Thank you for requesting this Product Disclosure Statement from Funds
Focus.
Fee Reduction
As highlighted within our offers page, whilst most managed funds typically pay
an entry fee of up to 5%. Applications lodged through Wealth Focus will
receive a rebate of up to 5% directly into your fund, providing you with more
money in your fund.
How to Apply
Please have a read through the PDS and if you would like to invest the
application pages can generally be found towards the back of the document.
You will only need to send the application section back with a cheque/direct
debit payable direct to the investment company (not ourselves). You should
take note of any minimum investment amounts that may apply and proof of ID
that is now required for the new Anti-Money Laundering regulations.
Then mail the completed application directly to us.
We will then check to ensure your form is completed correctly before
forwarding your document on to the investment provider on your behalf.
Wealth Focus Pty Ltd
Reply Paid 760
Manly
NSW 1655
Please note that we are unable to track applications mailed directly to the
product provider and therefore cannot guarantee that your discounts have
been applied in these instances.
Should you wish to take advantage of our free annual valuation and tax report
for all your investments you should complete our broker nomination form for
The Wealth Focus Investment Service.
Regards
Sulieman Ravell
Managing Director
Wealth Focus Pty Ltd
ABN 87 123 556 730 AFSL: 314872
56 The Corso, Manly, NSW 2095
Postal Address: PO Box 760, Manly, NSW 1655
Requirements for verifying your identity under the new Anti Money Laundering
(AML)/Counter Terrorism Financing (CTF) Act
The AML/CTF Act came into effect on the 12th December 2007. All financial
planning and fund management companies are now required to collect, verify and
store specific customer information before arranging investment services for a client.
It is designed to prevent, detect and protect Australian business from money
laundering and the financing of terrorist activities.
As such, we request that all new applications are sent with ‘certified documentation’.
We have found that the easiest way to provide the required documentation is to
have a copy of your driving licence or passport certified by Australia Post or a
Justice of the Peace (please see following page for a full list of individuals that
can certify documentation).
Once this has been completed, under the current requirements we will not
require you to send identification again.
What you need to do
You will need to enclose a certified piece of photographic evidence or one piece of
primary non-photographic evidence and one piece of secondary evidence (please refer
to the Identification Form for document requirements), with your application form
and post to us at the following address
Wealth Focus Pty Ltd
Reply Paid 760
Manly
NSW 1655
Please do not send us original driving licences or passports as these can very easily
get lost in the post. Copies of documents can be certified by an authorised individual,
they will need to sight and verify that the copy is a ‘certified true copy’, sign, date,
print their name and list their qualification.
ANTI-MONEY LAUNDERING REQUIREMENT FOR NEW APPLICATIONS
IDENTIFICATION FORM GUIDE TO COMPLETING THIS FORM
o Please contact us on 1300 55 98 69 if you have any queries.
o If you wish to apply in the name of a trust or company, please contact us for an alternative identification form.
SMSF's and retail superannuation applications do not need to provide ID (an online check will be performed for SMSFs)
Attach a certified copy of the ID documentation used as proof of identity. ID enclosed should verify your full name; and
EITHER your date of birth or residential address.
o Complete Part I (or if the individual does not own a document from Part I, then complete either Part II or III.)
PART I – ACCEPTABLE PRIMARY ID DOCUMENTS
Select ONE valid option from this section only
Australian State / Territory driver’s licence containing a photograph of the person
Australian passport (a passport that has expired within the preceding 2 years is acceptable)
Card issued under a State or Territory for the purpose of proving a person’s age containing a photograph of the person
Foreign passport or similar travel document containing a photograph and the signature of the person*
PART II – ACCEPTABLE SECONDARY ID DOCUMENTS – should only be completed if the individual does not own a document from Part I
Select ONE valid option from this section
Australian birth certificate
Australian citizenship certificate
Pension card issued by Centrelink
Health card issued by Centrelink
AND ONE valid option from this section
A document issued by the Commonwealth or a State or Territory within the preceding 12 months that records the provision of
financial benefits to the individual and which contains the individual’s name and residential address
A document issued by the Australian Taxation Office within the preceding 12 months that records a debt payable by the
individual to the Commonwealth (or by the Commonwealth to the individual), which contains the individual’s name and
residential address. Block out the TFN before scanning, copying or storing this document.
A document issued by a local government body or utilities provider within the preceding 3 months which records the provision
of services to that address or to that person (the document must contain the individual’s name and residential address)
If under the age of 18, a notice that: was issued to the individual by a school principal within the preceding 3 months; and
contains the name and residential address; and records the period of time that the individual attended that school
Who can verify customer identity documents?
Please find below a list of all the Approved Individuals that can certify documents:
•
A Justice of the Peace
•
An agent of the Australian Postal Corporation who is in charge of an office supplying postal services to the public, or a
permanent employee with more than two years continuous service (who is employed in an office supplying postal services to
the public)
•
A notary public (for the purposes of the Statutory Declaration Regulations 1993)
•
A person who is enrolled on the roll of the Supreme Court of a State or Territory, or the High Court of Australia, as a legal
practitioner (however described)
•
A judge, magistrate, registrar or deputy registrar of a court
•
A chief executive officer of a Commonwealth Court
•
A police officer
•
An Australian consular or diplomatic officer (within the meaning of the Consular Fees Act 1955)
•
An officer or finance company officer with two or more continuous years of service with one or more financial institutions (for
the purposes of the Statutory Declaration Regulations 1993)
•
An officer with, or authorised representative of, a holder of an Australian Financial Services Licence, having two or more
continuous years of service with one or more licensees, and
•
A member of the Institute of Chartered Accountants in Australia, CPA Australia or the National Institute of Accountants with
more than two years continuous membership.
Instreet Reliance Funds
Access some attractive market choices
with potential for quarterly distributions
and continuous capital protection.
Product Disclosure Statement Issued on 28th August 2008
The issuer of this Product Disclosure Statement and the Responsible Entity for the following Instreet Reliance Funds:
Instreet Reliance Global Allocation Fund (ARSN 131 599 927) Instreet Reliance Commodities Fund (ARSN 131 602 821) is:
Merrill Invest (Australia) Limited
ABN 86 126 232 139, AFS Licence No. 315369
Important information
Updated information
Applications are invited for investment in the Instreet Reliance Funds
(Funds), which are registered managed investment schemes under
the Corporations Act 2001 (Cth) (the Offer).
Information set out in this PDS is subject to change from time to
time. Information not materially adverse to Unitholders in the Funds
may be amended without issuing an updated or supplementary PDS.
You can find this updated information at any time on our website at:
Merrill Invest (Australia) Limited (ABN 86 126 232 139, AFS Licence
No. 315369) (referred to as ML, Responsible Entity, we, our or us) is
the responsible entity of the Funds.
It is important you read this product disclosure statement (PDS)
before making a decision to invest in the Funds. In particular, you
should:
www.instreet.com.au
or at HYPERLINK "http://www.merrillinvest.com.au"
www.merrillinvest.com.au
assess whether an investment in the Funds is appropriate for you;
A paper copy of this PDS (and any supplementary documents) can be
obtained free of charge on request by contacting us. Please refer to
our contact details at the back of this PDS.
evaluate any taxation implications; and
Making an investment
consider seeking professional financial and tax advice before making
an investment decision.
Units in the Funds can only be issued if you use an Application Form
attached to either a paper or electronic copy of this PDS. To make
additional investments in the Funds, Unitholders should contact the
Fund Administrator.
If you are selecting the Funds through an investor directed portfolio
service (IDPS), please refer to your IDPS operator or your financial
adviser for information on how to invest in the Funds. We consent to
the use of this PDS by IDPS operators who include the Funds on
their investment platforms.
The information contained in this PDS is general information only and
does not take into account your personal objectives, financial
situation or particular needs or circumstances. It has been prepared
to help you decide whether this product will meet your needs and
may assist you to compare this product to others you may be
considering. This PDS does not and is not intended to contain any
recommendations, statements of opinion or advice.
Returns not guaranteed
A copy of this PDS has not been lodged with the Australian Securities
and Investments Commission (ASIC) and is not required to be
lodged.
All fees are inclusive of GST after taking into account any expected
reduced input tax credits (unless stated otherwise).
All monetary amounts referred to in this PDS are given in Australian
dollars (unless otherwise specified).
Instreet Investment Limited ABN 44 128 813 016 (Instreet) will be
the Distribution Manager for investors into the Funds and will
coordinate your investment in Units in the Funds. Instreet is an
authorised representative of EA Financial, LP under Australian
Financial Services Licence No. 246801. EA Financial, LP is
responsible for overseeing the services of Instreet but does not
guarantee or otherwise provide assurance in respect of the
obligations of Instreet or ML.
Neither Instreet nor EA Financial, LP are part of Merrill Lynch Group
of companies. Instreet is not the agent or representative of any
member of the Merrill Lynch group of companies and acts on behalf
of EA Financial, LP. No person (including Instreet) has been
authorised by ML to give any information or make any
representations in connection with the Funds which is not in this PDS
and if given or made, such information or representation must not be
relied upon as having been authorised by ML.
The issue of this PDS is authorised solely by Merrill Invest (Australia)
Limited. No other person or company (whether or not related to
Merrill Invest (Australia) Limited) has prepared this PDS or is
responsible for any statement or information contained in this PDS.
Eligible investors and electronic PDS
This PDS and the Offer are available only to Australian resident
investors receiving this PDS (including electronically) in Australia.
Applications from outside Australia will not be accepted. If you are
printing an electronic copy of this PDS you must print all pages
including the Application Form. If you make this PDS available to
others, you must give them the entire electronic file or printout,
including the Application Form.
The investment of the Funds under the Swap Agreements is capital
protected by Merrill Lynch International (the Capital Protection
Provider) subject to certain conditions (see Section 4). The obligations
of Merrill Lynch International under the Swap Agreements are
guaranteed by Merrill Lynch & Co., Inc. However, neither the
Responsible Entity, its associates or subsidiaries provides capital
protection or guarantees the return on your investment in the Fund or
any gain.
Definitions
Capitalised terms used in this PDS have the meaning given in Section
9 "Definitions" .
Instreet
Instreet works closely with the financial adviser community to
create and distribute investment products that harness
inspiration, market insight and intelligent structuring.
After identifying adviser needs and market trends, Instreet
builds investment products by sourcing quality wholesale
providers from around the world. By doing so, Instreet makes
institutional assets available to individual investors. Instreet’s
products are administered by recognised financial institutions
and Instreet obtains ratings from research houses. The end
result is a selection of investment products designed to better
achieve the goals of client and adviser.
The Funds
Overview
The Funds aim to provide investors with exposure to some attractive investment opportunities and the
possibility of quarterly distributions. These opportunities may not be traditionally available to the individual
investor.
The Funds' Underlying Investments are managed by independent and experienced global management teams.
The Funds may suit you if you are looking:
To diversify your investment portfolio by gaining long-term exposure to some attractive investment
opportunities not readily available to the individual investor;
For limited downside risk in volatile market conditions provided by continuous capital protection at
the Capital Protection Level with the potential for greater protection due to a Profit Lock-In;
For an Australian dollar denominated exposure to the Schroder Alternative Solutions Commodity Fund
(Commodities Fund) or the BlackRock Global Allocation Fund (Global Allocation Fund), both of which
are continuously protected;
For income, through the potential for quarterly distributions of up to 4% (16% annually);
To invest in offshore assets without being exposed to the full extent of currency movements,
through a currency hedging strategy designed to minimise the impact to the capital value of the
Funds of adverse movements in currency exchange rates; and
For an investment that is suitable for self-managed superannuation funds.
The Funds may not suit potential investors who are seeking low-risk returns. Before investing in the Funds you
should consider carefully the risks that may affect the financial performance of the investment. For more
information, please refer to Section 6 "Risks" of this PDS.
1 4% is the maximum quarterly distribution that Unitholders in the Funds can receive. You will receive distributions of no more than 4% per quarter,
and you may receive significantly less (or nothing at all). We note in particular that Unitholders in the Global Allocation Fund would have received
average annualised distributions of 5.0% p.a. by holding Units for 1 year from 29 June 2007, and of 14.7% p.a. by holding Units for 5 years from 30
June 2003. Unitholders in the Commodities Fund would have received average annualised distributions of 15.7% p.a. by holding Units for 1 year
from 29 June 2007, and of 12.4% p.a. by holding Units for 31 months from 2 November 2005. These figures are based on our backward-looking
simulation of distributions which would have been received by Unitholders in the Funds if they had existed in the past. The simulations are further
explained in section 4.5, and worked dollar examples of distributions are provided in section 4.4. Past performance is not a reliable indicator of future
performance.
The Instreet Reliance Funds
The Funds aim to provide investors with exposure to some attractive investment opportunities and the possibility of
quarterly distributions. These opportunities may not be traditionally available to the individual investor. Further,
investors benefit from limited downside risk in volatile markets with continuous capital protection and Profit Lock-In
features.
The Funds' Underlying Investments are managed by independent and experienced global management teams.
Benefits & Features
The Funds offered under this PDS seek to provide you with the following benefits:
Attractive
investment
opportunities
The Funds offer you the opportunity to access investments pertaining to:
Commodities, or
Dynamic global asset allocation.
Section 3 "Investment
Options"
Continuous
capital
protection and
Profit Lock-In
The Funds provide limited downside risk in volatile markets, as the
investments are continuously capital protected at the Capital Protection
Level. The Profit Lock-In feature provides the potential for further
protection.
Section 4 "About the
capital protection, Profit
Lock-In and quarterly
distributions"
This capital protection is subject to risks, limitations and conditions.
Section 4 "About the capital protection, Profit Lock-In and quarterly
distributions".
Section 6 "Risks"
Quarterly
distributions
The Funds have the potential to pay quarterly distributions of 4% per
quarter (16% p.a.).2 You can elect to reinvest some or all of your
distributions.
Section 4 "About the
capital protection, Profit
Lock-In and quarterly
distributions"
Daily
redemptions
Subscriptions and withdrawals are permissible on a daily basis.
Section 9.2 "Redeeming
your investment"
Currency
hedging
A currency hedging strategy will be used to minimise the currency risk.
Section 2.7 "Currency
management"
Enhanced
participation
through
leverage
The Global Allocation Fund's exposure to the relevant Underlying
Investment may be up to 125% of the total amount invested.
Leverage is provided at wholesale interest rates.
Section 4.3 "Leveraging
and weighting of the
Underlying
Investments"
2 4% is the maximum quarterly distribution that Unitholders in the Funds can receive. You will receive distributions of no more than 4% per quarter,
and you may receive significantly less (or nothing at all). We note in particular that Unitholders in the Global Allocation Fund would have received
average annualised distributions of 5.0% p.a. by holding Units for 1 year from 29 June 2007, and of 14.7% p.a. by holding Units for 5 years from 30
June 2003. Unitholders in the Commodities Fund would have received average annualised distributions of 12.4% p.a. by holding Units for 1 year
from 29 June 2007, and of 15.7% p.a. by holding Units for 31 months from 2 November 2005. These figures are based on our backward-looking
simulation of distributions which would have been received by Unitholders in the Funds if they had existed in the past. The simulations are further
explained in section 4.5, and worked dollar examples of distributions are provided in section 4.4. Past performance is not a reliable indicator of future
performance.
Risks
Some key risks of an investment in the Funds include:
Allocation
away from
Underlying
Investments
The Underlying Investments of the Funds may not perform well,
including as a result of increases in equity market volatility. In the
event of poor performance, the capital protection strategy will dictate
a relatively high notional allocation towards cash, and the relevant
Fund’s potential for growth (which comes from notional exposure to
the Underlying Investments) may be adversely impacted.
Section 6 "Risks"
Divergence
from returns
achieved by
Underlying
Investments
In addition, the Funds may not participate in 100% of the increase in
the Underlying Investments because economic exposure is obtained
via a Swap Agreement and because of the capital protection and
currency hedging mechanics that are employed.
Section 6 "Risks"
Creditworthiness
of the Swap
Counterparty
The Funds get exposure to the Underlying Investments through
contractual arrangements with the Swap Counterparty. The Swap
Counterparty may not be able to meet its obligations.
Section 6 "Risks"
Liquidity risk
You may not be able to realise your investment when you want to.
Section 6 "Risks"
Quarterly
distributions
Actual quarterly distributions may be significantly less than suggested
by our simulation (and may be zero).
Section 6 "Risks"
Contents
Clause
Page
The Instreet Reliance Funds
3
01. Investment Summary
6
02. The Offer
8
03. Investment Options
10
04. About the capital protection, Profit Lock-In and
quarterly distributions
13
05. About the Responsible Entity, Swap Counterparty,
Capital Protection Provider, Fund Administrator and
Distribution Manager
17
06. Risks
19
07. Fees and Other Costs
24
08. Taxation
28
09. Managing Your Investment
32
10. Definitions
37
How to Complete the Application Form
39
Application Form
43
Contact Details
49
1. Investment Summary
The following table briefly summarises some of the key information contained in this PDS. It is not intended
to be a complete summary of this PDS and you should read this PDS in full before deciding whether to invest.
Topic
1.1
Further Information
Units in one or both of the following Australian registered
managed investment schemes:
„
Instreet Reliance Commodities Fund (ARSN 131 602 821);
and
„
Instreet Reliance Global Allocation Fund (ARSN 131 599
927),
together referred to as the Funds.
Section 2 "The Offer"
The Offer
a) What is
offered under
this PDS?
1.2
Summary
The Investment
a) The
responsible
entity of the
Funds
The responsible entity of each of the Funds is Merrill Invest
(Australia) Limited (Merrill Invest or Responsible Entity). Merrill
Invest is part of the Merrill Lynch group of companies.
Section 5 "About the
Responsible Entity,
Swap Counterparty,
Capital Protection
Provider and Fund
Administrator"
b) The
Investment
Neither of the Funds invests directly in the Underlying Investments.
Instead each Fund obtains economic exposure to one or more
Underlying Investments via a Swap Agreement.
Section 2.4.1 "How do
the Funds achieve
exposure to the
Underlying
Investments?"
Table 1 outlines the Underlying Investments to which each Fund is
exposed.
Section 2.1 "What do
the Funds invest into?"
Table 1: Underlying Investments
Fund
Underlying Investment
Commodities Fund
Schroder Alternative Solutions - Commodity Fund
Global Allocation Fund
BlackRock Global Funds - Global Allocation Fund
The performance of your investment in the Instreet Reliance Funds
may be different from that of the Underlying Investments, and
these differences may be significant. This difference will arise
because of the application of the capital protection strategy (including
Profit Lock-In and quarterly distributions), the application of the FX
Hedging Strategy and the deduction of fees.
c) Capital
protection
Each of the Funds' investments is continuously capital protected at
the Capital Protection Level. The Capital Protection Level is initially
set at 75% of the initial Reference Index Level (the Initial Capital
Protection Level). The Capital Protection Level may increase due to
the Profit Lock-Ins and decrease for quarterly distributions, but will
never fall below the Initial Capital Protection Level.
Section 4.1 "How
does the capital
protection strategy
work?"
Capital protection is not provided directly to Units in the Funds.
Rather, the Funds' investments are protected at the Capital
Protection Level.
d) Profit Lock-In
6
Instreet Investment
The Profit Lock-In feature provides the potential for an increase in
the Fund's Capital Protection Level.
Section 4.4 "Profit
Lock-In and quarterly
distributions"
Topic
Summary
Further Information
e) Quarterly
distributions
Any increases in a Fund’s Capital Protection Level will result in
quarterly distributions to Unitholders being made and the Capital
Protection Level being reset to a lower level (but not below the
Initial Capital Protection Level).
Section 4.4 "Profit
Lock-In and quarterly
distributions"
f) Currency
The Swap Counterparty will employ a foreign exchange hedging
strategy to minimise foreign exchange risk.
Section 2.7 "Currency
management"
g) Subscriptions
and withdrawals
Subscriptions and withdrawals are permissible on a daily basis.
The Responsible Entity has the ability to suspend subscriptions
and/or withdrawals.
Section 9 "Managing
your investment"
h) Minimum
Fund size
If at any time following the anniversary of the date of this PDS
either Fund holds less than A$25,000,000, the Responsible Entity
may redeem all the Units of the Fund and return monies to you.
Section 6 "Risks"
1.3
Investing in the Funds
a) Minimum
investment
amount
$5,000 per Fund.3
Section 9 "Managing
your investment"
b) Minimum
withdrawal
No minimum withdrawal amount.
Section 9 "Managing
your investment"
c) Minimum
balance
$1,000 per Fund.4
Section 9 "Managing
your investment"
d) Recommended
investment
timeframe
Medium to long term.
Section 9 "Managing
your investment"
e) Further
information
If you have read this PDS and have any questions either before or
after investing, please contact Instreet on (02) 8216 0804 or the
Responsible Entity on (02) 9225 6500.
f) How to apply
If after you have read this PDS you decide to apply for Units,
please complete and return the attached Application Form or print,
complete and return a copy of the Application Form from the
Fund's website at www.instreet.com.au.
1.4
"How to complete
the Application Form"
Fees and Other Costs
a) Fees and
expenses
A Contribution Fee of up to 5.5% is deducted from your initial
investment amount.5 This is paid to your financial adviser and may
be negotiated. The Contribution Fee will reduce the total amount
invested in the Funds.
An Administration Fee of up to 0.35875% p.a. of the gross value
of the Underlying Investments applies.
Section 7 "Fees and
other costs"
b) Transactional
and operational
costs
A buy/sell spread of +/- 0.2% applies on the Unit price. Borrowing
costs in respect of the Global Allocation Fund apply. These are
not direct costs to Unitholders. Underlying Investment
management fees apply. These are not a direct cost to
Unitholders.
Section 7 "Fees and
other costs"
c) Commissions
A trail fee of up to 1.10% p.a. on any quarterly distributions paid to
you may be payable to your financial adviser. The amount of the
trail fee may be negotiated.6 This trail fee, if paid, will reduce
returns to Unitholders.
Section 7 "Fees and
other costs"
3
4
5
6
The minimum investment amount does not apply to an investment in the Funds by an IDPS operator.
The minimum balance does not apply to an investment in the Funds made by an IDPS operator.
The Contribution Fee does not apply to an investment in the Funds made by an IDPS operator.
The trail fee does not apply to an investment in the Funds made by an IDPS operator.
Investment Summary
7
2. The Offer
This PDS contains an invitation for you to apply for
Units in one or both of the following Funds:
„
Instreet Reliance Commodities Fund (the
Commodities Fund); and
„
2.1
Instreet Reliance Global Allocation Fund
(the Global Allocation Fund).
What do Funds invest into?
Each corresponding Fund has economic exposure to
its Underlying Investment. The Underlying
Investment for each of the Funds is shown in Table 2.
2.2
Is my investment capital protected?
The investments of the Funds in the Swap
Agreement are continuously capital protected at the
Capital Protection Level. Capital protection is
provided within the Reference Index and is not
provided directly to Unitholders.
At any time, each Fund's investments will be capital
protected to at least the Initial Capital Protection
Level, which is equal to 75% of the initial Reference
Index Level (which is equal to 100).
Capital protection may at times be higher than the
Initial Capital Protection Level because of the Profit
Lock-In feature. However, each quarter where a
quarterly distribution is paid to Unitholders, the
Capital Protection Level will be reset to the Initial
Capital Protection Level or a higher level, as
described in section 4 "About the Capital Protection,
Profit Lock-In and quarterly distributions".
Capital protection is subject to risks, limitations
and conditions, described in Section 6 "Risks".
For more information, see section 4 "About the capital
protection, Profit Lock-In and quarterly distributions".
2.3
What distributions could I receive?
Unitholders may receive quarterly distributions from
the Funds if the Capital Protection Level rises above
75% of the initial Reference Index Level, and may
elect to reinvest some or all of these distributions.
See section 4 "About the capital protection, Profit
Lock-In and quarterly distributions" for more
information on the quarterly distributions.
2.4 How do the Funds achieve exposure to
the Underlying Investments?
In order to gain exposure to the Underlying
Investments, the Funds will each enter into a Swap
Agreement with the Swap Counterparty.
2.4.1
How do the Swap Agreements work?
A Swap Agreement is a contract in which one party
offers indirect economic exposure to an asset, index
or reference basket in return for a payment, and
delivers to the other party at a pre-determined later
date an amount determined by the performance of
that asset, index or reference basket over the term of
the agreement.
Under the terms of each Swap Agreement entered
into for this Offer, each of the Funds will pay to the
Swap Counterparty an amount equal to all application
monies received by that Fund less any relevant fees
and costs (see section 2.4.2 for more information).
In return, the Funds will receive exposure to the
Underlying Investments.
2.4.2 What happens if additional application
monies are received?
If a Fund receives further application monies on any
day, it will generally invest some or all of these
monies in the Swap Agreement and the Fund's
exposure to the relevant Underlying Investment will
notionally increase.
If a Fund receives withdrawal requests on any given
day, a corresponding portion of the Swap Agreement
may be unwound so that the total notional amount
invested in the Swap Agreement is reduced.
2.4.3 What is the term of the Swap
Agreements?
Each of the Swap Agreements are for a term of 7
years with an option to extend for a further 7 years.
At the end of the term of the Swap Agreements (the
Maturity Date), the Responsible Entity of the Funds
intends to enter into further Swap Agreements,
provided the terms of the further Swap Agreements
are substantially similar. Otherwise, the Funds will
terminate. For information on what you will receive
on termination, see Section 2.6.
Table 2: Underlying Investments
Commodities Fund
Global Allocation Fund
Schroder Alternative Solutions - Commodity Fund
BlackRock Global Funds - Global Allocation Fund
See section 3.1 for more information.
See section 3.2 for more information.
Maximum Weighting
100%
125%
Distributions
Available quarterly subject to Profit Lock-In
Available quarterly subject to Profit Lock-In
Foreign Currency
Overlay Strategy
Denominated in Australian Dollars following the
currency overlay strategy
Denominated in Australian Dollars following the
currency overlay strategy
Underlying Investment
8
Instreet Investment
The Responsible Entity will provide you with notice
and details of any further Swap Agreements, before
investing in the Swap Agreements.
2.4.4 Can the Swap Agreements be modified or
adjusted?
Yes, where an Adjustment Event occurs or is likely to
occur in respect of the Swap Agreement or an
Underlying Investment up to and including the
Maturity Date, reasonable and appropriate
adjustments or postponements may be made or
occur to any variable, calculation methodology,
valuation, settlement, payment terms or any other
terms in respect of the Swap Agreement, to account
for the impact of the Adjustment Event on the Swap
Counterparty, the Swap Counterparty's hedging
arrangements or the Swap Agreement itself.
Refer to Section 6 "Risks" for a list of the Adjustment
Events and information on what can happen if a Swap
Agreement terminates early.
2.4.5 Can my investment exposure to the
Underlying Investments terminate early?
The Swap Agreements will terminate if an Event of
Default occurs. Refer to Section 6 "Risks" for a list of
the Events of Default and their consequences.
2.5
Can I redeem my Units?
You may redeem your Units in the Funds by providing
a withdrawal request to the Fund Administrator by
2pm on any Business Day. Refer to Section 9.2
"Redeeming your investment" for further information.
On any Business Day, the price payable to acquire
Units in the Funds will be different from the price you
will receive if you redeem your Units, because of the
application of a buy/sell spread (see Section 7 "Fees
and Other Costs").
Because of the various factors that are considered in
determining the value of the Swap Agreement, the
cash amount you receive upon redemption may not
necessarily move in line with the value of the
Underlying Investments nor will it necessarily equate
to the value that would be achieved using calculations
to determine the final value of the Underlying
Investment as if the relevant calculation date was the
Maturity Date. The price you receive if you redeem
your Units will be equal to the early unwind value of
the Fund's investments adjusted for the sell spread.
2.6
What do I receive on termination of the
Funds?
On termination of the Funds, you will receive a
distribution equal to the maturity value of the Funds'
investments (primarily in the Swap Agreements) less
any taxes payable and less any accrued but unpaid
fees owing to the Responsible Entity.
The Offer
Please note that the distribution you receive on
termination of the Funds may not equal the Initial
Capital Protection Level. This is because the capital
protection is applied to the Funds' investments, not
to the value of your Units. For example, taxes and
any fees payable to the Responsible Entity may
reduce the distribution you receive such that the
amount you receive may be less than the Initial
Capital Protection Level. For information on how Unit
prices are calculated, see Section 9.1.
2.7
Currency Management
The Underlying Investments are denominated in US
dollars. The Units and Swap Agreements, however,
are denominated in Australian Dollars.
The Swap Counterparty will use a hedging strategy to
minimise currency risk (the FX Hedging Strategy).
Each Fund's exposure to the Underlying Investments
will not be fully hedged at all times. To the extent that
a Fund's exposure is not hedged, there is a risk that
the returns of each Fund may be lower than the
returns on the Underlying Investments, and this may
reduce returns to Unitholders.
All payments in respect of the Funds are
denominated in Australian dollars. For information on
the risks associated with currency movements, see
Section 6 "Risks".
2.8
Ethical considerations
We do not take into account labour standards or
environmental, social or ethical considerations when
selecting, retaining or realising investments of the
Funds. Nor do we consider whether any Underlying
Investments or investment managers take any such
considerations into account when making their
investment decisions.
2.9
Who can invest?
„
direct Unitholders;
„
indirect Unitholders (i.e. those investing through
an IDPS); and
IDPS operators.
Please note that we can only accept applications
submitted within Australia.
„
2.10
What if I change my mind?
If you invest directly into the Funds, and you change
your mind about holding Units in the Funds just after
you invest, you need to tell us quickly. If you invest in
the Funds via an IDPS operator, speak to the operator
to determine whether cooling off rights are available
for that service. Refer to "Cooling off" in section 9.1
for details on your rights to change your mind.
9
3. Investment Options
3.1 Instreet Reliance Commodities Fund
What am I investing into?
An investment in the Commodities Fund will provide
Unitholders with an indirect Australian dollar
denominated exposure to the Schroder Alternative
Solutions Commodity Fund (Schroder AS
Commodity Fund) (being the Underlying Investment
for the Commodities Fund).
Description of Schroder AS Commodity Fund
Overview
The Schroder AS Commodity Fund is managed by
Schroder Investment Management (Luxembourg)
S.A. (Schroder).
The Schroder AS Commodity Fund is benchmark
unconstrained, but is a beta or enhanced beta
commodity fund. It has two objectives: to outperform
its benchmark and to record lower volatility than the
benchmark (the benchmark is the simple average of
the four main commodity indices: S&P GSCI TR, DJ
AIG CI TR, Reuters CRB CI TR, and Rogers ICI TR).
The Schroder AS Commodity Fund invests globally
across the spectrum of commodities in over 60
individual commodities. As such, it provides a simple
way to gain exposure to a range of commodity
sectors and will be primarily invested in the
agriculture, metal and energy complexes.
Predominantly the investments are in derivative
related commodity instruments, principally
comprising of futures and other commodity linked
derivative instruments, and, to a lesser extent,
equities and cash. The fund will not acquire physical
commodities directly. The Schroder AS Commodity
Fund will neither employ leverage nor engage in short
selling.
returns over time. The manager uses an active
approach to portfolio management which at times
may carry a high degree of portfolio turnover.
In parallel with this identification of opportunities, the
manager also works continuously on maintaining the
optimal portfolio construction as a whole. A key aim
here is risk management, and the manager has strict
guidelines on the number, size and value of individual
holdings.
Diversification is central to the investment approach
and it should never become overdependent on a
particular sub-sector. Since the portfolio is indexunconstrained, there is flexibility in weightings
between sectors and asset types. The majority of the
portfolio (never less than 66%) will be invested in
commodity markets at all times. There are some
commodities not traded on the futures markets, such
as steel, coal, diamonds and tea: to gain exposure to
these areas, up to 25% of the portfolio can be
invested in equities. If necessary up to 33% of the
portfolio can be held in cash.
Data As Of 30/06/2008
Sector Allocation 30/06/2008
Metals 20.30%
Agriculture 33.40%
Schroder AS Commodity Fund
Fund Type
Open-ended
Domicile
Luxembourg
Investment adviser
Schroder Investment Management
Limited
Launch date
31-October-2005
Total fund size (as at
30 June 2008)
USD ($) 3.5 billion
Management Style
The manager considers a set of over 60 commodities,
with a close focus on 40, and analyses each on a
weekly basis. The research process combines both
top down analysis of global conditions with bottom
up analysis of individual commodity markets, all with
the aim of identifying trends and the resulting
opportunities. Fundamental analysis forms the core
of the investment process which the manager
complements through quantitative, technical, and
sentiment analysis to achieve positive absolute
10
Instreet Investment
Cash 1.20%
Energy 45.10%
Investment Security Exposure
Swaps, ETFs 16.00%
Cash 1.20%
Equity 0.20%
Futures 82.60%
Historic performance
The information above and Tables 1 and 2 below
show the historic performance of the Schroder AS
Commodity Fund in USD net of fees from November
2005 to 30 June 2008.
The returns shown are the returns of the Schroder AS
Commodity Fund only, and not the Instreet Reliance
Commodities Fund. The performance of your
investment in the Instreet Reliance Commodities
Fund may be different from that of the Schroder AS
Commodity Fund, and these differences may be
significant.
Any difference will arise because of the application of
the capital protection strategy (including Profit Lock-In
and quarterly distributions), the application of the FX
Hedging Strategy and the deduction of fees. The
capital protection strategy may result in your
exposure to the Schroder AS Commodity Fund being
switched wholly or partly into cash or similar
investments, meaning that you will not be fully
exposed to gains of the Schroder AS Commodity
Fund.
The figures shown below are in USD, while your
investment will be denominated in AUD. The Instreet
Reliance Commodity Fund will adopt a FX Hedging
Strategy which may significantly alter returns.
3.2
Instreet Reliance Global Allocation Fund
What am I investing into?
An investment in the Global Allocation Fund will
provide Unitholders with an indirect Australian dollar
denominated exposure to the BlackRock Global
Allocation Fund (BGF Global Allocation Fund)
(being the Underlying Investment for the Global
Allocation Fund).
Description of BGF Global Allocation Fund
Overview
The BGF Global Allocation Fund is managed by
BlackRock (Luxembourg) S.A. (BGF).
The BGF Global Allocation Fund seeks to maximise
total return. The BGF Global Allocation Fund invests
globally in equity, debt and short term securities, of
both corporate and governmental issuers, with no
prescribed limits. Usually the BGF Global Allocation
Fund will invest at least 70% of its total net assets in
the securities of corporate and governmental issuers.
It will seek to invest in securities that are, in the
opinion of the manager, undervalued. It can also
invest in the equity securities of small and emerging
growth companies. A portion of its debt portfolio
could be in high yield fixed income transferable
securities. Currency exposure is flexibly managed.
Fees are deducted from the Instreet Reliance
Commodity Fund which would not be deducted if the
underlying investment was in the Schroder AS
Commodity Fund.
BGF Global Allocation Fund
For more information on how the performance of
your investment will differ from that of the Schroder
AS Commodity Fund, see Sections 2.5 and 2.7.
Fund Type
Open-ended
Domicile
Luxembourg
Investment adviser
BlackRock (Luxembourg) S.A.
Additional Information
As of 30 June 2008
Table 1
Table 2
Annualised
Return
Schroder AS
Commodity
Annualised
Volatility
Schroder AS
Commodity
1 Yr
53.1%
1 Yr
16.3%
3Yr
27.3%
3Yr
13.5%
5 Yr
--
5 Yr
--
7 Yr
--
7 Yr
--
No data is presented for the 5-year or 7-year periods,
because the Schroder AS Commodity Fund has only
been in existence for approximately 21/2 years. The
data shown under the heading "3 years" is based on
data from 2 November 2005 to 30 June 2008 and has
been annualised.
In addition to equity securities the
BGF Global Allocation Fund may
use derivatives to hedge market
and currency risk, and for the
purpose of efficient portfolio
management
Launch date
03 Jan 1997
Total fund size (as at
30 June 2008)
USD ($)19,739.8 billion
Management Style
The BGF Global Allocation Fund is characterised by a
value-oriented approach to security selection (across
all company sizes, sectors, countries and qualities
and cash equivalents) that seeks to identify
attractively priced investment opportunities through
utilising both ‘top-down’ and ‘bottom-up’ analysis.
The investment mandate is highly ‘flexible’. The
manager is therefore able to seek out investment
opportunities in both equity and debt securities.
You should note that past performance of the
Schroder AS Commodity Fund is not an indicator
of its future performance or the performance of
an investment in the Instreet Reliance
Commodities Fund.
Investment Options
11
The team leverages global research and explores
investment ideas by analysing market trends,
demographic changes, corporate financial
statements, and participating in regular meetings with
the management teams of companies it is
researching. Typically there are 600 holdings and they
also seek diversification across markets, countries,
industries and issuers. There are no geographic limits
on where its investments may be located.
BlackRock Global Funds manager does not adopt
stated performance targets.
Historic performance
The information above and Tables 3 and 4 below
show the historic performance of the BGF Global
Allocation Fund in USD net of fees from 29 June
2001 to 30 June 2008.
The returns shown are the returns of the BGF Global
Allocation Fund only, and not the Instreet Reliance
Global Allocation Fund. The performance of your
investment in the Instreet Reliance Global Allocation
Fund may be different from that of the BGF Global
Allocation Fund, and these differences may be
significant.
Data As Of 30/06/2008
Asset
Cash & Cash Adj's 13.6%
Equity 54.6%
Fixed income 31.8%
This difference will arise because of the application of
the capital protection strategy (including Profit Lock-In
and quarterly distributions), the application of the FX
Hedging Strategy and the deduction of fees. The
capital protection strategy may result in your
exposure to the BGF Global Allocation Fund being
switched wholly or partly into cash or similar
investments, meaning that you will not be fully
exposed to gains of the BGF Global Allocation Fund.
The figures shown below are in USD, while your
investment will be denominated in AUD. The Instreet
Reliance Global Allocation Fund will adopt an FX
Hedging Strategy which may significantly alter
returns.
Regional
Fees are deducted from the Instreet Reliance Global
Allocation Fund which would not be deducted if the
underlying investment was in the BGF Global
Allocation Fund.
US/Canada 48.1%
Europe 17.2%
For more information on how the performance of
your investment will differ from that of the BGF
Global Allocation Fund, see Sections 2.5 and 2.7.
As of 30 June 2008
Asia 16.5%
Latin America 4.2%
Cash 13.6%
Africa/Middle East 0.4%
Sector
Utilities 1.8%
Consumer Discretionary 2.3%
Table 3
Table 4
Annualised
Return
BR Global
Allocation
Annualised
Volatility
BR Global
Allocation
1 Yr
6.4%
1 Yr
8.8%
3Yr
12.5%
3Yr
7.5%
5 Yr
14.2%
5 Yr
7.2%
7 Yr
11.2%
7 Yr
9.2%
Index Related / Unassigned -0.16%
Financials 7.6%
Telecoms Services 4.0%
Energy 8.6%
Consumer Staples 4.3%
You should note that past performance of the
BGF Global Allocation Fund is not an indicator of
its future performance or the performance of an
investment in the Global Allocation Fund.
Healthcare 6.4%
Industrials 6.9%
Information Technology 6.0%
Materials 6.8%
12
Instreet Investment
4. About the capital protection, Profit Lock-In
and quarterly distributions
4.1
How does the capital protection
strategy work?
Continuous protection is an investment strategy that
allows investors to participate in the upside of an
underlying investment while guaranteeing that at all
times the value of the overall investment in the
strategy will not fall below a given threshold. This
threshold is set to at least 75% of the Initial
Reference Index Level (the Initial Capital Protection
Level) but can increase as a result of the Profit LockIn mechanism described in Section 4.4. The level of
capital protection locked in at any point in time is also
referred to as the Floor.
The principle behind continuous protection is a
dynamic allocation to a portfolio that includes
„
Holdings in the Underlying Investment (the
Schroder Alternative Solutions Commodity Fund
or the BlackRock Global Funds Global Allocation
Fund in the case of the Reliance Funds); and
„
Holdings in cash, accruing interest at the rate
of Australian Dollar 1 month BBA Libor rate or
such other rate as determined by the Capital
Protection Provider.
The value of the portfolio is captured in the Reference
Index. The percentage weight of the Underlying
Investment within the overall portfolio is determined
and may change on a daily basis and is proportional to
the difference between the Reference Index level
and the Floor. Broadly speaking this means that all
else being equal:
„
The better the performance of the Underlying
Investment, the higher the weight allocated to it
up to a prescribed maximum weighting; and
„
The higher the Floor as a result of Profit Lock-In,
the lower the weight allocated to the Underlying
Investment.
The capital protection strategy also allows for holdings
in the Underlying Investment to be leveraged
(allowing the percentage weight of the Underlying
Investment in the portfolio to be greater than 100%).
In the case of the Reliance Funds, no leverage is
allowed for the Schroder Alternative Solutions
Commodity Fund, while leverage of up to 25% is
allowed for BlackRock Global Funds Global Allocation
Fund (consequently the percentage weight can go up
to 125%).
At any time, if the percentage weight of the
Underlying Investment is equal to or greater then
100%, then the portfolio has no holding in cash.
Otherwise the difference between 100% and the
weight of the Underlying Investment is allocated to
cash.
In order to ensure that a significant exposure to the
Underlying Investment is maintained, the capital
protection strategy can be designed to terminate it at
any time the percentage weight of the Underlying
Investment within the portfolio falls below a
predetermined level. In the case of the Reliance
Funds, this level is set to 10%.
Figures 1 and 2 illustrate the behaviour of capital
protection, including the Profit Lock-In feature, on a
theoretical basis. The two charts assume the
performance of a notional Underlying Investment and
illustrate the application of capital protection in both a
rising and a falling market. The figures assume that
the percentage weight of the Underlying Investment
can go up to 125%. Figures 1 and 2 show the effect
of capital protection on the percentage weight
allocated to the Underlying Investment, and on the
performance of the Underlying Investment once
capital protection is applied compared to the
performance of the Underlying Investment itself.
Figure 1
125%
230
100%
200
75%
170
Capital Protection increases for
Profit Lock-in and decreases for
Coupon Payment
140
50%
Weight/Capital Protecton (%)
Underlying/Reference Index (Based at 100)
260
25%
110
0%
80
1
2
3
4
YEAR
Underlying Investment
Reference Index Level - Including Continuous Protection
About the capital protection, Profit Lock-In and quarterly distributions
5
6
7
Weight of the Underlying Investment (%)
Capital Protection (as % of Initial Index)
13
The figures highlight:
„
In a rising market (Figure 1) the performance of
the Underlying Investment once capital protection is
applied – as reflected in the Reference Index - is less
than the performance of the notional Underlying
Investment.
„
The Capital Protection Level increases as a result
of Profit Lock-Ins and decreases as a result of
quarterly distributions being paid out. In a rising
market, there is a higher likelihood that part of the
performance of the Underlying Investment will be
locked-in and result in quarterly distributions being
made (Figure 1).
„
„
In a falling market (Figure 2), capital protection
serves to protect against significant downside as
the allocation to cash increases.
In both a rising and a falling market investors need
to be aware that the performance of the
Underlying Investment once capital protection is
applied – as reflected in the Reference Index – will
differ from the performance of the notional
Underlying Investment. This is highlighted in
section 6 under "Receiving less than the Capital
Protection Level".
For the avoidance of doubt, the fact that the Initial
Capital Protection Level is set to 75% of the Initial
Reference Index Level does not guarantee that at all
times an investment in the strategy has a maximum
downside of 25%. The maximum downside in
percentage terms will depend on the difference
between the Initial Capital Protection Level and the level
of the Reference Index on the day in which an
investment in the strategy is made. For example, if an
investment in the strategy is made on a day in which
the Reference Index equals 104% of the Initial
Reference Index Level, then the maximum downside in
percentage terms is equal to 27.9%(27.9%=(104%75%)/104%). Vice versa, if an investment in the
strategy is made on a day in which the Reference Index
equals 97% of the Initial Reference Index Level, then
the maximum downside in percentage terms is equal to
22.7% (27.9%=(97%-75%)/97%).
You should note that any accrued but unpaid fees as at
the Redemption Date or Maturity Date will be deducted
from any payment due by the Capital Protection
Provider to the Fund. In certain circumstances, any
exposures to the Underlying Investments or to cash will
be liquidated to pay these fees.
4.2
Can exposure to the Underlying
Investments be reduced to zero?
If, at any time, the relevant Reference Index is notionally
invested in cash for an amount which is greater than
90% of the Reference Index, Unitholders will cease to
have exposure to the Underlying Investments. At this
point (Liquidation Date), the Swap Agreement will end
and the Fund will receive the greater of the value of the
Swap Agreement or the Capital Protection Level.
For information on what you will receive on termination
of the Funds, see Section 2.6.
4.3
Leveraging and weighting of the
Underlying Investments
Leverage (or "gearing") involves borrowing or a
borrowing-like arrangement to enable more capital to be
invested in the active asset. Leverage is commonly
used by investment managers to provide the potential
to enhance returns. However, leverage can also
125
125%
100
100%
75
75%
50
50%
25%
25
Termination when the weight
of Underlying Investment falls
below 10%
0%
0
1
2
3
4
YEAR
Underlying Investment
Reference Index Level - Including Continuous Protection
14
Weight of Underlying/Capital Protection (%)
Underlying/Reference Index (Based at 100)
Figure 2
Instreet Investment
5
6
7
Weight of the underlying investment (%)
Capital Protection (% of Initial Reference Index)
magnify any losses. Leverage will only be used in the
Global Allocation Fund. The Commodities Fund will not
use leverage.
Capital
Random Reference Threshold Profit Lock-In
Protection
valuation Index Level achieved
Level
on valuation
date
date
The weighting is a factor which represents the
degree of leverage adopted to provide exposure to
the Underlying Investments. For example, a
weighting of 125% means that you are exposed 1.25
times to any movement in the Underlying Investment
and a weighting of 100% means that you have one to
one exposure to a movement in the Underlying
Investments.
The actual weighting will be calculated by the Capital
Protection Provider on each Business Day by
application of the capital protection methodology
having regard to relevant market data and market
conditions on that day. Changes in market data or
market conditions will cause the weighting of the
Underlying Investments to vary.
These variables are subject to continuous market
movement. You should note that if you acquire Units
in the Funds after the commencement date, the
weightings are likely to be different from those set
out in this document.
4.4 Profit Lock-In and quarterly distributions
On the commencement date of the Swap
Agreements, each Fund's investment is capital
protected at the Initial Capital Protection Level, which
is 75% of the initial Reference Index Level. The initial
Reference Index level is set at 100.
The Profit Lock-In feature establishes a series of
thresholds corresponding to 5% increases over the
initial Reference Index Level. The first time each
threshold is met in a quarter, the Capital Protection
Level will be increased by 3.75. Therefore, if the
Reference Index Level rises to 105, the Capital
Protection Level will rise to 78.75.
Once a new threshold is reached, the Capital
Protection Level will stay at the corresponding
increased level unless another threshold is passed, or
a quarterly distribution is paid to Unitholders
(described below).
The Profit Lock-In is shown in the table at the top of
the next column, for four random valuation dates
within a single quarter:
Quarter
Reference Threshold Capital Protection Level
before distribution
Index Level achieved
1
107
105
3.75
78.75
2
114
110
A further 3.75
82.5
3
117
115
A further 3.75
86.25
4
121
120
A further 3.75
90.00
Etc.
**
The figures shown above are an example to demonstrate how the
Profit Lock-In feature works. They are not an indication of how
your investment will actually perform.
The Profit Lock-In feature applies only once during each
quarter, so if the Reference Index Level were to reach
105, fall and then rise again above 105 in the same
quarter, the 3.75 increase in the Capital Protection Level
would only be locked in once for a total Capital Protection
Level of 78.75.
A quarterly distribution will be paid to Unitholders if the
Capital Protection Level is increased due to the Profit
Lock-In feature (if the Capital Protection Level remains at
the Initial Capital Protection Level, no distributions will be
paid). The amount of the distribution per Unit will be
calculated on the last Business Day of each quarter as
follows:
Distribution per Unit = (Capital Protection Level –
75)/100 x $1, up to a maximum of 4 cents per quarter
The amount of the quarterly distribution is then
subtracted from the Reference Index Level (expressed as
a percentage of the initial Reference Index Level) on the
first Business Day of the following quarter, giving a
revised Reference Index Level. This revised Reference
Index level will not be published until the third business
day of the following quarter.
The Capital Protection Level will be reset to the level
corresponding to the highest threshold which is lower
than or equal to that revised Reference Index Level. If
the revised Reference Index Level is less than 105, the
Capital Protection Level will be reset to the Initial Capital
Protection Level.
This is shown in the table below. The Reference Index
Levels shown in the 2nd column are those calculated on
the last Business Day of the quarter.
Quarterly distribution
paid per Unit
Revised Reference
Index Level
Capital Protection Level
after distribution
107 – 3.75 = 103.25
75
1
107
105
78.75
(78.75 - 75) x $1 = 3.75c
2
114
110
82.50
(82.50 - 75) x $1 = 4c
114 – 4 =110
82.5
3
117
115
86.25
(86.25 - 75) x $1 = 4c
117 – 4 = 113
82.5
4
121
120
90.00
(90.00 - 75) x $1 = 4c
121 – 4 = 117
86.5
Etc.
**
The figures shown above are an example to demonstrate how the Profit Lock-In feature and quarterly distributions work. They are not an
indication of how your investment will actually perform.
About the capital protection, Profit Lock-In and quarterly distributions
15
4.5
Simulated past performance
The following data indicate the average annualised
distributions that would have been paid to
Unitholders if they had held an investment in the
Commodities Fund and the Global Allocation Fund
over the last 1, 3, 5 and 7 years respectively, that is,
the average quarterly distribution paid over the life of
the backward-looking simulation, multiplied by 4. The
% Quarters Paid table shows the number of quarters
(expressed as a percentage) in which a Unitholder
would have received a quarterly distribution.
The backward-looking simulation performance data
is expressed in AUD, employing the same FX
hedging strategy used in the Funds to hedge
foreign currency exposure. The currency hedging
strategy reflects borrowing on a daily basis an
amount in USD equal to the notional value of the
underlying Index expressed into USD at the
prevailing exchange rate and charged at 1 month
USD Libor. The same amount is invested in AUD at
BBA Libor AUD 1 Month. There is no guarantee
that the exposure will be hedged at all times.
The purpose of this data is to give you an indication of
the magnitude of distributions you may receive, and
how often you may receive distributions. For the
Commodities Fund, no data is presented for the 5year or 7-year periods, because the backward-looking
simulations are generated using actual historical data
and the underlying fund, the Schroder AS Commodity
Fund, has only been in existence for approximately
21/2 years. For the same reason, the data shown
under the heading "3 years" is based on data from 2
November 2005 to 30 June 2008.
Average Annualised Distribution
These backward-looking simulations are based on a
number of assumptions, as detailed below.
Past performance is not a reliable indicator of
future performance.
„
The backward-looking simulation returns have
been calculated by Merrill Lynch, based on
hypothetical investments made on the following
dates:
1 Yr
3 Yr
5 Yr
7 Yr
Global Allocation Fund
5.0% 12.4% 14.7% 9.8%
Commodity Fund
15.7% 12.4%
% Quarters Paid
--
--
1 Yr
3 Yr
5 Yr
7 Yr
Global Allocation Fund
33.3%
81.8%
94.7%
63.0%
Commodity Fund
100.0%
100.0%
--
--
4.6
Underlying Investment Maintenance
Factor
Commodities Fund: 29-Jun-07 (1yr), 02-Nov-05
(3yrs)
The Swap Counterparty may profit from its ability to
manage the underlying risk associated with the
Reference Indices and its responsibilities in relation to
the capital protection and the FX Hedging Strategy.
This profit is called a Maintenance Factor. It is
factored into the pricing of the Swap Agreements,
and is not charged directly to Unitholders.
„
The backward-looking simulation calculates daily
data for the Underlying Investments in USD.
The Maintenance Factors for each of the Reference
Indices are as follows:
„
The FX Hedging Strategy is applied based on
historical values of Australian Dollar (AUD), United
Stated Dollar (USD), London Interbank Offer Rates
(Libor), AUD/USD FX and of AUD and USD 1 month
Libor rates.
The capital protection strategy (including quarterly
distributions) is applied on a daily basis ending on
30 June 2008. The Libor rate used to calculate
the capital protection mechanics is the 1 month
AUD Libor rate as of 30 June 2008.
Global Allocation Fund: 29-Jun-07 (1yr), 30-Jun-05
(3yrs), 30-Jun-03 (5yrs), 29-Jun-01 (7yrs)
„
„
16
„
Fees have been applied as they would apply to
investments in the Swap Agreements and not in the
Instreet Reliance Funds.
Instreet Investment
Instreet
Reliance Fund
Underlying
Investmentl
Maintenance
Factor
Global Allocation
Fund
BlackRock Global Funds Global Allocation Fund
1.45% p.a.
Commodities
Fund
Schroder Alternative Solutions –
Commodity Fund
1.65% p.a.
5. About the Responsible Entity, Swap
Counterparty, Capital Protection Provider,
Fund Administrator and Distribution Manager
Each of the Responsible Entity and Swap
Counterparty are part of the Merrill Lynch Group. The
Fund Administrator is FundBPO Pty Ltd.
Merrill Lynch was formed in 1914 and became a
publicly traded company on 23 June 1971. In 1973,
we created the holding company, Merrill Lynch & Co.,
Inc., a Delaware corporation that, through its
subsidiaries and affiliates, is one of the world’s
leading wealth management, capital markets and
advisory companies with offices in 40 countries and
territories and total client assets of approximately
USD 1.6 trillion.
As an investment bank, Merrill Lynch is a leading
global trader and underwriter of securities and
derivatives across a broad range of asset classes, and
serve as a strategic advisor to corporations,
governments, institutions and individuals worldwide.
In addition, Merrill Lynch own a 45% voting interest
and approximately half of the economic interest of
BlackRock, Inc., one of the world’s largest publicly
traded investment management companies with
approximately USD 1.4 trillion in assets under
management at 30 June 2008.
The Responsible Entity
Merrill Invest (Australia) Limited (ML) is the
Responsible Entity of the Funds. Among other
things, the Responsible Entity is responsible for
protecting the rights and interests of Unitholders as
set out in the relevant Constitutions and the law. ML
is a fully owned subsidiary of Merrill Lynch Markets
(Australia) Pty Limited which is owned by Merrill
Lynch (Australasia) Pty Limited, part of the global
Merrill Lynch Group headed by Merrill Lynch & Co.,
Inc.
The Responsible Entity holds Australian financial
services licence No. 315369 which contains
authorisations granted by ASIC allowing it to conduct
its business activities in the Australian marketplace.
The Responsible Entity may also use the services of
external companies to perform its duties. The
Responsible Entity has appointed a custodian, Merrill
Lynch (Australia) Nominees Pty Limited ACN 003 925
031, AFSL 235152 to hold and maintain the assets of
each Fund as agent of the Responsible Entity. The
Responsible Entity reserves the right to change the
custodian at its discretion.
The Responsible Entity may retire as Responsible
Entity under the circumstances set out in the
Corporations Act, including where Unitholders who
hold the required number of Units in a Fund pass a
resolution requiring us to retire from the relevant
Fund. We may also retire voluntarily, but only in
accordance with the requirements of the
Corporations Act.
The Swap Counterparty
The counterparty for the Swap Agreements (which
include the capital protection) which each Fund will
enter into is Merrill Lynch International (MLI). MLI is
a United Kingdom-based dealer in equity and fixed
income securities of a significant number of global
issuers, sovereign government obligations and assetbacked securities, and in loans and related financial
instruments. MLI is Merrill Lynch's primary non-U.S.
credit, equity derivatives and futures product dealer.
It is regulated by the United Kingdom Financial
Services Authority. It does not hold an Australian
financial services licence and operates in Australia
under Class Order 03/1099 issued by ASIC.
MLI is a subsidiary of Merrill Lynch & Co., Inc. In this
PDS Merrill Lynch & Co., Inc., its subsidiaries and
affiliates are referred to as "Merrill Lynch".
Guarantor
Merrill Lynch & Co., Inc. is a Delaware corporation
formed in 1973 as a holding company that, through
its subsidiaries and affiliates, provides broker-dealer,
investment banking, financing, wealth management,
advisory, investment management, insurance,
lending and related products and services on a global
basis.
As the Responsible Entity will enter into the Swap
Agreements with MLI as counterparty, Unitholders
who apply for Units in the Funds are exposed to the
creditworthiness of MLI, whose obligations are
guaranteed by Merrill Lynch & Co., Inc. Neither MLI
nor any other entity in the Merrill Lynch Group
guarantees the performance of your investment in
the Funds.
About the Responsible Entity, Swap Counterparty, CapitalProtection Provider, Fund Administrator and Distribution Manager
17
Conflicts of Interest
Distribution Manager – Instreet
Merrill Lynch may face possible conflicts of interest in
connection with its roles as counterparty to the Swap
Agreement and Calculation Agent for the Funds or in
connection with the calculation of the Underlying
Investments or provision of research to the
Responsible Entity. For example, Merrill Lynch and
its affiliates may engage in investment banking and
other activities for, or provide services to, the Funds
and the Responsible Entity, or companies in which
the Funds or Underlying Investments, or trade in the
underlying stocks that comprise the Underlying
Investments or financial instruments linked thereto
for their own account, or for the account of others. In
addition, Merrill Lynch International, as Calculation
Agent under the Swap Agreements, calculates all the
components, formulae, payments and the value of
the Swap Agreements. The Responsible Entity does
not check or confirm these calculations but accepts
the calculations provided by Merrill Lynch
International (in the absence of manifest error). All of
these activities may result in conflicts of interest with
respect to the financial interests of Merrill Lynch.
Under the Swap Agreements the Responsible Entity
may receive a payment at the Maturity Date or any
relevant Redemption Date of at least the Capital
Protection Level from MLI as counterparty to the
Swap Agreements. For more information on the
Guarantor, please refer to www.ml.com.
Instreet is the Distribution Manager in relation to the
Funds. Instreet works closely with the financial
advisor community to conceive and distribute
investment product that harness inspiration, market
insight and intelligent structuring.
Fund Administrator
FundBPO Pty Ltd (ACN 118 902 891) (the Fund
Administrator) is a fund administration and processing
specialist and is a wholly owned subsidiary of
MainstreamBPO Pty Ltd. Its business is the provision
of ‘back-office’ functions for fund managers and
financial institutions. It has sophisticated systems and
software, and employs dedicated and experienced
operational management and process personnel for
unit registry, investment administration and fund
accounting services.
The Responsible Entity has appointed FundBPO to
provide all back office fund administration processes
including investor interface, registry, investment
reporting and accounting. The Responsible Entity
maintains strict controls, including detailed and
regular reporting processes.
18
Instreet Investment
After identifying advisor needs and market trends,
Instreet builds products sourcing quality wholesale
providers from around the world. By doing so,
Instreet makes institutional assets available to
individual investors. Instreet products are
administered by recognised financial institutions and
independent ratings are obtained from trusted
research houses.
Instreet aims to offer a selection of investment
products designed to better achieve the goals of
client and adviser.
Instreet is not a member of the Merrill Lynch Group.
While acting as Distribution Manager or otherwise,
Instreet is not the agent or representative of the
Responsible Entity, Merrill Lynch International or any
other member of the Merrill Lynch Group and acts on
its own behalf.
6. Risks
All investing involves risk. Generally, the higher the
expected return, the higher the risk. While the
Funds are managed with the aim of providing
competitive investment returns and protecting
against risk, you should be aware that certain risks
do exist.
Potential investors should ensure that they
understand these risks fully before investing and
obtain independent financial and/or taxation advice if
necessary. This brief outline does not purport to
disclose all of the risks or other relevant
considerations in connection with an investment in
the Funds.
Specific risks of the Funds
This section sets out risks specific to the Units in
the Funds which must be carefully considered
before any investment decision is made.
The Merrill Lynch Group makes no representation or
warranty as to the performance of the Underlying
Investments, nor does it make any prediction of the
political, economic or other events which may affect
the Underlying Investments or the market for the
Units generally. Therefore, all factors likely to affect
the performance of the securities or commodities
which comprise the Underlying Investments are
important and investors should consider all
appropriate publicly available information in relation
to the Underlying Investments (and the securities or
commodities which comprise it).
Receiving less than the Capital Protection Level
Capital protection is not provided directly to Units in
the Funds. The Funds' own investments are
protected at the Capital Protection Level. This
means, on termination, you will receive a
distribution equal to the maturity value of the Funds'
investments (primarily in the Swap Agreements)
less any taxes payable and less any accrued but
unpaid fees owing to the Responsible Entity.
Please note that the distribution you receive on
termination of the Funds will not equal the Capital
Protection Level. The Capital Protection Level is
applied to the Funds' investments, not to the value
of your Units. For information on how Unit prices
are calculated, see Section 9.1.
Allocation away from one or more Underlying
Investments
If the capital protection strategy dictates a relatively
high notional allocation towards cash, the relevant
Fund’s potential for growth may be adversely
impacted. This is because the Fund relies upon the
notional exposure to the Underlying Investments
Risks
to provide the Fund with the expected returns. If
the Fund's investments are substantially allocated
to cash instead, there will be less opportunity for
the Fund to obtain growth beyond the returns it can
earn on the cash. It is possible that all the Funds'
assets will be notionally allocated to cash and
Unitholders will only receive the Capital Protection
Level less any taxes payable and less any accrued
but unpaid fees owing to the Responsible Entity.
If the allocation to cash exceeds 90% of the
Reference Index Level, the Swap Agreement will be
terminated. Please refer to section 4.1 for a
detailed explanation on how the capital protection
works.
Derivatives risk
Derivatives (such as swap agreements, deferred
purchase agreements, options, futures, forward rate
agreements and forward foreign exchange
contracts) are used to manage risk or to gain
exposure to individual securities, currencies and
investment markets. As at the date of this PDS, the
Funds will invest directly in the Swap Agreements.
Risks associated with using derivatives include the
value of the derivative failing to move in line with
the underlying asset and potential illiquidity of the
derivative and counterparty risk (this is where the
counterparty to the derivative contract cannot meet
its obligations under the contract).
We have a Derivatives Risk Statement (DRS)
covering the Funds that deals with the use of
derivatives, as well as our overall policies and
control procedures. Unitholders may view a copy of
our DRS at our offices on any Business Day or we
can provide a copy, free of charge, to Unitholders
who contact us.
Divergence from returns on the Underlying
Investments
The costs associated with providing the swaps, FX
Hedging Strategy and the dynamic allocation
between Underlying Investments and cash may
cause a divergence in returns of the funds as
compared to the Underlying Investments.
Performance of the Underlying Investments
and the global economy
The performance of Underlying Investments and the
value of the securities and commodities in which
they in turn invest will largely determine the market
price of the Units. The volatility of the market price
of the securities or commodities that comprise the
investments of the Underlying Investments and
other interrelated and complex factors and general
risks applicable to financial markets on which those
securities or commodities will be traded (such as
investor confidence and present and expected
future global economic conditions) will be relevant
as well.
19
Counterparty or credit risk
Counterparty or credit risk is the risk that a counterparty
to the Funds, such as the Swap Counterparty, fails to
meet its contractual obligations resulting in a loss of
capital or income. Although it is not likely, the
provider of the capital protection could fail to honour
its obligations under the Swap Agreements. If this
occurs, Unitholders could lose some or all of their
investments. For more information about the Swap
Counterparty, please refer to Section 5.
„
the formulae for or method of calculating a
Reference Index or the Swap Agreements are
modified, or the Reference Index is otherwise
materially modified or is cancelled;
„
a Reference Index is not calculated and
announced on any day;
„
an increased cost of hedging, whether caused by
an increase in tax, duty, expense or fees;
„
there is a change or violation of any material
constituent documents;
„
the main investment objective of the Underlying
Investments change;
„
a change in the currency of denomination of the
NAV of the relevant Underlying Investment;
„
the NAV of the relevant Underlying Investment is
not calculated or announced within the period the
Swap Counterparty would normally expect;
„
any suspension, deferral, restriction or limitation
(including the introduction or increase of any fee,
cost or expense) is placed on the subscription or
redemption of interests in the relevant Underlying
Investment, or there is a mandatory redemption of
interests in the relevant Underlying Investment;
„
a change in the tax or regulatory environment of
the Swap Counterparty, the Underlying
Investment or the manager or advisor of the
Underlying Investment or the imposition of any
withholding tax or other tax;
„
a change in law (including the adoption of or
change to a law or regulation or the promulgation
of or change in the interpretation of a law or
regulation) which results in it becoming illegal to
hold, acquire or dispose of interests in the
Underlying Investments, or a party to the Swap
Agreement incurring an increased cost in
performing its obligations;
„
a review or investigation of the activities of one of
the Underlying Investments or its managers is
conducted by a regulator or any disciplinary action
is taken;
„
the manager of the Underlying Investment is
terminated, liquidated or wound up, or loses its
regulatory approval, licence or registration, or
there is a merger, de-merger, winding up or
liquidation affecting the Underlying Investment;
Liquidity risk
There is no guarantee that a liquid secondary market
(i.e. the ability of the Unitholder to buy and sell) for
Units in the Funds will develop. Illiquidity could
adversely affect the price at which Units trade on the
secondary market if they trade at all. The liquidity and
price will not affect the Capital Protection Level.
We reserve the right, in accordance with the Funds’
Constitutions, to defer payment of Units you redeem
to reflect the liquidity of the assets of the Funds.
Please refer to “Redeeming Your Investment" on
Section 9.2 for more details.
Currency risk
Movements in exchange rates between the
Australian dollar and foreign currencies can affect the
performance of the Funds. Changes in interest rates
will also affect the FX Hedging Strategy. Where
foreign currencies fall in value relative to the
Australian dollar this could have an adverse impact on
investment returns for the Funds. The Reference
Index will apply a strategy that substantially hedges
notional assets denominated in foreign currencies to
minimise the volatility of the index due to currency
exposure, although this currency hedging strategy is
not designed to be a perfect hedge.
Adjustment events and termination of the
Swap Agreements
In certain circumstances, the Swap Agreements may
be either adjusted, amended, varied, replaced or
calculations may be postponed or the agreements
may terminate early.
The Swap Counterparty has powers to make
adjustments to the terms of the Swap Agreements
(including adjusting the formulae or methodology of
any calculations, the times at which prices are
calculated, the underlying prices used to make a
calculation, valuation, adjusting, amending,
substituting, or replacing any payment or settlement
terms or any other variable or term of the Swap
Agreement) if any of the following occurs:
20
Instreet Investment
„
„
„
any arrangement between the Swap Counterparty
and an Underlying Investment or its managers,
including arrangements relating to interests in the
Underlying Investment, is terminated or changed
without the Swap Counterparty's consent;
an event occurs which prevents, hinders or
materially impairs the Swap Counterparty's ability
to conduct its hedging activities in relation to its
exposure under the Swap Agreement or adversely
affects the economic basis on which the Swap
Counterparty entered into the Swap Agreement;
any other event under the Swap Agreement
otherwise contemplated to allow adjustment.
The Responsible Entity will notify you as soon as
possible after any adjustment occurs. If the Swap
Counterparty determines that no adjustment it could
make would produce a commercially reasonable
result then the Swap Agreement can be terminated
early.
The Swap Agreement may also be terminated early,
including, but not limited to, if any of the following
Events of Default occur:
„
as a result of the rebalancing of the Reference
Indices, the notional exposure to the Underlying
Investment is less than 10% (and the notional
exposure to the cash asset is greater than 90% of
the Reference Index Level);
„
the Responsible Entity ceases to be the sole
Responsible Entity for a Fund;
„
the Reference Indices are cancelled;
„
an Underlying Investment is, or is intended to be,
substituted or replaced;
„
the Swap Counterparty is unable to acquire,
establish, re-establish, substitute, maintain,
unwind or dispose of any asset it deems
necessary to hedge the Swap Agreement or to
realise, recover or remit the proceeds of such a
hedge;
„
the Swap Counterparty becomes insolvent;
„
the Swap Counterparty merges or consolidates
with another entity and the merged entity does
not assume the obligations under the Swap
Agreement;
„
due to action taken by a court or taxing authority
or a change in tax law, the Swap Counterparty will
or is likely to be required to pay an additional
amount to gross up any payment from which an
amount is to be deducted or withheld for tax;
Risks
„
the performance of the obligations of the Swap
Counterparty under the Swap Agreement
becomes unlawful;
„
either the Responsible Entity or the Swap
Counterparty fails to make, when due, any
payment under the Swap Agreement required to
be made by it if such failure is not remedied on or
before the 7th day following the due date for such
payment;
„
the Swap Counterparty breaches the terms of the
Swap Agreement in any way and fails to remedy
the breach within 30 days of notice;
„
the Merrill Lynch & Co., Inc. guarantee is not (or is
claimed by Merrill Lynch & Co., Inc. not to be) in
full force and effect, or expires or terminates prior
to the satisfaction of all obligations of Swap
Counterparty under the Agreement;
„
an amendment is made to the constituent
documents of the Fund without the Swap
Counterparty's prior written consent.
If a Swap Agreement is terminated early, then the
Responsible Entity has a number of options that it will
need to consider, including (but not limited to)
whether to terminate the Funds early, or allow the
Funds to continue. In deciding which option to
pursue, the Responsible Entity must act in the best
interests of Unitholders in the relevant Fund. If the
Swap Agreement has terminated, however, capital
protection will no longer apply and the full value of
the investments in the Funds will be held in cash. If
the Funds terminate early, the capital protection will
not apply and you will receive the present value of
your Units (which will equal the unwind value of the
Fund's investment), which may be less than your
initial investment.
The Funds may incur early termination costs. Costs of
early termination include the costs associated with
the Swap Counterparty closing out its hedges,
including closing out currency hedges, and may
include penalties for early redemption imposed by the
Underlying Investments. This means that if the Swap
Agreement terminates early, even due to any default
by the Swap Counterparty, the Funds may need to
make a payment to the Swap Counterparty.
21
Leverage risk
The Funds themselves do not use leverage, but may
borrow to meet redemption requests. Rises in
interest rates may affect the costs of leverage and
therefore reduce the returns of the Funds.
The Swap Counterparty uses leverage under the
terms of the Swap Agreement to gain leveraged
exposure to the Underlying Investments. Subject to
the capital protection arrangements, leverage may
magnify any losses on the Swap Agreement and
therefore magnify any losses on the return of the
Fund.
No operating history
The Funds have no financial operating history. As at
the date of this PDS, no audited financial statements
exist for the Funds and no Units have been issued.
Potential conflicts risk
The Merrill Lynch Group may conduct transactions (as
principal or agent) in the Underlying Investments.
These trading activities may affect (positively or
negatively) the price or liquidity of the Underlying
Investments. Although each Merrill Lynch entity that
has a role in the Funds and the Swap Agreement will
perform their respective obligations in good faith and
a commercially reasonable manner, the parties
(including in particular the Swap Counterparty) may
face conflicts in these roles with its own interests in
other capacities.
Market risk
The Funds are exposed to investment markets and
the performance of these markets will have an
impact on returns. These markets are affected by a
range of conditions (e.g. economic, technological or
political) that impact returns. As the risk relates to the
market as a whole it cannot be diversified away
simply by holding a greater variety of securities within
that market.
Contractual risk
In the interests of efficient investment we may act on
an investment application before confirmation of
receiving the investment monies. If an investor fails
to meet its contractual obligations to pay the
application monies, this could result in a loss of
capital to the Funds.
Fund and regulatory risk
The following risks may apply when investing in the
Funds:
22
„
characteristics of the Funds may change;
„
taxation and other laws are subject to continual
change and may affect the tax implications or
other characteristics of your investment, including
the Swap Agreements;
Instreet Investment
„
there may be different tax consequences for
different Unitholders compared to investing
directly in underlying investments;
„
there may be different tax consequences for
Unitholders investing directly in the Funds and
those investing through an IDPS operator; and
„
the Funds could be terminated.
Taxation
You should refer to Section 8 "Taxation" for general
information on the tax consequences of an
investment in the Funds. The information in this PDS
is not advice to any prospective investor in the Funds
and does not seek to address all of the tax issues that
may be relevant to a particular Unitholder. Investors
should seek their own independent advice on the
taxation consequences of an investment in the Funds
which takes into account the investor's particular
facts and circumstances.
Emerging markets risk
Investments in emerging market countries are
subject to all of the risks of foreign investing
generally, and have additional heightened risks due to
a lack of legal, political, business and social
frameworks to support securities markets in many of
these countries. Some of the additional significant
risks include:
„
political and social uncertainty (for example,
regional conflicts and risk of war) and risks due to
issues regarding sovereignty and sovereign
intervention;
„
volatility of emerging market currencies as against
developed market currencies;
„
pervasiveness of corruption and crime;
„
delays in settling portfolio transactions;
„
risk of loss arising out of systems of share
registration and custody;
„
markets that are comparatively smaller and less
liquid than developed markets. Short-term
volatility in these markets and declines of more
than 50% are not unusual. Markets which are
generally considered to be liquid may become
illiquid for short or extended periods;
„
the emerging markets, are often linked by a
number of interdependencies (such as trading
agreements, commodity supply and demand
relationships) and are often affected by the
markets’ perceptions of emerging market
economies generally;
„
less government supervision and regulation of
business and industry practices, stock exchanges,
brokers and listed companies than in Australia;
„
currency and capital controls;
„
inflation, deflation or currency devaluation; and
„
greater sensitivity to interest rates, commodity
prices (such as the price of gold and oil) and to the
state of the global and relevant regional
economies.
All of these factors make prices of securities in
emerging markets generally more volatile than
securities in developed markets.
Commodity specific risk
Because the Commodities Fund will have a
concentrated exposure to various forms of the
commodities market, it may be subject to more
dramatic changes in value than would be the case if
the Fund were required to maintain wide
diversification among sectors, regions, and countries.
Commodities, especially investments in individual
commodities, may experience high volatility in
returns.
Managing your risks
You can always help to manage the risks.
Importantly, you can manage risk by:
„
obtaining professional investment advice to
determine whether the Funds suit your
investment objectives, financial situation and
particular needs;
„
reading all the information in this PDS before
investing in the Funds and make sure you
understand what it is you are investing into;
„
obtaining professional investment advice
concerning a suggested minimum investment
timeframe for the Funds. Please note, however,
that investing for the suggested minimum
investment timeframe does not entirely eliminate
the risk of loss, although the capital protection
arrangements will assist to mitigate the risk of
loss of your initial investment amount; and
„
reviewing your investments in light of your
investment objectives, financial situation and
particular needs.
Risks
23
7. Fees and Other Costs
DID YOU KNOW?
Small differences in both investment performance and fees and costs can have a substantial impact on
your long-term returns.
For example, total annual fees and costs of 2% of your fund balance rather than 1% could reduce your
final return by up to 20% over a 30-year period (for example, reduce it from $100,000 to $80,000).
You should consider whether features such as superior investment performance or the provision of
better member services justify higher fees and costs.
You may negotiate to pay lower contribution fees and management costs where applicable. Ask the
Responsible Entity or your financial adviser.
TO FIND OUT MORE
If you want to find out more or see the impact of the fees based on your circumstances, the Australian
Securities and Investments Commission (“ASIC”) web site (www.fido.asic.gov.au) has a managed
investment fee calculator to help you check out different fee options.
The table below shows fees and costs you may be charged when investing in each Fund. These fees and
costs may be deducted from the money you invest, from the returns on your investment or from that Fund
assets as a whole.
Taxation information is set out in Section 8 of this PDS.
You should read all the information about fees and costs because it is important to understand their impact on
your investment.
24
Instreet Investment
TYPE OF FEE OR COST
AMOUNT
HOW AND WHEN PAID
1
FEES WHEN YOUR MONEY MOVES IN OR OUT OF THE FUNDS
Establishment Fee:
The fee to open your investment
Nil
Not applicable
0 – 5.5% of your initial
investment amount
The Contribution Fee may be deducted from your
initial investment amount and is paid to your financial
adviser. This fee is negotiable.
Nil
Not applicable
Nil
Not applicable
Administration Fee
Up to 0.35875% p.a.
The Administration Fee is calculated daily, paid quarterly
in arrears based on the gross asset value of the Fund's
investments and is deducted from the NAV of the Fund.
This fee is not negotiable.
Nil
Not applicable
1,2
Contribution Fee:
The fee on each amount
contributed to your investment
Withdrawal Fee:
The fee on each amount you take
out of your investment
Termination Fee:
The fee to close your investment
MANAGEMENT COSTS3
The fees and costs for managing
your investment
SERVICE FEES
Switching Fee:
The fee for changing
investment options
1. We will charge a buy/sell spread when you invest money in, or redeem money from, a Fund. This spread is a transaction cost associated with the
Funds'investments. Please see "Transactional and operational costs including costs associated with the Swap Agreement" below.
2. This fee includes an amount payable to an adviser. An additional trail fee may also be charged by advisers (please see “Financial planner and other　service fees” under "Additional explanation of fees and costs" below). We make payments to operators/responsible entities to allow Unitholders　access to this product on an investment menu out of our own monies. Neither the Contribution Fee nor the trail fee applies to an investment in the
Funds by an IDPS operator.
3. Management costs do not include any costs associated with entering into the Swap Agreement, borrowing costs or Underlying Investment　management fees, as these costs are "transactional and operational costs" within the meaning of the Corporations Act and are not "Management　Costs" per se. Management costs also exclude the 1.5%p.a. management and performance fees taken by Schroder and BGF at the Underlying
Investment　level, as well as commissions paid to financial advisers. For more information, please refer to the "Additional explanation of fees and
costs" below.
Fees and Other Costs
25
Additional explanation of fees and costs
Fees when your money moves in and out of the
Funds
Contribution Fee
A Contribution Fee may be payable on each amount
invested in the Funds. This fee is deducted from your
application monies and may be paid to your financial
adviser as commission. This will reduce the returns
on your investment.
The Contribution Fee is currently up to 5.5%.7 Please
see the "Example of annual fees and costs" below.
You can negotiate with your financial adviser to pay
lower Contribution Fees (or none at all). Speak to your
advisor to negotiate your Contribution Fee.
Management costs
The management costs are set out in the table in this
section 7. Management costs comprise the
Administration Fee. Management costs do not
include transactional and operational costs or adviser
remuneration (these are discussed below).
Administration Fee
The Administration Fee is 0.35875% p.a. and will be
paid to the Responsible Entity to cover the costs
associated with running the Funds. The Responsible
Entity will pay part of the Administration Fee to the
Fund Administrator, part to the Fund's Custodian and
part to the Fund's auditor.
The Administration Fee covers normal expenses, but
each Fund's Constitution also allows us to be
reimbursed for abnormal expenses of the Fund. Any
abnormal expenses, such as the cost of Unitholder
meetings or defending or bringing legal proceedings,
will be charged to the Fund. We do not expect any
abnormal expenses to be incurred during the life of
this PDS. If they do arise, these will be paid after
payment of our Administration Fee.
For a worked dollar example which includes the
Administration Fee, please refer to the section on
"Example of annual fees and costs" below.
Transactional and operational costs including
costs associated with the Swap Agreement
Transaction costs are costs associated with buying
and selling the underlying investments of the Fund.
These include brokerage costs, government or bank
charges and buy/sell spreads for the Fund, and are
usually reflected in the Unit price of the Fund.
Buy/sell spreads
We will charge a ±0.20% buy/sell spread on the Unit
price for applications and redemptions of Units in the
Funds. The buy/sell spreads are designed to pay for
the transaction costs associated with buying or selling
investments. In practice, money is not actually
deducted from your investment or withdrawal amount.
Instead, the entry price to the Swap Agreement is made
0.20% higher and the exit price is made 0.20% lower.
For example, if you invest $50,000, there is an
adjustment of the exit price down so that if effect you
pay $100 for the cost of us disposing of the
Underlying Investments so we can pay cash to you.
The buy/sell spreads are paid to the Swap Counterparty
and not to Fund or the Responsible Entity.
For information on our policy which sets out the
guidelines and relevant factors and discretions for
calculating unit prices, including buy/sell spreads, see
"Unit pricing and the value of your investment" in
section 9.1 below.
Borrowing costs
For the Global Allocation Fund, a spread of 1.0% p.a.
will be charged over the prevailing 1-month AUD
LIBOR on the borrowed or geared assets in order to
cover the costs of providing the leveraged exposure to
the BGF Global Allocation Fund. LIBOR is the London
Interbank Offer Rate and is a reference rate for
prevailing interest/borrowing rates available to
institutional investors.
Financial planner and other service fees
Trail fee
In addition to the commissions payable to your
financial adviser out of the Contribution Fee, a
financial adviser providing advice on your investment
in the Funds may receive a trailing payment for advice
on the issue of the product (commission). The trail fee
is 0 - 1.10% p.a. of any quarterly distribution paid to
you.8 So, if you were paid $10,000 in distributions, up
to $110 may be paid to financial advisers. Your
financial adviser has to meet his or her expenses from
this commission, and also relies on it to obtain an
income. The trail fee is paid from Fund distributions (if
distributions are made) and so will reduce returns to
Unitholders. Please refer to the financial services
guide or statement of advice your financial adviser
gives you for more information on commissions
payable to them.
We maintain a register for Alternative Forms of
Remuneration. The register, which will be publicly
available by contacting us, outlines alternative forms
of remuneration, including incentive payments that we
give to or receive from AFSL holders, fund managers
or any representatives (if any is paid or received at all
in relation to the Funds).
7. The Contribution Fee does not apply to an investment in the Funds made by an IDPS operator.
8. The trail fee does not apply to an investment in the Funds made by an IDPS operator.
26
Instreet Investment
Distribution Management Fee
MLI will pay to the Distribution Manager a distribution
fee of up to 0.75% p.a. of the amount invested in the
Funds out of its own monies. Therefore, for every
$50,000 invested in the Funds, the Distribution
Manager will receive a payment from MLI of up to
$375. This fee will not reduce returns to Unitholders.
Schroder and BGF each receive a 1.5% p.a.
management fee from the Underlying Investments.
These fees are not a direct cost to Unitholders and do
not reduce the performance of the Funds.
Differential fees
Apart from the Contribution Fee and the trail fee, fees
are not negotiable and as such will not differ between
investors. However, the Responsible Entity may
choose to waive some or all of the fees for employees
and directors investing in the Funds. Speak to your
financial adviser to negotiate your Contribution Fee.
Example of annual fees and costs
This table gives an example of how fees and costs of
the Funds can affect your investment over a 1 year
period. Use this table to compare this product with
other managed investment products.
Example
Contribution
Fee
Government charges and taxation
Government taxes such as GST will be applied to your
account as appropriate. In addition to the fees and
costs described in this section, standard government
fees, duties such as stamp duties, and bank charges
may apply. Some of these charges may include
additional GST and will apply to your investments and
withdrawals as appropriate.
These fees are included in the fees outlined in the
tables above. Please note that the fees take into
account any reduced input tax credits which may be
available. Further information on taxation matters can
be found in Section 8 of this PDS.
Fees and Other Costs
For every $5,000 you
invest, you will be
charged up to $275.
Plus
Up to 0.35875% p.a.
Management
Costs*
Administration
Fee
And, for every $50,000
you invest, you will be
charged $179.38 each
year.
Equals
Cost of Fund
If you had an investment
of $50,000 at the
beginning of the year and
invested an additional
$5,000 during the year,
you will be charged up
to $454.38.#
Can the fees and expenses change?
Fees and expenses may change for various reasons,
including changes in economic conditions and
regulations. We will give you 30 days' notice of any
proposed fee increase or some other notice as
required by law.
Any change in fees and expenses must be within the
limits of the Constitution for each Fund. If we want to
increase the limits of the Constitution for the Fund,
we need to obtain Unitholder approval first.
Up to 5.5% p.a.
Balance of $50,000,
including a contribution
of $5,000 during the year
What it costs you will
depend on the fees you
negotiate with your
financial adviser.
*
See "Management costs" in the table in this section 7 and "Additional
explanation of fees and costs" for a more detailed description of what
comprises management costs and how they are calculated.
management costs include all direct and indirect management costs
for managing the Fund. Please note, management costs do not
include costs associated with entering into the Swap Agreement or
borrowing costs as these costs are "transactional and operational
costs" and are not "management costs" for the purposes of the
Corporations Act. Management costs also exclude the 1.5% p.a.
management fees taken by Schroder and BGF at the Underlying
Investment level, as well as commissions paid to financial advisers.
#
This example assumes that (i) your balance remains constant at
$50,000 throughout the year for the purpose of calculating the
management costs (i.e., in accordance with ASIC policy, we have not
included for the purpose of these calculations the pro rated
management costs that would be payable on the $5,000 invested at
some point during the year, and we have assumed that no
distributions have been paid and that the Fund's Unit price remains at
$1), (ii) no abnormal expenses are incurred, (iii) fees are not
individually negotiated with your financial adviser so you pay the full
Contribution Fee. We have also excluded from these calculations all
transactional and operational costs and non-management costs.
27
8. Taxation
This tax summary outlines the key Australian income
tax, stamp duty and goods and services tax (“GST”)
implications arising for Unitholders who acquire Units
in a Fund. This tax summary is based on Australian tax
laws in force or proposed (including draft legislation
introduced into Parliament and anticipated legislation
described in Section 8.5) and administrative practices
generally accepted as at the date of this PDS.
Prospective Unitholders should be aware that these
laws and practices may change and that any changes
may give rise to a different taxation outcome.
The information contained in this summary is of a
general nature only. It does not constitute legal or tax
advice and does not seek to address all of the tax
issues that may be relevant to a particular Unitholder.
Prospective Unitholders should seek independent tax
advice relevant to their own particular facts and
circumstances. Furthermore, the summary is limited
in scope to the key tax implications for Unitholders
who are residents of Australia for tax purposes, who
hold their Units in a Fund on capital account and
whose dealings are all at arm’s length.
8.1
Tax treatment of the Funds
The Funds should be treated as ordinary trust estates
for the purpose of the Tax Act. This means that, so
long as each Fund has at least AUD1 of distributable
income and all of the distributable income of each
Fund is distributed each Financial Year (as is required
under the Funds’ Constitutions) then the Responsible
Entity should not be liable to pay tax on the Funds’
taxable income. Instead, you will be required to
include your share of the net (taxable) income of a
Fund in your own assessable income. Your share of
net income is determined by reference to your share
of the distributable income of the Fund to which you
are entitled.
8.1.1
Net income of the Funds
Subject to the following comments, the net income of
the Funds should take into account the following
assessable or deductible items:
28
„
any quarterly distributions received under a Swap
Agreement;
„
receipts which the Fund receives if there is a
partial early termination of a Swap Agreement;
„
any receipts under a Swap Agreement at the
Maturity Date;
„
any miscellaneous expenses or fees that the
Responsible Entity may be entitled to claim or
charge from time to time.
Instreet Investment
Division 16E
If the Swap Agreement is a "qualifying security", the
return on the Swap Agreement would be assessable
on a 6 monthly compounding accruals basis under
Division 16E of Part III of the Tax Act - rather than on a
receipts basis as described above.
The Swap Agreement would be a qualifying security if,
at the time when the Fund entered into the Swap
Agreement, it was "reasonably likely" that the total
receipts would exceed the consideration paid to enter
into the Swap Agreement.
There is a risk that the Swap Agreement is a qualifying
security. With that said, the meaning of the phrase
"reasonably likely" in this context is not defined and
the Commissioner of Taxation has applied a narrow
interpretation of this phrase in the context of other
investments (albeit non-binding in the context of this
product). Although this issue is not clear from doubt,
our preferred view is that if the Commissioner were to
apply Division 16E consistently, he should take the
view that Division 16E does not apply to the Swap
Agreement.
Capital gains
It is expected that any gains derived by each Fund will
be ordinary income for tax purposes and thus it is not
expected that you would be entitled to any Capital
Gains Tax (“CGT”) discount (as to which, see below)
in respect of distributions from a Fund.
Tax offsets
Neither of the Funds are expected to derive any
income of a kind which would enable it to distribute
imputation credits or foreign income tax offsets to
Unitholders.
Losses
In the event that a Fund incurs a loss on a Swap
Agreement at the Maturity Date this loss cannot be
distributed to you. However, such a loss may be
carried forward and deducted against future income of
the Fund if the Fund meets certain requirements
outlined in the trust loss provisions of Schedule 2F to
the Tax Act.
8.2
Unitholder’s tax treatment
8.2.1
Distributions of net income from a Fund
As noted above you are required to include in your
assessable income your share of the net income of a
Fund. You will be assessed at your individual marginal
tax rate on this share.
As discussed above, the partial unwind of the Swap
Agreement will crystallise an assessable gain that is
included in the net income of the Fund. However, the
Responsible Entity may not unwind the Swap
Agreement each time a Unitholder redeems their Units.
As such it is possible that the net income allocated to a
particular Unitholder may include gains accrued to a
Fund before the Unitholder acquired its Units.
8.2.2
Gains or losses on disposal of Fund Units
Calculation of cost base and reduced cost base
The cost base of your Units will include, amongst
other things:
„
the amount paid to acquire the Units;
„
incidental costs in relation to the acquisition and
disposal of the Units; and
„
the costs of ownership of the Units (e.g. interest
expenses on funds you borrow in order to acquire
the Units where the interest is not otherwise
allowable as a tax deduction).
Your reduced cost base in your Units includes points 1
and 2 above but not the items in point 3 above.
Your cost base and reduced cost base may be
reduced by the receipt of non-assessable distributions
from the Fund, if any.
Calculation of capital gain
You may crystallise a capital gain or capital loss when
you dispose of your Units. As a general rule, where
the proceeds on disposal of your Units are greater
than the cost base of those Units, you will make a
capital gain. The amount of proceeds on disposal will
depend on whether or not you redeem your Units at
the Maturity Date of a Swap Agreement, or at an
earlier date or whether you dispose of your Units to a
third party.
Taxation
Redemption
Where you choose to redeem your Units, your total
redemption proceeds may consist of an interim
distribution of income from the Fund (resulting from
any gain that the Fund may derive in having to unwind
part of the Swap Agreement) and a payment for the
redemption of your Units. Only the component
relating to the payment for the redemption of your
Units will be relevant in determining whether or not
you crystallise a capital gain or loss.
Disposal of Units to a third party
Where you are able to assign or sell your Units to a
third party, the total sale proceeds you receive for this
assignment will be taken into account in determining
whether you make a capital gain or capital loss.
8.2.3
Other CGT considerations
CGT discount
If you are an individual or a trust, you may be entitled
to the CGT discount. This concession means that only
half of any capital gain on Units which are held for
more than twelve months will be included in your
assessable income.
Capital losses
You make a capital loss on the disposal of your Units
where the capital proceeds you receive in respect of
the disposal are less than your reduced cost base in
the Units. If you make a capital loss on the disposal of
your Units, this loss will only be able to be offset
against capital gains you derive from other sources
and not against other assessable income like
distributions or wages. However, capital losses can be
carried forward and used to offset capital gains you
may make in later years (subject to satisfying special
loss rules if you are a company).
29
8.3
Borrowing to invest
8.3.1
General principles
You should seek your own independent advice as to
your ability to deduct any interest expenses and
borrowing expenses related to borrowings to fund an
investment in a Fund.
Generally, interest on money borrowed for the
purpose of deriving assessable income is deductible
as the liability accrues. Borrowing expenses are
generally deductible over the lesser of 5 years or the
term of the loan. These rules are subject to various
qualifications.
8.3.2
Negative gearing
If the total assessable income (excluding capital gains)
you expect to derive from your Units is exceeded by
the total allowable deductions (including interest) that
you expect to incur in relation to the Units, the
Commissioner may focus on your purpose in investing
in the Fund. If the deficit can only reasonably be
explained by reference to factors such as a reduction
of tax or the making of a capital gain, the deficit may
not be deductible. As a practical matter, the relevant
question is whether, at the time the investment was
entered into, it was reasonably likely the income
(other than capital gains) from the investment would
exceed the related deductible expenses.
8.3.3
Capital protected products
Division 247 of Part 3-10 of the Tax Act contains
capital protected borrowing provisions ("CPB
provisions") which treat part of the interest expense
paid in relation to specified capital protected
borrowings as attributable to the cost of the capital
protection feature, deeming this cost to be nondeductible and included in the cost base of a notional
put option.
A loan which you take out in order to fund your
acquisition of Units in the Fund may be affected by
the CPB provisions due to the capital protection
provided by the Capital Protection Provider under the
terms of the Swap Agreement entered into by a Fund.
You should discuss the application of the CPB
provisions with your own tax advisor.
30
Instreet Investment
8.3.4
Timing generally / pre-payment in
advance
The following comments in relation to timing of tax
deductions assume that you will be entitled to
deductions for your interest payments under any loan
taken out in order to acquire your Units under the
general principles described in Section 8.3.1 "General
principles".
Interest paid in arrears is generally deductible as it
accrues.
Where prepaid interest is less than A$1,000 in an
income year, then it is deductible when it is incurred.
If prepaid interest exceeds A$1,000 in an income year,
then special rules apply depending on the type of
investor you are. The timing of tax deductions for
interest will depend on the terms on which the
investor has borrowed. You should discuss the timing
of any interest deductions with your own tax advisor.
8.4
Part IVA
The general anti-avoidance rules contained in Part IVA
of the Tax Act are capable of broad application and
should be carefully considered in relation to any
investment decision. Part IVA is concerned with
schemes where a party to the scheme has the sole or
dominant purpose of obtaining a tax benefit (as
defined in the Tax Act) for themselves or another
party. If it could be construed that your commercial
objectives of investing in an Fund might, if Units in
that Fund had not been offered as investments, have
been achieved through a different arrangement having
a different tax outcome then the possible application
of Part IVA should be taken into account. You should
consider obtaining expert taxation advice.
8.5
Taxation of Financial Arrangements
On 20 September 2007 the Tax Laws Amendment
(Taxation of Financial Arrangements) Bill 2007
(“TOFA”) was introduced into Parliament, but lapsed
upon the calling of the Federal Election which was
held on 24 November 2007. The broad objective of
TOFA is to tax financial arrangements on an accruals
or marked to market basis. On 13 May 2008 the
Federal Treasurer announced that the current Federal
Government would amend and reintroduce the TOFA
measures with effect from 1 July 2009 – albeit there
is still some uncertainty as to when the TOFA Bill will
be reintroduced into Parliament. You should seek
your own advice as to the possible application of the
TOFA regime to an investment a Fund.
8.6
Other taxation issues
8.6.1
Stamp duty
You should not have to pay stamp duty upon issue,
redemption or transfer of Units.
8.6.2
Tax file number
If you do not provide a tax file number or claim a valid
exemption (or in certain circumstances provide an
Australian Business Number), the Responsible Entity
will be required to deduct tax from your distributions
at the highest marginal tax rate plus Medicare levy
(currently 46.5%).
8.6.3 GST
GST will not apply to the issue, purchase or
redemption of Units. This is on the basis that these
transactions are financial supplies for GST purposes
and therefore will be exempt from GST as they are
input taxed.
Some of the fees and costs outlined in the PDS will be
subject to GST (in the sense that they are
consideration for a taxable supply). The terms of the
PDS set out that Unitholders bear the cost of any GST
arising with respect to any taxable supply made under
or in connection with the PDS.
Even if registered for GST, it is unlikely that an
Unitholder will be entitled to claim a full input tax
credit for any GST included in the relevant fees or
generally for acquisitions relating to the acquisition of
the Units (or other dealings, for example a
redemption). Reduced input tax credits may be
available for some acquisitions.
Taxation
31
9. Managing Your Investment
9.1
How to invest
To invest in the Funds, please complete an Application
Form and forward it together with your application
monies as instructed on the Application Form.
Minimum investment, minimum balance and
minimum withdrawal amounts
The minimum investment amount for Units in each
Fund is A$5,000. There is no minimum withdrawal
amount, however the minimum balance that must
remain in your account is $1000. If you request a
withdrawal that results in a balance less than $1000,
we may redeem your total Investment Amount.9
Identification
As part of the Responsible Entity's and the Fund
Administrator's obligations to comply with anti-money
laundering legislation, we need to adequately identify
you by collecting certain details. The identification
requirements are contained in the Application Form.
Processing applications
The Fund Administrator will accept and process
applications for the Responsible Entity. The
acceptance of applications will however be at the
Responsible Entity's discretion and the Responsible
Entity has the discretion to suspend or refuse to
accept applications at any time.
Once your application to invest in the Units is
accepted, and Units are issued to you, you will receive
a confirmation detailing the particulars of your
investment. If at any time the terms of the product
are varied while you hold the product, you will also
receive a confirmation of this.
Unit pricing and the value of your investment
A Unit represents an interest in the relevant Fund.
Units are priced as follows:
1. the value of the net assets of the Fund is
determined (this is largely driven by the value of
the Swap Agreement as determined by the Swap
Counterparty); plus
2. an adjustment of 0.20% is made up for any buy
spread and down from any sell spread;
3. divided by the number of Units on issue.
This gives you a Unit price.
We have in place a formal Unit pricing policy in relation
to the guidelines and relevant factors taken into
account when calculating the Unit price and any
discretion we may exercise when determining prices.
We keep records of any exercise of such discretions
which are outside the scope of or are inconsistent
with the policy. A copy of this policy is available on
request free of charge by contacting us. Please refer
to our contact details at the back of this PDS.
Cooling off
A 14-day cooling off period applies to any investment
you make in a Fund. If during this period you decide
that the investment does not meet your needs, then
you should advise us as such in writing. Your
investment will be refunded, reduced or increased for
market movements and an amount deducted for any
tax or duty incurred and a reasonable amount for
transaction and administration costs. It may take an
extended period of time before you actually receive
your refund due to the Responsible Entity having to
unwind a portion of the Swap Agreement to access
your funds. The amount returned may be less than
your original investment, and in some circumstances
may be zero.
The 14-day cooling off period starts on the earlier of:
„
when we send you confirmation that you are
invested, or
„
the end of the 5th day after the day on which we
issue the Units to you.
For investors acquiring Units through an IDPS, speak
to the IDPS operator to determine whether cooling off
rights are available for that service.
9.2
Redeeming your investment
Direct Unitholders
To withdraw your investment please contact Instreet
who will provide you with details of the redemption
process.
Indirect Unitholders
Contact your IDPS operator for details about how to
withdraw money from your investment account, how
your withdrawal will be paid, and the minimum
withdrawal amount and account balance set by the
IDPS operator.
IDPS operators
Please contact us for all withdrawal requests.
Processing withdrawal requests
We process withdrawal requests received by 2:00pm
on each Business Day using the early unwind value of
the Swap Agreement (see Section 2.5 "Can I redeem
my Units?") calculated on the second Index Business
Day following receipt by the Fund Administrator of
your withdrawal request. If we receive a withdrawal
request after 2:00pm on a Business Day, the
Responsible Entity may hold over your redemption
until the next Business Day.
Once your withdrawal request has been processed,
you will receive a confirmation detailing the particulars
of the withdrawal.
9 The minimum investment amount and minimum balance does not apply to investment in the Funds by an IDPS operator.
32
Instreet Investment
Please refer to "Unit pricing and the value of your
investment" in section 9.1 for details on how we value
Units.
Withdrawal payment times
We normally expect to pay withdrawal requests within
10 Business Days. We therefore consider the Fund to
be a "liquid" scheme within the meaning of the
Corporations Act. However, the Fund’s Constitution
allows for up to 180 days (or longer in some
exceptional circumstances). Please see the
information below on the suspension of withdrawals.
Suspension of withdrawals
Withdrawals may be suspended in certain circumstances.
These circumstances are specified in the Fund’s
Constitution and may include if it is not considered to
be in the best interests of Unitholders to realise the
required assets, where we are unable to realise
assets due to restricted or suspended trading in
relevant markets, or if a Fund ceases to be "liquid" as
defined in the Corporations Act.
Transfer of Units
Unitholders may transfer Units. You should contact us
for the relevant transfer form.
Because the register of unitholders will be kept in
Victoria, we expect that no stamp duty (in particular,
no marketable securities duty and no mortgage duty)
will be payable in respect of dealings in Units.
For indirect Unitholders, to transfer Units you will
need to contact your IDPS operator. IDPS operators
should contact us for a transfer form.
9.3
Keeping you informed
We or our agents will:
„
confirm transactions you make (including each
acquisition or disposal of Units in the Funds and
any variation to the terms of the Units while you
hold the Units);
„
send you a report soon after June each year to
help you with your tax return;
„
make the accounts of the Funds available to you
around September each year. We will provide you
with these accounts by post unless you tell us, by
ticking the appropriate box on the Application
Form, that you would prefer to receive the
accounts by email or by accessing our website;
„
notify you of any material changes in this PDS
and any other significant event.
Managing Your Investment
Where a Fund has 100 Unitholders or more, that Fund
is considered a "disclosing entity" for the purposes of
the Corporations Act. As of the date of this PDS,
none of the Funds is a disclosing entity. If a Fund
becomes a disclosing entity, that Fund will be subject
to regular reporting and disclosure obligations.
Copies of documents lodged with ASIC in relation to
the Funds may be obtained from, or inspected at, an
ASIC office. You have the right to obtain a copy of the
following documents from us free of charge:
„
annual financial report most recently lodged with
the ASIC for the Funds;
„
any half-year financial report lodged with the ASIC
for the Funds after lodgement of the annual
financial report; and
„
any continuous disclosure notices given for the
Funds.
We may provide information about the Funds to you
via our website:
www.merrillinvest.com.au
9.4
Anti-Money Laundering and CounterTerrorism Financing Requirements
Since 12 December 2007, we have been required to
comply with the Anti-Money Laundering and CounterTerrorism Financing Act 2006 (AML/CTF Act) and
Rules. In order to comply with this Federal legislation
we are required to identify our investors by collecting
prescribed information about them and to require
production of documents that will verify their identity.
In certain circumstances, we will not be able to
provide a designated service to you. As a result of this
legislation, transactions may be delayed, blocked,
frozen or refused where reasonable grounds are
established that the transaction breaches Australian
law or sanctions, or the law or sanctions of any other
country. Where transactions are delayed, blocked,
frozen or refused, we are not liable for any loss the
investor suffers (including consequential loss) as a
result of our compliance with the AML/CTF Act and
Rules as it applies to the product. From time to time,
we may require additional information from you to
assist us in the above process.
33
The AML/CTF regulatory regime includes certain
reporting obligations. We must report certain matters
to the regulator - the Australian Transaction Reports
and Analysis Centre or AUSTRAC. Under the
legislation's 'tipping off' prohibition, we may be
prevented from informing you that any such reporting
has taken place. Further, we may have obligations to
disclose the information gathered about you to
regulatory and/or law enforcement agencies, including
AUSTRAC and to other bodies, including a related
company, if permitted or required by law. We must
keep records of information received. At all times, we
will ensure that your personal information is kept
confidential. If you do not provide us with the
prescribed relevant information (outlined in the
Application Form), we may not be able to process
your transactions, or may not be able to issue your
investment within the time contemplated in this PDS.
Alternatively, you can write to the Responsible Entity:
9.5
Privacy and personal information
We use your personal information to administer your
investment and to conduct research. Collection of
personal information is necessary for the issue of Units.
If you remain unhappy, you may contact the Financial
Ombudsman Service (FOS) at:
Attn: Head of Compliance
Merrill Invest (Australia) Limited
Level 38, Governor Phillip Tower
1 Farrer Place
SYDNEY NSW 2000
We will always acknowledge any complaint within 45
days from receipt and will try to resolve the complaint
as quickly as possible.
Complaints may also be made to EA Financial, LP. In
the first instance these may be directed to the
Compliance Officer on (02) 8667 3198, or Facsimile
1300 656 398 or write to:
EA Financial, LP
GPO Box 1498
Sydney NSW 2001
Tel: 1300 780 808
E-mail: info@fos.org.au
We will not disclose this information to anyone unless:
„
the law so requires;
„
we consider that your adviser needs the
information; or
„
we or someone from our group needs it to send
you promotional materials. If you don't want
these, indicate this on the Application Form or just
contact us anytime.
If you think our records are wrong or not updated,
particularly your address, e-mail address or financial
planner, contact us and we will correct them. If your
information is wrong or not updated, we will send you
a Change of Details Form for completion. You can
access your personal information by contacting us.
We have a Privacy Policy which can be obtained by
contacting us.
9.6
Enquiries and complaints
We have a Complaints Officer to manage the
administration and escalation of all complaints raised.
Any enquiries or complaints should be made in writing
and addressed to:
Instreet Investment Ltd
PO Box R380
Royal Exchange NSW 1225
Email: info@instreet.com.au
Phone: (02) 8216 0804
34
Instreet Investment
Mail: Financial Ombudsman Service
GPO Box 3
Melbourne, VIC 3001
FOS is an independent body and is approved by the
ASIC to consider complaints. For FOS to consider a
complaint, the claim must be less than $150,000
(unless we agree with you otherwise in writing).
9.7
Constitutions and compliance plans
The Constitutions establish each of the Funds and set
out the rules that govern the operation of each of the
respective Funds. Together with the PDS and
relevant laws, the relevant Constitution governs our
relationship with you. It gives us the right to be paid
fees and expenses and be indemnified from the
relevant Fund. It governs (among other things):
„
our powers (which are very broad);
„
Unitholder meetings;
„
Unit issue, pricing and withdrawal;
„
what happens if the Fund's assets cannot be easily
converted to cash (i.e. it becomes illiquid); and
„
what happens if the Fund terminates.
The Constitutions also limit our need to compensate
you if things go wrong. Generally, subject to liability
under the Corporations Act, if we act in good faith and
without gross negligence, we are not held liable in
regard to equity, contract, tort or otherwise to
Unitholders for any loss suffered in any way relating to
the Funds. You may obtain a free copy of each Fund's
Constitution by calling us.
A compliance plan has been established for each
Fund, setting out the measures applicable in operating
the Fund to ensure compliance with the Constitution
and the law.
We are responsible for overseeing the compliance
plan and our legal obligations arising from it.
9.8
Rights of Unitholders
Subject to the Constitution, Unitholders in a Fund are
generally entitled to:
„
receive a share of the Fund's distributable income;
„
redeem Units;
„
transfer Units;
„
receive confirmation of investment;
„
receive acknowledgment of Units held;
„
receive annual audited accounts;
„
inspect the Constitution; and
„
requisition, attend and vote at Unitholders'
meetings for the Fund in which they hold Units.
A Unitholder is bound by a resolution of
Unitholders, whether or not they attend the
meeting where it is passed.
9.9
Related parties and disclosure of
interests
Our related parties will perform various roles in
connection with each Fund (i.e. the Swap
Counterparty and Capital Protection Provider). Their
appointment is made on arms' length terms under a
written agreement with prescribed investment
guidelines approved by us. We monitor our related
parties' performances.
Subject to the Corporations Act, we and our
associates may hold Units in a Fund and act as
Responsible Entity in relation to any other fund. In
addition, we have set the following limits for related
party transactions for the Funds:
„
The Funds will not lend or invest in Merrill Lynch
Group owned entities or their officers apart from in
relation to the Swap Agreement.
„
Merrill Lynch Group or associated companies,
offices or personnel may receive a partial rebate on
fees subject to our approval.
„
If we invest into other funds which we operate,
Unitholders will not pay twice. We will rebate fees
for other funds the Funds invest into.
All related party transactions are recorded in the
Related Party Transaction Register. As required by
law, these transactions are also disclosed in the
financial statements for the Funds.
Managing Your Investment
9.10
Investing through an IDPS
We will allow Unitholders to access the Funds
through an IDPS or an IDPS-like scheme, nominee,
custody service or other types of registered managed
investment scheme that gives access upon
completion of a written agreement with an operator.
When Unitholders gain exposure to a Fund through
these types of services, they do not become
Unitholders in that Fund. Instead, the operator
becomes the Unitholder and has the rights of a
Unitholder. This means that Unitholders should
access reports on the Funds through their operator
and direct any enquiries or complaints to the same.
For example, a Unitholder who gains exposure to a
Fund through an IDPS will not have certain rights,
such as voting at meetings or transferring Units.
Additional fees may be charged by an IDPS operator
and we recommend that you check the agreement
you have with them on fees.
As described in this PDS, for investments made
through an IDPS operator, there is no minimum
investment amount, no minimum balance and no trail
fee or Contribution Fee. Investors investing in the
Fund via a IDPS operator should speak to the operator
to determine whether cooling off rights are available
to them for that service.
9.11
Interest on application monies
If a Fund receives application monies on any day, it
will generally invest some or all of these monies in the
Swap Agreement and the Fund's exposure to the
Underlying Investments will notionally increase.
There will be no interest earned on the amounts held
in cash prior to the initial investment into the Swap
Agreements.
9.12
Consents
FundBPO Pty Ltd consent
FundBPO Pty Ltd has given and, as at the date of this
PDS, not withdrawn its consent to be named in this
PDS in the form and context in which it has been
named.
Baker & McKenzie consent
Baker & McKenzie has given and, as at the date of
this PDS, has not withdrawn its consent for the
inclusion of its Tax Report in section 8 of this PDS,
and to be named in this PDS in the form and context
in which it has been named.
Schroder Investment Management (Luxembourg)
S.A.
Schroder Investment Management (Luxembourg) S.A.
has given and, as at the date of this PDS, not
withdrawn its consent to be named in this PDS in the
form and context in which it has been named.
35
BlackRock Global Funds
BlackRock Global Funds has given and, as at the date
of this PDS, not withdrawn its consent to be named in
this PDS in the form and context in which it has been
named.
EA Financial, LP
EA Financial, LP has given and, as at the date of this
PDS, not withdrawn its consent to be named in this
PDS in the form and context in which it has been
named.
Instreet Investment Limited
Instreet Investment Limited has given and, as at the
date of this PDS, not withdrawn its consent to be
named in this PDS in the form and context in which it
has been named.
Merrill Lynch International
Merrill Lynch International has given and, as at the
date of this PDS, not withdrawn its consent to be
named in this PDS in the form and context in which it
has been named.
Merrill Lynch & Co., Inc.
Merrill Lynch & Co., Inc. has given and, as at the date
of this PDS, not withdrawn its consent to be named in
this PDS in the form and context in which it has been
named.
None of the above entities has been involved in the
preparation of any part of the PDS. They have not
authorised or caused the issue of, and expressly
disclaim and take no responsibility for, any part of the
PDS other than the sections identified above and they
take no responsibility for the contents of the PDS.
None of the above entities guarantees the success of
the Funds, the repayment of capital or any particular
rate of capital or income return.
36
Instreet Investment
10. Definitions
In this PDS, unless the context requires otherwise:
Adjustment Event
has the meaning given to it in Section 6 of this PDS on "Adjustment events
and termination of the Swap Agreements";
Application Form
means the application form attached to this PDS;
ASIC
means the Australian Securities and Investments Commission who regulates
the activities of the Responsible Entity;
AUSTRAC
means the Australian Transaction Reports and Analysis Centre which
regulates the Anti-Money Laundering and Counter-Terrorism Financing Act 2006;
Business Day
means a day on which banks are open for business in Melbourne and Sydney
or such other day as necessary for calculations or payments in this PDS or
under the Swap Agreement as determined by the Swap Counterparty;
Capital Protection Level
has the meaning given to it to Section 2 "The Offer";
Capital Protection Provider
means Merrill Lynch International (ARBN 125336567) in its capacity as the
counterparty to the Swap Agreement entered into by the Responsible Entity
on behalf of the Fund;
Constitution
means the trust deed containing the terms governing the operation of the Funds;
Corporations Act
means the Corporations Act 2001 (Cth) as amended from time to time;
Distribution Manager
means Instreet Investment Limited;
Event of Default
has the meaning given to it in Section 6 of this PDS on "Adjustment events
and termination of the Swap Agreements";
Floor
means the level of capital protection locked in by the Profit Lock-In
mechanism from time to time;
Fund Administrator
means FundBPO Pty Ltd as described in Section 5 of this PDS;
Funds
means each of the Instreet Reliance Funds being:
(a) Instreet Reliance Global Allocation Fund (ARSN 131 599 927);
(b) Instreet Reliance Commodities Fund (ARSN 131 602 821);
FX Hedging Strategy
has the meaning given to it in Section 2.7 of this PDS on "Currency
Management";
Guarantor
means Merrill Lynch & Co., Inc, as guarantor of the obligations of Merrill Lynch
International under the Swap Agreement;
IDPS
means an investor directed portfolio service, or equivalent service;
IDPS operator
means the person responsible for operating the investor directed portfolio
service;
Index Business Day
means, for each Fund, a day on which banks are open for business in Hong
Kong or London and on which the NAV of the relevant Underlying Investment
of that Fund is published.
Initial Capital Protection Level
means 75% of the initial Reference Index Level;
Liquidation Date
has the meaning given to it in section 4.2 'Can exposure to the Underlying
Investments be reduced to zero?' of this PDS;
Maturity Date
means the end of the term of the Swap Agreement, which is the 7th
anniversary of the date the Swap Agreement is first entered into or, if the
option to extend the term is exercised, the end of that further 7-year term;
Merrill Lynch Group
means Merrill Lynch & Co., Inc., its subsidiaries and affiliates.
Offer
means the offer of Units in the Funds under this PDS;
PDS
means this product disclosure statement and any supplementary or
replacement product disclosure statement;
Definitions
37
38
Profit Lock-In
has the meaning given to it in Section 2.2 and Section 4.4 of this PDS;
Redemption Date
means up to the 6th Business Day after receipt by the Fund Administrator of
a withdrawal request;
Reference Index
means, with respect to a Fund, a dynamic investment strategy that allocates
a notional investment between two assets, the relevant Underlying
Investment and cash, and a synthetic borrowing, taking fees and a spread into
account. The aim of the investment strategy is for the Reference Index to
maximize exposure to the relevant Underlying Investment, whilst ensuring
that the level of the Reference Index on any Business Day will not be less
than 75% of the initial Reference Index Level. In replicating the dynamic
investment strategy, the Swap Counterparty adjusts the weightings between
the Underlying Investment and cash systematically according to a formulaic
procedure;
Reference Index Level
means the level of a Reference Index from time to time. The initial Reference
Index Level is equal to 100;
Responsible Entity
means Merrill Invest (Australia) Limited (ABN 86 126 232 139,
AFS Licence No. 315369);
Swap Agreement
means the agreement, including any master agreement, schedule and
confirmation evidencing the terms of a swap agreement between the Fund
and the Swap Counterparty;
Swap Counterparty
means Merrill Lynch International (ARBN 125 336 567) in its capacity as the
counterparty to the Swap Agreement entered into by the Fund;
Tax Act
means the Income Tax Assessment Act 1936 (Cth) or the Income Tax
Assessment Act 1997 (Cth) as the case may be.
Unit
means a unit on issue in the Fund;
Unitholder
means the person or entity whose Application Form is accepted by the
Responsible Entity in accordance with this PDS or who is otherwise entered
as a unitholder on each Fund’s register from time to time;
Underlying Investments
means:
(a) in respect of the Commodities Fund, the Schroder Alternative Solutions –
Commodity Fund; and
(b) in respect of the Global Allocation Fund, the BlackRock Global Funds –
Global Allocation Fund.
Instreet Investment
How to Complete the Application Form
Please mail the completed Application Form, certified
copies of the documents required to verify your identity
(listed in Section 2 below) and payment in full to:
Instreet Reliance Funds
C/O FundBPO Pty Limited
GPO BOX 4968
Sydney, NSW, 2001
Units in the Funds will only be issued on receipt of a
properly completed Application Form, issued together
with the PDS dated 28th August 2008 and cleared
funds. Please ensure you sign the Application Form.
If you have any queries please call your financial
adviser, the Fund Administrator (see details at the
back of this PDS) or the Distribution Manager at:
Instreet Investment Ltd
PO Box R380
Royal Exchange NSW 1225
Email: info@instreet.com.au
Phone: (02) 8216 0804
You may also contact Merrill Lynch at:
Internet: www.merrillinvest.com.au
Email: mlinvestau@ml.com
Telephone: (02) 9226 5133
Please note: for entities other than individuals, sole
traders, Australian companies, trusts and partnerships,
please contact the Distribution Manager for the
appropriate Application Form and identity verification
requirements.
Section 1: Instructions on completing the
Application Form
„
Please use CAPITAL LETTERS and a black ball point
when completing the form.
„
For joint investors we require the usual residential
address of each investor. You may only elect one
postal address for all notices and correspondence.
„
Your usual residential address cannot be your
financial advisor's address or a PO Box.
„
Company applications should include a contact
name and ACN, ABN, or ARBN as applicable.
„
For company applications we require the full
address of the registered office, plus the principal
place of business.
„
Individual applicants should be 18 years of age or
over.
Definitions
„
You can invest on a minor’s behalf by putting their
name in the account designation box. The Unitholder
will not, however, be the minor.
„
If you have an existing account and would like to
add to the account, please note your existing
account number.
Tax File Number (TFN)
You are not obliged to provide your TFN or claim a
valid TFN exemption. However, if you do not do so we
are required to deduct tax from distributions of income
made to you at the highest marginal tax rate, plus
Medicare Levy (if you are an Australian resident). Tax
File Numbers for minors will not be accepted. Where
your investment in the Fund is in the course or
furtherance of an enterprise you carry on you may
quote your ABN instead of your TFN.
Payment instructions
The minimum investment in each Fund is $5,000.
Please cross your cheque "not negotiable" and,
for applications in the Instreet Reliance Global
Allocation Fund, make it payable to "Instreet Reliance
Global Allocation Fund", and for applications in the
Instreet Reliance Commodities Fund, make it
payable to "Instreet Reliance Commodities Fund. Cash
is not accepted. If payment is made by EFT the
application money should be sent to the bank account
details which are set out in Section C of the
Application Form.
Account operation instructions
Please indicate how you would like your account to be
operated. In the case of joint accounts, you may
request joint signatures or allow either signatory to
sign. For a company or trustee please indicate your
account operation instructions by ticking the
appropriate box.
39
Examples of Correct Names and Account Designations
Type of investor
Correct name
Incorrect name
Signature(s) required
Individual/joint holding
Use full name of each
applicant, not initials
Luke John Smith
Susan Mary Smith
Luke J Smith
Susan M Smith
Each applicant
Company holding
Use full company name
ZYX Pty Ltd
ZYX inc
ZYX Co
ZYX p/l
2 directors OR a director &
secretary OR a single
director (if a sole director
company)
Susan Mary Smith
a/c designation
<Josh Smith>
Josh Smith
Each Applicant (not minor)
Superannuation funds/
trusts – individual
trustee(s)
Use trustee(s) personal
name(s). Use fund/trust
name as beneficiary.
Susan Mary Smith
a/c designation
<Susan Smith Trust>
S M Smith Trust
Each Trustee
<Susan Smith Super
Fund>
S M Smith Super Fund
Superannuation funds/
trusts – corporate trustee
Use trustee company name.
Use fund/trust name as
beneficiary.
ZYX Pty Ltd
<ZYX Trust>
<ZYX Super Fund>
ZYX Trust
Minors
Use full name of each
applicant, not initials. Use
minor name as beneficiary.
Distributions and redemptions
Distributions (if not reinvested) and redemptions will
be paid directly into your bank account specified in
Section D. Please ensure that you complete all details
of the institution in full. Please indicate the percentage
of the distribution that is to be reinvested and/or paid
directly into your nominated account. We will also use
these bank account details to pay your redemption
proceeds.
Request for information
The annual reports for the Funds will be available each
year either by way of printed copy or by email. Merrill
Lynch encourages you to elect to receive a copy by
email as this saves paper and expenses for the Fund.
However, you may elect to receive a printed copy of
the annual report either by post or email, free of
charge. The election that you make in the Application
Form is a standing election. You may change your
election at any time by contacting the Administrator.
40
Instreet Investment
Trustee – as per company
holding above
ZYX Super Fund
Signature(s)
You should ensure that you have read the attached
PDS in full before signing the application. Joint
applications must be signed by all persons. If the
application is being signed under Power of Attorney
please enclose a certified copy of the Power of
Attorney and appropriate photo identification of the
attorney.
Section 2: Identification and Verification
Requirements
Under the Anti-Money Laundering and CounterTerrorism Financing (AML/CTF) legislative regime,
certain due diligence must be conducted on any
prospective investor before units in the Fund may be
issued to that investor. The due diligence includes
verifying a prospective investor’s identity. Applications
made without providing this information cannot be
processed until all the necessary information has been
provided.
Individuals / Sole Traders
If you are an individual investor or sole trader, you will
need to give us certified copies of one document
from column [1] OR one document from each of
column [2] AND [3]:
Please note: for Trusts and Partnerships, if you are
required to complete the individual section of the
Application Form then you must also provide the
documents required for an individual applicant.
The AML/CTF compliance program will also include
ongoing customer due diligence and reporting of
suspicious matters to AUSTRAC as necessary, which
may require the Responsible Entity to collect further
information.
Reliable and Independent Verification
Documentation DO NOT SEND ORIGINALS: CERTIFIED COPIES ONLY
Column [1]
Primary Photographic
(one proof required)
Column [2]
Primary Non-Photographic
(one proof required)
Current photographic
Australian driver’s licence
Birth certificate or birth extract
issued by a State or Territory
Current Australian
passport
Commonwealth citizenship
certificate
Current State or Territory
photographic ID card
Centrelink Pension card
Current foreign passport*
OR
Current ID card issued by
a foreign government,
the United Nations or an
agency of the United
Nations containing a
photograph & signature*
Health Care card issue by
Centrelink
Column [3]
Secondary Identification
(one proof required)
Commonwealth, State and
Territory financial benefits
notice (less than 12 months
old)
ATO Tax notice (less than 12
months old)
AND
Local government body or
utilities provider notice (less
than 3 months old) recording
provision of services to the
person at the address
Foreign citizenship certificate
or birth certificate*
Notice issued within the last 3
months by school principal for
a person under 18, recording
period of time person attended
school and person's residential
address
Current foreign driver’s
licence with photograph
& date of birth*
# A passport that expired within the two years prior to submitting the application form will also be accepted.
* Documents that are written in a language that is not English must be accompanied by an English translation prepared by an accredited translator.
^Who may certify your documents as being a true and correct copy of the original
Legal Practitioner enrolled on the roll
of the Supreme Court of a State or
Territory, or the High Court of Australia
a Judge of a court
Police Officer
A finance company officer*
An agent of the Australian
Postal Corporation
Officer of or authorised representative
of a holder of an Australian financial
services licence*
a magistrate
Permanent employee of a post
office*
CEO of a Commonwealth Court
Registrar or deputy registrar of a court
Australian Consular Officer or
Diplomatic Officer
Justice of the Peace Officer
Financial institution officer/
employee of a bank*
Notary public
A member of the Institute of Chartered
Accountants in Australia, CPA Australia
or National Institute of Accountants
membership*
* Persons marked with an asterisk* must have two or more years of continuous service or membership.
Definitions
41
The eligible certifier must include the following
information:
Australian companies
If you are an Australian Company, you need to provide
only one of the following documents:
„
Their full name
„
Address
a search of the Australian Stock Exchange; OR,
„
Telephone number
„
The date of certifying
a public document issued by the relevant
company: OR,
„
Capacity in which they are eligible to certify, and
„
An official stamp/seal if applicable
a search of the relevant ASIC database; OR,
a search of the licence or other records of the
relevant regulator; OR,
The certified copy must include the statement,
“Icertify that this is a true copy of the original document”.
Beneficial Ownership search (private company only).
For photographic documents, the certified copy must
include the statement, “I certify that this is a true copy
of the original document and the photograph is a true
likeness”
Trusts and Trustees
If you are a Trust or Trustee you need to provide the following documents:
Reliable and Independent Verification Documentation
Registered managed investment
scheme, unregistered managed
investment scheme with wholesale
clients only which does not make
small-scale offerings under section
1012E, regulated trust or government
superannuation fund)
Copy or extract of Trust deed
showing full name of trust, that
the trust is a registered scheme,
regulated trust of superannuation
fund.
Other Trust Types (e.g. family, unit, charitable,
estate)
Copy or extract of Trust deed showing full
name of trust, that the trust is a
registered scheme, regulated trust of
superannuation fund.
Where the Trustee is an
Individual or Company
AND
Applicable Reliable and
Independent Verification
Documentation for an
Individual
OR
OR
Reliable and independent documents
relating to the trust*
Applicable Reliable and
Independent Verification
Documentation for a
Company
OR
Reliable and independent electronic data*
OR
A combination of above
* Documentation marked with an asterisk * can be from a solicitor, qualified accountant or from the ATO within the last 12 months in relation to the Trust.
Partnerships
If you are a Partnership you need to provide the
following documents:
Partnership agreement; OR,
Australian Partnership Taxation Return; OR,
Australian State or Territory Business Names
Search; OR,
Minutes of a partnership meeting: OR,
Disclosure Certificate;
AND
Applicable Reliable and Independent Verification
Documentation for an individual (for one of the
Partners)
42
Instreet Investment
If you need further information you may visit the
website at www.merrillinvest.com.au to obtain
details of the Responsible Entity’s identification
and verification requirements as an AML/CTF
Reporting Entity for each type of applicant.
Current Australian anti-money laundering
requirements, as well as prospective changes to
legislation, may in the future impose other due
diligence procedures, which include an obligation to
report suspicious matters to AUSTRAC, or require the
collection of further information from investors.
Application Form
Instreet Reliance Funds
10. Definitions
This is an Application Form for Units in the Instreet Reliance Funds issued by Merrill Invest (Australia) Limited ABN 86 126 232 139, AFSL 315 369. This
Application Form accompanies the PDS dated 28 th August 2008 and any supplementary PDS issued for the Funds.
It is important that you read the PDS in full and the acknowledgements contained in this Application Form before applying for Units in the Funds. The
Responsible Entity will provide you with a paper copy of the PDS including any supplemental PDS and the Application Form, on request without charge.
A person who gives another person access to the Application Form must at the same time and by the same means give the other person access to the PDS
including any supplemental PDS.
Please see the instructions on how to complete this Application Form in the PDS.
The Minimum Investment Amount for Units in each Fund is $5,000.
This Application Form and your initial investment amount must be received by the Fund Administrator by 2:00 pm in order to be processed that day.
Units in the Funds are only issued on receipt of:
„
this Application Form,
„
verification of the applicant’s identity,
„
payment in full.
PART A - INVESTOR DETAILS
Wealth Focus Pty Ltd
PO Box 760
Manly
NSW 1655
TEL: 1300 559869
AFSL: 314872
What type of person or entity is applying? Please tick one box ONLY.
Individual, joint or sole trader – complete A1
Partnership – complete A1 & A4
Australian Company – complete A1 (Directors) & A2
Trust / Super Fund with Individuals as Trustee – complete A1 (Trustees) & A3
Trust / Super Fund with Corporate Trustee – complete A1 (Directors), A2 (company) & A3
Other: ____________________________________________________
For other entities, including foreign companies, please contact us for an appropriate Application Form.
A1 INDIVIDUAL INVESTOR DETAILS (including individuals acting as trustee and corporate directors)
INVESTOR 1 (Your name MUST match your ID exactly.)
Title:
Given Names (in full):
Date of Birth (dd/mm/yyyy)
Surname:
Country of Citizenship
Are you an Australian resident for tax purposes?
Yes
No
If no, please specify your country of tax residence
Australian Tax File Number
OR
Exempt from quoting a tax file number
Exemption details (if applicable)
Residential Address
City/Suburb/Town
State
Postcode
Country
INVESTOR 2 (Your name MUST match your ID exactly.)
Title:
Given Names (in full):
Date of Birth (dd/mm/yyyy)
Surname:
Country of Citizenship
Are you an Australian resident for tax purposes?
Yes
No
If no, please specify your country of tax residence
Australian Tax File Number
OR
Exempt from quoting a tax file number
Exemption details (if applicable)
Residential Address
City/Suburb/Town
State
Postcode
Country
COMPLETE THIS PART IF INDIVIDUAL IS A SOLE TRADER
Full Business Name (if any)
ABN
Principal Place of Business (if any) (PO Box is NOT acceptable)
City/Suburb/Town
State
Postcode
Country
A2 AUSTRALIAN CORPORATIONS & CORPORATE TRUSTEES
Full name of the company as registered by ASIC
ABN
Registered Office Address (PO Box is NOT acceptable)
City/Suburb/Town
State
Postcode
Country
State
Postcode
Country
Principal place of business (PO Box is NOT acceptable)
City/Suburb/Town
Company type
Public – note each Director must also complete A1
Proprietary – complete Director details below and each Director must also complete A1
How many directors are there?
Each Director's name in full (in Capitals)
Is the company an Australian resident for tax purposes?
Yes
No
If no, please specify the company's country of tax residence
Australian Tax File Number of company
OR
Exempt from quoting a tax file number
Exemption details (if applicable)
A3 TRUSTS or SUPER FUND DETAILS
Name of Trust or Fund
Country of establishment
Date of establishment
ABN
Business name of the Trustee (if any)
Note: individual trustees must complete A1; corporate trustees must complete A2
Type of trust
Registered managed investment scheme
Unregistered managed investment scheme with only wholesale clients which does not make small-scale offerings under section 1012E of the
Corporations Act 2001
Regulated trust
Government superannuation fund
Other
If other, please specify (e.g. family, unit, charitable, estate)
Are you an Australian resident for tax purposes?
Yes
No
If no, please specify the Trust or Fund's country of tax residence
Australian Tax File Number
OR
Exempt from quoting a tax file number
Exemption details (if applicable)
NOTE: The Responsible Entity only recognises the Trustee(s) as the investor and not the beneficiary, therefore the trustee(s) details must be given above.
However the Responsible Entity is also required to record the individual beneficiary details or, if the terms of the trust identify the beneficiaries by reference
to class, the details of the class.
BENEFICIARY 1
Name
ABN (if applicable)
BENEFICIARY 2
ABN (if applicable)
Name
BENEFICIARY 3
Name
ABN (if applicable)
BENEFICIARY 4
ABN (if applicable)
Name
Class Details of Beneficiaries
A4 PARTNERSHIPS
Full Name of the Partnership
Full business name of Partnership registered in any State or Territory (if applicable)
Business of Partnership
Country of Establishment
Australian Tax File Number of partnership
Date of Establishment
OR
Exempt from quoting a tax file number
Exemption details (if applicable)
How many Partners are there?
Each Partner's details (in Capitals)
Full Name
Full Residential Address
Partnership Share
NB: One Partner MUST complete A1
SECTION B - ACCOUNT CONTACT DETAILS
Joint investors with different residential addresses must elect one postal address in this section.
We will not accept your financial adviser’s address.
Account Designation (optional)
Main Contact
Postal Address
City/Suburb/Town
State
Email Address
Telephone (home)
Area code
Number
Telephone (business hours) Area code
Number
Mobile
Fax:
Area code
Number
Postcode
Country
SECTION C - INVESTMENT DETAILS
I/we apply to invest
in the Instreet Reliance Commodities Fund.
I/we apply to invest
in the Instreet Reliance Global Allocation Fund.
Wealth Focus Pty Ltd
PO Box 760
Manly
NSW 1655
TEL: 1300 559869
AFSL: 314872
Please tick the box to advise how your payment will be made:
Cheque
Please make cheque payable to: “Merrill Invest (Australia) Limited – Instreet Funds”
Electronic Funds Transfer (EFT)
to: BSB
082-401
ACCOUNT
Instreet Reliance Global Allocation Fund Application Account
A/C Number: 82-274-4893
Instreet Reliance Commodities Fund Application Account
A/C Number: 82-302-2876
Reference Investors last name
Please ensure that you include the name of the “Investor” in the EFT reference field.
SECTION D - BANK ACCOUNT DETAILS
All investors must complete this section by providing details of an Australian banking institution for distributions and redemptions.
Bank Name/Institution
Branch name and address
City/Suburb/Town
State
BSB
Postcode
Country
Account Number
Account Name
If you would like to split your distributions between cash and reinvestment, please nominate the percentage you would like to receive in cash
SECTION E - OPERATING AUTHORITY
When giving instructions to us about your investment please indicate who has authority to operate your account:
INDIVIDUAL/JOINT ACCOUNTS (if no box is ticked we will assume all can sign)
any one to sign
both to sign
COMPANY, TRUST, SUPER FUND ACCOUNTS (if no box is ticked all future written instructions must be signed by two directors/trustees, director and
secretary, or the sole director)
any one to sign
any two to sign
all to sign
OTHER __________________
SECTION F - REQUEST FOR ANNUAL ACCOUNTS (optional)
The accounts for the Fund are available to investors on our website www.merrillinvest.com.au each year.
Leave both boxes blank if you wish to receive a copy by post. We request that you tick one of the boxes as it is costly for the Fund to print and mail out the
Annual accounts. You can change your mind at any time.
email notification (you must provide your email address in Section B)
I/we will view on the website
SECTION G - PRIVACY
Merrill Lynch may wish to contact you about future investment opportunities that may be of interest. Please tick the box if you do NOT wish to be contacted
for this purpose.
I/we do not wish to receive information from Merrill Lynch regarding future investment opportunities.
SECTION H - PROVIDING IDENTIFICATION
I/we confirm I/we have attached certified copies of the required proof of identification with this application form for each investor/applicant.
Section I - DECLARATIONS & SIGNATURES
YOU SHOULD READ THE PDS IN FULL BEFORE SIGNING THIS APPLICATION FORM
By completing the application form you:
1.
declare that you have read and understood this PDS.
2.
agree to the collection, use and disclosure of your personal
information provided in the application form.
3.
declare that you have received this PDS personally, or a print-out of
it, accompanied by or attached to the application form before signing
the form.
4.
declare that all information provided in the Application Form or any
other information provided in support of the application is true and
correct.
5.
declare if you have received the PDS from the internet or other
electronic means, that it was received either personally or a printout
accompanied the application form before making an application for
units in the Fund.
6.
13.
declare that if investing as a trustee on behalf of a superannuation
fund or trust you are acting in accordance with your designated
powers and authority under the trust deed. In the case of
superannuation funds, you also confirm that the funds are complying
funds under the Superannuation Industry (Supervision) Act.
14.
acknowledge that all information relating to this Application Form for
investment or any subsequent information relating to this
investment may be disclosed to any service provider to the Fund and
to your adviser. You understand this will not include disclosure of
your TFN, ABN or any information in relation to it to your adviser.
This authority will continue unless revoked in writing by you.
15.
If you use the facsimile or email facility you:
acknowledge that none of Responsible Entity, Client or the custodian
or any member of their respective groups or any of their directors or
associates or any other entity guarantees the performance of or the
repayment of capital invested in, or income from the Fund.
7.
declare that if the Application Form is signed under power of
attorney, you have no knowledge of the revocation of that power of
attorney.
8.
declare that you have the power to make an investment in
accordance with the application.
9.
declare that sole signatories signing on behalf of a company are
signing as sole director or as a sole director/secretary of the
company.
10.
acknowledge that an investment in the Fund is subject to risks
including possible delays in repayment and possible loss of capital
invested.
11.
agree to be bound by the provisions of the Constitution governing
the Fund set out in the PDS and as amended from time to time.
12.
acknowledge that this PDS does not constitute an offer in any
jurisdiction in which, or to any person of whom, it would be unlawful
to make the offer.
a)
release, discharge and agree to indemnify the Responsible
Entity and the Fund Administrator and their agents, including the
registrar and their respective officers from and against all losses,
liabilities, actions, proceedings, accounts, claims and demand
arising from instructions received under the facility.
b)
agree that a payment made in accordance with the conditions of
the facility shall be in complete satisfaction of all obligations to
you for a payment, not withstanding it was requested, made or
received without your knowledge or authority.
16.
acknowledge the Responsible Entity has entered into the transaction
with Merrill Lynch International and that you are aware that the
transaction is entered into with a related entity and, to the extent
required by law, consent to the terms of the DPA and the entering
into the DPA between the Responsible Entity and Merrill Lynch
International.
17.
acknowledge the Responsible Entity has entered into custodial
arrangements with Merrill Lynch (Australia) Nominees Pty Limited
and that you are aware that the transaction is entered into with a
related entity and, to the extent required by law, consent to the
terms of the custodial arrangements the entering into such
arrangements between the Responsible Entity and Merrill Lynch
(Australia) Nominees Pty Limited.
Signature of Unitholder 1
Name of Unitholder 1
Tick capacity - mandatory for companies
Date
Sole Director
Director
Secretary
Signature of Unitholder 2
Name of Unitholder 2
Tick capacity - mandatory for companies
Date
Sole Director
Director
Secretary
Wealth Focus Pty Ltd
PO Box 760
Manly
NSW 1655
TEL: 1300 559869
AFSL: 314872
ADVISER USE ONLY
Adviser Name (in full)
Adviser Postal Residential Address
City/Suburb/Town
State
Postcode
Country
Adviser Phone (business hours)
Adviser Code with Client Asset Management Ltd (if known)
Adviser Email
Adviser Stamp
0.00
Adviser Service Fee
%
Trail Fee
%
Wealth Focus Pty Ltd
PO Box 760
Manly
NSW 1655
TEL: 1300 559869
AFSL: 314872
Dealer Group name
Wealth Focus Pty Ltd
PO Box 760
Manly
NSW 1655
TEL: 1300 559869
State
AFSL: 314872
Dealer Group branch (Suburb, State)
Dealer Postal Address
City/Suburb/Town
Dealer Phone (business hours)
Dealer Code with Client Asset Management (if known)
Dealer Group Email
314872
87123556730
AFS License
ABN
Postcode
Country
Contact Details
Issuer and Responsible Entity:
Merrill Invest (Australia) Limited
Level 38, Governor Phillip Tower
1 Farrer Place
SYDNEY NSW 2000
Tel: 02 9225 6500
Distribution Manager:
Instreet Investment Ltd
PO Box R380
Royal Exchange NSW 1225
Email: info@instreet.com.au
Tel: 02 8216 0804
Fax: 02 8216 0701
Fund Administrator:
FundBPO Pty Ltd
Level 1, 51-57 Pitt Street
Sydney NSW 2000
Tel: 1300 133 451
Fax: 02 9251 3525
Legal and Tax Adviser to the Responsible Entity:
Baker & McKenzie
Level 27, AMP Centre
50 Bridge Street
Sydney NSW 2000
EA Financial, LP:
GPO Box 1498
Sydney NSW 2001
Instreet Investment Limited can be contacted at Level 34, 50 Bridge Street, Sydney
NSW 2000 Australia, by telephone +61 2 8216 0804 and email info@instreet.com.au
Our web address is www.instreet.com.au and if you need to fax +61 2 8216 0701.