Macquarie Australian Emerging Companies Fund

Transcription

1 Dated 26 October 2016 Macquarie Australian Emerging Companies Fund Information Memorandum Issuer: Macquarie Investment Management Australia Limited ABN AFS Licence Number ARSN

2 Macquarie Australian Emerging Companies Fund IMPORTANT INFORMATION This document is an Information Memorandum which has been prepared by Macquarie Investment Management Australia Limited ABN AFSL (Macquarie, we, us, our) as the responsible entity of the Macquarie Australian Emerging Companies Fund (Fund). Eligible investors This offer of units in the Fund is only available to wholesale clients as defined in section 761G of the Corporations Act (Eligible Investors). A wholesale client is an investor who falls within one of the following categories: a person subscribing at least $500,000 a person who has provided an accountant s certificate to us which is less than 24 months old indicating that they have either: net assets of at least $2.5 million, or a gross income for each of the last two financial years of at least $250,000 a year the holder of an Australian Financial Services Licence a person who controls at least $10 million (including any amount held by an associate or under a trust that they manage) a body regulated by the Australian Prudential Regulatory Authority other than as trustee of an Australian superannuation fund, an approved deposit fund, pooled superannuation trust or public sector superannuation scheme the trustee of an Australian superannuation fund, approved deposit fund, pooled superannuation trust or public sector superannuation and the fund, trust or scheme has assets of at least $10 million a body registered under the Financial Corporations Act 1974 of the Commonwealth of Australia a listed entity or a related body corporate of a listed entity a body corporate incorporated within Australia that is a public authority or instrumentality or agency of the Crown a person who carries on a business of investment in financial products, interests in land or other investments and invests funds received (directly or indirectly) following an offer or invitation to the public, the terms of which provided for the funds subscribed to be invested for those purposes a foreign entity which, if established or incorporated in Australia, would be covered by one of the preceding paragraphs, or a person who otherwise falls within the current definition, from time to time, of a Wholesale Client as defined in the Corporations Act. If you are not an Eligible Investor and units are issued to you in error, we reserve the right to redeem your unitholding and pay you the prevailing redemption price for your units. This Information Memorandum is a summary of significant information about the Fund. You should read this Information Memorandum before making a decision to invest in the Fund. The information provided in this Information Memorandum is general information only and does not take account of your personal financial situation or needs. Before making any investment decision, it is important that you have received, read and understood this Information Memorandum (and any supplementary documents), and that you obtain your own financial advice tailored to your personal circumstances. You can access a copy of the latest version of this Information Memorandum and any supplementary documents free of charge by contacting Macquarie Investment Management Client Service. Investments in the Fund are subject to investment risk Other than Macquarie Bank Limited (MBL), none of the entities noted in this document are authorised deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of these entities, unless noted otherwise. Business Days A reference in this Information Memorandum to Business Day means a day (other than a Saturday, Sunday, public holiday or bank holiday) on which banks are open for general banking business in Sydney. The offer This offer is only open to persons receiving this Information Memorandum within Australia or any other jurisdiction approved by us. Unless otherwise stated, all references to dollars or $ herein refer to Australian dollars. 1

3 Contents Macquarie Australian Emerging Companies Fund at a glance 3 Section 1 - How the Fund works 5 Section 2 - Risks you should consider 7 Section 3 - Fees and other costs 12 Section 4 - Taxation considerations 17 Section 5 - How to invest and access your money 20 Section 6 - Other information 24 Contact details 2

4 Macquarie Australian Emerging Companies Fund at a glance The table below is a summary of the key features of the Fund and a guide to where more detailed information can be found in this Information Memorandum. About the Fund Investment manager Investment objective and strategy Macquarie Investment Management Global Limited The Fund aims to outperform the S&P/ASX Small Ordinaries Accumulation Index (Index) over the medium to long term (before fees). It aims to provide capital growth and some income. The Fund provides investors with exposure to a portfolio of securities issued by emerging companies listed, or expected to be listed on the Australian Securities Exchange or on other Australian securities exchanges. The Fund may also invest in unlisted Australian companies. Where the Fund invests in unlisted Australian companies, it will be limited to 20% of the net assets of the Fund. The Fund may also invest up to 10% of its assets in companies listed on exchanges outside Australia. The market capitalisation of investments of the Fund will be less than $500 million at the time of first investment in the securities. The Fund qualifies as an emerging companies investment under Section 9 of Part 2 of the Migration (IMMI 15/100: Complying Investments) Instrument The Form 1413D for the Fund is available upon request. Page 5 5 Minimum transaction and balance requirements Minimum initial investment Minimum additional investment Minimum balance Fees and costs Management fee Performance fee Buy/Sell spread $1,500,000 (or as we otherwise determine) $50,000 (or as we otherwise determine) $100,000 (or as we otherwise determine) 1.25% pa of net asset value (inclusive of the net impact of GST) 20% of the cumulative outperformance of the Fund (after management fee and expenses) above the return of the Index, subject to a high watermark The buy/sell spread for the Fund, as at the date of this Information Memorandum, is +0.50% for applications and -0.50% for redemptions, but may be varied from time to time. In certain circumstances, the buy/sell spread may increase significantly. Notice will not usually be provided for variations to the buy/sell spread. Current buy/sell spreads that may be applicable to an application or redemption from the Fund are posted on our website at macquarie.com.au/daily_spreads

5 Risks There are a number of risks that may affect the value of your investment. At the date of this Information Memorandum, some of the key risks include, but are not limited to, the following: Distributions Frequency Unit pricing Frequency Investment risk: The Fund has exposure to share markets. The risk of an investment in the Fund is higher than an investment in a typical bank account or fixed income investment. Amounts distributed to unitholders may fluctuate, as may the Fund s unit price. The unit price may vary by material amounts, even over short periods of time, including during the period between a redemption request being made and the time the redemption unit price is calculated. Market risk: Share markets can be and have been volatile, and have the potential to fall by large amounts over short periods of time. The investments that the Fund has exposure to are likely to have a broad correlation with share markets in general, and hence poor performance or losses in domestic and/or global share markets are likely to negatively impact the overall performance of the Fund. Emerging companies risk: The Fund has exposure to companies generally considered very small to small in terms of market capitalisation. Companies within this sector of the market may include recently established entities with limited public information, or entities engaged in new-to-market concepts which may be speculative in nature. Shares in companies in this sector are generally less liquid and more volatile than those of larger companies. Emerging companies exposure may result in higher unit price volatility and an increased risk of loss. You should read the risks section in full and seek your own professional advice in relation to an investment in the Fund. Normally quarterly Normally daily Applications and redemptions Frequency Normally, daily for both applications and redemptions. Requests for applications must be received by 2.00pm (Sydney time) and requests for redemptions must be received by 12.00pm (Sydney time) on a Business Day or as we otherwise determine. Refer to Section 5 of this Information Memorandum for more information. 15 4

6 Section 1 - How the Fund works 1.1 Fund structure The Fund is an Australian unit trust registered under the Corporations Act 2001 (Cth) (Corporations Act) as a managed investment scheme. Each unit gives an investor in the Fund a beneficial interest in the Fund s assets as a whole, but not an entitlement to, or interest in, any particular asset of the Fund. Macquarie Investment Management Australia Limited (Macquarie, we, us, our), a company incorporated under the laws of Australia, is the responsible entity of the Fund. We are responsible for the investment decisions, management and administration of the Fund. Macquarie is part of the Macquarie Group and holds an Australian Financial Services Licence, authorising it to act as the responsible entity of the Fund. Our powers and duties are set out in the constitution of the Fund, the Corporations Act and general trust law. We may delegate some of these duties to third parties including other entities within the Macquarie Group. We have appointed Macquarie Investment Management Global Limited (ABN AFSL ) (Investment Manager) as the investment manager of the Fund. The Investment Manager is part of the Macquarie Group. The Investment Manager may appoint sub-investment managers to provide investment management, advisory or transaction execution services. 1.2 Investment objective and strategy The Fund aims to outperform the S&P/ASX Small Ordinaries Accumulation Index (Index) over the medium to long term (before fees). It aims to provide capital growth and some income. The Fund provides investors with exposure to a portfolio of securities issued by emerging companies listed, or expected to be listed on the Australian Securities Exchange or on other Australian securities exchanges. The Fund may also invest in unlisted Australian companies. Where the Fund invests in unlisted Australian companies, it will be limited to 20% of the net assets of the Fund. The Fund may also invest up to 10% of its assets in companies listed on exchanges outside Australia. The market capitalisation of investments of the Fund will be less than $500 million at the time of first investment in the securities. The Fund may also hold derivatives for risk management purposes (including options, futures, warrants and forwards) and cash. The Investment Manager aims to build a portfolio that provides exposure to some of the fastest growing companies primarily listed on Australian securities exchanges. The performance of these companies is expected to be impacted by a wide range of factors. The process employs a combination of quantitative screening and an intensive fundamental research to identify companies which the Investment Manager believes: are undervalued over the medium term on the Investment Manager s forecasts, and will exceed market expectations over the long term. The Fund qualifies as an emerging companies investment under Section 9 of Part 2 of the Migration (IMMI 15/100: Complying Investments) Instrument The Form 1413D for the Fund is available upon request. 1.3 Valuation and unit pricing We normally calculate application prices and redemption prices daily. The unit price is equal to the value of the Fund s assets, less liabilities, divided by the number of units on issue. Application and redemption unit prices take into account transaction costs (the buy/sell spread) as applicable. Assets are normally valued at their most recent market value, using independent pricing sources where available for the particular asset type. Any units held in unlisted funds are valued at their most recent unit prices as supplied by the fund operator. Overseas assets are valued as at the close of business in each of the relevant overseas markets. We may use model values or fair values if market values are not available or are considered by us to be unreliable. The valuation methods and policies applied by Macquarie, to value the Fund s assets and liabilities, are consistent with applicable industry standards and result in unit price calculations that are independently verifiable. Under the constitution for the Fund, Macquarie has certain discretions in determining application 5

7 and redemption prices. We have documented our policy regarding the exercise of these discretions. A copy of the policy, together with the related documents, is available free of charge from Client Service. In some circumstances, we may need to suspend the calculation of unit prices for the Fund (including indefinitely). For example, we may not have enough information about the underlying investments of the Fund to calculate a unit price for the Fund. On any day, the application price is different from the redemption price of units as a result of the buy/sell spread. See Section 3.2 of this Information Memorandum for more details on the buy/sell spread. 1.4 Distributions The Fund may receive distributions, interest and gains from its underlying investments. We will generally seek to distribute any net income on a quarterly basis and any net realised capital gains at least once a year. Distributions will be calculated based on the net income and net realised capital gains of the Fund. You may elect, in the application form, to have your distributions paid directly into a nominated Australian financial institution account or have them reinvested as additional units. If you do not make an election on the application form, your distributions will be reinvested. If you elect to have your distributions paid to you, we may pay distributions into a non-interest bearing trust account in order to facilitate payment of these amounts to your nominated account. If we are unable to credit your account for any reason these amounts may continue to be held in such a non-interest bearing trust account until you provide alternative payment instructions or we are required by law to pay these amounts to any regulatory body or other person or account. Unit prices may fall as a result of the allocation of distribution to unitholders, which has the effect of reducing the Fund s net assets. If you invest towards the end of a distribution period, you may find that you will receive some of your capital as income. However, if your application price is calculated as at the last Business Day of the period, your application price will not include an income component for that period. Similarly, if you withdraw your investment towards the end of the distribution period, you will receive your share of any accrued income as capital. However, if your redemption price is calculated as at the last Business Day of the period, your redemption price will not include an income component for that period but you will also receive the income as part of your distribution. 1.5 Calculating the performance of the Fund To calculate the performance of the Fund, we comply with the standards set by the Financial Services Council. Performance figures are calculated before tax and after deducting fees and expenses, using net asset value prices, assuming that income is reinvested and that the investment is held for the full performance calculation period. Past performance figures can be obtained from our website at macquarie.com.au/performance or by calling Client Service. Past performance is not a reliable indicator of future performance, which can differ materially. Returns can be volatile, reflecting rises and falls in the value of the underlying investments. 1.6 Changes to the Fund We may make changes to the Fund from time to time, including to the investment strategy of the Fund. Where we do so, we will provide such notice as required by the Corporations Act or constitution of the Fund. 1.7 Ethical investments Macquarie Asset Management is a signatory to the UN Principles for Responsible Investment (UNPRI). The investment team is responsible for identifying and incorporating labour standards, environmental, social and ethical considerations and, to the extent relevant, their impact on the selection, retention or realisation of the investments of the Fund. 6

8 Section 2 Risks you should consider All investments carry risk. Different investments carry different levels of risk, depending on the investment strategy and the underlying investments. Generally, the higher the potential return of an investment, the greater the risk (including the potential for loss and unit price variability over the short term). Financial markets can, and have been volatile, and higher levels of market volatility may result in greater risk for investors than an investment in less volatile markets. When you make an investment, you are accepting the risks of that investment. It is therefore important to understand these risks before deciding to invest. The level of risk that you are willing to accept will depend on a range of factors including your financial objectives, risk tolerance, age, investment timeframe, where other parts of your wealth are invested and whether your investment portfolio will be appropriately diversified after making the investment. The value of your investment and the returns from your investment will vary over time. Future returns may differ from past returns. We do not guarantee the performance or returns of the Fund and you may lose some or all of the money that you have invested in the Fund. Some of the significant risks of the Fund are described below, but there could be other risks that adversely affect the Fund. You should seek your own professional advice on the appropriateness of an investment in the Fund for you, having regard to your particular circumstances and financial objectives. Investment risk: The Fund has exposure to share markets. The risk of an investment in the Fund is higher than an investment in a typical bank account or fixed income investment. Amounts distributed to unitholders may fluctuate, as may the Fund s unit price. The unit price may vary by material amounts, even over short periods of time, including during the period between a redemption request being made and the time the redemption unit price is calculated. Market risk: Share markets can be and have been volatile, and have the potential to fall by large amounts over short periods of time. The investments that the Fund has exposure to are likely to have a broad correlation with share markets in general, and hence poor performance or losses in domestic and/or global share markets are likely to negatively impact the overall performance of the Fund. Emerging companies risk: The Fund has exposure to companies generally considered very small to small in terms of market capitalisation. Companies within this sector of the market may include recently established entities with limited public information, or entities engaged in new-to-market concepts which may be speculative in nature. Shares in companies in this sector are generally less liquid and more volatile than those of larger companies. Emerging companies exposure may result in higher unit price volatility and an increased risk of loss. Concentration risk: The Fund may have exposure to a small number of key investments. This may result in the returns of the Fund being dependent on the returns of individual companies and industry sectors. This concentration of exposures may increase the volatility of the Fund s unit price, and increase the risk of poor performance. It may also result in the Fund s returns differing significantly from its benchmark. Security specific risk: Securities and the companies that issue them are exposed to a range of factors that affect their individual performance. These factors may cause an investment s return to differ from that of the broader market. The Fund may therefore underperform the market and/or its peers due to its security specific exposures. Defensive strategies risk: The Fund may be protected against market downturns by employing defensive investment strategies. Such strategies have the aim of reducing the Fund s market exposure, and may include allocating a portion of the Fund s assets to cash. There is no guarantee that such defensive strategies will provide the expected levels of protection against loss. Additionally there is a risk that defensive strategies are employed at a time when the market rises, potentially resulting in the Fund underperforming its peers or the benchmark. Unlisted securities risk: The Fund may have exposure to in securities which are not listed on a securities exchange. Unlisted securities may have a higher risk of loss, and may be difficult to independently value and to sell due to their unlisted nature. Where such securities do list (for example through an initial public offering, or IPO), the listing price may differ materially from the price previously used when calculating the Fund s unit price. Where the Fund has exposure to unlisted securities these may increase its unit price volatility, its potential to underperform its benchmark, and its potential for loss. 7

9 Default risk: Issuers or entities that the Fund has exposure to may default on their obligations, for instance by failing to make a payment due on a security or by failing to return principal. Such parties can include the issuers of securities that the Fund holds or has exposure to including warrants, depositary receipts, and hybrid securities. Counterparties to the Fund may default on a contractual commitment to the Fund. Counterparties may include over-the-counter derivatives counterparties, brokers (including clearing brokers of exchange traded instruments), stock lending counterparties, foreign exchange counterparties, as well as the Fund s custodian. Default on the part of an issuer or counterparty could result in a financial loss to the Fund. Liquidity risk: Investments may be difficult or impossible to sell, either due to factors specific to that security, or to prevailing market conditions. Liquidity risk may mean that an asset is unable to be sold or an exposure is unable to be rebalanced within a timely period and at a fair price, potentially resulting in delays in redemption processing, or even the suspension of redemptions. If we are required to process a large redemption or application, the exposure of the Fund to particular investments, sectors or asset classes may be altered significantly due to the security sales or purchases required. Currency risk: The Fund may have exposure to investments denominated in currencies other than Australian dollars. Currency risk is the risk that fluctuations in exchange rates between the Australian dollar and foreign currencies impact the value of the foreign investments that the Fund has exposure to. Derivatives risk: Derivatives may be used to hedge existing exposures or to gain economic exposure. The use of derivatives may expose the Fund to risks including counterparty default, legal and documentation risk, and the risk of increased sensitivity of the Fund s unit price to underlying market variables. The use of derivatives may have the effect of magnifying both gains and losses. Manager risk: There is no guarantee that the Fund will achieve its performance objectives, produce returns that are positive, or compare favourably against its peers. The Investment Manager may change its investment strategies and internal trading guidelines over time, and there is no guarantee that such changes would produce favourable outcomes. International investments risk: The Fund has exposure to international investments. Global and country specific macroeconomic factors may impact the Fund s international investments. Governments may intervene in markets, industries and companies; may alter tax and legal regimes; and may act to prevent or limit the repatriation of foreign capital. Such interventions may impact the Fund s international investments. Significant Investor Visa compliance: The Fund, or the instruments in which it invests, may fail to be compliant with the Significant Investor Visa (SIV) requirements set by the Australian government. For example, this may arise due to changes to the SIV requirements. Regulatory and legal risk: Governments or regulators may pass laws, create policy, or implement regulation that affects the Fund and/or the execution of investment strategies. Such initiatives impact either a specific transaction type or market, and may be either country specific or global. Such changes may result in the Fund failing to achieve its investment objectives. Similarly laws affecting registered managed investment schemes (including taxation and corporate and regulatory laws) may change in the future, affecting investors rights and investment returns. 8

10 Section 3 Fees and other costs 3.1 Fees and other costs Management fee The management fee is 1.25% pa of the net asset value of the Fund (inclusive of the net impact of GST and net of Reduced Input Tax Credits). It generally accrues daily and is payable quarterly in arrears. It is deducted from the Fund s assets and reflected in the Fund s unit price. You may also incur a buy/sell spread when your money moves in and out of the Fund. Additional fees and charges may apply. See Section 3.2 below for more information. Performance fee We also charge a performance fee of 20% based on the Fund s cumulative outperformance over the S&P/ASX Small Ordinaries Accumulation Index (Index), subject to a high watermark. It is not possible to reliably estimate the actual performance fee payable in any given period, as we cannot accurately forecast what the performance of the Fund will be. The fee is calculated on the net asset value of the Fund and is accrued daily and payable quarterly. It is deducted from the Fund s assets and is reflected in the Fund s unit price. In general terms: 1. Each day, the cumulative performance of the Fund, since the inception date, is compared with the cumulative performance of the Index since the inception date of the Fund. The Fund s cumulative performance is calculated after the deduction of the management costs (paid or accrued) but before the deduction of performance fees (paid or accrued) and disregards any applications in and redemptions out of the Fund. The ratio of the Fund s performance above the Index s performance is referred to as outperformance. 2. A high watermark is set each time the level of cumulative outperformance exceeds the previous highest level of cumulative outperformance since inception of the Fund. 3. The ratio by which the Fund cumulative outperformance exceeds the previous high watermark is then calculated. 4. If the previous high watermark is exceeded on a day, a performance fee of 20% of the ratio of outperformance above the previous high watermark, multiplied by the Fund s net asset value, is then accrued. The performance fee is calculated daily and payable quarterly. 5. However, if the previous high watermark is not exceeded, no performance fee is deducted, even if the Fund performance has exceeded the Index performance on that day. Example Balance of $50,000 On a day, the cumulative Fund performance since inception is compared with the cumulative Index performance since inception, and there is no outperformance. On a day, the cumulative Fund performance since inception, when compared with the cumulative Index performance since inception, has outperformed the Index. However, the cumulative Fund outperformance since inception is less than the previous highest level of outperformance since inception of the Fund (the high watermark ). On a day, the cumulative Fund performance since inception, when compared with the cumulative Index performance since inception, has outperformed the Index by 10%. The Fund s previous highest level of outperformance since inception of the Fund (the high watermark ) is 8%. No performance fee is payable. No performance fee is payable. 20% x [(1 + 10%) / (1 + 8%) - 1] x $50,000 = $185 Therefore, for a balance of $50,000, you would effectively pay a performance fee of $185 for that period. 9

11 3.2 Additional explanation of fees and costs Expenses The constitution of the Fund allows all properly incurred expenses to be recovered directly from the Fund. Macquarie is entitled to this recovery in relation to the proper performance of its duties in respect of the Fund. When expenses are paid by the Fund, they will be deducted from the Fund s assets and reflected in the Fund s unit price. Expenses are generally paid when incurred. Administrative expenses We currently do not seek reimbursement from the Fund for administrative expenses such as custody fees, registry costs, audit, accounting and tax fees, postage and printing costs. Such expenses will be paid by us out of the management fee. We will provide prior notice to investors if we seek to recover these expenses from the Fund in the future. Abnormal expenses Abnormal expenses, such as the cost of unitholder meetings, defending legal proceedings, special valuation of assets and the costs of terminating the Fund, will generally be paid by the Fund. Abnormal expenses are not generally incurred during the day-to-day operation of the Fund. Abnormal expenses are in addition to administrative expenses. Transaction costs Transaction costs incurred in the acquisition or disposal of the assets of the Fund such as brokerage, clearing costs, transaction fees, taxes and stamp duty will generally be paid for by the Fund. Where the acquisition or disposal of assets relates to a subscription or redemption from the Fund, the Fund may recover an estimate of these costs from the investor who is applying for, or redeeming, units through the buy/sell spread. Buy/Sell spread When units are acquired, a buy spread is added to the value of a unit. The buy spread is an amount which reflects the estimated transaction costs associated with acquiring the underlying investments and may take into account the difference between the bid/offer price of investments traded and/or the estimated market impact of the acquisitions on the price of the investments being acquired. When units are redeemed, a sell spread is subtracted from the value of a unit. The sell spread is an amount which reflects the estimated transaction costs of disposing of the underlying investments and may take into account the difference between the bid/offer price of investments traded and/or the estimated market impact of the disposals on the price of the investments being sold. The buy/sell spreads are retained by the Fund and not paid to us or the Investment Manager. A buy/sell spread seeks to ensure that the estimated transaction costs of the acquisition or redemption are borne by the investor who is applying for or redeeming the units, and not by the other investors in the Fund. The buy/sell spread may apply even if no transaction to acquire or dispose of assets is required (for example, where there is an application from one investor and a corresponding redemption by another investor). The buy/sell spread for the Fund, as at the date of this Information Memorandum, is +0.50% for applications and -0.50% for redemptions, but may be varied from time to time. In certain circumstances, the buy/ sell spread may increase significantly. Notice will not usually be provided for variations to the buy/sell spread. Current buy/sell spreads that may be applicable to an application or redemption from the Fund are posted on our website at macquarie.com.au/daily_spreads. We may at our discretion reduce the buy/sell spread in certain circumstances, for example where an investor subscribes using assets (rather than cash) on an application or receives assets (rather than cash) on a redemption. Information about fee changes We may increase certain fees and expenses without your consent. We will provide at least 30 days notice to you of any proposed increase in fees, charges or expenses (except any changes to the buy/sell spread). We cannot charge more than the constitution of the Fund allows, unless we obtain investors approval to do so. 10

12 Other information about fees and costs Underlying funds fees and expenses The Fund may gain exposure to securities and other assets by investing in underlying funds. Where we are not (or an entity forming part of Macquarie Investment Management is not) the responsible entity, trustee or investment manager of the underlying fund Any management fee, performance fee and expenses charged by the underlying fund will generally be indirectly borne by the Fund through the value of the Fund s holding in the underlying fund. The fees and expenses charged by the underlying fund are in addition to the fees and expenses charged by us for your investment in the Fund. Where we are (or an entity forming part of Macquarie Investment Management is) the responsible entity, trustee or investment manager of the underlying fund Management fees Any management fee charged by the underlying fund will be rebated to the Fund or reduced such that the management fee payable to us (whether directly or indirectly) will not exceed the management fee of the Fund. Expenses and performance fees Any performance fee and expenses charged by an underlying fund will generally be borne by the Fund indirectly through the value of the Fund s holding in an underlying fund. Adviser remuneration and soft dollar payments A service fee of 0.25% pa will be paid quarterly to your adviser by us out of the management fee and is not an additional cost to you. Your adviser, at their discretion, may agree to rebate up to 100% of the service fee to you. The rebate will be paid in the form of an allocation of additional units in the Fund. The reinvestment of the rebate will be at the net asset value price on the first Business Day after each quarter end. Where permitted by relevant law, your adviser may receive non-monetary benefits from us, such as business and technical support, professional development, accommodation and travel. These benefits are not an additional cost to you. User pays costs Certain user pays fees apply for additional services which we provide at your request or which are incurred in connection with your particular investment, such as paying redemption proceeds by bank cheque, telegraphic transfer or RTGS, and dealing with overseas bank drafts. We can recover the costs we incur on your behalf by redeeming units from your investment, as required. These costs represent the standard bank charges we incur and are not a fee paid to us. The current costs are in the table below. Service Charge (includes GST if applicable) Bank cheque $7.50 Telegraphic transfer $35.00 RTGS $5.00 for transactions up to $499,999 and free for transactions of $500,000 and above Overseas bank draft $20.00 Differential fees We may negotiate reduced management fees and performance fees as permitted by the Corporations Act and ASIC relief. For example, we may negotiate reduced fees with sophisticated and professional investors, as defined in the Corporations Act. There is no set manner or method of negotiating fees. We may also offer reduced management fees to employees of the Macquarie Group of companies. The reduced fees are determined by us and notified to eligible employees from time to time. The reduced fees do not adversely affect the fees paid or to be paid by other unitholders in the Fund who are not entitled to the benefit of the fee arrangements. Contact Client Service for more information. 11

13 Section 4 - Taxation considerations Investing in a registered managed investment scheme is likely to have tax consequences. The information contained in the following summary is intended to be of a general nature only. It does not constitute tax advice and should not be relied on as such. You are strongly advised to seek independent professional advice on the tax consequences of an investment in the Fund, based on your particular circumstances, before making an investment decision. 4.1 Tax position of the Fund Income tax As investors in the Fund will collectively be presently entitled to the entire amount of the income of the Fund for each relevant financial year, the Fund should not be liable to Australian income tax under present income tax legislation. If the Fund incurs a tax loss in a financial year, there will be no distributable income for that year and the tax loss may be carried forward to be utilised in subsequent financial years (subject to the loss carry forward rules). 4.2 Tax position of resident investors The following comments only deal with Australian residents who are individuals, complying superannuation entities and companies that will hold their units on capital account. Capital Gains Tax (CGT) An Australian resident investor s assessable income for each year includes any net capital gains (ie after offsetting capital losses). There are two potential sources of capital gains tax to investors in relation to their investment in the Fund: 1. Capital gains tax may be payable on part of the distribution made in respect of units from the Fund on the basis that the assets in the Fund are held on capital account. The Fund has made the Managed Investment Trust CGT election to treat shares, units and options over shares and units as CGT assets. The Fund s ability to make this election is subject to it satisfying certain criteria. The Fund does not make allowance in the unit price for any tax on unrealised net gains accruing when investments are re-valued. As a result, investors should be aware that they may be liable for capital gains tax arising from the sale of assets where unrealised gains arose before they acquired their units. The distribution by the Fund of certain non-taxable amounts (if any) may give rise to cost base adjustments to an investor s units for CGT purposes. Such cost base adjustments may result in either an increased capital gain or reduced capital loss on the subsequent disposal of units in the Fund, or, an immediate capital gain to the extent the cost base of the units of the Fund is reduced to less than zero. 2. Capital gains tax may be payable when units are redeemed from the Fund. Concessions may be available depending on how long the units have been held. Where the units have been held continuously for at least 12 months, individuals and trusts may be entitled to a CGT discount of 50% and superannuation entities may be entitled to a discount of 33 1/3% in relation to the disposal of units. Companies are not entitled to this discount. Capital losses incurred by an investor may be offset against the gross capital gains for the investment before the application of the CGT discount. Capital gains or income arising from securities sold to meet a significant redemption can be distributed to the redeeming investor. Significant redemptions are those where an investor s total redemptions in the one financial year are 5% or more of the Fund s net asset value. In these circumstances the objective would be for remaining investors not to be affected by the capital gains resulting from a disposal of the assets where both the Fund and the redeeming investors make a capital gain in the relevant financial year. The 5% threshold may be varied by Macquarie with advance notice to investors. 12

14 Taxation of financial arrangements (TOFA) The TOFA rules may apply to financial arrangements held by the Fund when calculating its assessable income. Broadly, the TOFA rules may impact the timing of the recognition of gains and losses in the Fund for tax purposes and will also treat relevant gains and losses as being on revenue account. Franked dividends The Fund will seek to distribute franking credits to investors received from the Fund s investments in Australian companies. Any franking credits attached to distributions will be shown in investors annual tax statements. To the extent franking credit entitlements exceed tax payable by an investor, any excess may be refundable to individuals and complying superannuation funds. Foreign income tax offsets Australian residents are required to include in their assessable income their share of certain foreign taxes paid in respect of income derived by the Fund. Investors may be able to benefit from a foreign income tax offset in respect of foreign taxes paid by the Fund provided they are paid in relation to an amount that is included in the investor s assessable income and do not exceed the higher of a particular investor s foreign income tax offset limit and $1,000. Tax file number (TFN) and Australian Business Number (ABN) It is not compulsory for investors to provide their TFN or ABN, and it is not an offence if they decline to provide them. However, unless exempted, if the TFN or ABN is not provided, tax will be deducted from income at the highest marginal rate plus the Medicare levy. TFNs and ABNs can be provided on the application form when making an initial investment. Goods and Services Tax (GST) The Fund has registered for GST. The issue and redemption of units in the Fund and receipt of distributions will not be subject to GST. However, the Fund may incur GST on fees and expenses that it pays. The Fund may be entitled to claim input tax credits and/or reduced input tax credits on certain of these fees and expenses. 4.3 Tax position of non-resident investors Non-resident withholding tax Appropriate deductions of Australian tax will be made from distributions of Australian sourced income to nonresident investors. The amounts will be withheld at the rates of tax applicable to non-resident investors and will depend on the type of income and residence of the investor. Distributions to non-resident investors from sources wholly outside of Australia and on most capital gains will generally be exempt from Australian income tax and withholding tax. Non-resident investors may also be subject to tax laws in the country in which they reside, but may be entitled to a credit for some or all of the tax deducted in Australia. Capital Gains Tax On the basis that the assets of the Fund will not be direct or indirect interests in Australian real property, no capital gains tax consequences should arise for non-resident investors (assuming that their units are held on capital account) as a result of investing in the Fund. 4.4 General information Transaction taxes Normal transaction taxes and stamp duties (if any) also apply. Tax statement An annual tax statement will be sent to each Australian resident investor to assist in completing tax returns. 13

15 Tax advice If you have any questions regarding the application of income tax or capital gains tax to an investment in the Fund, you should consult your tax adviser. Investors should seek their own professional advice, including as to taxation, before investing. Please note that any discussion of tax in this Information Memorandum refers to Australian tax law as at the date of this Information Memorandum, and that these laws may change at any time. FATCA The United States has enacted the Foreign Account Tax Compliance Act (FATCA). The Australian government has entered into an inter-governmental agreement (IGA) with the US in relation to the application of FATCA to Australian institutions. The Macquarie Group intends to comply (to the extent applicable) with: FATCA the IGA between Australia and the US, and any local laws designed to give effect to the intent and purpose of FATCA and the IGA, (collectively, the FATCA Obligations ). How could FATCA affect you? By applying for units in the Fund, you: agree to promptly provide us with any information we may request from you from time to time agree to promptly notify us of any change to the information you have previously provided us consent to us disclosing any information we have in compliance with our FATCA Obligations if your units are held by or for the benefit of, or controlled by, specified US person(s) (as set out in the IGA). This may include disclosing information to the Australian Tax Office, who may in turn report that information to the US Internal Revenue Service, and waive any provision of domestic or foreign law that would, absent a waiver, prevent us from complying with our FATCA Obligations. Failure to comply with our FATCA Obligations could result in the Fund being subject to a 30% US withholding tax on payments of US income or gross proceeds from the sale of particular US securities. However, to the extent that all information requested by us is obtained, this withholding tax should not apply to the Fund or its investors. It is important to note that: although the Fund may attempt to take steps to manage the imposition of this withholding tax, no assurance can be given that the Fund will be successful, and if you fail to provide us with any information requested by us, and we become subject to such withholding tax, we may seek to recover the amount of such tax from you. 14

16 Section 5 - How to invest and access your money 5.1 Making initial and additional investments in the Fund Application cut-off time (Application Cut-off) 1 Minimum initial investment amount 1 Minimum additional investment amount pm Sydney time on a Business Day $1,500,000 $50,000 1 Or as we otherwise determine. You can apply to make an initial investment in the Fund by completing the application form accompanying this Information Memorandum. Where we receive an application form (including the required identification documentation) completed to our satisfaction, and cleared funds before the Application Cut-off, investors will generally receive the application price calculated for the relevant Business Day. Unless we agree otherwise, if we receive an application form (including the required identification documentation) completed to our satisfaction, and cleared funds after the Application Cut-off, or on a non- Business Day, we will generally treat the application as having been received before the Application Cut-off for the next Business Day. If we are not able to issue units immediately after receipt of your application money, that money will be held in a non-interest bearing trust account with an authorised deposit-taking institution. If we are not able to issue units within a period of one month starting from the day on which we receive your application money (or if this is not reasonably practicable, by the end of such longer period as is reasonable in the circumstances), we will return the application money to you. You can add to your investment at any time by depositing cleared funds using the account details provided to you at the time of your initial investment (Investment Account). Deposits into the Investment Account will be deemed to be an application for additional units in the Fund and will be subject to the same Application Cutoff requirements that apply to initial investments. We will not be responsible for any losses incurred by you as a result of the incorrect payment of funds into the Investment Account or into another incorrect bank account. We may accept or reject an application (in whole or in part) at our discretion (without giving reasons). How to apply To make your initial investment, complete the application form that accompanies this Information Memorandum. You can send the completed application form and required identification documentation to us by mail, facsimile or . If you fax or your identification documentation, the original should follow in the mail for our records. Your account may not be opened until your original identification documentation has been received. Paying your investment amount Payment of the initial and any additional investment amounts can be made by: bank transfer Real Time Gross Settlement (RTGS) cheque, and such other method approved by us. Make the cheque payable to 'MIMAL Macquarie Australian Emerging Companies Fund A/C <Full investor name>. For example 'MIMAL Macquarie Australian Emerging Companies Fund A/C John Smith ATF Smith Super Fund'. If paying by bank cheque, please ensure the investor is the cheque payee or that proof of purchase is attached. 15

17 To assist in processing additional investments greater than $500,000, please send notification by facsimile or to Client Service prior to the Fund s Application Cut-off. There may be delays in receipt of cleared funds for each method of payment and cleared funds will not necessarily be received by Macquarie prior to any particular cut-off requirement. Payments must be made in Australian dollars. Delays when an application form is incomplete As part of Macquarie s obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF), we cannot accept or process an application to invest until we are satisfied that the identity of the investor has been verified in accordance with the AML/CTF. Where an application is unable to be finalised for AML/CTF reasons or is otherwise incomplete, we will seek to contact you to obtain the missing or additional information. Your application will not be accepted by us, nor units issued to you, unless our AML/CTF verification has been completed or other issues have been addressed to our satisfaction. We will not be liable to any prospective investor for any losses incurred, including as a result of market movements, if an application is rejected or the processing of an application is delayed. 5.2 Redeeming your investment Redemption cut-off time (Redemption Cut-off) 1 Minimum balance amount 1, pm Sydney time on a Business Day $100,000 1 Or as we otherwise determine. 2 If acceptance of a redemption request will result in a balance of less than the minimum balance amount, we may either reject the redemption request or treat the redemption request as relating to your entire holding. You can generally request redemption of all or part of your investment in the Fund by completing a redemption request form which you can download at macquarie.com/redemptionform. Alternatively, you can provide a signed request specifying the account name, the Fund name, the amount or number of units to be withdrawn and bank details. You can send your redemption request by facsimile, , mail or such other method agreed by us. Where we receive a redemption request, completed to our satisfaction, before the Redemption Cut-off, investors will generally receive the redemption price calculated for that Business Day. Unless we agree otherwise, if we receive a redemption request, completed to our satisfaction, after the Redemption Cut-off, we will generally treat the request as having been received before the Redemption Cut-off for the next Business Day. Before paying you the redemption amount, we may deduct from that amount any money you owe us in relation to your investment. Redemption proceeds will generally be paid within five Business Days after we accept the redemption request. Suspension of redemptions In some circumstances, such as where there is a suspension of redemptions, investors may not be able to redeem their investment within the usual period or at all. The Fund s constitution generally allows us 21 days after acceptance of a redemption request to pay redemption proceeds. This may be extended if: payment of all or part of the redemption amount is not in the interests of unitholders as a whole or is materially adverse to unitholders as a whole, or market conditions are such that liquidation of the Fund s assets to facilitate the redemption is difficult, not desirable or impossible (such as where there is restricted liquidity or suspended trading in a market for the assets of the Fund). 16