Making an application is quick and easy
Investors simply need to fill in one form to apply for their investment and loan without the need to provide additional financial information (unless they are also applying for an optional interest loan). Before investing in Macquarie Flexi 100 it is important that investors read and understand the terms and investment risks set out in the PDS.
Borrowing to invest
In order to apply for units, investors must also apply for a 100% investment loan from Macquarie. There is a choice of a limited recourse or full recourse loan available.
Investors are required to pay interest on their investment loan annually-in-advance throughout the term of the investment. The indicative loan interest rates for the year ending 30 November 2010 are shown in the table below (these rates will not increase throughout the term).
| Loan Type |
Indicative Interest Rate4 |
Limited Recourse
Investment Loan |
9.10% pa |
Full Recourse
Investment Loan |
8.85% pa |
|
• |
SMSFs
The limited recourse loan will comply with
the SIS legislative requirements for SMSF
borrowing meaning Macquarie Flexi 100 can be
used by SMSF investors. With the potential
for income payments each year this may be an
attractive investment option. |
|
• |
Optional interest loan
To help manage cashflow, investors can
apply for an optional interest loan to fund
their interest pre-payment. The indicative
rate for the interest loan is 10.95% pa for
the period 30 November 2009 to 30 November
2010. An interest loan is not available to
SMSF investors. |
| |
CLASS E |
CLASS F & G |
| Investment menu |
S&P/ASX 200 |
Class F: S&P/ASX 200
Class G: MQ Asia Long Short Fund (USD) |
| Term |
5.5 years |
3 years5 |
| Walk away |
Available quarterly |
Available quarterly |
| Annual distributions |
Fixed annual distribution of 4% of the investment amount
(payable in arrears).6 |
Investors may be entitled to an annual distribution
based on the positive performance (if any) of the underlying reference
asset during that year, up to a set performance cap. This distribution
(if any) is payable at the end of years one, two and three.7 |
| At maturity |
Fixed distribution of 2% plus any gain on the
performance of the underlying reference index within a set hurdle and a
set performance cap.
Note the set hurdle is equivalent to the total annual fixed distribution
payments paid throughout the term. |
Investors will receive any distribution payable at the
end of year three (as above). |
Flexibility to ‘walk-away’
While Macquarie Flexi 100 is designed to be held to maturity, investors choosing the limited recourse investment loan may be able to redeem quarterly from the investment without incurring any investment loan break costs or being exposed to any shortfall between the value of their investment and their investment loan balance.
Please note that investors choosing the full recourse investment loan option may be required to contribute their own money in the event that Macquarie Bank Limited, which is a counterparty to a collateral agreement, fails to meet its obligations. An investor would be required to meet any shortfall between the value of their units and the amount outstanding on their loan from their own funds.
Who may be interested in this investment?
The investment may be suitable to investors for a number of reasons, including if the investor is looking:
|
• |
To gain medium term exposure to the Australian market or Asian equity positions. |
|
• |
For the cash flow advantages of a fixed annual distribution (for Class E) and a potential annual distribution throughout the term (for Class F and G). |
|
• |
To invest with the flexibility of being able to ‘walk away’ quarterly from the investment and investment loan without incurring additional costs if the limited recourse loan is selected.8 |
|
• |
To invest using their SMSF. |
Investment
returns
Class E – Worked example
An investor invests in class E of the Macquarie Flexi 100 Trust and holds
their Macquarie Flexi 100 investment to maturity (5.5 years).
Assumptions
|
• |
Investor
borrows $100,000 to invest |
|
• |
Fixed hurdle
of 122%. Fixed cap of 90% (indicative only)9 |
|
• |
S&P/ASX 200
start level of 4,300 |
|
• |
S&P/ASX 200
level at maturity of 8,265 |
|
• |
S&P/ASX 200
hurdle level of 5,246 (4,300 x 122%) |
|
• |
S&P/ASX 200
level capped at 8,170 (4,300 + 4,300 x 90%) |
Potential Returns
|
Total distribution payments received over the term |
$22,000 |
$100,000 x (4% x 5 + 2%) |
|
Gain on underlying reference index (S&P/ASX 200) |
$68,000 |
Gain on S&P/ASX 200 (8,170 – 5,246)/4,300 Multiplied by
investment amount of $100,000 |
|
Total received over the term of the investment10 |
$90,000 |
Distributions paid plus gain at maturity |
Class F – Worked example
An investor invests in class F of the Macquarie Flexi 100 Trust with the S&P/ASX
200 as the Reference Asset. The investor holds their Macquarie Flexi 100
investment to maturity (3 years).
Assumptions
|
• |
Investor borrows $100,000 to invest |
|
• |
Fixed cap of 17% p.a. (indicative only)9 |
|
• |
Year 1 |
| |
>> |
S&P/ASX 200 start level of 4,300 |
| |
>> |
S&P/ASX 200 end level of 5,100 |
|
• |
Year 2 |
| |
>> |
S&P/ASX 200 start level of 5,100 |
| |
>> |
S&P/ASX 200 end level of 4,800 |
|
• |
Year 3 |
| |
>> |
S&P/ASX 200 start level of 4,800 |
| |
>> |
S&P/ASX 200 end level of 5,500 |
Potential returns
|
Year 1 distribution |
$17,000 |
$100,000 x (5,031 – 4,300)/4,300 |
|
Year 2 distribution |
$0 |
Index has fallen over the period, therefore no
distribution. |
|
Year 3 distribution |
$14,583 |
$100,000 x (5,500 – 4,800)/4,800 |
|
Total received over the term of the investment10 |
$31,583 |
Distributions paid |
Risks
Some key risks of an investment in Macquarie Flexi 100 include:
|
• |
Underlying investment risk – the risk that the requested underlying Reference Asset does not perform well, including as a
result of recent increased equity market volatility and the global economic downturn; |
|
• |
Creditworthiness of the counterparties – the risk that the relevant counterparty is not able to meet its obligations; |
|
• |
Borrowing to invest – in order for investors to break even at maturity the value of their investment (including any
distributions received throughout the term) will need to increase by more than the amount of their interest payments and
other costs; |
|
• |
Early termination risk – the risk that the investment is terminated early; this may occur in a number of circumstances, for
example, as a result of increased hedging costs, especially for Class F and Class G; and |
|
• |
Currency risk – the risk that movements in the USD:AUD
foreign exchange rate will adversely affect
the value of an investor’s units throughout
the term (Class G units only).„ |
|
1 |
Note that
prepaid interest on an investment loan will not be refunded.
Investors will be required to pay any amount owing on their interest
loan (if applicable). If investors choose to borrow using
the full
recourse investment loan option, they may be required to contribute
their own money to repay the investment loan in the event that
Macquarie Bank Limited, which is a counterparty to a collateral
agreement, fails to meet its obligations. An investor would be
required to meet any shortfall between the value of their units and
the amount outstanding on their loan.
|
|
2 |
Class F and
Class G investors only. |
|
3 |
Interest
payments under the investor’s loans will be set off against any
distributions an investor is entitled to receive from their
investment. If the interest payments exceed the distributions of an
investor,
no cash payment will actually be received by the investor.
|
|
4 |
The actual
interest rates will be determined by the loan provider on or around
18 November 2009 and published at
www.macquarie.com.au/flexi. |
|
5 |
Subject to early termination. |
|
6 |
Investors will not receive this
distribution if they ‘walk-away’ during or at the end of each year. |
|
7 |
Investors will not receive this
distribution if they ’walk-away’ during each year. |
|
8 |
Note that prepaid interest on an
investment loan will not be refunded. Investors will be required to
pay any amount owing on their interest loan (if applicable).
Investment returns |
|
9 |
The actual performance caps will be determined as
at 18 November 2009 and published at
www.macquarie.com.au/flexi and could be lower than the
indicative performance caps depending on market conditions at the
time, in particular the level and volatility of the reference
assets. |
|
10 |
Not including costs
of gearing. |
Important Information
This information has been prepared by Macquarie Financial Products
Management Limited ABN 38 095 135 644, AFSL 237847 (MFPML) and is current as at
29 September 2009. This is not an offer. The offer will be made by MFPML in the
Macquarie Flexi 100 Trust Product Disclosure Statement dated around 2 October
2009 (PDS).
In deciding whether to acquire, or continue to hold, an interest in the
Macquarie Flexi 100 Trust, investors should obtain the PDS above and consider
its contents. We recommend investors obtain financial, legal and taxation advice
before making any financial investment decision.
The loans are offered by Macquarie Bank Limited ABN 46 008 583 542 and are
subject to approval.
Investments in the Macquarie Flexi 100 Trust are not deposits with, or other
liabilities of, Macquarie Bank Limited ABN 46 008 583 542, MFPML or of any
Macquarie Group company, and are subject to investment risk, including possible
delays in repayment and loss of income or capital invested. None of Macquarie
Bank Limited, MFPML or other member companies of the Macquarie Group of
companies guarantees any particular rate of return, the performance of, or the
repayment of capital from the Macquarie Flexi 100 Trust. |
