Macquarie Bank Limited

Transcription

1 Macquarie Bank Limited ABN AFS Licence A Member of the Macquarie Group of Companies 1 Martin Place Telephone SYDNEY NSW 2000 Facsimile GPO Box 4294 Internet SYDNEY NSW 1164 AUSTRALIA = = = MACQUARIE APEX Macquarie Bank Limited ( Macquarie ) has attached a research report on Macquarie Apex ( Facility ) prepared by Lonsec Limited ( Lonsec ) and commissioned by Macquarie. The report reflects the observations and conclusions of Lonsec about the Facility. The report was prepared in part based on information provided by the relevant entities in the Macquarie Group of companies as well as Lonsec s own expertise and other information and expertise accessed by Lonsec. The report is not the work of, nor does it necessarily reflect the views of any member of the Macquarie Group of companies or Macquarie. No company in the Macquarie Group of companies nor any of their respective officers or employees makes any warranty in relation to, or accepts any responsibility or liability arising in relation to, the content of the report. The report has been prepared for the use of licensed financial advisers only. It has not been prepared for the use of individual investors, and advisers and brokers should not pass on this report or extracts or conclusions from such information to their clients. In no circumstances is it to be used by a retail client for the purpose of making a decision about a financial product or class of financial products. Macquarie Apex ( Facility ) and any underlying unsecured note ( Note ) are issued by Macquarie Bank Limited (ABN and AFSL ) ( Macquarie ). The Facility and any Note are issued pursuant to a Product Disclosure Statement dated 4 April 2012 (as may be amended or supplemented from time to time). Additional terms relating to each series of Notes available for investment from time to time will be set out in a Term Sheet (together with the PDS, the Offer Document ). You and your clients should carefully consider the Offer Document, in particular the risks described in Section 6 of the PDS, before making any investment decision, including whether to acquire, or whether to continue to invest in, a Note. This is general advice only and does not take account of any investor s objectives, financial situation or needs. Advisers must form their own views on whether the Facility is appropriate after considering their client s objectives, financial situation and needs. We recommend advisers seek their own legal and taxation advice. Kind regards, Macquarie Bank Limited Macquarie Bank Limited is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia), and its obligations do not represent deposits or other liabilities of Macquarie Bank Limited.

2 Important Dates Initial Offer Open / Close Date 5 April 2012 / 11 May 2012 Issue Date 18 May 2012 Exposure Start Date / Exposure End Date 18 May 2012 / 17 May 2013 Barrier Observation Period 18 May 2012 to 17 May 2013 Fixed Coupon Periods Q1: 18 May Aug 2012 Maturity Date (Investment Term) Key Information Investment Type Issuer Q2: 18 Aug Nov 2012 Q3: 18 Nov Feb 2013 Q4: 18 Feb May May 2013 (12 months) A Note (an unsecured contractual obligation) that provides returns linked to the performance of multiple shares (Reference Assets) Macquarie Bank Limited (MBL) Minimum Investment $50,000 Capital Protection Reference Assets Indicative Fixed Coupon Rates (p.a.)* Barrier Start End Liquidity Fees & Commissions Establishment Fee Upfront Adviser Fee Series J ANZ Rio Tinto Woolworths Series J 13.12% % There is NO capital protection Series K ANZ CBA QBE Insurance Woolworths Series K 13.45% % Series J - 70% of Reference Asset s Start Series K - 65% of Reference Asset s Start Depends on the performance of the Reference Assets during the Barrier Observation Period and the performance of the Reference Assets at Maturity. This amount is payable to investors in cash by default, or investors can apply to receive shares (the lowest performing Reference Asset) if the is less than the Investment. Generally the closing price of each Reference Asset on the Exposure Start Date Generally the closing price of each Reference Asset on the Maturity Date Monthly, at the Issuer s discretion 1.1% of the Investment (including GST) but can be waived if adviser agrees to receive no Upfront Adviser Fee, payable by investor to Issuer. MBL may pay an investor s adviser an Upfront Adviser Fee equal to the Establishment Fee. * Determined on the Exposure Start Date. This offer will not proceed if MBL is unable to set the Fixed Coupon Rate to be at least equal to the lowest level in the specified range. The ranges assume an Upfront Adviser Fee of 1.1% of the Investment (including GST) will be paid to an investor s adviser. The Fixed Coupon Rate applicable will be increased if no Upfront Advisor Fee is to be paid. What this Rating means The Recommended rating indicates that Lonsec has conviction that the fund or product can achieve its objectives and, if applicable, outperform peers over an appropriate investment timeframe. The manager or product has a number of competitive advantages in people, process and product design. The investment is a recommended entry point to access this asset class or strategy. Using this Product This is General Advice only and should be read in conjunction with the Disclaimer, Disclosure and Warning on the final page. Investors are advised to read the Product Disclosure Statement and Term Sheet prior to making an investment decision. Lonsec views the Macquarie Apex Notes Facility Series J and K (the Note) as a concentrated Australian Equities exposure with an income focus and appropriate for some Balanced and Growth investors. Lonsec recommends the Note as a small part of an equities exposure in a diversified portfolio. Lonsec s asset allocation for all risk profiles is outlined in Lonsec s Risk Profile Review. The Note may appeal to: Investors who believe the closing price of any of the Reference Assets will not be equal to or less than the Barrier at any time during the Barrier Observation Period. Investors seeking a fixed distribution over the short term. Investors who are prepared to have their capital at risk to potentially earn higher returns than available from term deposits or other fixed rate investments. Investors who believe the total return (dividends plus capital growth) on any of the Reference Assets over the investment term will be lower than the Note s fixed distributions. Investors who are comfortable with the Start of the Reference Assets and are willing to incur the potential losses associated with any of the Reference Assets falling to or below the Barrier. Product Risk Characteristics Leverage Liquidity Counterparty Concentration Volatility Low Moderate High Risk categories are based on Lonsec s qualitative opinion of the risks inherent in the product s asset class and the risks relative to other products in the relevant Lonsec sector universe. WE STRONGLY RECOMMEND THAT POTENTIAL INVESTORS READ THE PRODUCT DISCLOSURE STATEMENT 1 Lonsec Limited ABN AFSL No Participant of ASX Group

3 Lonsec Opinion of this Product The Note is structured as an unsecured contractual obligation that provides exposure to multiple Reference Assets. Investor returns consist of quarterly Fixed Coupons and a at maturity (see How does the Product work?) which is capped at the Investment. It should be noted that investors do not receive dividends or franking credits on the Reference Assets. The premium received from the sale of options embedded in the product and the investment amount provides the basis of the Fixed Coupons. Lonsec notes that the level of distributions from this style of structured product has fallen over the past 18 months as volatility in financial markets has moderated. This has been balanced with a decline in risk to the investor. Investors in this product should have clear expectations about the price movements of the Reference Assets over the Barrier Observation Period as the is determined by their performance. Investors should be comfortable with the downside risk of the price of any of the Reference Assets being below the Barrier during the Barrier Observation Period. In this case investors are exposed to the performance of the lowest performing Reference Asset at maturity. Investors should note that the upside is capped at the Fixed Coupon Rate (indicatively 13.12% for Series J and 13.45% for Series K) and is therefore likely to underperform a direct investment in the Reference Assets during strongly upward trending markets. Investors might be able to mitigate the opportunity cost of holding the product in such a market by requesting a withdrawal from the Issuer. In a worst-case scenario, if the closing price of any one of the Reference Assets is $0.00 on the Maturity Date, investors will receive a of zero. Whilst the Upfront Adviser Fee is clearly outlined, fees paid to the Issuer are not transparent. Lonsec notes that various components of the product pricing including option hedging prices are determined by the Issuer in its discretion. As is often the case with structured product pricing generally, these are not transparent to the investor. In Lonsec s opinion, MBL is a suitably qualified and experienced issuer of structured investment products in Australia. Issuer Profile The Issuer of Macquarie Apex Notes Facility Series J and K is Macquarie Bank Limited (ABN ), which is part of the Macquarie Group and holds Australian Financial Services Licence No MBL is a licensed Australian bank, regulated by APRA and a member of the Macquarie Group. Macquarie Group Limited (MGL) is a non-operating holding company and the ultimate listed parent for the Macquarie Group. MGL is listed on the ASX (ticker: MQG) and is regulated by APRA as a nonoperating holding company of an authorised deposit-taking institution. How does the Product work? Investor returns are made up of quarterly Fixed Coupons and a. Using Series J as an example: 1. Quarterly Fixed Coupons are made regardless of the performance of the Reference Assets. The indicative Fixed Coupon Rate is 13.12% At maturity, a is calculated which is dependent on the performance of the Reference Assets during the Barrier Observation Period and at maturity. The is capped at the Investment but will be less than the Investment if: a. The closing price of any of the Reference Assets drops to or falls below 70% of its Start (the Barrier ) during the Barrier Observation Period; and b. The End of the lowest performing Reference Asset (in percentage terms) at maturity is less than its Hurdle (in this case, the Start ). The is calculated as follows: During the Barrier Observation Period, did the closing price of any of the Reference Assets fall to or below 70% of its Start? NO = Investment YES YES Is the End of the lowest performing Reference Asset equal to or above the Hurdle at maturity? NO (Hurdle RA End RA ) Investment Investment = - Start RA X RA Where RA is the Reference Asset with the lowest Performance Percentage WE STRONGLY RECOMMEND THAT POTENTIAL INVESTORS READ THE PRODUCT DISCLOSURE STATEMENT 2 Lonsec Limited ABN AFSL No Participant of ASX Group

4 Example 1 In the following hypothetical example on each business day over the Barrier Observation Period, the closing price of each Reference Asset is greater than its Barrier (70% of its Start ). Reference Asset Start Barrier End ANZ $23 $16.1 $20 Rio Tinto $65 $45.5 $55 Woolworths $26 $18.2 $25 Investment Investors receive a equivalent to the Investment upon maturity of the Note, plus the quarterly Fixed Coupons. Example 2 The following hypothetical example assumes that on some day during the Barrier Observation Period, one or more closing prices of the Reference Assets were less than or equal to its Barrier (70% of their Start ) but at maturity, the closing price of the lowest performing Reference Asset (Woolworths) in percentage terms was equal to the Hurdle at $26. Reference Asset Start Barrier End ANZ $23 $16.1 $25 Rio Tinto $65 $45.5 $67 Woolworths $26 $18.2 $26 Investment Liquidity An investment in the Note is designed to be held until maturity. However, the Issuer has the discretion to accept early withdrawal requests on a monthly basis. The Early Withdrawal Value is at the Issuer s discretion and will take into account the market value of instruments that might be used to hedge the Issuer s obligations under the Note and break costs and taxes associated with unwinding those hedges. Any withdrawal request that is accepted will be paid in cash. What happens at Maturity? At maturity, investors have two choices: 1. Receive the in cash (default option); or 2. If the is less than the Investment, request that the Issuer apply the to the purchase of the lowest performing Reference Asset (in percentage terms) (the Purchased Security). No brokerage is charged. Purchased Securities are rounded down to the nearest whole number and the value of any fractional Purchased Security is paid out in cash. Investors receive a equivalent to the Investment upon maturity of the Note, plus the quarterly Fixed Coupons. Example 3 The following hypothetical example assumes that on some day during the Barrier Observation Period, one or more closing prices of the Reference Assets were less than or equal to its Barrier (70% of their Start ) and at maturity, the closing price of the lowest performing Reference Asset (ANZ) in percentage terms was lower than the Hurdle at $17.3 (75% of its Start ). Reference Asset Start Barrier End ANZ $23 $16.1 $17.3 Investment Rio Tinto $65 $45.5 $55 (Investment Woolworths $26 $18.2 $30 * 0.25) Investors receive a that is equivalent to 75% of their Investment upon maturity of the Note, plus the quarterly Fixed Coupons. Lonsec Limited ABN AFSL No Participant of ASX Group 3

5 Risks An investment in the Note carries a number of standard investment risks associated with investment markets. These include performance, counterparty, distribution and tax risks. These and other risks are outlined in the PDS and should be read in full and understood by potential investors. Lonsec considers the following to be the major risks: Performance, Volatility and Concentration Risk The depends on the performance of the Reference Assets during the Barrier Observation Period and the return of the lowest performing Reference Asset (in percentage terms) at the Maturity Date. A higher number of Reference Assets in a Note, generally results in a higher chance of one Reference Assets performing adversely, thereby resulting in a lower than the Investment. Maximum Regardless of how the Reference Assets perform, the is capped at the Investment. No Capital Protection Investors are exposed to the price performance of the lowest performing Reference Asset (in percentage terms). In the case where the closing price of the lowest performing Reference Asset (in percentage terms) is $0.00 at the Maturity Date, investors will receive a of zero. Investors need to consider whether the higher Fixed Coupon payments are sufficient to compensate for the risk of the being less than the Investment. Counterparty Risk Investors are exposed to the creditworthiness of Macquarie Bank Limited as the value of the Note depends on Macquarie Bank Limited performing its obligations as they fall due. Early Termination Risk The Issuer has wide powers under the Note to determine an Early Termination Event for specific events, for example: investor insolvency, the Issuer is unable to hedge its exposure under the Notes. Any early termination may result in a lower amount than if the Note was held until maturity. Taxation Any distributions received during the investment term should generally be taxable at an investor s marginal tax rate. This comment constitutes General Advice only and Lonsec advises potential investors to consult a taxation specialist before making a decision to invest based upon these taxation considerations. Investors should refer to the PDS for more information regarding the taxation of the Notes. Contact Information Further information can be found at: General number for adviser enquiries: Website: Lonsec Limited ABN AFSL No Participant of ASX Group 4

6 Macqua rie Apex Notes Facility - Series J and K Appendix A The following table provides some financial information for each stock in the Reference Assets. Reference Assets GICS Sector 4 Total Dividend per share 7 Series J Dividend Yield 5 ANZ 1 Financials $ % Rio Tinto 2 Materials $ % Woolworths 3 Consumer Staples $ % Series K ANZ 1 Financials $ % CBA 3 Financials $ % QBE Insurance 2 Financials $ % Woolworths 3 Consumer Staples $ % 1 year performance 6 1 year volatility 6 3 year performance 6 3 year volatility 6-2.3% 20.6% 13.9% 22.1% -22.8% 28.9% 13.6% 26.5% -3.3% 11.0% 1.3% 12.9% -2.3% 20.6% 13.9% 22.1% -4.4% 15.9% 13.0% 18.5% -19.8% 36.9% -9.7% 29.9% -3.3% 11.0% 1.3% 12.9% S&P/ASX 200 Price Return Index -10.4% 13.6% 6.6% 13.7% Sources: Bloomberg, Company Reports, Lonsec Notes: 1. Financial year ends 30 September. 2. Financial year ends 31 December. 3. Financial year ends 30 June. 4. Based on the Global Industry Classification Standard (GICS). 5. Dividend yield equals total dividends per share paid during financial year divided by the closing share price at the end of the financial year. 6. As at 31 March 2012, based on monthly data. 7. Financial year 2011 Lonsec Limited ABN AFSL No Participant of ASX Group 5

7 Macqua rie Apex Notes Facility - Series J and K Analyst Disclosure & Certification Analyst remuneration is not linked to the rating outcome. The Analyst(s) may hold the product(s) referred to in this document, but Lonsec considers such holdings not to be sufficiently material to compromise the rating or advice. Analyst(s) holdings may change during the life of this document. The Analyst(s) certify that the views expressed in this document accurately reflect their personal, professional opinion about the financial product(s) to which this document refers. Date Prepared: April 2012 Analyst: Amy Ho Release Authorised by: Michael Elsworth LONSEC STRONGLY RECOMMENDS THIS DOCUMENT BE READ IN CONJUNCTION WITH THE RELEVANT PRODUCT DISCLOSURE STATEMENT(S) IMPORTANT NOTICE: The following relate to this document published by Lonsec Limited ABN ("Lonsec") and should be read before making any investment decision about the product(s). Disclosure at the date of publication: Lonsec receives a fee from the Issuer(s) or Distributor(s) for researching the product(s) using comprehensive and objective criteria. Lonsec s fee is not linked to the rating(s) outcome. Lonsec does not hold the product(s) referred to in this document. Lonsec s representatives and/or their associates may hold the product(s) referred to in this document, but detail of these holdings are not known to the Analyst(s). Lonsec was a member of the Zurich Financial Services Australia group until 30 June 2011 and where Lonsec rated product(s) issued by Zurich usual fee arrangements applied and the association did not affect the research process and outcome. Warnings: Past performance is not a reliable indicator of future performance. Any express or implied rating or advice presented in this document is a class service (as defined in the Financial Advisers Act 2008(NZ)) or limited to General Advice (as defined in the Corporations Act (C wth)) and based solely on consideration of the investment merits of the financial product(s) alone, without taking into account the investment objectives, financial situation and particular needs ( financial circumstances ) of any particular person. It is not a personalised service (as defined in the Financial Advisers Act 2008 (NZ)) and does not constitute a recommendation to purchase, redeem or sell the relevant product(s). Before making an investment decision based on the rating(s) or advice, the reader must consider whether it is personally appropriate in light of his or her financial circumstances, or should seek independent financial advice on its appropriateness. If our advice relates to the acquisition or possible acquisition of particular financial product(s), the reader should obtain and consider the Investment Statement or Product Disclosure Statement for each financial product before making any decision about whether to acquire a product. Lonsec s research process relies upon the participation of the Issuer(s) or Distributor(s). Should the Issuer(s) or Distributor(s) no longer be an active participant in the Lonsec research process, Lonsec reserves the right to withdraw the document at any time and discontinue future coverage of the product(s). Disclaimer: This document is for the exclusive use of the person to whom it is provided by Lonsec and must not be used or relied upon by any other person. No representation, warranty or undertaking is given or made in relation to the accuracy or completeness of the information presented in this document, which is drawn from public information not verified by Lonsec. Conclusions, ratings and advice are reasonably held at the time of completion but subject to change without notice. Lonsec assumes no obligation to update this document following publication. Except for any liability which cannot be excluded, Lonsec, its directors, employees and agents disclaim all liability for any error or inaccuracy in, or omission from, this document or any loss or damage suffered by the reader or any other person as a consequence of relying upon it. Lonsec Limited ABN AFSL No Participant of ASX Group 6