Man Series 8
LIMITED ARBN 101 184 623 | Explanatory Memorandum
New Capital Guarantee by
( subject to the conditions in Appendix A)
Investment Management by:
Glossary*
Compound annual return the annualised rate of return of an investment over a given period of time. This figure does not
illustrate the level of volatility experienced by the investment over the given period.
Correlation a measure of how two assets move in relation to each other. Correlation figures range from +1 to -1. Positive
correlation means that as one asset moves, either up or down, the other asset will move in the same direction. A correlation of
+1 means that two assets will move in exactly the same way. Negative correlation means that as one asset moves, either up
or down, the other asset will move in the opposite direction. A correlation of -1 means that two assets will move in exactly the
opposite way. Zero or low correlation means that the two assets will move in directions irrespective of each other.
Derivative a financial instrument, the price of which is dependant upon one or more underlying assets. Derivatives include
futures, forward contracts, options and swaps.
Equity hedged an investment strategy that focuses on buying undervalued stocks and selling overvalued stocks. Managers tend
to look for investments in the equity market, taking long positions in solid companies that are trading at a discount and taking
short positions in companies that are perceived to be overpriced.
Event driven An investment strategy that can capitalise on opportunities created by corporate events that affect the value of a
company’s assets. Events may include mergers or acquisitions, spin offs, bankruptcy and reorganisations.
Forward contract an agreement between two parties to buy or sell a particular asset on a specified future date at an
agreed price.
Fund of funds an investment fund that invests in a number of other funds in the execution of its investment strategy.
Futures an agreement between two parties to buy or sell a particular asset on a specified future date at an agreed price.
Futures contracts are traded on liquid and regulated investment exchanges around the world.
Global macro an investment strategy that attempts to generate returns from price movements in equity, currency, commodity
and interest rate markets. A broad array of strategies are used to identify situations where a market may be in disequilibrium and
potential profits can be made. Trades can be based on fundamental, political, economic and market factors.
Managed futures a professionally managed fund or program that primarily trades futures and forward contracts, but may also
trade other derivative instruments such as swaps and options. Managed futures funds typically access (through derivative
instruments) a broad range of markets including stocks, bonds, currencies, interest rates, energies, metals, credit and
agriculturals.
Options a financial instrument that gives one party the right, but not the obligation, to buy or sell an underlying asset from or to
another party over a specified period of time at a fixed price.
Redemption the return of an investor’s holdings in a security or the sale of shares/units in a fund.
Relative value an investment strategy that aims to profit from perceived pricing discrepancies between similar or related assets.
The assumption is that the value of the two or more securities will converge over time, allowing managers to take investment
positions accordingly.
Swaps an agreement between two parties to exchange a series of future cash flows.
Trend following an investment strategy that seeks to generate returns from sustained price movements (in other words, price
trends) in markets. A trend following strategy will typically purchase an asset (that is, take a long position in the asset) when
prices are trending upwards, or sell an asset (that is, take a short position in the asset) when prices are trending downwards.
Identifying a price movement can be done in a number of ways, including through the use of computerised systems.
Volatility a measure of an asset’s degree of fluctuation of returns around its historical average performance. The higher the
volatility, the higher the degree of fluctuation in returns. Assets that have higher volatility are commonly considered to be riskier
in nature. For example, an asset with a volatility of 15% will, all other things being equal, commonly be considered to be riskier
than an asset with a volatility of 10%.
* Investors should note that terms defined and used in this explanatory memorandum are set out on pages 42-43.
An opportunity to continue
your investment.
Your Shares in Man Series 8 OM-IP 220 Limited (the “Company”) mature on 30 June 2012. You
now have the opportunity to continue your investment in the Company for a further 10 years,
while still having the flexibility of monthly liquidity**.
If you would like all or some of your Shares in the Company to continue, please complete,
sign and return the enclosed Election Notice to Man Investments Australia by 25 May 2012.
Alternatively, you may submit your Election Notice online. Refer to page 18 for further details.
Contents
02
Investment overview
06
Investment information
07
Past performance of the Company
12
Key risks
17
FAQs
18
What do you need to do now?
19
Who should sign the Election Notice
20
The Westpac Guarantee
22
How the Company invests
24
Fees and costs
26
The Shares
30
Terms and conditions for Shareholders
31
Taxation
41
Directory
42
Definitions
44
Appendix A Full text of the New Westpac Guarantee
48
Appendix B List of markets traded by the AHL Diversified Program
This document contains important information for Shareholders of the Company. You should carefully read
this document before making an investment decision. Please read and follow the instructions set out in this
explanatory memorandum to elect to continue or exit your investment.
If you do not elect to continue your investment, all of your Shares will be redeemed on the Maturity Date.
** Subject to the terms and conditions set out on page 26.
explanatory memorandum
This explanatory memorandum is dated 27 March 2012 and is published by the Company. The Company is not licensed to
provide financial product advice in relation to the Shares.
This information has been prepared without taking into account anyone’s objectives, financial situation or needs so before
acting on it consider its appropriateness to your circumstances.
You should seek independent advice from a licensed financial advisor (in Australia) or an authorised financial advisor (in New
Zealand) in assessing the suitability of continuing your investment in the Company as part of your investment portfolio.
You should also seek independent taxation advice.
It is intended that the Company will offer New Zealand investors the ability to continue their investment in Shares pursuant
to and in accordance with Part 5 of the Securities Act 1978 and the Securities (Mutual Recognition of Securities Offerings –
Australia) Regulations 2008 (New Zealand). A copy of this explanatory memorandum has been lodged with the New Zealand
Registrar of Financial Service Providers. Investors receiving this explanatory memorandum in New Zealand should read the
‘New Zealand Shareholders: Warning Statement’ on page 28.
The Shares are not deposits or other liabilities of Westpac or its subsidiaries and neither Westpac, its subsidiaries, the Man
Group, Man Investments Australia nor the Directors guarantees the performance of the Company. Neither the Company, Man
Investments Australia nor the Man Group is a member of the Westpac Group. Investment in the Shares is subject to investment
risk, including possible delays in payment and, except as provided in the New Westpac Guarantee, loss of income and principal
invested. Westpac and its subsidiaries do not in any way stand behind the capital value or performance of the Shares or the
investments made by the Company, except as provided in the New Westpac Guarantee.
1
Investment overview
An opportunity to continue your investment in Man Series 8 OM-IP 220
(the “Company”), which provides access to the AHL Diversified Program
and the Man Investments Portfolio, with the security of the New
Westpac Guarantee†.
You should read the following investment overview in conjunction with this explanatory memorandum. Definitions
of terms used in this explanatory memorandum are set out on pages 42-43.
The proposal
Page 6
You are being offered the opportunity to continue your investment in the
Company for a further 10 years with monthly liquidity** and the benefit of the
New Westpac Guarantee†.
Your investment in the Company will not automatically continue. If you wish to
continue all or part of your investment to the New Maturity Date, you must notify
Man Investments Australia by completing, signing and returning the Election Notice
or alternatively, you may submit your Election Notice online.
Investment
strategy
Page 6
The Company has been trading for more than 9 years and over this time has
generated medium to long term capital growth in both rising and falling markets
and will continue to aim to do so with the security of the New Capital Guarantee
and New Rising Guarantee†.
The Company:
(i) invests in the Security Deposit to provide the security of a New Capital Guarantee
and a New Rising Guarantee; and
(ii) invests, via the Trading Subsidiary, using the AHL Diversified Program and the
Man Investments Portfolio.
Key dates
You must return the enclosed Election Notice to Man Investments Australia by
25 May 2012.
Underlying
investments
The AHL Diversified Program
Pages 8-11
The AHL Diversified Program is a computerised managed futures program designed
to analyse trends and capture opportunities across a broad range of markets.
The AHL Diversified Program involves trading in a managed portfolio of investments
in futures, options, forward contracts, swaps and other derivative instruments to
access a broad range of markets including stocks, bonds, currencies, interest rates,
energies, metals and agriculturals.
A list of markets traded by the AHL Diversified Program as at 31 December 2011 is
attached as Appendix B to this explanatory memorandum.
For further information, see pages 8-10.
The Man Investments Portfolio
The Man Investments Portfolio is a fund of funds, which means that it invests in a
portfolio of individual fund managers.
The Man Investments Portfolio currently accesses the expertise of more than 50
international fund managers. These fund managers invest using various alternative
investment styles.
The Investment Manager selects the individual fund managers for inclusion within
the Man Investments Portfolio, and the allocations to them, having regard to both
quantitative and qualitative criteria.
Man Series 8 OM-IP 220
For further information, see page 10.
2
† Subject to the terms of the New Westpac Guarantee as described on pages 20-21 and set out in Appendix A.
** Subject to the terms and conditions set out on page 26.
New Westpac
Guarantee
Pages 20-21
and Appendix A
The New Westpac Guarantee provides Shareholders on the New Maturity Date with:
(i) a New Capital Guarantee to protect the value of their investment as at
30 June 2012; and
(ii) a New Rising Guarantee to lock in a portion of any net new trading profits that
will enable the amount guaranteed under the New Westpac Guarantee at the
New Maturity Date to increase†.
The New Westpac Guarantee is only applicable for Shares held on the New Maturity
Date, and any sale or redemption of Shares prior to the New Maturity Date will
not benefit from the New Westpac Guarantee. The amount of the New Capital
Guarantee at the New Maturity is unlikely to have the same real value as the NAV at
30 June 2012 due to the likely effect of inflation and the time value of money.
The New Westpac Guarantee is unsecured; that is, it is not supported by any
security over the assets of Westpac. The Financial Claims Scheme established by the
Australian Government does not apply to any part of this investment.
Westpac does not in any way stand behind the capital value or performance of the
Shares or the investments made by the Company, except as provided in the New
Westpac Guarantee†.
Investment
exposure
Pages 6 and 22-23
The Company will have an investment exposure of 160% of the NAV.
Trading using the AHL Diversified Program is leveraged, meaning that for every $0.17
used, the Company aims to gain exposure to the price movements of $1.00 worth
of assets. This is possible because the AHL Diversified Program involves trading in
futures, options, forward contracts, swaps and other derivative instruments, which
require deposits of only a portion of the value of the underlying assets. For further
details, see page 22.
In addition, Financing Arrangements are used to provide leverage and thereby
increase the Company’s investment exposure to the Man Investments Portfolio.
For every $0.20 used, the Company aims to use an additional $0.40 funded
through the Financing Arrangements to provide a total investment exposure of
$0.60 to the Man Investments Portfolio.
As a result, for every $1.00 invested in the Company, the Company will have an
investment exposure of $1.00 to the AHL Diversified Program (using $0.17 of every
$1.00 invested in the Company) and $0.60 to the Man Investments Portfolio (using
$0.20 of every $1.00 invested in the Company and the Financing Arrangements).
Approximately $0.62 of every $1.00 invested in the Company will be used for
the Security Deposit, and $0.01 will be used in the payment of upfront costs as
described on pages 24-25.
Maturity dates
Current Maturity Date: 30 June 2012.
New Maturity Date: 30 June 2022.
Key benefits
The Company will continue to seek to provide Shareholders with the following benefits:
Pages 6-11
• Performance:
aims to generate medium to long term capital growth in both rising
and falling markets.
• Security:
the New Westpac Guarantee†.
• Diversification:
accesses a wide range of international fund managers, investment
strategies and markets.
explanatory memorandum
† Subject to the terms of the New Westpac Guarantee as described on pages 20-21 and set out in Appendix A.
3
Key risks
You should carefully consider all of the key risks set out on pages 12-16.
Pages 12-16
There are risks associated with continuing your investment in the Company and
there is no guarantee that you will receive any return, except as provided in the
New Westpac Guarantee†. The Shares are speculative for the following reasons:
• the value of Shares may increase or decrease, depending primarily on the
performance of the AHL Diversified Program and the Man Investments Portfolio;
• an investment in Shares is also subject to high volatility. Accordingly, the value of
Shares may fluctuate significantly within short periods of time;
• the sale or redemption of Shares may be suspended and, if this occurs, you may
not be able to access your money when you require it;
• the Company utilises Financing Arrangements to provide leverage to access
the Man Investments Portfolio, and this will magnify trading losses if losses are
incurred; although this will not affect the New Capital Guarantee. However, if such
trading losses are incurred, the subsequent activation of the New Rising Guarantee
may be less likely;
• investments made by the Company will be subject to counterparty risk; for
example, if a counterparty to a contract fails to perform its contractual obligations,
then the Company may suffer a loss that will reduce the NAV of the Shares. In
particular, as $0.62 of every $1.00 invested in the Company will be used for the
Security Deposit, the Company will have a concentrated counterparty risk exposure
to Westpac; and
• the New Capital Guarantee at the New Maturity Date is unlikely to have the same
real value as the NAV at 30 June 2012 due to the likely effect of inflation and the
time value of money.
A continued investment in Shares should be considered a medium to long term
investment, generally meaning an investment horizon of 5 years or more. A continued
investment in Shares should only be maintained by investors who are able to sustain
a loss or wait until the New Maturity Date to benefit from the New Capital Guarantee
and the New Rising Guarantee†.
Minimum holding
Page 26
Fees
Pages 24-25
Liquidity
Page 26
You can elect to continue all or part of your investment. The minimum holding is
2,000 Shares.
Refer to the table on pages 24-25 which sets out the fees and costs of the Company
and the Trading Subsidiary. These include investment management fees, performance
fees, a Westpac Guarantee fee, a consultancy fee and brokerage costs.
The Shares are not listed and therefore cannot be bought or sold on any exchange.
However, you can sell Shares to Man Investments Australia or have them redeemed
by the Company on the first Business Day of each month (at 98% of the NAV prior to
30 June 2013, 99% of the NAV between 1 July 2013 and 30 June 2014, or at 100%
of the NAV thereafter) subject to the terms and conditions on page 26.
You must retain a minimum holding of 2,000 Shares (unless all of your Shares are
sold or redeemed).
Man Series 8 OM-IP 220
The NAV can vary significantly within a short period of time, and you will not know in
advance of giving notice of your intention to sell or redeem Shares the price at which
such Shares will be sold or redeemed.
4
The New Westpac Guarantee is only applicable for Shares held on the New Maturity
Date, and any sale or redemption of Shares prior to the New Maturity Date will not
benefit from the New Westpac Guarantee.
Taxation
Pages 31-40
Taxation summaries are included on pages 31-40 for Australian and New Zealand
resident taxpayers. You should, however, seek your own tax advice.
† Subject to the terms of the New Westpac Guarantee as described on pages 20-21 and set out in Appendix A.
Dividend policy
It is the intention of the Directors at the date of this explanatory memorandum not to
declare any dividends in respect of a Share or to provide any income through the term
of the investment to Shareholders.
Dispute resolution
There are no external dispute resolution processes in Australia or New Zealand
available to Shareholders in respect of complaints against the Company. In addition,
the Company is not a member of any approved external dispute resolution service
in Australia such as the Financial Ombudsman service or in New Zealand. This
means that investors in Australia and New Zealand will not have access to a free and
independent dispute resolution mechanism that is an alternative to going to court.
Enforcement of
Shares
The rights of a Shareholder against the Company to enforce the terms of the
Shares would be construed in accordance with the law of the Cook Islands unless
otherwise provided for or agreed. In addition to any other remedies available to them,
Shareholders also have the right to enforce the terms of the Shares in the High Court
of the Cook Islands in accordance with its rules and procedures.
Directors
At the date of this explanatory memorandum, there are three Directors, who are each
independent from the Man Group.
Page 41
Investment
Manager
Page 41
Man Investments (CH) AG – Guernsey Branch is a part of the Man Group.
The Investment Manager is licensed and regulated by the Guernsey Financial
Services Commission to carry on the regulated activity of management in respect
of controlled investments.
The primary roles of the Investment Manager are to:
• provide monthly Shareholder reports on the performance of the Company;
• monitor the proportion of funds invested by the Company, through the Trading
Subsidiary, using the AHL Diversified Program and the Man Investments Portfolio
with a view to maintaining target investment exposure of 100% of the NAV to the
AHL Diversified Program and 60% of the NAV to the Man Investments Portfolio;
• negotiate the Financing Arrangements;
• advise on, and manage, any currency hedging to be undertaken for the benefit of
the Company; and
• select funds for inclusion within the Man Investments Portfolio as described on
page 10.
Conflicts of
interest
Page 29
Definitions
Pages 42-43
Contact details
The Company is not a member of the Man Group. However, many of the entities
named in this explanatory memorandum are members of the Man Group. Refer to
page 29 for further disclosure in relation to possible conflicts of interests.
Definitions of terms used in this explanatory memorandum are set out on
pages 42-43.
Man Investments Australia
Level 21, Grosvenor Place
225 George Street
Sydney NSW 2000
Australia
Fax (61-2) 9252 4453
toll free (Australia) 1800 787 220
toll free (New Zealand) 0800 787 220
info@maninvestments.com.au
www.maninvestments.com.au
explanatory memorandum
Man Investments Australia
PO Box N672
Grosvenor Place NSW 1220
Australia
Phone (61-2) 8259 9999
toll free (Australia) 1800 222 355
toll free (New Zealand) 0800 878 220
5
Investment information
Performance, security and diversification
The Company
The Company was launched in November 2002 and
has been trading for more than 9 years. Shares in the
Company are now approaching the Maturity Date.
The Directors have passed a resolution to provide
Shareholders with the opportunity to continue their
investment in the Company with the same features
offered by their current investment.
Your investment in the Company will not automatically
continue. If you wish to continue all or part of your
investment to the New Maturity Date you must notify
Man Investments Australia by completing, signing and
returning the Election Notice. Alternatively, you may
submit your Election Notice online.
As at 31 December 2011, the Company had a
net asset value of approximately A$185 million, and
103,177,400 Shares allotted and not redeemed.
It has achieved a compound annual return of
6.6% p.a.^ net of all fees since its inception in
November 2002. The AHL Diversified Program has
contributed approximately 94% of the compound
annual return, and the remainder of the Company’s
investments (including the Man Investments Portfolio)
has contributed approximately 6% of the compound
annual return. Over the same period, the Company
has recorded a volatility of 15.9% p.a. The Shares are
only suitable for investors with a medium to long
term investment horizon, generally meaning an
investment horizon of 5 years or more, who can
sustain such volatility.
Whilst an investment in Shares is designed to
generate medium to long term capital growth and
make gains in both rising and falling markets,
the Company may also experience periods of volatility,
with investors experiencing sharp increases or
decreases in the NAV.
Trading using the AHL Diversified Program is
leveraged, meaning that for every $0.17 used,
the Company aims to gain exposure to the price
movements of $1.00 worth of assets. This is possible
because the AHL Diversified Program involves trading
in futures, options, forward contracts, swaps and
other derivative instruments, which require deposits of
only a portion of the value of the underlying assets.
In addition, Financing Arrangements are used to
provide leverage and thereby increase the Company’s
investment exposure to the Man Investments Portfolio.
For every $0.20 used, the Company aims to use
an additional $0.40 funded through the Financing
Arrangements to provide a total investment exposure
of $0.60 to the Man Investments Portfolio.
As a result, for every $1.00 invested in the Company,
the Company will have an investment exposure of
$1.00 to the AHL Diversified Program (using $0.17 of
every $1.00 invested in the Company) and $0.60 to
the Man Investments Portfolio (using $0.20 of every
$1.00 invested in the Company and the Financing
Arrangements). Approximately $0.62 of every $1.00
invested in the Company will be used for the Security
Deposit and $0.01 will be used in the payment of
upfront costs as described on pages 24-25. This is
shown in the diagram below.
The Company is subject to certain key dependencies.
For example, the availability of Financing
Arrangements and the computer driven trading of
AHL. For further information refer to page 23.
The Company allocations
Man Series 8 OM-IP 220
62%
Security Deposit
38%
Trading Subsidiary trading capital
and upfront costs
17%
AHL Diversified Program
20%
Man Investments Portfolio
40%
Financing Arrangements
Target investment exposure**
Man Series 8 OM-IP 220
100%
AHL Diversified Program
6
60%
Man Investments Portfolio
160%
** The AHL Diversified Program involves trading in futures, options, forward contracts, swaps and other derivative instruments, which
require deposits of only a portion of the underlying value of the contracts. This is why, in the diagram above, an allocation of only 17%
is sufficient to sustain a target investment exposure of 100% to the AHL Diversified Program.
Note The diagram above does not take into account the fees and costs associated with a continued investment in the Company, other
than upfront costs. For further details refer to pages 24-25.
^ Past performance is not a reliable indicator of future performance. Performance figures are calculated net of all fees as at
31 December 2011.
Past performance of
the Company
Past performance of the Company
Since November 2002, the Company has generated a
total return of 79% and a compound annual return of
6.6% p.a., with an original A$1.00 Share worth A$1.79
as at 31 December 2011^. The past performance of
the Company can be seen in the chart below.
The Company has recorded a volatility of 15.9% p.a.
since inception, while the S&P/ASX 300 (Accum.)
Index recorded a lower volatility of 13.7% p.a. over
the same period~.
The highlighted section of the chart below shows
that the Company was capable of producing returns
during the global financial crisis of November 2007
to February 2009^, when Australian stocks were falling
in value. This highlights the diversification potential the
Company can provide Shareholders.
The table below shows the low correlation of the
performance of the Company to the performance of
traditional asset classes such as stocks, property and
bonds since its inception in November 2002^. This
low correlation highlights the potential of the Company
to diversify a traditional investment portfolio of stocks,
property and bonds.
The
Company
UBSA Composite Bond Index
0.21
S&P/ASX Property Trust (Accum.) Index
-0.11
MSCI World (Total Return) Index
0.10
MSCI Asia Pacific (Total Return) Index
0.17
S&P/ASX 300 (Accum.) Index
0.04
Past performance of the Company
November 2002 to December 2011
$2.20
$2.00
$1.80
NAV
$1.60
$1.40
$1.20
$1.00
Dec 02
Dec 03
Dec 04
Dec 05
Dec 06
Dec 07
Dec 08
Dec 09
Dec 10
Dec 11
Source Man Investments.
Note The chart is expressed in log scale to uniformly illustrate percentage changes each month. It shows the performance of the
Company which commenced trading in November 2002. It is not designed to predict the future performance of the Company. These
returns show that performance over the short term is sometimes less than the historic medium to long term results, sometimes more,
which is why it is important to view an investment such as the Company as a medium to long term investment. Performance figures are
calculated net of all fees as at 31 December 2011. Past performance is not a reliable indicator of future performance.
explanatory memorandum
^ Past performance is not a reliable indicator of future performance. Performance figures are calculated net of all fees as at
31 December 2011.
~ Volatility measures the degree of fluctuation around the average performance of the Company and the Australian stock market
index since inception. The higher the volatility, the higher the degree of fluctuation in returns.
7
The Company invests, via the Trading Subsidiary,
using the AHL Diversified Program and the Man
Investments Portfolio. The Company also invests in
the Security Deposit to provide the security of the
New Capital Guarantee and New Rising Guarantee.
The Company’s combined investment in the AHL
Diversified Program and the Man Investments
Portfolio is designed to generate medium to long term
growth and reduce the volatility of returns through
exposure to a wide range of international markets and
specialised investment strategies.
Conversely, in the period highlighted B, the price of
the asset is trending downwards. If a trend following
managed futures fund, such as the AHL Diversified
Program, entered into a short position in a derivative
instrument at point 3 and then exited that position at
point 4, it could profit from the decrease in the asset’s
value between these two points.
A
Price of asset
Underlying investments
B
3
2
1
The AHL Diversified Program - trading
liquid and transparent markets
The AHL Diversified Program is a computerised
managed futures program designed to analyse trends
and capture opportunities across a broad range of
markets. AHL is based in London, Oxford and Hong
Kong and is one of Man Investments’ core investment
divisions. It operates the AHL Diversified Program.
AHL was established in 1987 and has US$21 billion
under management (as at 31 December 2011). The
AHL Diversified Program is an investment program.
Source Man Investments
Note This chart is a hypothetical example only and does not
represent the price movement of any particular asset, nor any
trade actually made by the AHL Diversified Program.
The AHL Diversified Program currently accesses
international markets across a wide range of sectors.
It trades in a range of market instruments consisting
of futures, options, forward contracts, swaps and
other derivative instruments, using a number of trading
frequencies and trading strategies.
The AHL Diversified Program is quantitative. Entry
and exit points for the trades made by the AHL
Diversified Program are generated primarily through
a statistical analysis of historical price data in the
markets it accesses.
To generate returns, the AHL Diversified Program
primarily adopts a “trend following” investment
approach, meaning that it seeks to generate returns
from sustained price movements (in other words, price
trends) in the markets it accesses. These can be either
upwards or downwards price movements, as the AHL
Diversified Program has the flexibility to take both long
positions (for example, through the purchase of futures
which can generate a return if the price continues to
increase) and short positions (for example, through the
sale of futures, which can generate a return if the price
continues to decrease) in its trades.
Man Series 8 OM-IP 220
The chart opposite shows the hypothetical movement
in the price of an asset. In the period highlighted A,
the price of the asset is trending upwards. If a trend
following managed futures fund, such as the AHL
Diversified Program, entered into a long position in a
derivative instrument at point 1 and then exited that
position at point 2, it could profit from the increase in
the asset’s value between these two points.
8
4
Time
Being 100% systematic, the AHL Diversified Program
uses computerised systems to analyse such price
data, sampling thousands of prices per day, and to
identify potential price trends and therefore trade entry
and exit points. This is different to a discretionary
investment manager, which generally relies on human
skill and judgement (rather than computerised
systems) in selecting its investments.
The AHL Diversified Program, on average, holds a
trade position for several weeks. The majority of
trades made by the AHL Diversified Program are
made on financial exchanges.
The success of the AHL Diversified Program is based
on three core elements:
Trading – Trades around-the-clock across a wide
range of sectors, markets, instruments and systems.
Responds quickly to real-time prices while
dynamically adjusting exposures according to
changes in the markets.
Risk control – Supported by advanced IT systems and
strong operational controls. Portfolios are evaluated at
the aggregate, sector and instrument levels to ensure
they remain within acceptable risk limits.
Research – Applied research incorporated at every
step of the process, while new investment models
and trading strategies are continually tested and
refined. Researchers work closely with the University
of Oxford through the Oxford-Man Institute of
Quantitative Finance.
The allocation of assets to specific markets takes
account of:
• correlation between specific sectors and markets;
• expected returns and volatilities;
• market access costs; and
• the liquidity of the markets.
Management of risk
Risk in investments covers a range of circumstances
that may or may not occur in the future. Generally,
the higher the return of an investment, the higher the
risk of negative returns.
Risk may be effectively managed in a number of
different ways, including through diversification and
the use of appropriate risk control measures.
The AHL Diversified Program is underpinned by
computer driven processes, disciplined real-time risk
control and management information systems. It is
100% systematic and positioned to respond quickly to
price moves. This means the AHL Diversified Program
can employ rigorous control across investments in a
broad range of markets.
Risk management is an essential component of
AHL’s investment management process. AHL has
put in place a risk management framework which
is designed to identify, monitor and mitigate the
portfolio, operational and outsourcing risks relevant
to its operations. AHL’s risk management framework
is part of, and is supported by, the overarching risk
management framework of the Man Group.
Key principles of AHL’s risk management framework
include the segregation of functions and duties where
material conflicts of interest may arise and having an
appropriate degree of senior management oversight
of business activities. As part of this oversight, AHL’s
activities are subject to regular review by the Man
Group’s internal audit function.
The chart below illustrates the diversified market
sectors traded by the AHL Diversified Program as at
31 December 2011. The AHL Diversified Program
generally accesses these market sectors through
derivative instruments such as futures, and does not
invest directly in these sectors.
A list of the markets traded by the AHL Diversified
Program as at 31 December 2011 is attached as
Appendix B to this explanatory memorandum.
The sectors accessed by the AHL Diversified Program
and the allocations to them are regularly reviewed
and may change depending on market conditions
and trading signals generated by the AHL Diversified
Program and as a result of ongoing research.
You should regard the Shares as speculative, as
they may increase or decrease in value. You should
consider the key risks on pages 12-16 and seek
advice from a licensed or authorised financial
advisor before making a decision to continue or
exit your investment in the Company.
Allocations across seven different
market sectors
AHL Diversified Program
Interest rates 8.4%
Energies 8.6%
Bonds 26.3%
Agriculturals
9.0%
Stocks 13.3%
Metals 18.8%
Currencies 15.6%
Source Man Investments.
Note The sector allocations above are designed to reflect the
estimated risk exposure to each sector relative to the other
sectors in the AHL Diversified Program. The figures are based
on estimates of the risk exposure of each sector as at
31 December 2011. A geographic breakdown of the AHL
Diversified Program is not shown due to the diverse nature of
the markets traded. The AHL Diversified Program generally
accesses these market sectors through derivative instruments
such as futures, and does not invest directly in these sectors.
explanatory memorandum
Risk management consists primarily of monitoring risk
measures and ensuring the systems remain within
prescribed limits.
Diversification
9
The Man Investments Portfolio
In addition to the AHL Diversified Program and the
New Westpac Guarantee, the Company also invests
in the Man Investments Portfolio.
The Man Investments Portfolio is a fund of funds,
which means that it invests in a portfolio of individual
fund managers. The Investment Manager is the
investment manager of the Man Investments Portfolio.
The investment strategy of the Man Investments
Portfolio is to allocate capital to a diversified selection
of individual fund managers (as recommended by the
Investment Manager using various criteria, as
discussed further below), and generate returns
from the investments made by such individual
fund managers.
The Man Investments Portfolio currently accesses
the expertise of more than 50 international fund
managers. These fund managers invest using various
alternative investment styles, as shown in the chart
below, and typically invest in a variety of asset
classes including stocks, bonds, securities,
currencies, commodities, credit and interest rates.
As at 31 December 2011, the geographical focus of
the fund managers within the Man Investments
Portfolio was approximately as follows:
Geographical focus
Asia Pacific
13.8%
Emerging Markets
5.1%
Western Europe
8.5%
Global
39.0%
Japan
4.7%
North America
28.9%
Note “Global” as used in the above table refers to fund
managers whose geographical focus is two or more of the other
geographical regions listed above.
The Investment Manager selects the individual
fund managers for inclusion within the Man
Investments Portfolio.
Man Series 8 OM-IP 220
As at 31 December 2011, the average allocation to
each individual fund manager within the Man
Investments Portfolio was approximately 2% of the
total size of the Man Investments Portfolio, with the
highest single allocation being 4.55% and the lowest
single allocation being 0.55%. The Investment
Manager intends to continue to hold a diversified
selection of individual fund managers within the Man
Investments Portfolio.
10
In considering a fund manager for inclusion within the
Man Investments Portfolio (and/or the allocations to
them), the Investment Manager will have regard to
both quantitative and qualitative criteria such as
(but not limited to):
Quantitative criteria
• Track record of fund manager
• Comparison of fund manager’s performance relative
to its peers
• Liquidity of fund manager
• Capacity of fund manager; that is, how large the fund
manager’s fund can grow given its investment style
Qualitative criteria
• Diversification of fund manager
• Attractiveness of fund manager’s investment style
• Expected value add to the Man Investments Portfolio
• Outcome of meetings with fund manager
The Man Investments Portfolio may invest in funds
owned or operated by the Man Group, subject to
the Investment Manager following the process
described above.
The Man Investments Portfolio is dynamically
managed, meaning that the fund managers within
the portfolio (and/or the allocations to them) are
expected to change over time, depending on market
conditions and investment opportunities.
The chart below indicates the allocations to the
alternative investment styles used in the Man
Investments Portfolio as at 31 December 2011.
A description of each of these styles is set out in the
glossary at the front of this explanatory memorandum.
Financing Arrangements are used by the Company to
provide leverage and thereby increase the Company’s
investment exposure to the Man Investments
Portfolio. For every $0.20 used, the Company aims to
use an additional $0.40 funded through the Financing
Arrangements to provide a total investment exposure
of $0.60 to the Man Investments Portfolio. For an
explanation of the risks associated with the Financing
Arrangements, see page 13. For further detail on the
Financing Arrangements, see pages 22-23.
Man Investments Portfolio
Fund styles
Managed futures 3.7%
Event driven 9.4%
Equity hedged
37.0%
Relative value
18.6%
Global macro 31.3%
Source Man Investments.
Note This is a schematic illustration which indicates broadly
the fund styles accessed by the Man Investments Portfolio. It
shows the estimated proportion of trading capital allocated to
each fund style as at 31 December 2011. The styles accessed
by the Man Investments Portfolio, and the allocations to them,
are regularly reviewed and may change depending on market
conditions and as a result of ongoing research.
Past rising guarantee additions+
November 2002 to December 2011
$2.50
Value of Current Westpac Guarantee+
Net Asset Value per Share at the date that
each rising guarantee addition was made
$2.00
A$2.02
A$1.65
$1.50
A$1.43
A$1.43
A$1.05
A$1.13
A$1.23
A$1.07
A$1.27
A$1.17
$1.00
$0.50
$0.00
Jun 03
Jun 05
Jun 06
Jun 07
Jun 08
Source Man Investments.
Note Past performance is not a reliable indicator of future performance.
New Westpac Guarantee†
Shareholders in the Company also have the benefit
of the New Capital Guarantee and the New Rising
Guarantee from Westpac†. The New Capital Guarantee
provides that Shareholders on the New Maturity Date
will receive at least the NAV as at 30 June 2012 for
each Share held by them. For further details on the
New Capital Guarantee and the New Rising Guarantee,
see pages 20-21 and Appendix A.
Although protecting the initial investment amount
provides security, an amount invested today is unlikely
to have the same real value in 10 years, due to the
time value of money. The New Rising Guarantee
helps address this, by potentially locking in a portion
of profits during the term of the investment provided
certain conditions are met, and therefore potentially
increasing the amount guaranteed to investors on the
New Maturity Date.
+
• Diversify a traditional portfolio of stocks,
property and bonds.
• Benefit from the security provided by a
capital guarantee (in the form of the New
Westpac Guarantee)†.
• Access funds, if required, on a monthly basis**.
• Access an investment managed by the Man
Group, one of the world’s largest alternative
asset managers with approximately US$58.4
billion under management∞.
The information above is general, not personal,
advice and may not be suitable for all investors.
It does not take into account your objectives,
financial situation or needs so before acting
on it consider its appropriateness to your
circumstances and seek advice from your
licensed financial advisor (in Australia) or
authorised financial advisor (in New Zealand).
When considering whether to continue or
exit your investment in the Shares, you
should carefully read all of this explanatory
memorandum. Continuing an investment in the
Shares is subject to the risk factors outlined on
pages 12-16.
Subject to the terms of the Current Westpac Guarantee.
Subject to the terms of the New Westpac Guarantee as described on pages 20-21 and set out in Appendix A.
** Subject to the terms and conditions set out on page 26.
∞ Funds under management as at 31 December 2011.
†
explanatory memorandum
Since the Company’s inception in November 2002, the
rising guarantee has been activated on five occasions
to lock in profits made by the Company, as shown in
the chart above. The rising guarantee has not been
activated since 2008 because the Company has not
generated net new profits or has not made good any
prior years’ losses. For information on the New Rising
Guarantee, see page 20.
Continuing an investment in the Company may
benefit you, if you seek to:
11
Key risks
You should regard a continued investment in the
Shares as speculative, as their value may decrease
as well as increase depending on the performance
of the Investment Manager, trading systems, and the
strategies selected. You should carefully consider each
of the risks set out in this section, as well as the other
information in this explanatory memorandum and
seek advice from a licensed or authorised financial
advisor, in assessing the suitability of continuing your
investment in the Company.
You must decide the amount to continue to invest
in the Shares taking into consideration the risks
described in this section and the terms and conditions
described in this explanatory memorandum. The
investments which the Company makes can be
subject to sudden, unexpected and substantial
price movements. Consequently, the trading of such
investments can lead to substantial losses as well
as gains within a short period of time. A decision
to continue an investment in Shares should only be
made by investors who are able to sustain a loss or
wait until the New Maturity Date to benefit from the
New Westpac Guarantee†.
Risks associated with the investment
Performance history
The performance information contained in this
explanatory memorandum is not intended to be
a forecast of the future performance of the AHL
Diversified Program, the Man Investments Portfolio
or the Company. Past performance is not a reliable
indicator of future performance.
An investment in the Company should be considered
a medium to long term investment, generally meaning
an investment horizon of 5 years or more. There can
be no assurance that the Company’s aim to generate
medium to long term capital growth in rising and
falling markets will be achieved, and this aim is subject
to a number of risks including the following:
(i) the reversal of a price trend (i.e. the market
moves in the opposite direction to the position
taken by the AHL Diversified Program); or
(ii) the absence of upwards or downwards price
trends in the markets it accesses (i.e. the market
is flat).
The chart below shows the hypothetical movement
in the price of an asset. The scenario described in (i)
above may occur in the period highlighted A. If a trend
following managed futures program, such as the AHL
Diversified Program, identified an upward trend and
entered into a long position in a derivative instrument
at point 1 and then exited that position at point 2, it
could incur a loss from the decrease in the asset’s
value between these two points.
The scenario described in (ii) above may occur in the
period highlighted B. There is the absence of a price
trend between points 3 and 4 and any position taken
by a trend following managed futures program, such
as the AHL Diversified Program, could incur a loss, or
achieve a zero return.
A
B
1
2
3
12
4
Time
Source Man Investments.
Note This chart is a hypothetical example only and does not
represent the price movement of any particular asset, nor any
trade actually made by the AHL Diversified Program.
Man Series 8 OM-IP 220
• The risk that the Investment Manager may make
an investment decision that does not generate the
targeted returns; for example, through its selection of
fund managers within the Man Investments Portfolio.
• The risk that market conditions may not be
favourable to the AHL Diversified Program or that
the computerised systems underpinning the AHL
Diversified Program identify a trade that does
not prove to be profitable. As the AHL Diversified
Program primarily adopts a “trend following”
investment approach (see pages 8-10), the following
scenarios may result in losses to the AHL Diversified
Program which may significantly affect the value of
an investment in the Company:
Price of asset
Holding Shares in the Company is subject to certain
risks. The following summary of the key risks of
continuing an investment is not exhaustive of all risks
and new risks may emerge over time.
† Subject to the terms of the New Westpac Guarantee as described on pages 20-21 and set out in Appendix A.
Volatility risk
The Company may directly or indirectly make
investments in markets, using the AHL Diversified
Program and the Man Investments Portfolio, that are
volatile. Accordingly, the value of an investment in the
Company may fluctuate more so than for other, less
volatile, investments.
For example, on 30 November 2009, the NAV was
A$1.87. By 31 January 2010, the NAV had decreased
to A$1.71. The NAV subsequently rose to A$1.91
by 31 August 2010. An investor selling Shares on
31 January 2010 would have, relative to their position
on 30 November 2009, realised a loss of A$0.16
per Share, and would not have participated in the
subsequent A$0.20 increase in the NAV between
31 January 2010 and 31 August 2010.
The Shares are only suitable for investors with a
medium to long term investment horizon, generally
meaning an investment horizon of 5 years or more,
who can sustain such volatility.
Leverage risk
(AHL Diversified Program)
The Company, via the Trading Subsidiary, invests
through an underlying vehicle for the purposes of
gaining access to the AHL Diversified Program
(“Underlying Vehicle”).
This Underlying Vehicle utilises leverage; that is
for every $0.17 invested in the Underlying Vehicle,
the Company aims to gain exposure to the price
movements of $1.00 worth of assets. This is possible
because the AHL Diversified Program involves trading
in futures, options, forward contracts, swaps and
other derivative instruments, which require deposits of
only a portion of the value of the underlying assets.
Leverage, such as that utilised by the Underlying
Vehicle, may result in the risk of substantial losses
as well as the possibility of gains to the Underlying
Vehicle. Any event that adversely affects the value of
an investment made by the Underlying Vehicle would
be magnified to the extent that leverage is used, and
this would affect the performance of the Company
and the value of the Shares (but would not affect the
New Westpac Guarantee relating to the Shares at the
New Maturity Date). For example, if an investment is
leveraged from $0.17 to $1.00, a loss of 17% only
(on the $1.00) would be sufficient to reduce the value
of the $0.17 investment to zero.
Despite the risks above, neither the Company nor
Shareholders will be liable for any losses incurred
in excess of the amount invested in the Underlying
Vehicle, which amounts to $0.17 for every $1.00 of
investment exposure to the AHL Diversified Program.
For further details, see pages 22-23.
These risks will not affect the New Westpac Guarantee.
Financing Arrangements risk
(Man Investments Portfolio)
Financing Arrangements are used to fund part of
the Company’s investment in the Man Investments
Portfolio. They create leverage, which will, in the
event of trading losses being incurred by the Trading
Subsidiary, magnify those losses, and this would affect
the performance of the Company and the value of
the Shares (but would not affect the New Westpac
Guarantee). For example, if an investment is leveraged
from $0.20 to $0.60, a loss of 33.3% only (on the
$0.60) would be sufficient to reduce the value of the
$0.20 investment to zero.
Financing Arrangements are provided from time to
time by independent third parties and/or one or more
entities in the Man Group. There is no assurance that
any Financing Arrangement will be renewed and, if
any Financing Arrangement is renewed, it may be
renewed on less favourable terms including but not
limited to a change in applicable interest rates. In
particular, third parties may not be available to act as
financing providers and the Man Group itself may face
regulatory, commercial or other constraints, resulting
in it not offering or renewing a Financing Arrangement.
Additionally, any Financing Arrangement may be
subject to early termination in accordance with its
terms and may be terminated by a counterparty.
A loss of, a termination of, or a reduction in a
Financing Arrangement as described above may have
the effect of causing the Trading Subsidiary to reduce
its overall investment exposure with a corresponding
reduction in the performance of the Company and
the value of the Shares. For further details on the
Financing Arrangements, see pages 22-23.
These risks will not affect the New Westpac Guarantee.
explanatory memorandum
In the event of a decline in the performance of the
AHL Diversified Program, the Underlying Vehicle may
be required to make further deposits and/or liquidate
positions, and this may affect the performance of
the Company and the value of the Shares. If losses
continue to a level insufficient to continue trading,
the Underlying Vehicle may cease trading the AHL
Diversified Program. The Investment Manager
manages this risk for the Company by seeking
to ensure that the underlying risk is managed in
accordance with predetermined levels.
13
Segregation risk
The assets and liabilities of the share classes of Man
Strategies Holdings SPC, a company incorporated in
the Cayman Islands, in which the Trading Subsidiary
invests in order to gain exposure to the Man
Investments Portfolio, are segregated under the laws
of Cayman Islands from the assets and liabilities of
the other share classes of that company. However,
Man Strategies Holdings SPC may invest or operate
in jurisdictions which do not recognise the legal
segregation of assets. The Trading Subsidiary may
incur losses in these circumstances which may affect
the performance of the Company and the NAV. In any
event, this would not have an adverse effect on the
New Westpac Guarantee.
Investment strategy
On the advice of the Investment Manager, the
Trading Subsidiary may change the allocation of
funds between the AHL Diversified Program and the
Man Investments Portfolio based on the ongoing
performance of each investment, the risk/reward of
each investment and their contribution to achieving
the investment objectives of the Company.
The Investment Manager may also reduce the target
investment exposure of 160% of the Net Asset Value
per Share at any time, taking into account market
conditions. If this occurs, Shareholders will have less
exposure to the performance of the AHL Diversified
Program and/or the Man Investments Portfolio, which
may affect the performance of the Company.
Counterparty risk
The investments directly and/or indirectly made by
the Company will be subject to counterparty risk;
for example, if a counterparty to a contract fails to
perform its contractual obligations, then the Company
may suffer a loss that will reduce the NAV of the
Shares. In particular, as A$0.62 of A$1.00 invested in
the Company will be used for the Security Deposit,
and the New Capital Guarantee and the New Rising
Guarantee is provided by Westpac, the Company will
have a concentrated counterparty risk exposure to
Westpac. In the event of a winding up of Westpac, the
Company may incur losses and you may not be able
to benefit from the New Westpac Guarantee.
Man Series 8 OM-IP 220
The AHL Diversified Program uses counterparties in
the execution of its investment strategy (for example,
prime brokers) and the Company may be subject to
counterparty risk arising out of this. This counterparty
risk may be concentrated.
14
In relation to the Man Investments Portfolio,
counterparty risk may arise in relation to the
counterparty to the Financing Arrangements. In
the event of the insolvency of such a counterparty,
the Trading Subsidiary may indirectly become an
unsecured creditor in relation to any deposit and/or
margins paid to the counterparty and any unrealised
gains under a Financing Arrangement. It may also
lose further investment opportunities while alternative
arrangements are put in place to enable the Trading
Subsidiary to access the Man Investments Portfolio
at the target investment exposure.
The Investment Manager will seek to minimise
the Company’s counterparty risk by selecting
counterparties that, using its procedures, it considers
appropriate for the transactions to be undertaken.
For example, in the case of the AHL Diversified
Program, only those prime brokers that are approved
by the Man Group’s due diligence processes will
be considered.
Systems risk
You should note that the AHL Diversified Program is
100% systematic and relies solely on computer driven
trading. There may be risks that are unique to
computer trading programs, including risks arising
from the use of technology, that may result in losses
to Shareholders. However, AHL seeks to manage
these risks through the use of disaster recovery and
other risk management processes.
Foreign currency exposure risk and interest
rate risk
The Company will ensure that the Security Deposit
is denominated in Australian dollars. The Company’s
trading using the AHL Diversified Program and the
Man Investments Portfolio will involve trading in
currencies other than Australian dollars. Trading in
non-Australian dollar assets involves an exposure
to currency fluctuations which may adversely affect
the performance of the Company and the NAV.
As a consequence, the Company will seek, but
cannot guarantee, a reduction of this exposure by
either converting profits and losses into Australian
dollars or hedging that exposure, using a discretionary
process on a regular basis, or by holding excess cash
in Australian dollars. However, such currency hedging
may not completely remove the risks associated with
having a foreign currency exposure.
The Company may also have exposure to interest rate
risks. To the extent prevailing interest rates change, it
could affect the performance of the Company.
Conflicts of interest
There is a risk that conflicts of interest, as described
on page 29, may arise for the Directors of the
Company as they may also be directors of other
companies sponsored by Man Investments Australia,
entities within the Man Group or of any other entities
who provide services to the Company and the
Trading Subsidiary which will receive various fees and
commissions in relation to the sale of Shares and
other services provided to the Company and/or the
Trading Subsidiary.
The New Westpac Guarantee
The amount of the New Capital Guarantee at the New
Maturity Date is unlikely to have the same real value
as the NAV at 30 June 2012 due to the likely effect
of inflation and the time value of money. The New
Westpac Guarantee will only increase if the Company
adds to the Security Deposit. You should carefully
read pages 20-21 of this explanatory memorandum
and the full text of the New Westpac Guarantee in
Appendix A before making a decision to continue your
investment in Shares.
If a redemption payment that would otherwise be
covered by the New Westpac Guarantee is made by
the Company to a Shareholder, the New Westpac
Guarantee is released to the extent of that payment
and the New Westpac Guarantee will no longer apply
even if the payment is subsequently set aside or if there
is a requirement to repay that amount to the Company.
The amount payable under the New Westpac
Guarantee may be reduced by tax or changes of
law during the life of the investment, although the
Company is not aware of any such circumstance at
the date of this explanatory memorandum.
Risks associated with the Shares
Liquidity risk
The Trading Subsidiary may make investments in
markets which can become illiquid. This may result
in it being expensive or not possible to liquidate
positions against which the market is moving or to
meet margin requests, margin calls, redemptions or
further requirements. As a consequence the Directors
may declare a suspension of the determination of the
NAV or a suspension of the redemption or purchase
of the Shares.
To enable the Company to provide monthly liquidity
to Shareholders, the Trading Subsidiary may on
the advice of the Investment Manager enter into an
uncommitted liquidity arrangement with a member
of the Man Group and/or another third party acting as
a counterparty.
There is a risk that this arrangement may not be
available and in such circumstances, the redemption
or purchase of the Shares may be suspended.
Suspension of valuation or redemption of
Shares
The Directors may declare a suspension of the
determination of the NAV for any period during
which, in the opinion of the Directors, it is not
reasonably practicable to reduce the Company’s
assets and liabilities.
During a suspension of the determination of the NAV
or a suspension by the Company of the redemption of
the Shares, your right to have your Shares redeemed
by the Company (or purchased by Man Investments
Australia) will be suspended. This may result in periods
where the Shares cannot be valued, sold or redeemed.
For further information, see pages 20-21.
Return on investment
Other Westpac arrangements
If there is an unremedied default under the Company’s
agreements with Westpac, Westpac is entitled to
be paid or to set off any amounts it owes to the
Company against all payments due to it under those
agreements. Westpac will therefore, in relation to
the assets of the Company, subject to the terms
of the security given to the Bank, rank in priority
ahead of the unsecured creditors (other than those
preferred by law) and Shareholders to the extent of
any liability of the Company under the terms of the
indemnity referred to on page 21 of this explanatory
memorandum, and other agreements with Westpac.
explanatory memorandum
Your returns on the Shares (by way of payment of
redemption proceeds) will be determined by reference
to any cumulative net gains or losses (if any) arising
from the investment activities of the Company. The
NAV (and therefore the return on the Shares) may
vary significantly over time, and may decrease as
well as increase, depending upon trading profits
and investment gains and losses. How the NAV is
determined is set out on page 27 under “Valuation of
Shares”. The Company makes no representation as to
any return that you may earn on the Shares and there
is no assurance that information on the Investment
Manager, the AHL Diversified Program or the Man
Investments Portfolio set out in this explanatory
memorandum will be, in any respect, indicative of how
they will perform in the future.
15
There is no guarantee that you will receive any return
on an investment in the Company. However, if you
hold your Shares until the New Maturity Date, you will
benefit from the New Westpac Guarantee.
Early sale or redemption
Any sale or redemption of Shares before the
New Maturity Date will not have the benefit of the
New Westpac Guarantee and if the NAV is, at the time
of early sale or redemption, less than the NAV as
at 30 June 2012, you may receive less in total than
the NAV as at 30 June 2012.
If you apply to Man Investments Australia to sell or
redeem your Shares prior to the New Maturity Date,
you should note that at least two weeks notice is
required before the relevant Dealing Day and that
you may also be required to provide documentation
to verify your identity prior to transacting a sale
or redemption and may not receive sale or
redemption proceeds until such time as the
required documentation has been received.
You will not know in advance of giving notice the
price at which the Shares referred to in that notice
will be sold or redeemed. The NAV for the purpose
of that sale or redemption may be less than the NAV
published at the time the notice for sale or redemption
is given. As a result, you may receive less in terms of
sale or redemption proceeds than anticipated.
Your right to redeem Shares is subject to the laws of
the Cook Islands under which creditor interests may in
some circumstances preclude redemption. No sale or
redemption of Shares may be made by the Company
if it is insolvent or when such sale or redemption
would result in the Company being incapable of
meeting its obligations to creditors.
Cook Islands
Man Series 8 OM-IP 220
The Company is incorporated in the Cook Islands
and registered in Australia as a foreign company
under the Corporations Act (Cth) 2001 of Australia.
Refer to page 28 for more information in relation to
Cook Islands law.
16
Effect of changes in applicable law
The New Westpac Guarantee can be affected by tax or
changes of law during the life of the investment. If there
is any reduction in the value of the Security Deposit
or certain bank accounts held by the Company as a
result of any tax, or the imposition or proper payment
of any taxes or any change of law (which includes any
appropriation, confiscation, order or directive of any
governmental agency or any judgment issued by a
court or tribunal) the amount payable under the New
Westpac Guarantee may be reduced. As at the date
of this explanatory memorandum, the Company is not
aware of any taxes or changes of law which would
result in any reduction of the amount payable under the
New Westpac Guarantee.
You and/or the Company may be exposed to the risk
of changes in laws, legislation or regulation or taxation
during the life of the investment.
FAQs
Are you
continuing your
investment in
Shares?
How do I elect
to continue my
investment?
Instructions to continue your investment in Shares can only be
given by completing, signing and returning the enclosed Election
Notice to Man Investments Australia or alternatively, by submitting
your Election Notice online. An election to continue an investment
in Shares is subject to the terms and conditions outlined in this
explanatory memorandum.
When do I need to
return the Election
Notice?
You need to complete, sign and return the enclosed Election Notice
to Man Investments Australia or submit your Election Notice online
by 25 May 2012.
Can I elect to
You may elect to continue all or part of your investment.
continue part of my The minimum holding is 2,000 Shares.
investment?
Are you
redeeming
your Shares?
What happens to
my Shares if I elect
to continue?
Shares continuing to the New Maturity Date will be renamed as
Continuing Redeemable Shares. You will receive a contract note
for the number of Shares being continued and a New Westpac
Guarantee notice after the Maturity Date.
Are there any fees
for electing to
continue?
There are no fees for electing to continue your Shares. There are
however, ongoing fees and costs, which are explained on pages
24-25 of this explanatory memorandum.
When do I need to
return the Election
Notice?
If you wish to redeem your Shares, you need to complete, sign and
return the enclosed Election Notice to Man Investments Australia or
submit your Election Notice online by 25 May 2012. Completing or
submitting the Election Notice will enable you to confirm your details
recorded on the Company’s share register to facilitate payment of
redemption proceeds after the Maturity Date.
If you make no election, all of your Shares will automatically be
redeemed on the Maturity Date.
Can I elect to
redeem part of my
investment?
You may elect to redeem all or part of your investment. Shares can
be redeemed subject to a minimum holding of 2,000.
Can I sell or
redeem my Shares
earlier?
Shares can be sold to Man Investments Australia or redeemed by
the Company prior to the Maturity Date by written notice to Man
Investments Australia at least two weeks before a Dealing Day stating
the number of Shares to be sold or redeemed. The last Dealing Day
before the Maturity Date will be 1 June 2012.
What happens
to my Shares if
I redeem at the
current Maturity
Date?
If you choose to have some or all of your Shares redeemed at the
Maturity Date you will receive, by way of payment in respect of the
redemption of those Shares, the NAV as at 30 June 2012.
Redemption proceeds will be paid by cheque in the name of the
Shareholder as shown on the Company’s share register, in Australian
dollars within 21 business days of the Maturity Date. The cheque will
be posted to the address of the redeeming Shareholder as shown on
the Company’s share register or to any other address nominated by the
Shareholder on the Election Notice before the Maturity Date.
explanatory memorandum
17
What do you need to do now?
To ensure that our records are up to date, we recommend that you complete, sign and
return the Election Notice or submit the Election Notice online.
1. Complete each section of the Election Notice, nominating the number of Shares to continue
and/or be redeemed.
2. Check your address details and update for changes. If there has been a change in name,
address, company director(s) or trustee(s), please include the new details and call Man
Investments Australia to ascertain if any other documentation is required for the Company
to verify the new details.
3. For Continuing Shareholders, please tick as appropriate on the Election Notice if you would
like to receive electronic notifications for quarterly newsletters, annual reports, guarantee
notices and information on new funds and provide your email address in the space provided.
Please also tick as appropriate if you would like to receive your contract note electronically.
4. Ensure all Shareholders sign the Election Notice. For instructions on who should sign,
please refer to page 19.
5. Call Man Investments Australia Client Services on toll free Australia 1800 222 355,
toll free New Zealand 0800 878 220 or (61-2) 8259 9999 if you have any questions.
You can also contact Man Investments Australia at info@maninvestments.com.au or visit
www.maninvestments.com.au.
6. Return your completed and signed Election Notice by 25 May 2012 to:
Man Investments Australia
PO Box 3218
North Parramatta NSW 2151
Australia
Man Investments Australia
Level 21, Grosvenor Place
225 George Street
Sydney NSW 2000 Australia
Man Investments Australia
PO Box 91997
Victoria Street West
Auckland 1142 New Zealand
Or you can send your completed and signed Election Notice by facsimile to:
(61-2) 9252 4453, toll free Australia 1800 787 220 or toll free New Zealand 0800 787 220
Or scan and email to:
series8@maninvestments.com.au
Man Series 8 OM-IP 220
7. Alternatively, submit your Election Notice online at:
www.maninvestments.com.au/series8/election
Please note that to submit your Election Notice online you will require your Unique ID and
PIN which is printed on the Election Notice mailed to you.
18
Who should sign the
Election Notice
Type of Shareholder
Who signs the Election Notice
Individual
Shareholder to sign and print name.
Use given name(s) in full,
not initials
Joint
Each Shareholder to sign and print name.
Use given name(s) in full,
not initials
Company
Use company name in full
with no abbreviations
Superannuation funds
(all trustees to be included)
Use the name of the trustee(s)
of the fund and insert the
name of the fund
Trusts
(all trustees to be included)
Use trustee(s) personal name(s)
and insert the name of the trust
Minor
(under the age of 18)
Use the name of the adult who
signs on behalf of the minor
Partnerships
Two directors or a director and company secretary to sign unless a sole
director. Each must state their capacity and print their name next to
their signature.
If an individual/joint trustee, each to sign and print name and to note in
writing by his/her signature that he/she signs as trustee on behalf of
(insert name of Superannuation Fund).
If a company trustee, two directors or a director and company secretary
to sign unless a sole director. Each must state their capacity and print their
name next to their signature.
If an individual/joint trustee, each to sign and print name and to note in
writing by his/her signature that he/she signs as trustee on behalf of
(insert name of trust).
If a company trustee, two directors or a director and company secretary
to sign unless a sole director. Each must state their capacity and print their
name next to their signature.
The person who signs on behalf of the minor to sign and print their name
and to note by his/her signature that he/she signs on behalf of (insert name
of minor).
Partners to sign and print name(s).
Use partners’ personal name(s)
Estates
The executor(s) of the Estate as appointed.
explanatory memorandum
19
The Westpac Guarantee
Current Westpac Guarantee
The Current Westpac Guarantee+ will continue to
provide for Shareholders on the Maturity Date
(30 June 2012), including those who elect to
continue their investment to the New Maturity Date
(30 June 2022), the security of receiving A$1.43
per Share for each Share held on 30 June 2012.
However, Shareholders electing to continue their
investment will, on making that election and subject
to certain conditions being satisfied, release Westpac
from its obligations under the Current Westpac
Guarantee (see page 30).
New Westpac Guarantee
The Company has arranged for the New Westpac
Guarantee† to be given in favour of Shareholders on
the New Maturity Date.
The New Westpac Guarantee is conditional on
Westpac not having been required to pay any amount
to Shareholders who have elected to continue their
investment in the Company, under the Current
Westpac Guarantee. Therefore, if Shareholders who
elect to continue their investment in the Company
are paid by Westpac under the Current Westpac
Guarantee, for example, if the NAV on the Maturity
Date is less than the guaranteed amount under the
Current Westpac Guarantee, the New Westpac
Guarantee will cease to have effect in respect of such
Shareholders. In such circumstances, Shareholders
who elect to continue their investment will be entitled
to receive payment of the guaranteed amount under
the Current Westpac Guarantee.
The New Westpac Guarantee provides the security
of a capital guarantee and provides for a rising
guarantee subject to the terms and conditions set
out on this and the following page and set out in full
in Appendix A.
Westpac does not in any way stand behind the capital
value or performance of the Shares or the investments
made by the Company, except as provided in the New
Capital Guarantee.
Man Series 8 OM-IP 220
New Capital Guarantee
20
The New Capital Guarantee provides that
Shareholders on the New Maturity Date (as certified
by the Registrar) will receive a minimum amount of the
NAV as at 30 June 2012 for each Share held by them
on the New Maturity Date. For example, if the NAV
as at 30 June 2012 is A$1.80 then the New
Westpac Guarantee will be for a minimum amount
of A$1.80 per Share for Shareholders on the New
Maturity Date±.
The guaranteed amount, if payable, will be paid on
11 August 2022. The New Capital Guarantee will
apply if the amount paid to Shareholders by the
Company on redemption of each Share on the New
Maturity Date is less than the NAV as at 30 June
2012. The amount of the New Capital Guarantee at
the New Maturity Date is unlikely to have the same
real value as the NAV as at 30 June 2012, due to the
likely effect of inflation and the time value of money.
The Company helps to address this with the New
Rising Guarantee (see below).
In order to provide Continuing Shareholders with the
New Capital Guarantee the Company will invest an
amount in an Australian dollar denominated deposit
with Westpac (the ‘Security Deposit’) which will have
a value on the New Maturity Date at least equal to the
amount required to repay the NAV as at 30 June 2012
for each Share held on the New Maturity Date.
New Rising Guarantee
Shareholders on the New Maturity Date will also
have the benefit of provisions in the New Westpac
Guarantee which will, subject to this section, enable
the amount guaranteed by Westpac to increase.
The Company has agreed with Westpac that
commencing 1 July 2012, it will lock in a portion of
net new trading profits (being net new trading profits
from the combination of the Trading Subsidiary’s
investments in the AHL Diversified Program and the
Man Investments Portfolio) for each financial year in
which the trading capital of the Trading Subsidiary
equals or exceeds 50% of the Company’s aggregate
net asset value as at the end of that financial year.
The amount to be locked in for the financial year
will (when paid into the Security Deposit) enable
the amount guaranteed under the New Westpac
Guarantee on the New Maturity Date to increase by
an amount equal to 50% of the Trading Subsidiary’s
net new trading profits for that financial year, after
making good any prior years’ losses.
This means that Shareholders on the New Maturity
Date can, subject to the terms of the New Westpac
Guarantee, benefit when net new trading profits
generated in a financial year are locked away by
the Company.
+ Subject to the terms of the Current Westpac Guarantee.
† Subject to the terms of the New Westpac Guarantee as described on pages 20-21 and set out in Appendix A.
± This example is for illustrative purposes only and is not a forecast or prediction of the performance of the Company
or the likely NAV on 30 June 2012.
The Company will notify Shareholders at the
intervals set out below, of the value of the New
Westpac Guarantee in respect of each Share held
by Shareholders on the New Maturity Date. The
value of the New Westpac Guarantee advised to
Shareholders by the Company will be calculated and
confirmed by Westpac having regard to the terms of
the New Westpac Guarantee and increases in (by way
of additions to) the Security Deposit. The Company
will send this advice by way of a notice (the ‘rising
guarantee notice’) or in such other form agreed to
by Westpac and the Company, within approximately
90 days of 30 June each year (from 30 June 2013
to 30 June 2021) to the addresses of Shareholders
shown in the Company’s share register when there
has been an addition to the Security Deposit.
The Company has agreed to pay this amount
into the Security Deposit. Westpac is under no
obligation to ensure that the Company makes these
additional deposits.
Conditions affecting the New Westpac
Guarantee
The New Westpac Guarantee is a contractual
obligation of Westpac under deed poll for the benefit
of Shareholders on the New Maturity Date.
However, where a redemption payment which would
otherwise be covered by the New Westpac Guarantee
is made by the Company to a Shareholder, the New
Westpac Guarantee is released to the extent of that
payment. The New Westpac Guarantee will no longer
apply even if the payment is subsequently set aside
or there is a requirement to repay the amount to
the Company.
The New Westpac Guarantee cannot be amended
in a way which would diminish or negate Westpac’s
potential liability under the New Westpac Guarantee
to any Shareholder without the written consent of
that Shareholder.
Indemnity for the New Westpac Guarantee
The Company has given the Indemnity to Westpac
and has given security over the Security Deposit to
Westpac in relation to its obligations under, amongst
other things, the Indemnity.
If Westpac actually pays or is liable to pay any amount
under the New Westpac Guarantee or the Current
Westpac Guarantee, Westpac will be entitled to be
reimbursed for that amount from the Security Deposit
to the extent that the Company does not meet its
obligations to pay Westpac the required amounts in
accordance with the terms of the Indemnity.
The New Westpac Guarantee can be affected by tax or
changes of law during the life of the investment. If there
is any reduction in the value of the Security Deposit
or certain bank accounts held by the Company as a
result of any tax, or the imposition or proper payment
of any taxes or any change of law (which includes any
appropriation, confiscation, order or directive of any
governmental agency or any judgment issued by a
court or tribunal) the amount payable under the New
Westpac Guarantee may be reduced.
As at the date of this explanatory memorandum, the
Company is not aware of any taxes or change of law
which would result in any reduction of the amount
payable under the New Westpac Guarantee.
The New Westpac Guarantee and the amount
payable by Westpac under the terms of the New
Westpac Guarantee will not be affected in the event
of insolvency or liquidation of the Company or the
Trading Subsidiary.
explanatory memorandum
21
How the Company invests
The Company will continue to harness the performance of the
AHL Diversified Program and the Man Investments Portfolio.
The Security Deposit
The Man Investments Portfolio
The amount invested in the Security Deposit will be
held by Westpac to secure the Capital Guarantee.
The Company, on the advice of the Investment
Manager, will invest approximately A$0.20 of its
assets, via the Trading Subsidiary, using the Man
Investments Portfolio. This gives the Company
an investment exposure to the Man Investments
Portfolio equal to 60% of the NAV. This investment
exposure is possible because the Company uses
an additional A$0.40 of funding obtained through
Financing Arrangements, which provide leverage
and thereby increase the investment exposure to the
Man Investments Portfolio. For further details on the
Financing Arrangements, see below.
It is estimated that this amount will be approximately
A$0.62 for every A$1.00 invested in the Company.
However, the amount invested will depend on the
prevailing interest rates.
The Trading Subsidiary may also pay to the Company
a portion of the net new trading profits generated in
a financial year (after making good any prior years’
losses). This will be added to the Security Deposit to
secure the New Rising Guarantee. For further details
on the New Rising Guarantee see pages 20 and 21.
AHL Diversified Program
The Company, on the advice of the Investment
Manager, will invest approximately A$0.17 of its
assets, via the Trading Subsidiary, using the AHL
Diversified Program. This gives the Company an
investment exposure to the AHL Diversified Program
equal to 100% of the NAV. This investment exposure
is possible due to the leverage available from
trading in international futures, options, derivatives
and currency markets, which require deposits of
only a portion of the underlying contract value and
accordingly provide leverage to the investment.
Access to the AHL Diversified Program is provided in
such manner as the Investment Manager approves,
and currently includes the purchase of shares in AHL
Institutional Series 1 Limited, incorporated in Bermuda
with limited liability and designed to provide access
to the AHL Diversified Program (the “Underlying
Vehicle”). The Underlying Vehicle has three directors,
two of which are independent of the Man Group.
The Company, via the Trading Subsidiary, holds
non-voting shares in the Underlying Vehicle. The
Underlying Vehicle is not part of the Man Group. The
valuation of the Underlying Vehicle is conducted by an
independent third party, currently Citco Fund Services
(Cayman Islands) Limited.
The AHL Diversified Program has no assets, liabilities,
profits or losses itself, as it is an investment program.
To access the individual fund managers in the Man
Investments Portfolio, the Trading Subsidiary currently
holds shares in Man Strategies Holdings SPC, an
exempted company incorporated in the Cayman
Islands with limited liability designed to provide access
to the Man Investments Portfolio. This vehicle has
three directors, two of which are independent of the
Man Group. The Company holds non-voting shares
in this vehicle. This vehicle is not part of the Man
Group. The valuation of the Company’s investments
in this vehicle is conducted by an independent third
party, currently Citco Fund Services (Cayman Islands)
Limited. The administrator and custodian of this
vehicle is HSBC Institutional Trust Services (Ireland)
Limited. Allocations from Man Strategies Holdings
SPC to the individual fund managers within the Man
Investments Portfolio will take place in such manner
as the Investment Manager determines. All allocations
are made in US dollars.
Financing Arrangements
As described above, Financing Arrangements are
used to provide leverage and thereby increase the
investment exposure to the Man Investments Portfolio.
Financing Arrangements will be provided in whole or in
part by independent third parties, and/or one or more
entities in the Man Group.
Financing Arrangements may consist of a credit
facility, the use of leveraged notes, other derivative
instruments, investments in leveraged vehicles or
other funding arrangements.
Man Series 8 OM-IP 220
Each Financing Arrangement would typically include
an interest rate of USD LIBOR plus a spread (such a
spread is likely to be subject to change, dependant on
prevailing market conditions, and is currently expected
to be between 2% and 4%).
22
It is intended that the Financing Arrangements will
be adjusted monthly to reflect any changes in the
allocation of investment capital between the AHL
Diversified Program and the Man Investments Portfolio
and payments to the Security Deposit to provide for
the New Rising Guarantee.
The total financial indebtedness incurred under the
Financing Arrangements will be dependent on the
Investment Manager’s allocation of investment capital
between the AHL Diversified Program and the Man
Investments Portfolio as it maintains a balanced
investment portfolio and as the Company makes
payments to the Security Deposit to provide for the
New Rising Guarantee.
The Investment Manager has been appointed by the
Company pursuant to an investment management
agreement to perform the above functions. The
directors of the Company retain responsibility for
supervising the performance of the Investment
Manager’s obligations under the investment
management agreement.
Key dependencies
The Company has key dependencies on the
Investment Manager, AHL (including the trading,
risk control and research elements described on
pages 8 and 9) and the providers of the Financing
Arrangements (which may be independent third
parties and/or one or more entities in the Man Group).
Managing the Company’s investments
The Investment Manager will continually monitor the
proportion of funds invested by the Company using
the AHL Diversified Program and the Man Investments
Portfolio with a view to maintaining target investment
exposures of 100% of the NAV to the AHL Diversified
Program and 60% of the NAV to the Man Investments
Portfolio. As part of this process, the Investment
Manager may change the allocation between the AHL
Diversified Program and the Man Investments Portfolio
based on the available trading capital. The investment
allocations are based upon current recommendations
by the Investment Manager. As part of the Investment
Manager’s ongoing review process, investment
allocations will be continually reviewed and allocations
are subject to change.
On the recommendation of the Investment Manager,
the Company may, directly or indirectly, also invest in
other investments which provide a similar and more
cost effective means of accessing the AHL Diversified
Program and/or the Man Investments Portfolio.
The Company has entered into an arrangement
under which additional short term funds can be made
available to the Company if required. The Company
does not expect this arrangement to be regularly
utilised. However, if this arrangement is utilised, it will
be used by the Company for short term operational
purposes and will not be used by the Company for
gearing purposes.
explanatory memorandum
23
Fees
This table sets out the fees and costs of the Company
and the Trading Subsidiary. These fees and costs will,
as accrued, reduce the NAV of the Shares. Further
details are set out in the notes following this table and
under the heading ‘Conflicts of interest’ on page 29.
You should read all of the information about the fees
and costs, as it is important to understand their impact
before deciding whether to continue an investment in
the Shares.
Type of fee or cost
The fees and costs payable by the Company and/or
the Trading Subsidiary may be subject to renegotiation
over the life of the Company. The Directors may
allocate all or any of these fees and costs to either
the Company or the Trading Subsidiary and effect
payment accordingly.
Amount
When
Registrar: payable by the Company to the
Registrar for agreeing to provide registry and other
services under the Registrar, Transfer Agency and
Administration Agreement2.
US$14,000.
After 30 June 2012.
Costs of renaming (including the costs of preparing
this explanatory memorandum, the election notice
pack sent to existing investors and a prospectus
for a new issue of Shares and certain contracts to
which the Company is a party) which will be borne
by the Company and amortised over 12 months.
A$250,000.
After 30 June 2012.
Up to 0.5% p.a. of the investment exposure (which
will target 160% of the aggregate net asset value of
the Shares) before deducting consultancy, brokerage
and performance fees, if any.
Calculated and payable
monthly in arrears.
Management fee: directly or indirectly payable by the
Trading Subsidiary to Man Investments AG and/or
Man Investments.
Up to 2% p.a. of the investment exposure to the
AHL Diversified Program (which will target 100% of
the aggregate net asset value of the Shares) before
deducting brokerage, performance and an allocation
of consultancy fees.
Calculated and payable
monthly in arrears.
Performance fee: directly or indirectly payable by the
Trading Subsidiary to Man Investments AG and/or
Man Investments4.
20% of any net appreciation and increase in value
attributable to the AHL Diversified Program after
deduction of the management and brokerage fees
and an allocation of consultancy fees.
Calculated and payable
monthly in arrears.
Management fee: directly or indirectly payable by the
Trading Subsidiary to Man Investments AG and/or
the Investment Manager.
Up to 1.5% p.a. of the investment exposure to the
Man Investments Portfolio (which will target 60% of
the aggregate net asset value of the Shares).
Calculated and payable
monthly in arrears.
Performance fee: directly or indirectly payable by the
Trading Subsidiary to Man Investments AG and/or
the Investment Manager4.
10% of any net appreciation per Share attributable to
the Man Investments Portfolio.
Calculated and payable
monthly in arrears.
0.25% p.a. calculated daily on the guarantee liability.
Calculated daily and
payable half yearly in
arrears.
Up to 3.1% p.a. of the investment exposure to the
AHL Diversified Program (plus the cost, at institutional
rates, for execution of any futures contract traded and
hedging transactions) before deducting management,
performance and an allocation of consultancy fees.
Calculated and payable
monthly in arrears.
Fees and costs
1
Consultancy, management and performance fees3
Consultancy fee: directly or indirectly payable by
the Trading Subsidiary to Man Investments AG
for trading advice and risk management services
provided by the Investment Manager and Man
Investments AG.
AHL Diversified Program: for managing the Trading
Subsidiary’s investment.
Man Investments Portfolio: for managing the Trading
Subsidiary’s Investment.
New Westpac Guarantee fee
New Westpac Guarantee fee: an ongoing fee
payable by the Company to Westpac for providing
the New Westpac Guarantee.
Man Series 8 OM-IP 220
Additional fees and costs
24
Brokerage costs: directly or indirectly payable by
the Trading Subsidiary to Man Investments AG
for trading conducted using the AHL Diversified
Program.
Type of fee or cost
Amount
When
Financing Arrangement fee: directly or indirectly
payable by the Trading Subsidiary.
Any amount outstanding under the Financing
Arrangements is likely to bear interest at the rate of
LIBOR plus a spread (such a spread is likely to be
subject to change dependant on prevailing market
conditions, and is currently expected to be between
2% and 4%), calculated on the principal amount
outstanding under the Financing Arrangements.
Further fees relating to the Financing Arrangements
such as arrangement, commitment, minimum
utilisation, LIBOR adjustment and renewal fees may
also apply.
Subject to the terms
of the Financing
Arrangement.
Valuation fee: payable by the Company to Man
Valuation Services Limited for valuation services in
respect of the Shares.
0.15% p.a. of the NAV, together with any
disbursements incurred by Man Valuation Services
Limited, subject to a minimum fee of US$25,000 p.a.
Calculated and payable
monthly in arrears.
Registrar fee: an ongoing fee payable by the
Company to the Registrar for providing registry,
accounting and administration services2.
US$45,000 p.a.
Paid quarterly in
arrears.
Service provider fee: an ongoing fee payable by
the Company to Westpac for the services provided
under the services agreement.
A$25,000 p.a.
Paid annually in
arrears.
Directors’ fees: payable by the Company to Mr
Michael Collins, Mr Ronan Daly and Mr John Walley5.
US$5,000 p.a. for each Director, subject to
annual review.
Paid annually.
Dealing facility fee: directly or indirectly payable by
the Trading Subsidiary to Man Investments AG
and/or Man Investments for arranging the facility.
0.05% p.a. of the target investment exposure of the
Trading Subsidiary to the AHL Diversified Program and
the Man Investments Portfolio.
Calculated and payable
monthly in arrears.
Incidental costs: incurred by the Company in the
ordinary course of its business and may include
audit expenses and printing and mailing costs.
As incurred.
When incurred.
Service provider redemption fee: payable by the
Company to Westpac.
A$250 per Dealing Day on which a redemption is
transacted.
Upon redemption of
Shares.
Additional fees and costs (continued)
Fee if a Shareholder sells or redeems Shares (this fee is not reflected in the net asset value of the Shares)
Early sale or redemption fee: payable by the
Company to Man Investments Australia.
1 These fees and costs will be capitalised
and amortised uniformly over 12 months
when determining the net asset value of
the Shares.
2 The Registrar is also indemnified by
the Company for any costs, losses and
liabilities incurred by it in the proper
performance of its duties.
3 In implementing the AHL Diversified
Program and/or the Man Investments
Portfolio investments may be made into
other funds. The Trading Subsidiary will
participate indirectly in proportion to
such investments in all fees and costs
of those funds and will also indirectly
bear a proportion of the operating costs
of those funds.
2% of the NAV per Share for Shares sold or
redeemed up to 30 June 2013; 1% of the NAV per
Share for Shares sold or redeemed thereafter up to
30 June 2014. Nil thereafter.
4 Performance fees are only payable if the
net appreciation and increase in value
attributable to the relevant investment
strategy exceeds a previously attained
value for such investment strategy.
5 The Company may pay a proportion of a
daily fee for Directors required to travel
to attend meetings of the Company
and may reimburse the Directors for
expenses properly incurred in attending
general meetings of the Company,
Directors meetings and in connection
with the business of the Company or
their duties as Directors. The Directors
are indemnified against any loss or
liability sustained or incurred in the
proper execution of their office.
Upon sale or
redemption of Shares.
Note Man Investments AG will pay Man
Investments Australia an annual fee for
providing various services, and in turn,
subject to applicable law, Man Investments
Australia may pay an initial and/or annual
fee to financial advisors for procuring
applications for Shares. These fees are not
additional fees payable by the Company or
the Trading Subsidiary. Man Investments
Australia may also retain some of these
fees for its own account.
explanatory memorandum
25
The Shares
The Company has issued redeemable shares that are
due to mature on 30 June 2012.
The Directors have determined that a dividend will not
be paid prior to or on the Maturity Date. Redemptions
on the Maturity Date will be at the full Net Asset Value
per Share on that date.
Article 9A of the Company’s Articles permits the
Directors to resolve to enable each Shareholder to
elect to have their shares renamed as Continuing
Redeemable Shares. The Directors have passed
this resolution.
Continuing Redeemable Shares carry the same rights
as the existing Shares except that they will not mature
and be redeemed on 30 June 2012. The New Maturity
Date for the Continuing Redeemable Shares will be
30 June 2022. Electing to have your Shares renamed
as Continuing Redeemable Shares is, therefore,
electing to continue your investment in the Company.
The minimum number of Shares which may be
continued is 2,000 Shares.
If the number of elections for Continuing Redeemable
Shares are, in the opinion of the Directors, insufficient
for the Company to continue trading with the aim to
generate medium to long term capital growth, the
Directors may resolve to compulsorily redeem all
Shares as at the Maturity Date in accordance with
the Articles.
Sale or redemption of Shares before the
New Maturity Date
Continuing Redeemable Shares may be sold to Man
Investments Australia or its nominee, or redeemed by
the Company, each month at 98% of the NAV prior to
30 June 2013, 99% of the NAV between 1 July 2013
and 30 June 2014, or at 100% of the NAV thereafter,
calculated on the Valuation Day immediately preceding
the relevant Dealing Day. Shareholders should advise
Man Investments Australia in writing two weeks
before a Dealing Day of their desire to sell
or redeem Shares, stating the number of Shares
to be sold or redeemed.
The last Dealing Day prior to the New Maturity
Date for Shareholders to sell their Shares to Man
Investments Australia is currently 1 May 2022.
The last Dealing Day for Shareholders to redeem their
Shares to the Company is currently 1 June 2022.
Man Series 8 OM-IP 220
No sale or redemption of Shares may be made until
all completed forms have been received by Man
Investments Australia or the Company.
26
These include:
(i) an original written request, facsimile or email scan
of the instruction for the sale or redemption of
Shares including Shareholder bank account details;
(ii) a completed original, facsimile or email scan of
the standard transfer form duly signed by the
Shareholder; and
(iii) identification documentation certified in original ink
(if required).
If Man Investments Australia or the Company does
not receive all completed documentation for the sale
or redemption of Shares, the sale or redemption will
not proceed and the Shareholder’s request will be
held over to the next Dealing Day.
In addition, if Man Investments Australia or the
Company has not received the completed
documentation within a stipulated period after the
next Dealing Day, the Shareholder’s sale or
redemption request will be cancelled.
The Shareholder will generally be sent the sale or
redemption proceeds in Australian dollars on or
about 20 Business Days from the relevant Dealing
Day. The sale or redemption proceeds will be paid
to the Shareholder in the name of the Shareholder.
The Shareholder will be paid either by cheque
(posted at the risk of the Shareholder to the address
of the Shareholder as shown on the Company’s
share register) or by electronic transfer to an account
in the name of the Shareholder.
Man Investments Australia or the Company will only
pay the sale or redemption proceeds in the name
of the Shareholder registered on the Company’s
share register.
Redemption of Shares on the New Maturity
Date
The Continuing Redeemable Shares will be redeemed
by the Company on 30 June 2022 (if not redeemed
earlier) subject to the laws of the Cook Islands and the
Articles. Redemptions on the New Maturity Date will
be at the full Net Asset Value per Share at that time.
The Company will only pay the redemption proceeds
to the Shareholder as registered on the Company’s
share register.
Compulsory redemption of Shares
Joint shareholders
The Company may, subject to Cook Islands’ law,
(though it is not under any obligation to do so) at
any time before the New Maturity Date, redeem any
Shares at 100% of the then applicable NAV if in the
opinion of the Directors such Shares were acquired or
are held by US Persons or any person in breach of the
laws or requirements of any country or governmental
authority or in the case of a corporation, in breach
of its constituent documents, or such compulsory
redemption would eliminate or reduce the exposure
of the Company or its Shareholders to adverse tax
consequences or any other pecuniary or commercial
disadvantage under the laws of any country or if the
Shareholder is registered as the holder of fewer than
2,000 Shares.
Joint shareholders will hold the Shares as joint
tenants. In the case of death of any one of joint
Shareholders, the surviving joint Shareholders will
have full ownership of the Shares.
In addition, the Company reserves the right to
compulsorily redeem the Shares of a Shareholder
who fails to provide the required information and
documentation to verify their identity to Man
Investments Australia within a stipulated time period.
In those circumstances, the Company will not pay
the proceeds of the compulsory redemption of the
Shares to the Shareholder until it has received the
required information and documentation to verify the
Shareholder’s identity.
Transfer of Shares
Subject to the restrictions mentioned below, Shares
are transferable using a standard transfer form, signed
by (or in the case of a transfer by a body corporate,
signed on behalf of or sealed by) the transferor
and the transferee and registered in the Company’s
share register.
The Directors may decline to register any transfer
which, in their opinion, may result in Shares being held
by US Persons or any person in breach of the laws or
requirements of any country or governmental authority
or in the case of a corporation, in breach of its
constituent documents, or may subject the Company
or its Shareholders to adverse tax consequences
or any other pecuniary or commercial disadvantage
under the laws of any country or would result in either
of the transferor or the transferee being registered as
the holder of fewer than 2,000 Shares.
Shares which are transferred by arrangement between
the transferor and the transferee will be subject to the
terms and conditions agreed by each party and the
Company will charge no fees on such transfers.
Shares will continue to be valued each month by
dividing the net asset value of the Company by the
total number of Shares on issue, in accordance with
the procedure described in the Articles. The net asset
value of the Company is calculated as the value of the
underlying assets of the Company attributable to the
Shares, after deducting the liabilities of the Company
and the estimated costs, duties and charges of
realising all of the investments of the Company.
The NAV is included in the financial statements
(which are audited annually) and is published
monthly on Man Investments Australia’s website
www.maninvestments.com.au.
The NAV is determined as at the Valuation Day in
relation to the Dealing Day. Any determination of
NAV made pursuant to the Articles is binding on
all Shareholders.
Anti-Money Laundering and Counter-Terrorism
Financing Laws
Shareholders in the Company are subject to the
anti-money laundering requirements of Man
Investments Australia.
Man Investments Australia and the Company
reserve the right to carry out procedures and seek
documentation to verify the identity of a Shareholder in
respect of any Share transaction. The Company also
reserves the right to decline to register a transfer of
Shares or to compulsorily redeem the Shares failing
satisfactory verification.
You should be aware that:
(a) transactions may be delayed or refused where
Man Investments Australia or the Company has
reasonable grounds to believe that the transaction
breaches applicable law or regulation; and
(b) where transactions are delayed or refused, neither
Man Investments Australia nor the Company and
their related parties are liable for any loss you
suffer (including consequential loss) however
so caused.
explanatory memorandum
Man Investments Australia and the Company reserve
the right to collect information and documentation to
verify the identity of the transferor and transferee.
Valuation of Shares
27
Exchange control
As at the date of this explanatory memorandum,
there are no exchange control approvals required
in Australia or the Cook Islands in respect of the
payments and other transactions contemplated by
this explanatory memorandum.
Cook Islands Law
Apart from the two changes set out below, the laws
of the Cook Islands relating to the Company and its
activities remain largely unchanged. However, as a
result of amended anti-money laundering legislation,
under Cook Islands law an investigation into a
suspected suspicious transaction may give rise to
restrictions on the movement of moneys relating to
that transaction.
As a result of a change under Cook Islands law
the Company is no longer required to issue share
certificates in respect of Shares. Accordingly from
3 June 2008 the Company has issued a contract
note or confirmation letter in respect of share transfers
and redemptions. A contract note or confirmation
letter will also be issued in respect of any Shares
renamed as Continuing Redeemable Shares.
Facsimile and email indemnity
You may give instructions, including redemption
requests and standard transfer forms, by facsimile
or email to Man Investments Australia. If you give
facsimile or email instructions you release the
Company, the Registrar and Man Investments
Australia from, and indemnify the Company, the
Registrar and Man Investments Australia against,
any loss, liability, cost or expense arising from any
payment made or action (or inaction) taken based
on a facsimile or email instruction that is given, or
appears to be given, by you.
You, and any person claiming through you or on your
behalf, will have no claim against the Company, the
Registrar or Man Investments Australia in relation to
payments made or actions taken based on facsimile
or email instructions.
Relevant contracts and documentation
Man Series 8 OM-IP 220
A number of the Company’s and the Trading
Subsidiary’s contracts will terminate following
the renaming of Shares and the payment of
redemption proceeds following the Maturity Date.
As a consequence, the Company and the Trading
Subsidiary have negotiated and entered into, or will
negotiate and enter into, new contracts:
28
• documenting the respective roles of the Company,
Westpac, the Registrar and Man Investments
Australia in relation to the maturity of Shares on
30 June 2012, the renaming and services going
forward; and
• replacing the contracts which have terminated or
will terminate.
Copies of these contracts and of the Articles may be
inspected (by prior appointment) free of charge during
business hours at the offices of Man Investments
Australia once they have been entered into.
New Zealand Shareholders: Warning
Statement
(i) This offer to New Zealand investors is a regulated
offer made under Australian and New Zealand law.
In Australia, this is Chapter 8 of the Corporations
Act 2001 and Regulations. In New Zealand,
this is Part 5 of the Securities Act 1978 and
the Securities (Mutual Recognition of Securities
Offerings—Australia) Regulations 2008.
(ii) This offer and the content of the offer document
are principally governed by Australian rather than
New Zealand law. In the main, the Corporations
Act 2001 and Regulations (Australia) set out how
the offer must be made.
(iii) There are differences in how securities are
regulated under Australian law. For example,
the disclosure of fees for collective investment
schemes is different under the Australian regime.
(iv) The rights, remedies, and compensation
arrangements available to New Zealand investors
in Australian securities may differ from the rights,
remedies, and compensation arrangements for
New Zealand securities.
(v) Both the Australian and New Zealand securities
regulators have enforcement responsibilities
in relation to this offer. If you need to make a
complaint about this offer, please contact the
Financial Markets Authority, Wellington, New
Zealand. The Australian and New Zealand
regulators will work together to settle your
complaint.
(vi) The taxation treatment of Australian securities is
not the same as for New Zealand securities.
(vii) If you are uncertain about whether this investment
is appropriate for you, you should seek the advice
of an appropriately qualified financial adviser.
(viii) The offer may involve a currency exchange risk.
The currency for the securities is not New Zealand
dollars. The value of the securities will go up or
down according to changes in the exchange rate
between that currency and New Zealand dollars.
These changes may be significant.
(ix) If you expect the securities to pay any amounts
in a currency that is not New Zealand dollars,
you may incur significant fees in having the funds
credited to a bank account in New Zealand in New
Zealand dollars.
Within five working days of receiving a request from
an offeree for a copy of the constitution of the issuer,
the Company will send the offeree a copy of the
constitution of the issuer free of charge.
services or other services in relation to a number of
funds or managed accounts which may have similar
investment strategies to that of the Trading Subsidiary
or funds in which, or managed accounts through
which, the Trading Subsidiary invests.
Conflicts of interest and relationship with the
Man Group
The Investment Manager, Introducing Broker
and International Broker will have regard to their
obligations under their agreements with the Company
and the Trading Subsidiary to act in the best interests
of the Company and the Trading Subsidiary, also
having regard to their obligations to other clients, if a
potential conflict of interest arises. If a conflict does
arise, the Investment Manager will endeavour to
ensure that such conflict is resolved fairly.
Although the Company is not a Member of the
Man Group, various Man Group companies are
entitled to receive various fees and commissions for
services provided to the Company and/or the Trading
Subsidiary pursuant to agreements which are on arm’s
length terms. These Man Group companies include
Man Investments (CH) AG – Guernsey Branch, Man
Valuation Services Limited, Man Investments AG and
Man Investments Australia.
Man Investments Australia holds a number of roles
in relation to this investment including acting as local
agent of the Company in Australia and the provider of
certain services to the Company.
The total fees paid by the Company to these Man
Group entities for the years ending 30 June 2011,
30 June 2010 and 30 June 2009 were approximately
A$15,885,317, A$14,592,372 and A$19,020,004
respectively.
The Directors are also directors of other companies
including the Trading Subsidiary and other companies
sponsored by Man Investments Australia. Michael
Collins and John Walley are also directors of Master
Multi-Product Holdings Limited. Where a conflict does
arise the Directors will act in accordance with their
duties to the Company and/or the Trading Subsidiary.
The Trading Subsidiary may buy investments from or
sell investments to the Investment Manager or its
associates according to normal market practices and
applicable law.
Other members of the Man Group and their
associates may deal with the Company or Trading
Subsidiary as principal or as agent, provided that any
such dealings are in the best interests of the Company
or the Trading Subsidiary respectively and are carried
out on an arm’s length basis. See pages 24 and 25
for further details in relation to the fees payable by the
Company to these Man Group companies.
The Man Group also has a financial interest in the
fees paid by the Trading Subsidiary, directly or
indirectly, for its exposure to the AHL Diversified
Program and the Man Investments Portfolio. The Man
Group may also have a financial interest in brokerage
incurred using the AHL Diversified Program and the
Man Investments Portfolio.
The Investment Manager may revise the target
investment exposure of 160% of the Net Asset Value
per Share taking into account market conditions.
A change in the investment exposure will affect those
fees which are charged on the basis of a percentage
of the investment exposure to the AHL Diversified
Program and the Man Investments Portfolio.
explanatory memorandum
In addition, members of the Man Group and their
associates over the life of the investment are involved
in other financial, investment or professional activities
which may on occasion give rise to conflicts of interest
with the Company and the Trading Subsidiary. In
particular, the Investment Manager may over the life
of the investment provide advice, risk management
29
Terms and conditions for
Shareholders
If you elect to rename your Shares as Continuing
Redeemable Shares:
1 you agree to release Westpac from its obligation
under the Current Westpac Guarantee, subject to
the following conditions:
(a) those Shares being renamed as Continuing
Redeemable Shares on 29 June 2012; and
(b) the Company paying, before 31 July 2012, to
or at the direction of each Shareholder whose
Shares mature on the Maturity Date or on
trust for such Shareholder as and by way of
redemption of their maturing Shares, an amount
at least equal to the guaranteed amount under
the Current Westpac Guarantee multiplied by
the number of maturing Shares held by that
Shareholder, such that Westpac will not be
required to make any payments to or in respect
of any maturing Shareholders pursuant to the
Current Westpac Guarantee;
2 you agree and acknowledge that, provided the
conditions referred to in paragraphs 1(a) and 1(b)
above have been satisfied, the release will be
effective no later than the end of 31 July 2012
(Sydney time) with the intent that Westpac will
not be obliged to make any payment to that
Shareholder under the Current Westpac Guarantee;
3 you agree and acknowledge that:
(a) the Continuing Redeemable Shares have a
maturity date of 30 June 2022;
(b) the Continuing Redeemable Shares do not
represent deposits or other liabilities of Westpac;
(c) neither Westpac, any member of the Man Group
nor the Directors of the Company guarantees
or in any way stands behind the capital value or
the performance of the Continuing Redeemable
Shares or investments made by the Company
(except, in the case of Westpac, to the extent
provided in the New Westpac Guarantee†);
4 you direct that your election to have Shares
renamed is effective on 29 June 2012 and that,
insofar as the Election Notice is a notice for the
purposes of Article 9A, Man Investments Australia
holds that notice on your behalf until that date; and
5 you understand that the elections and requests
made in the Election Notice are irrevocable.
Privacy
By signing the Election Notice, you acknowledge and
agree that your personal information may be handled
by the Company, Man Investments Australia and their
service providers in the manner set out below.
The Company collects your personal information to
process and administer your election and shareholding
in the Company and to provide you with information
about your investment in the Company. Some of this
information is required by anti-money laundering laws
and/or by Cook Islands law and may be required to be
kept on a register in accordance with the Corporations
Act 2001.
The Company may disclose your personal information
for purposes related to your investment to the
Company’s agents and service providers including
Man Investments Australia, Westpac and the Registrar.
In order to use and disclose your personal information
for the purposes stated above, Man Investments
Australia or the Company may be required to transfer
your personal information to entities located outside
Australia where it may not receive the level of protection
afforded under Australian law. By signing the Election
Notice, you consent to your personal information being
transferred overseas for these purposes.
You are able to access the information about you
held by the Company and Man Investments Australia,
subject to certain exemptions allowed by law, by
contacting Man Investments Australia whose contact
details are provided on page 41.
Man Series 8 OM-IP 220
(d) the Continuing Redeemable Shares are subject
to investment risk including possible delays
in payment and, except as provided in the
New Westpac Guarantee, loss of income and
principal invested; and
30
(e) Shareholders on 30 June 2022 will have the
benefit of the New Westpac Guarantee (subject
to its terms, and in particular provided that
no amount has been paid to Shareholders
under the Current Westpac Guarantee) that the
Company has arranged to be provided for the
benefit of Shareholders on that date;
† Subject to the terms of the New Westpac Guarantee as described on pages 20-21 and set out in Appendix A.
Taxation
AUSTRALIAN TAXATION OPINION
The following independent report has been prepared by Greenwoods & Freehills Pty Limited for the Company
and outlines the taxation consequences for Australian resident Shareholders. Man Investments Australia is not
licensed to provide personal or taxation advice.
27 March 2012
The Directors
Man Series 8 OM-IP 220 Limited
Bermuda House
Tutakimoa Road
Rarotonga
COOK ISLANDS
Dear Sirs
Man Series 8 OM-IP 220 Limited
This report has been prepared for inclusion in an explanatory memorandum concerning the renaming of
redeemable shares (the ‘Shares’) in Man Series 8 OM-IP 220 Limited (the ‘Company’) dated 27 March 2012.
The report outlines the Australian income tax consequences arising from the ability of Australian resident
Shareholders to elect for their Shares to be renamed as continuing redeemable shares (‘Continuing Redeemable
Shares’). The report is general in nature, and only applies to those Shareholders for whom the Shares and
Continuing Redeemable Shares are held as capital assets, and is not applicable in circumstances where these
interests are held as trading stock or revenue assets.
The report is based upon the provisions of the Income Tax Assessment Act 1936 and the Income Tax
Assessment Act 1997 (collectively, ‘the Act’) and Australian Taxation Office (‘ATO’) rulings and determinations
applicable as at the date of this report. Terms defined in the explanatory memorandum and not defined in this
report have the meaning given to them in the explanatory memorandum.
The representatives of Greenwoods & Freehills Pty Limited involved in preparing this report are not licensed to
provide financial product advice in relation to dealing in securities. Shareholders should consider seeking advice
from a suitably qualified Australian Financial Services License holder before making any decision. Shareholders
should also note that taxation is only one of the matters that need to be considered when making a decision in
respect of the renaming of Shares as Continuing Redeemable Shares and should satisfy themselves of possible
consequences by consulting their own professional tax advisors.
Telephone 61 2 9225 5955 Facsimile 61 2 9221 6516
www.gf.com.au DX 482 Sydney
Liability limited by a scheme, approved under the Professional Standards Legislation
Greenwoods & Freehills Pty Limited ABN 60 003 146 852
explanatory memorandum
MLC Centre Martin Place Sydney NSW 2000 Australia
GPO Box 492 Sydney NSW 1044 Australia
31
1
Background
We have based our report on the following facts:
a) The Company was incorporated in the Cook Islands on 2 July 2002.
b) Shareholders were invited to subscribe for Shares, which are due to be redeemed by the Company on
30 June 2012. As an alternative to a redemption of these interests, Shareholders may elect to have
their Shares renamed as Continuing Redeemable Shares.
c) The terms of the Continuing Redeemable Shares are identical to those of the Shares, with the
exception that the maturity date of these interests will be 30 June 2022 (‘New Maturity Date’), and
the renaming does not result in the Shares currently held by Shareholders being either redeemed or
cancelled. Shareholders choosing to rename their Shares as Continuing Redeemable Shares will be
able to dispose of these shares prior to the New Maturity Date for an amount equal to 98% of the
Net Asset Value on or before 30 June 2013, 99% of the Net Asset Value between 1 July 2013 and
30 June 2014, and for 100% of the Net Asset Value thereafter.
d) Westpac will give the New Westpac Guarantee in favour of holders of Continuing Redeemable
Shares, which will consist of the New Capital Guarantee and the New Rising Guarantee. For further
information in relation to the New Westpac Guarantee, please refer to pages 20-21 of the
explanatory memorandum.
e) The Company will, in relation to the redemption of the Shares or Continuing Redeemable Shares,
give a notice to Shareholders specifying the amount paid up (just prior to redemption) on the
Share / Continuing Redeemable Share (as applicable).
2
Shareholders electing not to rename
The consequences of each of the scenarios below are dependent on the circumstances of the Shareholder.
Each scenario is based on the assumption that a Shareholder holds Shares as capital assets such that
gains or losses on the sale of the Shares are subject to the capital gains tax (‘CGT’) provisions of the Act
and initially subscribed at A$1.00 per Share.
2.1 Sale of Shares prior to the Maturity Date
Where a Shareholder sells Shares prior to the Maturity Date a capital gain will arise when the proceeds
received for the sale of Shares exceeds the cost base of the Shares. The cost base of the Shares is equal
to the amount paid for the acquisition of the Shares plus certain other incidental costs of acquisition or sale
that are not deductible to the Shareholder.
Where the Shares have been held for at least 12 months, individuals, trusts and complying superannuation
entities should be entitled to discount any capital gain (after the application of capital losses) arising from
the sale of the Shares. Individuals are entitled to a CGT discount of 50%, and complying superannuation
entities are entitled to a CGT discount of 33.33%. Companies are not entitled to a CGT discount.
A capital loss will arise if the proceeds received for the sale of Shares are less than the reduced cost base
of the Shares. Capital losses can only be offset against capital gains (before any available CGT discount)
derived by a Shareholder in the same income year or subsequent income years.
2.2 Redemption of Shares prior to the Maturity Date
Man Series 8 OM-IP 220
Where a Shareholder redeems Shares prior to the Maturity Date, any amount received per Share exceeding
A$1.00 should be an unfranked dividend. Subject to the operation of the former foreign investment fund
(‘FIF’) rules (see 5 below), this unfranked dividend should be included in the assessable income of the
Shareholder. No capital gain or capital loss should arise in these circumstances. If the redemption proceeds
are less than the reduced cost base of the Shares, the shortfall should be a capital loss to the Shareholder.
32
2.3 Redemption of Shares on the Maturity Date
There are a number of scenarios which may arise upon redemption of the Shares:
(1) Net Asset Value per Share equal to A$1.00
If the Shares are redeemed on the Maturity Date for A$1.00 each, a Shareholder should not be
assessable on any part of the proceeds received.
If the Shares are redeemed for A$1.00 each and the Shareholder receives a payment under the Current
Westpac Guarantee, a capital gain would arise equal to the payment received. Individuals, trusts
and complying superannuation entities should be entitled to reduce the amount of the capital gain
remaining after the application of relevant capital losses by the applicable CGT discount percentage
(ie. 50% for individuals and trusts and 33.33% for complying superannuation entities).
(2) Net Asset Value per Share less than A$1.00
If the redemption proceeds paid by the Company are less than A$1.00 per Share, a capital loss
should arise.
A capital gain should arise for a shareholder equal to any payment received from Westpac under the
Current Westpac Guarantee.
The capital loss on the Shares should be able to offset, in part, the capital gain arising from
any payment received under the Current Westpac Guarantee. Individuals, trusts and complying
superannuation entities should be entitled to reduce the amount of the capital gain remaining after the
application of relevant capital losses by the applicable CGT discount percentage (ie. 50% for individuals
and trusts and 33.33% for complying superannuation entities).
(3) Net Asset Value per Share greater than A$1.00
To the extent the redemption proceeds paid by the Company exceed A$1.00 per Share, the excess
should be treated as an unfranked dividend for tax purposes. Subject to the operation of the former
FIF rules (see 5 below), this unfranked dividend should be included in the assessable income of the
Shareholder for the year of income during which the redemption proceeds are received.
A capital gain should arise if any payment is received from Westpac by a Shareholder under the Current
Westpac Guarantee. Individuals, trusts and complying superannuation entities should be entitled to
reduce the amount of this capital gain remaining after the application of relevant capital losses by the
applicable CGT discount percentage (ie. 50% for individuals and trusts and 33.33% for complying
superannuation entities).
3
Shareholders electing to continue to hold shares
3.1 Renaming of Shares as Continuing Redeemable Shares
No taxation consequences should arise for a Shareholder who elects to have their Shares renamed as
Continuing Redeemable Shares.
First, no CGT consequences will generally arise where the variation in the rights attaching to a share does
not result in a cancellation or redemption of that share under Australian corporate law (see Taxation Ruling
94/30). The articles of association of the Company contained a renaming provision allowing the renaming
of Shares at the time of issue of the Shares, such that the possibility of a renaming can be viewed as an
incidental right forming part of the Shares themselves. Accordingly, no CGT consequences should arise for
a Shareholder making an election to rename their Shares as Continuing Redeemable Shares.
Secondly, the value shifting provisions should not apply to crystallise a taxable gain or cause an adjustment
to the cost base of either the Shares or Continuing Redeemable Shares as the Shares which are not
renamed will be redeemed for an amount that is equal to their market value.
The taxation consequences for the sale or redemption of the Continuing Redeemable Shares are broadly
the same as those described above for the sale or redemption of the Shares. Please refer to the discussion
contained in section 2 above.
explanatory memorandum
3.2 Sale or redemption of Continuing Redeemable Shares
33
4
FIF Rules
4.1 Continuing to hold Continuing Redeemable Shares
The FIF provisions have been repealed with effect for the 2010-11 and later years of income. This means
that Shareholders that hold Continuing Redeemable Shares should not be subject to any attribution under
the FIF rules for the 2010-11 and later income years.
As part of the repeal of the FIF provisions, a new foreign accumulation fund (‘FAF’) regime will be introduced
(an exposure draft of the proposed FAF provisions was released for comment on 17 February 2011). Whilst
it is not expected that the proposed FAF provisions should apply to a Shareholder’s Continuing Redeemable
Shares, Shareholders should monitor these provisions as they are finalised (as their precise scope
remains uncertain).
4.2 Sale or redemption of Shares
As reflected in the initial prospectus for the Company dated 1 August 2002, a Shareholder’s interest in the
Company will have constituted an interest in a FIF such that unless an exemption applied (for instance,
the exemption for individuals holding less than A$50,000 of FIF interests) the Shareholder will have been
required to calculate its attributable FIF income from the Company on an annual basis and include this
amount within its assessable income (in relation to the income years prior to the 2010-11 income year).
Notwithstanding the repeal of the FIF provisions (see 4.1 above), if a Shareholder sells or redeems its
Shares and has previously included attributable FIF income from the Company within its assessable
income then:
5
•
any assessable dividend that the Shareholder receives on redemption (see 2.3(3) above) should not be
assessable to the extent of the previously attributed FIF income arising from the Company; and
•
the disposal proceeds received by the Shareholder on sale of the Shares should be reduced by the
amount of the previously attributed FIF income arising from the Company.
Taxation of Financial Arrangements (TOFA)
The TOFA rules are a code for the taxation of receipts and payments in relation to qualifying “financial
arrangements” that apply on a mandatory basis for income years commencing on or after 1 July 2010
(with an optional start date). The TOFA rules contemplate a number of different methods for bringing to
account gains and losses in relation to financial arrangements (including four elective methods).
As a Continuing Redeemable Share or benefit that an investor has in relation to their shares under the New
Westpac Guarantee should not be a “qualifying security” for the purposes of Division 16E, TOFA should not
apply on a mandatory basis for the following taxpayers in respect of their investment:
•
individuals;
•
superannuation funds and “managed investment schemes” if the value of their assets is less than
A$100 million; or
•
other taxpayers whose aggregated turnover (having regard to the turnover of connected entities or
affiliates) is less than A$100 million, the value of their assets is less than A$300 million, and the value of
their financial assets is less than A$100 million.
Taxpayers who are not automatically subject to TOFA can elect to be subject to TOFA on a voluntary basis.
Man Series 8 OM-IP 220
Shareholders who are subject to TOFA should obtain their own tax advice as the precise implications
under TOFA (if any) will depend on their facts and circumstances and in particular what elections they
may have made.
34
6
Part IVA
Part IVA of the Act contains the general anti-avoidance provisions which, in general terms, may apply
where a taxpayer obtains a “tax benefit” as a consequence of entering into a scheme and the dominant
purpose of one or more parties to the scheme (or a part of the scheme) was to secure a tax benefit. A tax
benefit would be, for example, the making of a “discounted capital gain” on a sale of Shares in substitution
for an amount of income which might reasonably have been expected to be included in the taxpayer’s
assessable income had the Shares been redeemed.
Whilst we do not consider that an election to rename Shares as Continuing Redeemable Shares is likely to
attract the application of Part IVA, the application of Part IVA generally to a Shareholder holding, selling or
redeeming Shares or Continuing Redeemable Shares will depend upon the particular circumstances of the
Shareholder. Accordingly, Shareholders should seek professional advice in relation to the application of Part
IVA to their particular circumstances.
7
Disclaimer and consent
Greenwoods & Freehills Pty Limited has been involved only in the preparation of this report as it appears in
the explanatory memorandum. Greenwoods & Freehills Pty Limited has given (and has not withdrawn) its
consent to the issue of the explanatory memorandum with this report included in the form and context in
which it is shown.
Yours faithfully
GREENWOODS & FREEHILLS PTY LIMITED
explanatory memorandum
35
NEW ZEALAND TAXATION OPINION
The following independent report has been prepared by Chapman Tripp for the Company and outlines the
taxation consequences for New Zealand resident Shareholders. Man Investments Australia is not licensed to
provide personal or taxation advice.
27 March 2012
The Directors
Man Series 8 OM-IP 220 Limited
Bermuda House
Tutakimoa Road
Rarotonga
COOK ISLANDS
Dear Sirs
Renaming of the Shares in Man Series 8 OM-IP 220 Limited: Tax
consequences for NZ Shareholders
Introduction
1
This report has been prepared for inclusion in an explanatory memorandum concerning the renaming of
redeemable shares (“Shares”) in Man Series 8 OM-IP 220 Limited (“Company”) as continuing redeemable
shares (“Continuing Redeemable Shares”) in the Company.
2
The following is intended to be only a general summary of the New Zealand taxation consequences of
the offer for New Zealand resident investors (“Shareholders”). The comments are neither exhaustive nor
definitive. Shareholders should obtain their own taxation and financial advice based on their own personal
circumstances.
3
This report is based on the law in effect at the date of this letter. Tax laws can be changed, potentially with
retrospective effect and existing case law is subject to reinterpretation by future decisions of the courts.
4
All section and statutory references are to the Income Tax Act 2007 (“Act”) unless otherwise specified.
Background
Man Series 8 OM-IP 220
5
36
We have based our advice on the following facts and assumptions:
5.1
The Company was incorporated in the Cook Islands on 2 July 2002.
5.2
Shareholders were invited to subscribe for Shares, which are due to be redeemed on 30 June
2012 (“the Maturity Date”) by the Company. As an alternative to a redemption of these interests,
Shareholders may elect to have their Shares renamed as Continuing Redeemable Shares (as provided
for in article 9A of the Articles of Association of the Company).
5.3
The terms of the Shares after their renaming are identical to the terms before renaming, with the
exception that the maturity date of the Shares will be 30 June 2022 (“the New Maturity Date”).
Chapman Tripp
T: 64 9 357 9000
F: 64 9 957 9099
23 Albert Street
PO Box 2206, Auckland 1140
New Zealand
www.chapmantripp.com
Auckland, Wellington,
Christchurch
5.4
As stated in the initial prospectus, the directors have the power to declare a dividend immediately
prior to the Maturity Date but we understand the directors will not be exercising this power at the
time of the renaming.
5.5
The Company is a non-resident of New Zealand for the purposes of the Act.
5.6
The Company is not a controlled foreign company (“CFC”) within the meaning of the Act.
5.7
The Inland Revenue Department has agreed to treat the Shares held by each New Zealand resident
Shareholder as being Shares of a separate class for tax purposes.
Tax position of New Zealand Shareholders
Background
6
Subject to a de minimis exception, New Zealand taxes residents owning offshore equity investments under
one of two regimes:
6.1
the controlled foreign company (‘CFC’) regime (which we have assumed does not apply in the
present case, so do not discuss); and
6.2
the foreign investment fund (‘FIF’) regime.
7
De minimis investors will not be subject to the FIF regime. These are ‘natural persons’ whose total FIF
interests (excluding, amongst other things, shares in Australian resident companies listed on certain
approved ASX indices)1 cost NZ$50,000 or less to acquire. For this purpose, the investor can elect to
treat all interests which it held on 1 January 2000 as having a cost equal to half the market value of those
interests on 1 April 2007.
8
We refer to investors who are subject to the FIF regime as “FIF Shareholders”.
Renaming of Shares as Continuing Redeemable Shares
9
The renaming should not have any tax consequences for a Shareholder, on the basis that the renaming will
not be a sale, cancellation or redemption of the original Shares. In our view the renaming involves merely
an extension of the Maturity Date of Shares, rather than a cancellation and reissue of Shares. So, the
Shareholder still owns the original Shares.
10
Therefore, de minimis Shareholders should continue to be liable to tax in New Zealand in the same manner
as before the renaming. In particular, for the purpose of the de minimis rule the cost price of the Shares
after renaming will be the cost price of the Shares prior to renaming.
11
Similarly, FIF Shareholders will continue to be subject to tax under the FIF regime in the same way as prior
to the renaming.
12
In paragraphs 14-38 we summarise the different tax treatments applying to the two classes of Shareholders
(i.e. de minimis Shareholders and FIF Shareholders) who choose not to have their Shares renamed.
13
In paragraphs 39-44 we summarise the tax treatment for both de minimis Shareholders and non-de
minimis Shareholders where they choose to have their Shares renamed, thus continuing their investment in
the Company.
Shareholders whose Shares are not renamed as Continuing Redeemable Shares
Taxation consequences for de minimis Shareholders
14
De minimis Shareholders will be subject to tax on any dividends received on the Shares at their marginal
tax rate.
15
The tax consequences of a disposal of Shares will depend upon the method of disposal. In this regard:
15.1 the Shares may be redeemed by the Company prior to or on the Maturity Date; or
1 The
Shares do not qualify for this exclusion.
explanatory memorandum
15.2 the Shares may be purchased from Shareholders who choose to sell them prior to the Maturity Date
to Man Investments Australia Limited.
37
16
Proceeds of a redemption of the Shares by the Company prima facie are taxable as a dividend.
They will be excluded from being a dividend (and taxed instead in the same way as proceeds of a
sale of the Shares) only:
16.1 to the extent that the Shareholder can establish that the amount of the distribution does not exceed
the “available subscribed capital per share cancelled”; and
16.2 (as the redemption is part of a “pro rata cancellation”) if the total proceeds returned on the Maturity
Date exceed 15% of the market value of all the Company’s Shares when notice of the redemption
was first given to Shareholders; and
16.3 if the Commissioner is satisfied that the redemption is not in lieu of a dividend, having regard to
certain criteria.
17
Given these requirements, there is a significant risk that the amount distributed on redemption will be taxed
in whole or in part as a dividend.
18
Where the Shares are purchased by Man Investments Australia the tax treatment of the proceeds from the
sale will depend on whether the shares are held on revenue or capital account by the Shareholder.
19
The Shares will be held on revenue account if the Shareholder acquired them:
19.1 with a dominant purpose of resale or redemption; or
19.2 as part of a business carried on by the Shareholder either of dealing in securities such as the Shares
or in respect of which selling such securities is an ordinary incident; or
19.3 as part of a profit making scheme or undertaking.
20
As there is a specified date for redemption of the Shares and there are no regular dividends it may be
difficult for an individual Shareholder to prove that the Shares were not purchased with a dominant purpose
of resale or redemption.
21
The proceeds will not be taxable to the Shareholder if the Shares are held on capital account.
Conversely they will be taxable if held on revenue account.
22
The cost of acquiring the Shares is only deductible if the Shares are held on revenue account.
23
Even for Shareholders who hold their shares on revenue account, it may be more tax efficient for
Shareholders to have their Shares repurchased by Man Investments Australia rather than redeemed.
24
We note that in certain circumstances, the Commissioner has the power to recharacterise the proceeds
of a sale of Shares as a dividend if all or any part of the proceeds represent, are equivalent to, or in
substitution for an amount that would otherwise be received as dividends.
Taxation consequences for FIF Shareholders
25
FIF Shareholders must calculate their income from their Shares using either the fair dividend rate (“FDR”)
method or the comparative value (“CV”) method. The CV method is only available for:
25.1 natural persons;
25.2 trustees of certain family trusts;
25.3 Shareholders who hold (with their associates) more than 10% of the direct income interests in the
Company.
The Taxation (International Investment and Remedial Matters) Bill (‘Bill’) currently before Parliament
proposes to amend the FIF regime so that the FDR method will be available to most Shareholders who
hold more than 10% of the Company for income years beginning on or after 1 July 2011 and the CV
method will not be available on the basis of the criterion in clause 25.3 above i.e. that a Shareholder (with
their associates) holds more than 10% of the direct income interests in the Company.
Man Series 8 OM-IP 220
26
38
The FDR method is the default method for calculating FIF income where it is available. A Shareholder using
this method is deemed to derive assessable income equal to 5% of the market value of the Shares held
by it at the beginning of the income year plus an amount referred to as the ‘quick sale adjustment’
(which may be zero) if the Shareholder has bought and sold Shares during the year.
27
To calculate any ‘quick sale adjustment’ the FIF Shareholder first needs to calculate its ‘peak
holding adjustment’.
28
To calculate the peak holding adjustment with respect to their Shares, the FIF Shareholder must calculate
the difference between the greatest number of Shares held at any point during the income year and the
greater of:
28.1 the number of Shares held at the beginning of the income year; and
28.2 the number of Shares held at the end of the income year.
29
The Shareholder must then multiply that difference by the average cost of the Shares acquired during the
year. The peak holding adjustment is 5% of this amount.
30
The ‘quick sale adjustment’ amount which then must be returned by the Shareholder is the lesser of:
30.1 the total peak holding adjustment for all FIF interests; and
30.2 the total profit (if any) made on the sale of all FIF interests acquired during the year, plus any
distributions received on those FIF interests. For this purpose, the last share acquired is deemed to
be the first sold.
31
FIF Shareholders are subject to tax on this assessable income at their marginal rate.
32
Any dividend paid and any gain or loss on realisation of the Shares (other than where Shares are bought
and sold within the year and a quick sale adjustment must be made) is ignored under the FDR method.
A slightly more complex version of this method is used by managed funds.
33
We note that section EX 46(10) of the Act does not allow the FDR method to be used for an FIF interest
where another person has a non-contingent obligation to pay the investor more than the issue price of the
FIF interest.
34
This raises the issue of whether the existence of the Westpac Capital Guarantee means that Shareholders
cannot use the FDR method to calculate their FIF income in respect of the Shares. While the matter is not
entirely free from doubt, we consider that Shareholders should still be entitled to use the FDR method in
respect of the Shares.
35
Shareholders referred to in paragraphs 25.1 to 25.3 can elect to calculate their income for any year under
the CV method. Under this method, electing Shareholders will be deemed to derive assessable income
upon disposal of their Shares, whether by redemption or sale, equal to the difference between:
35.1 cash received (whether by redemption or sale); less
35.2 the value of their Shares at the beginning of the relevant income year (plus any cash invested
(i.e. by the acquisition of additional Shares) in that year).
There are no restrictions on a Shareholder who is a natural person or a trustee of certain family trusts
switching between the FDR method and the CV method from year to year. However the Shareholder must
apply the chosen method to all its FIF interests (including the Shares) for that income year. The Shareholder
cannot, for example, use the CV method in respect of the Shares and use the FDR method in respect of
another FIF interest in the same year.
37
The effect of this is that a Shareholder who is a natural person or the trustee of certain family trusts can
calculate what its taxable income would be on its total pool of FIF interests (including the Shares) under
both the FDR method and the CV method. The Shareholder can then elect to use whichever method
produces the lowest amount of taxable income for that income year.
38
FIF Shareholders cannot claim an aggregate FIF loss in respect of their portfolio of offshore equity
investments (including the Shares), except in the case of a Shareholder who holds (with their associates)
more than 10% of the direct income interests in the Company. The Bill proposes to amend the FIF regime
so that for income years beginning on or after 1 July 2011, Shareholders holding (with their associates)
more than 10% of the direct income interests in the Company will also be unable to claim an aggregate FIF
loss under the CV method.
explanatory memorandum
36
39
Shareholders whose Shares are renamed as Continuing Redeemable Shares
Taxation consequences for de minimis Shareholders
39
De minimis Shareholders will be subject to tax on any dividends received on the Continuing Redeemable
Shares at their marginal tax rate.
40
As in the case of the original shareholding, the tax consequences of a disposal of the Continuing
Redeemable Shares will depend upon the method of disposal. We understand that the available methods
of disposal will remain the same as those outlined in paragraphs 15.1-15.2. Accordingly, the tax treatment
of a disposal will be the same as described in paragraphs 16-24.
Taxation consequences for FIF Shareholders
41
FIF Shareholders of Continuing Redeemable Shares will remain subject to the regime outlined at
paragraphs 25-38 and will need to use either the FDR method or the CV method (if available to them).
42
The CV method taxes a Shareholder on the change in value of its interest in the Company from the
beginning to the end of the relevant income year, plus any cash received either from the Company or from
a sale of the Shares and less any cash invested (e.g. by the acquisition of additional Shares) in that year.
The CV method is only available for Shareholders described in paragraphs 25.1 to 25.3 (paragraph 25.1
and 25.2 for income years after 1 July 2011 if the Bill is enacted).
43
The FDR method is described in paragraphs 26-34 of this letter. Shareholders who are natural persons or
the trustee of certain family trusts can switch between the FDR method and the CV method in the manner
described in paragraphs 35-37.
44
FIF Shareholders cannot claim an aggregate FIF loss in respect of their portfolio of offshore equity
investments (including the Shares), except in the case of a Shareholder who holds (with their associates)
more than 10% of the direct income interests in the Company. If the Bill currently before Parliament is
enacted in its current form, for income years beginning on or after 1 July 2011, Shareholders holding
(with their associates) more than 10% of the direct income interests in the Company will also be unable
to claim an aggregate FIF loss under the CV method.
Westpac Guarantee
45
Any payment received by a Shareholder from Westpac Banking Corporation under the New Westpac
Guarantee (including the New Rising Guarantee) or the Current Westpac Guarantee (including the Rising
Guarantee) will be assessable under the financial arrangements rules in subpart EW of the Act.
Yours faithfully
Man Series 8 OM-IP 220
CHAPMAN TRIPP
40
Directory
Registered office in Cook Islands
Directors of Man Series 8 OM-IP 220
Man Series 8 OM-IP 220 Limited
Bermuda House
Tutakimoa Road
Rarotonga Cook Islands
Mr Michael Collins
Argonaut House
5 Park Road
PO Box HM2001
Hamilton HMHX Bermuda
Telephone (682) 22680
Fax (682) 20566
Sponsor, local agent and registered office
in Australia
Man Investments Australia Limited
Level 21 Grosvenor Place
225 George Street
Sydney NSW 2000 Australia
Registrar and transfer agent
HSBC Trustee (Cook Islands) Limited
Bermuda House
Tutakimoa Road
Rarotonga Cook Islands
Auditor
Ernst & Young
Ernst & Young Building
2 Takutai Square
Britomart
Auckland 1010 New Zealand
Investment Manager
Man Investments (CH) AG – Guernsey Branch
First Floor, Suite 1
Albert House
South Esplanade
St Peter Port
Guernsey GY1 1 AJ Channel Islands
Service Provider
Westpac Banking Corporation
Level 20
275 Kent Street
Sydney NSW 2000 Australia
Westpac Guarantee
Westpac Banking Corporation
Level 20
275 Kent Street
Sydney NSW 2000 Australia
Mr Ronan Daly
13 Grosvenor Place
Rathmines
Dublin 6 Ireland
Mr John Walley
62 The Avenue
Carrickmines Wood
Brennanstown Road
Foxrock
Dublin 18 Ireland
Secretary
Penrhyn Secretaries Limited
Bermuda House
Tutakimoa Road
Rarotonga Cook Islands
Valuations Agent
Man Valuation Services Limited
Riverbank House
2 Swan Lane
London EC4R 3AD
United Kingdom
Enquiries
Any enquiries relating to this explanatory
memorandum should be referred to Man Investments
Australia at:
Level 21 Grosvenor Place
225 George Street
Sydney NSW 2000 Australia
Phone (61-2) 8259 9999 or
toll free Australia 1800 222 355 or
toll free New Zealand on 0800 878 220 or
Fax (61-2) 9252 4453 or
toll free Australia 1800 787 220 or
toll free New Zealand 0800 787 220
www.maninvestments.com.au
info@maninvestments.com.au
explanatory memorandum
41
Definitions
AHL Diversified Program means the investment
program managed by Man Investments and more
particularly described on pages 8-10.
Article 9A means Article 9A of the Articles.
Articles means the Company’s Articles of Association
(as amended).
Business Day means a day on which banks generally
are open for business in Sydney and the Cook Islands
excluding a Saturday, Sunday or public holiday.
Company and Man Series 8 OM-IP 220 means
Man Series 8 OM-IP 220 Limited ARBN 101 184 623
(incorporated in the Cook Islands).
Continuing Redeemable Share means a Share in the
Company which matures on the New Maturity Date.
Continuing Shareholder means a Shareholder who
elects to continue their investment in Shares to the
New Maturity Date.
Current Westpac Guarantee means the guarantee
by Westpac to Shareholders who hold Shares on the
Maturity Date the full text of which is set out on pages
23-26 of the prospectus issued by the Company
dated 1 August 2002.
Dealing Day means the first Business Day in each
calendar month or such other day as the Directors
may from time to time determine (and includes the
Maturity Date and the New Maturity Date).
Directors means the directors from time to time of
the Company.
document(s) means information in paper or
electronic form.
Election Notice means an election notice in the form
accompanying this explanatory memorandum given by
a Shareholder in accordance with Article 9A.
Financing Arrangements means the arrangement,
more particularly as described on pages 22-23.
International Broker means any broker introduced
by the Introducing Broker and appointed by the
Trading Subsidiary.
Investment Manager means Man Investments (CH)
AG – Guernsey Branch.
Man Series 8 OM-IP 220
LIBOR means the rate per annum at which prime
banks may borrow USD on the London Interbank
market as published from time to time by recognised
information providers.
42
Man Group means Man Group plc and all or any of its
associated companies, as the context requires.
Man Investments means Man Investments Limited,
a wholly owned subsidiary of Man Group plc and/or all
or any of its associated companies, as the
context requires.
Man Investments AG and Introducing Broker means
Man Investments AG, a wholly owned subsidiary of
Man Group plc.
Man Investments Australia means Man Investments
Australia Limited ABN 47 002 747 480, a wholly
owned subsidiary of Man Group plc.
Man Investments Portfolio means the portfolio
of investment strategies and managers and more
particularly described on page 10 (formerly known as
the Glenwood Program).
Maturity Date means 30 June 2012.
Net Asset Value per Share or NAV means the amount
calculated as the net asset value of the Shares in
accordance with the Articles divided by
the number of Shares on issue at the relevant time.
New Capital Guarantee means that part of the
New Westpac Guarantee, which relates to Westpac
guaranteeing a return to Shareholders on the New
Maturity Date of an amount equal to the NAV per
Share as at 30 June 2012, as described on page 20.
New Maturity Date means 30 June 2022 or,
if such a date is not a Business Day, the next
Business Day.
New Rising Guarantee means that part of the
New Westpac Guarantee which relates to Westpac
guaranteeing, subject to the terms of the New Westpac
Guarantee, to pay Shareholders on the New Maturity
Date the profit lock-ins as described on page 20.
New Westpac Rising Guarantee Notice means
the rising guarantee notice to be provided by the
Company to Shareholders as described on page 21
and under the New Westpac Guarantee set out in
Appendix A.
New Westpac Guarantee means the guarantee by
Westpac to Shareholders who hold Shares on the
New Maturity Date, comprising the New Capital
Guarantee and the New Rising Guarantee, the full
text of which is set out in Appendix A.
Registrar means HSBC Trustee (Cook Islands) Limited.
Security Deposit means the Australian dollar
denominated cash deposit agreed to and held by
Westpac to secure the New Westpac Guarantee.
Share means a redeemable share in the Company.
Shareholder(s) means the holder of a Share in the
Company.
Trading Subsidiary means Man Series 8 OM-IP 220
Trading Limited (incorporated in the Cook Islands),
a wholly owned subsidiary of the Company.
Underlying Vehicle means AHL Institutional Series
1 Limited, an exempted company incorporated in
Bermuda designed to provide access to the AHL
Diversified Program.
US Person(s) means a US person, as the term is
defined in Regulation S under the Securities Act of
1933 (as may be amended from time to time) and
more particularly include references to: (i) any natural
person that resides in the US or is a US citizen; (ii) any
partnership or corporation organised or incorporated
under the laws of the US; (iii) any entity organised or
incorporated outside the US the beneficial owners of
which include US Persons; (iv) any estate of which any
executor or administrator is a US Person; (v) any trust
of which any trustee is a US Person; or (vi) any agency
or branch of a foreign entity located in the US.
For the purposes of clarity, the term ‘US Person’ shall
not include:
(a) entities which are described as ‘not US persons’
under Regulation S as amended from time to
time, including any discretionary account or similar
account (other than an estate or trust) held for
the benefit or account of a non-US person by
a dealer or other professional fiduciary organised,
incorporated, or (if an individual) resident in the
United States; or
(b) non-discretionary accounts or similar held by
a dealer or other professional fiduciary organised,
incorporated, or (if an individual) resident in the
United States for the benefit or account of
a non-US person, provided such non-discretionary
accounts are not otherwise US Persons as defined
above.
For the purposes of further clarity, the term ‘US
Person’ shall not include any Shareholder whose
Election Notice has been approved by the Directors
in their sole discretion.
For the purposes of further clarity, the term ‘US
Person’ includes other tax-exempt investors or entities
in which substantially all of the ownership is held by
US tax-exempt investors, and ‘United States Persons’
or ‘US Persons’ shall be construed accordingly.
Westpac means Westpac Banking Corporation
ABN 33 007 457 141.
explanatory memorandum
Valuation Day means in respect of a Dealing Day
the last day of the calendar month preceding that
Dealing Day or such other day as the Directors of the
Company shall from time to time determine, including
the New Maturity Date.
43
Appendix A
New Westpac Guarantee
1
GUARANTEE
By this Deed Poll and subject to the conditions
hereof Westpac Banking Corporation
ABN 33 007 457 141 (Guarantor) of Level
20, Westpac Place, 275 Kent Street, Sydney,
New South Wales, 2000 unconditionally
and irrevocably guarantees to pay to each
Shareholder on 11 August 2022, an amount
in Australian dollars in respect of each Share
(certified by the Registrar to be registered in
the name of that Shareholder as at the Maturity
Date) which is equal to the difference between
the Guaranteed Amount and the amount (if any)
paid by or on behalf of the Company to or at the
direction of the Shareholder or on trust for the
Shareholder as and by way of or in connection
with redemption of that Share (whether as a
dividend immediately before redemption or
as a return of capital), if that amount paid by
or on behalf of the Company is less than the
Guaranteed Amount.
2
CONDITION
This guarantee will cease to have any force or
effect in respect of holders of Shares (other than
in respect of their holdings of New Continuing
Redeemable Shares) if any amount is paid by
the Guarantor under and in accordance with the
Original Deed Poll Guarantee to the Shareholders
(or any previous holder of the applicable Shares).
3
DEFINITIONS AND INTERPRETATION
3.1 Definitions
Continuing Redeemable Share has the meaning
given in the Articles.
Diminution means reduction to any extent
including a reduction to nil.
Excluded Accounts means each of:
(a) the Expense Account;
(b) any Original Account;
(c) the Subscription Moneys Account;
(d) any account into which transfers are made
by or on behalf of the Company after
30 June 2012 in order to fund the redemption
of Non-continuing Shares;
(e) any trust account established and operated
by or on behalf of the Company to deposit
moneys to be returned to applicants for
redeemable shares in the Company who have
not become Shareholders; and
(f) any other account into which transfers are
made by or on behalf of the Company after
the Maturity Date on trust for Shareholders of
the Company.
Expense Account has the meaning given in the
Services Agreement.
Accounts means any bank account, deposit
or other account opened by, or bank or other
deposit made by, the Guarantor or the Service
Provider or a nominee of either pursuant to the
Services Agreement in the name of or for the
account of the Company and all certificates or
other documents issued in respect thereof but
does not include the Excluded Accounts.
First Security Deposit Advice (Final) has the
meaning given in the Services Agreement.
Capital Guarantee Notice means a notice (which
the Guarantor has agreed to the sending of) sent
by the Company to the registered holders of
Shares, containing, without limitation, the details
of the amount referred to in paragraph (a) of the
definition of Guaranteed Amount.
Man Series 8 OM-IP 220
Company means Man Series 8 OM-IP 220
Limited (ARBN 101 184 623), a Cook Islands
corporation.
In this Deed Poll the following terms have the
following meanings:
Articles means the Articles of Association of the
Company.
44
date hereof including, but without limiting the
generality of the foregoing, the imposition or
increase of any Tax or change in the basis of
any Tax.
Change of Law means any appropriation,
expropriation, confiscation, restraint, restriction,
prohibition, law, decree, order, directive of
any Governmental Agency and any judgment
issued by a court or tribunal occurring after the
Governmental Agency means any state,
country or government or any governmental,
semi-governmental or judicial entity or authority
or any authorised officer thereof.
Guaranteed Addition means, in respect of
each Share, an amount specified as such in a
Guarantee Notice.
Guaranteed Amount means, in respect of each
Share, the sum of:
(a) the amount notified to the Guarantor in the
First Security Deposit Advice (Final) to be
the Net Asset Value per Share, calculated in
accordance with the Articles as at 30 June
2012 (which amount shall be evidenced by a
Capital Guarantee Notice); and
(b) the Guaranteed Profit in respect of that Share.
Guaranteed Profit means, in respect of each
Share, an amount in Australian dollars equal to
the aggregate of the Guaranteed Additions in
respect of that Share.
Guarantee Notice means a notice confirmed
by the Guarantor in writing and sent, from time
to time, by the Company to holders of Shares
advising of the amount of the Guaranteed
Amount and any Guaranteed Addition.
Guarantor Security Fund means:
(a) the Accounts; and
(b) the Security Deposits.
Implementation Deed means the Man Series
8 OM-IP 220 Limited Maturity and Renaming
Implementation Deed between the Company,
HSBC Trustee (Cook Islands) Limited, Westpac
Banking Corporation and Man Investments
Australia, dated on or about the date of this
Deed Poll.
Indemnity means the indemnity dated on or
about the date of this Deed Poll between the
Company and the Guarantor as varied, novated,
ratified or replaced from time to time.
Maturity Date means 30 June 2022.
Mortgage means any one or more of:
(a) the Australian Security Deed dated on or
about the date of this Deed Poll as varied,
novated, ratified or replaced from time to time
granted by the Company to the Guarantor to
secure, amongst other things, the Indemnity;
(b) the English Security Deed governed by
English Law entered into between the
Company and the Guarantor on or about the
date of this Deed Poll as varied, novated,
ratified or replaced from time to time; and
(c) any other security (including any security
replacing a document referred to in
paragraph (a) or (b)) provided by the
Company to the Guarantor and agreed by the
Guarantor, other than any Original Security.
New Continuing Redeemable Share means a
Continuing Redeemable Share issued pursuant
to the New Prospectus.
Non-continuing Share has the meaning given in
the Services Agreement.
Original Deed Poll Guarantee means the Deed
Poll Guarantee granted by the Guarantor dated
30 July 2002 in favour of holders of redeemable
shares in the Company on 30 June 2012.
Original Prospectus means the prospectus
issued by the Company dated 1 August 2002.
Original Security has the meaning given in the
Services Agreement.
Payment Amount means, in respect of each
Share, the amount paid out of the Guarantor
Security Fund by or on behalf of the Company
to or at the direction of the Shareholder or on
trust for the Shareholder as and by way of or
in connection with redemption of that Share
(whether as a dividend immediately before
redemption or as a return of capital).
Reduced Value of the Guarantor Security Fund
means the total amount payable or received
or which would be payable or received as at
the Maturity Date by or for the benefit of the
Company in respect of the investments and
cash comprising the Guarantor Security Fund
following the occurrence of one or more events
contemplated by paragraphs (a), (b) and (c)
under clause 4.
Registrar means the registrar from time to time
under the Registrar Agreement.
Registrar Agreement means the agreement
entitled Registrar, Transfer Agency and
Administration Agreement dated on or about the
date of this Deed Poll between the Company,
HSBC Trustee (Cook Islands) Limited and the
Guarantor and includes any agreement that, with
the consent of the Guarantor, from time to time
may amend, novate, supplement, vary or replace
it.
Renamed means renamed in accordance with
Article 9A of the Articles and Renaming has a
corresponding meaning.
Security Deposit means:
(a) any Australian dollar cash deposit made
by the Company, the Service Provider or
a nominee of either in the name of or by
or for the account of the Company after
the date hereof with the London branch
of the Guarantor (or such other branch of
the Guarantor as the Guarantor and the
Company may agree in writing from time to
time) (excluding the balances from time to
time of the Excluded Accounts);
explanatory memorandum
New Prospectus means the prospectus to be
issued by the Company and lodged with the
Australian Securities & Investments Commission
in connection with the proposed new issue by
the Company of redeemable shares from the
unissued authorised capital of the Company
once that capital has been Renamed.
Original Account has the meaning given in the
Services Agreement.
45
(b) all of the Company’s right, title and interest to:
Tax includes any tax, levy, impost, deduction,
charge, rate, duty, compulsory loan or withholding
which is levied or imposed by a Governmental
Agency, including (without limitation) any
withholding, income, stamp or transaction tax,
duty or charge together with any interest, penalty,
charge, fee or other amount imposed or made on
or in respect of any of the foregoing.
(i) the repayment of all such deposits; and
(ii) any interest on all such deposits (whether
or not the interest has been added or
credited as the case may be); and
(c) any cash into which the amounts referred
to in paragraphs (a) and (b) above are
converted,
Value of the Guarantor Security Fund means
the total amount payable or received or which
would have been payable or received (but for the
occurrence of one or more events contemplated
by paragraphs (a), (b) and (c) under clause 4) as
at the Maturity Date by or for the benefit of the
Company in respect of the investments and cash
comprising the Guarantor Security Fund.
and a reference to Security Deposit includes any
part of it.
Security Deposits means all and any Security
Deposits made from time to time and a reference
to Security Deposits includes any Security
Deposit, any part of any Security Deposit and
any part of the Security Deposits.
Service Provider means the person, appointed
from time to time, to perform the obligations
of the Service Provider under the Services
Agreement which is currently the Guarantor.
Services Agreement means the agreement so
titled dated on or about the date of this deed
between the Company, the Service Provider, the
Guarantor and Man Investments Australia Limited
as varied, novated, ratified or replaced from time
to time or any replacement services agreement
executed by the Company, a replacement service
provider, the Guarantor and Man Investments
Australia Limited.
Share means:
(a) a redeemable share in the Company originally
issued at an issue price of one Australian
dollar (A$1.00) pursuant to and as defined in
the Original Prospectus, which is renamed as
a Continuing Redeemable Share pursuant to
the Articles; and
(b) a New Continuing Redeemable Share.
Shareholder means any person whom the
Registrar certifies to the Guarantor to be a
registered holder of a Share as at the
Maturity Date.
Shareholder’s Quota means, for the purposes
of determining any limitation on the liability of
the Guarantor under this Deed Poll to pay the
Guaranteed Amount, the following fraction:
Man Series 8 OM-IP 220
1
46
Total number of Shares held by all Shareholders
at the Maturity Date
Subscription Moneys Account has the meaning
given to that term in the Implementation Deed.
3.2 Interpretation
In this Deed Poll:
(a) words denoting the singular number shall
include the plural and vice versa; and
(b) reference to any deed or agreement
(including this Deed Poll) is to that deed or
agreement as varied, novated, ratified or
replaced from time to time.
4
LIMITATION OF LIABILITY AND CONDITIONS
Each payment of any amount by or on behalf
of the Company to or at the direction of a
Shareholder or on trust for a Shareholder as and
by way of or in connection with redemption of
a Share held by that Shareholder (whether as a
dividend immediately before redemption or as a
return of capital) must be taken into account in
determining the liability of the Guarantor to that
Shareholder under this Deed Poll notwithstanding
any subsequent setting aside of that payment by
the Company to that Shareholder or requirement
that that Shareholder repay any redemption
moneys to the Company in each case for any
reason whatsoever.
The liability of the Guarantor under the guarantee
contained in this Deed Poll shall, in respect of
each Share, be reduced by the Shareholder’s
Quota of the amount equal to the aggregate of:
(a) any Diminution of the Value of the Guarantor
Security Fund arising as a result of any Tax or
the imposition or proper payment of any such
Tax; and
(b) to the extent that it is not included by
reason of paragraph (a), any Diminution of
the Value of the Guarantor Security Fund
arising as a result of any Change of Law
(and including without limitation any such
Change of Law which has the consequence
that the enforcement of the Indemnity or
the Mortgage or both will be unlawful or
impracticable which such action shall be
deemed for the purposes of this paragraph
(b) to have caused a Diminution of the Value
of the Guarantor Security Fund to nil); and
and such posting to such address or payment
into such account shall discharge absolutely the
obligation of the Guarantor under this Deed Poll
to that Shareholder.
If the Guarantor upon any Change of Law is
required to deduct any amount on account of Tax
from a payment made by it under this Deed Poll,
the Guarantor will:
(c) to the extent that it is not included by reason
of paragraph (b), the difference between
the amount which the Guarantor would
have been able to recover in enforcing the
Indemnity and the Mortgage but for a Change
of Law and the amount which the Guarantor
in fact would be able to recover in enforcing
those instruments if it were to pay moneys
pursuant to this Deed Poll,
(c) deduct that amount, and promptly remit it to
the relevant Governmental Agency; and
(d) notify the Shareholder that such payment has
been made and the amount payable by the
Guarantor to the relevant Shareholder under
this Deed Poll will be reduced accordingly.
Under no circumstances will the Guarantor be
liable to make any payment whatever under this
Deed Poll before 30 days after the Maturity Date.
but only to the extent that:
(d) the Shareholder’s Quota of the Reduced
Value of the Guarantor Security Fund is less
than the amount by which the Guaranteed
Amount exceeds the Payment Amount as
a result of the occurrences of the events
contemplated by paragraphs (a), (b) and (c)
above; and
(e) the Diminution referred to in paragraphs (a)
or (b) above or the difference referred to in
paragraph (c) above is permanent in nature.
If any Diminution or difference of a kind and due
to a cause referred to in paragraphs (a), (b) or
(c) above occurs which is temporary in nature
the Guarantor’s obligations under this Deed Poll
in respect of each Share are suspended to the
extent specified in paragraph (d) above for so
long as the Diminution or difference is in effect.
Any certificate setting out the names and
addresses of Shareholders or the number of
Shares registered in the name of a Shareholder
given by a director or authorised signatory of the
Registrar to the Guarantor in accordance with
the Registrar Agreement is conclusive of those
matters and the Guarantor is entitled to rely on the
certificate without any further enquiry on its part.
5
6
GENERAL
This Deed Poll may be amended by the
Guarantor with the consent in writing of the
Company provided that no amendment may
diminish or abrogate the potential liability of the
Guarantor with respect to a particular Share
without the written consent of the registered
holder of that Share at the time.
This Deed Poll is governed by the laws of New
South Wales.
Executed by the Guarantor in the Cook Islands
as a deed poll and delivered on 8 March 2012.
Signed Sealed and Delivered for and on behalf
of Westpac Banking Corporation by its attorney
under power of attorney dated 17 January 2001
Book 4299 No 332 who states that he or she
has no notice of the revocation of the power of
attorney under which he or she so executes this
deed, in the presence of:
Witness
Attorney
Print name
Print name
Print title
Print title
PAYMENTS
The Guarantor may make payment under the
guarantee contained in this Deed Poll by:
(a) cheque payable to the Shareholder posted
to the address of the Shareholder certified by
the Registrar at the Maturity Date; or
explanatory memorandum
(b) paying into an interest free account in
Australia with the Guarantor to be held on
trust for the Shareholder and by notifying the
Company accordingly,
47
Appendix B
List of markets traded by the AHL Diversified Program
As at 31 December 2011
Note The sectors accessed by the AHL Diversified Program and the allocations to them are regularly reviewed and may change depending on
market conditions and trading signals generated by the AHL Diversified Program and as a result of the Investment Manager’s ongoing research.
The AHL Diversified Program may trade different contract types in any one asset and each of these contracts is considered a different market.
Agriculturals
Cocoa
Coffee
Corn
Cotton
Feeder Cattle
Lean Hogs
Live Cattle
Orange Juice
Palm Oil
Rapeseed
Rubber
Soyabeans
Soyameal
Soyaoil
Sugar
Wheat
Bonds
Australian 10yr Bond
Australian 3yr Bond
Canadian Bond
Euro-BOBL
Euro-BUND
Euro-BUXL
Euro-SCHATZ
Gilts
Italian Government 10yr Bond
Japanese Bond
Korean 3yr Bond
Ultra Bond
US 2yr Treasury Note
US 5yr Treasury Note
US 10yr Treasury Note
US Treasury Bonds
Japanese Yen
Malaysian Ringgit
Mexican Peso
New Zealand Dollar
Norwegian Krone
Peruvian Nuevo Sol
Philippine Peso
Polish Zloty
Russian Ruble
Singapore Dollar
South African Rand
South Korean Won
Swedish Krona
Swiss Franc
Taiwanese Dollar
Turkish Lira
UK Sterling
US Dollar
US Dollar Index
Energies
Crude Oil
Gas Oil
Gasoline
Heating Oil
Natural Gas
Interest rates
Australian T-Bills
Bankers Acceptance Canada
Euribor
Eurodollar
NZ 90 day Bills
Short Sterling
Metals
Currencies
Man Series 8 OM-IP 220
Australian Dollar
Brazilian Real
Canadian Dollar
Chilean Peso
Chinese Renminbi
Columbian Peso
Czech Koruna
Euro
Hungarian Forint
Indian Rupee
Indonesian Rupiah
48
Aluminium
Copper
Gold
Lead
Nickel
Palladium
Platinum
Silver
Tin
Zinc
Stocks
Australian SPI200 Index
Dax Index
Dutch All Index
FTSE
FTSE China A50 Index
Hang Seng
H Shares Index
Istanbul Stock Exchange
National 30 Index
Korean Kospi
Kuala Lumpur Comp Index
Mexican Bolsa Index
Nasdaq 100 Index
Nifty Index
Nikkei
Oslo OBX Index
Russell 2000 Index
S&P 500 Index
S&P Canada 60 Index
SET50 Index
Singapore MSCI Index
South African All Index
Swedish OM Index
Swiss Market Index
TAIEX Index
Taiwan MSCI Index
Tokyo Stock Exchange Index
Warsaw Stock Index
PERFORMANCE | SECURITY | DIVERSIFICATION
Important
information