MACQUARIE FUNDS GROUP Macquarie Australian Equity Income Fund

Transcription

1 MACQUARIE FUNDS GROUP Macquarie Australian Equity Income Fund PRODUCT DISCLOSURE STATEMENT Dated 31 January 2009 ARSN MQ Portfolio Management Limited ABN AFSL No

2 Macquarie Australian Equity Income Fund Supplementary Product Disclosure Statement Dated 20 July 2010 ARSN APIR code: MAQ0358AU Issuer: MQ Portfolio Management Limited ABN AFS Licence Number Investments in the Macquarie Australian Equity Income Fund (the Fund) are not deposits with or other liabilities of Macquarie Bank Limited ABN or any member of the Macquarie Group and are subject to investment risk, including possible delays in repayment and loss of income and principal invested. Neither Macquarie Bank Limited nor any member of the Macquarie Group guarantees the performance of the Fund or the repayment of capital from the Fund or any particular rate of return. This Supplementary Product Disclosure Statement, dated 20 July 2010 (Supplementary PDS) is supplemental to the Macquarie Australian Equity Income Fund Product Disclosure Statement dated 31 January 2009 (PDS). The PDS and this Supplementary PDS should be read together. From 20 July 2010 the following changes will apply: On page 8, the section entitled Prime broker risk is deleted. On page 9, the section entitled Counterparty default risk is replaced with the following: Counterparty default risk is the risk of loss due to a counterparty not honouring a financial commitment. Counterparties to this Fund may include issuers of the securities which the Fund invests in, the Custodian which holds the assets of the Fund, equity brokers, derivative brokers, counterparties to stock lending transactions and counterparts to transactions involving instruments such as swaps and foreign exchange derivatives. Default risk is generally greater for counterparties or issuers with lower credit ratings. On page 14, under the heading Dealing with other Macquarie entities or related parties after the fourth paragraph, the following bullet points are included: > custody agreement; > futures clearing agreement; On page 21, the section entitled Prime Broker and Custodian, is replaced in its entirety with the following: Custodian Bond Street Custodians Limited (BCSL) has been appointed as the custodian, to hold the assets of the Fund. BCSL is part of the Macquarie Group, however, the arrangements with BCSL have been entered into on an arm s length basis. MPML will monitor and review BSCL s procedures and systems to ensure that custodial functions are carried out efficiently and properly. Futures and Options Macquarie Bank Limited (MBL) has been appointed to perform futures execution and futures clearing services for the Fund, and Macquarie Securities (Australia) Limited (MSAL) has been appointed to provide execution and clearing services to the Fund in respect of ASX exchange-traded options. MBL and MSAL are part of the Macquarie Group and the arrangements with MBL and MSAL have been entered into on an arm s length basis. BCSL, MBL and MSAL will have no decision making discretion relating to the Fund s investment strategy. BCSL, MBL and MSAL are service providers to the Fund and are not responsible for the preparation of this document or the activities of the Fund and therefore accept no responsibility for any information contained in this document. MPML reserves the right to change the custodian and other service providers for the Fund without providing notice to Unitholders. On page 22, in the section entitled Consents, the third paragraph is deleted. The information in this Supplementary PDS, dated 20 July 2010, is general information only and does not take into account your individual objectives, financial situation or needs. You should consider whether the Fund is appropriate for you in light of your objectives and circumstances. Unless the context otherwise requires, capitalized terms in this Supplementary PDS have the same meanings as those set out in the PDS.

3 IMPORTANT NOTICE Investments in the Macquarie Australian Equity Income Fund ARSN ( Fund ) are not deposits with, or other liabilities of, Macquarie Bank Limited ABN (referred to as Macquarie Bank ) or any Macquarie Group company, and are subject to investment risk, including possible delays in repayment and loss of income and capital invested. None of Macquarie Bank, MQ Portfolio Management Limited, MQ Specialist Investment Management Limited or any other member of the Macquarie Group guarantees the performance of the Fund, the repayment of capital from the Fund or any particular rate of return. This Product Disclosure Statement This Product Disclosure Statement ( PDS ) is dated 31 January 2009 and is issued by MQ Portfolio Management Limited ABN in its capacity as the responsible entity of the Fund (referred to as MPML, we or us ). MPML holds Australian financial services licence no This PDS and the application form included in, or accompanying this PDS, contain the only terms on which Units will be issued to retail clients in Australia. To the extent permitted by law, we accept no liability whatsoever for any loss or damage arising from you relying on any other information when investing. Unless stated otherwise all dollar amounts and performance data in this PDS are quoted in Australian dollars. Applications In this PDS, MPML invites you to apply for Units in the Fund. The Fund has been registered as a managed investment scheme under the Corporations Act 2001 (Cth). Units to which this PDS relates will only be issued on receipt of a completed application form included in or accompanying this PDS. We may reject an application for Units for any reason. For more information on how to apply for Units in the Fund, please refer to Section 4 of this PDS. Electronic copies This PDS is available on our website at mfg. Any person receiving this PDS electronically should note that applications can only be accepted if MPML receives a completed application form which was included in or accompanied the electronic or paper copy of this PDS. Offers made in Australia This offer is open to persons receiving this PDS, whether in paper or electronic form, in Australia. This PDS does not constitute an offer or invitation in any place outside Australia where, or to any person to whom, it would be unlawful to make such an offer or invitation. The distribution of this PDS (electronically or otherwise) in any jurisdiction outside Australia may be restricted by law and persons who come into possession of this PDS should seek advice on and observe, any such restrictions. Any failure to comply with such restrictions may constitute a violation of the applicable law. Currency of information The information in this PDS is current as at 31 January We may, however, change any information in this PDS if the change is not materially adverse to Unitholders by posting updated information on our website at You may access this information at any time. Alternatively you can call Client Service on On request, we will provide you with a paper copy of any information updated on our website, free of charge. If the change is materially adverse, we will issue a supplementary PDS. We will provide you with a paper copy of any supplementary PDS on request, free of charge. Representations Potential investors should only rely on information in this PDS. No person, including any distributor of this PDS, is authorised to give any information or to make any representation in connection with the offer of Units that is not contained in this PDS. Any information or representation not in this PDS must not be relied on as having been authorised by MPML. Investor directed portfolio service We authorise the use of this PDS as disclosure for investors who wish to access the Fund through an investor directed portfolio service or IDPS-like scheme (commonly a master trust or wrap account) or a nominee or custody service approved by us ( IDPS ). Glossary of Terms If you do not understand a word or phrase you should refer to the Glossary of Terms. The Glossary of Terms is located on page 24 of the PDS. Experienced investors The Fund employs specialist trading and hedging techniques that may require the use of derivatives. Investors should not invest in the Fund unless they understand and are comfortable with the risks associated with investing in the Fund. Further advice recommendation An investment in the Fund involves financial and other risks and is suitable for investors for whom an investment in the Fund does not represent a complete investment portfolio or programme and who fully understand the risks of investing in the Fund. Before making an investment in the Fund, you should: > carefully read all of this PDS; > seek professional legal, taxation and financial advice to determine whether an investment in the Fund is appropriate for you; and > carefully consider the potential benefits and the risks involved in investing in the Fund, in light of your particular investment needs, objectives and financial and taxation circumstances. Please refer to the At a Glance section of this PDS for a summary of the specific risks involved in investing in the Fund, and Section 2 of the PDS for a more detailed discussion of the risks. As well as considering the risks, you should also consider how an investment in the Fund fits into your overall investment portfolio. By diversifying your investment portfolio, you can reduce your exposure to failure or underperformance of any one investment, manager or asset class. This PDS is a general disclosure document and does not take into account your particular investment needs, objectives and financial and taxation circumstances.

4 Contents At a Glance 2 Section 1 Macquarie Australian Equity Income Fund 6 Section 2 Risks You Should Consider 8 Section 3 Fees and Other Costs 10 Section 4 Terms and Conditions of the Investment 15 Section 5 Additional Information 20 Section 6 Tax 23 Glossary of Terms 24 Application form

5 At a Glance The table below is a summary of the key features of the Macquarie Australian Equity Income Fund and a guide to where more detailed information can be found in this PDS. Topic Highlights More Information Fund Macquarie Australian Equity Income Fund ARSN ( Fund ). Section 1 The Fund has been registered as a managed investment scheme under the Corporations Act 2001 (Cth). Responsible Entity MQ Portfolio Management Limited ABN is the responsible entity of the Fund (also referred to as MPML, we or us ). Page 5 Investment Manager MQ Specialist Investment Management Limited ABN is the investment manager for the Fund ( Investment Manager ). Page 5 Units offered Fully paid Units ( Units ). Section 4 Fund type Australian equity fund Section 1 Investment objective Investment strategy Over the medium term to long term the Fund aims to provide: regular income above the yield of the S&P/ASX 200 Index; the potential for some capital growth; and lower volatility than the S&P/ASX 200 Index. Income focused fund using both Australian equity and equity derivatives such as options. Section 1 Section 1 Investment region Australia Section 1 Suggested investment time frame 5-7 years 1 Not applicable 2 Significant benefits The Fund offers the potential to earn dividends and franking credits from Australian shares. The Fund offers the potential to generate additional income over and above the income generated from dividends generally received by holding a portfolio of Australian shares, due to the income generated from the option portfolio. Section 1 The Fund offers potential for some capital growth. 1 Although we have suggested a time frame for your investment, you should regularly review your investment decision with your professional financial adviser as your investment requirements or market conditions may have changed. Our suggested time frame should not be considered as personal advice.

6 Topic Highlights More Information Risks There are a number of risks that may affect the value of your investment. At the date of this PDS, some of the key risks include, but are not limited to, the following: Volatility risk. The price of the Fund s investments or the unit price of the Fund itself may go up and down by a material amount, even over a short period of time. Recently, equity markets have generally fallen and have become more volatile; indeed volatility in some markets is at very high levels. Investing in such highly volatile conditions implies a greater level of risk for investors than an investment in a more stable market. You should carefully consider this additional volatility risk before making any investment in the Fund. Market risk. Investors returns may be adversely affected by market conditions. Investment Manager strategy risk is the risk that the Investment Manager s investment strategy is not successful resulting in underperformance of the Fund, either in absolute terms, or relative to the market and/or its peers. Furthermore there is a risk that the manager fails to implement the investment strategy successfully. Option-selling risk is the risk that the exposure to a security obtained by selling a call option may adversely affect the value of your investment in the Fund. When the Fund sells a call option, the Fund may have to enter into a defined transaction at some point in the future if the buyer of the option so decides. This may have the effect of capping upside potential and limiting the Fund s growth. Section 2 Derivative risk. Derivatives are leveraged instruments that are used to obtain or reduce market exposures. As the market value of derivatives is variable, gains or losses can be incurred and can be greater than unleveraged positions. The Fund may utilise derivatives in order to achieve its investment objectives. To reduce the risks associated with the use of derivatives, we ensure that short derivatives positions are backed by a matched amount of similar physical assets and long derivatives positions are backed by a matched amount of liquid assets such as cash equivalents. 3 Income risk. The Fund s capacity to distribute income is determined by the performance of the Fund and general market conditions. As a result, there is no guarantee that you will receive any income. This is not a fixed income product. For a full description of these and some other significant risks please see section entitled Risks you should consider which begins on page 8. You should read the risks section in full and seek your own professional advice in relation to an investment in the Fund. Investment Manager s expectation of risk Moderate to high. Section 1

7 Topic Highlights More Information Fees Base management fee: 0.95% p.a. calculated daily on the daily NAV. Section 3 Expense recoveries: Capped at 0.30% p.a. for the Fund, excluding transaction costs and abnormal expenses calculated daily on the daily NAV. Buy/sell spread estimate: Our estimate in normal market conditions is +0.35% of unit price for applications and 0.35% of unit price for redemptions. However, in stressed and dislocated markets, the buy/sell spread may be significantly higher. From time to time, we may vary the buy/sell spread without notice to reflect changing market conditions. To obtain the current estimate of the buy/ sell spread, please visit: Minimum investment 2 For direct investors, the minimum initial investment is $20,000. The minimum additional investment is $10,000. Section 4 Minimum investment balance 2 $20,000 Section 4 Applications and withdrawals Daily, subject to the receipt of application or withdrawal requests prior to the cut-off times specified in Section 4. Section 4 Assuming that the Fund is liquid and withdrawals have not been delayed, we intend to pay the withdrawal proceeds within seven days after the relevant redemption date. In some circumstances, MPML may delay or stagger withdrawals and delay the payment of withdrawal proceeds (see Section 4). Cooling off period If you are a retail client, you have cooling off rights when investing initially in the Fund. If you are investing through an IDPS, you should contact the operator of that service to find out about any cooling off rights you may have. Section 4 4 Taxation Some general information on the significant tax implications of an investment in the Fund is included in Section 6 of this PDS. Nevertheless, you should seek your own professional taxation advice to determine the tax treatment applicable in your particular circumstances. Section 6 Complaints We have procedures for resolving complaints. Section 5 Further information and questions If you have any questions about an investment in the Fund please contact your financial adviser or Client Service: Phone: mfg.clientservice@macquarie.com Internet: Not applicable 2 If you are investing via an IDPS, please contact your IDPS operator for details.

8 The Responsible Entity MQ Portfolio Management Limited MQ Portfolio Management Limited (MPML) is the responsible entity of the Fund and the issuer of this PDS. It has appointed the Investment Manager to manage the Fund s investments. MPML is part of the Macquarie Group. It holds Australian financial services licence no , issued by the Australian Securities and Investments Commission ( ASIC ), which authorises it to operate managed investment schemes. MPML is in the business of acting as the responsible entity for registered managed investment schemes. MPML currently acts as the responsible entity of a number of registered managed investment schemes. The Investment Manager MQ Specialist Investment Management Limited The Investment Manager is part of the Macquarie Group. The Macquarie Group is a market leader in managing specialist investments, with $183.7 billion of specialist assets under management as at 30 September 2008, including infrastructure, real estate, private equity and hedge funds. In its role as the investment manager for the Fund, the Investment Manager is responsible for managing the investments of the Fund. The Investment Manager holds Australian financial services licence no , issued by ASIC, which authorises it to provide investment management services to the Fund. 5

9 S E C T I O N 1 Macquarie Australian Equity Income Fund Investment objective Over the medium to long term the Fund aims to provide: regular income above the yield of the S&P/ASX 200 Index; the potential for some capital growth; and lower volatility than the S&P/ASX 200 Index. Investment strategy The Investment Manager s strategy combines a portfolio of shares with a portfolio of options. The diagram below represents the core investment strategy. Stock The stock portfolio is designed to provide: > dividends > franking credits and > some capital growth Option The option portfolio is designed to provide: > additional income > lower volatility > additional returns in flat, falling or slightly rising markets 6 Current investments The Fund predominantly invests in Australian securities that form part of the S&P/ASX 200 Index, options relating to that index and options relating to securities in that index. The Fund may also invest in futures contracts relating to the S&P/ASX 200 Index and futures contracts relating to securities in the index. The Fund may benefit investors who are seeking: regular income from a portfolio of shares and options; exposure to the Australian sharemarket; and the benefit of a managed active options strategy. Stock selection process The Fund utilises active stock selection, employing quantitative and qualitative techniques. The portfolio is constructed to complement the option portfolio to meet the Fund s investment objectives. An option or option contract is an agreement whereby the holder of the option has the right, but not the obligation, to receive or deliver a specified quantity and quality of an underlying asset at or before a specified future date (the expiry date) at a price agreed when the contract was executed. This is known as an option contract that is physically settled. Option contracts may also be cash settled. Option contracts may be closed out before the expiry date. A call option is an instrument that gives the holder the right, but not the obligation, to purchase a defined quantity of an underlying security from the writer of the option, at a specified price on or before a specified date. If the purchaser of the call option decides to exercise the option, then the writer of the option has an obligation, not a right, to deliver a specified quantity of the underlying asset at a specified time (or during a specified time period) and at a specified price. The use of options and futures The Fund does not intend to use options, futures or other derivatives for the purposes of leverage or gearing. The Fund utilises options to create an additional source of income and manage volatility. The Fund may employ a range of options including: options over shares in listed companies ( single share options ); index options such as options over a share price index (for example, the S&P/ASX 200 Index); options over share price index futures such as the SFE SPI 200 Equity Index Futures; and over-the-counter options. For information on the risks associated with using derivatives, please refer to Section 2.

10 Example of a combined long stock, written option strategy Assume the Investment Manager: buys 10,000 shares in a company at $1.00 per share (as part of the Fund s long share portfolio); and sells the equivalent of 10,000 shares in call options with an exercise price of $1.00, allowing the holder of the option to buy 10,000 shares in the company within the next three months for $1.00 per share. The Fund would receive a premium for selling the options. In this example let us assume it receives 10 cents per share for the options. If, within the next three months, the share price increases to $1.15 per share, the option holder has the right to exercise the call option and purchase 10,000 shares from the Fund at $1.00 per share. If the call option is exercised, the Fund has not benefited from any increase in the share price above $1.00 with respect to these 10,000 shares. The Fund, however, has received a premium of 10 cents per share for selling the option over the 10,000 shares. If, however, during that same time period the share price declines from $1.00 to $0.95 per share, the Fund will own 10,000 shares valued at $0.95 per share. The Fund has also received the 10 cents premium for selling the option. The diagram below illustrates a long stock written call option payoff at expiry for the above example. Profit and Loss Long stock outperforms $ Long stock written call option outperforms Long Stock Written Call Option Long Stock Strike Price $1.00 $1.10 Stock Price While selling options increases the income-based returns to the Fund, it also limits the ability of the Fund to benefit from capital appreciation of the shares. Significant benefits The Fund offers the potential to earn dividends and franking credits from Australian shares. The Fund offers the potential to generate additional income over and above the income generated from dividends generally received by holding a portfolio of Australian shares, due to the income generated from the option portfolio. The Fund offers potential for some capital growth. Performance information For information on the performance of the Fund, please visit the Macquarie Australian Equity Income Fund website at 7

11 S E C T I O N 2 8 Risks You Should Consider Prospective investors should give careful consideration to the factors set out below in evaluating the merits and suitability of an investment in the Fund. The following does not purport to be a comprehensive summary of all of the risks associated with an investment in the Fund. There are risks associated with any investment. Generally, the higher the expected return of an investment, the higher the risk and the greater the variability of returns and the risk of loss of capital. MPML s risk management objective is to deliver risk/ return outcomes in line with our clients expectations. However, we cannot provide assurances or guarantees on future profitability and Fund returns, distributions and return of capital. As well as considering the below risks, you should also consider how an investment in this product fits into your overall investment portfolio. By diversifying your investment portfolio, you may reduce your exposure to failure or underperformance of any one investment, manager or asset class. You should seek your own professional advice on the appropriateness of this investment to your circumstances. Volatility risk. The price of the Fund s investments or the unit price of the Fund itself may go up and down by a material amount, even over a short period of time. Recently, markets have generally become more volatile; indeed volatility in some markets is at very high levels. Investing in such highly volatile conditions implies a greater level of risk for investors than an investment in a more stable market. You should carefully consider this additional volatility before making any investment in the Fund. Market risk broadly refers to the potential for changes in share prices to result in a loss in the value of your investment in the Fund. This Fund primarily invests in companies that are listed on a share market and as a result is exposed to movements in their share prices. Factors that drive changes in share prices may include changing profitability of companies and the sectors and markets in which they operate, economic cycles, volume of share issuance, investor demand levels, business confidence and government and central bank policies. Investment manager strategy risk is the risk that the Investment Manager s investment strategy is not successful resulting in underperformance in the Fund, either in absolute terms, or relative to the market and/ or its peers. Furthermore there is a risk that the manager fails to implement the investment strategy successfully. Option-selling risk is the risk that the exposure to a security obtained by selling a call option may adversely affect the value of your investment in the Fund. When the Fund sells a call option, the Fund may have to enter into a defined transaction at some point in the future if the buyer of the option so decides. Typically this transaction would only take place when there was a profit to the buyer, meaning that the Fund would experience a loss. Losses on such positions are theoretically unlimited. This risk is reduced by the Fund only selling options to the extent that it owns either the underlying asset of the option or similar physical assets. Selling call options also introduces an opportunity cost for the Fund as in a rising market the use of sold call options has the effect of capping the upside potential, and limiting the Fund s growth potential as a whole. Derivative risk. Derivatives are leveraged instruments that are used to obtain or reduce market exposures. As the market value of derivatives is variable, gains or losses can be incurred and can be greater than positions in unleveraged instruments. The Fund may utilise derivatives in order to achieve its investment objectives. To reduce the risks associated with the use of derivatives, we ensure that short derivatives positions are backed by a matched amount of similar physical assets and long derivatives positions are backed by a matched amount of liquid assets such as cash equivalents. Income risk. The Fund s capacity to distribute income is determined by the performance of the Fund and general market conditions. As a result, there is no guarantee that you will receive any income. This is not a fixed income product. Further, the Fund allows for quarterly distributions. If during a financial year, the Fund pays out total distribution of net income which exceed the total net taxable income for the particular financial year, the excess you receive may be treated as a return of capital rather than income. This may have tax implications for you. Please refer to Section 6 for more information. Prime broker risk. Goldman Sachs International ( GSI ) has been appointed as a prime broker and custodian to the Fund. As a prime broker to the Fund, GSI will provide broking, stock lending and other services. As a custodian, GSI will be responsible for the safekeeping of all the investments and other assets of the Fund (the Custody Assets ) delivered to it. The Custody Assets may be used by GSI as collateral for obligations owed by the Fund to GSI, in which case the Custody Assets will become the property of GSI and the Fund will have a right against GSI for the return of equivalent assets only.

12 The Fund will rank as an unsecured creditor in relation to the Custody Assets held as collateral, and in the event of the insolvency of GSI, the Fund may not be able to recover such equivalent assets in full. This means that the Fund has counterparty exposure to the credit worthiness of GSI. Cash held or received for the Fund by or on behalf of GSI will not be treated as client money and will not be subject to the client money protections conferred by the FSA Client Money Rules. Accordingly, the Fund s cash will also be collateral and will not be segregated from the cash of GSI. As a consequence, such cash may be used by GSI in the course of its business and the Fund will rank as a general creditor in the event of GSI s insolvency. Company specific risk is inherent in a particular stock s performance due to factors that are pertinent to that company. These factors will cause a stock s return to differ from that of the market. Actively managed funds look to gain exposure to this risk in order to attempt to outperform the market, however this exposure can also lead to underperformance. Liquidity risk exists when particular investments are difficult to purchase or sell, preventing a fund from closing out its position or rebalancing within a timely period and at a fair price. While every effort is made for the Fund to be able to meet all redemptions, prevailing market conditions may result in the Fund not being able to meet all redemption requests when they are received. In some circumstances MPML may delay or stagger withdrawals and delay payment of withdrawal proceeds from the Fund (see Section 4 of the PDS for more information). Counterparty default risk is the risk of loss due to a counterparty not honouring a financial commitment. Counterparties to this Fund may include equity brokers, as well as derivative brokers such as option and futures counterparties. Default risk is generally greater for counterparties or issuers with lower credit ratings. Fund risk. The Fund may terminate or the Investment Manager or the investment professionals could change. The suggested timeframe for investment in the Fund is five to seven years. MPML has discretion to terminate the Fund which could mean that an investor s investment in the Fund may be prematurely brought to an end before the expiry of the investor s desired investment horizon. MPML has discretion to compulsorily redeem Units. Investing in the Fund may give different results than investing directly in the market because investing in the Fund may have a different income, capital gains and expense profile outcome compared to direct investment. Furthermore, the results of investing in the Fund may be affected by the investments and withdrawals of other investors. Trading restrictions risk. In certain circumstances, statutory restrictions may preclude the Fund from acquiring securities in a company (for instance, if the acquisition would cause the Macquarie Group s holdings in that company, when aggregated with those of the Fund and other Macquarie-managed funds, to exceed applicable takeover thresholds). Trading restrictions may result in an adverse effect on the value of the Fund s investments due to the Investment Manager being unable to enter into or exit positions as desired. Please see Section 3 for more information. Legal and compliance risk. Domestic and/or international laws or regulations may change in a way that adversely affects the Fund in which you invest. For example, changes to short selling restrictions, taxation, financial, regulatory and money laundering laws, may adversely affect the Fund. Differences in laws between countries or jurisdictions may make it difficult for MPML to enforce legal agreements entered into on behalf of the Fund. MPML reserves the right to take steps to limit or prevent any adverse effects from changes to laws or their interpretation on the Fund, including altering investments of the Fund or restructuring the Fund. Taxation risk. Changes in tax laws or their interpretation could adversely affect the tax treatment of the Fund, its investments and its investors. Other than the Tax section (see Section 6 of the PDS) which sets out some tax issues, MPML does not provide taxation advice to investors and all investors should seek independent taxation advice before investing in the Fund. In the event of an adverse tax change, MPML reserves the right to change investments of the Fund, restructure the Fund, or compulsorily withdraw Units in the Fund in accordance with the Constitution to limit or prevent any adverse effects. Investment via the Fund may offer a different tax outcome than investing directly in the underlying assets of the Fund due to withdrawals or investments by other investors, and as a result of income or capital accruing in the Fund. Please see Section 6 for more information. 9

13 S E C T I O N 3 Fees and Other Costs Did you know? Small differences in both investment performance and fees and costs can have a substantial impact on your long term returns. For example, total annual fees and costs of 2% of your fund balance rather than 1% could reduce your final return by up to 20% over a 30 year period (for example, reduce it from $100,000 to $80,000). You should consider whether features such as superior investment performance or the provision of better member services justify higher fees and costs. You may be able to negotiate to pay lower contribution fees and management costs where applicable. Ask the fund or your financial adviser. TO FIND OUT MORE If you would like to find out more, or see the impact of the fees based on your own circumstances, the Australian Securities and Investments Commission (ASIC) website ( has a managed investment fee calculator to help you check out different fee options. Fees and other costs This document shows the fees and other costs that you may be charged. These fees and costs may be deducted from your money, from the returns on your investment or from the fund assets as a whole. Taxation information is set out in Section 6 of this PDS. You should read all the information about fees and costs because it is important to understand their impact on your investment. Type of fee or cost 1 Amount How and when paid Fees when your money moves in or out of the Fund 2 Establishment fee The fee to open your investment Nil Not applicable Not applicable Contribution fee The fee on each amount contributed to your investment either by you or your employer Nil Not applicable Not applicable Withdrawal fee The fee on each amount you take out of your investment Nil Not applicable Not applicable 10 Termination fee The fee to close your investment Nil Not applicable Not applicable Management Costs The fees and costs for managing your investment Management Costs are made up of the following components: Base management fee 0.95% p.a. calculated daily on the daily NAV. For example, for every $20,000 of NAV, the Fund will be charged a Base management fee of $190. Payable to MPML quarterly in arrears out of the Fund. Performance fee Nil Not applicable Not applicable Expense recoveries: are the costs for operating the Fund. They include administration costs, distribution costs and other expenses incurred in operating the Fund, except for transaction costs. Capped at 0.30% p.a. for the Fund excluding transaction costs and abnormal expenses calculated daily on the daily NAV. For example, for every $20,000 of NAV, expenses of up to $60 each year could apply. The expenses are reimbursable to MPML quarterly in arrears out of the Fund.

14 Type of fee or cost 1 Amount How and when paid Service fees Investment switching fee The fee for changing investment options. Nil Not applicable Not applicable 1 Unless otherwise stated, all fees and costs that are expected to be subject to GST are stated inclusive of the net impact of GST (that is, including GST less any applicable input tax credits or reduced input tax credits). Should the Fund not be entitled to claim input tax credits or reduced input tax credits included in the fees and costs charged to your investment, such fees and costs may be higher than those stated in the PDS. 2 You may also incur a buy/sell spread when your money moves in or out of the Fund. Please refer to the heading Buy/sell spread estimate under the section Additional explanation of fees and costs. Example of annual fees and costs of the Fund This table gives an example of how fees and costs for this product can affect your investment over a one year period. You should use this table to compare this product with other managed investment products. EXAMPLE Macquarie Australian Equity Income Fund 1 BALANCE OF $50,000 WITH A CONTRIBUTION OF $5,000 2 DURING YEAR Contribution Fees Nil For every additional $5,000 you put in, you will not be charged a contribution fee. PLUS Management Costs 1.25% And, for every $50,000 you have in the Fund you will be charged $625 each year. EQUALS Cost of fund If you had an investment of $50,000 at the beginning of the year and you put in an additional $5,000 during that year, you would be charged: $625 What it costs you will depend on the investment option you choose and the fees you negotiate with your Fund or financial adviser. 1 2 Please note that this is an example only and does not take into account transaction costs, government charges or any movements in the value of the investor s investment or distributions that may occur over the course of the year. Please note that the minimum additional contribution for the Fund is $10,

15 12 Additional explanation of fees and costs The following important additional information has been provided to assist you in understanding the table of fees and other costs set out on the previous pages. Buy/sell spread estimate There is a difference between the application and redemption price quoted on any business day, referred to as the buy/sell spread. To ensure that existing investors do not continually bear the transaction costs resulting from the applications or redemptions made by other investors, we charge investors the buy/sell spread when they transact, except in certain circumstances (see below). The buy/sell spread is added to the Net Asset Value per unit when units are applied for to reflect the estimated transaction costs of acquiring the underlying investments. It is subtracted from the Net Asset Value per unit when units are redeemed to reflect the estimated transaction costs of disposing of the underlying investments. It is important to note that the spreads are a transaction cost payable by you and retained by the Fund. The spreads are not a payment to MPML. Further, the buy spread will not necessarily be the same as the sell spread. In calculating this spread, we take into account the estimated transaction costs which, in our view, are applicable from time to time. These transaction costs may comprise brokerage, stamp duty, foreign exchange hedging and the buy/sell spreads (being the difference between the bid and offer prices) on exchange traded and non-exchange traded transactions. The example below is based on an application or redemption of $50,000 and an estimated buy/sell spread of 0.35%, which is indicative of an estimated spread in normal trading conditions. This may not be the applicable spread at the time of your application or redemption of units: Buy /sell spread Cost Application % $ Redemption % $ The size of the buy/ sell spread may be varied from time to time without notice, to ensure that non-transacting investors are not adversely impacted by the application or redemption by other investors. For example, a different amount or estimate may apply when brokerage costs or the difference between the bid and offer prices for assets change. In stressed and dislocated market conditions, the buy/ sell spread may increase significantly. Any revised spread will be applied uniformly to transacting investors while that spread applies. To obtain the current the buy/sell spreads applicable to an application or redemption from the Fund, please visit: In addition we may at our discretion reduce the buy/sell spread where: there is a simultaneous purchase and redemption of units of equivalent value by different investors; or an investor subscribes assets (rather than cash) on an application or receives assets (rather than cash) on a redemption. Reinvested distributions do not incur the buy/sell spread. Adviser remuneration You may agree to pay your adviser a fee for any financial advice that they provide to you. However, these are separate to any fees we charge in respect of your investment in the Fund, as set out in Fees and Other Costs table on page 10 of this PDS. Additional services and charges We can recover from you certain user pays costs for additional services provided at your request or incurred in connection with your particular investment, such as paying redemption proceeds by bank cheque, telegraphic transfer or real time gross settlement ( RTGS ), and dealing with overseas bank drafts. You agree that we can apply your redemption proceeds to recover the costs we incur on your behalf. These costs represent the standard bank charges we incur and are not a fee paid to us. Currently, these costs are as follows. Service Bank cheque $7.50 Telegraphic transfer $35.00 RTGS Overseas bank draft $20.00 Charge (includes GST if applicable) $5.00 for transactions up to $500,000 and free for transactions of $500,000 and above

16 Tax and insurance costs For information on significant tax implications relating to investing in the Fund, see Section 6 of this PDS. Changing fees We reserve the right to change fees, and to charge for other miscellaneous services. Factors which may lead us to vary the fees of the Fund (up to the maximum permitted under the Fund s Constitution) include legal, economic, policy and procedural changes. The right to vary is at our discretion and this is not an exhaustive list of circumstances which would lead us to vary the fees of the Fund. We will give you a minimum of 30 days prior notice of any change to the current fee and/or the introduction of any additional fee. Fees charged by third-party service providers as part of the management costs may be indexed to rise with inflation or subject to a periodic review. We cannot charge fees higher than the maximum fees stated in the Constitution (and to increase the fees in the Constitution we would need to have Unitholders approval by special resolution). These maximums are: a maximum application fee (referred to in the PDS as a Contribution fee ) of 3.0% of the application amount. a maximum management fee (referred to in the PDS as a Base management fee ) of 5.0%p.a of the value of assets. a maximum redemption fee (referred to in the PDS as a Withdrawal fee ) of 5.0% of the greater of the Unit price at which the Units being redeemed were issued to the Unitholder and the Unit price at which Units are withdrawn. a maximum redemption processing fee (referred to in the PDS as a Withdrawal processing fee ) of $2500. a maximum performance fee of 25% of the returns over the benchmark subject to a high water mark. These maximums are stated exclusive of the net impact of GST. Differential fees MPML may rebate fees: (a) by negotiation with investors who are wholesale clients, as defined in section 761G and GA of the Corporations Act 2001 (Cth); and/or (b) to investors of the Fund who are also employees of MPML or of MPML s related bodies corporate, and associates of those employees, on a different basis to that applied to other members of the Fund where permitted under the Corporations Act or relevant ASIC policy. In the case referred to in paragraph (b), the amount of any fee that relates to an investment in the Fund by an employee of MPML or of MPML s related bodies corporate or associates of those employees may be rebated by MPML in part or in full to that employee or associate. Differential fee arrangements for employees and their associates will only apply where the number of votes that may be cast on a resolution of the Fund s Unitholders by employee/associate Fund Unitholders is no more than 5% of all votes of Fund Unitholders or as otherwise permitted by law. For further information please contact Client Service on Goods and Services Tax (GST) The Fund may be charged GST on management and other fees and expenses. However, where available, MPML will claim on behalf of the Fund a proportion (ie. 75%) of this GST as a reduced input tax credit. Unless otherwise stated, fees and charges quoted in this PDS have been calculated on the basis that the fees and charges attract GST but the Fund will be entitled to claim an input tax credit or reduced input tax credit in respect of that GST. Should the Fund not be entitled to claim an input tax credit or reduced input tax credit for the GST included in fees and costs charged to the Fund, the fees and costs charged against the value of your investment may be higher than those stated in this PDS. Soft Dollar Commissions We do not pay any commissions to your financial adviser. However, the dealer group to which your adviser belongs and your IDPS operator may receive certain payments or other non-monetary benefits from us, such as business and technical support, professional development and entertainment. The provision of such benefits is governed by our Soft Dollar Policy. These payments and benefits are not an additional cost to you. We also maintain a register summarising alternative forms of remuneration that is paid or provided to advisers. If you would like to review this register, please contact Client Service on , 8.30am to 6.00pm Sydney time, Monday to Friday. Related party transactions In the execution of transactions, we deal with professional organisations that may include Macquarie Group Limited or its associated companies ( Macquarie Group ). All transactions are conducted on arm s length terms. We can also trade the Fund s investments with Macquarie Group where we believe the investments are in the best interest of investors. These organisations may receive commissions at prevailing market rates for 13

17 the execution of transactions. Any conflict of interest or potential conflict of interest is managed in accordance with our Conflicts of Interest Policy. The Fund may invest in a number of other funds of which we act as responsible entity. In these circumstances you will only be charged management fees and performance fees (if any) once. Where another Macquarie Group company manages the underlying fund(s) you may be charged their management fees and performance fees which will be reflected in the Fund s return. Dealing with other Macquarie entities or related parties Members of the Macquarie Group or their directors, employees or affiliates may buy and sell instruments or securities or other financial products which are related to the investments or underlying investments of the Fund. In addition, companies in the Macquarie Group may advise on transactions concerning such instruments, securities or other financial products. Such dealings may or may not affect the value of the investments in the Fund. Other related party issues Macquarie Group is a global provider of banking, financial, advisory, investment and funds management services. Macquarie s main business focus is generating returns by providing a diversified range of services to clients. Macquarie acts on behalf of institutional, corporate and retail clients and counterparties around the world. MPML, as responsible entity of the Fund, generally has no control over these activities. As a result, from time to time the Fund s activities may be restricted, for example due to regulatory constraints applicable to the Macquarie Group, and/or its internal policies designed to comply with such constraints. In addition, where, due to such constraints there is limited capacity to acquire particular securities, the Fund will not have priority over any member of, or any Fund associated with, the Macquarie Group to acquire those securities. The directors and employees of the Investment Manager may receive compensation based on the performance of the Investment Manager in its role as investment manager to the Fund. Under the terms of the investment management agreement, MPML will pay out of the Base management fee that MPML receives, a management fee to the Investment Manager. This amount is included in the Fees and Other Costs section of this PDS for the Fund and will be reflected in the Fund s return. MPML, in respect of the Fund, has entered into, or may enter into, the following arrangements with other members of the Macquarie Group: 14 prime brokerage agreement; stock lending agreement; ASX derivatives agreement; derivatives trading agreement with Macquarie Bank; ISDA master agreement; investment management agreement; and administration agreement for the supply of administrative services to MPML. MPML may appoint another member of the Macquarie Group as sub-custodian for the purposes of prime brokerage services. Further, MPML may transfer assets of the Fund to that Macquarie Group entity as collateral under the arrangements.