Ausbil Investment Trusts Ausbil MicroCap Fund Product Disclosure Statement 1 February 2010 Issued by: Ausbil Dexia Limited ABN 26 076 316 473 AFSL 229722 Level 23, 207 Kent St Sydney NSW 2000 Telephone: 1800 287 245 (Toll Free) www.ausbil.com.au
IMPORTANT INFORMATION Legal entity Ausbil Dexia Limited Registered numbers ABN 26 076 316 473 AFSL 229722 Abbreviated term used throughout the Product Disclosure Statement Ausbil, we, us, our Dexia SA RPM Brussels VAT BE 0458.548.296 Dexia Group, Dexia Ausbil Investment Trusts - Ausbil MicroCap Fund ARSN 130 664 872 APIR AAP0007AU Ausbil MicroCap Fund, MicroCap Fund, Fund National Australia Bank Limited ABN 12 004 044 937 NAB, Custodian, administrator Ausbil is the responsible entity and issuer of units in the Fund offered in this Product Disclosure Statement (PDS) and has prepared this PDS. Neither Ausbil nor any member of the Dexia Group guarantees the performance of the Fund, the repayment of capital or any particular rate of return. Investment in the Fund is not a bank deposit or an investment in or other liability of Ausbil or any member of the Dexia Group. No assurance is given in respect of the Fund that the Fund s asset allocation, sector weightings or stated objectives will be achieved or maintained at the levels disclosed in this PDS. Staff of Ausbil are remunerated from the management and performance fees earned by Ausbil, received in its capacity as responsible entity for the Ausbil Investment Trusts and Investment Manager for the discretionary mandates. Elements of the remuneration received are linked to the performance fees generated from the performance of certain Funds and discretionary mandates. The Directors are all shareholders of Ausbil or representatives of the majority shareholder, Dexia. No Directors fees are paid by Ausbil to the directors, who are either remunerated directly by Ausbil or Dexia or receive dividends pursuant to their shareholding in Ausbil. Certain key executives of Ausbil are shareholders and thus also receive dividends. Ausbil does not provide advice to retail investors on the merits of investments in the Fund. The Fund offered in this PDS is a registered managed investment scheme for the purposes of the Corporations Act. The offer of units in the Fund falls under Australian jurisdiction. Ausbil authorises the use of the PDS as disclosure to indirect investors who are investors and prospective investors accessing the Fund through an investor directed portfolio service ( IDPS ) or IDPS-like services (commonly known as a master trust or wrap account). Indirect investors should read the information contained under the heading Indirect Investors. Unless otherwise stated all fees quoted in this PDS are inclusive of Goods and Services Tax (GST) and Reduced Input Tax Credits (RITCs). GST and RITC details are set out in the Other Important Information section on page 15. Unless stated otherwise, references to $ are references to Australian dollars. Website-based disclosure Ausbil will satisfy its continuous disclosure requirements via website-based disclosure. To keep informed of important information and updates relating to the Fund, visit our website www.ausbil.com.au on a regular basis. The website contains further information which should be read in conjunction with this PDS, including: Financial Services Guide PDS Updating items Fund Updates Unit prices, performance and asset allocations We recommend that you obtain and review such information before you invest. Alternatively, you can call us on 1800 287 245 (Toll Free) and we will send you the requested information free of charge. The Fund s constitution is also available upon request. If you are unsure as to any aspect relating to the Fund, Ausbil recommends that you consult your financial or other professional adviser. IMPORTANT INFORMATION
CONTENTS IMPORTANT INFORMATION Inside Cover AUSBIL MICROCAP FUND 2 THE INVESTMENT MANAGER 3 THE FUND S INVESTMENTS 4 BENEFITS AND RISKS OF INVESTING 5 FEES AND OTHER COSTS 7 OPERATIONAL INFORMATION 12 OTHER IMPORTANT INFORMATION 15 INDIRECT INVESTORS 20 APPLICATION FORM 21 CLIENT IDENTIFICATION FORMS 26 Ausbil MicroCap Fund Product Disclosure Statement 1
AUSBIL MICROCAP FUND Investment manager Ausbil Dexia Limited ARSN 130 664 872 APIR code Investment objective AAP0007AU The aim of the Fund is to outperform the S&P/ASX Emerging Companies Accumulation Index over the long term by investing in microcap Australian companies listed or soon to be listed on the Australian Stock Exchange. Investment philosophy and process Refer to Ausbil s microcap investment philosophy and process on page 3. Investment guidelines Australian equity 80-100% Cash 0-20% Performance benchmark Microcap universe Indicative investment timeframe horizon Volatility / risk level Income potential S&P/ASX Emerging Companies Accumulation Index Any stock that is not a constituent of the S&P/ASX 200 Index. Long Term High Low Minimum 1 initial investment $50,000 Minimum 1 additional investment $10,000 Minimum 1 redemption $10,000 Minimum 1 investment balance $50,000 Access to funds Fees Distribution Distribution period Buy-Sell spread Valuation Generally within 4 working days of the next available unit price. Management fee: 1.20% p.a. Performance Fee: 20.5% of the benchmark out-performance Half yearly, 31 December and 30 June each year 1 July to 31 December and 1 January to 30 June. 0.35% buy / 0.35% sell Daily Commencement date 1 February 2010 Contact details for applications and redemptions Mail: National Australia Bank Limited Registry Services PO Box 1406 Melbourne VIC 3001 Fax : 1300 365 601 1 Ausbil has the discretion to waive these minimums. Ausbil MicroCap Fund Product Disclosure Statement 2
THE INVESTMENT MANAGER Ausbil Dexia Limited is an Australian equities specialist with approximately $12 billion in funds under management as at 31 December 2009. Established in April 1997, we are a joint venture between senior members of the Australian investment/ management team and Dexia Asset Management, the asset management arm of the Dexia Group. The Dexia Group is rated A+ 2 and as at 30 September 2009 had assets of approximately $984 billion. The Dexia Group s funds under management as at 30 June 2009 were in excess of $132 billion. Ausbil offers our clients the focus and specialisation of an employee-owned boutique backed by the financial integrity of a global banking partner. Dexia Asset Management Australian Investment/Management Team Ausbil Dexia Limited Australia Established: April 1997 Investment philosophy and process- Microcap Ausbil s broad investment philosophy is that active management of our portfolios facilitates consistent and risk controlled outperformance. Rather than focusing only on growth or value investing, our investment processes allow us to exploit the inefficiencies across the entire market, at all stages of the cycle and across all market conditions. As a total segment of the market, the micro-capitalisation ( microcap ) stock universe is one of the most dynamic. From a portfolio management perspective, it is also among the most inefficient, as the investment universe is under-researched by both institutional investors and the broking community. Through superior proprietary research, we believe these inefficiencies can be exploited to deliver compelling investment opportunities. Of particular importance in the microcap universe is the sustainability of a stock s business model and the appropriateness of its capital structure. Having the right capital structure to sustain and grow the business is important for any business but is absolutely critical for companies in the microcap space. The cost of capital is much higher and, as a matter of course, fresh capital is harder to obtain. Without the right capital structure the penalty for shareholders is far greater than what it is for owners in the large cap end of the market. We believe that the Australian equity market is relatively efficient, but not perfect. The basic premise of our philosophy is that stock prices ultimately follow earnings and earnings revisions. We believe that the market places excessive emphasis on the current situation and does not sufficiently take into account the likelihood of future changes to the earnings profile of individual companies and sectors. Our process seeks to identify earnings and earnings revisions at an early stage, and hence to pre-empt stock price movements. We seek to position our portfolios towards those sectors and stocks which we believe will experience positive earnings revisions and away from those we believe will suffer negative revisions. At any time, our portfolio will be tilted toward stocks which we believe afford the most compelling opportunities for appreciation over the coming twelve months. This process is summarised in the diagram below: STAGE 1 Top-Down Analysis Assess current market conditions to identify attractive sectors and set portfolio themes 2 Fitch, as at 30 June 2009 STAGE 2 STAGE 3 Investment Grade Stock Selection Filter Ensure assessable earnings and sufficient liquidity Fundamental stock analysis backed by dual quantitative ranking screens Conclusions constantly retested STAGE 4 Portfolio Construction Robust, appropriate and risk aware portfolio Ausbil MicroCap Fund Product Disclosure Statement 3
THE FUND S INVESTMENTS Authorised investments Although Ausbil has a broad range of investment powers under the Constitution, Ausbil has determined that the investments of the Fund referred to in this PDS are to be limited to cash, securities and derivatives. For the purposes of this PDS the terms securities and derivatives have the meaning given to them in the Corporations Act. Authorised investments will be in Australian assets unless otherwise stated. Borrowings The Fund s Constitution provides that Ausbil may only undertake temporary borrowings on behalf of the Fund that will not exceed 30% of the value of the Fund. No borrowings have been undertaken on behalf of the Fund nor is it intended that any borrowings will be undertaken other than on a temporary basis to fund purchases and other outgoings where unsettled sales are outstanding. Derivatives Derivative transactions include instruments such as; futures, options on futures, over the counter options, exchange traded options, swaps and forward contacts. The use of derivatives may have a negative impact on the Fund where there is an adverse movement in the underlying asset on which a derivative is based or where a derivative position is difficult or costly to reverse. Ausbil recognises that there are significant risks associated with the investment in derivatives that may be undertaken by the Fund. It is the intention of Ausbil to not use derivatives. Any usage notwithstanding this intention, will be primarily undertaken for the purpose of managing risk. An additional objective for using derivatives is to achieve the desired investment exposure to assets or securities without buying or selling the underlying assets or securities. In all cases there will be cash and/or underlying assets available to meet the exposure positions of the derivative instruments. Related party investments The Fund s Constitution does not specify a limit in respect of related party investments by the Fund. A related party investment is an investment in another trust which has Ausbil, or an associate of it, as the Responsible Entity. Labour standards, environment, social and ethical considerations Ausbil does not explicitly take labour standards or environmental, social or ethical considerations into account when making investment decisions as a separate consideration. However, where such issues financially affect an investment, such financial effect is likely to influence our investment decisions. Ausbil MicroCap Fund Product Disclosure Statement 4
BENEFITS AND RISKS OF INVESTING Benefits By investing in the Fund the unitholder will be entitled to the following benefits: Access to the investment expertise of Ausbil Opportunity for exposure to under-researched microcap stocks Potential for strong capital growth over the long term Opportunity for diversification within their Australian equities portfolio Risks of Investing All investments have risk, which means the value of your investment may fall. While it is not possible to identify every risk factor relevant to investing in the Fund, the significant risks are listed below. Market risks Investment returns are influenced by market factors. These factors include changes in government regulations, market sentiment, local and international political events and environmental and technological issues. These changes can lead to changes in prices and overall market volatility. Macro-economic risks The general state of the Australian and international economies as well as changes in taxation policy, monetary policy, interest rates, currency exchange rates and statutory requirements are some of the factors which may influence the progress of financial markets and individual companies. Company-specific risks In addition to the macro-economic risks outlined above, the progress of individual companies may be affected by changes in factors such as the competitive environment in which they operate, technology, personnel and consumer preferences. Microcap company risk Shares in microcap companies may trade less frequently and in smaller volumes and may experience greater price volatility than larger companies. In times of heightened market volatility, microcap companies could face an illiquid securities market, thereby limiting the ability of the Fund Manager to sell out of positions. Microcap companies may also have more limited operating histories, markets, product lines or financial resources than larger companies. They may also depend more heavily on key personnel. Unlisted company risk Unlisted investments are not as liquid as investments in a listed company. Investments in unlisted companies carry a heightened risk due to lack of transparency in management, directors and operations. In addition, unforeseen factors may prevent an unlisted company from listing on an exchange. Operational risks The custody and investment administration of the Fund has been outsourced to National Australia Bank Limited. The custodial operations of NAB are subject to regular review and reporting by external audit, however, by itself this review does not prevent breakdown of operations and procedures. Ausbil is satisfied that NAB has in place adequate internal controls for its custody and investment administration operations. Liquidity risk Liquidity risk exists when particular investments are difficult to purchase or sell, preventing a fund from closing out its position or rebalancing within a timely period and at a fair price. While every effort is made for the Fund to be able to meet all redemptions, the nature of the underlying securities means that in certain circumstances, we may not be able to meet all redemption requests when they are received. Fund risk Fund risks include potential termination of the Fund and a change in fees and expenses. There is also a risk that investing in the Fund may give different results than investing directly because of the income or capital gains or losses accrued in the Fund and the consequences of applications and redemptions by other investors. Ausbil MicroCap Fund Product Disclosure Statement 5
Currency risk Currency risk is the risk that fluctuations in exchange rates between the Australian dollar and foreign currencies may cause the value of a fund s investments and the income from those investments to decline. The Fund potentially has indirect exposure to currency risks as the underlying investments may source a major part of their revenue from overseas. Regulatory risk Regulatory risk arises from regulatory or taxation changes introduced by a government or a regulator, which may affect the value of securities in which the Fund invests. These regulatory or taxation changes may occur in Australia or other countries in which the Fund invests. These changes are monitored by Ausbil, and action is taken where appropriate and consistent with the Fund s investment objectives. Credit risk Credit risk refers to a risk of loss arising from the failure of a borrower or other party to a contract to meet its obligations. This may arise in derivatives, fixed interest securities and mortgage securities. Derivative risk A derivative is a financial instrument that is derived from some other asset, index, event, value or condition (underlying security). Derivatives can expose a fund to risks such as market risk (the risk that the value of the derivative will fluctuate due to movement in the price of the underlying security), basis risk (the risk that the value of the derivative moves independently from the value of the underlying security), liquidity risk and credit risk. Refer to page 4 for information on the Fund s use of derivatives. How Ausbil manages risk Ausbil is unable to eliminate all investment risk, but does analyse, manage and aim to reduce the impact of risks by actively monitoring investment markets and portfolios and through the use of carefully considered investment guidelines. Ausbil MicroCap Fund Product Disclosure Statement 6
FEES AND OTHER COSTS Did you know? Small differences in both investment performance and fees and costs can have a substantial impact on your long-term returns. For example, total annual fees and costs of 2% of your fund balance rather than 1% could reduce your final return by up to 20% over a 30 year period (for example, reduce it from $100,000 to $80,000). You should consider whether features such as superior investment performance or the provision of better member services justify higher fees and costs. You may be able to negotiate to pay lower contribution fees and management costs where applicable. Ask us or your financial adviser. To find out more If you would like to find out more, or see the impact of fees based on your own circumstances, the Australian Securities and Investments Commission (ASIC) website (www.fido.asic.gov.au) has a managed investment fee calculator to help you check out different fee options. The above consumer advisory warning is required under Australian law. This document shows fees and other costs that you may be charged. These fees and other costs may be deducted from the money you invest, from the returns on your investment or from the Fund assets as a whole. You should read all the information about fees and costs, because it is important to understand their impact on your investment. Summary of Fees Type of fee or cost Amount 3 How and when paid Fees when your money moves in or out of the Fund 4 Establishment fee: The fee to open up your initial investment. Contribution fee: The fee on each amount contributed to your investment. Withdrawal fee: The fee on each amount you take out of your investment. Nil Nil Nil Not applicable Not applicable Not applicable Termination fee: The fee to close your investment. Nil Not applicable Management costs Management fee: The fee for managing your investment. Performance fee: This fee is in addition to the above Management fee. Services fee Switching fee: The fee for changing between investment options. 1.20% p.a 20.5% of the benchmark outperformance Nil This fee is accrued daily and drawn monthly in arrears. The Performance fee is accrued daily and drawn monthly in arrears. Not Applicable 3 Fees and costs disclosed in this table are inclusive of GST and RITC. 4 You will incur a buy spread and a sell spread. See buy-sell spreads on page 10. Ausbil MicroCap Fund Product Disclosure Statement 7
Example of annual fees and costs for the MicroCap Fund The following table presents an example of how the fees and costs in the Fund can affect your investment over a 1-year period. You should use this table to compare this product with other managed investment products. Example Amount Balance of $50,000 with a contribution of $5,000 during the year Contribution fee 0% Nil PLUS Management fee PLUS Performance fee charged on the Fund EQUALS cost of the Fund 1.20% p.a. 20.5% benchmark out performance And, for every $50,000 you have in the fund, you will be charged $600 each year. And, for every $50,000 you have in the Fund, you will be charged a performance fee of: $102.50 for every 1% by which the Fund s excess return exceeds the benchmark If you have an investment of $50,000 at the beginning of the year and put in an additional $5,000 during that year, you would be charged fees estimated to be: $600* plus ($102.50 for every 1% by which the fund s excess return exceeds the benchmark). * The $600 assumes the additional $5,000 was invested at the end of the year (1.20% x $50,000). If it is assumed the additional $5,000 was invested at the beginning of the year, the management fee would be $660 (1.20% x $55,000) and the Performance fee would be $112.75 for every 1% by which the Fund outperforms the benchmark (20.5% x 1% x$55,000). Please note that this is just an example. In practice, the actual investment balance of an investor will vary daily and the actual fees we charge are based on the value of the investment balance. Management costs There are two components to Management costs: 1. Management fee and; 2. Performance fee. The Fund has a fixed management fee (where all expenses incurred in operating the Fund are paid by Ausbil from this fee) and a performance fee as detailed in the table below. Fees Percentage (%) Management fee Performance fee 1.20% p.a. 20.5% of the benchmark out-performance The Fund s management fee is currently 1.20% p.a. of the net asset value of the Fund. The management fee is accrued daily and paid monthly in arrears. The performance fee is 20.5% of the gross (exclusive of management fees) amount of benchmark outperformance. The performance fee is accrued daily and paid monthly in arrears. The performance benchmark is the S&P / ASX Emerging Companies Accumulation Index. The fee is calculated at each valuation date and, if a period of underperformance to the benchmark occurs, the performance fee remains at its current accrued level and further performance fees may not commence to be accrued again until the full amount of underperformance is recouped. The unit price is reflective of accrued performance fees. The full methodology for calculating the performance fee is detailed in the Fund s constitution. The following table illustrates how performance fees might impact the investment of a hypothetical unitholder under two scenarios, a positive market return and a negative market return, and assumes the following: The unitholder invests $50,000 in the Fund The unitholder remains in the Fund for a full month Positive market return scenario: The Fund achieves a return of 4% compared with the Benchmark return of 2% for the month i.e. 2% outperformance. Negative market return scenario: The Fund achieves a return of -2% compared with the Benchmark return of -4% for the month i.e. 2% outperformance. Ausbil MicroCap Fund Product Disclosure Statement 8
Scenario 1: Positive market returns. Market value at commencement of the month $50,000 Gross Fund performance over the month of 4% $2,000 Gross benchmark performance over the month of 2% $1,000 Out-performance over benchmark over the month of 2% $1,000 Manager s performance fee (20%* of out-performance) $200 GST payable on Manager s performance fee $20 Reduced Input Tax Credits (RITC) - $15 Performance fee payable by the Fund of 20.50% (inclusive of GST and RITC) $205 Gross outperformance less performance fee payable by the Fund ($2,000 - $205) $1,795 Market value at end of the month $51,795 *exclusive of GST and RITC Scenario 2: Negative market returns. Market value at commencement of the month $50,000 Gross Fund performance over the month of -2% - $1,000 Gross benchmark performance over the month of -4% - $2,000 Out-performance over benchmark over the month of 2% $1,000 Manager s performance fee (20%* of out-performance) $200 GST payable on Manager s performance fee $20 Reduced Input Tax Credits (RITC) - $15 Performance fee payable by the Fund of 20.50% (inclusive of GST and RITC) $205 Gross outperformance less performance fee payable by the Fund (- $1,000 - $205) - $1,205 Market value at end of the month $48,795 *exclusive of GST and RITC So, under both scenarios if the hypothetical unitholder had an average investment of $50,000 over the period, the performance fee would be $205 or 0.41% of the average Fund value over the period. Indirect cost ratio (ICR) The ICR of the Fund is the ratio of the Fund s management costs that are not deducted directly from an investor s account to the Fund s total average assets. The ICR does not include establishment, contribution, redemption or termination fees, transactional and operational costs, but does include administration fees, management fees and performance fees. The Fund has a fixed management fee of 1.20% pa. In addition to the fixed management fee, a performance fee may be payable. The Fund s ICR is therefore the aggregate of the fixed management fee and any performance fee paid, expressed as a percentage of the average size of the Fund over a financial year. The ICR calculation includes the net effect of any GST and RITC. As this is a new Fund a historical ICR is not available, however the following examples illustrate the hypothetical ICR under different performance scenarios. Examples: The ICR paid by a sample investor, assuming their investment was $50,000 in the Fund for a 12 month period, would have been as follows: ICR with no performance fee payable Assuming performance fees were not payable over the 12 month period, the ICR would be 1.20% p.a. or $600 in dollar terms. ICR with performance fee payable For the purposes of providing an ICR dollar example, the following table illustrates the hypothetical performance fee accruals for a 12 month period, with the first two months drawn from scenario one and scenario two above respectively, and assumes for the remaining months no performance fees are payable. Ausbil MicroCap Fund Product Disclosure Statement 9
Month Performance fee accrual for the month Month 1 $205 Month 2 $205 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12 Nil Nil Nil Nil Nil Nil Nil Nil Nil Nil Total $410 Under these assumptions the ICR would be 2.02% (Management fee of 1.20% + Performance fee of 0.82%) for the 12 month period, or $1,010 (($50,000 x 1.20%) +$410) in dollar terms. ICRs represented in the above examples do not represent any promise that the ICR for future periods will be at this level. Buy-sell spread The buy-sell spread aims to ensure that an investor pays the transaction costs associated with their investment decision to either enter or exit the Fund. The buy spread is built into the Fund s application price and sell spread is built into the Fund s redemption price. The buy-sell spreads are not fees paid to Ausbil. They are paid to the Fund. At the date of this PDS, the buy spread is 0.35% on applications and the sell spread is 0.35% on redemptions. Buy Spread Sell spread Fund % Dollar example on investment of $50,000 % Dollar example on redemption of $50,000 MicroCap Fund +0.35 $175-0.35 $175 The buy-sell spread will impact the return on your investment and is an additional cost to investors. Fee changes and maximum fees All fees can change. Reasons for this may include changing economic conditions and changes in regulation. We will however give you 30 days prior written notice of any proposed change, however we cannot charge more than the Fund s Constitution allows. If we wished to raise fees above the amounts allowed for in the Fund s Constitution, we would need approval from unitholders. Under the Fund s Constitution we are presently entitled to charge the following maximum fees. Fee Contribution fee Redemption fee Responsible Entity fee Issuer fee Expense recovery fee Performance fee Switching fee *Exclusive of GST and RITC Maximum permitted under the Fund s Constitution* 5.00% of the application monies payable on application Nil 0.80% p.a. of the value of the assets of the Fund 0.05% p.a. of the value of the assets of the Fund No limit, if Fund related 25% of benchmark out performance (gross of management costs). Nil Miscellaneous fees Financial institutions may charge us a fee if your cheque or other negotiable instrument is dishonoured. In this event, Ausbil may recover a handling fee of $20 from the applicant. Ausbil MicroCap Fund Product Disclosure Statement 10
Can fees be different for different investors? We may negotiate, rebate or waive fees for wholesale clients (as defined by the Corporations Act) and our employees or employees of our related body corporates. The rebates are paid from the management fee Ausbil is entitled to receive, and will therefore not affect the unit price. Adviser commissions The Fund does not pay commissions. Additional payments made by Ausbil Ausbil may make Product Access Payments (flat dollar amounts) to IDPS operators who distribute the Fund on their investment menu. These payments may help to cover costs incurred in establishing and maintaining the Fund on those menus, and certain other marketing and distribution costs. If these types of payments are made, they are paid directly by Ausbil and do not impact the Fund. Ausbil will negotiate the amount of the Product Access Payment with each IDPS operator. Ausbil may also make Fund Manager Payments (rebates) to IDPS operators, dealer groups and financial advisers for their marketing support. We may also provide other types of nonmonetary benefits such as technical support and sponsorship of professional development days. If these types of payments are made, they are paid directly by Ausbil and do not impact the Fund. Ausbil MicroCap Fund Product Disclosure Statement 11
OPERATIONAL INFORMATION Transacting in the Fund Investors may apply for, or redeem, units on every business day 5 and, where that day is not a business day, on the next business day (each such day a Valuation day ). Generally, if your valid 6 transaction request is received at our administrator s Melbourne office before 2.30pm Melbourne time on a Valuation day (the transaction cut-off time), it will usually be processed using the unit price determined as at the close of business on that day. If your payment and transaction request are received after the transaction cut-off time, your transaction will be processed using the next available unit price. Send transaction requests directly to: National Australia Bank Limited Registry Services PO Box 1406 Melbourne VIC 3001 Fax: 1300 365 601 Applications The minimum initial investment in the Fund is $50,000. Initial applications can be made by completing the Fund s Application form together with appropriate client identification forms. The minimum additional investment in the Fund is $10,000. You can make additional investments by completing the Additional Investment Form available from our website www.ausbil.com.au, or alternatively by written request. A valid additional investment written request should include: Date Investor name Investor number Fund name - MicroCap Fund A$ amount of the additional investment Authorised signatory(ies) Units will be allotted the day after the Valuation day, following receipt of; a valid Application form or valid additional investment request, completion of all Anti Money Laundering and Counter Terrorism Financing ( AML/CTF ) procedures (required for initial Applications only) and the receipt of application monies into our account, subject to transaction cut-off times. Application monies for units in the Fund can be paid by either: Direct credit transfer to the Custodian s bank account: Account name: NNL - Ausbil Dexia Limited Application Account Bank: National Australia Bank Limited BSB No: 083 043 Account No: 561 830 901 A cheque made payable to: NNL Ausbil Dexia Limited Application Account and should be crossed not negotiable. Third party cheques endorsed to the Custodian will not be accepted. 5 A business day is a New South Wales business day on which Australian banks are open for business excluding Saturday and Sunday. 6 A valid transaction request includes the specific information requested for each transaction type and where applicable, the receipt of application or additional investment money and the completion of all AML/CTF requirements. Ausbil MicroCap Fund Product Disclosure Statement 12
Send transaction requests and cheques (if applicable) to: National Australia Bank Limited Registry Services PO Box 1406 Melbourne VIC 3001 Fax: 1300 365 601 Ausbil retains absolute discretion to accept or reject any application in whole or in part. Specifically, if we are unable to approve an application due to a lack of documentation or failure of verification procedures required by our AML/CTF policies, your application will not be processed until these procedures are complete and will receive the next calculated application price following completion of all AML/CTF procedures, or receipt of any outstanding document (as the case may be). Redemptions The minimum redemption amount is $10,000. Units will be redeemed at the next Valuation day after receipt and acceptance of a valid redemption request, subject to transaction cut-off times. Investors may request the redemption of all or part of their investment at any time by completing the Redemption Form available from our website or alternatively by written request. A valid written redemption request should include the following information: Date Investor name Investor number Fund name - MicroCap Fund A$ redemption amount / number of units Account s authorised signatory(ies). Redemption proceeds are normally paid within 4 working days after processing your request. Redemption monies will only be paid to the bank account linked to you investment account. Under no circumstances will cheques be sent out or monies be paid to third party bank accounts. Ausbil has the right to fully redeem your investment in the Fund if a redemption request would result in the value of your holding in the Fund falling below $50,000. Suspending redemption requests The Fund s constitution allows us to delay redemptions if, between one Valuation date and the next: The Responsible Entity receives, over a period of two consecutive business days requests for redemption in respect of 10% or more of the units issued in the Fund, or There is a fall in the All Ordinaries Index of the Australian Stock Exchange Limited of 5% or more compared to the level of that index at the date of receipt of the notice. In either case we may delay a redemption to the date 28 days after the date of receiving a redemption notice. The effect of delaying a redemption is that the redemption price is based on the next available unit price immediately after the deferred redemption date in lieu of the usual Valuation date. Market timing The investor must apply for or redeem units of the Fund at the next calculated unit price following the advice of the proposed transaction. Ausbil does not permit practices associated with Market Timing and reserves the right to reject application or redemption requests from an investor that Ausbil suspects of using such practices and, if need be, to take the necessary measures to protect the other investors in the Fund. Ausbil MicroCap Fund Product Disclosure Statement 13
Unit prices Generally, the unit price will be valued every Valuation day. The net asset value (NAV) of units is calculated by deducting the value of the Fund s liabilities from the value of the Fund s gross assets. The application unit price is calculated by dividing the NAV of units by the number of units on issue and then adding a buyer spread The redemption unit price is calculated the same way, except that the sell spread is deducted from the NAV per unit. Example of application and redemption prices Assume the net asset value per unit on a Valuation day is $10.00. The buy spread and the sell spread are each 0.35% of this amount ($0.035). The application price is calculated as $10.00 plus $0.035, which equals $10.035. The redemption price is calculated as $10.00 minus $0.035, which equals $9.965. Please note that the above figures are not actual, They are illustrative only. Buy/sell spreads are explained in the section on Buy-sell spreads on page 10. We operate on a forward pricing model, this means that the unit price for a particular Valuation day is calculated using the valuation of the Fund s assets at the close of business of that day and is generally available the next business day. The latest unit prices are available on our website www.ausbil.com.au or by contacting our Investor Services Team on 1800 287 245 (Toll Free). Unit pricing is carried out in accordance with the Fund s constitution and our Unit Pricing Discretions Policy. If we were to exercise our discretion and change the current unit pricing process for the Fund, we must inform you as soon as practicable. A copy of our Unit Pricing Discretions Policy is available from us free of charge upon request. Distributions A distribution is a payment of a Fund s taxable income. The amount of the distribution may vary and will usually consist of interest, dividends, foreign income, net realised capital gains and other income. The components of the distribution will vary from year to year. There may also be times when no distribution is paid. The amount of the distribution for the Fund is generally calculated by accumulating all income earned by the Fund for the period, taking into account taxable gains and losses, and then deducting all expenses incurred and any provisions that are considered appropriate by Ausbil. The income to be distributed is then divided by the total number of units on issue at the end of the distribution period to determine the cents per unit distribution rate. Details relating to any tax-free or tax-deferred components, imputation credits, foreign tax credits, or capital gain components for all distributions payments made during the year will be forwarded to Unitholders shortly after the end of each financial year. All distributions are paid in Australian dollars. Example of income distribution entitlement The distributable income amount of the Fund as at 30 June is $50,000. Total number of units on issue in the Fund as at 30 June is 100,000. The distributable income amount per unit is $50,000 divided by 100,000 units, which equals $0.50 per unit. The number of units held by the investor as at 30 June is 5,000. The investor s entitlement to distributable income is calculated as 5,000 multiplied by $0.50, which equals $2,500. Please note that the above figures are not actual. They are illustrative only. As distributable amounts are a component of the unit price, unit prices normally fall by the distribution amount following a distribution. Distributions may be paid by either of the following methods: Reinvestment as additional units Direct transfer to the nominated Australian bank account Distributions are automatically reinvested unless you instruct us otherwise. A buy-sell spread is not applied to reinvested distributions. The application price that will apply to units from such reinvestment will be the Mid Price per Unit (ex distribution) as at the end of the accrual period. Reinvestment will be effected on the first business day after the close of each accrual period. Applications received by 2.30pm on the last day of the distribution period will be entitled to a distribution. Conversely redemptions from the Fund received before 2.30pm on the last day of the distribution period will not be entitled to a distributions. Ausbil MicroCap Fund Product Disclosure Statement 14
OTHER IMPORTANT INFORMATION Taxation The Australian taxation system is complex and investors should be aware that the tax treatment of their investment and distributions depend on their own particular circumstances. It is recommended that intending investors consult their own professional tax advisors before making an investment in the Fund. Tax position of the Fund The Fund will generally hold its investments on capital account. Accordingly, realised gains (or losses) will generally be recognised as capital gains (or losses). Distributions to investors Although the Fund should not be subject to Australian tax, distributions made by the Fund will generally be included in the assessable income of an investor. Ausbil will provide details to the investor of any portion of any distribution that is tax-free or tax-deferred, together with any imputation credit entitlement, foreign tax credit entitlement or capital gain arising in respect to the distribution. Capital gains tax Investors may be subject to capital gains tax on the disposal of units. In this regard, a redemption, switch or otherwise will constitute a disposal of a units for capital gains tax purposes. The calculation of an investor s capital gain or loss may also be affected by any tax-free or tax-deferred distributions made by the Fund. Tax-free & tax-deferred distributions Generally tax-free or tax-deferred distributions are limited to situations where a Fund invests in property or in property trusts. Any assessable capital gain arising from disposal of a unit will be increased as a consequence of the receipt by the investor of taxdeferred distributions made by the Fund. However, if the investor disposes of the units for a capital loss then the loss is reduced by any tax-free or tax-deferred distributions made by the Fund. Tax File Number Investors should notify Ausbil of their Tax File Number or their exemption status. Although not compulsory, in the event that Ausbil is not notified, tax will be deducted at the highest marginal rate (including Medicare levy) from each distribution, until such time as the relevant Tax File Number or exemption notice is given. Eligible Investment Business The Fund carries on only Eligible Investment Business activities as defined in Section 102M of the Income Tax Assessment Act (1936). Overseas investors Ausbil may be required to deduct Australian tax from distributions made to non-resident investors. Any such tax deducted is not a final Australian tax (except where the tax that is deducted is in respect of a distribution period dividend or interest income) and therefore, the amount of tax deducted will be available as a credit against the Investor s Australian tax liability. Foreign income Income received by the Fund from sources outside Australia may be subject to taxation in the country of source. Australian resident investors may be entitled to claim a credit against their Australian tax liability in respect of their share of the foreign tax paid. GST The Goods and Services Tax (GST) disclosures contained in the PDS are of general use only. GST may be payable on expenses incurred in the management and administration of the Fund. All fees quoted in this PDS, unless otherwise stated, are quoted inclusive of Goods and Services Tax (GST) and Reduced Input Tax Credits (RITCs) and it has been assumed that Ausbil will be entitled to the maximum amount of RITCs applicable when stating fee amounts. Currently, GST is charged at a rate of 10% and RITC is equal to 75% of GST paid, which effectively reduces the GST payable by the Fund from 10% to 2.5%. As a consequence of the reviews being conducted by the Federal Government into the current system of taxation, management fees paid by the Fund may change as a consequence of any change in the level of GST charged by the Investment Manager or as a result of a variation in the level of RITC that may be claimed by the Fund. RITC refers to the partial credit available to the Fund for the GST included in the price of specific types of purchases and other acquisitions nominated in A New Tax System (Goods and Services Tax) Act 1999. Ausbil MicroCap Fund Product Disclosure Statement 15
Ausbil s website General and updated information about the Fund is available from our website www.ausbil.com.au. This includes Fund unit prices, performance and distribution history and Monthly Updates (detailing Fund exposures and top holdings), the current PDS (and any supplementary material) and the Fund s Annual Financial Reports. We also, from time to time, post interesting articles and topical updates. Online access to your investment account You can access information about your investment in the Fund by logging onto Investor Online: a secure client website with access restricted by client ID and password. Information on the site includes: your account balance; your transaction history; unit prices; performance returns; distribution statements; and year end Tax statements. In completing the Application Form you will automatically receive online access (unless you elect otherwise). Unitholders who wish to register for Investor Online will receive an e-mail containing a secure link to the registration page of the Investor Online website. Regular reports Unitholders may receive or access the following reports: transaction confirmations quarterly Fund Investment reports periodic unitholder reports annual tax statements annual Fund Financial Report (available at www.ausbil.com.au) Up-to-date information Information in the PDS is subject to change from time to time and may be updated by us if it is not materially adverse to investors. We will notify you of such changes via our website and regular investor communications. We will issue a supplementary or replacement PDS if, in our opinion, there is a materially adverse change or omission. You can obtain updated information by contacting your financial adviser, contacting Investor Services on 1800 287 245 (Toll Free) or visiting our website www.ausbil.com.au. Regular reporting and disclosure obligations As a disclosing entity, the Fund is subject to regular reporting and disclosure obligations and copies of documents lodged with ASIC in relation to the Fund may be obtained from or inspected at an ASIC office. Investors may obtain a copy of the following documents from Ausbil without charge upon request or alternatively on the website www.ausbil.com.au: a. the annual financial report most recently lodged with ASIC by the Fund; b. any half-year financial report lodged with ASIC by the Fund; and c. any continuous disclosure notices given by the Fund Joint tenants Where an investment is held in the name of two or more investors, the investment will be recorded as joint tenants. Upon notice of one of the joint investor s death the units will be automatically held in the name of the remaining joint applicant(s). Ausbil MicroCap Fund Product Disclosure Statement 16
Constitution The Fund is a managed investment scheme and is governed both by a Constitution and a Compliance Plan. The Fund s Constitution (as amended from time to time) governs the Fund s operation and, together with the PDS, the Corporations Act 2001 and other laws, regulates the Fund and our legal relationship with investors. The Fund s Constitution deals with a number of issues including: your rights as a unitholder unitholder meetings calculation of unit prices calculation of distributions the process by which units are issued and redeemed our broad powers to invest, borrow, recover expenses, receive fees and other payments and generally manage the Fund Fund termination. The Constitution states that your liability is limited to the amount you have paid for your units, but the courts are yet to determine the effectiveness of provisions of this kind. The Fund s Constitutions have been lodged with ASIC. The statements in the PDS only provide a summary of some of the provisions of the Constitution. A copy is available free of charge by contacting our Investor Services Team on 1800 287 245 (Toll Free). Compliance plan Ausbil has, in accordance with Section 601HA of the Corporations Act 2001, established a Compliance Plan for the Fund. Compliance committee The Compliance Committee comprises three members (two external and one nominated by Ausbil). The role of the Compliance Committee is set out in the Corporations Act 2001 and includes monitoring Ausbil s compliance with the Compliance Plan and reporting breaches of the Corporations Act 2001 and the Constitutions. The Compliance Committee members may change from time to time, without prior notice to Unitholders. Consent National Australia Bank Limited has given, and has not withdrawn before the date of this PDS, their written consent to be named in this PDS in the form and context in which they are named. Privacy Ausbil will need to collect personal information from you in order to process your investment and provide services to you. We may also need to disclose your personal information collected by third party service providers in order to carry out these activities. We aim to ensure that the personal information we retain about you is accurate, complete and up-to-date. To assist us with this, please contact us if any of the details you have provided change. If you have concerns about the completeness or accuracy of the information we have about you, we will take steps to correct it. Please contact our Investor Services Team on 1800 287 245 (Toll Free) if you want to change or correct personal details. It is important that you contact us because until you do so we will assume that by investing in the Fund you have consented to our using your personal information as indicated above. A copy of Ausbil s Privacy Policy is available on the website www.ausbil.com.au or may be obtained from the Privacy Officer. If you have further questions about privacy, please write to us or contact us at: Privacy Officer Ausbil Dexia Limited Level 23, 207 Kent Street Sydney NSW 2000 Telephone: 1800 287 245 (Toll Free) Fax: (02) 9259 0222 Ausbil MicroCap Fund Product Disclosure Statement 17
Cooling-off Investors in the Fund have the benefit of a 14-day cooling-off period starting from the earlier of: The receipt of confirmation of their investment The end of the 5th day after the issue of units in response to their application If an investor reconsiders his or her decision to invest in the Fund within that 14-day period and notifies Ausbil before the expiry of the 14 days, then the direct investor is entitled to receive their Application Money back subject to any negative market movements in the intervening period and after deduction of reasonable expenses incurred by Ausbil in the processing of the application. If negative market conditions occur during this cooling-off period, the losses incurred on terminating the redemption will be deducted from the proceeds. In addition, if there is a buy-sell spread applicable on the investment, the cost of this spread will be deducted from the proceeds. Dispute resolution If you have a complaint about the Fund, please contact us on 1800 287 245 (Toll Free), or write to us at: Compliance Officer Ausbil Dexia Limited Level 23, 207 Kent Street Sydney NSW 2000 If you are not satisfied with the handling of your complaint, you may refer the issue to the Financial Ombudsman Service Limited ( FOS ), which is an independent body whose decisions are binding on us. Mail: Financial Ombudsman Service Limited GPO Box 3, MELBOURNE VIC 3001 Phone: 1300 78 08 08 Fax: (03) 9613 6399 Web: www.fos.org.au Ausbil MicroCap Fund Product Disclosure Statement 18