘safe’ assets such as cashdeposits may help you sleep easier atnight, but it may also mean you don’thave enough money accumulated whenyou need it. Historically, the best way togenerate wealth has been to invest ingrowth assets, even though they mayincur negative returns from time to time.

What is often required is a long-termapproach to investing – ignoring short-term glitches along the way. Negativereturns are not desirable, but they areoften a necessary evil when seeking thebest long-term results for yourinvestments.

Q3. I’m interested in using marginlending to invest more in amanaged share fund, but I’veheard that I may need to meet a margin call if markets decline.What does this involve and whatcan I do to reduce the risk?

When you establish a margin loan, theamount you can borrow (the ‘securityvalue’) is usually between 40% and 75%of the total value of shares and/ormanaged funds you provide as loansecurity. However, over time, the securityvalue of your portfolio can changeaccording to market performance.

If the security value falls below yourloan balance by a small amount, mostmargin lending institutions will allow yousome leeway in the form of a buffer –usually of around 5% to 10%.

If your loan balance exceeds thesecurity value by more than the buffer,you will need to make someadjustments to your facility. This iscalled meeting a margin call and can be achieved by either:

• Making a payment to reduce yourloan balance

• Providing additional approvedinvestments as security, and/or

• Selling some of your approvedinvestments and using theproceeds to repay part of the loan.

The best way to avoid a margin call isto borrow less than the maximumallowable. You should also ensure yourmanaged share fund is invested acrossa range of quality companies, spreadacross different industries andgeographical areas. Finally, you shouldhave access to additional cash orinvestments in the event that a margincall arises.

Ask your financial adviser how a marginloan can help you reach your goalssooner. They can also recommend arange of strategies to help you managethe risks (including margin calls).

keyquestionsDavid Hutchison, MLC Investment Research Manager,

answers your investment questions.

This article is intended to provide general advice only, and has been prepared without taking into account any particular person's objectives, financial situation or needs.You should, before acting on the advice, consider its appropriateness for your own circumstances. This is best done with the assistance of your financial adviser.

The National Bank’s Junior Games

– it’s child’s play!

Melbourne may be hosting the CommonwealthGames in 2006, but the experience will come earlyfor many children around Australia, with the 2005National Bank’s Junior Games kicking off in March.

Children have always used their playgrounds and backyards to cover themselves in sporting glory. With a bit of hard work and an active imagination, it’s even possible to createthe atmosphere and euphoria of a gold medal winningperformance without leaving the lounge room.

But this year around 30,000 school children aged 8 to 12 will be given the opportunity to get a real taste of theCommonwealth Games.

The 2005 Junior Games will visit 34 sites in every State and Territory across Australia, with more than 950 primaryschools expected to take part. Events will be held in city,regional and rural areas – giving those unable to be inMelbourne for the Games a chance to be part of it.

With modified ‘kid safe’ equipment, and a spirit of fun rather than competitiveness encouraged, the National’sJunior Games are sure to be a hit for all involved.

To find out more about the 2005 Junior Games, visitnational.com.au/juniorgames


National Australia Group joins the journeyThe National Australia Group, of which MLC is the wealth management division, is pleased to be a major sponsor of Melbourne 2006, and the 2005 National Junior Games.

The National Group was also privileged to help coordinate participation in the National Junior Games, with the support of the Australian Council for Health, Physical Education & Recreation (ACHPER).

Captain Nash is the National Junior Games Head Coach

From 1 July 2005, up to 5 millionAustralians will be able to choosetheir preferred superannuationprovider – many for the first time. The introduction of the Choice ofSuperannuation Funds (‘Fund Choice’)legislation is a positive step, as it’slikely to empower more people to takean active interest in their super andlonger-term financial well-being. It also provides a further incentive to seek financial advice, given acomfortable retirement starts with a sound superannuation strategy.

Who can choose?

While many people will be able toparticipate in Fund Choice, there aresome exceptions. For example, formalworkplace or enterprise agreements, or State Awards dealing with super canoverride the Fund Choice legislation.Also, most people in the Governmentsector will not, at least initially, have theright to choose their own fund. Youremployer will be able to tell youwhether Fund Choice applies to you.

What contributions are affected?

If eligible, you will be able to chooseany complying super fund or retirementsavings account for all futureSuperannuation Guarantee (SG)contributions. These are thecompulsory 9% super contributionsyour employer is required to pay onyour behalf. Your employer may alsoagree to pay any salary sacrifice oradditional voluntary employercontributions into your chosen fund.

What must employers do?

Employers that are required to offer choicemust provide a ‘Standard Choice’ form toexisting employees by 29 July 2005, andwithin 28 days of commencement for newemployees. They are also required tomake contributions into the nominatedfund, unless:

• You’ve already made a choice withinthe previous 12 months

• You don’t provide sufficient detailsregarding your preferred fund, or

• Your chosen fund cannot accept thecontributions.

What happens if you don’t make a choice?

If you don’t make a choice, youremployer will contribute into the ‘default’fund(s) they have selected. The defaultfund(s), which will be named in theStandard Choice form, may notnecessarily be the same as the fundwhere your current employercontributions are being paid. You shouldtherefore carefully read anydocumentation sent by your employer(and speak to a financial adviser beforeyou make any decisions).

Does choice also apply to existingsuper benefits?

The choice legislation only applies tofuture SG contributions. If you wish totransfer your existing benefits to a newfund, you will need to contact yourexisting super provider. While somefunds allow you to transfer benefits atany time, others may impose restrictions.However, following the introduction ofnew ‘portability’ measures on 1 July2004, most funds cannot refuse atransfer request if your account has notreceived any employer contributions fora period of six months or longer.


Through the

keyholePaul Maddock, General Manager ofMLC Investment & Technical Services,

looks at some recent legislation and how it may affect you.

Fund Choice is on its way Other issues

Surcharge reduction

The maximum superannuation surchargerate will reduce from 12.5% in 2004/05 to10% in 2005/06, with possible furtherreductions in the future. The surcharge isan additional ‘tax’ that is payable by higherincome earners on deductible supercontributions (including employercontributions and salary sacrifice).

Proposed super contribution splittingfor spouses

The Government is still committed toallowing members of accumulationsuperannuation funds to split their supercontributions with their spouse on anannual basis. If this legislation is passed, it is anticipated that contribution splittingwill be limited to 60% of a member’sdeductible contributions and 100% of amember’s after-tax (undeducted)contributions. While this measure waspreviously proposed to commence from 1 July 2005, this date could be extended.

Co-contributions reminder

Commencing 1 July 2004, if you make apersonal after-tax super contribution of$1,000 (and you satisfy certain otherconditions), the Government may add up to$1,500 to your super account. That’spotentially an effective rate of return of up to150% on the amount you contribute. To takeadvantage of this opportunity this financialyear, you will need to act before 30 June.

Note: Your adviser may also be able to helpyou with other tax-effective, year-end,financial planning strategies. Depending onyour circumstances, some examples couldinclude making tax-deductible supercontributions, using capital losses to youradvantage, and pre-paying 12 monthsinterest on an investment loan.

See over the page for more on Fund Choice.


1 Retirement Savings Gap study performed by RiceWalker Actuaries, commissioned by Investment &Financial Services Association Ltd (IFSA), 2003.

2 APRA Superannuation Trends – September Quarter 2004.

You’ve probably lived with it for morethan a decade. It bears your name andwill be largely responsible for fundingyour retirement. But how well do youknow your superannuation?

Over the last 20 years, successiveAustralian Governments have introducedmeasures aimed at helping Australiansfund their own retirement. It started withcompulsory employer superannuationcontributions – introduced into industrialawards in 1986, and then extended tocover most employees in 1992 (known as the Superannuation Guarantee).

Recent initiatives include the introductionof Government co-contributions for lowincome earners, a relaxation ofcontribution restrictions for those under65, and new term allocated pensions(see page 14 for more on TAPs).

The next step in the evolution

Perhaps the biggest change tosuperannuation since compulsory employercontributions were introduced is ‘Choice ofSuperannuation Fund’ legislation –commencing on 1 July this year.

Fund Choice, as it’s known, will make itpossible for up to 5 million Australians tochoose their own superannuation provider.

While it won’t apply to everyone, themessage is clear: the Government wantsus to take a more active interest in ourfinances.

Why? Because it’s generally consideredAustralians won’t have enough money tolive comfortably in retirement – especiallythose who are close to retiring. Thisshortfall (where your money runs outbefore you do) is commonly referred toas the ‘retirement gap’, and has beenestimated at $600 billion1.

It sounds a little scary, doesn’t it? But it’snot all doom and gloom. With professionaladvice and good planning, there aresimple ways to get more out of your superand help avoid the shortfall. Some ofthese are listed on page 9.

All I wanna do is have one fund…

It seems more common for people tochange jobs these days. And every timeyou change jobs you probably open up anew super account without thinking twiceabout it.

The Australian Prudential RegulationAuthority (APRA) counted 26.7 millionmember accounts in 20042. Compare thatto Australia’s workforce of just under 10million and you can start to see one ofthe problems.

When changing jobs, one of the lastthings you think about is consolidatingyour super balances. But you’ll probablyfind it’s more economical to have onlyone super account in your name. Forone, you could be paying additionalaccount fees and charges by having anumber of smaller balances.

Consolidating your accounts also makesit easier to keep track of your super –ensuring you don’t cheat yourself out ofyour hard-earned retirement income.

Now it’s just a matter of choice

Having all your money in a single fund isone thing, but which fund should you bein? Fund Choice may open up some newoptions, but does this mean you shouldswitch funds? Not necessarily – andcertainly not before you understand yourcurrent fund, or what your options are.

If you’re eligible to choose your own fund,you should talk to a financial adviserbefore you make any decisions aboutyour super. There are a number of things you should consider, some of which we will talk about here.

Fund Choice vs investment choice

It’s important not to confuse investmentchoice – the ability to select differentinvestment options within the one fund –with Fund Choice. While Fund Choice willlet many people choose their own fundfor the first time, most funds have beenoffering investment choice for years.

Before you make any decisions aboutchanging funds, you should explore theinvestment options available in yourcurrent fund. You may find this is all youneed to change.

Choosing your investment optionInvestment options can vary greatlybetween and within super funds, socomparisons are difficult. Generallyspeaking you are choosing the level ofrisk you’re comfortable with. The riskier(or higher growth) options will usually bemore volatile, but are expected to deliverbetter returns over the long term.Typically, the longer you’re prepared toinvest, the more volatility you can tolerate– you have the time to ride out the highsand lows.

For most people, super is a long-terminvestment. It doesn’t make sense tochoose an investment based on 1 or 2year returns, as short-term ‘winners’ don’tstay on top for long. Market cycles havea big impact on which fund styles (andtherefore which investment options)dominate at any given time. The tideinevitably turns.

Instead, you should pick the investmentoption with the risk profile and objectivesclosest to your own. Provided aninvestment meets your requirements andis performing according to expectations(including the inevitable ups and downsalong the way), you may be best offstaying put. After all, you need to beconfident that your investment will helpyou reach your retirement goals, not justdeliver a good year or two along the way.

SUPERSUPERget to know your superIt�s time to

Here are ten ways to make the most of your super –helping you live well in retirement.

1. Take stock. Make sure you track down any ‘lost’ superand consolidate multiple accounts into one to reduce feesand paperwork. The SuperSeeker on ato.gov.au can helpyou do this, or you can call the ATO on 13 28 65.

2. Go for growth. Retirement is a long-term goal, soconsider investing your super in assets that have thepotential for higher long-term returns (such as shares and property).

3. Stay the course. Only switch into another investmentoption if your goals, time horizon or risk tolerance changes.Switching options in response to short-term marketperformance can be wealth destroying.

4. Invest more. Because investment earnings are taxed ata maximum rate of 15%, your money can work harder in asuper fund than in other investments. There may also besome ‘up-front’ tax incentives for making additionalcontributions (see tips 5 to 7).

5. Sacrifice some of your income. By getting youremployer to contribute some of your pre-tax salary directlyinto super, you could make a net tax saving of up to 33.5%*.

6. Qualify for a co-contribution. If you make a personal after-tax super contribution of $1,000, you may qualify for a Government co-contribution of up to $1,500*.

7. Make deductible contributions. If you’re self-employedor substantially self-employed and you contribute to super,you may be eligible for a tax deduction that can be used toreduce your taxable income*.

8. Purchase insurance through super. Life and total andpermanent disability insurance taken out through a super fundcould be almost up to 48.5% cheaper – on an after-tax basis– when compared to insuring outside super (see page 17).

9. Rollover to an income stream. If you rollover your superto an income stream (e.g. an allocated pension) when youretire, you can eliminate lump sum tax and receive a tax-free income of up to $31,350 p.a*.

10. Seek advice. If you’re serious about securing yourfinancial future, you should speak to a financial adviser.They can help you to set clear goals and implement a rangeof clever strategies (within and outside super) to help makeyour dreams a reality.

* Certain conditions need to be met to qualify for these tax benefits.See your adviser for more information.

top10 tips


Different types of funds

Here are some broad descriptions of the six main types of super funds.

• Personal or public offer funds – these are funds open to thegeneral public. They have professional trustees approved byAPRA, which manage the fund on behalf of the members.Individuals can start their own personal account or, in some cases,employers can create a plan for their employees within the fund.

• Corporate funds – where an employer (or a group of employers)establishes a stand-alone super fund, usually for employees only.The trustees are generally appointed equally by the employer andemployees.

• Industry funds – these are typically large funds where employersin a given industry contribute for their employees, often as arequirement of an industrial award. Some of these funds may beopen to the general public (see ‘Personal or public offer funds’above).

• Public sector funds – these are funds or schemes establishedunder relevant laws, which are only open to Governmentemployees.

• Retirement Savings Accounts (RSAs) – these aresuperannuation-specific accounts, commonly offered by banks,building societies or credit unions. They usually guarantee aspecific but conservative rate of return.

• Do-it-yourself (DIY) funds – these can be split into self managedsuper funds (SMSFs) and small APRA funds (SAFs). SMSFs haveno more than four members, who typically must run and operatethe fund themselves. Small APRA funds are similar to SMSFs, butthey have a nominated trustee, approved by APRA, performing thetrustee’s responsibilities.

Each of these fund types can vary significantly in the way theyoperate – even within these categories. As a result, it’s difficult tomake blanket comparisons between fund types. There are pros andcons to all funds, some of which are outlined later. The best fund foryou will depend on your circumstances and your goals, and shouldbe discussed with your adviser.

Hands on or hands off?

One of the main issues with super is how much you want to be involved.

A self managed fund, for example, could give you additional options,especially when it comes to where you invest your super. But with thisfreedom comes the responsibility of acting as trustee of the fund.There’s also the need to cover start-up costs, as well as ongoing legal,compliance, investment and administration costs. And you’re required toresearch and review your investments on a regular basis, which in itselfcould be a full-time occupation.

If you don’t have the time, the know-how, or the inclination to chooseand maintain your own underlying assets (as well as ensure you fulfilall the legal and tax obligations), you might be better off in a public offerfund. These have dedicated professionals managing and regularlyreviewing the portfolios and investment options on your behalf. Thesefunds typically build diversification into the available portfolios – helpingprotect against market fluctuations.

continued over page.


Benefits of your current fund

Many people who will soon be eligible forFund Choice currently belong to a superfund offered to them by their employer –be it a plan in a public offer fund (likeMLC MasterKey Business Super), acorporate fund, or an industry fund.These employer-sponsored funds oftencome with a number of advantages,generally achieved by the greater buyingpower of organisations, including:

• The potential for lower administrationand investment fees

• Automatic acceptance for insurancepurposes (if there are enoughmembers)

• The potential for lower insurancepremiums for basic insurance cover(generally based on the level of coverfor automatic acceptance, whereapplicable)

• Access to a range of investmentoptions

• Access to member education

• Access to other ancillary benefitprograms (eg. discounts on bankingproducts and other goods andservices).

These benefits differ between funds and providers. It’s worth reviewing thebenefits of your current fund, andchecking with your adviser, before you contemplate switching funds.

Look at the big picture

Fund choice opens up a range ofsuperannuation options for many people,but it should be kept in context. Super iscertainly a key element of any retirementplan. But it is only one element, andpicking a super provider is only a smallpiece in the puzzle. There are a number of other ways you can make your moneywork harder for you, now and in the future.

Establishing an ongoing relationship witha financial adviser is a good start tosorting out your finances. If it’s been awhile since you saw your adviser, itmight be time to book an appointment. If you don’t have an adviser, and wouldlike to be put in touch with one, call MLCon 1800 245 160 or visit mlc.com.au

• Access to MLC’s manager of managers investment process.• A wide range of investment options.• Online access and consolidated reporting.• Simple, transparent and competitive fees.• Competitive premiums offered on death and disability insurance.• Management fee rebates as your portfolio grows.

MasterKey Business Super only• Access to additional management fee rebates when part

of a large employer plan.• Competitive premiums offered on income protection insurance.

• A wide range of direct and managed investments.• Online access and consolidated reporting.• Seamless transfer to an income stream in retirement.

SMSF only• The flexibility of a self managed super fund without the

complexities of running it.• Ability to invest in private assets like property and private

unit trusts.• Comprehensive range of pension and income streams.

MasterKeySuperannuation

MasterKey Business Super

MasterKey Custom Superannuation

MasterKey Custom SMSF

You

Your financial adviser

Super solutions with MLCMLC’s range of super funds offer something for everyone. From the ready-made diversification of MasterKey Superannuationand MasterKey Business Super, to the flexibility and control offered by MasterKey Custom Superannuation and MasterKeyCustom Self Managed Super, MLC can help you achieve your long-term goals.

For more information visit mlc.com.au, call MLC on 13 34 33, or speak to your adviser.

SUPERSUPERget to know your superIt�s time to

Think of life as a journey. From a financial planningperspective, this journey often begins when you get your firstjob, and you start to think about saving for your first car or abig trip overseas. Your goals will change throughout life. Theycan be tangible long-term goals, such as buying a home. Ormaybe financial challenges that you may not have thoughtabout, like paying for a child’s wedding.

Much is said about planning for retirement, which may notsound too exciting to someone in their 20’s or 30’s. But what is exciting about financial planning is that it can help you reachmany kinds of goals or milestones on the journey towardsretirement. And if you think about retirement as financialindependence – or having the lifestyle you want withoutworking – doesn’t that sound a bit more enticing?

Why put it off?

One common misconception among younger people is thatthey’re not earning enough or they don’t have enough moneyto get anything out of financial advice.

But people in their 20s and 30s may need help with thingssuch as budgeting, or saving for a deposit on a house. Whilesetting up a budget may seem like a fairly simple exercise, itcan be the very first step to financial security in the future. Andmany people just don’t know the best ways to balance out theirdebt with their savings.

There are also many people in their 30s and 40s who have ahome loan and who therefore may need more strategic advice.For example, there is a perception that you should focus onsimply reducing your debt as quickly as possible. And it’s truehaving debt can be an unpleasant thought. But advisers canshow you that there are such things as ‘good debt’ and ‘baddebt’ – and it is the difference between these two which canmake for effective strategies.

continued over page.


Tax-deductible interest No Yes

Assets purchased Depreciate and/or need to be maintained Have potential to grow in value (e.g. shares and investment property)

Income to service loan No Yes

Examples Home loan Home equity loan

Credit cards (if not repaid within the Margin loaninterest-free period)

Personal loans

Most people go to the doctors when they’resick, and take their smoking cars to themechanic. But why is it they’ll often waityears before giving their finances a check-up? Getting financial advice from a youngerage could be just what the doctor ordered foryour financial future.

start

now!

You’re never too youngfor GOOD ADVICEYou’re never too youngfor GOOD ADVICE

Bad debt Good debt


Some strategic ways advice can help you

Advisers may recommend you pay off a non-deductible debt,such as a home loan, as soon as you can, but notnecessarily just for the sake of eliminating debt. As moreequity is built into the family home each year, you couldconsider whether you wanted to use this equity as securityfor a tax-effective investment loan (if your circumstancesmean that this is a suitable option).

Taking out a margin loan to purchase investments can beanother long-term wealth accumulation strategy. A marginloan is a line of credit that can be used to borrow money forinvestment purposes. You simply provide security for theloan, which can be in the form of approved shares, managedfunds or cash. You can then use the borrowed money toaccess a range of investment opportunities. An adviser canalso show you how borrowing to invest through a marginloan can potentially deliver some powerful tax benefits.

Margin lenders should offer a large range of approved ASX-listed stocks and managed funds to borrow against, along withflexibility when deciding the loan structure that best suits you.

On top of meeting these criteria, a National Margin Lendingfacility may also make it easier to keep track of your marginloan balance when the margin loan is used to invest whollythrough the MLC MasterKey Investment Service – the newway to access all currently available investment options inthe MLC MasterKey Unit Trust, plus 17 single managerinvestment options (managed outside MLC). In this case,reporting on the performance of your MasterKey investmentsis integrated with reporting on your National Margin loan, via mlc.com.au

Home equity loans and margin lending are just twoexamples of how advisers can help younger investors inways you may not have thought of before. Advisers will alsohelp you implement appropriate strategies and review themas your situation changes.

Let’s not forget insurance…

Many people in their 30s and 40s have surprisingly lowlevels of insurance cover. Recent surveys conducted by RoyMorgan Research1 have found that only 9% of people agedbetween 30 and 44 have income protection and 27% havelife insurance. However, this is also a stage in life whendebts and other financial commitments can be at theirhighest levels.

Advisers can show you how insurance can protect you andyour family against unexpected, and often unspoken events –such as death and disability. Insurance is available whichcaters for younger clients who don’t want to spend a lot oftime and bother during the application process. Less paperwork, for example, is part of MLC’s latest insurance offer,MasterKey Protection Essentials.

Start now – you’ll thank yourself for it later

Getting ‘financially active’ earlier can be a great start toplanning for a financially independent retirement, andmeeting your other goals along the way. Your first decisioncould be as simple as making a choice about thesuperannuation fund for your contributions (see page 8). Or it could be something more complex, such as having afinancial adviser help you implement a range of strategiesappropriate to your situation and your goals.

The important thing to remember is that you can maximiseyour financial outcomes by taking action early, like whenyou’re in your 30s or early 40s. To see a case study whichdemonstrates how much difference financial advice canmake, see Scott and Amy’s story on MLC‘s website.

‘The value of advice for thirty somethings’ introduces ahypothetical couple, Scott and Amy, who are in their late 30sand who want to reach financial independence in 20 years.This interactive demonstration on mlc.com.au shows thedifferent scenarios that could play out for Scott and Amy, bothwith and without financial advice. The results are great newsfor people who seek financial advice earlier in life, with apositive difference of more than $271,000 in the value of thecouple’s portfolio after a 20 year period.

MLC’s new simple, integrated solutionsIn 2005, MLC will be introducing a range of productstailored to the needs of the thirty somethings. Askyour adviser about the enhancements to MasterKey,which make it simpler than ever to get your financesin order.

1. The surveys were conducted over a twelve-month period to December 2003.

save yourself

don�t put it

off

What would you say if someone told you poor decisionmaking could cost you $790,000 over your lifetime?

You’d probably think they were talking about millionaires, or at least people with larger incomes. But what if the figurewas based on people with salaries of $36,000 p.a.?

These were the findings from the Government’s FinancialLiteracy Taskforce2, giving an alarming insight into the valueof getting the right financial advice.

Who do you turn to for advice?

You often hear that you should seek the help of a financialadviser before making any investment decisions. This islargely because no two people’s circumstances are thesame, and there are no ‘one-size-fits-all’ solutions.

But how many of you have an ongoing relationship with an adviser? If you don’t, where is your advice coming from?

A study commissioned by MLC 3 found that 58% of MLCcustomers have an ongoing relationship with their adviser,and over half of these had seen their adviser in the last sixmonths. Of these advised customers, 72% are highlysatisfied4 with the relationship they have with their adviser.

But what about the many people who don’t regularly see an adviser? Where do they turn for advice? The table belowgives you an indication based on age.

These figures clearly indicate that the proportion of peoplegetting their advice from financial advisers increases withage. This is hardly surprising, given the greater emphasis on financial planning as retirement nears.

But think about all the decisions you need to make earlier in life – like buying your first home – that could affect yourfinancial position. Then think about ASIC’s findings; toomany bad decisions could cost you $790,000 over yourlifetime.

Smarter budgeting, better management of your loans andmortgages, appropriate insurance, astute investing, andclever super strategies can all make a big difference to yourfinancial position – helping you avoid costly errors injudgement.

0%

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Source of Primary Financial Advice

18-24

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14%

63%

3%

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22%

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37%

1%

4%

34%

15%

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47%

1%

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17%

5%

5%3%

12%

57%

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3%7%

8%

25-34 35-49 50-59 60+

Family or friendsSolicitorStockbrokerAccountantBank managerLife insurance agentFinancial plannerOther

2 ASIC Media Release 04-345, 21 October 2004

3 MLC Customer Satisfaction & Competitor Benchmark Survey, conductedby the Institute for market psychology (ifm) September 2004.

4 ‘Highly satisfied’ = satisfaction rating of 80% or above

with the right advice

Source: ‘Winningfriends and influencingpeople’, FinancialPlanning, August 2002,using results ofFPA/RMIT University –Consumer SentimentSurvey, May 2002.

How do I contact an adviser?

The Financial Planning Association (FPA) is a goodplace to start. Their website (fpa.asn.au) helps yousearch for advisers in your area based on the sort ofadvice you’re looking for. You can also contact anadviser via MLC, by logging onto mlc.com.au orphoning 1800 245 160.


a fortune


What is a TAP?

A TAP is an income stream investment.This means you invest a lump sum thatis paid back to you gradually, along withany investment earnings, to meet yourday-to-day needs in retirement.

A TAP can only be started by investing asuper lump sum or Eligible TerminationPayment (ETP). The amount of incomeyou receive each year is based on yourremaining account balance, divided by apre-determined ‘Payment Factor’ (PF).This essentially reduces your accountbalance to zero over the selected term ofthe pension.

While the idea of a retirement incomestream is certainly not new, TAPs havesome compelling features worthunderstanding.

Using a TAP to access the AgePension

Centrelink applies a number of criteriawhen assessing who’s eligible for the AgePension, one of which is the Assets Test.

Starting a TAP will qualify you for a 50%exemption from the Assets Test –meaning only half of your accountbalance in the TAP will be counted. Asthe case study opposite shows, thiscould help you receive more AgePension benefits, and make a significantdifference to your financial position.

Using a TAP to access investmentchoice

Another feature of TAPs is that they giveyou a range of investment options –including the ability to invest in growthassets.

Growth assets (such as shares andproperty) have traditionally providedhigher returns over the long term thanfixed-income investments. This canmake a valuable difference over time,but you should be aware that growthassets are often more volatile.

You should consider your own timeframe and tolerance for risk beforechoosing the portion of growth assets in your portfolio. Market fluctuations(good and bad) will be reflected in youraccount balance, and the amount ofincome you would receive from the TAPeach year.

How are TAPs different from otherincome streams?

Traditional income streams, such ascomplying annuities, may also beeligible for favourable treatment under the Assets Test. But they don’t offerinvestment choice, and are typicallybacked by fixed income investments only.This means a steady but modest amountof interest is earned on the lump sum.

Allocated pensions do offer investmentchoice. But they lack the favourableAssets Test treatment offered by TAPsand complying annuities.

Essentially TAPs bridge the gap betweencomplying annuities and allocatedpensions – giving you a 50% Assets Testexemption, but not restricting yourchoice of investments. However they do have important limitations.

One of the drawbacks of a TAP is thatyour capital is non-commutable –meaning you generally can’t cash it out.This feature is somewhat of a trade-off for the Government concessions availablethrough TAPs, and can be quite restrictiveif you need money at a pinch.

TAP into a betterretirement

Try to picture it and you’ll probably seeyourself relaxing, spending time at home, taking trips away. Anything butworking! But everything costs money, and you need to make sure you’llhave enough of it to truly retire in style.

You’ve already heard about the ‘retirement gap’, and how the Government’sattempting to address this situation by getting Australians to take an interest intheir finances at a younger age (see page 8).

But what if you’re already retired? Or nearing retirement? What’s being done tohelp you make the most of what you’ve got?

The introduction in 2004 of ‘complying market-linked income streams’ – or TAPs(Term Allocated Pensions) as they’re more commonly known – is one example ofa Government measure designed to help retirees make their savings last.

Retirement.


Using a TAP to access social security benefits

Let’s take a look at the example of a couple who have worked out they will need an after-tax income of $38,000 p.a. to livecomfortably in retirement.

Case study

Adrian (65) and Jan (63) own their own home. Adrian has $440,000 in super and together, they have $50,000 in other assets.

If Adrian places his entire super in an allocated pension, the entire amount will be counted towards the Centrelink Assets Test. As a result, their total assets will exceed the cut-off threshold for a home-owning couple ($481,500) and disqualify them for anysocial security payments.

If, however, he invested $200,000 in a TAP* and $240,000 in an allocated pension, Adrian would then be eligible to receive$7,131 in social security benefits, as well as the Pensioner Concession card.

The table below outlines their Age Pension and income position under both these scenarios.

By combining an allocated pension with a TAP, Adrian receives the same amount of income each year. However, because Adrianand Jan now qualify for a part pension of over $7,000, they don’t need to draw as much of their own capital to meet their incomegoal, ensuring their retirement savings last longer.

* Assumes the TAP is reversionary with a 28-year term.

Strategy Single Allocated Pension Combined Allocated Pension / TAP

Product AP AP TAP

Investment amount $440,000 $240,000 $200,000

Income stream payments $38,000 $30,869

Age Pension $0 $7,131

Total pre-tax income $38,000 $38,000

Does your super exceed yourRBL?Your Reasonable Benefit Limit (RBL) is themaximum amount of super you can receive in your lifetime while still gaining taxconcessions. The lump sum RBL is $619,223in 2004/05, and any amounts in excess ofthis limit are considered ‘excess benefits’.These can be taxed at up to 48.5% whentaken as a cash lump sum.

Provided you’ve put at least half of the RBLvalue of your super into a TAP (or othercomplying income stream), you will be able to qualify for the higher Pension RBL($1,238,440 in 2004/05). This could producesignificant tax savings for those withsubstantial amounts of super accumulated.

This is one reason why TAPs are often combined with other incomestreams, such as allocated pensions, rather than being relied on as acomplete retirement solution.

By ‘locking away’ (into a TAP) only as much of your investment as youneed to gain the Government concessions, you can keep the rest whereyou can get your hands on it. The case study below is an example of sucha strategy.

You should ask a financial adviser whether a TAP suits yourcircumstances. An adviser can also help you with the bigger picture,including cashflow and estate planning. You want to make the most of yourretirement, and the right advice could be invaluable in making that happen.

MLC has a range of strategy guides covering retirement, superannuation,wealth protection, debt management, and wealth creation. Ask your adviserto show you some of the clever ways you can make your money work harder.

If you don’t have an adviser and would like to be referred to one, call MLCon 1800 245 160 or visit mlc.com.au

• You can only start a TAP with super or ETP monies.

• The 50% Assets Test exemption could help you qualify for the Age Pension.

• If at least half your RBL super amount is invested in a TAP, you may qualify for the higher Pension RBL – meaningyou’re less likely to incur ‘excess benefits’ tax.

• You can choose the term of the pension based on your life expectancy (or your spouse’s), but bear in mindincreasing the term reduces your annual income from the TAP.

• Remaining capital on the death of the primary or reversionary pensioner is payable to the dependants or the estate.

• A TAP gives you investment options, but you then bear the risk of market volatility.Tips

& tr

aps

Australia a nation over-exposed

Many Australians tend to take anoptimistic approach to planning (or notplanning!) ahead. Unfortunately, this‘she’ll be right’ mentality often extendsto insuring against life’s unexpectedmishaps – like sickness, injury, andcritical illness.

According to Stephen Moore, GeneralManager of Platform Development atMLC, there is an element of denialinvolved.

“We’re a nation that doesn't want to facethe reality we could be seriouslyimpacted by these factors. But what we need to realise is that sickness canlead to loss of income, with a flow-oneffect on our lifestyle, and our ability torepay debt and provide for dependants.”

The facts – Australians areunderinsured

With household debt levels on the rise 1,you'd probably expect more Australiansto be taking out insurance – coveringtheir debt repayments shouldsomething happen to them.

But recent research by DEXX&R 2

suggests the average Australian hasless than a third of the life insurancethey need to cover their debts andprovide replacement income for theirdependants.

For many people, the only lifeinsurance they have is via theirsuperannuation plan. While there arecertainly benefits in having this cover,Stephen Moore says it can sometimeslead to a false sense of security.

“The average life cover from super isbetween $100,000-150,000, and if youapply a general rule of thumb that youneed between 5-10 times your currentsalary to be adequately covered, this isclearly not enough for many people.”

A good plan needs good advice

Your circumstances are unique, andgetting the right advice is critical tomaking sure you get the best insurancesolution to meet your personal andfinancial needs.

Insurance can seem like a complexbusiness, and Stephen Mooreencourages more Australians to seekadvice about building a safety net intotheir financial plans.

“With a bit of foresight and the help ofan adviser, you can make sure youhave the appropriate cover against theunexpected, rather than just hoping forthe best.”

Your income...what would you do without it?

Most people take for grantedtheir ability to earn an income.But if your income suddenlystopped due to illness or injury, itwould certainly leave a huge gapin your lifestyle, and potentiallyjeopardise your debt repayments.

Income protection insurance canprovide a monthly benefit of up to75% of pre-tax income to replacelost earnings while you're off.This could play a vital role inkeeping your household running..

1. RBA, ABS – Household debt as a percentage of household disposable income 2004.

2. AXA/DeXX&R – ‘Exposed. The risks Australiansare taking without insurance’, October 2004.


While many people think to insure their homes and cars against loss, many fail to protect

themselves against sickness, injury and critical illness – the very things that could most

jeopardise their financial security.


Case studyAndrew (aged 43) is self-employed, pays tax at a marginal rate of 48.5%* and is married to Wendy (aged 40). They're raising ayoung family and Wendy works part-time (earning less than $10,800 p.a.). They both have death and TPD insurance cover intheir own names, outside super.

Andrew is currently paying premiums of $1,337 p.a., while Wendy is paying $815 p.a. – a total cost of $2,152 p.a. After speakingto their adviser, they decide to take out insurance through their super fund instead.

Because Andrew is eligible to claim his super contributions as a tax deduction, insuring through a super fund will enable him toreduce his tax by $648 (i.e. 48.5% of $1,337). What’s more, by contributing $815 into super on behalf of Wendy, Andrew can alsoclaim a tax offset of $147 (i.e. 18% of $815) in his annual tax return.

Collectively, these tax savings will reduce the cost of their insurance by $795, as illustrated in the following table.

Note: If Andrew was subject to the full 12.5% superannuation surcharge, the cost of his insurance cover would effectivelyincrease by $167 (i.e. $1,337 x 12.5%). This would still result in a saving to the couple of $628 each year.

* Includes a Medicare Levy of 1.5%

Taking a tax-effective approach

A simple and tax-effective strategy may be to increase the amount of life cover under a superannuation plan.

Purchasing life and total and permanent disability insurance through super often reduces the effective cost of premiums (seecase study) – in some cases by up to 48.5%. This is because the extra contributions used to buy insurance through super aretreated like other super contributions, and can attract tax offsets and deductions. Taking into account the potential tax savings, itmay be possible to purchase a higher level of cover than insuring outside super.

The example below illustrates how life and total and permanent disability insurance can be a tax-effective way to protect your lifestyle.

The super insurance strategy

Andrew# Wendy# Total

Pre-tax premiums $1,337 $815 $2,152

Less tax deduction at 48.5% ($648) (N/A)

Less tax offset at 18% (N/A) ($147)

After-tax premiums $689 $668 $1,357

Annual premium saving $795

# Death and TPD cover.

Award-winning protection with MLC

MLC won three significant industry awards in 2004, including Personal Investor Magazine’s ‘Insurance Company of the Year’ forthe third year in a row.

This year, MLC’s award-winning Personal Protection Portfolio will be joined by MasterKey Protection Essentials – making it eveneasier to build insurance into your financial plan.

For more information, ask your adviser, phone MLC on 133 442 or visit mlc.com.au


Global Shares

Global shares rose strongly over the year, finishing up 12.1% inlocal currency and 11.3% in Australian dollar terms (AUD) – thelower AUD return due to the AUD’s 3.9% appreciation against theUS dollar (USD). In contrast, the AUD recorded falls of 3.1%against the pound sterling, 0.5% against the Yen and 3.6% againstthe Euro – giving holders of unhedged USD denominated shareslower returns on their portfolios than USD hedged investors.

Despite lacklustre economic growth and a strong Euro currency,the European share market outperformed the US for the year. InAsia, the best performing markets were the Philippines (21.7%),Indonesia (46.3%) and Korea (18.1%). Japanese economicexpansion appears to have come off the boil, with the JapaneseNikkei Index finishing the year up only 7.6%. China and Thailandwere the only markets to fall, finishing down 2.1% and 4.8%respectively. China also experienced its first interest rate rise innine years, as authorities cooled down a rapidly expandingeconomy.

Australian Shares

The Australian share market’s yearly return was the highest since1994, with an all-time high reached in late December. Marketconditions were solid for much of the year, with the market risingfor eight consecutive months to December. The S&P/ASX300Accumulation Index increased by 27.9% over the twelve months,making the Australian share market one of the strongestperformers in a global context.

The strength of the Australian market was reflected across allS&P/ASX300 Sector Indices. The Energy sector’s return of 43.9%was the highest – with oil prices reaching historic highs during theyear – followed by Information Technology (+40%), Industrials(+38.7%) and Consumer Staples (+35.2%). The Telecoms sectordelivered a modest 10.4% rise, reflective of Telstra’s (+1.9%) andTelecom Corporation of New Zealand’s (+19.6%) belowbenchmark returns. While the Financials (ex Listed PropertyTrusts) return of +25.3% was substantial in an absolute sense,performances of stocks within that index were variable. NationalAustralia Bank’s share price fall of 3.8% contrasted with Suncorp-Metway’s 40.3% rise, and the strong performances of insurancestocks such as QBE (+44.8%), Promina (+64.6%) and InsuranceAustralia Group (+51.3%).

Market performanceThe following commentaries provide an overview of investment market conditions over the 12 months to 31 December 2004, while the graphs provide a longer performance history. Investments into any of the assetclasses should not be influenced by short-term performance, but should be considered as part of anappropriate strategy formulated with the help of a financial adviser.

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S&P/ASX 300 Accumulation Index Prior to November 2002 returns are based on the S&P/ASX 200 Accumulation Index to April 2000

Prior to April 2000 returns are based on the All Ordinaries Accumulation Index


Australian Bonds

The domestic bond market returned 7% for the year. Much ofthis return was driven by coupon income, but the slight declinein yields over the year delivered some capital gains to investors.For much of the year the domestic market followed the US,where yields declined for the majority of the year.

The Reserve Bank of Australia kept rates steady at 5.25%during the year. The expected interest rate rises early in the yeardid not eventuate, and expectations of tighter monetary policy in2005 diminished – leading to a small decline in bond yields.

Within the market, longer dated securities performed better thanthe short dated securities, as long dated yields declined further.A common theme throughout the year, despite a reversal in thelast quarter, was the general outperformance of riskier debtsectors – reflected in the difference between treasuries (+6.83%)and credit (+7.06%).

Global Bonds

Bond markets across all bond sub-sectors and regions deliveredstrong returns to investors, although global bonds (+9.41%)outperformed Australian bonds (+7%).

Much of the first half of the year was spent focused on thepotential impact of rising interest rates and oil prices, whichspiked to US$56 per barrel in October. Another concern was thepotential impact of the US current account deficit – fundedpredominantly by offshore savings from China and Japan. Someof this concern has been reflected in the currency markets,where the US Dollar (USD) declined 7.6% against the Euro and3.9% against the Australian Dollar (AUD), although it has nothalted the continued widening of the US current account deficit.

Weaker economic growth data later in the year, particularly theweaker US employment growth in the third quarter, supportedthe general decline in yields and flattening of the US yield curve.It also led to a marked fall in European debt yields.

Listed Property Securities

The Australian listed property trust sector recorded a substantialreturn for the year, with the S&P/ASX200 Property TrustsAccumulation Index increasing by 32%. This is the highestcalendar year return recorded by the sector for over a decade.

The main driver of this return was the amount of rationalisationactivity during the year – continuing the dramatic changes withinthe sector in recent years. As a result of these changes, thereare now 21 trusts (down from almost 50 trusts five years ago),the largest and five largest trusts now account for 34.4% and65.5% (respectively) at the sector, stapled securities are now thedominant structure within the sector (up to 65% from only 13%five years ago), and gearing has increased to over 37% (from11% ten years ago).

UBS Warburg Composite Bond Index (All Mat) Prior to November 1988 returns are based on the Commonwealth Bank Bond Accumulation Index

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S&P/ASX 200 Property Accumulation IndexPrior to April 2000 returns are based on the Property Trusts Accumulation Index

MLC MasterKey Performance Summary to 31 December 2004

MLC MASTERKEY UNIT TRUST *Compound Returns % p.a. Since

1 Year 3 Years 5 Years 7 Years InceptionMLC MasterKey Horizon PortfoliosMLC Horizon 7 - Accelerated Growth Portfolio 19.6% - - - 17.0%MLC Horizon 6 - Share Portfolio 16.5% 2.6% - - 1.7%MLC Horizon 5 - Growth Portfolio 16.1% 3.5% 3.1% 5.7% 8.0%MLC Horizon 4 - Balanced Portfolio 15.3% 4.6% 4.4% 6.2% 9.1%MLC Horizon 3 - Conservative Growth Portfolio 12.3% 4.9% - - 4.4%MLC Horizon 2 - Income Portfolio 11.5% 6.6% 6.9% 6.6% 7.1%

MLC Multi-Manager Style FundsGlobal Share Growth Style Fund 5.6% - - - 5.1%Global Share Value Style Fund 11.7% - - - 11.5%Australian Share Growth Style Fund 24.8% - - - 22.4%Australian Share Value Style Fund 27.7% - - - 25.9%

MLC Multi-Manager Sector FundsGlobal Share Fund 8.5% -8.1% -6.4% 0.5% 6.9%IncomeBuilder TM 24.9% 7.3% 8.3% 9.5% 11.8%Australian Share Fund 25.7% 8.3% 8.0% 8.8% 10.9%Property Securities Fund 30.5% 16.3% 15.8% 12.4% 11.5%

Single Manager Funds (managed by MLC)MLC - Platinum Global Fund 13.4% 8.3% 6.8% 15.8% 14.8%MLC Capital International Global Share Fund 6.8% -9.0% - - -8.7%MLC-Vanguard Australian Share Index Fund 26.2% 8.8% 8.0% 9.2% 10.2%Cash Fund 4.6% 4.1% 4.3% 4.2% 6.7%

Closed FundsMLC-Platinum Global Fund NZ Currency Managed 10 12.8% 8.7% 8.0% 15.1% 15.7%National Balanced Fund 10 16.0% 4.5% - - 3.5%National Capital Stable Fund 10 9.8% 4.5% - - 3.7%Global Bond Fund 10 8.3% 7.7% 7.3% 6.2% 6.7%Australian Bond Fund 12 5.9% 5.1% 6.1% 5.2% 8.8%Inflation Linked Bond Fund 10 9.8% 6.4% 6.2% 6.2% 5.6%

MLC MasterKey Cash Management Trust 4.4% 3.9% 4.2% 4.1% 6.5%

MLC MASTERKEY APPROVED DEPOSIT FUND * 7

MLC MasterKey Horizon PortfoliosGrowth Fund 14.6% 4.6% 4.2% 6.1% 8.5%Balanced Fund 14.5% 4.7% 4.2% 6.0% 8.2%Capital Stable Fund 9.3% 4.1% 3.7% 4.6% 5.6%

MLC Multi-Manager Sector FundsGlobal Share Fund 5.9% -9.3% -7.1% -0.4% 6.0%Australian Share Fund 24.9% 8.4% 8.4% 9.0% 9.4%Property Securities Fund 27.2% 14.7% 14.1% 11.2% 10.0%Australian Bond Fund 5.2% 3.4% 4.1% 3.8% 7.2%

Single Manager Funds (managed by MLC)MLC-Vanguard Australian Share Index Fund 23.7% 8.7% 8.3% 9.3% 8.3%

Other FundsCapital Maintenance Fund 3.8% 3.0% 3.1% 3.0% 5.0%Secure Deposit Fund 3.2% 2.8% 3.0% 2.9% 4.9%

MLC CAPITAL GUARANTEED NET INTERIM RATE 3% p.a. for Superannuation and 2.25% p.a. for Non-Superannuation

half-

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MLC MASTERKEY SUPERANNUATION *MLC MASTERKEY BUSINESS SUPER * 2

GOLD STAR FIVE STARCompound Returns % p.a. Since Compound Returns % p.a. Since

1 Year 3 Years 5 Years 7 Years Inception 1 Year 3 Years 5 Years 7 Years InceptionMLC MasterKey Horizon PortfoliosHorizon 7 - Accelerated Growth Portfolio 18.1% - - - 16.4% 17.5% - - - 13.2%Horizon 6 - Share Portfolio 15.7% 2.5% 3.1% 6.5% 7.4% 15.2% 2.0% 2.6% 6.0% 8.7%Horizon 5 - Growth Portfolio 15.1% 3.4% 3.7% 6.0% 7.2% 14.5% 2.8% 3.2% 5.5% 6.6%Horizon 4 - Balanced Portfolio 14.4% 4.2% 4.5% 6.0% 7.6% 13.9% 3.7% 4.0% 5.5% 7.8%Horizon 3 - Conservative Growth Portfolio 11.6% 4.3% - - 4.3% 11.1% 3.8% - - 3.8%Horizon 2 - Capital Stable Portfolio 8.4% 3.8% 4.1% 4.7% 5.9% 7.8% 3.3% 3.5% 4.1% 5.4%Horizon 1 - Bond Portfolio 4.8% 4.3% 5.0% 4.2% 7.7% 4.3% 3.8% 4.5% 3.6% 6.9%


MLC Multi-Manager Sector FundsGlobal Share Fund 7.3% -6.6% -4.7% 2.2% 5.7% 6.8% -7.0% -5.2% 1.7% 7.0%IncomeBuilder TM 1 23.5% 7.4% 8.2% 8.5% 9.9% 22.9% 6.9% 7.7% 8.0% 9.4%Australian Share Fund 25.2% 8.5% 8.6% 8.9% 8.6% 24.6% 8.0% 8.1% 8.4% 9.9%Property Securities Fund 26.4% 13.8% 13.5% 10.6% 8.8% 25.8% 13.3% 13.0% 10.1% 9.1%

Single Manager Funds (managed by MLC)MLC - Platinum Global Share Fund 1 11.4% 7.2% - - 4.8% 10.8% 6.7% - - 4.3%MLC Capital International Global Share Fund 6.3% -8.1% - - -8.0% 5.8% -8.5% - - -8.5%MLC-Vanguard Australian Share Index Fund 24.5% 8.6% 8.2% 9.4% 8.0% 23.9% 8.0% 7.7% 8.9% 8.7%Cash Fund 1 3.4% 2.9% 3.1% 3.1% 5.7% 2.9% 2.4% 2.6% 2.6% 4.5%

National Funds (managed by MLC)National Balanced Fund 14.9% 4.2% - - 3.2% 14.3% 3.7% - - 2.3%National Capital Stable Fund 10.4% 4.4% - - 3.8% 9.9% 3.9% - - 3.2%

Single Manager Funds (managed outside of MLC)ABN AMRO Global Equity Fund 4.9% - - - 1.4%Dresdner RCM International Equities Fund -0.8% - - - -2.6%Vanguard International Shares Index Fund - (Hedged) 10.4% - - - 11.9%Vanguard International Shares Index Fund - (Unhedged) 4.9% - - - 3.3%EQT Wholesale Small Companies Fund 13.9% - - - 13.5%Investors Mutual Australian Share Fund 17.7% - - - 14.4%IOOF Perennial Value Shares Trust 21.3% - - - 16.4%ABN AMRO Australian Equity Fund 24.4% - - - 19.4%Schroder Wholesale Australian Equity Fund 21.4% - - - 18.1%UBS Australian Share Fund 21.1% - - - 19.7%Perpetual's Wholesale Ethical SRI Fund 22.8% - - - 17.7%Citigroup Property Securities Trust 24.2% - - - 21.3%Vanguard Property Securities Index Fund 24.7% - - - 22.5%Colonial First State Wholesale Income Fund 3.7% - - - 3.5%Vanguard International Fixed Interest Index Fund (Hedged) 4.8% - - - 3.8%Vanguard Australian Fixed Interest Index Fund 4.2% - - - 3.1%

Closed FundsColonial First State Diversified Fund 1,8 11.5% 1.6% - - 1.4% 10.9% 1.1% - - 1.0%Merrill Lynch Mercury Balanced Fund 1,8 13.6% 2.0% 2.2% - 3.9% 13.1% 1.5% 1.7% - 3.4%Sagitta Rothschild Balanced Fund 1,8 17.3% 4.1% 3.8% 5.3% 6.5% 16.7% 3.6% 3.3% 4.8% 6.0%BT Balanced Fund 1,4 11.0% 2.3% 1.2% 3.5% 4.7% 10.5% 1.8% 0.7% 3.0% 4.2%INVESCO Growth Fund 1,5 20.6% 4.6% 4.1% 5.6% 41.6% 20.0% 4.1% 3.6% 5.1% 6.7%INVESCO Protected Growth Fund 1,5 7.2% 3.5% 3.4% 3.3% 4.5% 6.7% 3.0% 2.9% 2.9% 4.0%National Property Fund 28.1% 13.7% - - 13.8%National Capital Secure Fund 5.4% 3.9% - - 3.9%Managed Growth 14.8% 4.6% 4.8% 6.2% 7.7%Guaranteed Growth 3.7% 3.4% 3.5% 3.4% 5.8%Accent Managed 1 14.4% 4.1% 4.4% 6.2% 7.2%Entrepreneur Managed 1 14.6% 4.2% 4.5% 6.3% 7.3%Retirement Savings Account 1,9 3.4% 2.9% 3.1% - 3.2%Accent Capital Guaranteed For details of the current interim rate, please contact the MasterKey Service Centre on 133 991Entrepreneur Capital Guaranteed For details of the current interim rate, please contact the MasterKey Service Centre on 133 991

THE EMPLOYEE RETIREMENT PLANFor details of the current interim rate, please contact the MasterKey Service Centre on 133 991

22 MLC KEYNOTE ISSUE 12 200522 MLC KEYNOTE ISSUE 12 2005

MLC MASTERKEY ALLOCATED PENSION *MLC MASTERKEY TERM ALLOCATED PENSION * 11


1 Year 3 Years 5 Years 7 Years Inception 1 Year 3 Years 5 Years 7 Years InceptionMLC MasterKey Horizon PortfoliosHorizon 7 - Accelerated Growth Portfolio 19.8% - - - 13.8% 19.0% - - - 15.0%Horizon 6 - Share Portfolio 17.4% 2.8% 3.0% - 5.7% 16.6% 2.1% 2.3% - 5.0%Horizon 5 - Growth Portfolio 16.7% 3.8% 3.8% - 5.7% 16.0% 3.1% 3.2% - 5.0%Horizon 4 - Balanced Portfolio 16.0% 4.9% 4.8% 6.6% 6.2% 15.3% 4.3% 4.1% 5.9% 7.6%Horizon 3 - Conservative Growth Portfolio 12.8% 5.1% - - 4.7% 12.1% 4.4% - - 4.0%Horizon 2 - Capital Stable Portfolio 9.4% 4.5% 4.7% 5.4% 5.3% 8.7% 3.8% 4.0% 4.7% 5.9%Horizon 1 - Bond Portfolio 5.6% 5.1% 6.0% 5.2% 5.3% 4.9% 4.4% 5.3% 4.5% 5.2%


MLC Multi-Manager Sector FundsGlobal Share Fund 8.6% -7.9% -6.3% 0.5% 0.2% 7.9% -8.5% -6.9% -0.2% 4.2%IncomeBuilder TM 1 26.3% 8.6% 9.3% 10.1% 9.3% 25.5% 7.8% 8.6% 9.4% 10.4%Australian Share Fund 27.6% 9.9% 9.6% 10.1% 8.7% 26.7% 9.1% 8.8% 9.4% 10.9%Property Securities Fund 30.4% 15.9% 15.5% 12.2% 12.0% 29.5% 15.2% 14.7% 11.5% 10.7%

Single Manager Funds (managed by MLC)MLC-Platinum Global Share Fund 1 13.1% 8.2% - - 5.4% 12.4% 7.5% - - 4.7%MLC Capital International Global Share Fund 1 6.8% -8.9% - - -9.1% 6.1% -9.6% - - -9.7%MLC-Vanguard Australian Share Index Fund 1 27.3% 9.7% 8.5% - 10.3% 26.5% 8.9% 7.8% - 9.6%Cash Fund 4.0% 3.6% 3.8% 3.8% 3.8% 3.3% 2.9% 3.2% 3.1% 3.6%

National Funds (managed by MLC)National Balanced Fund 17.4% 5.4% - - 4.1% 16.6% 4.7% - - 3.3%National Capital Stable Fund 10.6% 5.2% - - 4.3% 9.8% 4.5% - - 3.6%

Single Manager Funds (managed outside of MLC)ABN AMRO Global Equity Fund 6.8% - - - 1.9%Dresdner RCM International Equities Fund 0.9% - - - 1.4%Vanguard International Shares Index Fund - (Hedged) 14.1% - - - 16.5%Vanguard International Shares Index Fund - (Unhedged) 5.1% - - - 1.5%EQT Wholesale Small Companies Fund GS 16.8% - - - 16.8%Investors Mutual Australian Share Fund GS 20.5% - - - 17.5%IOOF Perennial Value Shares Trust GS 25.3% - - - 21.1%ABN AMRO Australian Equity Fund GS 29.0% - - - 26.0%Schroder Wholesale Australian Equity Fund GS 24.3% - - - 24.3%UBS Australian Share Fund GS 24.6% - - - 23.4%Perpetual's Wholesale Ethical SRI Fund 26.2% - - - 23.2%Citigroup Property Securities Trust 28.9% - - - 27.1%Vanguard Property Securities Index Fund 30.0% - - - 28.0%Colonial First State Wholesale Income Fund 4.5% - - - 4.4%Vanguard International Fixed Interest Index Fund (Hedged) 5.9% - - - 4.3%Vanguard Australian Fixed Interest Index Fund 5.0% - - - 3.4%

Closed FundsColonial First State Diversified Fund 1,8 14.0% 2.1% - - 2.1% 13.2% 1.4% - - 1.4%Merrill Lynch Mercury Balanced Fund 1,8 16.6% 2.5% 2.4% - 4.0% 15.9% 1.8% 1.7% - 3.3%Sagitta Rothschild Balanced Fund 1,8 18.3% 3.7% 3.7% - 5.0% 17.5% 3.1% 3.0% - 4.3%BT Balanced Fund 1,4 14.3% 4.1% 2.0% 4.4% 3.8% 13.6% 3.4% 1.4% 3.7% 5.3%INVESCO Growth Fund 1,5 21.1% 4.9% 4.5% 6.5% 5.9% 20.3% 4.2% 3.8% 5.8% 6.6%INVESCO Protected Growth Fund 1,5 7.6% 3.6% 3.4% 4.0% 3.5% 6.9% 2.9% 2.7% 3.3% 4.1%

* Returns are calculated on an annualised, compound basis using end of monthredemption prices and are net of management fees, charges, expenses and do notallow for initial/exit fees, fees charged based on an investor’s individual circumstances(such as adviser service fees or minimum balance fees) or policy charges. Returns forthe MLC MasterKey Unit Trust assume all distributions are reinvested and are prior totax considerations. Returns for Superannuation and Investment Bond products are netof any tax payable by MLC Limited. The returns outlined above representhistorical performance only and are not indicative of future performance. The value of an investment may rise or fall with changes in the market.Returns are calculated in accordance with IFSA Standard No. 6. Please refer to thelatest applicable PDS or annual report for a list of funds available.“-” Indicates that the fund was not in existence at this time and full year returns arenot available for that period.Notes:1. The investment performance history based on previously published unit prices did

not accurately reflect the true position of the funds. For the period of 1 October2000 to 8 November 2001, (and 2 January 2002 to 6 August 2002 for the CashFund) errors were identified and investment performance returns have beenreconstructed for the period.

2. Performance of MLC MasterKey Business Super and MLC PersonalSuperannuation are the same as MLC MasterKey Superannuation Gold Staroption.

3. These funds were closed to new investors from 30 April 1998.4. This fund was closed to new investors from 1 December 2002.5. This fund was closed to new investors from 1 October 2001.6. These funds were closed to new investors from 30 June 2001.

7. These funds were closed to new investors from 30 June 1998.8. These funds were closed to new investors from 31 December 2003.9. MLC MasterKey Retirement Savings Account (RSA) only applies in the Gold Star

option. MLC MasterKey Retirement Savings Account (RSA) is closed to newinvestments.

10. These funds will be terminated on 27 February 2005.11. Performance of MLC MasterKey Term Allocated Pension is the same as the MLC

MasterKey Allocated Pension Gold Star option.12. This fund was closed to new investors from 28 November 2004.

This information has been prepared by MLC Limited (ABN 90 000 000 402) amember of the National Australia Bank Limited group of companies, 105-153Miller Street, North Sydney, NSW 2060. While the information is believed to beaccurate, it may be subject to change.

None of MLC Limited, the National Australia Bank Limited (ABN 12 004 044 937)or any member company of the National Australia Bank Limited group ofcompanies, warrant or represent that the above information is free from errorsor omissions or that the information is suitable for any particular person'sintended use. No responsibility is taken for any inaccuracy or for investmentdecisions or any other actions taken by any person on the basis of the materialincluded. Other important information, as well as the risks associated with theabove products, is discussed in the relevant PDS. Refer to the “ImportantInformation” section for further details on how to obtain the relevant PDS.The trustee or issuer has elected to close some of the above funds to new investorsand plans to new business and will only accept additional contributions and switchinstructions in respect of those fund or plans. For further information, please call theCustomer Service Centre on 13 39 91.


MLC MASTERKEY INVESTMENT BOND * 6


1 Year 3 Years 5 Years 7 Years Inception 1 Year 3 Years 5 Years 7 Years InceptionMLC MasterKey Horizon PortfoliosShare Portfolio 12.2% 1.6% 2.4% 4.9% 6.3% 11.7% 1.1% 1.9% 4.4% 6.2%Balanced Portfolio 12.2% 3.6% 3.4% 4.5% 5.8% 11.7% 3.1% 2.9% 4.0% 5.6%Capital Stable Portfolio 7.2% 3.2% 3.2% 3.7% 4.2% 6.7% 2.7% 2.7% 3.2% 3.7%Bond Portfolio 4.1% 3.4% 3.8% 3.0% 5.3% 3.6% 2.9% 3.3% 2.5% 4.6%

MLC Multi-Manager Sector FundsGlobal Share Fund 5.0% -5.5% -4.3% 0.1% 3.2% 4.5% -6.0% -4.8% -0.4% 3.6%Australian Share Fund 20.3% 6.9% 7.1% 7.3% 7.7% 19.8% 6.4% 6.6% 6.8% 7.5%Property Securities Fund 25.4% 12.8% 11.9% 9.1% 7.5% 24.8% 12.3% 11.4% 8.6% 7.8%

Single Manager Funds (managed by MLC)MLC-Vanguard Australian Share Index Fund 21.5% 7.0% 6.3% 7.8% 7.1% 20.9% 6.4% 5.8% 7.3% 6.8%Cash Fund 2.4% 2.0% 2.1% 1.9% 3.7% 1.9% 1.5% 1.6% 1.4% 2.8%

Closed FundsAccent Managed 12.2% 3.6% 3.4% 5.2% 5.9%Entrepreneur Managed 12.4% 3.7% 3.5% 5.4% 6.0%Accent Capital Guaranteed For details of the current interim rate, please contact the MasterKey Service Centre on 133 991Entrepreneur Capital Guaranteed For details of the current interim rate, please contact the MasterKey Service Centre on 133 991Breakthrough (Savings & Passbook) 12.6% 3.9% 3.8% 5.1% 6.1%

RAINBOW PROTECTION AND SAVINGS * 3

Closed FundsRed 12.3% 1.9% 1.7% 4.9% 6.1%Orange 12.1% 2.4% 2.4% 5.0% 6.2%Yellow 11.9% 3.3% 3.2% 5.1% 5.8%Green 10.4% 3.1% 3.2% 4.6% 5.3%Blue 6.9% 2.9% 2.9% 3.3% 3.7%Indigo 5.9% 2.7% 2.7% 3.4% 3.6%Violet 2.1% 1.7% 1.8% 2.2% 2.1%

For the latest fund performance figures visit mlc.com.au


How to contact us

MLC MasterKey Service CentreFor more information call the MLC MasterKey

Service Centre from anywhere in Australia on 133 991,

or contact your financial adviser.

WebsiteFor details on MLC’s range of products

and services visit our website at mlc.com.au

Postal AddressMLC LimitedPO Box 200

North Sydney NSW 2059

5291

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52910 keynote 0105 - superannuation - super accounts ... · of fund choice – effective from 1...

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