Macquarie Contracts for Difference

Transcription

1 Macquarie Contracts for Difference Product Disclosure Statement MACQUARIE BANK LIMITED 27 August 2010 Macquarie Bank Limited ABN and AFSL

2 This PDS This product disclosure statement ( PDS ) is dated 27 August 2010 and has been prepared by Macquarie Bank Limited (ABN , AFSL number ) ( Macquarie, we or us ). This PDS (including the Updated Information defined in Currency of information below) and the Application Form contain the only terms on which retail clients in Australia will be invited to apply for Contracts for Difference ( CFDs ). 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. Under this PDS, Macquarie invites you to apply to trade CFDs issued by Macquarie. Your liability Your potential liability under the Macquarie Prime Facility is not limited to the balance deposited in your Prime Account or the value of Financial Instruments held through the Macquarie Prime Facility and we may ask you to pay amounts in excess of these amounts to cover any outstanding monies, especially where you have a short position in relation to a share or are leveraged (eg have a Loan Facility or hold CFDs). You should read all of this PDS and any other Transaction Document to which you are a party carefully and seek professional legal, taxation and financial advice to determine whether any given investment in, or held through, the Macquarie Prime Facility is appropriate for you. Offers made in Australia This offer is open to persons receiving this PDS, whether in paper or electronic form, in Australia. This PDS is not 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 outside Australia 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 applicable law. Currency of information This PDS is current as at its date (see This PDS above). Macquarie may vary this PDS by issuing a supplementary PDS. Where information changes that is not materially adverse to investors, Macquarie may update the information by posting a notice online at the Prime Website. You may access this information at any time. Alternatively, you can call the Prime Client Service Team on Macquarie will provide, on request and without charge, a paper copy of any updates that are posted to the Prime Website or any supplementary PDS ( Updated Information ) to investors. Representations This PDS has been prepared and issued by Macquarie. 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 our invitation to apply to trade CFDs 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 Macquarie. Nothing in this PDS is an express or implied endorsement by Macquarie of an investment in or through the Macquarie Prime Facility or the Shares of any Listed Entity. Electronic copies This PDS is available from us online at the Prime Website. Any person receiving this PDS electronically should note that applications can only be accepted if Macquarie receives a completed Application Form which was included in, or accompanied, the electronic copy of this PDS. Glossary At the end of this PDS is a Glossary in which various words and phrases used in this PDS are defined. If you do not understand a word or phrase, you should refer to the Glossary. Capitalised words that are used in this PDS have the meaning given to those words in the Glossary, unless the context requires otherwise. Unless stated otherwise: (i) all dollar amounts in this PDS are quoted in Australian dollars; and (ii) all references to time are to time in Sydney. Further advice recommendation An investment in a Macquarie Prime Facility, including in CFDs, involves financial and other risks. Before making an investment in a Macquarie Prime Facility, you should: carefully read all of this PDS; seek professional legal, taxation and financial advice to determine whether an investment in, or held through, the Macquarie Prime Facility is appropriate for you; and carefully consider the potential benefits and the risks involved in investing in the Macquarie Prime Facility. As well as considering the risks, you should also consider how any investment in, or held through, the Macquarie Prime Facility fits into your overall investment portfolio. By diversifying your investment portfolio, you can reduce your exposure to failure or underperformance of any one investment, counterparty or asset class. 2

3 Macquarie Contracts for Difference Product Disclosure Statement Contents 02 At a Glance 09 Section 1 Investment Overview 11 Section 2 Details of CFD Trading 19 Section 3 Cashflows and Margin 22 Section 4 Fees and Other Costs 24 Section 5 Worked Examples 29 Section 6 Significant Risks You Should Consider 36 Section 7 Taxation Considerations 38 Section 8 Additional Information 40 Section 9 About the Issuer Macquarie Bank Limited 41 Section 10 How to Apply 42 Section 11 Terms and Conditions 56 Section 12 Glossary At a Glance 1 1

4 At a glance This Section of the PDS contains the highlights and key features of CFDs. To find information on the topics listed below, see the Section number listed or document described where applicable. These highlights indicate the kind of information you can find in this PDS, but are not intended to be a complete summary. You should read all of this PDS carefully and seek professional legal, taxation, and financial advice to determine whether an investment in CFDs is appropriate for you. Is a CFD suitable for you? CFDs are complex and potentially highly geared products that are only suitable for experienced and sophisticated traders that are able to constantly monitor their Positions. You should ensure that you have considered whether or not a CFD is suitable for you. In particular you should consider whether: you have sufficient liquid assets to be able to post Margin on very short notice; you are an experienced share trader who is familiar with the share market; you have the ability to tolerate a high level of risk; and you are confident in your own investment ability and fully understand the way CFDs work, as well as the risks involved in using CFDs. You should also understand that your potential losses on a CFD can be substantial, and in the case of a Short CFD, your potential losses can be unlimited. Topic Highlights More information Who is the issuer of this PDS and the CFDs? What is offered? What is a CFD? This PDS and the CFDs are issued by Macquarie Bank Limited ( Macquarie ). Macquarie's contact details are set out on the back cover of this PDS. You are invited to apply to trade in CFDs with Macquarie by giving Orders, including GSL Orders, on the terms outlined in this PDS, using your Prime Facility. A contract for difference, or CFD, is a derivative which allows you to make a profit or loss from fluctuations in the price of an underlying ASXlisted security, referred to as a Reference Security, without actually owning that security. The amount of any profit or loss made on a CFD will be equal to the difference between the price of the Reference Security when the CFD is opened, and the price of the Reference Security when the CFD is closed, multiplied by the number of Reference Securities to which the CFD relates (the CFD Quantity ). Any profit or loss made will also be affected by certain other payments required to be made under the terms of the CFDs, including fees and commissions, payments relating to dividends declared in relation to the underlying Reference Security and interest. A CFD is designed for experienced traders. Section 9: About the Issuer Macquarie Bank Limited. Section 2: Details of CFD Trading. Section 11: Terms and Conditions. Section 2: Details of CFD Trading. Section 11: Condition 4 of the Terms and Conditions. 2

5 Topic Highlights More information What are Long CFD and Short CFD positions? What are the significant risks of investing in CFDs? You can enter into a Long CFD or a Short CFD. If you hold a Long CFD, you have the potential to profit from a rise in the price of the Reference Security. A Long CFD is similar to borrowing funds from Macquarie to buy Reference Securities, and posting an amount of cash as security for this position. In this situation, you are identified as the Long Party, being the party who has notionally purchased the Reference Securities and Macquarie is identified as the Short Party. Where you are the Long Party, you may make a profit if the Reference Price rises while your CFD is open. Conversely, you will generally make a loss if the Reference Price falls while your CFD is open. If you hold a Short CFD, you have the potential to profit from a fall in the price of the Reference Security. A Short CFD is similar to borrowing the Reference Securities from Macquarie, selling them on the market with a view to repurchasing them at a future date, and in the meantime investing the proceeds of the initial sale in a bank account, with a proportion of these proceeds being held as security for this position. In this situation, you are identified as the Short Party, being the party who has notionally sold the Reference Security and Macquarie is the Long Party. Where you are the Short Party, you may make a profit if the Reference Price falls while your CFD is open. Conversely, you will generally make a loss if the Reference Price rises while your CFD is open. Although a CFD replicates the buying and selling of Reference Securities, you do not actually acquire or deliver the Reference Securities and you have no shareholder rights with respect to the Reference Securities, such as voting rights. Significant risks include: An adverse movement in the value of the Reference Securities: The value of the Reference Securities, which in turn affect the value of your CFD, may go up or down by a material amount, even over a short period of time. Since July 2007 equity markets have generally become more volatile; indeed, over this period, volatility in some markets has been 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. You are responsible for selecting Financial Instruments for any Position that you enter into and as such the performance of that Position will mainly depend on your own investment decisions. Gearing: CFDs are speculative and can be highly geared. They carry a significantly higher level of risk than non-geared assets (eg shares). You should not invest in CFDs unless you are experienced in equity derivatives and understand and are comfortable with the risks of investing in CFDs (including the risks associated with gearing). Unlimited loss: Your potential loss on entering into Short CFDs may be unlimited. You may lose more money than the amount in your Prime Account: Your potential losses on a CFD can be substantial and may exceed how much Margin is designated to support a CFD and even the total funds in your Prime Account. Counterparty risk: The risk that Macquarie will not meet its obligations under the CFD. There are other significant risks associated with investing in CFDs. Section 2: Details of CFD Trading. Section 11: Condition 4 of the Terms and Conditions. Section 6: Significant Risks You Should Consider. 3

6 Topic Highlights More information You should read Section 6 of this PDS before you apply for a CFD. How do I trade CFDs? What Margin is required? Trading a CFD involves entering into, or Closing-out, a derivative contract with Macquarie. While CFD prices are referable to Reference Securities that trade on the ASX, there is no secondary market in Macquarie CFDs themselves and you cannot transfer them to another party. We use the phrase trade CFDs in this PDS for simplicity s sake, and are referring only to the Opening, altering and Closing-out of a CFD. Your CFD trading will be conducted via the Macquarie Trading Platform. As such, you will need to have the use of a computer with internet access. See Part 4 of the Prime Client Agreement for information regarding the Trading Platform. Please note that CFDs are traded subject to the terms of this PDS rather than the Prime Trading Terms contained in the Prime Client Agreement. Each Open CFD and most Orders placed by you require the posting of an amount of cash as security (or Margin ). You will need to ensure that this Margin amount is covered by the funds in your Prime Account prior to placing your Order. Section 11: Terms and Conditions. Part 4 of the Prime Client Agreement. Section 3.1: Margin. Section 11: Condition 6 of the Terms and Conditions. What are Mark- To-Market Payments? Mark-To-Market Payments are payments required to be made by you to Macquarie or vice versa depending on how the Reference Price moves. Mark-To-Market Payments reflect the loss or profit with respect to the CFD which would be realised if the CFD were Closed-out immediately. If the Reference Price increases while the CFD is open, the Short Party must pay the amount of the corresponding increase in the CFD Face Value to the Long Party. Conversely, if the Reference Price decreases while the CFD is open, the Long Party must pay the amount of the corresponding decrease in the CFD Face Value to the Short Party. Mark-To-Market Payments are either deducted from, or credited to, your Prime Account and are paid each Business Day. You will need to ensure that the Available Funds in your Prime Account are sufficient to meet your required Mark-To-Market Payments at all times, not just at the relevant Closing Time. The deduction of Mark-To-Market Payments from your Prime Account may affect your ability to meet your Margin Obligations. A failure to maintain sufficient funds in your Prime Account to meet Margin Obligations can lead to a Close-out of your Positions. Section 3.2.1: Mark-To- Market Payments. Section 11: Condition 4.2 of the Terms and Conditions. 4

7 Topic Highlights More information Involuntary Close-out Macquarie may Close-out your Positions, including your Open CFDs, and cancel your Orders in a number of circumstances, including where you have insufficient funds in your Prime Account to meet your obligations to provide Margin for any of your Transactions or where you exceed your Risk Limit. This may cause you financial loss. In some cases this may occur without you receiving any prior notice from Macquarie, for example, in the case of a sudden and dramatic adverse movement of the value of the Reference Securities. In particular: In the case of Short CFDs, it is important to realise that Macquarie has the right to Close-out Short CFDs at any time without prior notice to you even if you are meeting your Margin Obligations and have not exceeded your Risk Limit. Where you breach a Margin Obligation and there is a shortfall in your Margin Obligations that is equal to or greater than 50% of the aggregate of all your Margin Obligations (i.e. where the amount that is required to comply with the Margin Obligations is equal to or greater than 50% of those Margin Obligations) Macquarie may immediately commence Closing-out any or all of your Positions to rectify the breach. This can also occur where you exceed your Risk Limit by more than 5% or where the breach of your Risk Limit occurs as a result of the expiry of a Guaranteed Stop-Loss Order (however, in the case of expiry of a Guaranteed Stop-Loss Order, the Close-out is limited to the Position to which the Guaranteed Stop-Loss Order applies). Further, even if the shortfall in your Margin Obligations is below 50% of the aggregate of all your Margin Obligations, or if you exceed your Risk Limit by less than 5%, you must act immediately, as Macquarie may Close-out your Open Positions if you have not rectified the breach by 2pm on the next Business Day after the day on which Macquarie gave you notice of the breach. A Close-out of your Positions may result in financial loss. It is important that you monitor at all times the level of funds in your Prime Account, as well as your total Margin and Utilised Risk Limit, and make additional deposits to your Prime Account when necessary to meet your Margin Obligations and any other payment obligations you have under your Prime Facility and to avoid exceeding your Risk Limit. Additionally, the Positions that are Closed-out may be unrelated to the Margin Obligation in respect of which the breach occurred (for example Macquarie may Close-out your CFDs in order to rectify a breach of your obligations to provide Margin in respect of your Loan Facility). Macquarie's rights to Close-out Positions under the Transaction Documents are held solely for the purpose of securing your obligations to Macquarie. Macquarie may choose not to Close-out your Positions and you cannot rely on Macquarie s ability to Close-out as a way to limit your exposure to further loss. Macquarie's Close-out rights are an important factor in how Macquarie calculates the Margin Rates that it offers to Investors. Section 11: Condition 7 5

8 Topic Highlights More information Do I receive dividends on CFDs? Do I pay or receive interest? If you hold an Open Long CFD at the close of business on the day prior to the ex-dividend date of the underlying Reference Security, you will receive an amount equal to the ordinary cash dividend on that Reference Security, excluding any franking credits. If you hold an Open Short CFD on the close of business on the day prior to the ex-dividend date, you must pay an amount equal to the ordinary cash dividend to Macquarie. In limited circumstances, you may also be required to pay the value of any franking credits applicable to the dividend. If you hold an Open Long CFD overnight, you will be charged interest on the CFD Face Value of that Open position. Conversely, if you hold an Open Short CFD overnight, you will receive interest on the CFD Face Value of that Open position. This interest is calculated and payable on each Business Day and is paid to (or debited from) your Prime Account. If you fail to pay when due any amount payable, interest on the overdue amount may be payable and will be calculated at the Default Interest Rate. Section 3.2.2: Dividends. Section 11: Condition 4.3 of the Terms and Conditions. Section 3.2.3: Interest paid and received on Open CFDs. Section 3.2.4: Default Interest. Section 11: Condition 5 of the Terms and Conditions. What are the interest rates? The applicable interest rates are equal to the Benchmark Rate plus or minus a margin. The Benchmark Rate is the interbank overnight cash rate published by the Reserve Bank of Australia from time to time. The rate of interest you must pay Macquarie in the event you hold an Open Long CFD overnight ( Long Position Funding Rate ) is the Benchmark Rate plus up to a maximum of 6.00%pa. The rate of interest Macquarie must pay you if you hold an Open Short CFD overnight ( Short Position Funding Rate ) is the Benchmark Rate minus up to a maximum of 6.00%pa. No interest will be payable by either party if the Short Position Funding Rate is negative. You may also be liable to pay Default Interest if you fail to pay any amount payable when due as provided under the General Conditions contained in your Prime Client Agreement. Standard interest rates are published on the Prime Website and are subject to change at Macquarie's discretion. Section 3.2.3: Interest paid and received on Open CFDs. Section 3.2.4: Default Interest. Section 11: Condition 5 of the Terms and Conditions. Part 6 of the Prime Client Agreement. 6

9 Topic Highlights More information What fees and other costs are payable? How do I Close-out a CFD? What are the taxation consequences of investing in CFDs? How can I obtain further information? How do I apply to trade CFDs? In addition to any fees and charges payable by you under other Transaction Documents, including the Prime Client Agreement: Trading Fee: You will be charged a Trading Fee each time you trade a CFD, payable in two instalments: the first on the Opening, and the second on the Close-out of the CFD. Each instalment of this fee will be equal to the greater of: (a) (b) the CFD Face Value on the Opening or Close-out of the CFD multiplied by the Trading Fee Rate applicable at that time (the Trading Fee Rate will not be greater than 2.00%); and the minimum amount specified or agreed by Macquarie applicable at that time (that amount will not be greater than $200). The minimum amount and the Trading Fee Rate may vary depending on what method you use to place your Order (eg whether by phone or via the Trading Platform) and whether or not you have an adviser. GSL Premium (GSLs only): Where you have Guaranteed Stop-Loss protection over a CFD, you will be charged a GSL Premium. The GSL Premium will be quoted to you at the time you place your GSL Order and is payable immediately if the GSL Order is accepted. Adviser commission: Your adviser may receive commission from us relating to your CFDs in respect of: (a) (b) Trading Fees charged to you; and interest on your Open CFDs. We will pay this commission to your adviser from our own funds. Your adviser should disclose any commission to you. Please refer to Section 4.4 for more information. You will need to ensure that the Available Funds in your Prime Account are sufficient to meet all required fees and payments when due (including amounts payable to your adviser). Failure to maintain sufficient funds in your Prime Account may result in the closure of some or all of your Positions and/or your Facility (at the sole discretion of Macquarie). You may place an Order requesting the Close-out of an Open CFD at any time. Please note that, like an Order to open a CFD, an Order to Closeout a CFD may be rejected by Macquarie. The taxation consequences of trading CFDs depend on your personal circumstances and you should obtain independent professional taxation advice. Macquarie does not provide taxation advice. For more information, please contact us by: Telephone: Internet: prime@macquarie.com.au macquarie.com.au/prime Alternatively, you can speak to your financial adviser. You can apply online at the Prime Website: macquarie.com.au/prime You must ensure that you have read and fully understood this PDS before applying to trade CFDs in your Prime Facility. Sections 4: Fees and Other Costs. Section 11: Conditions 4.4, 4.5, 4.6, 4.7 and 4.8 of the CFD Terms and Conditions. Section 2.4: How do I Close-out a CFD? Section 11: Condition 7 of the Terms and Conditions. Section 7: Taxation Considerations. Section 10: How to Apply. 7

10 Topic Highlights More information What do I need to read and agree to so that I can trade CFDs? To trade in Macquarie CFDs, you must open a Macquarie Prime Facility, a Macquarie Prime Account and a Macquarie Shorting Facility. The Macquarie Prime Facility is an online investment platform that allows you to buy and sell financial products, including Macquarie CFDs. You must maintain a Macquarie Prime Account in order to provide cash to be blocked as Margin and otherwise to support your payment obligations in respect of your CFDs and Orders. You need to apply under the separate Macquarie Prime Account PDS, Prime Client Agreement and Macquarie Shorting PDS to open a Macquarie Prime Facility. The terms of the Macquarie Prime Account are set out in the Macquarie Prime Account PDS. The terms of the Macquarie Trading Platform are set out in the Prime Client Agreement. The Macquarie Shorting PDS contains the terms applicable for shorting using the Macquarie Prime Facility. The Macquarie Prime Account PDS, Prime Client Agreement, and Shorting PDS are available on the Prime Website: macquarie.com.au/prime. You should note that your trading of CFDs and your Prime Facility are interrelated. Your rights and obligations relating to the Macquarie Prime Facility will be affected by your rights and obligations under your CFDs. Macquarie Prime Account PDS and Prime Client Agreement. 8

11 Section 1 Investment Overview This PDS contains important terms and conditions for you to consider. Before completing the Application Form, you should read and ensure you understand this entire PDS. In particular, you should note the risks outlined in Section 6 of this PDS. The following is only a brief description of some of the key benefits and significant risks involved in investing in CFDs. 1.1 What are the key features and benefits of Contracts for Difference? Leverage / gearing: gain access to larger amounts of trading capital CFDs offer a potentially large amount of gearing. You are able to outlay a relatively small amount (in the form of Margin) to secure an exposure to the Reference Security. This will have the affect of magnifying any profits or losses and so consequently carries significant risk (see Section 6.1 for details). Trading any market direction: ability to take short positions If you believe that a Reference Price may fall, Macquarie CFDs enable you to open a short position in relation to the Reference Security. Compared to opening long positions, opening short positions in listed securities has traditionally been a difficult exercise and CFDs offer a means of taking such short positions. Optional Guaranteed Stop-Loss protection: limit potential downside A large adverse movement in a Reference Price can give rise to large losses on Open CFDs. Placing Guaranteed Stop-Loss ( GSL ) protection on a CFD allows you to limit your potential losses arising from sudden market movements by giving you a guaranteed Close-out price during the GSL Period on that CFD (see Section relating to GSL Orders for details). Highly flexible: access real-time market prices and multiple order entry options The Trading Platform gives you access to real-time pricing and market depth information. You have the ability to enter into CFDs in real-time over the internet, with the flexibility of utilising Market-To-Limit, Trigger, Stop-Loss, and Guaranteed Stop-Loss Orders. Dividends and interest Holders of Open Long CFDs also receive the benefit of any ordinary cash dividends paid to holders of the underlying Reference Securities, but are charged interest on the CFD Face Value of their Open CFD. Conversely, holders of Open Short CFDs must pay cash equal to the value of any ordinary cash dividend1 paid to holders of the underlying Reference Securities, but receive interest on the CFD Face Value of their Open CFD. 1.2 What are the key significant risks of CFDs? Gearing magnifies losses CFDs can be highly geared and can carry a high degree of risk. If you are considering trading in CFDs, you should be experienced in equity derivatives and understand and be comfortable with the risks of gearing. Gearing can magnify your losses, just as it can also magnify your gains (see Section 6.1 for details). Short CFDs If your application is accepted, you will be able to place Orders for Short CFDs. If you do not take out Guaranteed Stop-Loss protection, your potential losses on a Short CFD are unlimited. Gearing can magnify the level of losses on a Short CFD (see Section 6.2 for details). 1 Plus, in limited circumstances, the value of any franking credits applicable to the dividend. Please refer to Condition 4.3 of the CFD Terms and Conditions for more information. 9

12 You may lose more money than the amount in your Prime Account Your potential losses on a CFD can be substantial and may exceed how much Margin is designated to support a CFD and even the total funds in your Prime Account. Where your liability to us exceeds the funds in your Prime Account, we have recourse to you for any outstanding amount as a debt (see Section 6.3 for details). Providing Margin is an ongoing and constant obligation As with any other Margin Obligations you may have under your Prime Facility, you must meet Margin Obligations on your CFDs at all times and may be required to deposit additional funds into your Prime Account at any time and on short notice. Among other things, failure to meet Margin Obligations may result in us Closing-out your Open CFDs without any prior notice to you (see Section 6.4 for details). For this reason, you should monitor your Positions closely. Systems infrastructure may be disrupted Your ability to trade CFDs depends on the continued operation of, among other things, the Trading Platform, the internet, and your personal computer. A fault, delay or failure of any of these things could prevent you from making Orders and may result in losses on your Open positions (see Section 6.5 for details). Investment decisions You are responsible for the selection of the Reference Security for any CFD that you take out. As such, the performance of any CFD will depend mainly on investment decisions made by you. CFDs may be speculative (see Section 6.6 for details). Involuntary Close-out Macquarie may Close-out your Positions, including your Open CFDs, in a number of circumstances, including where you have insufficient Available Funds in your Prime Account to meet your obligations to provide Margin for any of your Transactions or where you exceed your Risk Limit. This may cause you financial loss. In some cases this Close-out may occur without you receiving any prior notice. In light of this, it is your responsibility to monitor at all times the level of funds in your Prime Account, as well as your total Margin and Utilised Risk Limit, and make additional deposits to your Prime Account when necessary to meet your Margin Obligations and any payment obligations you may have under your Prime Facility and to avoid exceeding your Risk Limit. However, note that Macquarie has the right to Close-out Short CFDs at any time without prior notice to you even if you are meeting your Margin Obligations and have not exceeded your Risk Limit. (see Section 6.7 for details) Macquarie s discretion, indemnities and limitations on liability We have discretions which can affect your Orders or CFDs, including certain powers to accept or refuse any Order you place, close your Prime Facility or Close-out any CFD. You do not have the power to direct us about the exercise of any discretion (see Section 6.8 for details). These and other key risks relating to CFDs are described in greater detail in Section 6 Significant Risks You Should Consider, which you should read carefully. 10

13 Section 2 Details of CFD Trading This Section contains a brief summary only of certain material features relating to trading CFDs. More detailed information relating to trading CFDs can be found in Section 11 Terms and Conditions. 2.1 How do I start trading in Macquarie CFDs? In order to trade CFDs with Macquarie, you must complete and submit online the Application Form available at macquarie.com.au/prime. In addition, to provide the Margin needed to support your CFDs, you will need to open a Macquarie Prime Facility and Macquarie Prime Account in your name under the terms of the Macquarie Prime Account PDS and Prime Client Agreement. Macquarie will then require that an initial amount of at least $5,000 (current as at the date of this PDS, but subject to change) be deposited in your Prime Account, or such lower amount that Macquarie may determine from time to time ( Initial Deposit ). Once the Initial Deposit is held in cleared funds in your Prime Account, you are able to place Orders and trade CFDs with Macquarie. Please note that Macquarie retains the right to refuse any application to trade CFDs or to open a Macquarie Prime Facility. Risk Limit When you open a Macquarie Prime Facility, we will place a limit on the total exposure to any Financial Instruments (including CFDs and shares) you are able to enter into using the Macquarie Prime Facility ( Risk Limit ). This Risk Limit will be shared across any Financial Instruments you enter into (not just CFDs). We retain the right to reject any Orders and/or Close-out CFDs in certain circumstances where you exceed your assigned Risk Limit. We may refuse to accept an Order in certain circumstances, including if the Order would increase your Utilised Risk Limit over and above your allocated Risk Limit. Additionally, if your Utilised Risk Limit exceeds your Risk Limit, this can lead to serious financial consequences for you, including refusal or cancellation of any Orders, Close-out of any Positions and/or closure of your Prime Facility (see Parts 2.5 and 6.7 for more information), as well as us recovering from you any monies that you owe us. At any time, you can view how much of this Risk Limit you have used through your investment activities (the Utilised Risk Limit ). Your Utilised Risk Limit is calculated as the maximum of: (i) the Face Value of all Positions and Orders for all Financial Instruments within your Prime Facility less your Net Equity; and (ii) zero. Your Net Equity is the value of all of your Long Positions, less the value of all of your Short Positions (if any), plus your Prime Account Balance. Your Prime Account Balance is the sum of the Funds Balance and the Blocked Funds in your account. The Funds Balance is equal to all amounts that have been deposited into your Prime Account, less any amounts withdrawn/paid out of that account and any Blocked Funds. Your Risk Limit, Utilised Risk Limit, the Face Value of your Positions and Orders and your Net Equity can all be viewed on the Macquarie Trading Platform. If you have an assigned Risk Limit of zero, you are required to use GSL protection on every Short CFD that you enter into (see Section below relating to Guaranteed Stop-Loss Orders). If you have a Risk Limit of zero, you should also note that if, at any time, you hold a CFD that is not subject to GSL protection, including where the GSL Period for that protection has expired, your CFD to which the Guaranteed Stop Loss Order applies may be immediately Closed-out in order to ensure that your Utilised Risk Limit no longer exceeds your Risk Limit of zero. This may occur prior to us notifying you of the breach of your Risk Limit. Therefore, if you want to continue holding your CFD past the end of the GSL Period and avoid the Close-out of the CFD, it is important that you purchase new GSL protection prior to the expiry of your existing GSL protection. Regardless of your Risk Limit, you must maintain sufficient Available Funds in your Prime Account to meet your Margin Obligations (see Section 3.1 for details). 11

14 2.2 How will my Macquarie Prime Account be affected by my trading in CFDs? While you are trading CFDs, amounts within your Prime Account will be designated as either Available Funds or Margin, depending on your Orders, CFDs and market movements. Available Funds are the funds that can be withdrawn from your Prime Account or used to meet payment obligations under your Prime Facility. In addition to holding sufficient Available Funds in your Prime Account (for example to meet any fees and charges associated with your trading in CFDs as referred to in Section 4), you are required to make sufficient funds available to support your Margin Obligations on each of your existing CFDs and on each Order to Open a CFD (being an amount equivalent to that held if the Order was accepted) ( CFD Margin ). Such Margin represents security held by Macquarie for your Orders and CFDs. You will be notified of the CFD Margin required at the time of your Order for the CFD and you should ensure that you have sufficient Available Funds in your Prime Account to cover this Margin as well as the ongoing CFD Margin (assuming we accept your Order). Your rights to deal with monies to the credit of your Prime Account are restricted to your Available Funds (and are also subject to our rights to call due amounts under your Loan Facility, if you have one). Generally, if we hold any monies to the credit of your account as CFD Margin, you will not be able to deal with those monies. All CFD Margin for Orders that are yet to be accepted are held in the Blocked Orders balance of your Prime Account and all CFD Margin for existing CFDs are held in the Blocked Funds sub-account of your Prime Account (see the Macquarie Prime Account PDS for more information on these balances). It is your responsibility to monitor at all times the level of Available Funds in your Prime Account, as well as your Margin Obligations, and make any necessary deposits to ensure that you have sufficient Available Funds in your Prime Account to cover any CFD Margin and any other payment obligations you have under your Prime Facility. Please refer to Section 3.1 for a further description as to how Margin is calculated. 2.3 How do I Open a CFD? You will need to place your Order through the Trading Platform, electronically or by telephone. We will allow you access to the Trading Platform if we accept your Application to trade CFDs using your Prime Facility. When you place an Order to open a CFD, you will need to specify certain information including the Reference Security and the CFD Quantity. Your Order will become an Open CFD only if and when Macquarie has accepted your Order in accordance with the Terms and Conditions. That is, when Macquarie enters into arrangements to buy or sell Reference Securities to hedge its exposure, or otherwise at the time it records the transaction concerning the CFD in its records. If by Macquarie accepting your Order, you would exceed your Risk Limit, your Order will not be accepted by Macquarie. Under the Terms and Conditions, Macquarie may choose not to accept an Order in certain circumstances (see Condition 3.4). If Macquarie, in its discretion, accepts an Order, you should note that there is no guarantee that an Order (other than a Guaranteed Stop-Loss Order) will be filled at a given price or time. You may cancel an Order at any time prior to that Order being accepted and filled by Macquarie. 2.4 How do I Close-out a CFD? You may Close-out in whole or in part your CFD by placing a Market-to-Limit or Limit Order that is an Opposite Position to an existing CFD and that Order is accepted by Macquarie. Where this Order is for a smaller quantity than the existing CFD, the existing CFD will be split into two CFDs, with one CFD equal in size to the Order being Closedout and the other CFD remaining Open. Your CFD will Close-out automatically if: a related Stop-Loss Order is accepted by Macquarie; or a related GSL Order is triggered. 12

15 2.5 Can Macquarie close my CFDs or stop my ability to trade CFDs without my approval? In some circumstances, Macquarie may Close-out a CFD or suspend your ability to trade CFDs, including where you exceed the Risk Limit or fail to maintain sufficient Available Funds to meet Margin Obligations. This may cause you financial loss. In some cases the Close-out or suspension may occur without you receiving any prior notice from Macquarie. It is important that you monitor at all times the level of funds in your Prime Account, as well as your total Margin and Utilised Risk Limit. You may need to make additional deposits to your Prime Account to meet your Margin Obligations and any payment obligations you may have under your Prime Facility and to avoid exceeding your Risk Limit. Additionally, in the case of Short CFDs, it is important to realise that Macquarie has the right to Close-out Short CFDs at any time without prior notice to you even if you are meeting your Margin Obligations. See Condition 7 of the Terms and Conditions for more details. 2.6 What types of CFD Orders exist? The basic types of Orders you can place when Opening, altering or Closing-out a CFD are set out below. If you have a Risk Limit of zero, you may need to place an Order for a GSL at the same time as your Order (see Section 2.1). This does not apply to an Order to Close-out a CFD Orders that can Open or Close-out a position You can Open or Close-out CFDs using a Limit Order, Market-to-Limit Order, or Trigger Order. Limit Order This is an Order to enter into a new CFD or Close-out an existing CFD where the relevant Reference Price reaches a specified level (the Limit Price ). If we accept this Order: where you are the Long Party under the new CFD (or requesting a Close-out to which you are the Short Party), the Order may be filled at the prevailing Reference Price where that price is equal to, or less than, the Limit Price; or where you are the Short Party under the new CFD (or requesting a Close-out to which you are the Long Party), the Order may be filled at the prevailing Reference Price where that price is equal to, or greater than, the Limit Price. Limit Orders expire at the end of the Limit Order Period that you select unless cancelled by either party. Market-to-Limit Order This is an Order to enter into a new CFD or Close-out an existing CFD at the best prevailing price at which the Reference Security is being offered for sale or bought respectively on the ASX. If there is not a sufficient quantity of the Reference Security at the best prevailing offer or bid price matching your Market-to-Limit Order, your Order for the remaining quantity will remain un-accepted and will be treated as a Limit Order at that original best prevailing offer or bid price. Market-to-Limit Orders are valid until accepted by us or cancelled by either party. For example, you decide to place a Market-to-Limit Order to Open 1,000 XYZ Long CFDs. The best current offer price (ie. the lowest price at which someone is prepared to sell an XYZ share on the ASX) is $10.00 per share. There are 600 XYZ shares available on the ASX at this price. Your Order may be accepted for 600 XYZ Long CFDs at $ The rest of your Order (ie. for the 400 XYZ Long CFDs that have not been accepted) will only be accepted if another offer is entered into the market at $10.00 or lower. 13

16 Trigger Order This is an Order requesting the placement of a Market-to-Limit or Limit Order2 if a particular event (a Trigger Event ) occurs. You specify the Reference Security and a specified Reference Price at which you would like the Trigger Event to occur (the Trigger Level ), and whether the Reference Price must be above or below (or equal to) the Trigger Level for the Trigger Event to occur. If a Trigger Event occurs, the Market-to-Limit or Limit Order is placed as applicable and operates as a normal Order of that type. For example, XYZ is currently trading at $9.80. You would like to Open a Long CFD at a Limit Price of $10.10, but only if XYZ trades above $ In this example: the Trigger Level is set at $10.00; and if XYZ trades at $10.00 or greater, a Trigger Event occurs and Limit Order to Open a Long CFD at $10.10 or less is placed Orders that can be used to limit losses Stop-Loss Order This is an Order requesting the Close-out of an existing Open CFD if the Reference Security reaches a price you specify in the Order (the Stop-Loss Level ). We may accept this Order by Closing-out your CFD at the prevailing Reference Price when: for a Long CFD, the Reference Price becomes equal to, or less than, the Stop-Loss Level; or for a Short CFD, the Reference Price becomes equal to, or greater than, the Stop-Loss Level. You should note that if the Reference Price moves suddenly, it is possible that Stop-Loss Orders may not be filled, or may be filled at a different price to that specified by you, and that you may suffer loss as a result. Stop-Loss Orders are valid until accepted by us or cancelled by either party. Guaranteed Stop-Loss Order (over CFDs) A Guaranteed Stop-Loss Order ( GSL Order ) is a request to enter into a binding commitment to Close-out a given CFD at a specified price (the GSL Level ) during the GSL Period if: for a Long CFD, the Reference Price is equal to or less than the GSL Level; or for a Short CFD, the Reference Price is equal to or greater than the GSL Level. A GSL Premium is payable by you should your GSL Order be accepted. For more information on GSL Premiums, see Section 4.3. When Opening or reviewing a CFD, you should consider whether a Stop-Loss Order or GSL Order would be appropriate for that position. The following are important matters you should consider before placing a GSL Order: Guaranteed worst-case Unlike a Stop-Loss Order which is Closed-out at the prevailing Reference Price, Close-out under a GSL will occur at exactly the GSL Level, thus guaranteeing your worst-case exit price during the GSL Period irrespective of market conditions. Macquarie will honour your GSL, even if a Market Disruption Event should occur up to and including the time 30 minutes prior to the Closing Time on the last Business Day of the GSL Period ( GSL Expiry ). For further information concerning how Market Disruption Events might affect your GSL, see Sections 2.10 and If these Order types are available. 14

17 Finite protection period GSL Periods are selected by you, generally from a list of available GSL Periods on the Trading Platform. GSL protection will cease on the first to occur of the following: the CFD to which the GSL relates is Closed-out; we accept a subsequent GSL Order over the same CFD; or GSL Expiry This means that, if you have not already Closed-out a CFD to which a GSL relates and wish to continue GSL protection over the CFD, you would need to purchase new GSL protection at least 30 minutes prior to Closing Time on the GSL Expiry Date. If you place your GSL Order in respect of a Market-to-Limit or Limit Order that has not yet been accepted, the GSL Period commences when the underlying Market-to-Limit or Limit Order is accepted, and the relevant GSL Premium has been paid. GSL replacement Throughout the GSL Period, you are able to replace your GSL at a new GSL Level. If you replace your GSL Level, you will incur no additional GSL Premium provided that: the GSL Percentage in absolute terms, is no less than that specified in the Order for the GSL you are replacing; and the GSL Expiry Date does not change. Otherwise, you will be charged a GSL Premium equal to what we calculate to be the incremental difference between the remaining value of the original GSL, and the cost of the new GSL. GSL Orders are available over a limited number of Reference Securities only GSLs can only be placed over Reference Securities approved by us. A list of approved Reference Securities is listed on the Prime Website. Additional cost A GSL Premium will be charged to your Prime Account when your GSL Order is accepted by us. The size of the GSL Premium will depend on a number of factors including the Reference Security itself, the GSL Percentage and the length of the GSL Period (see Section 3.14 for more information on GSL Premiums). GSL Order Acceptance We will only accept GSL Orders while the ASX is open, but you are able to submit GSL Orders to the Trading Platform at any time. If the market is not open at the time the GSL Order is submitted, it will not be processed until the market next opens for business. This also applies for any amendments to existing GSLs. Minimum GSL Percentage We retain the right to set a minimum GSL Percentage for all GSL Orders in absolute terms. This minimum GSL Percentage may be altered from time to time, with any changes published on the Trading Platform. Adjustment for the amount of any cash dividend If GSL protection is effective on the relevant Reference Security s ex-dividend date, we may reduce the GSL Level by an amount equal to the relevant cash dividend. No GSL trigger after normal trading ends If the Reference Price is beyond the GSL Level, this would ordinarily trigger the GSL and result in your CFD being Closed-out by Macquarie buying or selling Reference Securities on the ASX. In these circumstances, if the ASX has ceased normal trading when the Reference Price triggers the GSL (eg where the Reference Price is the price published at the end of the closing auction conducted by the ASX at the end of a Trading Day), you will not be deemed to have placed an Order to Close-out the CFD and your CFD will not be Closed-out. If the Reference Price at the beginning of trading on the next Trading Day was still beyond the GSL Level, the GSL would be triggered and GSL protection would apply in the normal way. If your Macquarie Prime Facility is terminated prior to the expiry of the GSL Period for any of your GSLs, Macquarie will refund part of the GSL Premium that you have paid. The amount refunded will be the remaining value of the GSL, as specified on the Trading Platform on the date of termination. When opening or reviewing a CFD, you should consider whether a Stop-Loss Order or GSL would be appropriate for that position. 15

18 2.7 Macquarie operates a Direct Market Access model for CFDs. What does this mean? When you place an Order in relation to a Reference Security, it is likely that Macquarie will place a corresponding order on the ASX to purchase or sell that Reference Security to hedge its market risk. Macquarie has certain discretions as to when and if it will accept an Order. Without limiting this discretion, it is likely that Macquarie will elect not to accept an Order in circumstances where its corresponding order on the ASX has not been filled. As such, ASX market procedures (including the procedures relating to the Integrated Trading System, ITS ), are likely to be highly determinative of how Macquarie may exercise its discretion with regard to your CFD trading. Macquarie may be unable to purchase or sell the Reference Security corresponding to your CFD Order on the ASX under certain circumstances, as set out below. Also, there are a number of circumstances outlined below where ASX orders may be cancelled, and you should understand that Macquarie is likely to cancel any related CFD Orders at the same time. These circumstances are not exhaustive and are subject to change. Market trading periods Normal trading on the ASX generally occurs between the hours of 10am and 4pm on Business Days. Where you place a CFD Order outside these market hours, your CFD Order is unlikely to be accepted by Macquarie until normal trading commences or Macquarie is otherwise able to purchase or sell the security corresponding to the Reference Security on the ASX. Orders by Macquarie on the ASX Macquarie s orders to purchase a Reference Security at a specified price (a bid ) during normal market hours will generally be matched off against any order to sell that Reference Security at or below that specified price (an offer ) and vice versa. Bids and offers at the same specified price are generally filled in the sequence they were placed. According to the ASX Operating Rules, a limit order to buy (or sell) a Reference Security will be filled to the extent that there are offers in the market at or below the limit price (or above in the case of a limit order to sell). This means that a limit order to buy a Reference Security may not be immediately filled if there are not sufficient offers to satisfy the volume of the limit order at or below the limit price. A market-to-limit order to buy (or sell) a Reference Security is treated as a limit order to buy (or sell) that Reference Security at the best available offer (or bid) price at the time the order is entered into ITS. Again, this means that, where the volume of the market order exceeds the volume of the best available offer (or bid), a portion of that order will not be filled immediately and will remain in the market as a bid (or offer) at that same price. Macquarie is unlikely to accept your CFD Order where Macquarie s corresponding bid or offer is not filled on the ASX. Even if Macquarie has accepted a CFD Order in relation to a Reference Security, where Macquarie has placed an order on the ASX to purchase or sell that Reference Security to hedge its market risk in relation to the Order and that purchase or sale does not settle, is cancelled or its settlement is delayed, Macquarie may cancel its acceptance of the Order or retrospectively change the date on which the Order was deemed to have been accepted and change any information in the Trading Platform (including the record of any CFD) to reflect this. Trading halts, suspensions and delisting An ASX-listed security may be placed in trading halt in circumstances that include the existence of price sensitive information (including a takeover bid) relating to that security. Additionally, a security may be suspended or delisted in circumstances including a failure by the Listed Entity to abide by the ASX listing requirements. Orders in relation to suspended or delisted securities are generally removed from ITS (a process described as purging ). Macquarie may cancel your CFD Order where the Reference Security is the subject of a trading halt, a suspension or a delisting. Dividends The ex-dividend date for an ASX-listed security is the first day that security is traded without the holder being entitled to a previously declared dividend. Orders placed on the ASX in relation to a Reference Security that will trade on an ex-dividend basis on the following Business Day are generally purged by the ASX. In this event, Macquarie is likely to cancel any Orders (other than Stop-Loss Orders) placed by an Investor for CFDs in relation to that Reference Security that have not been accepted. In addition to this, any GSL protection that is in effect on the relevant Reference Security s ex-dividend date, may have its GSL Level reduced by Macquarie by an amount equal to the Dividend Amount. Refer to Condition 8.1 of the Terms and Conditions for more detail on adjustments to Guaranteed Stop- Loss protection relating to dividends. 16

19 Corporate actions When a corporate event affecting a Listed Entity is imminent (including a bonus issue, rights issue or stock split), orders in relation to that security are generally purged by the ASX. Accordingly, Macquarie may cancel your Orders in respect of the Reference Securities of that Listed Entity under these circumstances (see Condition 3.15 of the Terms and Conditions) How are Reference Prices determined? If your Order is accepted, we will determine the Reference Price used to calculate the relevant CFD Face Value, having regard to the relevant quantities that are bid and offered at various prices on the ASX in respect of the Reference Security and other factors we consider are relevant to the determination. While a CFD is Open, the Reference Price will be equal to the last traded price of the Reference Security on the ASX. However, you should note that there are a number of cases where we have the right to determine Reference Prices which may be different to the last traded price, including when: the Reference Security is undergoing a Potential Adjustment Event (see Section 2.11); or the Reference Security is otherwise subject to a Market Disruption Event (see Section 2.9) What is a Market Disruption Event? A Market Disruption Event in relation to a Reference Security means the occurrence or existence of: (a) an Exchange Disruption, where we reasonably determine that: (i) the ability of market participants, in general, to effect transactions in, or obtain market values for, the Reference Security on the ASX has been disrupted or impaired; or (ii) the market for the Reference Security is illiquid, with reference to volume of Reference Securities bid or offered in the market at that time; or (b) a Trading Disruption, where: (i) any suspension, delisting or material limitation of trading in the Reference Security on the ASX occurs, the existence of which will be determined in good faith by us; or (ii) the ASX closes before its regularly scheduled Closing Time. An example of a Market Disruption Event is where a Reference Security is subject to an extended trading halt, and the Listed Entity makes an announcement that an external administrator has been appointed. In this case, it is likely that the true value of the Reference Security is lower than the last traded price on the ASX, and we may determine that the Reference Price is less than the last traded price (and potentially zero). Your GSL will be triggered if a Market Disruption Event occurs and the Reference Price we determine is less than or equal to the GSL Level in the case of an Open Long CFD, or greater than or equal to the GSL Level for an Open Short CFD How do Market Disruption Events affect GSLs when they expire? If a GSL reaches GSL Expiry when the relevant Reference Security is subject to a Market Disruption Event, the Reference Price is determined by us in our sole discretion, and may have the effect of causing a GSL to be triggered. In determining the Reference Price, where: (a) a Reference Security is subject to a Market Disruption Event; (b) GSL Expiry occurs in relation to a GSL over a CFD in respect of that Reference Security; and (c) during the occurrence of that Market Disruption Event, the relevant Listed Entity is subject to an Insolvency Event and the Reference Security is delisted or suspended, we will deem the Reference Price at the time of GSL Expiry to be zero, and honour any such GSLs on that basis. 17

20 2.11 How do Potential Adjustment Events affect CFDs? What is a Potential Adjustment Event? Potential Adjustment Event means, in relation to a Reference Security, any one or more of the following (as determined by Macquarie): (a) a subdivision, consolidation or reclassification of the Reference Security; (b) a distribution or dividend of any Reference Securities to existing holders by way of bonus, capitalisation or similar issue; (c) a distribution, issue or dividend to existing holders of the Reference Security of: (i) Reference Securities; (ii) other share capital or Reference Securities granting the right to payment of dividends and/or the proceeds of liquidation of the Listed Entity (or any other entity); (iii) share capital or other Reference Securities of a different person as a result of a spin-off or other similar transaction; or (iv) any other type of Reference Securities, rights or warrants or other assets; (d) a Special Dividend; (e) a redemption, cancellation or re-purchase by the Listed Entity or any of its subsidiaries of Reference Securities, whether out of profits or capital and whether the consideration for such redemption, cancellation or repurchase is cash, Reference Securities or otherwise; (f) a tender offer, exchange offer or a takeover bid for Reference Securities or any analogous offer; (g) a consolidation, amalgamation, de-merger, merger or binding share exchange of the Listed Entity with or into another entity or person; (h) the person that issued the Reference Security: (i) instituting or having instituted against it by a regulator, supervisor or any similar official with primary insolvency, rehabilitative or regulatory jurisdiction over it in the jurisdiction of its incorporation or organisation or the jurisdiction of its head or home office; (ii) consenting to a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors rights; or (iii) having presented in relation to it a petition for its winding-up or liquidation; and (i) any other event which Macquarie reasonably determines may have a dilutive or concentrative effect on the theoretical value of the Reference Security. Where a Potential Adjustment Event occurs, we may adjust the terms of any CFDs, Orders or GSL protection associated with that Reference Security or make a payment to, or debit funds from, the Macquarie Prime Account to aim to preserve the economic equivalence of the rights and obligations of the parties immediately prior to such an event. For example, we may adjust a Reference Price in relation to CFDs you hold, or adjust a GSL Level for a GSL Order you have placed. 18

21 Section 3 Cashflows and Margin Before applying to trade CFDs, or placing an Order, you should make sure you understand how the cashflows and Margin associated with trading CFDs work especially, in what circumstances you will need to pay us. You should consult with your stockbroker or financial adviser if you are uncertain as to how Margin or cashflows work. Failure to have sufficient Available Funds in your Prime Account to cover your obligations may give rise to an Event of Default, giving us certain rights, including the right to Close-out your CFDs or close your Prime Facility. Your potential liability for payments is not limited to the balance in your Prime Account and we may ask you to pay amounts in excess of any balance to cover outstanding amounts. Please advise us promptly if you are in financial difficulty. 3.1 Margin What is Margin? We take security from you to cover our financial exposure from your trading activity within your Prime Facility (ie security for any potential obligations you may have to make such as Mark-To-Market Payments, as explained in Section 3.2.1). For CFDs and Orders to open CFDs, this Margin is known as CFD Margin and comprises some or all of the cash blocked in your Prime Account. It is not a cost as such, but will affect how you deal with the funds in your Prime Account (see the Macquarie Prime Account PDS). Your rights to deal with monies to the credit of your Prime Account are restricted to your Available Funds (and are also subject to our rights to call due amounts under your Loan Facility, if you have one). Available Funds are the funds that can be withdrawn from your Prime Account or used to meet payment obligations under your Prime Facility. Generally, if we hold any monies to the credit of your account as Margin, you will not be able to deal with that amount. Margin secures our position; not yours. If you would like to limit your risk of losing money, you should consider a GSL when placing an Order. How much Margin do I need? Generally, the CFD Margin will fluctuate depending on market movements. The amount of CFD Margin we require you to hold at any time will be published on the Macquarie Trading Platform. We will notify you when you are in breach of your Margin Obligations via the Macquarie Trading Platform and, generally, an to your designated address. However, in some situations, we are able to close-out your CFDs to rectify your breach of a Margin Obligation prior to notifying you of the breach. As a result, it is critical for you to monitor your Positions and ensure you have sufficient Available Funds at all times to meet any changes in your Margin Obligations, including your CFD Margin. IMPORTANT The amount of Margin may change from time to time and even from minute to minute. It is not limited by the amount you hold in your Deposit Sub-Account at any time. So, you may be required to deposit funds into your Prime Account at short, or even without, notice to meet your Margin Obligations. Accordingly, it is vital that you maintain a sufficient buffer of Available Funds at all times to meet any changes. It is your responsibility to monitor at all times the amounts of Available Funds and Margin for your CFDs and Orders and make additional deposits to your Prime Account where necessary to meet your Margin Obligations and any payment obligations you may have under your Prime Facility. While Mark-To-Market Payments will generally only occur at the end of each Business Day, they may occur more frequently, and calculations of CFD Margin and designation of funds between Available Funds and Margin in your Prime Account are made continuously during each Business Day. If, at any time, there are insufficient Available Funds in your Prime Account to meet Margin Obligations after allowing for Mark-To-Market Payments based on prevailing intra-day Reference Prices this may lead to one or more of the following occurring in respect of your Prime Facility: your Orders may be cancelled - in some cases, without prior notice; Open CFDs may be Closed-out - in some cases, without prior notice; and your Prime Facility may be closed - in some cases without prior notice to you. The formula for determining the CFD Margin in respect of any CFD or Order is set out in the definition of CFD Margin in the Glossary in Section 12 of this PDS. The formula refers to the applicable Margin Rate. We may require less Margin than the amount indicated by the formula. 19

22 Note that the Margin required for a CFD or Order may be reduced by purchasing GSL protection over that CFD or an Order to place such a GSL. Please refer to Section 5.1.1, 5.1.2, 5.1.3, 5.1.4, and for worked examples of the calculation and maintenance of Margin. What are the Margin Rates? This PDS does not specify Margin Rates. This is because the Margin Rate applicable to each Reference Security is determined by reference to a number of variable factors, including the liquidity and volatility of the Reference Security. These rates may change for each Reference Security and will be published by Macquarie from time to time on the Trading Platform. Macquarie's Close-out rights are an important factor in how Macquarie calculates the Margin Rates that it offers to Investors. We will give you at least 3 days' prior notice of any change to Margin Rates that arise from our quarterly reviews of Margin Rates. We may also change Margin Rates at other times and if those changes relate to Margin Rates that apply to your Positions, we will also give you 3 days' prior notice. If the changes are to Margin Rates that do not apply to your Positions, we will send you a message in the Online Portal letting you know of the change. That message will be sent at least 3 days' prior to when the changes come into effect and you will see that message the first time you access the portal after the message has been sent. However, the time of your receipt of that message will obviously depend on how often you access the Online Portal. 3.2 What are the basic cashflows resulting from transacting in CFDs? Certain payments, fees and charges will be due and payable during the term of your CFDs. Such amounts may be due daily, monthly, when you place an Order, or when that Order is accepted by Macquarie. In addition to Margin Obligations, you are required to ensure that you have sufficient Available Funds in your Prime Account to facilitate such payments when they fall due. Failure to make these funds available is an Event of Default under the Terms and Conditions and gives Macquarie certain rights, including the right to cancel your Orders, Close-out your CFDs or close your Prime Facility Mark-To-Market Payments At the end of each Business Day, the CFD Face Value of each position is calculated and compared to the Previous CFD Face Value. Where the CFD Face Value is higher than the Previous CFD Face Value, the Short Party must pay the difference to the Long Party. Conversely, where the CFD Face Value is lower than the Previous CFD Face Value, the Long Party must pay this difference to the Short Party. These Mark-To-Market Payments will be affected by Macquarie as set out in Condition 4.2 of the Terms and Conditions. Please refer to Section 5 for a worked example of how a Mark-To-Market Payment is calculated. Please note that, while Mark-To-Market Payments are made only at the end of each Business Day, CFD Face Values are in fact recalculated continuously to ensure that there are sufficient Available Funds to cover such payments. If, at any time during a Business Day, it is determined that Available Funds held are not sufficient to cover the required Mark-To-Market Payments based on an intra-day valuation, this may lead to you being in breach of your Margin Obligations which could result in Macquarie Closing-out your CFDs or cancelling your Orders Dividends If you hold an Open Long CFD in respect of a Reference Security at the Closing Time on the day prior to the day the Reference Security is first quoted on an ex-dividend basis, you will receive an amount equal to the Dividend Amount multiplied by the CFD Quantity. This amount will be credited to your Prime Account. Conversely, if you hold an Open Short CFD in respect of a Reference Security at the Closing Time on the day prior to the day the Reference Security is first quoted on an ex-dividend basis, you will be charged an amount equal to the Dividend Amount multiplied by the CFD Quantity. This amount will be debited from your Prime Account. You should be aware that in certain limited circumstances where you hold an Open Short CFD, you may also be charged for franking credits applicable to a dividend paid to holders of the Reference Security3. The maximum amount so charged will be: 3 Where you hold a Short CFD, Macquarie will seek on a reasonable endeavours basis to borrow securities offshore to hedge Macquarie's exposure to that Short CFD. In ordinary circumstances, Macquarie will be able to borrow the securities offshore. However, if offshore borrowing is unavailable and a dividend is paid on the security, the relevant Dividend Amount debited from your Cash Account may include the value of any related franking credit, as well as the value of the cash dividend. 20

23 where; FC = amount included in the Dividend Amount referable to franking credits on the dividend D = the franked portion of the dividend t = the corporate tax rate at that time (currently 30%) Please refer to Condition 4.3 of the Terms and Conditions for more information on the payment of dividends, and Section for a worked example of how dividend payments are calculated Interest paid and received on Open CFDs Whether we pay you, or you need to pay us, interest on an overnight position depends on your CFD. The following table explains how interest works: Position Description Interest Rate You hold a Long CFD overnight You hold a Short CFD overnight You will be charged interest on the CFD Face Value of your Long CFD. This interest will be debited from your Prime Account. You will receive interest on the CFD Face Value of your Short CFD. This interest will be credited to your Prime Account. The Long Position Funding Rate is the Benchmark Rate plus a maximum margin of 6.00%pa. The Short Position Funding Rate is the Benchmark Rate minus a maximum margin of 6.00%pa. No interest will be payable by either party if the Short Position Funding Rate is negative. The Long Position and Short Position Funding Rates will be determined by Macquarie from time to time and may vary where the Benchmark Rate or our margin (within the maximum limits described above) changes. The margins set by Macquarie in respect of the Long Position and Short Position Funding Rates may differ (within the maximum limits described above). Standard rates will be displayed on the Prime Website, however we may set rates for individual Investors, including where your adviser tells us that you have agreed to a different rate from the standard rate. All of these rates (including rates you agree with us or your adviser) may be varied from time to time by either Macquarie where the Benchmark Rate or our margin changes, or by agreement between you and your adviser (provided that the rates that you agree with your adviser do not exceed the rates described in this PDS). For each CFD you hold overnight, interest will be calculated based on that position s CFD Face Value. This interest will be debited from, or credited to, your Prime Account on a daily basis. The daily interest amount for each CFD is calculated as follows: where: I = the daily interest amount. If you are the Long Party, this number represents the amount of interest you have to pay us. If you are the Short Party, this represents the amount of interest we are required to pay to you V = the CFD Face Value of the position. R = the Long Position Funding Rate where you are the Long Party, or the Short Position Funding Rate where you are the Short Party. Please refer to Section 5 for some worked examples of interest on Open CFDs Default Interest If you fail to pay when due any amount payable under any of the Transaction Documents, you must pay interest on the amount, from and including the due date, to the date of actual payment (after, as well as before, judgment). All such interest due shall be calculated using the Default Interest Rate, and paid in arrears on each Business Day by Macquarie debiting the funds held in your Prime Account. You must advise Macquarie promptly if you are in financial difficulty. For example, if you failed to make a Mark-To-Market Payment to Macquarie of $10,000 and the Default Interest Rate was 13.00%, Default Interest of $3.564 for each calendar day would be debited from your Prime Account. 4 $10,000 x 13% 365 = $$

24 Section 4 Fees and Other Costs Before applying to trade CFDs, or placing an Order, you should make sure you understand the fees and other costs of such an investment. You should consult with your stockbroker or financial adviser if you are uncertain as to how the level of fees and costs may affect you. Failure to have sufficient Available Funds available to cover fees and other costs may give rise to an Event of Default giving us certain rights, including the right to Close-out your CFDs or close your Prime Facility. Your potential liability for fees and other costs is not limited to the balance in your Prime Facility and we may ask you to pay amounts in excess of any balance to cover outstanding amounts. Please advise us promptly if you are in financial difficulty. The fees and other costs stated below are subject to change. Current fees and other costs are published on the Prime Website. 4.1 Interest You will have to pay interest to Macquarie on your Open Long CFDs. See Section for details concerning how the interest payable by you, or to you, is calculated. 4.2 Trading Fee You will be charged a Trading Fee each time you trade a CFD. This Trading Fee is payable in two instalments: the first on Opening and the second on the Close-out of the CFD. Each instalment of the Trading Fee will be calculated as being equal to the greater of: (a) (b) the CFD Face Value on Opening or Close-out of the CFD, multiplied by the Trading Fee Rate applicable at that time; and the minimum amount specified or agreed by Macquarie applicable at that time. How can I place an Order? You can place an Order via the Trading Platform, telephone or, if you have an adviser, through your adviser. How do I find out my Trading Fee Rate and minimum Trading Fee? If you do not have an adviser: As shown on the Prime Website at the time of Opening or Closing-out your CFD. If you have an adviser: Contact your adviser. The Trading Fee Rate and the minimum amount specified by Macquarie may vary depending on what method you use to place your Order, eg by phone or via the Trading Platform and whether or not you have an adviser. What is the most Macquarie can charge me as a Trading Fee? The Trading Fee Rate will not be greater than 2.00%. The minimum amount specified or agreed by Macquarie will not be greater than $200. If you have a financial adviser when you apply for a Macquarie Prime Facility, you and your adviser can agree a rate and minimum amount for your Trading Fee, provided that: (a) they cannot be more than the maximum levels listed in the table above; and (b) Macquarie consents to this rate and minimum. Your adviser will then notify us of the agreed rate and minimum amount that we will charge you. The rate and minimum amount of the Trading Fee you will pay may be changed in the future, either by Macquarie or if you agree a new Trading Fee with your adviser. Please also note that the Trading Fee you have agreed to with your adviser may differ from the fee quoted on the Prime Website. Trading Fees are debited from your Prime Account at the time of acceptance of an Order. No GST is generally payable in respect of Trading Fees. Please refer to Sections 5.1.2, 5.1.4, and for worked examples of how the Trading Fee payments are calculated. 22

25 4.3 GSL Premium Investors who have Guaranteed Stop-Loss protection in relation to a CFD will be charged a GSL Premium. The indicative GSL Premium will be calculated by Macquarie and communicated at the time the GSL Order is placed by the Investor and is subject to change. The GSL Premium is calculated and is payable when the GSL Order is accepted by Macquarie. This PDS does not specify the amount of any GSL Premium. This is because the amount of any GSL Premium is determined by reference to a number of variable factors as at the time of the GSL Order, including the market price of the Reference Security, prevailing interest rates, our view on the expected volatility of that price and the length of the GSL Period. For the purposes of simplicity, GSL Percentage is taken to be an absolute value in the above table (that is, an indicator of how far the GSL Level is set from the current Reference Price). No GST is generally payable in respect of GSL Premium. Please refer to Section 5 for an example of the application of a GSL Premium. 4.4 Adviser remuneration We may, out of our own funds, pay a commission to your financial adviser: (a) in respect of Trading Fees charged to you (in no case will this commission be more than the Trading Fees you pay); and (b) in respect of interest on overnight positions (in no case will this commission be more than 6.00%pa (inclusive of any applicable GST) of the aggregate CFD Face Values of the CFDs you have at any given point in time). Commissions paid to advisers will be calculated daily, payable monthly in arrears. For example, if you have an adviser and your total Trading Fees for the month of January are $1,200 we may pay your adviser up to $1,200 in respect of your Trading Fees for that month. And if, for example, you have an adviser and the aggregate CFD Face Values of all the CFDs you have open at the close of trading on a particular day is $40,000, we may calculate an amount payable to your adviser at month end of $6.585 for that day. Any adviser remuneration may be in addition to any other fees or expenses you may have agreed with your adviser for their services. Your adviser should give you details of their remuneration arrangements. Depending on your arrangements with your financial adviser, the amount of the adviser remuneration may be negotiated with your adviser and they may agree to reduce or rebate all or part of this remuneration. Soft dollar commissions Macquarie, or any member of the Macquarie Group, may from time to time provide or receive non-monetary benefits, sometimes known as soft dollar commissions. These may be provided to (or received from), for example, financial advisers or brokers. These benefits may include, but are not restricted to, research and market information, free or subsidised services, accommodation, broking arrangements, software and sponsorship of seminars and conferences. These benefits, when provided, will be paid by us or any member of the Macquarie Group, out of our own resources. 4.5 Goods and Services Tax ( GST ) Unless otherwise stated, fees and costs for supplies made by Macquarie that are expected to be subject to GST are stated inclusive of GST but do not take into account any applicable input tax credits or reduced input tax credits. The availability of input tax credits for Investors in respect of the acquisitions to which such fees relate will depend on each Investor's particular circumstances and it is recommended that you obtain your own independent taxation advice. 5 Commission = $40,000 x 6.00% / 365 (this commission is based on a rate of 6.00%pa) 23

26 Section 5 Worked Examples This Section provides hypothetical examples of how CFDs may operate. The Reference Prices, GSL Premiums, dividend rates, interest rates, Margin Rates, fees and charges quoted in the examples are provided for illustrative purposes only and should not be taken as an indication or commitment by Macquarie as to the values of these parameters that will actually apply on a CFD or an Order. Investors should read and understand the risks set out in Section 6 of this PDS and discuss these matters with their financial adviser before making any investment decision. 5.1 Long CFD Position Summary table of the rates and fees used in this example Margin Rate for Commonwealth Bank of Australia Ltd (CBA) 10.00% Trading Fee Rate 0.12%6 Long Position Funding Rate 7.25%pa Timing What happens Example The CFD Margin for your Order is calculated and that amount is redesignated from Available Funds to Blocked Orders in your Prime Account when you place your Order When you first place an Order When your Order is accepted. If your Order is a Limit Order to enter into a CFD at a particular Reference Price, the Order may be accepted if the Reference Security trades equal to or better than your specified price. Once the Order becomes a CFD position, the CFD Margin is then redesignated from Blocked Orders to Blocked Funds within your Prime Account. If and when the Order is accepted, a Trading Fee is payable. This will be payable in two instalments the first on acceptance of your Order, and the second on Closeout of the CFD. On 22 January 2009, Jane opens a Macquarie Prime Facility, depositing an amount of $10,000 into her Macquarie Prime Account. At the same time, Jane applies to transact in CFDs and places a Limit Order to enter into a CFD in respect of 2,000 Commonwealth Bank of Australia Ltd (CBA) Reference Securities at a Limit Price of $30. Jane specifies she will be the Long Party in this CFD. The Margin Rate for CBA is 10.00%, making the CFD Margin for this Order $6, This amount of Available Funds is redesignated as Blocked Orders in Jane s Macquarie Prime Account. The Available Funds balance is therefore $4,000. As the current market price for CBA is $30.50, the Order is not immediately filled. Later on 22 January, CBA s Reference Price declines to $30, and Jane s Limit Order is accepted. The first instalment of the Trading Fee of $72 8 is debited against the Available Funds in Jane s Macquarie Prime Account, leaving an Available Funds balance of $3,928. The $6,000 CFD Margin is transferred from Blocked Orders to Blocked Funds. 6 Please note for these examples the minimum Trading Fee is set at $ ,000 x $30.00 x 10.00% = $6, x $30.00 x 0.12% = $

27 5.1.3 Timing What happens Example While your CFD position is Open CFD position is Closed-out. Interest is payable by overnight holders of Open Long CFDs. This interest amount is calculated and paid daily. The Mark-To-Market Payments are calculated. CFD Margins are calculated continuously, with cash being redesignated between Available Funds and Blocked Funds in your Prime Account as appropriate. Interest is payable by overnight holders of Open Long CFDs. This interest amount is calculated and paid daily. The cash value of any dividends paid to the holders of the underlying Reference Securities is paid to Investors who hold Open Long CFDs on the ex-dividend date. A Long Party to a CFD can Closeout that CFD position by placing an Order for Close-out with Macquarie which is accepted by Macquarie. The Long Position Funding Rate is 7.25%pa and CBA s Reference Price at the close of business is unchanged at $30. The initial daily interest amount charged on Jane s position is therefore $ This is debited from Jane s Macquarie Prime Account. On 23 January, CBA s price increases to $32. The current CFD Face Value is $4,000 higher than the Previous CFD Face Value, and a Mark- To-Market Payment is made by Macquarie to Jane s Macquarie Prime Account. The CFD Margin on Jane s CFD position has risen to $6,400 10, so the extra $400 in Margin is taken from Jane s $4,000 Mark-To-Market Payment and redesignated as Blocked Funds. The remaining $3,600 is credited to Available Funds. As the CBA Reference Price at the close of business is $32, the daily interest amount charged on Jane s position for 23 January is therefore $ This is debited from Jane s Macquarie Prime Account. CBA announces a cash dividend of $1.00 per share with an ex-dividend date of 24 January. On the ex-dividend date, an amount of $2, is credited to Jane s Macquarie Prime Account. On 24 January, CBA s price falls to $31 and Jane decides to close her CFD position by placing a Market-to-Limit Order to Close-out that CFD. The current balance of Blocked Funds is redesignated as Available Funds and the second instalment of the Trading Fee of $ is debited from Jane s Prime Account. 9 2,000 x $30.00 x 7.25% 365 = $ ,000 x $32.00 x 10.00% = $6, ,000 x $32.00 x 7.25% 365 = $ ,000 x $1.00 = $2, ,000 x $31.00 x 0.12% = $

28 Jane s Macquarie Prime Account will have the following cash flows during January: 26

29 5.2 Short CFD position with a Guaranteed Stop-Loss Summary table of the rates and fees used in this example Margin Rate for Telstra Corporation Limited (TLS) 10.00% Trading Fee Rate 0.12% Short Position Funding Rate 1.25%pa Timing What happens Description The CFD Margin for your Order is calculated and compared to the amount of Available Funds in your Prime Account Order is placed, and Order is accepted. If there are sufficient Available Funds, the CFD Margin is redesignated from Available Funds to Blocked Orders, and your Order may be accepted. Once the Order has been accepted and a CFD position is opened, the CFD Margin is redesignated as Blocked Funds While your CFD position is Open. Interest is receivable by holders of overnight Open Short CFD positions. This interest amount is calculated and paid daily Guaranteed Stop-Loss ( GSL ) protection is purchased. You may make a Guaranteed Stop-Loss Order, specifying the GSL Period and the GSL Percentage. The GSL Period commences if and when the GSL Order is accepted by Macquarie and the GSL Premium is paid. Greg has a Macquarie Prime Facility with $5,000 on deposit in his Macquarie Prime Account and no open positions or Orders. On 2 April 2008, the current market price for Telstra Corporation Limited (TLS) is $4.70, and Greg places a Marketto-Limit Order to enter into a CFD in respect of 8,000 TLS securities. Greg specifies he would be the Short Party in this CFD. The Margin Rate for TLS securities is 10.00%, making the CFD Margin on this Order $3, This amount is redesignated from Available Funds to Blocked Orders to Blocked Funds. The Order is accepted by Macquarie at a Reference Price of $4.70. The first instalment of the Trading Fee of $45.12 is debited from Available Funds15. The Short Position Funding Rate is 1.25%pa and TLS s Reference Price at the close of business is $4.70. The initial daily interest on Open positions received on Greg s position is therefore $ On 3 April 2008, TLS s Reference Price is unchanged, but Greg has become concerned about the affect of a sudden rise in TLS s Reference Price on his Short CFD position. Greg places a GSL Order in respect of this CFD with a GSL Level of $4.90, a GSL Period of one month, and a cost of 0.70%. The Order is accepted by Macquarie, and the GSL Premium of $ is debited from Greg s Macquarie Prime Account. 14 8,000 x $4.70 x 10.00% = $3, ,000 x $4.70 x 0.12% = $ ,000 x $4.70 x 1.25% 365 = $ ,000 x $4.70 x 0.70% = $

30 Timing What happens Description Calculation of Margin on a CFD protected by a GSL. A GSL can have the affect of lowering the amount of CFD Margin required on a given CFD Interest is receivable by holders of overnight Open Short CFD positions. This interest amount is calculated and paid daily GSL Level is triggered, position is Closed-out. If, at any time during the GSL Period, the Reference Price is at or beyond the GSL Level, the CFD is Closed-out at exactly that GSL Level. The CFD Margin required on Greg s GSL protected CFD is equal to $1, The excess Margin of $2,160 is redesignated from Blocked Funds to Available Funds. As the TLS Reference Price remains at $4.70 on 3 April 2008, the daily interest amount Greg receives is again $ On 4 April 2008, TLS makes a positive public announcement regarding its profitability prior to the commencement of trading, and its Reference Price opens at $5.00. The GSL is triggered, and Greg s CFD is Closed-out at the GSL Level of $4.90. While Greg has lost more than $1,600 on this trade, the GSL has protected him from suffering more substantial losses. The second instalment of the Trading Fee of $ is payable on this Close-out, and is debited from Greg s Prime Account. Greg s Macquarie Prime Account will have the following cash flows during April: 18 CFD Margin = [$ $4.70] x 8,000 = $1, ,000 x $4.70 x 1.25% 365 = $ ,000 x $4.90 x 0.12% = $

31 Section 6 Significant Risks You Should Consider All investments involve varying degrees of risk. CFDs can carry a high level of risk. Returns received depend on a number of variable factors and may be volatile. In evaluating the merits and suitability of trading CFDs, you should carefully consider the following significant risk factors. This Section does not purport to be a comprehensive summary of all the risks associated with trading CFDs, but highlights particular significant risks of Investors suffering loss that we wish to encourage prospective Investors to discuss in detail with their professional advisers. Your rights and obligations in relation to your Prime Facility are contained in a number of separate documents, known as Transaction Documents. Please ensure you read and understand the terms of each of these documents and particularly any significant risk disclosures in each of these documents. You also need to understand the way in which your Transaction Documents interact. If you are unsure about any matter, we urge you to seek independent professional advice. CFDs are designed for experienced and sophisticated investors. You should not invest in CFDs unless you are experienced in equity derivatives and understand the risks of geared investing. You should reach an investment decision only after carefully considering the suitability of a CFD in your particular circumstances. You should seek independent advice where necessary. As well as considering the risks, you should consider how an investment fits into your overall investment portfolio. By diversifying your portfolio, you can reduce your exposure to any one investment or asset class. 29

32 Significant risks specific to investments in Macquarie CFDs 6.1 Gearing magnifies losses CFDs allow you to gain significant exposure to a Reference Security while outlaying a relatively small amount of cash. This is also known as gearing. A CFD can involve significant levels of gearing, which may magnify your potential losses (just as it may also increase your gains). If you borrow funds to use as Margin, this will further increase your level of gearing to potentially very high levels. Gearing magnifies losses - the higher the level of gearing, the more money you will lose if there is an adverse movement in the value of the Reference Security. Because of this you should ensure that you choose a gearing level suitable for you. Similarly, if you use your savings (including retirement savings) to fund the CFD Margin, the effect of gearing could mean that a relatively small change in the price of your investment could result in the loss of those savings. You should note that losses can exceed the amount of Margin that you outlay (see Section 6.3 below). As such, the value of any CFD can be volatile, and any investment in a CFD may be considered to be speculative. The example below demonstrates the affect of gearing by entering into CFDs with a $10,000 Margin, compared with using the $10,000 to invest directly in the underlying shares. In the example, the Investor has deposited the minimum funds in their Macquarie Prime Account to open this CFD, that is, the CFD Margin, thereby maximising the level of gearing available in respect of this CFD. As shown in the table, when trading CFDs, a relatively small fall in the price of the Reference Security can have a significant effect on the value of the CFD. * If you choose to purchase 500 shares at $20, the initial outlay will be the cost of buying the shares. If you choose to enter into CFDs, the initial outlay is the CFD Margin required to enter into this position, based on a Margin Rate of 5% for this Reference Security and no GSL protection. These examples are calculated on a gross basis and do not include any fees, interest or dividend adjustments. See Sections 3 and 4 for more details of the fees and costs payable in respect of CFDs. 30

33 6.2 Short CFDs CFDs allow you to take short positions in Reference Securities. The value of a short position will decrease if the Reference Price increases. This means that if you do not take out GSL protection, your potential losses on a short position are unlimited and could exceed the amount of money in your Prime Account (see Section 6.3 below). Gearing can also magnify the level of losses on a short position (see Section 6.1). 6.3 You may lose more money than the amount in your Prime Account Your potential losses on a CFD may be substantial; your losses may exceed how much Margin is designated to support a position and even the total funds in your Prime Account. Where your liability to us exceeds the funds in your Prime Account, we have recourse to you for any outstanding amount as a debt. You may also be liable for Default Interest. For example, if you held $2,000 in your Prime Account and had an Open CFD within your Prime Facility with a CFD Face Value of $15,000, if the Reference Price moved against you, you could lose more than the $2,000 in your Prime Account. 6.4 Providing Margin is an ongoing and constant obligation If a Reference Price moves against you, you may be required to make a Mark-to-Market Payment from your Prime Account. This could happen at any time, and could result in the balance of your Available Funds being insufficient to meet Margin Obligations on your CFDs and Orders. Further, we may change the Margin Rates for particular Reference Securities from time to time. As a result, you may be required to deposit substantially more money into your Prime Account. IMPORTANT The amount of Margin may change from time to time and even from minute to minute. It is not limited by the amount you hold in your Deposit Sub-Account at any time. So, you may be required to deposit funds into your Prime Account at short, or even without, notice to meet your Margin Obligations. Accordingly, it is vital that you maintain a sufficient buffer of Available Funds at all times to meet any changes. Failure to provide additional Margin when required could result in, for example: (a) your Orders being cancelled - in some cases without prior notice; (b) your CFDs being Closed-out (regardless of Reference Price) - in some cases without prior notice; (c) your Prime Facility being closed - in some cases without prior notice; (d) the balance of your Prime Account being insufficient to meet the required level of Margin and we may have recourse to you for any outstanding amount as a debt; and/or (e) Default Interest being charged. It is your responsibility to monitor at all times the level of funds in your Prime Account, as well as your total Margin, and make additional deposits to your Prime Account when necessary to meet your Margin Obligations and any payment obligations you may have under your Prime Facility. 6.5 Disruptions to Trading Platform Your ability to operate your Prime Facility depends on the continued operation of, among other things, the Trading Platform, your internet connection and your personal computer. A fault, delay or failure of any of these things could result in delays or failures to place Orders or restrict your ability to operate your Prime Facility. If this were to occur, you could suffer financial losses. To the extent permitted by law, we do not take any responsibility for any liability incurred in connection with any fault, delay or failure of the Trading Platform or any related infrastructure. However, see the discussion in section 6.8 below with respect to certain statutory rights you may have which cannot be excluded, restricted or modified. If, at any time, you are unable to use the Trading Platform, please call the Prime Client Service Team on Investment decisions Macquarie does not guarantee the performance of any CFD you enter into using the Macquarie Prime Facility. You are responsible for selecting the Financial Instrument for any CFD that you enter into. As such, the performance of any CFD will depend primarily on your own investment decisions. The Macquarie Prime Facility allows you to enter into CFDs that may be speculative, and you may lose more than the total funds in your Prime Account. Before placing an Order, please consider if a Stop-Loss Order or Guaranteed Stop-Loss Order would be appropriate to limit your potential loss. 31

34 Before making an investment decision via your Prime Facility, you should consider (in addition to the other risks described in the Transaction Documents): Volatility risk The value of your investments may go up and down by a material amount, even over a short period of time. Since July 2007, equity markets have generally become more volatile; indeed, over this period, volatility in some markets has been 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. Concentration / market risk This is the risk that the performance of your overall investment portfolio may be significantly affected if particular investments perform poorly, or you link your investments to common regions, industries or other groupings, and such regions, industries or other groupings perform poorly. Liquidity risk If liquidity is low in a Reference Security, this may affect your CFDs and Orders in respect of that Reference Security, including restricting your ability to open or Close-out CFDs in respect of that Reference Security as and when you want to. 6.7 Involuntary Close-out and Termination Under the Transaction Documents, including the Terms and Conditions set out in Section 11, we may Close-out a CFD (and potentially terminate your right to trade CFDs) in a number of circumstances, including where you have insufficient funds in your Prime Account to meet your Margin Obligations or where you exceed your Risk Limit. This may cause you financial loss. Additionally failure to comply with a Margin Obligation or exceeding your Risk Limit are Events of Default, which can lead to termination of the Prime Facility. IMPORTANT: Macquarie can in some cases Close-out any or all of your Positions, including your CFDs, without giving you any prior notice. In particular, where you breach a Margin Obligation and there is a shortfall in your Margin Obligations that is equal to or greater than 50% of the aggregate of all your Margin Obligations (ie. where the amount that is required to comply with the Margin Obligations is equal to or greater than 50% of those Margin Obligations) Macquarie may immediately commence Closing out any or all of your Positions, including your Open CFDs, to rectify the breach. This can also occur where you exceed your Risk Limit by 5% or greater or where you exceed your Risk Limit as a result of the expiry of a Guaranteed Stop Loss Order (however, in the case of expiry of a Guaranteed Stop-Loss Order, the Close-out is limited to the Position to which the Guaranteed Stop-Loss Order applies). Even if the shortfall in your Margin Obligations is or remains below 50% of the aggregate of all you Margin Obligations, or if you exceed your Risk Limit by less than 5%, you must act immediately, as Macquarie may Close-out your Positions if you have not rectified the breach by 2pm on the next Business Day after the day on which Macquarie gave you notice of the breach. In light of this, it is your responsibility to monitor at all times the level of funds in your Prime Account, as well as your total Margin and Utilised Risk Limit, and make additional deposits to your Prime Account when necessary to meet your Margin Obligations and any payment obligations you may have under your Prime Facility and to avoid exceeding your Risk Limit. Additionally, in the case of Short CFDs, Macquarie has the right to Close-out Short CFDs at any time without prior notice to you even if you are meeting your Margin Obligations and have not exceeded your Risk Limit. You should also note that the Positions that Macquarie closes to rectify the breach of a Margin Obligation may be unrelated to the Margin Obligation the increased in which led to you having insufficient funds to meet your Margin Obligations. For example, if a change in the Reference Price of BHP shares purchased under the Loan Facility leads to you having insufficient funds available funds to meet the change in the Margin Obligation associated with that Position, Macquarie may choose to Close-out other of your Positions (for example, by selling Telstra shares held in your Prime Facility) in order to make available sufficient funds to meet the relevant Margin Obligation. WARNING: Macquarie's rights to Close-out Positions under the Transaction Documents are provided solely for the purpose of securing your obligations to Macquarie, not for your benefit. Despite our rights to Close-out your Positions, including in the circumstances identified above, we may not do so and you should not rely on this to limit your exposure to further loss. 32

35 You should note that, even though Mark-To-Market Payments generally occur at the end of each Business Day, they may occur more frequently and CFD Margin is calculated by us on a continuous basis (see Section 6.4). So, your Orders and positions may be affected intra-day if you fail to meet obligations with respect to your CFD positions, including Margin and Mark-To-Market Payments. 6.8 Our discretion, indemnities and limitations on liability The Terms and Conditions (together with other Transaction Documents like the Macquarie Prime Account PDS) confer discretions on us which could affect your Orders and positions. These discretions include the powers to: accept or refuse any Order you place in certain circumstances; set your Risk Limit (see Prime Client Agreement); terminate your right to trade CFDs or Close-out any CFD in certain circumstances(see Section 2.5 above); determine the Reference Price used to value Open CFDs in certain circumstances(see Section 2.8); nominate Potential Adjustment Events and determine what adjustments may be appropriate to your CFDs as a result (see Section 2.11); and determine Margin Rates (see Section 3.1) You do not have the power to direct us about the exercise of any discretion. Whether you can exit your position at any time depends greatly on how liquid the underlying Reference Security is. We may not accept an Order to Close-out if, for example, we cannot purchase or sell Reference Securities in order to hedge that position. We may also be prohibited from accepting such an Order in respect of a Listed Entity (for instance, if the acquisition would cause the Macquarie Group s aggregate holdings in that company to exceed applicable takeover thresholds, or where a member of the Macquarie Group has announced a takeover bid for the relevant Listed Entity). You also indemnify us against certain losses and liabilities relating to the Trading Platform (see your Prime Client Agreement). An indemnity is a promise to keep another party harmless and compensate them for any loss or damage (including claims, costs, expenses, liabilities and other losses) which they may suffer as a result of any action covered by the indemnity. Indemnities are often drafted so as to cover a wide range of actions. An obligation to pay under an indemnity may arise without there being a breach of any obligation under the Prime Client Agreement or any other Transaction Document and without the need for Macquarie to prove that there have been any damages. You may have to compensate Macquarie for the entirety of the actual loss it has incurred regardless of whether you had any connection to the action which caused the loss. Further, our liability to you for losses is expressly limited in respect of that Trading Platform (see your Prime Client Agreement). This limitation of liability may extend to losses which are caused by Macquarie. However, as a consumer you have certain rights under certain State and Commonwealth legislation, including the Australian Securities and Investments Commission Act 2001, which can not be excluded, restricted or modified except, in some cases, to a limited extent. The limitations and exclusions in this CFD PDS, the Prime Client Agreement and other Transaction Documents are subject to the application of these rights. You should read the Terms and Conditions and your Prime Client Agreement carefully to understand these matters and seek legal advice if you are in doubt as to your legal rights. 6.8 A Settlement failure Trades in Reference Securities on ASX may fail. This occurs where, for example, a person does not receive the shares they purchased (or their sale proceeds) as the vendor (or purchaser) does not meet their obligations. To meet its obligations to you for CFD trades, Macquarie may hedge its risk by trading in the market in Reference Securities. If it does so, Macquarie will rely on its counterparties settling their trades to settle your CFD trade. Where these market counterparties fail to meet their obligations, however, this risk will be borne by you. For example, if Macquarie accepted your Order to buy a Long CFD in respect of 100 Reference Securities, Macquarie might place an equivalent Order on ASX to buy 100 Reference Securities to hedge its risk (of issuing the CFD to you). If Macquarie's counterparty fails to deliver Reference Securities, Macquarie may cancel the acceptance of your CFD Order, or retrospectively change the date on which this Order was deemed to have been accepted. In this respect, your CFD trading mimics the settlement risk of equivalent Reference Security trading in the market. ASIC and ASX also have the discretion to cancel or amend market transactions or crossings without the prior approval of Macquarie. Where a market transaction or crossing fails, this risk is borne by you and you are not able to claim compensation from Macquarie in respect of the cancelled or amended transaction. Macquarie may also remove or amend any Positions displayed on the Trading Platform prior to the transaction being cancelled or amended. 33

36 6.9 No guarantee in relation to Stop-Loss Orders Stop-Loss Orders may not be filled, or may be filled at a different price from that specified by you, for example, if the Reference Price moves suddenly, or liquidity changes, or if Macquarie determines that hedging its acceptance of a Stop-Loss Order (in whole or part) could create a disorderly market in the Reference Security. You may suffer loss as a result. Investors who are concerned about this risk should consider the use of GSL protection Our obligations The value of a CFD depends on, among other things, our ability to perform our obligations under the terms of this PDS. Failure to comply with such obligations may result in the investment being worth less than it otherwise would be, or even worth nothing at all. Our obligations in respect of a CFD are not deposit liabilities of Macquarie, and they are not guaranteed by any party. They are unsecured contractual obligations of Macquarie, which will rank equally with Macquarie's other unsecured contractual obligations and with its unsecured debt other than liabilities mandatorily preferred by law. In this regard, the Banking Act 1959 provides that, in the event of Macquarie becoming unable to meet its obligations, the assets of Macquarie shall be available to meet its liabilities in relation to protected accounts, certain costs of the Australian Prudential Regulatory Authority relating to those accounts, and other types of deposits in priority to all other liabilities of Macquarie, including the obligations of Macquarie under any CFDs. You must make your own assessment of our ability to perform our obligations. A description of Macquarie is set out in Section 9 to assist you in making this assessment Not a regulated market While CFDs allow you to gain exposure to listed Reference Securities, it is not associated with the ASX or any other licensed market and does not enjoy the protections available to trades made on those markets, such as the National Guarantee Fund Potential conflicts of interest Macquarie, other members of the Macquarie Group or their directors, employees or affiliates may buy and sell (whether as principal or agent) financial products related to the Macquarie Prime Facility or the Listed Entities, including trading in Financial Instruments. In addition, members of the Macquarie Group may, from time to time, advise any of the Listed Entities in relation to activities unconnected with the Macquarie Prime Facility and which may or may not affect the value of the Listed Entities or Financial Instruments. Such relationships and advisory roles may include: acting as manager, underwriter or joint lead manager in relation to the offering or placement of rights, options or other securities including Shares; advising in relation to mergers, acquisitions or takeover offers; and acting as general financial adviser in respect of (without limitation) corporate advice, financing, funds management and property and other services. Macquarie may also have a commercial relationship with various senior executives of a Listed Entity and may sell financial products to, or advise, such senior executives in relation to the Macquarie Prime Facility or matters unconnected with the Macquarie Prime Facility. These activities may have an adverse affect on the value of CFDs (for example, increasing required Margin) or the acceptance of Orders under a Macquarie Prime Facility. 34

37 General risks 6.13 General market risk and interest rate risk The price of a Reference Security can go up or down. Interest rates can go up as well as down. If the Benchmark Rate increases at a time when you are the Long Party to a CFD, then you will have to pay interest on that position at an increased rate. Factors that can affect the price of Reference Securities and interest rates generally include the changing profitability of companies and industries, economic cycles, volume of issuance, investor demand levels, business confidence and government and central bank policies Change of law Changes in law, including taxation and corporate regulatory laws, practice and policy could adversely impact your returns from investing in CFDs. These laws may also affect Macquarie s ability to hedge its obligations under a CFD and impact ability to accept Orders, including Close-out Orders. ASIC has from time to time banned covered short selling in particular Reference Securities. If such bans are imposed, then we may prevent you from entering into or Closing-out CFDs through the Trading Platform. As regulation in this area is constantly changing, please ensure you keep informed of any changes to short selling laws which may affect you Substantial shareholders, takeovers and associations The opening of a CFD may have implications for you (particularly if you are a substantial shareholder) under Chapters 6, 6A and 6C of the Corporations Act. The precise implications depend on your particular circumstances. The following summary of the law as at the date of this PDS is intended to assist you in identifying some possible practical obligations that may arise as a result of holding a CFD. Your obligations will, however, be affected by your individual circumstances and you should obtain your own advice. As soon as you place an Order to Open a Long CFD, until the Order is cancelled or the position is Closed-out, it is possible that you will have a relevant interest in the Reference Security relating to that Long CFD. At the time you open and Close-out a short position, it is also possible that you will have a relevant interest in the Reference Security relating to that short position. Disclosure obligations (including obligations on substantial shareholders) and limitations on acquisitions, under Chapters 6, 6A and 6C of the Corporations Act, may affect you in respect of opening, holding and closing of Long and Short CFDs. Further, under Part 6.10, Division 2 of the Corporations Act, the Takeovers Panel in certain circumstances may declare that an undisclosed CFD amounts to unacceptable circumstances Foreign Investors Transacting in CFDs may also have implications for foreign Investors under the Foreign Acquisitions and Takeovers Act 1975 ( FATA ) and other Commonwealth and State legislation (such as the Financial Sector (Shareholdings) Act 1998, the Telstra Corporation Act 1991, the Broadcasting Services Act 1992 and the Qantas Sale Act 1992). The FATA contains anti-avoidance provisions which prohibit foreign Investors from obtaining an economic interest in certain shares without acquiring the shares, for the purpose of avoiding the application of the FATA. Investors should seek their own legal advice in relation to all aspects of the proposed investment Other risks Your rights and obligations in relation to your Prime Facility are contained in a number of separate documents, known as Transaction Documents, such as the Macquarie Prime Account PDS or (if applicable) the Shorting PDS. Please ensure you read and understand the terms of each of these documents and particularly any significant risk disclosures in each of these documents. You also need to understand the way in which your Transaction Documents interact. If you are unsure about any matter, we urge you to seek independent professional advice. 35

38 Section 7 Taxation Considerations This summary outlines the main Australian income tax, GST and stamp duty implications for Investors who enter into CFDs pursuant to this PDS. The information in this summary is of a general nature only and does not purport to constitute legal or tax advice. Taxation issues are complex and taxation laws, their interpretation and associated administrative practices may change over the term of an investment in CFDs. Macquarie does not provide financial or tax advice and this PDS cannot address all of the taxation issues which may be relevant to a particular Investor. Each Investor must take full and sole responsibility for their own investment in CFDs, the associated taxation implications arising from that investment and any changes in those taxation implications during the course of that investment. As the taxation implications for each potential Investor may be different, Macquarie recommends that each prospective Investor obtains their own independent professional taxation advice on the full range of taxation implications applicable to their own individual facts and circumstances. All references in this summary to legislative provisions are to provisions of the Income Tax Assessment Act 1936 or the Income Tax Assessment Act 1997 (together, the Tax Act ). 7.1 Assumptions This summary of taxation implications assumes: (a) you are an Australian resident as defined in section 6(1) of the Tax Act; (b) you will hold CFDs under the Macquarie Prime Facility on revenue account, ie you will be a person who is carrying on a business of either trading in securities or derivatives or investing in securities or derivatives in the course of which you regularly acquire and dispose of securities or derivatives, and/or you will enter into CFDs for profit-making purposes, and not for the purpose of hedging risks associated with other securities held by you on capital account; (c) each obligation in respect of a CFD will be denominated in Australian dollars; (d) all transactions the Investor enters into with Macquarie in relation to Macquarie CFDs will be at prevailing market prices and otherwise on arm's length terms. This summary is based on Australian taxation laws in force and administrative practices generally accepted as at the date of this PDS. Any of these may change in future without notice and legislation introduced to give effect to announcements may contain provisions that are currently not contemplated. Future changes in taxation laws, their interpretation or associated administrative practices could affect the taxation treatment of CFDs offered under this PDS. 7.2 Income Tax Profits and losses from CFDs Any profit derived or loss incurred by an Investor in respect of a CFD should be included in the Investor's assessable income or allowable as a deduction (respectively) on the Close-out Date. The amount of any profit or loss should incorporate the amount of the Surplus, the Shortfall, the Trading Fee and any Dividend Amount or Interest on Open CFDs paid or received by the Investor. The CFD will also be a capital gains tax asset for the purposes of applying the capital gains tax ( CGT ) provisions. However, to the extent that a gain arising as a result of a CGT event in relation to the CFD is included in an Investor's assessable income under a provision of the Tax Act outside the CGT provisions, the capital gain resulting from the CGT event will be reduced. Similarly, to the extent that any loss under the CFD is deductible, this amount will not also contribute to a capital loss. Other payments Any GSL Premium paid by the Investor should be regarded as incurred for the purpose of deriving assessable income and should therefore be deductible at the time they are incurred. 36

39 Interest on your Prime Account Please refer to the Macquarie Prime Account PDS for information in relation to the tax treatment of any interest on your Prime Account. Taxation of financial arrangements On 26 March 2009, the Taxation of Financial Arrangements (TOFA) legislation was enacted. Broadly, this legislation affects the taxation of financial arrangements including the timing of derivation of assessable income, the quantum of a gain or a loss for taxation purposes and also the character of a particular receipt. The TOFA provisions only apply to income years commencing on or after 1 July 2010 unless an election to adopt the TOFA provisions early has been made. Further, the TOFA provisions do not apply to certain investors, including (a) individuals, (b) superannuation entities and managed investment schemes with assets of less than AUD $100,000,000 and (c) other entities with aggregated turnover of less than AUD $100,000,000, financial assets of less than AUD $100,000,000 and assets of less than AUD $300,000,000, unless the investor makes a specific election for the provisions to apply or the arrangement is considered to be a qualifying security for the purposes of the Act. CFDs should not be considered to be a qualifying security. Financial arrangements that are subject to the TOFA regime may be taxed on a compounding accruals basis, or in some circumstances in accordance with your audited financial reports (if any). If you elect into the TOFA regime, you should obtain independent taxation advice as to the application of the proposed provisions and their implications for the taxation treatment of an investment in CFDs. 7.3 Goods and Services Tax The A New Tax System (Goods and Services Tax) Act 1999 and related legislation impose a goods and services tax ( GST ) on certain supplies. The A New Tax System (Goods and Services Tax) Regulations 1999 identify a range of supplies that are input taxed financial supplies and not subject to GST. The opening or Close-out of a long or short CFD, the Mark-To-Market Payments, the payment of Dividend Amounts on CFDs, the payment or receipt of interest on the CFD Face Value of a position, the payment of Trading Fees or GSL Premiums will not be subject to GST. 7.4 Stamp Duty The Opening of a CFD, payments under a CFD and the Close-out of a CFD will not give rise to a stamp duty liability. 37

40 Section 8 Additional Information 8.1 Reporting Each time you Open or Close-out a CFD, or any time a GSL Order is accepted, we will provide you with a trade Confirmation outlining the details of the transaction. This trade Confirmation will be sent via or will be made available on the Trading Platform. You must provide a valid address as part of your Application. To avoid missing important communications, you should keep us updated of any changes to that address or any of your other details. 8.2 Enquiries and complaints We have procedures for dispute resolution, and they are available to you free of charge. You may make a complaint relating to your Prime Account directly to us in writing. We will always acknowledge any complaint promptly and provide a substantive response within no more than 45 days. If the outcome is unsatisfactory, you may be entitled to refer your complaint to the Financial Ombudsman Service at: Financial Ombudsman Service GPO Box 3 Melbourne VIC 3001 Telephone: Fax: (03) info@fos.org.au Web: fos.org.au The Financial Ombudsman Service s jurisdiction to hear your complaint will be subject to its rules (please refer to the service s website for more details). Nothing in this PDS is intended to prevent Macquarie from objecting to the referral of a complaint to the service, where appropriate. 8.3 Anti-money laundering regulations If your Application for a Macquarie Prime Facility, including the CFDs, is accepted: (a) You undertake that you will not knowingly do anything to put us, or any of our related bodies corporate (together, the Macquarie Group ) in breach of the Anti-Money Laundering and Counter-Terrorism Financing Act 2006, rules and subordinate instruments ( AML/CTF Laws ). You undertake to notify us if you are, or become, aware of anything that would put us, or any other member of the Macquarie Group, in breach of AML/CTF Laws. (b) If requested by us or any other member of the Macquarie Group, you undertake to provide additional information and assistance, and comply with all reasonable requests, to facilitate our, or any other member of the Macquarie Group s, compliance with AML/CTF Laws in Australia or any equivalent laws in any overseas jurisdiction. (c) You undertake that you are not aware, and have no reason to suspect, that: (d) the money used to fund your investment in or through a Prime Macquarie Facility, including CFDs, is derived from or related to money laundering, terrorism financing or similar activities ( Illegal Activities ); and (e) the proceeds of an investment made in connection with your Prime Macquarie Facility, including CFDs, will fund Illegal Activities. (f) You acknowledge that we, and other members of the Macquarie Group, are subject to AML/CTF Laws. In making an Application pursuant to this PDS, you consent to us and other members of the Macquarie Group disclosing, in connection with AML/CTF Laws, any of your Personal Information (as defined in the Privacy Act 1988 (Cth)) we have. 38

41 (g) (h) In certain circumstances we, or another member of the Macquarie Group, may be obliged to freeze or block your Prime Facility or any investment held under or through that facility where it is, or they are, used in connection with Illegal Activities or suspected Illegal Activities. Freezing or blocking can arise as a result of the monitoring that is required by AML/CTF Laws. If this occurs, neither us, nor any other member of the Macquarie Group, are liable to you for any consequences or losses whatsoever and you agree to indemnify us, and each other member of the Macquarie Group, if we, or any other member of the Macquarie Group, are found liable to a third party in connection with the freezing or blocking of your Prime Facility or any investment held under or through that facility. You acknowledge that we, and each other member of the Macquarie Group, retain the right not to provide any financial service or financial product to any person that we, or any other member of the Macquarie Group, decide, in our sole discretion, that we do not wish to supply. 8.4 Ethical considerations In relation to CFDs, we do not take into account labour standards, environmental, social or ethical considerations. 8.5 No cooling-off period Please note that no cooling-off rights apply following acceptance of your Application or any Orders made by you. 8.6 Privacy statement In addition to our duties under the Privacy Act 1988 (Cth), we have a general obligation of confidentiality toward you as an account holder except where: disclosure is compelled by law; there is a duty to the public to disclose; our interests require disclosure; or the disclosure is made with your consent. By completing the Application Form, you consent to us making certain disclosures regarding you, your CFDs and any other personal information you disclose to us from time to time. In particular, you agree to Macquarie collecting and using personal information about you to process your application (including with respect to any applicable AML/CTF Laws), and administer and manage the products and services we provide to you. This includes monitoring, auditing and evaluating those products and services, modelling data, data testing, communicating with and dealing with any complaints or enquiries. The Corporations Regulations 2001 require the collection of your name, date of birth and address. You need not give us any personal information requested in the Application Form or in any other document or communication relating to the products or services we supply you. However, if you do not provide us with this complete information, we may not be able to process your application or provide you with an appropriate level of service. You agree to allow us to disclose your personal information to other companies in the Macquarie Group as well as external service providers located in Australia or overseas, which provide services in connection with our products and services, for example, mail houses and professional advisers. Where you indicated you have an adviser, we will supply that adviser with information about your investments. We may also disclose your personal information: if, acting in good faith, we believe that the law requires or permits us to do so; if you consent; or to any person proposing to acquire an interest in our business. We and other companies in the Macquarie Group may use your personal information to offer products or services that may be of interest to you unless you request us not to. Under the Privacy Act 1988 (Cth), you may request access to your personal information that we hold. You can contact us to make such a request or for any other reason relating to the privacy of your personal information by telephoning the Prime Client Service Team on or writing to the Prime Client Service Team whose address is set out in the Directory. Macquarie s privacy statement and details on how you may access or update your personal information can be accessed at macquarie.com.au/privacypolicy. 39

42 Section 9 About the Issuer Macquarie Bank Limited Macquarie Bank Limited ( Macquarie Bank ) is an authorised deposit-taking institution under s9 of the Banking Act 1959 (Cth). Macquarie Bank is a subsidiary of Macquarie Group Limited ( MQG ). MQG, which is the ultimate parent of the Macquarie Group, is listed on the ASX and is regulated by APRA as a non-operating holding company of an authorised deposit-taking institution. Further information about the Macquarie Group structure and Macquarie Bank is available from macquarie.com.au. Information disclosed to the ASX by MQG can be viewed on the ASX website: asx.com.au (listing code MQG). Disclosure obligations Macquarie Bank is a disclosing entity under the Corporations Act and has a continuous disclosure obligation under that Act and the ASX Listing Rules. This means that, subject to certain exceptions, Macquarie Bank must disclose to the ASX any information concerning it that a reasonable person would expect to have a material effect on the price or value of Macquarie Bank s quoted securities (Macquarie Income Securities). Copies of the information disclosed to the ASX can be viewed on the ASX website: asx.com.au (issuer code: MBL). Documents available Macquarie Bank will provide a copy, free of charge, of its most recent publicly available financial reports and interim reports to any person who requests such copies by contacting Macquarie Bank (see the Directory for details). These documents may also be available online at: macquarie.com.au/investorrelations. Updated information You can obtain up-to-date information about Macquarie Bank by referring to: macquarie.com.au/investorrelations. 40

43 Section 10 How to Apply 10.1 Who can apply to trade CFDs? As a minimum, you may only apply to trade CFDs if you have successfully applied under the Macquarie Prime Client Agreement and the Macquarie Prime Account PDS. As with Macquarie Prime Account, to include CFDs as part of your Prime Facility you must be either: an Australian resident of 18 years or older; an Australian company; an Australian incorporated body; or an Australian trustee or nominee of another entity, such as a family trust, superannuation fund or Indirect Investment Service operator. You can apply to trade CFDs in your Prime Facility at the same time as you apply for a Macquarie Prime Facility. Please refer to the Prime Client Agreement for more information on applying for a Macquarie Prime Facility generally. We may require you to provide other supporting documentation before processing your application. We may reject or accept an Application for any reason or without giving any reason, in our sole discretion, and are not liable for any loss arising as a result of an Application being rejected How to Apply The online Application Form is available at the Prime Website. Please refer to the online Application Form for further details. 41

44 Section 11 Terms and Conditions MACQUARIE AND THE INVESTOR AGREE: 1 Definitions and interpretation 1.1 The definitions contained in the Glossary set out in Section 12 of this PDS apply to these Terms and Conditions unless the context otherwise requires. 1.2 The General Conditions apply to these Terms and Conditions. To the extent that there is any inconsistency between the provisions of these Terms and Conditions and the General Conditions, these Terms and Conditions will prevail. 2 Enabling CFD trading 2.1 Establishing the Investor s right to trade CFDs (a) (b) (c) If Macquarie, in its sole discretion, accepts the Application, Macquarie will allow the Investor to place Orders to enter into and Close-out CFDs. Macquarie will not accept any Orders relating to CFDs until the Investor has a minimum of the Initial Deposit in cleared funds in the Investor s Macquarie Prime Account as required by that PDS and the amount required as CFD Margin in accordance with Condition 6. The Investor's rights under these Terms and Conditions to place orders to enter into and Close-out CFDs apply only while the Investor maintains an open Macquarie Prime Account. Any closure of the Investor's Prime Account immediately suspends all rights of the Investor to place Orders under these Terms and Conditions. 2.2 Independent obligations The obligations of Macquarie in respect of each Investor in CFDs constitute separate and independent obligations governed by these Terms and Conditions which the relevant Investor is entitled to enforce. 2.3 Term The Investor acknowledges that these Terms and Conditions will continue until the Investor has performed all its obligations under the CFDs, all CFDs between Macquarie and the Investor have been Closed-out and the Investor s right to enter into or Close-out CFDs terminates in accordance with these Terms and Conditions. 2.4 Reference Securities The Investor acknowledges and agrees that, while Macquarie will determine the list of securities available as Reference Securities for the purposes of the Terms and Conditions, the selection of the Reference Securities underlying an Order or a CFD is the Investor s responsibility. The inclusion of a particular security as a Reference Security under these Terms and Conditions is not a representation, warranty or endorsement of the value or prospects of that Reference Security by Macquarie and as such, Macquarie accepts no liability or responsibility for the performance of any Reference Securities. 42

45 3 Contracts for difference 3.1 Entry into a CFD (a) (b) (c) If the Investor places, and Macquarie accepts, an Order in accordance with this Condition 3, Macquarie will enter into a CFD with the Investor in respect of a Reference Security. The CFD constitutes an obligation of Macquarie to pay to the Investor: (i) the Surplus on the Close-out Date; (ii) any Dividend Amounts payable by Macquarie in accordance with Condition 4.3; and (iii) any interest on Open CFDs payable by Macquarie in accordance with Condition 5.2. In consideration for the acquisition of the CFD, the Investor agrees to pay to Macquarie: (i) the Shortfall on the Close-out Date; (ii) any Dividend Amounts payable by the Investor in accordance with Condition 4.3; (iii) the Trading Fee in accordance with Condition 4.4; and (iv) any interest on Open CFDs payable by the Investor in accordance with Condition Determination of Reference Prices (a) When determining Reference Prices: (i) for the Opening or Close-out of CFDs, Macquarie will determine the relevant Reference Prices, being Macquarie's reasonable estimate of the market value of the Reference Security having regard to: (A) the relevant quantities that are bid and offered at various prices on the ASX in respect of the Reference Security; (B) (C) any ASX, company or market, announcements which Macquarie reasonably considers will materially change the value of the Reference Security; and any other factors that Macquarie considers are relevant to the determination. (b) (ii) while a CFD is Open, subject to Condition 3.2(b) below, the Reference Price will be equal to the last traded price of the Reference Security on the ASX, as determined by Macquarie; Macquarie will determine Reference Prices in any case where: (i) the ASX is closed; (ii) the Reference Security is subject to a Potential Adjustment Event; or (iii) the Reference Security is subject to a Market Disruption Event, being Macquarie's reasonable estimate of the market value of the Reference Security having regard to: (iv) the relevant quantities that are bid and offered at various prices on the ASX in respect of the Reference Security; (v) any ASX, company or market, announcements which Macquarie reasonably considers will materially change the value of the Reference Security; and (vi) any other factors that Macquarie considers are relevant to the determination. 3.3 Placing Orders (a) (b) (c) Once the Investor has the ability to enter into CFDs pursuant to Condition 2.1, the Investor may, by placing an Order with Macquarie: (i) offer to enter into a new CFD with Macquarie; or (ii) request Macquarie to Close-out an Open CFD. Orders are placed by Investors through the Trading Platform, or via other means acceptable to Macquarie. The Investor is responsible for ensuring the Investor has sufficient Available Funds in their Macquarie Prime Account to meet Margin Obligations for each Order to open a new CFD, as set out in Condition 6 of these Terms and Conditions. 43

46 (d) (e) (f) (g) When placing the Order, the Investor must set out details of: (i) whether the Investor intends to be the Long Party or the Short Party under the Order and the CFD; (ii) the relevant Reference Security; (iii) the CFD Quantity; (iv) the Order type; and (v) any other information applicable to the Order as may be required by Macquarie from time to time. Where the Macquarie Prime Facility has a Risk Limit of zero, each Order placed by the Investor to open a Short CFD must be accompanied by a corresponding Guaranteed Stop-Loss Order. No CFD is created or Closed-out until the Investor s Order is accepted by Macquarie in accordance with Condition 3.4 below. Where a Market-to-Limit or Limit Order is placed by an Investor that is an Opposite Position to an existing CFD of the Investor: (i) (ii) the Market-to-Limit or Limit Order will be treated as a request to Close-out the CFD to the extent that the CFD Quantity of the Market-to-Limit or Limit Order offsets the CFD Quantity of the existing CFD; and to the extent that the CFD Quantity of a Market-to-Limit or Limit Order exceeds the CFD Quantity of the CFD, this will be treated as a Market-to-Limit or Limit Order for a new CFD with a CFD Quantity equal to the amount of this excess. 3.4 Acceptance of Order (a) Macquarie may: (i) accept an Order in whole; or (ii) refuse to accept an Order or only accept an Order in part where: (A) Macquarie is unable to fill an order on the ASX that Macquarie requires in order to manage its risks with respect to the Order; (B) (C) (D) you have insufficient funds in your Prime Account to meet your obligations; trading in the Shares or Financial Instruments relevant to the Order have been suspended or halted for any reason whatsoever and you have not reconfirmed instructions; or a view is taken that the Order or the actions necessary for Macquarie to manage its risks with respect to the order is likely to: (I) (II) (III) contribute to a breach of either the Corporations Act, ASIC Market Integrity Rules, or ASX Operating Rules; or be inappropriate, unethical or likely to negatively impact on the reputation and integrity of Macquarie or the Trading Participant within the market; or create a disorderly market in the Shares. (E) (F) (G) (H) (I) accepting an Order would be in breach of Macquarie's internal risk management policies; you have not entered into a relevant agreement with Macquarie allowing you to place the Order; Macquarie is unable to accept the Order due to interruptions or failures of its IT systems; a relevant trade is not completed properly; Macquarie reasonably determines that: (I) market conditions make it inappropriate to accept the Order (having regard to factors including volatility, liquidity and availability); (II) it is otherwise necessary to refuse to accept the Order; or (J) accepting an Order would result in your Utilised Risk Limit exceeding your Risk Limit. 44

47 (b) (c) (d) (e) (f) Macquarie will be taken to have accepted an Order as soon as it enters into any arrangement to hedge its exposure under the CFD resulting from acceptance of the Order or otherwise at the time it records the transaction concerning the CFD in its records. Where the Macquarie Prime Facility has a Risk Limit of zero, Macquarie will not accept an Order to open a new Short CFD unless the Order is accompanied by a corresponding Guaranteed Stop-Loss Order. An Order will be binding on the Investor upon the acceptance by Macquarie of the Order. The Investor acknowledges that Macquarie may accept an Order in accordance with this Condition 3.4 without any notice of acceptance, aside from the Confirmation, being given to the Investor. If Macquarie decides not to accept, or cancels its acceptance of, an Investor s Order to enter into a CFD or to Close-out a CFD, Macquarie will advise the Investor of that decision. Despite anything in these Terms and Conditions, if Macquarie trades a Reference Security to hedge its acceptance of an Investor's Order and that trade does not settle, is cancelled or its settlement is delayed, Macquarie may cancel the acceptance of the Investor s CFD Order or retrospectively change the date on which this Order was deemed to have been accepted and change any information in the Trading Platform (including the record of any CFD) to reflect this. 3.5 Confirmations (a) (b) (c) (d) If Macquarie accepts an Order, Macquarie will send an Investor a Confirmation. A failure by Macquarie to send the Investor a Confirmation will not affect the validity of the CFD or Close-out. The Investor authorises Macquarie to: (i) send Confirmations in electronic form, on the basis that neither of them guarantees the security, confidentiality or absence of viruses or other harmful material in electronic communications; (ii) where permitted by law, send a single Confirmation for a series of transactions; and (iii) issue a replacement Confirmation or statement to correct an error or omission, if required by law. If there is a conflict between: (i) the Transaction Documents; and (ii) Macquarie s records of the transaction concerning a CFD or an Order, Macquarie s records of the transaction concerning a CFD or an Order will prevail except in the case of an error in Macquarie's records. 3.6 Errors If within five Business Days of acceptance of an Order, Macquarie determines that, in Macquarie's reasonable opinion, any terms of the CFD or Guaranteed Stop-Loss protection are materially incorrect, then without prejudice to any other rights of the parties: (a) Macquarie will Close-out the CFD and/or cancel the Guaranteed Stop-Loss protection; (b) Macquarie will give notice to the Investor of the error and the Close-out of the CFD and/or the cancellation of the Guaranteed Stop-Loss protection as soon as reasonably practicable; (c) each party must promptly refund any amounts paid in respect of the CFD or Guaranteed Stop-Loss protection, and neither party will have any further obligation in respect of the CFD or the Guaranteed Stop-Loss protection. 3.7 Order types (a) When placing an Order under Condition 3.3, an Investor may specify any of the following types of Orders: (i) Market-to-Limit Order ; (ii) Limit Order ; (iii) Stop-Loss Order ; (iv) Trigger Order ; (v) Guaranteed Stop-Loss Order ; or (vi) any other Orders described on the Prime Website from time to time. 45

48 Some Order types may not be available at a given point in time. Further, certain Order types will only be available for selected Reference Securities. A full list of the Order types and Reference Securities that are currently available is published by Macquarie on the Prime Website. 3.8 Market-to-Limit Orders (a) (b) (c) If an Investor specifies that an Order is a Market-to-Limit Order, the Investor offers to Open a CFD or requests the Close-out of an Open CFD in respect of the CFD at the best prevailing bid (where the Order is to Open a Long CFD or Close-out a Short CFD) or offer (where the Order is to Close-out a Long CFD or Open a Short CFD) Reference Price. If Macquarie does not completely accept the Order (because there is not a sufficient quantity of securities at the best prevailing offer (or bid) Reference Price for the Order to be accepted completely) the remaining quantity will remain un-accepted and will be treated as a Limit Order at the original best prevailing offer (or bid) Reference Price. The Market-to-Limit Order is open for acceptance in accordance with this Condition 3 for an indefinite period until the Market-to-Limit Order is cancelled by the Investor. 3.9 Limit Orders (a) (b) (c) (d) Where an Investor specifies that an Order is a Limit Order, the Investor offers to enter into a CFD in respect of the Reference Security or requests the Close-out of an Open CFD at the Limit Price or better at any time during the Limit Order Period in accordance with Condition 3.9(d). The Limit Order is open for acceptance by Macquarie for the Limit Order Period. The Limit Order Period is specified by the Investor as extending to either: (i) the next Closing Time; or (ii) an indefinite period until the Limit Order is cancelled by the Investor. Subject to Condition 3.4(a) Macquarie may accept the Limit Order: (i) where the Investor will be the Long Party under the CFD, or where the Investor is requesting the Closeout of a CFD to which the Investor is the Short Party, where the Reference Price is less than or equal to the Limit Price during the Limit Order Period; or (ii) where the Investor will be the Short Party under the CFD, or where the Investor is requesting the Closeout of a CFD to which the Investor is the Long Party, where the Reference Price is greater than or equal to the Limit Price during the Limit Order Period Stop-Loss Order (a) (b) (c) (d) Where an Investor specifies that an Order is a Stop-Loss Order, the Investor requests Macquarie to Close-out a CFD where the Reference Price is at or beyond the Stop-Loss Level in accordance with Condition 3.10(d). The Stop-Loss Order is open for acceptance by Macquarie for an indefinite period until the Stop-Loss Order is cancelled by the Investor. A Stop-Loss Order can be made with reference to an Open CFD, or with reference to a Limit Order. In the case of a Stop-Loss Order in respect of a Limit Order, the Stop-Loss Order can only be accepted by Macquarie after the Limit Order has been accepted. Macquarie will, subject to the matters set out in Condition 3.4(a)(ii), use reasonable endeavours to accept the Stop-Loss Order by Closing-out the CFD: (i) (ii) where the Investor is the Long Party, where the Reference Price is less than or equal to the Stop-Loss Level; or where the Investor is the Short Party, where the Reference Price is greater than or equal to the Stop- Loss Level. 46

49 3.11 Trigger Order (a) (b) (c) (d) If an Investor specifies that an Order is a Trigger Order, the Investor requests Macquarie to place a Market-to- Limit or Limit Order contingent on the occurrence of a Trigger Event in accordance with Condition In placing a Trigger Order, the Investor must specify the following terms on which a Trigger Event may occur, being the: (i) Reference Security; (ii) Trigger Level; and (iii) whether the Reference Price must trade equal to or above, or equal to or below, the Trigger Level for a Trigger Event to occur. The Investor must also specify the terms of the Market-to-Limit or Limit Order they wish to place based on the occurrence of a Trigger Event. The Investor may also place Stop-Loss or Guaranteed Stop-Loss Orders in respect of their Market-to-Limit or Limit Order. If a Trigger Event occurs in respect of a Trigger Order that has not been cancelled, the Investor is taken to have placed a Market-to-Limit or Limit Order in accordance with Condition 3.8 or 3.9 (as appropriate) and that Order is open for acceptance in accordance with Condition Guaranteed Stop-Loss Order (a) (b) (c) (d) (e) (f) (g) (h) Where an Investor specifies that an Order is a Guaranteed Stop-Loss Order, the Investor requests Macquarie to enter into a binding commitment to Close-out an Open CFD at the GSL Level if the Reference Price equals or exceeds trades at or beyond the GSL Level during the GSL Period, in accordance with Condition 3.12(f). As part of the Order, the Investor must specify a GSL Period and a GSL Percentage and will be advised of the indicative GSL Premium by Macquarie. The GSL Percentage is used in the calculation of the GSL Level. An offer to enter into a Guaranteed Stop-Loss arrangement can be made by an Investor with reference to an existing CFD, or with reference to a Market-to-Limit Order or a Limit Order that has not yet been accepted, including these Orders where they are part of a Trigger Order. Where the Guaranteed Stop-Loss Order is made with reference to an existing CFD, the Order may be accepted by Macquarie immediately. Where the Guaranteed Stop-Loss Order is made with reference to a Market-to-Limit Order or a Limit Order that has not yet been accepted, the Guaranteed Stop-Loss Order can only be accepted by Macquarie when Macquarie has accepted the Market-to-Limit Order or Limit Order (whichever applies). Macquarie may at its sole discretion accept a Guaranteed Stop-Loss Order. Upon acceptance by Macquarie, the Investor must immediately pay the applicable GSL Premium to Macquarie and the GSL Period will commence once the GSL Premium has been received by Macquarie. If at any time during the GSL Period: (i) if the Investor is the Long Party to the relevant Open CFD, the Reference Price is less than or equal to the GSL Level; or (ii) if the Investor is the Short Party to the relevant Open CFD, the Reference Price is greater than or equal to the GSL Level, the Investor will be deemed to have placed an Order to Close-out the Open CFD at the GSL Level. Subject to the payment of the GSL Premium, Macquarie also agrees that it will accept any Order to Close-out the Investor's CFD made under Condition 3.12(e) above. The Guaranteed Stop-Loss shall apply until either: (i) the CFD to which it relates is Closed-out by operation of the Guaranteed Stop-Loss or otherwise; or (ii) a subsequent Guaranteed Stop-Loss Order in respect of the same CFD is placed by the Investor and accepted by Macquarie; or (iii) GSL Expiry is reached, whichever occurs first. Subject to payment of the GSL Premium and Condition 3.4(a), Macquarie will Close-out the CFD at the GSL Level: (i) where the Investor is the Long Party, where the Reference Price is less than or equal to the GSL Level; or (ii) where the Investor is the Short Party, where the Reference Price is greater than or equal to the GSL Level. 47

50 (i) (j) Condition 3.12(e) will not apply if an event described in Condition 3.12(e) occurs at a time when normal trading on the ASX has ceased for that Trading Day. In the event that the Investor's Macquarie Prime Facility is terminated prior to the expiry of the GSL Period, Macquarie will refund part of the GSL Premium. The amount refunded will be the remaining value of the Investor's GSL, as specified on the Trading Platform on the date of termination Cancellation of Orders (a) (b) (c) 48 Without limiting Macquarie s rights under Condition 3.4(e), an Order (or part of an Order) can be cancelled at any time prior to the Order (or that part of the Order) being accepted by Macquarie. Such a cancellation can be made by: (i) the Investor, by giving notice of cancellation in a form acceptable to Macquarie; or (ii) Macquarie, by cancelling the Order (or the relevant part of the Order) in Macquarie s books and records. Where an Investor s request to cancel an Order (or part of an Order) is not received by Macquarie prior to acceptance of that Order (or the relevant part of the Order) by Macquarie the CFD or Close-out resulting from the acceptance of that Order shall be valid and binding under these Terms and Conditions. The Investor agrees and acknowledges that any action by the Investor to modify or cancel an Order (or part of an Order) otherwise than in accordance with Condition 3.13(a) will be ineffective No transfer of legal or beneficial interest in the Reference Securities The Investor agrees and acknowledges that a CFD does not transfer the legal or beneficial interest in any Reference Security to or from the Investor and the Investor has no right or obligation to acquire or deliver the Reference Securities underlying a CFD. 4 Payments, settlement, fees and charges 4.1 CFD Valuation Macquarie will calculate the CFD Face Value as at each Valuation Time. 4.2 Mark-To-Market Payments (a) (b) (c) (d) If at any Valuation Time: (i) the CFD Face Value is greater than the Previous CFD Face Value, the Short Party must pay to the Long Party the excess of the CFD Face Value over the Previous CFD Face Value; or (ii) the CFD Face Value is less than the Previous CFD Face Value, the Long Party must pay to the Short Party the excess of the Previous CFD Face Value over the CFD Face Value. If on the Close-out Date: (i) the Close-out Value is greater than the Previous CFD Face Value, the Short Party must pay to the Long Party the excess of the Close-out Value over the Previous CFD Face Value; or (ii) the Close-out Value is less than the Previous CFD Face Value, the Long Party must pay to the Short Party the excess of the Previous CFD Face Value over the Close-out Value. All Mark-To-Market Payments to be made in accordance with this Condition 4.2 shall be made on the same Business Day as the relevant Valuation Time or Close-out Date. Macquarie may deduct the amount equal to the Mark-To-Market Payments owing to it from the Macquarie Prime Account of the Investor in whole or in partial satisfaction of the Investor s payment obligation. Any Mark-To-Market Payment made under this Condition 4.2 by: (i) Macquarie, will be treated: (A) firstly as a refund of any Shortfall prepaid by the Investor under Condition 4.2(d)(ii)(B); and (B) secondly, to the extent of any excess of the Mark-To-Market Payment over the amount referred to in paragraph (A), as a prepayment of the Surplus; and (ii) the Investor, will be treated: (A) firstly as a refund of any Surplus prepaid by Macquarie under Condition 4.2(d)(i)(B); and (B) secondly, to the extent of any excess of the Mark-To-Market Payment over the amount referred to in paragraph (A), as a prepayment of the Shortfall.

51 4.3 Dividends (a) (b) If at any time during the term of a CFD the relevant Listed Entity pays an ordinary cash dividend to holders of the Reference Securities the Short Party must pay to the Long Party the Dividend Amount multiplied by the CFD Quantity. This payment shall apply to any CFD in relation to the relevant Reference Security held Open at the close of the last day where the Reference Security is traded on a cum-dividend basis, and the payment shall occur on the first day that the Reference Security is quoted on an ex-dividend basis. Amounts due under this Condition 4.3 will be satisfied by Macquarie either crediting or debiting the relevant amount to or from an Investor s Macquarie Prime Account. Where an Investor is the Short Party, Macquarie may, at its discretion, determine that the Dividend Amount includes an additional amount up to the value of any franking credits attaching to the dividend paid to holders of the Reference Securities. Without limiting this discretion, Macquarie may make this determination in circumstances where Macquarie incurs equivalent costs in hedging its obligations under the Investor's CFD. Macquarie undertakes to the Investor to use its reasonable endeavours to borrow stock offshore in order to minimise such costs. For the purposes of this Condition 4.3 the maximum amount which may be included in the Dividend Amount in relation to franking credits is; where; (c) (d) FC = amount included in the Dividend Amount referable to franking credits on the dividend D = the franked portion of the dividend t = the corporate tax rate at that time (currently 30%) Any payment under this Condition 4.3 by the Short Party to the Long Party where the Listed Entity for any reason subsequently fails to pay the related ordinary cash dividend shall be refunded by the Long Party to the Short Party at the earliest practicable time. If for any reason the Australian dollar amount of a dividend payable by a Listed Entity is not known at the exdividend date, the amount payable under this Condition 4.3 shall be determined at that time by Macquarie acting in good faith based on the relevant foreign currency conversion rate prevailing at that time. For the avoidance of doubt, this Condition 4.3(d) shall apply to any situation where the Listed Entity declares a dividend in a currency other than the Australian dollar, and the rate of conversion from this currency to the Australian dollar is not known at the ex-dividend date. 4.4 Amounts Payable Subject to Condition 0, the Investor will pay to Macquarie the Fees and Charges by the due dates specified in this PDS. 4.5 Settlement Unless otherwise noted, all amounts payable by the Investor to any Macquarie Group entity under these Terms and Conditions will be debited from the Investor s Macquarie Prime Account. All amounts payable by a Macquarie Group entity to the Investor will be credited to the Investor s Macquarie Prime Account. 4.6 Investor required to make all funds available The Investor must maintain sufficient Available Funds in their Macquarie Prime Account to satisfy the Fees and Charges when due and payable under these Terms and Conditions, and authorises Macquarie to debit the Investor s Macquarie Prime Account in respect of any such Fees and Charges that become due and payable. 4.7 Notification A notification given by Macquarie stating any amount or rate for the purpose of these Terms and Conditions, any CFD or Order will be evidence of the amount or rate unless proved to be incorrect by the Investor Variation of Fees Macquarie in its sole discretion reserves the right to change applicable Fees and Charges from time to time. Macquarie will provide prior notice of such changes as may be required by applicable law and regulation or, if there is no relevant requirement, at least 5 Business days' notice. Current Fees and Charges will be published on the Prime Website. To the extent that such Fees and Charges differ from those set out in Section 4, the Fees and Charges published on the Prime Website will prevail. 49

52 5 Interest 5.1 General (a) (b) (c) (d) All amounts payable under this Condition 5 shall be calculated by Macquarie on each Business Day using the applicable interest rate divided by 365 multiplied by the applicable Interest Period. All interest rates will be published by Macquarie or otherwise notified to an individual Investor and are subject to change. All interest payments shall be in arrears and shall be credited to or debited from the Macquarie Prime Account. Macquarie may agree with the Investor to vary the Long Position Funding Rate or Short Position Funding Rate that will apply to the Investor. 5.2 Interest on Open CFDs (a) (b) (c) (d) (e) In the event that a CFD is Open at Closing Time and the Investor is the Long Party, the Investor must pay to Macquarie an amount equivalent to interest on the CFD Face Value of this Open CFD at the Long Position Funding Rate. In the event that a CFD is open at Closing Time and the Investor is the Short Party, Macquarie must pay to the Investor an amount equivalent to interest on the CFD Face Value of this open position at the Short Position Funding Rate. Neither the Investor nor Macquarie will be liable to pay any interest in the event that the Short Position Funding Rate is negative. Any interest payable under paragraphs (a) or (b) above must be paid on the Business Day following the Closing Time. Where interest is payable by Macquarie under paragraph (b), Macquarie will pay such interest free and clear of and without deduction or withholding for or on account of Taxes except to the extent required by law. Macquarie is not required to make any additional payment to the Investor if it is required to deduct or withhold any amount from an interest payment to the Investor. 5.3 Long Position Funding Rate Subject to Condition 5.1(d), Macquarie may vary the Long Position Funding Rate at any time up to a maximum of 6% above the Benchmark Rate by publishing the rate as changed on the Prime Website, upon giving: (a) in the case of any variation arising in any way relating to a change in the official cash rate of the Reserve Bank of Australia, prior notice; (b) in all other cases, at least 5 Business Days' notice, of the change. 5.4 Short Position Funding Rate Subject to Condition 5.1(d), Macquarie may vary the Short Position Funding Rate at any time to a minimum of 6% below the Benchmark Rate by publishing the rate as changed on the Prime Website, upon giving: (a) in the case of any variation arising in any way relating to a change in the official cash rate of the Reserve Bank of Australia, prior notice; (b) in all other cases, at least 5 Business Days' notice, of the change. 50

53 6 Margin for CFDs (a) (b) (c) (d) (e) The Investor undertakes to comply with any Margin Obligations arising in relation to a CFD pursuant to these Terms and Conditions. The Investor must maintain any CFD Margin that applies for the Investor's CFDs as Blocked Funds in the Prime Account. The Investor irrevocably authorises and directs Macquarie to: debit the Investor's Deposit Sub-Account and credit Blocked Funds for the CFD Margin required for its CFDs in order to give effect to requirements under these Terms and Conditions. All Margin Rates: (i) are determined by Macquarie in its sole discretion (ii) may differ between: (A) particular Financial Instruments; or (B) particular Investors; (iii) will be published by Macquarie on the Prime Website (URL: Macquarie.com.au/prime); and (iv) are subject to change. Macquarie may vary the Margin Rates in its sole discretion by publishing the rates as varied on the Prime Website. Macquarie: (i) (ii) will review all Margin Rates from time to time and will provide at least 3 days' notice of all changes to the Margin Rates arising from that review; may also vary Margin Rates at any time and if it does so: (A) Macquarie will provide at least 3 days' notice of any variation to the Investor if the Investor holds a Position in respect of which the relevant Margin Rate is being varied; (B) if the Investor does not hold a position in respect of which the relevant Margin Rate is being varied: (I) Macquarie will send a notice of the change to the Investor at least 3 days prior to when the change(s) come into effect; and (II) the notice will be available to the Investor on the first occasion that the Investor logs-in to the Trading Platform after the notice is sent. (f) (g) (h) (i) The CFD Margin that is required for the Investor s CFDs Orders and for CFDs: (i) is calculated by Macquarie; (ii) is published on the Trading Platform; (iii) applies to the Investor from the time that the updated CFD Margin is reflected on the Trading Platform. The Investor must maintain sufficient Available Funds in its Macquarie Prime Account to satisfy the CFD Margin required in respect of all the Investor s CFDs and Orders for CFDs at all times, including any change in the required CFD Margin from time to time. Macquarie may in its sole discretion determine a CFD Margin amount to be less than that calculated in accordance with Condition 6(f). In the event that the Available Funds in a Macquarie Prime Account of an Investor is less than any increase in their Margin Obligation, the shortfall is immediately due and payable and gives rise to an Event of Default. The Investor acknowledges and agrees that any amount payable under this Condition 6(f) is a debt due and owing to Macquarie. 51

54 7 Close-out of CFD and termination of right to trade CFDs 7.1 Close-out of CFD by Agreement An Open CFD will be Closed-out: (a) (b) on acceptance by Macquarie of an Investor s Stop-Loss Order; pursuant to a Guaranteed Stop-Loss, on acceptance pursuant to Condition 3.14 of an Investor s request under Condition 3.14(e) (being the time during the GSL Period that the Reference Price first trades at or beyond the GSL Level); (c) on acceptance of an Investor s Order requesting Close-out of the Investor s CFD (including where the Order is deemed to be a Close-out under Condition 3.3(g)(i)); or (d) by Macquarie under Condition Partial Close-out of CFD by agreement If Macquarie accepts an Order requesting Close-out of a CFD and such Order relates to a CFD Quantity that is less than the CFD Quantity of the Investor s Open CFD: (a) (b) (c) the Investor s Open CFD will be deemed to have been split into two separate CFDs immediately prior to acceptance of the Order; of the two resulting CFDs: (i) the CFD Quantity of the first resulting CFD will equal the CFD Quantity of the Close-out Order; and (ii) the CFD Quantity of the second resulting CFD will equal the CFD Quantity of the original CFD less the CFD Quantity of the Close-out Order; and these Terms and Conditions will apply equally to the two resulting CFDs as if they had been entered into separately from the time of acceptance of the original CFD. 7.3 Terminating an Investor s right to trade CFDs by Investor If: (a) all an Investor s CFDs have been Closed-out; and (b) the Investor has paid in full all amounts due to Macquarie under these Terms and Conditions, the Investor may stop trading CFDs under these Terms and Conditions by giving notice in a form acceptable to Macquarie. 7.4 Close-out of CFD or cancelling Orders by Macquarie (a) (b) Subject to Condition 7.4(b) and Condition 7.4(d), for the purposes of securing the Investor s obligations to Macquarie in relation to the Investor s Open CFDs, if an Investor is in breach of a Margin Obligation or the Investor's Utilised Risk Limit exceeds the Investor's Risk Limit, Macquarie may: (i) in order to manage its risks; or (ii) for any other reason: do either of the following: (i) (ii) Close-out any or all CFDs to which the Investor is a party to the extent necessary to ensure that no breach of a Margin Obligation subsists or that the Investor's Utilised Risk Limit no longer exceeds the Investor's Risk Limit (as applicable); or cancel any or all of the Investor s Orders. Subject to condition 7.4(d): (i) unless (b) (ii) or (iii) or (iv) applies, Macquarie may exercise its rights under Condition 7.4(a) if the Investor is still in breach of a Margin Obligation or the Investor's Utilised Risk Limit still exceeds the Investor's Risk Limit at 2pm on the next Business Day after the day on which Macquarie gave notice of the breach of the Margin Obligation or that the Investor's Utilised Risk Limit has exceeded the Investor's Risk Limit. 52

55 (c) (d) (e) (f) (ii) if there is a shortfall in the Margin Obligation that is equal to or greater than 50% of the aggregate of all Margin Obligations. Macquarie may exercise its rights under Condition 7.4(a) even though it has not given any notice to the Investor of the breach of Margin Obligation prior to exercising those rights; (iii) where the Investor's Utilised Risk Limit has exceeded the Investor's Risk Limit by greater than 5%, Macquarie may exercise its rights under Condition 7.4(a) even though it has not given any notice to the Investor that the Utilised Risk Limit has exceeded the Investor's Risk Limit prior to exercising those rights; or (iv) where: (A) the Investor's Utilised Risk Limit has exceeded the Investor's Risk Limit due to the expiry of a Guaranteed Stop-Loss Order; or (B) the Investor has a Risk Limit of zero and a Guaranteed Stop-Loss Order expires (resulting in the Investor's Utilised Risk Limit exceeding the Investor's Risk Limit), Macquarie may exercise its rights under Condition 7.4(a), however limited to Closing Out the CFD to which the Guaranteed Stop-Loss Order applies, even though it has not given any notice to the Investor that the Utilised Risk Limit has exceeded the Investor's Risk Limit prior to exercising those rights; Without limiting Condition (b) under the heading Severability in the Interpretation section of Section 12 - Glossary below, each of paragraphs (i) to (iii) and sub-paragraphs (iv)(a) and (iv)(b) is a separate right or obligation and this clause is to be read as if each such was a separately expressed right or obligation. Macquarie's rights under this Condition 7.4(b) do not derogate from or limit its rights under Condition 7.4(c). Without derogating from or limiting Condition 7.4(b) and subject to Condition 7.4(d), for the purposes of securing the Investor s obligations to Macquarie in relation to the Investor s Open Short CFDs, Macquarie may, in its sole discretion Close-out any or all Short CFDs to which the Investor is a party immediately without prior notice to the Investor if: (i) (ii) as a result of steps Macquarie has taken to manage its risks with respect to the Short CFD, Macquarie is required to re-deliver security corresponding to the Reference Security applicable to the Short CFD; or for any other reason Macquarie is unwilling or unable to continue the Short CFD. Nothing in this Condition 7.4 derogates from or limits or restricts Macquarie's rights to Close-out CFDs under any other provisions of the Transaction Documents. For the purposes of this Condition 7.4 any Close-out pursuant to this Condition 7.4 will be deemed to take effect as if the Investor had placed, and Macquarie had accepted, a Close-out Order. The Investor acknowledges and agrees that for the purposes of Condition 7.4(a), to ensure that no breach of a Margin Obligation subsists or that the Investor's Utilised Risk Limit no longer exceeds the Investor's Risk Limit (as applicable) it may be necessary to Close-out CFDs greater in value than the extent of the shortfall in the Margin Obligations or the extent to which the Investor's Utilised Risk Limit exceeds the Investor's Risk Limit. 7.5 Terminating an Investor s right to trade CFDs by Macquarie (a) (b) In addition to any other right or remedy to which Macquarie may be entitled pursuant to the Transaction Documents or at law, following the occurrence of an Event of Default that is capable of remedy Macquarie may: (i) (ii) give the Investor a written notice that the Event of Default must be remedied within at least 3 Business Days of receipt of the notice; and without prior notice to any Investor Party, suspend the Investor's use of the Trading Platform and/or suspend the Investor's rights to trade CFDs under these Terms and Conditions until such time as the Event of Default is remedied. If the Investor fails to remedy the Event of Default within the period specified in a notice under Condition 7.5(a)(i) above, Macquarie may immediately without any further notice to the Investor:: (i) terminate the agreement comprised in the Transaction Documents ; (ii) (iii) (iv) terminate the Investor's use of the Trading Platform and/or terminate the Investor's rights to trade CFDs under these Terms and Conditions; cancel all or any of the Investor's Orders; or satisfy any obligation the Investor may have to Macquarie out of, without limitation, funds in the Macquarie Prime Account or funds available pursuant to Macquarie s set-off rights at Condition

56 (c) (d) In addition to any other right or remedy to which Macquarie may be entitled pursuant to the Transaction Documents or at law, following the occurrence of an Event of Default that is not capable of remedy Macquarie may immediately without any notice to any Investor Party: (i) terminate the agreement comprised in the Transaction Documents; (ii) (iii) (iv) terminate the Investor's use of the Trading Platform and/or terminate the Investor's rights to trade CFDs under these Terms and Conditions; cancel all or any of the Investor's Orders; or satisfy any obligation the Investor may have to Macquarie out of, without limitation, funds in the Macquarie Prime Account or funds available pursuant to Macquarie s set-off rights at Condition 7.8. Upon giving at least 10 Business Days' notice of its intention to do so, Macquarie may: (i) terminate the agreement comprised in the Transaction Documents; (ii) terminate the Investor's use of the Trading Platform and/or terminate the Investor's rights to trade CFDs under these Terms and Conditions; or (iii) cancel all or any of the Investor's Orders. 7.6 Position on termination of an Investor s right to trade CFDs With effect from the termination of an Investor s rights to trade CFDs under these Terms and Conditions, in accordance with this Condition 7: (a) the amount of any accrued interest and all other sums which have accrued under the Terms and Conditions (whether or not presently payable) will become immediately due and payable without further demand, notice or legal formality of any kind); and (b) the Investor will cease to have any rights to use the Trading Platform. In addition to the rights set out at Condition 7.8: (c) any indemnity granted by the Investor; (d) all the Investor s confidentiality obligations; (e) the representations and warranties given by the Investor; (f) any exclusion of Macquarie s liability; under the Transaction Documents, and any other rights or obligations of the Investor which arose before the Investor s right to trade CFDs under these Terms and Conditions was terminated and the use of the Trading Platform was terminated, will continue to have full force and effect. 7.7 Action on Event of Default Conditions 7.4, 7.5 and 7.6 operate in addition to any other rights of Macquarie or remedies conferred on Macquarie by the Transaction Documents or by law. 7.8 Settlement following Close-out or termination of an Investor s right to trade CFDs (a) (b) If a CFD is Closed-out under Conditions 7.1 or 7.4 or 7.9, or the Investor s right to trade CFDs under these Terms and Conditions is terminated under Conditions 7.3 or 7.5, any amount payable must be paid in accordance with Condition 4.2. For the avoidance of doubt, Macquarie s obligation to pay the Surplus and the Investor s obligation to pay the Shortfall under Condition 3.1 will be satisfied in full by making the Mark-To- Market Payments and by application of the unrefunded prepayments of those amounts made under Condition 4.2 so that no additional payment needs to be made by Macquarie or the Investor on account of the Surplus or Shortfall. Without prejudice to any other rights or remedies to which a party may be entitled to at law, upon termination of an Investor s right to trade CFDs under these Terms and Conditions any amounts, due and payable in accordance with these Terms and Conditions, by one party to another up to and including the termination, must be paid in accordance with these Terms and Conditions. 54

57 8 Undertakings and Acknowledgements, Variation of CFD and order terms 8.1 Potential Adjustment Events (a) If a Potential Adjustment Event occurs in respect of the Reference Securities the subject of a CFD, Order or Guaranteed Stop-Loss protection, Macquarie will ; (i) determine the appropriate adjustment, if any, to be made to the terms of any CFD, Order or Guaranteed Stop-Loss, including the number or description of the Reference Securities which are the subject of the CFD, Order or Guaranteed Stop-Loss; and (ii) make such payment to or from the Investor s Macquarie Prime Account, as it reasonably considers appropriate to account for the diluting or concentrative effect of that event. In making a determination under this Condition 8.1(a), Macquarie will use its reasonable endeavours to preserve the economic equivalence of the rights and obligations of the parties under the CFD, Order or Guaranteed Stop-Loss immediately prior to the event. (b) Where, in Macquarie's reasonable opinion, the Potential Adjustment Event referred to in Condition 8.1(a) would only result in an immaterial adjustment, Macquarie is not required to comply with Condition 8.1(a); 8.2 Ordinary cash dividend or distribution If any ordinary cash distributions or dividends are declared and/or paid on any Reference Securities the subject of a Stop-Loss Order or a CFD with a Guaranteed Stop-Loss protection, Macquarie will reduce any Stop-Loss Level or GSL Level by an amount equal to the Dividend Amount. This amendment will take place when Reference Security is first quoted on an ex-dividend basis. 8.3 Adjustment Such adjustment by Macquarie under Conditions 8.1 and 8.2 shall take effect as at a date reasonably determined by Macquarie and notification of the adjustment shall be given by Macquarie to the Investor as soon as reasonably practicable after the adjustment has been effected. 55

58 Section 12 Glossary Important Note: Unless the context otherwise requires, to the extent a defined term in this Glossary is inconsistent with an equivalent term defined in the Prime Client Agreement and/or Macquarie Prime Account PDS, the definition below will apply in this PDS to the extent of any inconsistency. accept means, in relation to an Order, the acceptance of that Order in accordance with Condition 3.4(a) of the Terms and Conditions. Application means an application by the Investor to Macquarie to trade CFDs on these Terms and Conditions set out in this PDS and the Application Form. Application Form means each of the online Application Forms available on the Prime Website and any other form of application or request for a financial service or Financial Instrument an Investor makes in relation to, or through, the Trading Platform, in a form acceptable to Macquarie. ASIC means the Australian Securities and Investments Commission. ASIC Market Integrity Rules means the ASIC/ASX Market Integrity Rules applying to trading on the market and all procedures, directions, decisions, requirements, customs, usages and practices of ASIC, as amended from time to time. ASX means the ASX Limited (ABN ) or the stock market conducted by ASX Limited, as the context requires. ASX Operating Rules means the operating rules, procedures, directions, decisions, requirements, customs, usages and practices of the ASX, as amended from time to time. Written guidance is made available by the ASX at asx.com.au/supervision/rules_guidance/index.htm ASX Settlement means ASX Settlement Pty Limited (ABN ) or another settlement facility approved to settle securities and other financial product transactions on markets operated by the ASX. Australian dollars means the lawful currency of Australia. Available Funds has the meaning given to that term in the Macquarie Prime Account PDS. Benchmark Rate means the interbank overnight cash rate published by the Reserve Bank of Australia from time to time. Blocked Funds has the meaning given to that term in the Macquarie Prime Account PDS. This is where required CFD Margin in respect of any CFDs is held within the Investor s Macquarie Prime Account. Blocked Orders has the meaning given to that term in the Macquarie Prime Account PDS. This is where required CFD Margin in respect of any Order to enter into a CFD is held within the Investor s Macquarie Prime Account. Business Day means a Trading Day on which commercial banks are open for general business in either Sydney or Melbourne. CFD means an over the counter contract for difference between an Investor and Macquarie entered into under the Terms and Conditions. CFD Face Value means, in respect of a CFD or Order at any Valuation Time, the amount calculated by Macquarie in accordance with the following formula: 56

59 CFD Margin means: (a) in respect of a given CFD or Order on any date where the CFD is, or the Order will be, protected by a Guaranteed Stop-Loss; (i) for a Long CFD, or an Order for a Long CFD: ; or (ii) for a Short CFD, or an Order for a Short CFD: (b) and for all cases other than those covered by (a) above, an amount calculated as: (i) in the case of a Limit Order: ; or (ii) for CFDs and any other type of Order, an amount calculated as; ; or such lesser amount, as Macquarie may determine from time to time. CFD Quantity means the number of Reference Securities to which the CFD or Order relates, as adjusted in accordance with the Terms and Conditions. Close-out or Closed-out means the termination of all or part of a CFD in accordance with Condition 7 of the Terms and Conditions. Close-out CFD Face Value means the amount calculated by Macquarie in accordance with the following formula: Close-out Date means the date on which all or part of a CFD is Closed-out. Close-out Reference Price means, in respect of a CFD, the price of the Reference Security as agreed between Macquarie and the Investor by, and applicable to, the Close-out of a CFD. Closing Time means the time that trading ceases in the ordinary course of business on the ASX. Condition means a condition set out in the Terms and Conditions. Confirmation means, in relation to a CFD, the confirmation prepared by Macquarie, and either: (a) sent to the Investor via electronic transmission; and/or (b) made available to the Investor via the Trading Platform, confirming the terms of the transaction. Corporations Act means the Corporations Act 2001 (Cth). Default Interest means the default interest payable as described in Section and payable under the General Conditions. 57

60 Default Interest Rate means: (a) the rate specified as the Default Interest Rate on the Macquarie Prime Website as at the date on which the Investor's Macquarie Prime Account is opened; or (b) if Macquarie has varied that rate under Condition 4(c) of the General Conditions, the rate as so varied. Disclosure Document means a product disclosure statement, information memorandum or other document under which a Financial Instrument is offered to an Investor. Dividend Amount means in respect of a Listed Entity, an amount equal to the gross amount of any ordinary cash dividend paid in respect of a relevant Reference Security and where the Investor is the Short Party, includes any additional amount referable to the amount of any applicable franking credit pursuant to Condition 4.3(b) of the Terms and Conditions. Event of Default has the meaning given to that term in the Macquarie Prime Account PDS. Exchange Disruption has the meaning as described in Section 2.9. Fees and Charges means the fees and charges specified in Section 4 as varied in accordance with Condition 4.8 from time to time. Financial adviser or adviser includes a broker or other financial intermediary. Financial Instrument has the meaning given to that term in the Macquarie Prime Account PDS. geared or gearing in relation to an investment in a CFD, has the meaning given in Section 6.1. General Conditions means the general conditions contained in Part 6 of the Prime Client Agreement. GSL Expiry means the time 30 minutes prior to the Closing Time on the last Business Day in the relevant GSL Period. GSL Expiry Date in respect of any GSL, means the date on which GSL Expiry occurs. GSL Level means where the applicable Guaranteed Stop-Loss Order is: (a) in respect of a Market-to-Limit or Limit Order that had not been accepted at the time the Guaranteed Stop- Loss Order was accepted: (b) in respect of an Open CFD at the time the Guaranteed Stop-Loss Order was accepted: GSL Percentage means: (a) where the Guaranteed Stop-Loss Order is in respect of a Long CFD or an Order to Open a Long CFD the percentage specified by the Investor in the relevant Order, which must be less than zero (ie negative); or (b) where the Guaranteed Stop-Loss Order is in respect of a Short CFD or an Order to Open a Short CFD, the percentage specified by the Investor in the relevant Order, which must be greater than zero (ie positive). GSL Period means the period agreed by the parties for which the Guaranteed Stop-Loss protection under Condition 3.14 of the Terms and Conditions will apply, commencing when the relevant GSL Premium is received by Macquarie. GSL Premium means the price of the Guaranteed Stop-Loss Order, as calculated by Macquarie and paid by the Investor to Macquarie in accordance with Condition 3.14 of the Terms and Conditions. GST means any goods and services tax, consumption tax, value added tax or similar tax, impost or duty imposed under any GST Law. GST Law means the tax imposed by the A New Tax System (Goods and Services Tax) Act 1999 (Cth) and the related imposition Acts of the Commonwealth. Guaranteed Stop-Loss or GSL means a binding commitment between Macquarie and the Investor to Close-out a CFD at the GSL Level in accordance with Condition 3.14 of the Terms and Conditions. 58