MLC Investor Funds Compensation - 16 August 2002

MLC today announced that investors will be compensated for the reductions in unit prices which occurred on 30 October 2001 in National Australia Financial Management Superannuation, Pension, and Investment Bond products which it manages.

Over 270,000 investors in funds with $4.5 billion under management will collectively receive compensation in the order of $60 million, an average of 1.3 per cent of total funds, to make good the impact of the changes in the unit prices. The unit pricing methodology will be maintained to ensure equity between all unit holders.
In May and June 2001 some National products were closed to new business to enable clients to enjoy the benefits of the more contemporary MLC product suite and investment philosophy.

Following closure of these products, there was a net outflow of assets. This led to the need for a unit price adjustment to take account of transaction costs. The 30 October 2001 adjustment was required by, and in accordance with, the policy documents.

The October adjustment to unit prices created no financial benefit to MLC or the National Group.

Based on information now available, investors remaining in the fund at the time the unit price adjustment was made may have been adversely affected by the fact that, prior to 30 October 2001, a decision to adjust unit prices for transaction costs had not been made.

In response to concerns from investors and advisers, MLC has reviewed the impact of the decision to close these products, the unit price adjustment and the communication processes. It has been decided to make good the October 2001 adjustment to ensure that no one in the relevant member group has been adversely affected.

MLC has also responded to requests from ASIC on this issue.

MLC Chief Executive Officer Mr Peter Scott said: " This unit price adjustment issue is very complex. While satisfied that the October adjustment needed to be made, our communication processes have fallen short of our usual standards. For this we apologise. This action ensures that our investors are not disadvantaged by our decisions or the manner in which we implemented or communicated them."

"MLC has taken this decision to maintain the trust of investors and advisers," Mr Scott said.

Advisers have been informed and MLC will contact investors and corporate clients to fully brief them.

ASIC and APRA have been notified of the decision to compensate investors and of the action taken to date. MLC will continue to consult with these organisations on planned future actions. MLC's auditor, KPMG, is overseeing this process.