Macquarie Individually Managed Account Agreement and Application Booklet

Transcription

1 Macquarie Individually Managed Account Agreement and Application Booklet Macquarie Private Portfolio Management PART A PRODUCT FEATURES AND THE INVESTMENT MANAGEMENT AGREEMENT This Macquarie Individual Managed Account Agreement and Application Booklet is provided in two parts: Part A: Product features and the Investment Management Agreement Part B: How to apply and application forms Part A should be read and understood prior to making a decision to invest and completing the application forms in Part B. Issued by Macquarie Private Portfolio Management Limited ABN AFSL DATED: 12 MARCH 2014 A

2 Contents Contents 1. Introduction Key features and benefits How it works the basics How it works the details Significant risks Reporting Operating your account General information Individually Managed Account Agreement 16 9A. Investment Management Agreement 16 9B. Investment Policy Statement (IPS) 20 9C. Limited Power of Attorney 22 9D. Other important terms and conditions 24 B This document has been prepared by Macquarie Private Portfolio Management Limited ABN AFSL No (referred to in this document as MPPM, we, our, us). This document contains general advice and does not take into account your objectives, financial situation or needs. Before acting on this general advice you should consider whether it is appropriate to your situation. We recommend that you obtain financial, legal and taxation advice before making any financial investment decision. The Macquarie Individually Managed Account (IMA) referred to in this Agreement and Application Booklet is offered by MPPM. MPPM is part of the Macquarie Group of Companies. Investments in the IMA are not deposits or liabilities of Macquarie Bank Limited ABN or any member of the Macquarie Group and are subject to investment risk, including possible delays in repayment and loss of income and principal invested. Neither Macquarie Bank Limited, nor any other member company of the Macquarie Group guarantees the performance of the IMA or the repayment of capital from the IMA or any particular rate of return. Information in this document may change from time to time. We may provide updated information on our secure website. A paper copy of the updated information will also be available upon request and free of charge by contacting us. We may also be required to amend this document as a result of certain changes, in particular where the changes are materially adverse from the point of view of a reasonable person deciding to invest via the IMA.

3 1 Introduction As a client of Macquarie Private Portfolio Management (MPPM) you receive a comprehensive financial solution including customised portfolio management, reporting and investment administration. The Macquarie Individually Managed Account (IMA) is a discretionary portfolio management service that is available to wholesale clients (as defined by the Corporations Act 2001), including business investors, tax-exempt organisations, selfmanaged super funds and high net worth individuals. The minimum initial investment for the IMA is 500,000. Macquarie Private Portfolio Management Limited is a business operated by Macquarie Group. How it works Your account is an Individually Managed Account. An Individually Managed Account allows you to retain beneficial ownership of all assets. Your account is managed on a discretionary basis by a team of portfolio managers, to an agreed strategy and can be customised to suit your risk profile, tax status and ethical preferences. You have the ability to invest in the major asset classes, and your account has a unique investment mandate reflecting your objectives and asset allocation. You retain beneficial ownership of all the investments transferred into your account. This means that we can transfer in an existing portfolio of investments with little or no tax consequences and continue to manage to your individual circumstances. You and your adviser can: customise your account to suit your individual tax management, risk and return requirement and ethical preferences fund your account with cash, or transfer an existing portfolio of ASX listed securities and certain managed funds, without triggering a capital gains tax liability (provided there is no change in beneficial ownership) set up a regular contribution plan to make recurring contributions to your account set up a regular withdrawal plan to receive regular payments from the cash component of your account view your account holdings and transactions online upon closing your account, transfer investments to your name without triggering a capital gains tax liability (provided there is no change in beneficial ownership). Individually Managed Account Agreement In addition to information about the IMA, this booklet contains a number of important agreements, terms and conditions relating to your account, which can be found on pages 16 to 28 of this booklet. Details of these documents are outlined in the table below. Page Section Purpose 16 9A. Investment Management Agreement 20 9B. Investment Policy Statement (IPS) The Investment Management Agreement details the terms on which we have agreed to manage your account. The Investment Policy Statement details investment objectives, goals and guidelines for your account. The Investment Policy Statement includes details of your customised investment mandate, including your agreed investment strategy and asset allocation. 22 9C. Limited Power of Attorney Enables us to transfer assets on your behalf to our custodian for the purpose of funding your account. 24 9D. Other important terms and conditions Terms and conditions governing the operation of your account. Please ensure that you consider the risks of investing in the IMA, including those on pages 8 to 9. As well as considering the risks, you should also consider how an investment in the IMA fits into your overall investment portfolio. By diversifying your investment portfolio, you can reduce your exposure to failure or underperformance of any one investment, manager or asset class. 1

4 2 Key features and benefits Key features Feature Details Section Tailored investment portfolios Asset allocation Term deposits Choice of funding Minimum initial investment Online access 24/7 Quarterly reports Annual tax report Investment lending Access to your investment Your account can be customised to suit your individual tax management, risk and return requirements. You also have the ability to restrict certain securities or sectors, enabling you to tailor your account to suit your individual investment and ethical preferences. Your account is managed according to the asset allocation outlined in your Investment Policy Statement. Changes to your asset allocation can be made at any time by completing a Change in Investment Policy Statement form available from your adviser or the Resources section of our secure website. You have access to a range of term deposits with different maturities, subject to a minimum deposit of 50,000 and increments thereof of 10,000. A list of available term deposits is available on our secure website. Accounts can be funded by cash, transfer of an existing portfolio of ASX listed securities and certain managed funds, by borrowing via an investment loan from an approved lender, or a combination of these. In addition you can set up a regular contribution plan to make recurring contributions to your account. Part A, sections 3 & 4 Part A, section 4 Part A, section 4 Part A, section 7 500,000. Part A, section 7 You have access to secure online reporting, allowing you to view your account holdings and transactions at any time. Each quarter we will make available a report pack that will include: market and strategy commentary performance asset allocation tax invoice (where applicable). After the end of a tax year we will make available details of any assessable income, capital gains, tax credits and any other relevant items to include in your tax return. You can apply to gear your account with an investment loan from an approved lender. For further details, speak to your financial adviser. You can withdraw from your investment at any time, or set up a regular withdrawal plan to transfer regular payments from your account to your nominated financial institution. If you withdraw your investment or close your account, you have a choice of: having your holdings sold, and the cash proceeds sent to you having your holdings transferred to your name, without triggering a capital gains tax liability (provided there is no change in beneficial ownership), or a combination of the above. Part A, section 6 Part A, section 6 Part A, section 6 Part A, section 7 Part A, section 7 Key benefits Customised solution Professional management Personalised tax management Beneficial ownership Complete transparency Flexibility Tailor your account to suit your investment requirements. In consultation with your adviser choose from a range of strategies across multiple asset classes, then customise your account to match your risk profile, tax status and ethical preferences through the creation of an Investment Policy Statement. Your account is individually managed by a dedicated investment team who seek to provide superior investment outcomes by undertaking in depth analysis and research. Your account is individually managed on an after-tax basis, with your tax status taken into account prior to the execution of trades, which has the potential to enhance the performance of your account. Because you are the beneficial owner of the assets in your IMA, you benefit from the income and franking credits the account generates. This approach seeks to deliver better after-tax outcomes than a pooled investment. Stay connected to your account through secure online access, including visibility of holdings and transactions through daily account reporting. Quarterly performance reporting, including tailored investment commentary, and annual tax reporting is also provided. Flexibility to enter or exit at any time without entry or exit fees and the ability to transfer securities held in the same name in and out of your account without the realisation of capital gains. 2

5 3 How it works the basics There are four key elements to establishing and managing your IMA 1. Your Investment Policy Statement records your asset class and strategy selections and your investment restrictions. 2. The funding of your account with cash, an existing portfolio of investments or an investment loan. 3. The commencement of your account and ongoing rebalancing to keep your account tracking to its strategic targets. 4. Ongoing investment management of the asset class strategies. YOU AND YOUR ADVISER Investment Policy Statement (IPS) Asset allocation Investment strategy Investment restrictions MACQUARIE PRIVATE PORTFOLIO MANAGEMENT Funding Cash Securities Managed funds Investment loan Account commencement Ongoing rebalancing Transfer to IMA custody Strategy and weighting changes 14 days to build account to IPS Trading Investment restrictions Investment restrictions Optimise for tax Optimise for tax Investment management Investment strategy management Research Stock weights and changes 3

6 4 How it works the details 4.1 Investment Policy Statement (IPS) The purpose of the IPS is to document investment objectives, goals and guidelines in managing your investment account. There are four parts: strategic asset allocation investment strategy term deposits investment restrictions. Strategic asset allocation Strategic asset allocation refers to the long term or target asset allocation to each asset class in your investment account. The asset allocation you nominate forms part of your IPS and should reflect your investment objectives, risk profile and time horizon of your account. You have the ability to invest in term deposits as part of the cash portion of your strategic asset allocation. Your asset allocation should be reviewed on a periodic basis by you or with your financial adviser to ensure it remains aligned with your long term investment objectives. Any changes to your asset allocation need to be made in writing and will be made effective once we agree to the change. If we do not agree to the change, we will contact you. We will aim to manage your account to the target allocations you specify, generally achieving this either within 14 calendar days from the date your account is fully funded, or in the period you select when we receive your IPS change request. If for any reason, such as a cash or stock contribution or a large market movement, your account moves away from your target allocations, your account will be rebalanced back towards the target allocations as soon as reasonably practical. If you are invested in term deposits, we may be unable to rebalance your account until your term deposits mature. This may reduce the amount of cash that is able to be reinvested in term deposits. Investment strategy You also nominate an investment strategy for each asset class. Each strategy has its own investment objective and approach. There are a range of strategies to select for each asset class, you can only select one strategy per asset class. A summary of the investment strategies is available by logging into our secure website on macquarie.com.au/mppm. Your adviser can also provide you with more detailed information on the investment strategies. The investment strategy summaries give you information on matters such as objective, investment philosophy of the strategy, the decision making and the risk management process. You should review your selected strategy profile and discuss any concerns with your adviser before filling out the application form. The available investment strategies and their characteristics may change from time to time. All amendments will be made available via our secure website. Term deposits You have the ability to invest in term deposits as part of the cash portion of your strategic asset allocation. As part of your IPS you can set the parameters to which an investment in term deposits can be made. This is achieved by setting a maximum allocation to term deposits within your target cash weighting. This is subject to a minimum cash balance of two per cent (excluding term deposits). MPPM will monitor investments in term deposits to ensure it is within this allocation. For more information on term deposits please refer to section 4.4. Customising your investment To enable the construction and ongoing management of your account to meet your individual circumstances you can create customisations on what securities can be purchased or sold: You can apply customisations that: prevent securities from being held eg to meet an ethical preference preserve holdings of transferred in securities eg to retain a security for taxation or personal reasons set the maximum allocation to industry sectors or special indices eg to cap the exposure to industry sectors or special indices to meet an individual risk management requirement. Depending on the customisation selected, you can generally apply customisations to: ASX listed securities or managed funds industry sectors special indices MPPM have compiled a number of indices that meet common ethical concerns which may match to your own ethical concerns. We manage the content of these indices to our criteria and at our discretion. Your adviser can help you identify the customisation type and the correct security, sector and/or special index that best meet your investment considerations. In some circumstances your individual requirements may not be able to be met by the customisations we offer, we will assess these on a case by case basis to establish if an individual customisation can be created, however we provide no guarantee that all individual requirements can be accommodated. In all cases customisations need to be approved by MPPM before they can be applied to your account. It is important to understand that in customising your investment in the IMA there may be an impact on your account s performance as it compares to the performance of the investment strategy because your portfolio will not be aligned as closely to the investment strategy. When you apply customisations to specific ASX listed securities you and your adviser have the responsibility to maintain this list. If you do not update your restriction list to include these new securities as corporate actions occur, it is possible that they may be purchased or sold as part of our regular portfolio management activity. We will however manage name and code changes on your behalf. 4

7 How it works the details If you apply customisations on an industry sector or special index the securities within these will be maintained on your behalf. As companies move in or out of a sector or index it may result in a change to your account eg a holding may need to be sold if the company is now a member of one of your specified excluded sectors; likewise a holding may be created in a security if the company is no longer a member of one of your specified excluded sectors. For securities included in a specific industry sector or index, MPPM will generally include associated listed hybrid securities, such as listed interest rate securities issued by companies covered in the sector or index. For example if a company that is included in the casino and gaming industry sector issued a convertible note we will include the note alongside the company; this means that if the note is included in the Diversified Australian Fixed Interest strategy, customisations may affect the holding in that note. MPPM will generally use Global Industry Classification Standard (GICS) 1 codes for the purpose of defining industry sectors, however we may use other means at our discretion. Where a change to the composition of an industry sector or special index occurs that has an impact on the securities held in your account, we will generally rebalance your account as soon as reasonably practical. More information on customisation and customisation types is available in the customisations brochure, available from your adviser or on our secure website. Please note that information in the customisation brochure may change from time to time. Investments into term deposits can also be customised by the amount and term. To allow for timely investment into term deposits, you must authorise your financial adviser to provide these ongoing instructions on your behalf. 4.2 Funding your account You can fund your account by contributing cash, transferring an existing portfolio of ASX listed securities or certain managed funds, by gearing with an investment loan from an approved lender, or a combination of these. Refer to Part A, section 7 for details on how to fund your account. Ownership You are the beneficial owner of the assets held in your account. It is important to recognise that beneficial ownership is not identical to holding these assets in your own right. Please note the following differences: the custodian will be the legal owner of the investments rather than you. We maintain a register of holdings for each investor for managed investments, you do not become the direct unit holder. The registered unit holder will be the custodian you do not receive communications directly from companies or share registries including such things as corporate action notifications, dividend payments and notices of meetings. These are processed on your behalf. By doing so, we remove the administrative burden of direct ownership, providing you with consolidated reports detailing activity on your account as your name is not on the share register (securities are registered in the name of the custodian), your privacy is protected you are not entitled to shareholder benefits such as discount cards, nor will you be able to vote at shareholder meetings some corporate actions may have an entitlement limit determined on a per holding basis (rather than the size of the holding), which may result in you receiving a lesser entitlement than you otherwise would if you held the securities directly. The IMA s cash holding (excluding term deposits) is invested as a single deposit. Investors do not hold a deposit directly with the appointed financial institution. The investor s IMA cash holding is not covered by the Financial Claims Scheme (FCS) (commonly referred to as the Australian Government deposit guarantee). Further information about the FCS can be obtained from the APRA website at apra.gov.au and the APRA hotline on (or if calling from overseas). 1 The Global Industry Classification Standard (GICS) was developed by and is the exclusive property and a service mark of Morgan Stanley Capital International Inc. (MSCI) and Standard & Poor s, a division of The McGraw-Hill Companies, Inc. (S&P). Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the forgoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classification have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. 5

8 How it works the details Custody All assets within your account are held for you by a custodian appointed by MPPM. As at the date of this Agreement and Application Booklet the custodians are Bond Street Custodians Limited (BSCL) and HSBC Bank Australia Limited (HSBC). Additional custodians may be added in the future to broaden the services offered to you. We will notify you in writing once a new custodian has been appointed by MPPM. Cash holdings within your account are deposited with Macquarie Bank Limited ABN , AFSL No (MBL), a member of the Macquarie Group. Deposits will be used by MBL in the conduct of its normal banking business. MBL sets the rate of return on the deposit, having regard to competing rates of return in the market, and changes in interest rates, which respond to factors such as inflation, economic conditions and actions by the Reserve Bank of Australia. Current rates are available by contacting our Client Service team on BSCL and MBL are related bodies corporate of MPPM. All related party transactions are conducted on arm s length terms. Any conflict of interest or potential conflict of interest is managed in accordance with Macquarie Group s Conflict of Interest Policy. 4.3 How we invest your money Account commencement and ongoing rebalancing We will aim to manage your account to the target allocations you specify, generally achieving this either within 14 calendar days from the date your account is fully funded, or in the period you select when we receive your Investment Policy Statement change request. If for any reason, such as a cash or stock contribution, a large market movement or updates to investment restrictions, your account moves away from your target allocations, your account will be rebalanced back towards the target allocations as soon as reasonably practical. There is a 10 per cent boundary on your target allocations before rebalancing is required under the agreement in Part A section 9B, but we will generally rebalance your account towards your target allocations on an ongoing basis, even if these boundaries have not been exceeded (subject to endeavouring to manage your account in as efficient a manner as possible). When rebalancing is conducted, your Investment Policy Statement and any restrictions if relevant are taken into account. We also take into account various tax consequences such as capital gains events based on your tax status as provided by you. Investment authority By opening a Macquarie IMA, you authorise us to make all investment decisions on your behalf relating to your account. This includes the buying and selling of securities and other investments, responding to corporate action elections and dividend elections. The exception to this process is where you have requested specific restrictions and they have been accepted by us. Investment management MPPM may appoint investment managers to provide the strategies that may be selected when investing in the IMA. MPPM also acts as an investment manager for a number of strategies. MPPM s internal team of investment professionals has extensive market and industry experience. Their investment process relies on an in-depth proprietary research process that seeks to identify undervalued assets backed by quality management, strong balance sheets and dominant industry positions. Through careful risk management and optimisation processes they aim to minimise the likelihood of uncompensated risk. Trading We aggregate all IMA orders for trading purposes and execute them through a broker (this may be a related Macquarie entity). When orders are completed, they are then disaggregated and applied to individual client accounts. We calculate and apply the average trade price for each order to each client account, so that clients are treated equally. We book all trades on a daily basis. In some circumstances, it may not be possible to complete an order for a particular security on the same day, in which case we will execute a number of smaller trades on a daily basis until the transaction is complete. For example, as the result of a portfolio management decision, we are required to buy 1,000 Company XYZ (XYZ) securities on your behalf. We are unable to complete the order on the same day, and therefore may execute your XYZ trades over a number of days where appropriate. An example of this is as follows: Day 1 Day 2 Day 3 Day 4 TOTAL Purchase 300 XYZ securities Purchase 200 XYZ securities Purchase 200 XYZ securities Purchase 300 XYZ securities 1,000 XYZ securities Corporate actions We will receive communications relating to corporate actions affecting the securities held in your account. For example the issuers of securities held in your account will send any corporate action notifications, dividend payments, and notices of meetings to us. Our policy regarding corporate actions affecting securities held in your account is that generally: we will elect to receive dividends and distributions in cash, which will be credited to your cash holding within your account we will generally adopt a neutral position and not vote at meetings of holders of securities, although we may exercise our discretion and vote depending on the particular circumstances we will use our best endeavours to contact you for further instructions where you have a customisation which is in conflict with the corporate action, and we will deal with other corporate actions using our absolute discretion. 6

9 Significant risks 4.4 Term deposits Through the Macquarie Individually Managed Account (IMA) you have the ability to invest in term deposits as part of your cash portion of your strategic asset allocation. The below diagram illustrates how term deposits held within the IMA work: Term deposits are held in trust for you by MPPM with the selected term deposit provider. Different maturities are available, with investments made on a weekly basis. Term deposits are held individually, therefore deposits under the cap are covered by the Financial Claims Scheme (FSC) (commonly referred to as the Australian Government deposit guarantee). Further information about the FSC can be obtained from the APRA website at apra.gov.au and the APRA hotline on (or if calling from overseas). As part of your Investment Policy Statement you can set the parameters to which an investment in term deposits can be made. This is achieved by setting a maximum allocation to term deposits within your target cash weighting. This is subject to a minimum cash balance of two per cent. MPPM will monitor investments in term deposits to ensure it is within this allocation. Investments into term deposits can be customised by the amount and term (Term Deposit Customisations). To allow for timely investment into term deposits, you authorise your financial adviser to provide these ongoing instructions on your behalf. The investible amount must be greater than 50,000 per deposit with increments of 10,000 and within your maximum allocation when the instruction is provided. You may invest in one or more term deposits as long as the total amount invested is within your maximum allocation when the instruction is provided. There may be a time when your actual account varies from your target asset allocation by more than the 10 per cent, due to such factors as market movement or cash flows. MPPM may be unable to rebalance your account back to your Strategic Asset Allocation until your term deposits mature. At maturity, MPPM will rebalance your account, which may reduce the amount of cash that is able to be reinvested in term deposits. On maturity of any term deposit, the principal and interest will be credited back to your cash holdings. Your financial adviser will be able to provide further instructions regarding the amount and term to be reinvested in term deposits. The amount to be invested and the term may be different to your previous term deposit holdings as long as it is within your maximum term deposit allocation. Early withdrawals from term deposits are typically unavailable. Where required, withdrawal requests will be facilitated by selling down other investments in your account. There are restrictions to breaking a term deposit held in your account and costs may apply. Requests for early withdrawal will be assessed on a case by case basis. YOU AND YOUR ADVISER Investment Policy Statement (IPS) Asset allocation Target cash weighting Term deposit allocation MACQUARIE PRIVATE PORTFOLIO MANAGEMENT Monitors term deposit allocation Invests in term deposits weekly Holds in Trust Account rebalancing Customisations Amount Term Macquarie Bank Limited Term deposits 7

10 5 Significant risks All investments carry risk. Different investment strategies carry different levels of risk depending on the underlying mix of assets that make up each investment strategy. Assets with the highest long terms returns may also carry the highest level of short term risk. The appropriate level of risk for you will depend on your age, investment time frame, where other parts of your wealth are invested and your individual risk tolerance. It is important to understand that: the value of your investment will go up and down investment returns will vary and future returns may be different from past returns, and returns are not guaranteed and there is always the chance that you may lose some or all of the money you invest in the IMA. When you make an investment, you are accepting the risks of that investment. It is important to understand these risks before deciding to invest. The significant risks for the IMA are described below, but these risks are not exhaustive and there could be other risks that may adversely affect the IMA. You should seek your own professional advice on the appropriateness of this investment for your particular circumstances and financial objectives. Market risk Market risk refers to changes in the prices of investments in your account that may result in loss of principal or large fluctuations in the valuation of your investment within short periods of time. Factors that drive changes in asset prices include: the changing profitability of companies and industries the liquidity of securities, particularly for small capitalisation equities or small companies with limited volume of security issuances the changes in economic cycles and business confidence the country in which the market is located and its government and central bank policies, its economic or social developments, and instances of instability such as recession or armed conflict where there is an emerging market exposure, which is generally riskier than developed markets due to factors such as lower liquidity, the potential for political unrest, the increased likelihood of sovereign intervention (including default and currency intervention), currency volatility, and legal system instability. Strategy and model risk MPPM uses investment and risk analytical processes and models in its IMA strategies. However these processes and models may not successfully select profitable investments, manage risk or perform in a manner to which they have historically performed or were intended to perform. This may have an adverse effect on the performance of your account. Volatility risk Volatility risk refers to the potential for the price of securities in your account to vary, sometimes markedly and over a short period of time. As an indicator of risk, the greater the volatility of returns the more likely it is that returns will differ from those expected over a given time period. Generally, the higher the potential return, the higher the risk and the greater the chance of substantial fluctuations in returns over a short period of time. In particular, investments in equity securities are traditionally towards the higher end of the risk -return spectrum. This may lead to fluctuations in the value of your account, including fluctuation over the period between a withdrawal request being made and the time of payment. Markets are volatile and indeed volatility in some markets can be at very high levels. Security specific and concentration risk Each investment in a company s securities is subject to the risk of that particular company s performance due to factors that are pertinent to that company, the sector of the market to which the company belongs, or the equity market generally. This risk also includes changes in credit ratings from rating agencies. The fewer the number of holdings in your account, the higher the concentration risk. The more concentrated your account is, the greater the risk that poor performance in a group of securities may significantly affect the performance of your account. Currency risk Currency risk is the risk that fluctuations in exchange rates between the Australian dollar and foreign currencies may cause the value of international investments to decline significantly. If your account includes exposure to international assets, they may not be hedged back to Australian dollars and therefore your investment may be exposed to currency risk. 8

11 Investment manager risk Investment manager risk refers to the risk that the investment manager and/or the manager s investment strategy will not achieve its performance objectives or not produce returns that compare favourably against its peers. Additionally, there is the risk that a manager s investment strategy may not prove to be effective. Many factors can negatively impact the manager s ability to generate acceptable returns from its security selection process, including the loss of key staff. Implementation risk There is a risk that the performance of your account will differ from that of the investment strategies. This occurs due to factors such as differences in the buy and sell prices of investments compared to the investment strategies, fees, movements of cash and securities into and out of your account, slight differences in weights of holdings due to the requirement for a minimum cash holding of two per cent and use of a minimum transaction size, and external factors, for example if trading in a particular security is subject to liquidity constraints or has been restricted or suspended in the market. Customisation risk There is a risk that account customisation will impact the performance of your investments and may result in negative returns and/or underperformance of your account relative to your nominated investment strategy. Customisation could be explicit, that is restrictions included in your investment policy statement, or implicit, such as outcomes resulting from the management of your account to suit your particular tax circumstances. Counterparty and credit risk Counterparty risk is the risk of loss due to a counterparty not honouring a commitment which may cause the value of your account to fall. Counterparties include custodians, brokers and settlement houses. Credit risk is the risk that for cash and interest rate investments, income and/or your capital investment will not be repaid due to the financial position of the financial institution or issuer of that investment. Liquidity risk Particular securities or investments may be difficult to purchase or sell, preventing the IMA from closing out its position or rebalancing within a timely period and at a fair price. As a result withdrawal requests may not be able to be fully met when they are received. Liquidity risk may potentially be amplified where an account invests in listed interest rate securities and unlisted managed funds due to the illiquid nature of these assets. For term deposits, liquidity risk is the risk of not being able to access your investment in a term deposit prior to the maturity date. Interest rate risk Movements in domestic and international interest rates may cause the value of your investment to decline. Leverage risk If you have borrowed to fund your investment, you will be subject to a number of additional risks including, but not limited to, margin calls as a result of market volatility, increased losses as a result of increased exposure, and interest rate risk. If utilising an investment loan and your account goes into margin call, it may be necessary to sell securities in your account and use the net proceeds to reduce your loan balance. You should refer to your lender s offer document for full details of the risks involved. Derivative risk Derivatives are financial instruments that are used to obtain or reduce market exposures. They can potentially create leveraged positions, where exposures are obtained that are greater than the value of assets required to support them. As the market value of derivatives positions are variable, gains or losses can be incurred, and can be greater than unleveraged positions. The use of derivatives may also expose the investment strategies that use them to risks including counterparty default, legal and documentation risk. Change of law and other statutory and trading restrictions Changes in laws or their interpretations including, but not limited to, taxation and corporate regulatory laws, practice and policy could have a negative impact on the returns of investors. In certain circumstances, statutory or internal Macquarie Group imposed restrictions may preclude the acquisition or disposal of securities in the IMA. Without limitation, this includes where the acquisition would cause the Macquarie Group s aggregated holdings in a company (including holdings that the Macquarie Group is required to aggregate) to exceed applicable takeover thresholds. In addition, where, due to such restrictions, there is limited capacity to acquire particular securities, the IMA will not have priority over any member of, or any other fund associated with, the Macquarie Group to acquire those securities. Such restrictions may result in an adverse effect on the value of the investments in your account due to your account being unable to enter into positions or exit positions as and when desired. 9

12 6 Reporting Our comprehensive reporting ensures that you are kept informed at all times, meaning that you and your adviser can make faster, more informed decisions. 6.1 Online reporting When you open a Macquarie IMA you will be sent a Macquarie Access Code (MAC) and password that you can use to access information about your account via our secure website. The following reports are available online: asset allocation portfolio valuation income summary income details investment transactions cash transactions unrealised gains/losses realised gains / losses account details. Reports are generally for holdings and transactions up until the previous business day, using market close prices for that day. You can also download transaction and portfolio valuation reports in electronic data format, enabling you to open them in a spreadsheet or upload them into some accounting packages. Quarterly and annual tax reports (see the following sections for details) are also posted online where you can view and download them. If you would like additional parties to have access to these online reports please fill out the relevant section of the application form. Existing investors may complete the Third Party Authority form available from your adviser or the Resources section of our secure website. Terms and conditions regarding Macquarie s online service are explained in more detail on page Tax reports After the end of a tax year we will make available details of any assessable income, capital gains, tax credits and any other relevant items to include in your tax return. These reports will generally be available for you to view and download from our secure website by the end of October each year. Tax accounting method You can select from the following tax accounting methods: Minimise Gain tax parcels are selected to minimise the capital gain (or maximise the capital loss) on disposal of an asset Maximise Gain tax parcels are selected to maximise the capital gain (or minimise the capital loss) on disposal of an asset, or First In First Out (FIFO) the earliest tax parcel is selected on disposal of an asset. The default method is Minimise Gain. You can change your tax accounting method at any time by written notification. The new method will apply from the date the change is processed, and all transactions from that date will use the new method. It is recommended that you seek advice from an independent tax adviser before selecting or changing your tax accounting method. If you wish to change your tax accounting method retrospectively, this will need to be processed manually as a cost base reconstruction. A fee will be charged for this service. 6.2 Quarterly reports Each quarter we will make available a report containing: market and strategy commentary performance asset allocation tax invoice (where applicable). These reports will generally be available for you to view and download from our secure website within 30 days of the end of the quarter. 10

13 7 Operating your account 7.1 You and your adviser If you have an adviser you will be working closely together. Your adviser must be registered with us. Your adviser is integral to the establishment and ongoing operation of your account. Your adviser is your primary point of contact and any queries about your account should be directed to them. Your adviser is responsible for: identifying which asset class mix, investment strategy and investment customisations (if any) best suits your risk profile and needs ensuring that you have all the necessary information and documentation to make your investment decisions informing you of the potential risks involved with your investment decisions ensuring that you authorise all instructions in writing acting on your instructions to us providing Term Deposit Customisations on your behalf. In relation to term deposit instructions, you authorise your financial adviser to provide Term Deposit Customisations on your behalf through your Investment Policy Statement. You also authorise MPPM to act on any Term Deposit Customisations we receive from your adviser. All instructions with regards to the operation of your account must be authorised by you. Instructions may be given to us in writing by mail, facsimile or electronic services. In some cases the original form will be required to be mailed to us, this will be noted on the form. If you do not have an adviser or cease to have an adviser it is assumed that you are a self-directed investor and are responsible for making all decisions in relation to the operation of your account. 7.2 Opening an account To invest, please complete the application form accompanying this Agreement and Application Booklet and send it to us with your initial payment. Initial investments must be for a minimum of 500,000. We may, at our discretion, establish higher minimum investment amounts or reject applications for investment in the IMA. You can fund your account by contributing cash, transferring an existing portfolio of ASX listed securities or certain managed funds, by gearing with an investment loan from an approved lender, or a combination of these. Please note that each investor in the IMA must satisfy the requirement to be a wholesale client. Please refer to clause 7 in Part A section 9A the Investment Management Agreement. If you are funding part of your investment with an investment loan, the loan component of the initial contribution does not count towards meeting the wholesale client test of an initial contribution as discussed in clause 7, Part A Section 9A the Investment Management Agreement. Please note that we will accept the amount received without reference to you when the actual amount received by us is within +/-10 per cent of the original investment amount as specified in section 7 of the application form, subject to satisfying the requirement to be a wholesale client. Cash contributions Cash contributions can be made by cheque, bank transfer, direct debit or by real time gross settlement (RTGS). Cheque contributions must be made out to: BSCL ACF MPPM IMA (Account ID) If depositing via electronic transfer or RTGS, the bank account details are: Bank Macquarie Bank Limited BSB A/C Name BSCL ACF MPPM IMA Customer Reference Account ID Please ensure your customer reference is included on the contribution transfer. If a reference is not included there may be delays in setting up your account or your contribution may be returned to you. Security and managed fund contributions You can fund all or part of your account by transferring an existing portfolio of ASX listed securities or managed funds by completing the Security Transfer form accompanying this Agreement and Application Booklet. Please note, we can generally only transfer managed funds that are existing holdings in our investment strategies. Security and managed fund contributions are valued upon receipt of the assets. Therefore the amount of your contribution may decrease from your stated funding amount due to market movement. This may result in your contribution failing to meet our minimum investment requirements. If this occurs we may require an additional contribution of funds before we can commence your account. For further information, please discuss with your financial adviser or contact our Client Service team on When you sign up for an IMA, you grant Limited Power of Attorney to MPPM, enabling us to transfer assets on your behalf to our appointed custodian, for the purpose of funding your account. For further details, please refer to Part A, section 9C Limited Power of Attorney. We accept cost base information provided by you as being correct. Please be careful to ensure this data is recorded accurately, as your account will be managed based on the tax information you provide to us and a fee may be incurred to correct it later if it is wrong. We will confirm if your application is accepted. If for any reason we are unable to process your application (for example, if your application is incorrectly completed), we will contact you or your adviser for instructions. 11

14 Operating your account 12 Your account will be deemed active when your application is accepted, cash is cleared and all securities and managed funds have been effectively transferred to the appointed custodian. Once your account is deemed active, we will begin managing your account in accordance with your Investment Policy Statement. We will aim to have your account within the minimum and maximum allocation for each asset class specified in your Investment Policy Statement within 14 days from the deemed active date. Your performance reporting is generally deemed to commence from the active date but this may be extended up to 14 days for when the account is fully invested. If you wish to use a staggered investment approach, whereby you incrementally invest your cash holdings into the other asset classes over a period that is greater than 14 days, you must state your initial asset allocation in section 2 of your Investment Policy Statement form and then submit a Change of Investment Policy Statement form (available from your financial adviser or the Resources section of our secure website) at each subsequent date that you wish to adjust your asset allocation. We will not be responsible for monitoring and implementing a staggered investment approach that is greater than 14 days. Prior to your account becoming active, you will receive interest on your cash balance. Fees may commence on receipt of your initial contribution. Investment lending You can establish an investment loan with an approved lender. Investment lending allows you to borrow against your existing investments and increase the size of your investment portfolio. Please note that the wholesale minimum investment test of 500,000 excludes any investment loan amount. Your adviser can provide you with additional information on investment lending offerings (including fees and charges), as well as how these products operate in conjunction with the IMA. Your adviser can also provide the necessary loan application documents for the investment lender. Please read the investment loan offer document to understand the risks associated with using an investment loan to invest prior to establishing an investment loan. Your lender is likely to have certain rights as a mortgagee over some or all of your securities in your account that are held by the appointed custodian. Please ensure that you are well aware of your rights and obligations and those of your lender in relation to your investment loan and your securities in your account. It is important to note that where you have an investment loan and have granted security for that loan to your lender over securities in your account neither the appointed custodian or us are obliged to act on your instructions in respect of these securities in your account without your lender s permission. In respect of a margin call we will act on instructions from your lender without reference to you. 7.3 Additional contributions You can make additional contributions three ways: One off contribution You can contribute additional cash, securities or certain managed funds to your account at any time. Cash contributions can be made by cheque, bank transfer, direct debit or by RTGS. Cheque contributions must be made out to: BSCL ACF MPPM IMA (Account ID) If depositing via electronic transfer or RTGS, the bank account details are: Bank Macquarie Bank Limited BSB A/C Name BSCL ACF MPPM IMA Customer Reference Account ID Please ensure your customer reference is included with the cheque or funds transfer. If a reference is not included there may be delays in applying the contribution to your account or your contribution may be returned to you. For additional securities or managed funds transfers please complete the Security Transfer form available from your adviser or the Resources section of our secure website. Please note, we can generally only transfer managed funds that are existing holdings in our investment strategies. In the event that law prevents MPPM from receiving transfers of a particular security, the transfer of that particular security will not be processed and your financial adviser will be informed of the situation. MPPM has an absolute discretion to refuse transfers of securities. Establish a regular investment plan You can make contributions via direct debit from your nominated bank account on a regular basis to your account. To do this, please complete the relevant section of the application form. Existing investors can also complete a Direct Debit form, available from your adviser or the Resources section of our secure website. You can set up a plan with a weekly, fortnightly, monthly, quarterly or bi-annually direct debit. You can amend, cancel or suspend your regular investment plan at any time by providing revised signed instructions in writing or by fax. Please provide us with your revised instructions at least seven business days before your next scheduled direct debit for your instructions to take effect. We may cancel your regular investment plan if two consecutive direct debits are dishonoured due to insufficient funds. Instalment gearing You can establish an instalment gearing plan with an approved lender, whereby you make regular contributions to your account on a monthly basis which is matched with an additional amount from your investment loan. You will need to submit an application form for instalment gearing to your lender. For more information on this option, speak to your financial adviser.