Product Disclosure Statement

Transcription

1 Product Disclosure Statement Australia - June 2015 Associated Foreign Exchange Australia Pty Ltd. ABN: ACN: AFSL Number: Global Payment and Risk Management Solutions

2 Table of Contents Purpose... 3 Changes to this PDS... 3 About Us... 3 Your Contract with AFEX... 4 What Financial Products Do We Offer?... 4 Spot Value Contracts... 4 Exotic Currency Spot Value Contracts. Value Today Contracts.. 5 Value Tomorrow Contracts, Window Forward Contracts... 5 Outright Forward Contracts... 6 Exotic Currency Forward Contracts... 6 Vanilla Option... 6 Forward Extra... 9 Participating Forward Collar Option Knock-out Forward Knock-out Forward Extra Knock-out Ratio Forward Knock-out Ratio Forward Extra Ratio Forward Ratio Forward Extra Terms and Conditions Foreign Exchange Option Partial or Full Pre-Delivery Cancellation Client Money Significant Benefits of Our Products Significant Risks of Our Products How to Open an Account with AFEX When Payment is Made Cost of Foreign Exchange Transactions Other Ways We Are Remunerated Confirmation of Foreign Exchange Transactions Taxation Disputes Privacy Statement Glossary Associated Foreign Exchange Australia Pty Ltd Page 2 of 44

3 Purpose The purpose of this Product Disclosure Statement (PDS) is to provide you with sufficient information to enable you to make an informed decision about whether to purchase a financial product from Associated Foreign Exchange Australia Pty Ltd (trading as Associated Foreign Exchange) ( AFEX, we, us, our ). This PDS sets out the significant features of our financial products, including their risks, benefits, costs and other related information. This PDS will: help you make meaningful comparisons with similar products; help you decide if the product meet your needs; and explain the rights, terms, conditions, and obligations as it relates to each product. The PDS is an important document and we recommend that you read it carefully before purchasing the financial product, and then keep it in a safe place. We also have a Financial Services Guide that gives you more information about us and the products and services we can offer you. Please contact us using the details on the cover page of this PDS to get a free copy of this document. If you have any questions or need more information, please contact us using the details on the cover page of this PDS. Warning: Trading in foreign exchange and foreign exchange derivative products involves the potential for gain as well as the risk of loss. In some cases, that loss may exceed the amount of money you commit to a transaction. Movements in the price of foreign exchange rates are influenced by a variety of factors many of which are unpredictable. AFEX is unable to guarantee a maximum loss that you may suffer from trading. You must not use any products described in this PDS unless you have a comprehensive understanding how they work, including the risks and the costs involved. Changes to this PDS Information in this PDS that is not materially adverse to users of our products is subject to change and may be updated via our company website (see our contact details on the cover page of this PDS). You can access that information by visiting the website, or otherwise contacting us and asking for an electronic or paper copy, which will be provided free of charge. You can also access the website which may contain, from time to time, other information about our products. We may make other information about our products available to you, and that information may also be accessed for free from our website or by contacting us by phone or . About Us Associated Foreign Exchange Australia Pty Ltd is a wholly owned subsidiary of Associated Foreign Exchange Holdings, Inc. headquartered in the United States of America. The business was established in 1979 to provide a better level of service to firms and individuals with a need for foreign exchange services. Besides Australia and the United States, the group has presence in the United Kingdom, Switzerland, Italy and Canada. We have established trading relationships in over 40 countries and cultivated a diverse client base representing every industry. AFEX is the issuer of all of the products described in this PDS. This PDS is available to the general public, and you can get copies of this PDS by contacting us using the details on the cover page of this PDS. You should consider this PDS before making a decision to acquire or continue to hold any of the products described in it. If you become a client, you will be assigned an Account Executive. That person will be your primary contact point, and will help you use our services. Associated Foreign Exchange Australia Pty Ltd Page 3 of 44

4 Your Contract with AFEX When you acquire a product from us you are entering into a contract with AFEX in relation to the product. That contract is made up of: the relevant application form; the description of the products in this PDS; the terms and conditions provided to you (this is usually part of the account application form, but may include extra documents); and any additional documents or correspondence relating to one or more contracts with us. The application forms, our standard terms and conditions and any additional documents or correspon-dence relating to one or more contracts with us are separate documents to this PDS. The relevant ap-plication form for you will depend on whether you are using our services in your own capacity (a personal account application form) or on behalf of a business (a business account application form). The terms and conditions and description of fees and products within those documents forms part of this PDS. A copy of those forms is available upon your request, at no charge, by contacting us using the details on the cover page of this PDS. To the extent of any inconsistency, the terms of this PDS prevail over any other terms and conditions. None of our products have a cooling off period. What Financial Products do we offer? AFEX offers the following products that help you transfer currency, exchange currency, and manage currency risks: Foreign Exchange Products: Spot Value Contracts (page 4) Exotic Currency Spot Value Contracts (page 5) Foreign Exchange Derivative Products: Value Today Contracts (page 5) Value Tomorrow Contracts (page 5) Window Forward Contracts (page 5) Outright Forward Contracts (page 6) Exotic Currency Forward Contracts (page 6) Foreign Exchange Option Contracts: Vanilla (page 6) Forward Extra (page 9) Participating Forward (page 12) Collar Option (page 15) Knock-Out Forward (page 18) Knock-Out Forward Extra (page 20) Knock-Out Ratio Forward (page 23) Knock-Out Ratio Forward Extra (page 26) Ratio Forward (page 29) Ratio Forward Extra (page 32) Each of the above products is explained in this PDS. You should refer to the glossary at the end of this PDS for an explanation of specific terms. The examples in this PDS are for illustrative purposes only, and do not reflect actual market conditions. Spot Value Contracts Spot Value Contracts exchange one currency for another at a specified and agreed Foreign Exchange Rate (the Spot Exchange Rate) two Business Days after the Trade Date (Spot Value Date). Spot Value Contract Example You are an Australian based importer and need to pay for goods valued USD 100,000 in two days and will pay for these USDs using AUDs. AFEX quotes you a spot exchange rate (the contract rate) of Acceptance of this quote will create the Spot Value Contract between you and AFEX. The AUD equivalent is USD 100,000 AUDUSD = AUD 117, Before 3pm AEST/AEDT of the Spot Value Date, you will send AFEX the AUD to settle your contract so that AFEX can deliver the USD on the Spot Value Date. By entering into a Spot Value Contract you have removed the uncertainty of exchange rate movements over the next two Business Days. In exchange for this exchange rate certainty you have lost the opportunity to take advantage of any favourable exchange rate movements between the Trade Date and the Spot Value Date. Associated Foreign Exchange Australia Pty Ltd Page 4 of 44

5 Exotic Currency Spot Value Contracts If you intend to purchase an Exotic Currency, (and you will be informed at the time of booking by your Account Executive whether the currency you are buying is an Exotic Currency) you are only allowed to book for delivery on the Spot Value Date and need to make payment for this purchase on or before 3pm AEST/AEDT of the Trade Date. Failure to do so may result in the Exotic Currency you had purchased being sold back and the resulting loss (if any) being charged to you. It is your responsibility to provide correct and complete bank instructions prior to the trade. The trade may take place only upon approval of the bank instructions by AFEX. By entering into an Exotic Currency Spot Value Contract you have removed the uncertainty of exchange rate movements over the next two Business Days. In exchange for this exchange rate certainty you have lost the opportunity to take advantage of any favourable exchange rate movements between the Trade Date and the Spot Value Date. In addition to this Exotic Currencies are illiquid, i.e. they have low trading volumes and therefore market movements in these environments can be amplified and unpredictable. This increased level of risk represents a high cost to carry for trading entities and complicates the unwinding of existing currency positions. The differences between the bid and ask prices for exotic currencies tend to be significantly wider compared to the major currencies. This combination of illiquidity and a lack of inherent price stability have an adverse effect on exotic currency pricing. In turn, this heightens volatility, which poses a significant risk to any trading entity. Market volatility can be higher by a margin of several hundred percent, depending on socioeconomic and political conditions or the prevalent investment climate in the respective jurisdiction. If a transaction has to be sold back to the currency market, the probability for substantial losses is significantly increased. Value Today Contracts Value Today Contracts exchange one currency for another at a specified and agreed Foreign Exchange Rate for a Value Date the same day as the Trade Date. They are not available for Exotic Currencies. opportunity to take advantage of any favourable exchange rate movements from the time you have had your contract executed. The exchange rates quoted for Value Dates different from the Spot Value Contract are determined by adjusting the Spot Exchange Rate by Forward Points. Value Tomorrow Contracts Value Tomorrow Contracts exchange one currency for another at a specified and agreed Foreign Exchange Rate for a Value Date one Business Day after the Trade Date. They are not available for Exotic Currencies. The exchange rates quoted for Value Dates different from the Spot Value Contract are determined by adjusting the Spot Exchange Rate by Forward Points. By entering into a Value Tomorrow Contract you have removed the uncertainty of exchange rate movements over the next Business Day. In exchange for this exchange rate certainty you have lost the opportunity to take advantage of any favourable exchange rate movements between the Trade Date and the Value Date. Window Forward Contracts Window Forward Contracts exchange one currency for another at a specified and agreed Foreign Exchange Rate for a Value Date between three Business Days and one year after the Trade Date and allow you to access your foreign currency at any time within the Window Period. The exchange rates quoted for Value Dates different from the Spot Value Contract are determined by adjusting the Spot Exchange Rate by Forward Points. By entering into a Window Forward Contract you have removed the uncertainty of exchange rate movements until the settlement of the contract. In exchange for this exchange rate certainty you have lost the opportunity to take advantage of any favourable exchange rate movements between the Trade Date and the Value Date. In addition, with a Window Forward Contract, you may utilize any portion of the currency purchased at any time up to the Value Date of the contract, once that currency has been paid for. By entering into a Value Today Contract you have removed the uncertainty of exchange rate movements for the day. In exchange for this exchange rate certainty you have lost the Associated Foreign Exchange Australia Pty Ltd Page 5 of 44

6 Outright Forward Contracts Outright Forward Contracts exchange one currency for another at a specified and agreed Foreign Exchange Rate for a Value Date between three Business Days and one year after the Trade Date and have a fixed future date as the Value Date. The exchange rates quoted for settlement dates different from the spot value contract are determined by adjusting the Spot Exchange Rate by Forward Points. By entering into an Outright Forward Contract you have removed the uncertainty of exchange rate movements over the next Business Days. In exchange for this exchange rate certainty you have lost the opportunity to take advantage of any favourable exchange rate movements between the Trade Date and the Value Date. Outright and Window Forward Contract Example You are an Australian based importer and need to pay for goods valued USD 100,000 in 3 months and will pay for these USDs using AUDs. AFEX quotes you a forward exchange rate (the contract rate) of , which in this case is made up of a spot exchange rate less forward points. Acceptance of this quote will create the Forward Contract between you and AFEX. The AUD equivalent is USD 100,000 AUDUSD = AUD 121, Before the value date of the contract, you will send AFEX the AUDs to settle your contract so that AFEX can deliver the USDs on the final date of the contract. By entering into a forward contract you have removed the uncertainty of exchange rate movements over the term of the forward contract. In exchange for this exchange rate certainty you have lost the opportunity to take advantage of any favourable exchange rate movements. As mentioned, in an Outright Forward Contract you can only make use of the foreign currency on the Value Date. In a Window Forward Contract you can make use of the foreign currency throughout the Window Period and must be fully paid for by the Value Date. Exotic Currency Forward Contracts If you intend to purchase an Exotic Currency for a value date later than the Spot Value Date, (and you will be informed the time of booking by your Account Executive whether the currency you are buying is an Exotic Currency) you will be entering into an Exotic Currency Forward Contract. It is your responsibility to provide correct and complete bank instructions prior to the trade. The trade may take place only upon approval of the bank instructions by AFEX. Following approval the trade will take the form of an Outright Forward Contract. In addition to the risks and benefits of the applicable type of Forward Contract, Exotic Currencies are illiquid, i.e. they have low trading volumes and therefore market movements in these environments can be amplified and unpredictable. This increased level of risk represents a high cost to carry for trading entities and complicates the unwinding of existing currency positions. The differences between the bid and ask prices for exotic currencies tend to be significantly wider compared to the major currencies. This combination of illiquidity and a lack of inherent price stability has an adverse effect on exotic currency pricing. In turn, this heightens volatility, which poses a significant risk to any trading entity. Market volatility can be higher by a margin of several hundred percent, depending on socio-economic and political conditions or the prevalent investment climate in the respective jurisdiction. If a transaction has to be sold back to the currency market, the probability for substantial losses is significantly increased. Vanilla Option A Vanilla Option is a type of Foreign Exchange Option Contract. When you buy a Vanilla Option you obtain an agreement that gives you the right but not the obligation to enter into a Spot Value Contract Transaction at a predetermined Foreign Exchange Rate on a pre-determined date in the future. You will have to pay a non-refundable fee (Premium) for the Vanilla Option, but you will not have to settle the transaction if you choose not to exercise the Vanilla Option. A Vanilla Option gives you the right but not the obligation to: Buy one currency at a pre-determined price within a predetermined time frame (Call Option); or Sell one currency at a pre-determined price within a predetermined time frame (Put Option). Associated Foreign Exchange Australia Pty Ltd Page 6 of 44

7 We adopt the Tokyo cut-off time which starts and finishes at 3 P.M. in Tokyo (UTC/GMT +9), unless we state otherwise for the Vanilla Option. Put Option Example: You will have to pay USD 1,000,000 on 05/06/12, and you wish to sell AUD to obtain the USD. You want to ensure a minimum Foreign Exchange Rate of , but you would like to profit if the Spot Rate were to move higher than This option gives you the right to sell AUDUSD at Example Strategy: Buying a Vanilla Put Option gives you the right, but not the obligation to sell a pre-determined amount of currency, at a pre-determined price within a predetermined time frame. This is a hedging strategy, which, for a small cost, can protect you from an adverse movement in the Spot Rate, and allow you to get a better rate than the current Forward Rate if the Spot Rate moves in your favour. Strategy Details AUDUSD Vanilla Option Currency Pair AUDUSD Notional Amount USD 1,000,000 Worst Case Rate Strike Rate Expiry Date 01-June-2012 Expiry Time 03:00PM Tokyo Delivery Date 05-June-2012 Premium AUD 21, Buyer Scenario YouA Seller AFEX There are two possible outcomes at the Expiry Time: Scenario A: The AUDUSD Spot Rate is above You choose to let the Vanilla Put Option lapse, dealing in the spot market at a more favourable Spot Rate than Scenario B: The AUDUSD Spot Rate is below You choose to exercise the Vanilla Put Option and buy USD 1,000,000 at the Worst Case Rate of Payoff: If the Spot Rate is below at the Expiry Time, this Vanilla Put Option is in-the-money, and allows you to sell AUDUSD at (the Worst Case Rate). If AUDUSD increases above , the Put Option expires worthless and you would sell at the market Spot Rate (which is a better rate). Your maximum gain is unlimited. Scenario B Payoff Profile: The Strike Rate specifies a Worst Case Rate. This means that you will receive at least no matter how low the AUDUSD Spot Rate is at the Expiry Time. However, if the Spot Rate is above at the Expiry Time, you would sell AUD and buy USD at the prevailing market Spot Rate. The higher the Spot Rate goes the more profit you will make, as compared to your Worst Case Rate. For a more favourable Worst Case Rate (i.e. a higher Strike Rate), you would pay a higher Premium. Please note that as you make the Worst Case Rate more favourable, you sacrifice some of the profit you would make if the Spot Rate at the Expiry Time was above the original Worst Case Rate. Associated Foreign Exchange Australia Pty Ltd Page 7 of 44

8 Call Option Example: You will have to pay USD 1,000,000 on 05/06/12, and you wish to sell USD to obtain the AUD. You want to ensure a minimum rate of , but you would like to profit if the Spot Rate were to move lower than This option gives you the right to sell USD buy AUD at Example Strategy: Buying a Vanilla Call Option gives you the right, but not the obligation to buy a pre-determined amount of currency, at a pre-determined price within a predetermined time frame. This is a hedging strategy, which, for a small cost, can protect you from an adverse movement in the Spot Rate, and allow you to get a better rate than the current Forward Rate if the Spot Rate moves in your favour. There are two possible outcomes at the Expiry Time: Strategy Details AUDUSD Vanilla Option Currency Pair AUDUSD Notional Amount USD 1,000,000 Worst Case Rate Strike Rate Expiry Date 01-June-2012 Expiry Time 03:00PM Tokyo Delivery Date 05-June-2012 Premium USD 28, Buyer You Scenario A Seller AFEX Scenario A: The AUDUSD Spot Rate is below You choose not to exercise the Vanilla Option; dealing in the spot market at a more favourable Spot Rate than Scenario B: The AUDUSD Spot Rate is above You choose to exercise the Vanilla Option and buy AUD 1,000,000 at the Worst Case Rate of Payoff: If the Spot Rate is above at the Expiry Time, this Vanilla Put Option is in-the-money, and allows you to sell USD buy AUD at (the Worst Case Rate). If AUDUSD is under , the Call Option expires worthless and you would buy at the market Spot Rate (which is a better rate). Your maximum gain is unlimited. Payoff profile - Worst Case Rate: The Strike Rate specifies a Worst Case Rate. This means that you will receive at least no matter how high the AUDUSD Spot Rate is at the Expiry Time. However, if the Spot Rate is below at the Expiry Time, you would BUY at the market Spot Rate. The lower the Spot Rate goes the more profit you will make, as compared to your Worst Case Rate. For a more favourable Worst Case Rate (i.e. a lower Strike Rate), you would pay a higher premium. Please note that as you make the Worst Case Rate more favourable, you sacrifice some of the profit you would make if the Spot Rate at the Expiry Time was above the original Worst Case Rate. Scenario B Associated Foreign Exchange Australia Pty Ltd Page 8 of 44

9 Significant Benefits: The Significant Benefits of using a Vanilla Option are: They allow you to protect yourself from an unfavourable movement in the Foreign Exchange Rate, but allow you to simply trade at the Spot Rate if the Spot Rate is more favourable when the time comes for you to conduct the transaction. In the example above, the Call strategy allows you to protect the risk of buying currency at a rate that is less favourable than your Worst Case Rate of , and it allows unlimited partici pation in a favourable move of AUDUSD moving lower than You can define a worst case exchange rate. The upfront financial cost is limited to the cost of the Premium. See page 36 of this PDS for other benefits. Significant Risks: The Significant Risks of using a Vanilla Option are: You need to pay for a Vanilla Option with a premium, which is non-refundable. It is not a zero cost structure. Depending on prevailing market rates, the total cost of the Vanilla Option, including the Premium plus the ultimate Foreign Exchange Rate, might be higher than if you had not purchased a Vanilla Option. At the Expiry Time or upon cancellation of the Vanilla Option, movements in market exchange rates plus the passage of time may result in the Vanilla Option having a reduced value or even no value. If you need to cancel the Vanilla Option, you may incur fees. See the section titled Cancellation on page 35 for more information, including information about how any loss is calculated. See page 36 of this PDS for other risks. Forward Extra A Forward Extra is a type of Structured Option which provides a guaranteed Worst Case Rate and also allows you to fully participate in favourable exchange rate movements, provided the Foreign Exchange Rate has not breached a prespecified rate (Barrier Level). If the Barrier Level has been breached during the pre-specified Barrier Period, you will be obliged to trade the full notional amount of the contract at the Worst Case Rate, regardless of where the Spot Rate is at the Expiry Time. Example for Exporter: You will have to pay a liability of AUD 1,000,000 on 22/08/12, so, you will need to sell USD and buy AUD to get the AUD to cover it. You believe that, by 22/08/12, AUDUSD will be near to, but no lower than and would like to benefit if that happens. Otherwise you want to ensure a maximum rate of This strategy gives you the right to sell USD and buy AUD at , and if spot is in be tween and you will profit from the lower rate. Provided of course the Barrier Level has not been breached. Recommended Strategy: This is a hedging strategy that can lock in a Worst Case Rate, while allowing you to profit against the Worst Case Rate if the Spot Rate ends up close to the Barrier Level, but still in between the Barrier Level and the Strike Rate. If AUDUSD breaches the Barrier Level of , the Worst Case Rate is locked in and you must transact at that rate, regardless of the AUDUSD. Strategy Details - AUDUSD Forward Extra Currency Pair AUDUSD Notional Amount AUD 1,000,000 Worst Case Rate Strike Rate Barrier Level Barrier Period Start Date 22-Aug-2012 Barrier Period End Date 22-Nov-2012 Expiry Date 22-Nov-2012 Delivery Date 26-Nov-2012 Expiry Time PM Tokyo Premium Zero Cost Buyer You There are three potential outcomes at expiry: Seller AFEX Scenario A: If the AUD/USD spot rate has traded at or below the barrier level of at any point during the life of the contract, you are obliged to sell USD and buy AUD 1,000,000 at the budget level of , regardless of where the exchange rate is on the expiry date. Scenario B: If the AUD/USD spot rate is below and has not traded at or below the barrier level of at any point, you have the right but not the obligation to sell USD and buy AUD 1,000,000 at the prevailing spot rate. Associated Foreign Exchange Australia Pty Ltd Page 9 of 44

10 Scenario A Scenario C: If the AUD/USD spot rate is above , you have the right, but not the obligation, to sell USD and buy AUD 1,000,000 at Payoff: This Forward Extra ensures that you receive no more than (the budget/protection rate). If AUD/ USD is in between and at expiry but hasn t touched during the life of the contract, you have no obligation and can choose to trade in the market at the prevailing spot rate, otherwise you receive Payoff Profile - Budget Rate: The strike rate, , specifies a budget rate. You will receive no more than this rate to sell your USD. Scenario B Disadvantages: The budget rate for a zero cost forward extra is worse than the current forward rate. Your participation in profit from a favourable move of AUD/USD is limited to a rate of Advantages: Can be used to establish a budget rate of strike for selling USD, buying AUD 1,000,000. Can be structured at zero cost. Allows a profit vs. the budget rate if spot ends up in between and at expiry but hasn t touched the barrier level during the life of the trade. Scenario C Associated Foreign Exchange Australia Pty Ltd Page 10 of 44

11 Example for Importer: You will have to pay a liability of USD 1,000,000 on 05/06/12, so, you will need to sell AUD and buy USD to get the USD to cover it. You believe that, by 05/06/12, AUDUSD will be near to, but no higher than and would like to benefit if that happens. Otherwise you want to ensure a minimum rate of This strategy gives you the right to sell AUD and buy USD at , and if spot is in between and you will profit from the higher rate. Provided of course the Barrier Level has not been breached. Scenario A Example Strategy: This is a hedging strategy that can lock in a Worst Case Rate, while allowing you to profit against the Worst Case Rate if the Spot Rate ends up close to the Barrier Level, but still in between the Barrier Level and the Strike Rate. If AUDUSD breaches the Barrier Level of , the Worst Case Rate is locked in and you must transact at that rate, regardless of the AUDUSD Spot Rate at Expiry Time. Scenario B Strategy Details - AUDUSD Forward Extra Currency Pair AUDUSD Notional Amount USD 1,000,000 Worst Case Rate 1.05 Strike Rate 1.05 Barrier Level Barrier Start Date 01-Mar-2012 Barrier End Date 05-June-2012 Expiry Date 01-June-2012 Delivery Date 05-June-2012 Expiry Time 03:00 PM Tokyo Premium 0 USD Trade Time Available upon request Buyer You There are three potential outcomes at Expiry Time: Seller AFEX Scenario A: If the AUDUSD Spot Rate has traded at or above the Barrier Level of at any point since the contract was entered into, you are obliged to sell AUD and buy USD 1,000,000 at the Worst Case Rate of 1.05, regardless of where the Spot Rate is at Expiry Time. Scenario C Scenario B: If the AUDUSD Spot Rate is above 1.05 and has not traded at or above the Barrier Level of at any point, you can sell AUD and USD 1,000,000 at the prevailing Spot Rate. Associated Foreign Exchange Australia Pty Ltd Page 11 of 44

12 Scenario C: If the AUDUSD Spot Rate is below 1.05, you have the right, but not the obligation, to sell AUD and buy USD 1,000,000 at Payoff: This Forward Extra ensures that you receive no less than 1.05 (the Worst Case Rate). If AUDUSD is between 1.05 and at expiry but hasn t breached during the life of the trade, you can trade at the Spot Rate, otherwise you trade at Payoff Profile: The Strike Rate of 1.05 specifies a Worst Case Rate. You will receive no less than this rate for your AUDUSD when using a Forward Extra Option with the above example. Significant Benefits: The Significant Benefits of a Forward Extra are: It can be used to establish a Worst Case Rate for selling currency. It can be structured at zero cost, so no Premium is payable. It allows you to benefit against the Worst Case Rate if the Spot Rate ends up in between 1.05 and at expiry but hasn t touched the Barrier Level during the life of the trade. See page 36 of this PDS for other benefits. Significant Risks: The Significant Risks of a Forward Extra are: The Worst Case Rate for a zero cost Forward Extra is worse than the Forward Rate. You will be prevented from enjoying some of the benefit of favourable movements in Foreign Exchange Rates if the rate breaches the Barrier Level. If you need to cancel the Forward Extra Option, you may incur fees. See the section titled Cancellation on page 35 for more information, including information about how any loss is calculated. If your Forward Extra Option moves out of the money beyond a predetermined percentage (which would be agreed with you prior to entering a contract for example, 10 per cent) of the contract amount, we may seek from you an Additional Partial Prepayment as an offset to bring your Option s risk exposure back to zero. See page 37 for more detail. See page 36 of this PDS for other risks. Participating Forward A Participating Forward is a type of Structured Option which allows you to set a Worst Case Rate. It also gives you an opportunity to benefit if the Foreign Exchange Rate moves in your favour than the Worst Case Rate, by giving you the option to trade a pre-agreed percentage of your contract value at the higher and more favourable Spot Rate. That way you are participating in the prevailing market rate but are hedging all of the contract value in the event that the Foreign Exchange Rate moves in an adverse direction. Example for Exporter: You will have to pay a liability of AUD on 05/06/12, so you will need to sell USD 1,000,000 and buy AUD to cover it. You want to ensure a minimum rate of for the full amount of the contract, but you still want to benefit if spot moves lower than This strategy gives you the right to sell USD at , and if spot is lower than you will participate in a proportion of the notional amount at the prevailing rate. Recommended Strategy: This is a hedging strategy which can protect you from an adverse movement in the Spot Rate, yet still allow you to get a better rate than the current Forward Rate. You can choose the level of participation that you want to have i.e. you can choose to cover 100% of your liability at 1.02, but participate in 50% of any upward movement. Strategy Details - AUDUSD Participating Forward Option (Exporter) Currency Pair AUDUSD Notional Amount USD 1,000,000 Obliged Amount to Deal USD 500,000 Protection Rate Strike Rate Expiry Date 01-June-2012 Delivery Date 05-June-2012 Expiry Time 03:00PM Tokyo Premium Zero Cost Buyer YOU Seller AFEX Associated Foreign Exchange Australia Pty Ltd Page 12 of 44

13 There are two potential outcomes at expiry: Scenario A: The AUDUSD Spot Rate is below You are obligated to buy USD 500,000 at the worst case rate of However, the remaining USD 500,000 can be bought in the Spot Market at the prevailing Spot Rate. The company has partially participated in a favourable exchange rate move. Scenario A Scenario B: The AUDUSD Spot Rate is above The Participating Forward Option provides a Worst Case Rate of You have full protection to buy USD 1,000,000 at a rate of Payoff: This Participating Forward ensures that you receive a rate no higher than (the budget/protection rate). If AUDUSD is below strike at expiry, you will buy USD at for USD 500,000 and are free to trade at the spot rate for the remaining amount. Scenario B Your maximum gain is unlimited. Payoff Profile - Budget Rate: The strike rate, , specifies a budget rate. You will not receive a rate higher than this rate for your AUDUSD exposure. Disadvantages: The budget rate for a zero cost participating forward is worse than the current forward rate. Your participation in profit from a favourable move of is limited to 50%. Advantages: Can be used to establish a budget rate of strike for selling AUDUSD. Can be structured at zero cost. Allows limited participation in a favourable move of AUDUSD moving lower than Example for Importer: You will have to pay a liability of USD 1,000,000 on 05/06/12, so you will need to sell AUD and buy USD to cover it. You want to ensure a minimum rate of for the full amount of the contract, but you still want to benefit if spot moves higher than This strategy gives you the right to sell AUD at , and if spot is higher than you will participate in a proportion of the notional amount at the prevailing rate. Example Strategy: This is a hedging strategy which can protect you from an adverse movement in the Spot Rate, yet Scenario C Currency Pair AUDUSD Notional Amount USD 1,000,000 Obliged Amount to Deal USD 500,000 Protection Rate Strike Rate Expiry Date 01-June-2012 Delivery Date 05-June-2012 Expiry Time 03:00PM Tokyo Premium Zero Cost Buyer YOU Seller AFEX Associated Foreign Exchange Australia Pty Ltd Page 13 of 44

14 still allow you to get a better rate than the current Forward Rate. You can choose the level of participation that you want to have i.e. you can choose to cover 100% of your liability at 1.02, but participate in 50% of any upward movement. Scenario A There are two possible outcomes at Expiry Time: Scenario A: The AUDUSD Spot Rate is below The Participating Forward Option provides a Worst Case Rate of You have full protection to buy USD 1,000,000 at a rate of Scenario B: The AUDUSD Spot Rate is above You are obligated to buy USD 500,000 at the worst case rate of However, the remaining USD 500,000 can be bought in the Spot Market at the prevailing Spot Rate. The company has partially participated in a favourable exchange rate move. Payoff: This Participating Forward Option ensures that you pay no less than (the Worst Case Rate). If AUDUSD is above strike at expiry, you will pay for USD 500,000 and the Spot Rate for USD 500,000. Your maximum gain is unlimited. Scenario B Payoff Profile: The Worst Case Rate is You will not receive less than this rate. Significant Benefits: The Significant Benefits associated with Participating Forward Options are: They can be used to establish a Worst Case Rate which allows you to hedge your exposure. The can be structured so that no Premium is payable (they are zero cost). They allow limited participation in a favourable move of the Foreign Exchange Rate (in the example above, the favourable movement was AUDUSD moving higher than ). See page 36 of this PDS for other benefits. Significant Risks: The Significant Risks associated with Participating Forward Options are: example, 10%) of the contract amount we may seek from you an Additional Partial Prepayment as an offset to bring your Option s risk exposure back to zero. See the section titled Cancellation on page 35 for more information, including information about how any loss is calculated. See page 36 of this PDS for other risks. The Worst Case Rate for a zero cost Participating Forward Option is worse than the current Forward Rate. Your benefit from a favourable move of AUDUSD is limited to 50%. If your Participating Forward Option moves out of the money beyond a predetermined percentage (which would be agreed with you prior to entering a contract for Associated Foreign Exchange Australia Pty Ltd Page 14 of 44

15 Collar Option The Collar Option is a type of Structured Option which allows you to protect against the risk that the Spot Rate will be less favourable than a nominated Worst Case Rate. It also gives you the ability to participate in favourable movements in the Spot Market between your Worst Case Rate and a Best Case Rate. Example for Exporter: You have to pay a liability of AUD 1,000,000 on 05/06/12; therefore you will need to sell USD to convert it into AUD. You want to ensure a minimum rate of , but you would like to profit if the Spot Rate were to move higher than You are willing to limit your potential to profit from a favourable market movement, in order to decrease the cost of the structure. This strategy gives you the right to buy AUDUSD at or better, but no better than Strategy Details Collar Option (Exporter) Currency Pair: AUDUSD National Amount: AUD 1,000,000 Worst Case Rate Strike Rate Best Case Rate Expiry Date Delivery Date Expiry Time Delivery Date 03-June June :00PM Tokyo 05-June-2012 Premium Zero Cost Scenario A Recommended Strategy: The strategy provides the opportunity for limited profit, with the possibility of limited loss. Scenario A: If the AUDUSD Spot Rate is above , you have the right, but not the obligation, to sell USD and buy AUD 1,000,000 at the Worst Case Rate (described in the diagram as Barrier ) of Scenario B: If the AUDUSD Spot Rate is below the Best Case Rate (described in the diagram as Strike ) of at expiry, you are obliged to sell USD and buy AUD 1,000,000 at the Best Case Rate of Scenario B Scenario C: If the AUDUSD Spot Rate is between and , you have the right, but not the obligation, to sell USD and buy AUD 1,000,000 at the prevailing Spot Rate. Payoff: This Collar Option ensures that you receive no more than (the budget rate). You will receive a more favorable rate if, at expiry, AUDUSD is below , but with a capped participation rate of Significant Benefits: The Significant Benefits associated with Collar Options are: They can be used to establish a Worst Case Rate which allows you to hedge your exposure. They can be structured so that no Premium is payable (they are zero cost). They allow limited participation in a favourable move (in the above example, the favourable move was AUDUSD Associated Foreign Exchange Australia Pty Ltd Page 15 of 44

16 moving lower than ). See page 36 of this PDS for other benefits. Scenario C Significant Risks: The Significant Risks associated with Collar Options are: The Worst Case Rate is lower than the current Forward Rate so it is possible that the payoff of this Collar Option at Expiry Time is worse than the payoff would have been, if you had purchased a Forward Contract at the current market value. Your participation in profit from a favourable move of AUDUSD is limited to the Best Case Rate. If your Collar Option moves out of the money beyond a predetermined percentage (which would be agreed with you prior to entering a contract for example, 10%) of the contract amount we may seek from you an Additional Partial Prepayment as an offset to bring your Option s risk exposure back to zero. If for any reason you want to cancel the Collar Option, you may incur cancellation costs. See the section titled Cancellation on page 35 for more information, including information about how any loss is calculated. See page 36 of this PDS for other risks. Example for Importer: You have to pay a liability of USD 1,000,000 on 05/06/12; therefore you will need to sell AUD to convert it into USD. You want to ensure a minimum rate of 1.03, but you would like to profit if the Spot Rate were to move higher than You are willing to limit your potential to profit from a favourable market movement, in order to decrease the cost of the structure. This strategy gives you the right to sell AUDUSD at 1.03 or better, but no better than Strategy Details - AUDUSD Collar Currency Pair AUDUSD Notional Amount USD 1,000,000 Worst Case Rate 1.03 Strike Rate 1.03 Best Case Rate 1.06 Expiry date 01-June-2012 Delivery Date 05-June-2012 Expiry Time 03:00 PM Tokyo Premium Zero Cost Buyer You Seller AFEX Example Recommended Strategy: The strategy provides the opportunity for limited profit, with the possibility of limited loss. There are three potential outcomes at Expiry Time: Scenario A: If the AUDUSD Spot Rate is above the Best Case Rate (described in the diagram as Strike ) of 1.06 at expiry, you are obliged to sell AUD and buy USD 1,000,000 at the Best Case Rate of Scenario B: If the AUDUSD Spot Rate is below 1.03, you have the right, but not the obligation, to sell AUD and buy USD 1,000,000 at the Worst Case Rate (described in the diagram as Barrier ) of Associated Foreign Exchange Australia Pty Ltd Page 16 of 44

17 Scenario C: If the AUDUSD Spot Rate is between 1.03 and 1.06, you have the right, but not the obligation, to sell AUD and buy USD 1,000,000 at the prevailing Spot Rate. Scenario A Payoff: Collar Option ensures that you receive no less than 1.03 (the Worst Case Rate). You will receive a more favourable rate if, at expiry, AUDUSD is above 1.03, but with a maximum of If the Spot Rate at expiry is above 1.06, you are obliged to take the rate of Significant Benefits: The Significant Benefits associated with Collar Options are: They can be used to establish a Worst Case Rate which allows you to hedge your exposure. They can be structured so that no Premium is payable (they are zero cost). They allow limited participation in a favourable move (in the above example, the favourable move was AUDUSD moving higher than 1.03). See page 36 of this PDS for other benefits. Scenario B Significant Risks: The Significant Risks associated with Collar Options are: The Worst Case Rate is lower than the current Forward Rate so it is possible that the payoff of this Collar Option at Expiry Time is worse than the payoff would have been, if you had purchased a Forward Contract at the current market value. Your participation in profit from a favourable move of AUDUSD is limited to the Best Case Rate. If your Collar Option moves out of the money beyond a predetermined percentage (which would be agreed with you prior to entering a contract for example, 10%) of the contract amount we may seek from you an Additional Partial Prepayment Margin Amount as an offset to bring your Option s risk exposure back to zero. If for any reason you want to cancel the Collar Option, you may incur cancellation costs. See the section titled Cancellation on page 35 for more information, including information about how any loss is calculated. See page 36 of this PDS for other risks. Scenario C Associated Foreign Exchange Australia Pty Ltd Page 17 of 44

18 Knock-Out Forward A Knock-Out Forward is a type of Structured Option which provides a known Strike Rate for future exchange requirements which is better than the prevailing Forward Rate. However, if the Spot Rate breaches a pre-determined Knock-Out Level at any time during the Knock-Out Period, the trade ceases to exist and there are no obligations on either party. If the Knock-Out Level is not breached during the Knock-Out Period then you will be obliged to exchange the full Notional Amount at the pre-agreed Strike Rate. Example for Exporter: You have ongoing exposure to currency fluctuations and need to sell USD. You acknowledge that AUDUSD may depreciate in your favour and would like to benefit from it if it happens. You are not comfortable booking at the prevailing Forward Rate. This strategy gives you the right to buy AUD and sell USD at and if the Spot Rate moves above you will profit from the lower rate, providing the Knock-Out Level has not been breached during the Knock-Out Period. If the Spot Rate breaches the Knock-Out Level at any point during the Knock-Out Period you will be left un-hedged and may wish to sell USD in the Spot Market. Example Strategy: The strategy provides an improved Strike Rate to the outright Forward Rate. If at any point during the Knock-Out Period the Spot Rate breaches the Knock-Out Level you will be left un-hedged and may decide to transact in the Spot Market. Strategy Details - AUDUSD Knock-Out Forward (Exporter) Currency Pair: AUDUSD Notional Amount: AUD 100,000 Strike Rate: Knock-Out Level: Knock-Out Period start 22-June-2012 Knock-Out Period date: end 24-Sept-2012 Expiry Date: date: 24-Sept-2012 Delivery Date: 26-Sept-2012 Expiry Time: 3.00 p.m. Tokyo time Premium: Zero Cost Buyer: You Scenario A Seller: AFEX Scenario B There are two possible outcomes at Expiry Time: Scenario A: If the AUDUSD Spot Rate has traded at or above the Knock-Out Level of at any point during the Knock-Out Period, you will be left un-hedged and may wish to trade in the Spot Market, which is likely to be considerably higher than Scenario B: If the AUDUSD Spot Rate has not breached the Knock-Out Level of at any point during the Knock-Out Period, you have the obligation to buy AUD and sell USD at at expiry. Payoff: This Knock-Out Forward offers a Strike Rate lower than the current Forward Rate, if the Knock-Out Level is not breached during the Knock-Out Period, in which case you will be buying AUD at , which is a rate that was not achievable at the time you booked the contract. Associated Foreign Exchange Australia Pty Ltd Page 18 of 44

19 Example for Importer: You have ongoing exposure to currency fluctuations and need to buy USD. You acknowledge that AUDUSD may appreciate in your favour and would like to benefit from it if it happens. You are not comfortable booking at the prevailing Forward Rate. This strategy gives you the right to sell AUD and buy USD at , and if the Spot Rate moves below you will profit from the higher rate, providing the Knock-Out Level has not been breached during the Knock-Out Period. If the Spot Rate trades at at any point during the Knock-Out Period you will be left un-hedged and may wish to buy USD in the Spot Market. Example Strategy: The strategy provides an improved Strike Rate to the outright Forward Rate. If at any point during the Knock-Out Period the Spot Rate breaches the Knock-Out Level you will be left un-hedged and may decide to transact in the Spot Market. Strategy Details - AUDUSD Knock-Out Forward (Importer) Currency Pair: AUDUSD Notional Amount: USD 100,000 Strike Rate: Knock-Out Level: Knock-Out Period start date: 22-June-2012 Knock-Out Period end date: 24-Sept-2012 Expiry Date: 24-Sept-2012 Delivery Date: 26-Sept-2012 Expiry Time: 3.00 p.m. Tokyo time Premium: Zero Cost Buyer: You Scenario Seller: AFEX A There are two potential outcomes at Expiry Time: Scenario A: If the AUDUSD Spot Rate has traded at or below the Knock-Out level of at any point during the Knock-Out Period, you will be left un-hedged and may wish to trade in the Spot Market, which is likely to be considerably lower than Scenario B: If the AUDUSD Spot Rate has not traded at the Knock-Out Level of at any point during the Knock- Out Period, you have the obligation to sell AUD and buy USD at at expiry. Payoff: This Knock-Out Forward offers a Strike Rate higher than the current Forward Rate, if is not breached during the Knock-Out Period, in which case you will be buying USD at , which is a rate that was not achievable at the time you booked the contract. Scenario B Significant Benefits: The Significant Benefits associated with Knock-Out Forwards are: They can be structured at zero cost. They provide a Strike Rate that is better than the current Forward Rate available when the con tract is booked, if the Knock-Out Level is not then breached. See page 36 of this PDS for other benefits. Significant Risks: The Significant Risks associated with Knock-Out Forwards are: They do not offer a guaranteed Protection Rate. Your profit from a favourable move of AUDUSD is limited to the Strike Rate. See page 36 of this PDS for other risks. Associated Foreign Exchange Australia Pty Ltd Page 19 of 44

20 Knock-out Forward Extra A Knock-Out Forward Extra is a type of Structured Option which provides a known Strike Rate for future exchange requirements with the opportunity to participate in favourable exchange rate movements, provided the currency pair has not breached a pre-specified Barrier Level during the pre-specified Barrier Period If the Barrier Level has been breached at any time during the Barrier Period, you will be obliged to trade the full Notional Amount at the known Strike Rate. Also, if the Spot Rate breaches the pre-determined Knock-Out Level at any time during the pre-specified Knock-Out Period, the trade ceases to exist and there are no obligations on either party. Example for Exporter: You have an ongoing exposure and need to Buy AUD. You acknowledge that AUDUSD may depreciate in your favour and would like to benefit from it if it happens. However, you also recognize the upside risks and would like to achieve a maximum rate of This strategy gives you the right to sell USD and buy AUD at , and if the Spot Rate is in between and you will profit from the lower rate, providing has not been breached during the Barrier Period. However, if the Spot Rate breaches , the pre-determined Knock- Out Level, at any point during the Knock-Out Period, the trade ceases to exist and there are no obligations on either party. Strategy Details - AUDUSD Knock-Out Forward Extra (Exporter) Currency Pair: AUDUSD Notional Amount: USD 100,000 Strike Rate: Knock-Out Level: Barrier Level: Knock-Out Period and Barrier Period start date: 28-June-2012 Knock-Out Period and Barrier Period end fate: 27-Sept-2012 Expiry Date: 27-Sept-2012 Delivery Date: 02-Oct-2012 Expiry Time: 3.00 p.m. Tokyo time Premium: Zero Cost Buyer: You Scenario A Seller: AFEX There are four potential outcomes at Expiry Time: Scenario A: The AUDUSD Spot Rate traded at or below during the Barrier Period and has not breached during the Knock-Out Period. You are obliged to sell USD and buy AUD at Scenario B Scenario B: The AUDUSD Spot Rate is below on expiry and has not traded at or below during the Barrier Period or breached during the Knock-Out Period. You have no obligation and can transact within the prevailing Spot Market. Scenario C: The AUDUSD Spot Rate is above on expiry and has not traded at or below during the Barrier Period, and has not breached during the Knock-Out Period. You have the right to sell USD and buy AUD at Scenario D: The AUDUSD Spot Rate has traded at or above during the Knock-Out Period. You are left unhedged and may wish to trade in the Spot Market, which is likely to be considerably higher than Associated Foreign Exchange Australia Pty Ltd Page 20 of 44