Merlon Australian Share Income Fund


The Merlon Australian Share Income Fund provides investors with the opportunity to access a diversified portfolio of Australian securities listed or about to list on the Australian Securities Exchange (ASX). The Fund is designed for investors seeking a fund with a particular emphasis on income (some of which may be tax effective) while retaining the potential for capital growth.

Interests in the Merlon Australian Share Income Fund and the Merlon Wholesale Australian Share Income Fund are offered by Fidante Partners Limited ABN 94 002 835 592 AFSL 234668 (Fidante Partners). Fidante Partners has appointed Merlon Capital Partners Pty Ltd as the investment manager of the Fund.

Fund objective

To provide a higher level of tax-effective income with a lower level of risk than the S&P/ASX 200 Accumulation Index, whilst also providing the potential for capital growth and inflation protection over the medium to long term.

Investment approach

Merlon's investment approach is to build a portfolio of undervalued high dividend yielding companies and to then reduce some risk through the use of derivatives. Merlon aims for the Fund to be fully invested in large and mid-cap companies listed on the ASX, which are selected based on Merlon's investment philosophy.

There are two elements to Merlon's investment philosophy:
Value: Merlon believes that stocks trading below fair value will outperform through time. Merlon measures value by sustainable free cash flow yield. Merlon views franking credits similarly to cash and takes a medium to long term view.

Risk management: Merlon believes that the impact of risk associated with investing can be reduced through derivative based hedging strategies. By entering into a derivative contract whose value moves in the opposite direction to the underlying asset, the risk of a reduction in the value of the underlying asset can be cancelled out in part or in full. Derivative based hedging strategies may also have the potential to provide additional returns and may deliver beneficial tax outcomes.

Update of information

Introduction of the future of financial advice reforms -1 July 2013

In April 2010, the Government announced the Future of Financial Advice (FOFA) reforms aimed at improving the quality and access to financial advice for Australian investors. The reforms are mandatory from 1 July 2013. Generally, the FOFA reforms introduce a duty for financial advisers to act in the best interests of their clients and prohibit the payment of conflicted remuneration to advisers and platforms.

We have reviewed our procedures to ensure we comply with the new FOFA requirements and this update is made to ensure you have the correct information about the fees and benefits we pay to platforms and advisers.

Please read the following update together with the relevant fund's Product Disclosure Statement (PDS) and Additional Information booklet (AIB) and relates to the 'Additional explanation of fees and costs' section in the AIB.

Introduction of the Future of Financial Advice Reforms (FOFA)