IM FIF Fixed Income Fund Information Memorandum
Table of Contents 1.0 About Us 4 2.0 How the Fixed Income Fund works 5 3.0 Benefits of investing in the Mitchell Asset Management Fixed Income Fund 6 4.0 Risks 6 5.0 How we invest your money 8 6.0 Fees and costs 9 7.0 How managed investment schemes are taxed 11 8.0 How to apply 11 Important Notice This Information Memorandum dated 14 November 2012 has been prepared and issued by Mitchell Asset Management Pty Ltd ACN 123 804 491 (Mitchell Asset Management) in respect of an investment in units in the Mitchell Asset Management Fixed Income Fund (the Fund). Mitchell Asset Management is the holder of Australian financial services licence No. 320019. Eligible Investors This Information Memorandum has not and will not be lodged or registered under the Corporations Act. The offer of the Investment does not require disclosure to investors under Division 2 of Part 7.9 of the Corporations Act. Persons eligible to invest in the Fund are those to whom an offer of units in the Fund is an offer that does not require provision of a product disclosure statement pursuant to Division 2 of Part 7.9 of the Corporations Act by reason of those persons being wholesale clients as defined in Section 761 of the Act and those other persons as determined from time to time by Mitchell Asset Management. All information contained in the Information Memorandum is to be treated as confidential information and is not to be disclosed to any other party without Mitchell Asset Management s prior consent. This Information Memorandum is not an offer or invitation in relation to the Investment in any place in which, or to any person to whom, it would not be lawful to make such an offer or invitation. General advice only Any opinions expressed in this Information Memorandum are general in nature and do not take into account your personal circumstances, objectives or needs. Accordingly nothing in this Information Memorandum should be construed as a recommendation by Mitchell Asset Management that an investment in Units in the Fund is appropriate for you. You should seek advice from your professional and appropriately licensed (financial and tax) adviser before making any decisions in relation to this product. This Information Memorandum may contain opinions, estimates, financial objectives and forecasts with respect to the anticipated future performance of the Fund. These opinions, estimates and forecasts are based upon assumptions. Mitchell Asset Management makes no representations or warranties as to the validity, certainty or completeness of any of the assumptions or the accuracy of the opinions, estimates, financial objectives or forecasts contained in this Information Memorandum. The financial objectives are in no way guaranteed. Investment decisions should not be based solely on the financial objectives. Risks You should read the section titled Risks of unregistered managed investment schemes and carefully consider this in light of your personal investment objectives, financial situation or particular needs (including financial and taxation issues) and seek professional advice from your financial adviser and taxation adviser before deciding whether to acquire or dispose of units in the Fund. You can obtain further information in relation to the Fund, including the constitution of the Fund, free of charge by contacting us on 1300 360 949. 3
1.0 About Us At Mitchell Asset Management we provide a wide range of financial services to ensure we protect and grow our client s wealth. Our range of services include: > Stocks (Australian and International) > Bonds > Currencies > Derivatives > Standard Margin Lending > Structured products (protected equity and hedged equity investment loans) > Alternative investments (hedge funds and private equity) > Deposits > Professional money management > Discretionary portfolio management At Mitchell Asset Management MAM we are focused on nurturing relationships and developing a strong partnership to meet your long-term financial goals. Domiciled in Australia with an offshore office in Hong Kong we are independently owned. We are domestically focused with a global reach. This is backed by a strong team of people dedicated to providing these services. Our process is very simple, we take time to listen and understand our clients, we only offer advice when we have a clear understanding of your situation. Your adviser will then draw on specialist expertise from within the firm and their network to ensure you are able to benefit from the blend of services you need. This approach is backed by our commitment to employing the very best people in our industry, and giving them the tools and support they need to offer the most well-informed advice. It s an approach that reaps rewards for our clients and has helped to make us one of the Australia s leading private client investment managers. Our advisers are committed to high touch service. Each client large or small is important enough to receive our premier service, a level of attention other firms usually reserve for their largest clients. We work in partnership with our clients knowing our success rests solely on theirs. > Open architecture, including external managers > Trust and wealth structuring > Consolidated reporting Our process is very simple, we take time to listen and understand our clients, we only offer advice when we have a clear understanding of your situation > Pictured, Brindabella multiple winner of the Sydney Hobart Yacht Race navigating her way across Storm Bay to the finish line 4 Mitchell Asset Management (ABN 65 123 804 491) holds an Australian Financial Services Licence No. 320019
2.0 How the Fixed Income Fund works The Fund s objective is to provide investors with regular quarterly distributions through investments in an actively managed portfolio of bonds and credit securities. We will primarily focus on bonds and credit securities that are classified as Tier 1 capital, such as loans, bonds, notes and credit securities, that are issued by major Australian Banks in the Australian market and also on global bond and security markets (Tier 1 Bonds). The Fund will principally seek bonds and credit securities from Australian Banks with strong liquidity, funding and capital positions and effective investment strategies. This will typically include bonds and credit securities issued by the four major trading banks in Australia, namely: > ANZ Bank Limited > Commonwealth Bank Limited > National Australian Bank Limited, and > Westpac Banking Corporation Limited. While Mitchell Asset Management will focus on Tier 1 Bonds in major Australian Banks, we will also consider other investments, including bonds and credit securities that are classified as Tier 2 capital, and investments in products issued by other Australian Banks. We will regularly inform investors of the Fund s investment portfolio via our website at www.mitchellam.com. To facilitate the investment mandate above, we may borrow in the currency of the relevant security. We may also enter into forward foreign exchange contracts to hedge against the risk of exchange rate movements. Borrowings may be arranged from a related party financier. > For more information, please go to www.mitchellam.com select Incorporated information from the Information Memorandum information menu, and go to Fund profile and Our legal relationship with you. The material relating to how the Fund works may change between the time when you read this Information Memorandum and the day when you acquire the product. Investing in a managed investment scheme The Fund is an unregistered managed investment scheme structured as a unit trust. In a managed investment scheme, investors money is pooled together to purchase the scheme s assets, and it is the investment manager, not the investors, who has day to day control of the scheme. The Fund s constitution, along with the Fund s Information Memorandum, the Corporations Act and other relevant laws, set out the relationship between us and our investors. The Fund is not required to be a registered managed investment scheme because it is only open to wholesale clients as explained on page 3. The value of your investment Investors in a managed scheme are issued with units. Each unit represents a share of the value of the scheme s assets. The Fund has a number of classes of units. When you invest in the Fund through this Information Memorandum, we will issue you with Ordinary units. The value of your investment at any point in time is calculated by multiplying the number of Ordinary units you hold, by the Ordinary unit price at that time. The unit price depends on a number of factors, including the market value of the Fund s assets. As a result, unit prices can rise and fall on a daily basis and the value of your investment will vary from time to time. Unit prices are updated monthly online at www.mitchellam.com and are also available by contacting us. Who can apply? Applications to invest in the Fund through this Information Memorandum can only be made by: > individual and joint investors of at least 18 years of age, and > partnerships, companies, trusts and superannuation funds, who receive this Information Memorandum (including electronically) within Australia. We can only accept applications signed and delivered to Mitchell Asset Management in Australia, and we reserve the right to refuse or reject an application. We will inform investors via our website if the investment opportunity under this Information Memorandum is offered in other jurisdictions, such as Singapore, Hong Kong and New Zealand. Investments, distributions and withdrawals will be in Australian dollars. Amounts in this Information Memorandum are in Australian dollars. The Fund may accept applications in other currency denominations and may pay distributions or withdrawals in other currencies. If we do, we will inform you by updating our website. Initial investment To invest in the Fund you will need to complete the application form accompanying a current Information Memorandum and submit it to us with 5
your initial investment amount of at least $10,000. Mitchell Asset Management reserves the right, however, to accept smaller investment amounts. You can make your initial investment by cheque or direct debit. Additional investments You can make additional investments of at least $5,000 at any time. You will need to complete an application form each time you make an additional investment. Initial and additional investments are made on the basis of the Information Memorandum current at the time of the investment. Distributions The Fund aims to pay distributions quarterly. Distributions paid are based on the income earned by the Fund and the number of units you hold at the end of the distribution period. You should be aware that although the Fund aims to pay distributions quarterly, the amount of each distribution may vary or no distribution may be payable in a quarter. You should read the important information about how the Fund works before making a decision. Accessing your money You can submit a redemption request in writing in respect of your Ordinary units, after holding your units for at least 12 months, and provided that you give Mitchell Asset Management at least one month written notice of your redemption request prior to a Redemption Date (being each of 31 March, 30 June, 30 September and 31 December). A minimum withdrawal amount of $5,000 applies, and we generally require a minimum balance of $10,000 to keep your investment open (Mitchell Asset Management reserves the right, however, to accept smaller amounts). Different time periods for redemption requests apply for different classes of units which may be issued by Mitchell Asset Management in accordance with the Fund s constitution. Under the Fund s constitution, payment and processing of redemption requests may take longer in some circumstances, such as if there is insufficient cash available in the Fund to meet all redemption requests which have been made for a particular Redemption Date. 3.0 Benefits of investing in the Mitchell Asset Management Fixed Income Fund Benefits of investing For investors seeking a diversified Australian Bank bond and credit security portfolio, the Fund provides: > access to Tier 1 Bonds, including loans, bonds, notes and credit securities in Australian Banks in both the Australian market and the global bond and security markets (including access to products that normally have a minimum application of $500,000) > diversification across Australian Bank issuers > the potential for regular quarterly distributions > the potential for total returns (primarily income with some capital growth) above government bonds, and > access to Mitchell Asset Management s team with a depth of experience managing investment funds. You should read the important information about the benefits of investing and the features of the Fund before making a decision. 4.0 Risks General risks relating to all investments The Fund s investments are subject to the usual risks which can affect our ability to make returns or distributions. When you invest in a managed investment scheme, you should be aware that: > all investments carry risk > different strategies may carry different levels of risk, depending on the assets that make up the strategy > assets with the highest long-term returns may also carry the highest level of short-term risk > returns are not guaranteed future returns may differ from past returns, and the level of returns may vary, and > the value of your investment may vary, and there may be the risk of loss of invested capital. 6 Mitchell Asset Management (ABN 65 123 804 491) holds an Australian Financial Services Licence No. 320019
The value of your investment may also be affected by: > the state of the Australian and world economies > consumer confidence > changes in laws and regulations including tax laws and government policies relating to managed investment schemes > changes in management and the loss of key personnel, and > the specific risks noted below. Your personal circumstances (including your age, investment time frames, where other parts of your wealth are invested and your own risk tolerance) can also affect the levels of risk for you as an investor. As the risks noted in this section do not take factors such as these into account, you should obtain appropriate financial advice before making a decision about investing or reinvesting in the Fund. Specific risks of the Fund Risks specific to the Mitchell Asset Management Fixed Income Fund may include or be associated with: > loss of value of investments at the time the Fund may wish to sell a bond or security and realise its value, its value may have decreased > repayment risk at the expected time that an Australian Bank will repay the principal on a bond or security, the Australian Bank may instead decide to convert the bond or security into preference or ordinary shares in the Bank or may instead wish to rollover the bond or security. Further, there is also repayment risk (although such risk is considered very low) that the Australian Bank may not be financially able to repay the bond or security at its repayment date > credit including the risk that a credit issuer or counterparty defaults on interest payments, the repayment of capital or both > interest rates including the risk of capital loss in a rising interest rate environment > international investments including losses related to currency exchange rates, hedging, and changes in the state of the Australian and world economies > derivatives the use of derivatives may magnify any losses incurred > gearing increases in interest rates may affect the cost of the Fund s borrowings and reduce the Fund s returns > changes in regulations and tax laws including the risk that a change may trigger a repayment or conversion event in respect of an investment in a bond or credit security > hybrid securities as these are a combination of debt and equity, they carry the risks associated with interest rates, derivatives and share market investments > financier risk in the event of a default on a loan, a financier may take security over the Fund s underlying investments > liquidity assets subject to liquidity risk may be difficult to trade, and it may take longer for their full value to be realised > management risk there is a risk that the decisions made by Mitchell Asset Management as the Manager may not be optimal at any point in time considering the available choices to be made in respect of such investment decisions, and > counterparty risk there is a risk that counterparties to third party contracts may not meet their obligations under those agreements. There are risks associated with investing as a wholesale client in an unregistered managed investment scheme compared with a retail client investing in a registered scheme: > The Manager is not required to be a responsible entity and therefore is not subject to as stringent financial and professional indemnity related requirements under its licence; > As a wholesale client, the Manager is not required to afford you access to its internal complaints handling procedures and you may not have access to an external complaints handling scheme such as the Financial Ombudsman Scheme. > The Manager is not subject to the Compliance Committee obligation of a responsible entity in relation to a registered scheme, which provides independent oversight of compliance by the responsible entity; and > The Manager is not required to issue a Product Disclosure Statement which has more prescriptive requirements for information to be disclosed. You should read the important information about risks before making a decision. 7
5.0 How we invest your money The Fund The Mitchell Asset Management Fixed Income Fund is an unregistered managed investment scheme which invests in an actively managed portfolio of bond and credit securities. We will primarily focus on Tier 1 Bonds, being loans, bonds, notes and credit securities, that are issued by major Australian Banks in the Australian market and also on global bond and security markets. The Fund is suitable for investors seeking a diversified Australian Bank bond and credit security portfolio. It is intended that at least 80% of the Fund s investments will be tradeable over the counter and be able to be realised into cash within 10 days. We do not intend to invest in preference shares or other equity securities. If the bonds or credit securities convert into preference shares or other equity securities, we intend to realise those securities for cash, which will be reinvested into Tier 1 Bonds (or other bonds or credit securities). Asset allocation The Fund may invest in Tier 1 Bonds and other financial investment products (such as securities and bonds classified as Tier 2 capital issued by Australian Banks). The Fund may hold up to 20% in term deposits or cash bank accounts with an Australian Bank. Investment return objective The Fund aims to pay distributions quarterly. You should be aware that although the Fund aims to pay distributions quarterly, the amount of each distribution may vary or no distribution may be payable in a quarter. Suggested minimum investment timeframe > 3 years Summary of risk level The Fund s risk band and risk label above are an estimate and the methodology used for calculating the risk level can be obtained by contacting us. This is not a complete description of the risks of investing in the Fund. Before choosing to invest or reinvest in the Fund, you should read the Fund s Information Memorandum, and consider factors such as the likely investment return, the risks of investing and your investment timeframe. Risk band 1 2 3 4 5 6 7 Risk label very low low low to medium medium medium to high high very high You should read the important information about how we invest your money before making a decision. 8 Mitchell Asset Management (ABN 65 123 804 491) holds an Australian Financial Services Licence No. 320019
6.0 Fees and 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 the Fund or your financial adviser. Table 1 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.moneysmart.gov.au) has a managed investment fee calculator to help you check out different fee options, and to calculate the effect of fees and costs on your account balance. Summary of fees and costs The following table provides an overview of the costs of acquiring units in the Fund, and the fees and costs charged in relation to your investment. These fees may be charged to your investment account or deducted from investment returns or the Fund s assets. For this Fund, these fees are paid out of the Fund s assets, and are reflected in the unit price. You can use this information to compare the Fund s fees and costs with those of other funds. Type of fee or cost Amount Fees when your money moves in or out of the Fund Establishment Fee Contribution Fee Withdrawal Fee Termination Fee Nil Nil Nil Nil Management costs Management fee The fees and costs for managing your investment Administration Fee 0.75% per annum of the value of the Fund (determined under the Fund s constitution). We charge a fee for administering and managing the Fund. These fees are calculated monthly on the value of the Fund and paid to us (as responsible entity for the Fund) on a monthly basis. These fees reduce the net asset value of the Fund and are reflected in the unit price. The fees are not charged separately to your investment. $1,000 per annum, payable from your account at the end of each financial year. Transaction fee The fee for purchasing the Tier 1 Bonds (and other bonds and credit securities) Between 0.5% and 1.0% of the dollar value of the bonds or other credit security purchased (as a one-off fee each time such an investment is purchased). All figures in Table 1 are GST exclusive. Important: Fees may be payable to your financial adviser. These fees are additional to the fees noted in Table 1 (for more information, refer to the Statement of Advice provided by your adviser). 9
Changes to fees We may change the fees noted in this Information Memorandum at our discretion and without the consent of investors. For example, we may increase fees where increased charges are incurred due to government changes to legislation, where we incur increased costs, if there are significant changes to economic conditions, or if third parties impose or increase processing charges. However, we will give investors 30 days written notice of any intention to increase the existing fees, expenses or recovery of expenses, or introduce contribution, withdrawal or other fees. Example of annual fees and costs Table 2 below gives an example of how the fees and costs in the Fund can affect your investment over a one year period. You should use this table to compare this product with other managed investment products. The fees shown in this table are an example only and are not additional to the fees described in Table 1. You should read the important information about fees and costs before making a decision. Table 2 Example Mitchell Asset Management Fixed Income Fund 1 Balance of $50,000 with a contribution of $5,000 during the year. Contribution Fees Nil For every additional $5,000 you put in, you will be charged $0 Management costs Management fee 0.75% Administration Fee Transaction fee 0.5% Total management costs Equals Cost of the Fund 3 And, for every $50,000 you have in the Fund you will be charged $425 each year. And for your investment in the Fund you will be charged $1,000 per annum each financial year. Assuming 80% of your $50,000 investment is used to acquire bonds or credit securities, you will incur a one-off fee of $200. The total management cost for a $50,000 investment, assuming that 80% of the investment is used to acquire securities, will be $1,625 2. If you had an investment of $50,000 at the beginning of the year (of which 80% was used towards investments) and you put in an additional $5,000 during that year, you would be charged a fee of $1,625. What it costs you will depend on the fees you negotiate with your fund or financial adviser. 1. All figures in Table 2 are GST exclusive. 2. The $1,625 shown in the table above does not include the management costs charged on the additional $5,000 investment. The additional management costs would be an additional management fee of $42.50 and an additional transaction fee of $20 if you had invested the $5,000 for a full 12 months and 80% of that additional investment (i.e. $4,000) was invested by us. The total management cost in this case would therefore be $1,687.50. If the Fund assets were geared 50%, the management fees in the above table would be $1,850 and the transaction fee would be $400 (for total fees and costs of $2,250). If you invested the additional $5,000 investment for a full 12 months (on the same basis as assumed in 1 above for the total amount), there will be an additional management cost of $125. 3. This cost does not include any advice fees paid to your financial adviser. 10 Mitchell Asset Management (ABN 65 123 804 491) holds an Australian Financial Services Licence No. 320019
7.0 How managed investment schemes are taxed Investing in an unregistered managed investment scheme is likely to have tax consequences for investors. Specifically, managed investment schemes do not pay tax on behalf of investors in the scheme, and investors are assessed for tax on any income and capital gains generated by the scheme. This Information Memorandum does not purport to provide tax advice to investors, but contains general information only. The tax laws are complex and change from time to time. We strongly recommend you seek professional taxation advice for your potential investment in light of your circumstances. You are strongly advised to seek professional taxation advice before you invest or deal with your investment. The Australian tax system is complex and will apply differently to each investor. The taxation treatment of your investment will be specific to your circumstances and the nature of your investment. Mitchell Asset Management will provide yearly tax statements. 8.0 How to apply Investing in the Fund You will need to complete an application form when you apply for an initial investment in the Fund, or make an additional investment. Applications must be in Australian dollars. The offer to invest in the Fund is subject to the terms and conditions described in the Information Memorandum current at the time of contributing your investment amount. Cooling off rights Where we have accepted your application to invest or reinvest in the Fund, you can request the return of your investment within 14 days of the earlier of the initial transaction being confirmed, or the end of the fifth business day after the units are issued. The amount returned to you may be less than the amount of your initial investment in the Fund due to adjustments to take into account such factors as changes in the unit price or any tax payable on the units. Your investment cannot be returned if you have exercised any rights or powers available under it. Complaints procedure We have an established procedure to deal with complaints which we will provide access to for investors in the Fund despite them being wholesale clients. If you have concerns relating to your investment in the Fund, please contact please contact the Complaints Officer by telephone on 1300 360 949 or in writing to Mitchell Asset Management Funds Management Limited, PO Box 638, Toorak Victoria 3142. If the matter is not resolved to your satisfaction or is not resolved within 45 days, you may wish to contact the Financial Ombudsman Service, by telephone on 1300 780 808 or in writing to GPO Box 3 Melbourne Victoria 3001. The Financial Ombudsman Service is independent from us. FOS may not be able to deal with your complaint if you are making this investment as a wholesale client. It can deal with complaints from wholesale clients in certain circumstances, but they are unlikely to be able to deal with a complaint in relation to this investment. 11
How to invest Lodgement of application and payment details Application for units may only be made and will only be accepted by Mitchell Asset Management on the attached Application Form. To apply for units in the Mitchell Asset Management Fixed Income Fund, complete the attached application form and mail with accompanying cheque. Cheques should be crossed Not Negotiable and made payable to Mitchell Asset Management. The completed application together with the subscription cheque should be sent to: Mitchell Asset Management PO Box 638 Toorak Victoria 3142 Mitchell Asset Management reserves the right to refuse any application in whole or in part. Applicants who are unsuccessful or are allotted less then number of shares applied for will receive a refund of their application money as soon as practicable following the date of allotment. Minimum investment The minimum investment per applicant is 10,000 $1.00 units and thereafter in increments of 10,000 units payable upon application. Issue of units in the unit trust Units will be allotted as soon as practicable upon acceptance by Mitchell Asset Management of your application for Units. Subscription of 800,000 units paid to $1.00 is met. Certificates Mitchell Asset Management will issue a Certificate to successful applicants confirming the number of Units allotted as soon as practicable following allotment. Tax file number or Australian business number Please enter your Tax File Number ( TFN ) or Australian Business Number ( ABN ). Collection of TFN s and ABN s is authorized by taxation laws. Quotation of your TFN or ABN is not compulsory and will not affect your Application. However, if no TFN and ABN is quoted any interest or distributions may be taxed at the highest marginal tax rate plus the Medicare Levy. Mitchell Asset Management reserves the right to allot units offered in Mitchell Asset Management Fixed Income Fund in full on any application or to allot any lesser number or to decline any application. 12 Mitchell Asset Management (ABN 65 123 804 491) holds an Australian Financial Services Licence No. 320019
Application form I / We hereby irrevocably apply for I / We have enclosed a cheque for $ units in Mitchell Asset Management Fixed Income Fund upon the terms listed above. ($1.00 per unit) made in favour of Mitchell Asset Management at Mitchell Asset Management Fixed Income Fund Applicant 1 Title Mr Mrs Ms Miss Dr Other Full Name / Company Name Applicant 2 Title Mr Mrs Ms Miss Dr Other Full Name / Company Name On behalf of a trust or superannuation fund Yes No Beneficial holder (i.e. Trust, Super Fund) Postal Address Street Number and Name Suburb State Postcode Country Contact Details Contact Name Phone Number ( ) Tax File Number Applicant 1 (if applicable) Applicant 2 (if applicable) Beneficial Holder (i.e. Trust / Super Fund) Australian Business Number or Exemption Applicant 1 (if applicable) Applicant 2 (if applicable) Beneficial Holder (i.e. Trust / Super Fund) 13
Declaration of Applicants By completing the application form the Applicant: > Acknowledges that subscription is subject to investment risks including the possible loss of capital invested; > Declares that they have read the Information Memorandum in its entirety; > Acknowledges that Mitchell Asset Management Fixed Income Fund is entitled to accept or reject this application in whole or in part; Signatures of Applicants Individuals Applicant 1 Signature Applicant 2 Signature Company Executed by Name of Company Signature of Director Signature of Director / Company Secretary Print Name Print Name SMSF Name of Super Fund SMSF Individual trustees Applicant 1 Signature Applicant 2 Signature SMSF Company Signature of Director Signature of Director / Company Secretary Print Name Print Name 14 Mitchell Asset Management (ABN 65 123 804 491) holds an Australian Financial Services Licence No. 320019
info@mitchellam.com www.mitchellam.com afsl 320019