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FIXED DISTRIBUTION CLASSES |
VARIABLE DISTRIBUTION CLASSES |
| Investment menu |
Class H: S&P/ASX 200
Class I: MQ Asia Long Short Fund
Class J: Asian Equity
Class K: Global Infrastructure
Class L: MQ Asia Long Short Fund 3.5 year |
Class M: S&P/ASX 200
Class N: MQ Asia Long Short Fund
Class O: Asian Equity
Class P: Global Infrastructure |
| Term5 |
Classes H – K: 5.5 years
Class L: 3.5 years |
3 years |
| Walk away |
Available quarterly |
Available quarterly |
| Annual distributions |
Classes H, I, J, and K: Fixed annual distribution of 4% of the investment amount (payable in arrears). 6
Class L: Fixed annual distribution of 6.5% of the investment amount for years 1 and 2 and 3.25% for year 3 (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 performance cap. This distribution (if any) is payable at the end of years one, two and three. 7 |
| At maturity |
Classes H, I, J and K: Fixed distribution of 2% plus any gain on the performance of the underlying reference asset above a set hurdle and within a set performance cap.
Class L: Any gain of the underlying reference asset above a set hurdle.
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). |
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:
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To gain medium term exposure to Australian, Asian or global infrastructure market positions. |
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For the cash flow advantages of a fixed annual distribution (for Classes H – L) and a potential annual distribution throughout the term (for Class M – P). |
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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 |
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To invest using their SMSF. |
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 29 June 2011 are shown in the table below (these rates will not increase throughout the term).
| Loan Type |
Indicative Interest Rate9 |
| Limited Recourse
Investment Loan |
9.10% pa |
| Full Recourse
Investment Loan |
8.85% pa |
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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. |
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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 June 2010 to 29 June 2011. An interest loan is not available to SMSF investors. |
Investment
returns
Class H – Worked example
An investor invests in class H of the Macquarie Flexi 100 Trust with the S&P / ASX 200 as their reference asset and holds their Macquarie Flexi 100 investment to maturity (5.5 years).
Assumptions
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Investor
borrows $100,000 to invest |
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Fixed hurdle
of 122%. Fixed cap of 100% (indicative only)10 |
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S&P/ASX 200
start level of 4,850 |
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S&P/ASX 200
level at maturity of 9,750 |
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S&P/ASX 200
hurdle level of 5,917 (4,850 x 122%) |
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S&P/ASX 200
level capped at 9,700 (4,850 + 4,850 x 100%) |
Potential Returns
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Total distribution payments received over the term |
$22,000 |
$100,000 x (4% x 5 + 2%) |
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Gain on underlying reference index (S&P/ASX 200) |
$78,000 |
Gain on S&P/ASX 200 (9,700 – 5,917)/4,850
Multiplied by
investment amount of $100,000 |
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Total received over the term of the investment11 |
$90,000 |
Distributions paid plus gain at maturity |
Class O – Worked example
An investor invests in class O of the Macquarie Flexi 100 Trust with the Asian Equity basket as the reference asset. The investor holds their Macquarie Flexi 100 investment to maturity (3 years).
Assumptions
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Investor borrows $100,000 to invest |
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Fixed cap of 17% p.a. (indicative only)10 |
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AUD:USD exchange rate at start is 0.85 |
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Year 1 |
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Asian Equity basket start level of 100 |
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Asian Equity basket end level of 120 |
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AUD:USD exchange rate at end Year 1 is 0.90 |
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Year 2 |
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Asian Equity basket start level of 120 |
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Asian Equity basket end level of 135 |
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AUD:USD exchange rate at end Year 2 is 0.85 |
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Year 3 |
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Asian Equity basket start level of 135 |
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Asian Equity basket end level of 130 |
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AUD:USD exchange rate at end Year 3 is 0.80 |
Potential returns
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Year 1 distribution |
$16,056 |
$100,000 x (117 – 100)/100 x 0.85/0.90 |
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Year 2 distribution |
$13,235 |
$100,000 x (135 – 120)/120 x 0.90/0.85 |
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Year 3 distribution |
$0 |
Basket has fallen over the period, therefore no distribution. |
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Total received over the term of the investment11 |
$29,291 |
Distributions paid |
Risks
Some key risks of an investment in Macquarie Flexi 100 include:
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Reference asset risk: the risk that the reference asset relevant to each unit class does not perform well, including as a result of recent increased equity market uncertainty and the global economic downturn. Recent high levels of volatility in equity markets increase this risk. |
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Borrowing to invest: there is a material risk that the total value of your returns at maturity (if any) and distributions paid throughout the term will be less than your total interest payments and other costs. If this occurs you will have lost money on your investment at maturity. |
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Counterparty risk: the value of your investment depends on the ability of the relevant counterparties (including the hedge counterparty, swap counterparty and the collateral counterparty, amongst others) to perform their obligations. |
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Early termination risk: Exposure to the reference asset may be terminated early by the swap counterparty in a number of circumstances, including as a result of a material change in hedging costs or in its ability to hedge its exposure (especially in relation to variable distribution classes). |
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Foreign exchange risk: USD:AUD foreign exchange rate movements will affect the value of USD classes throughout the term and at maturity. |
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Interest deductibility: the ATO may adopt a position leading to the denial of part or all of your tax deductions for some or all of your interest expenses in relation to your investment. |
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1 |
Capital protection is not guaranteed and is subject to the ability of the collateral counterparty, Macquarie Bank Limited, to meet its obligations under the
collateral agreement. |
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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. |
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Trustees of superannuation funds who propose to invest in Macquarie Flexi 100 should be aware of their obligations to formulate and implement an
appropriate investment strategy that has regard to the whole of the circumstances of their fund and to act in the best interests of the members of the fund. |
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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. |
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Subject to early termination. |
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Investors will not receive this distribution if they ‘walk-away’ during or at the end of each year. |
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Investors will not receive this distribution if they ’walk-away’ during each year. |
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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). |
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The actual interest rates will be determined by the loan provider on or around 25 June 2010 and published at www.macquarie.com.au/flexi. |
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The actual performance caps will be determined as at the Swap Start Date and published at www.macquarie.com.au/flexi and could be lower than the indicative performance cap depending on market conditions at the time, in particular the level and volatility of the reference index. |
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11 |
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), the responsible entity of, and issuer of units in, the Macquarie Flexi 100 Trust and is current as at 1 April 2010. This information only applies to Class H, I, J, K, L, M, N, O and P units in the Macquarie Flexi 100 Trust. An invitation to apply for the Macquarie Flexi 100 Trust is made in a Product Disclosure Statement dated 18 March 2010 (PDS). The PDS is available above.
In deciding whether to acquire, or continue to hold, an interest in the Macquarie Flexi 100 Trust, investors should obtain the PDS and consider its contents. MFPML 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 (unless otherwise determined by MFPML to be another Macquarie Group company, in which case it will be that Macquarie Group company) 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. |
