Macquarie's ALPS are a 6-year product issued by Macquarie Bank Ltd and provide a capital guarantee of 100% if held to maturity. They offer a maximum starting yield (for example 12% p.a.) paid semi-annually, which is directly linked to the performance of a ‘Reference Basket’ of ASX listed shares. The yield remains at the starting level unless a knock-out event occurs.
ALPS may benefit long-term investors and Self Managed Super Funds who want:
- higher potential yields than those generally available for cash
- the confidence of capital protection on expiry (after 6 years)
- the benefit of an ASX listed investment for maximum flexibility
From time to time Macquarie will issue a new series of ALPS. While the structure is generally the same, some features may be altered. It is encouraged that you refer to the issuer's PDS.
Product overview ALPS2
|Investment term/ expiry date||6 years, 29 September 2011|
|Maximum starting yield||12.00% p.a.*|
|Capital protection||Yes, 100 per cent at expiry (subject to early maturity)|
|Face value / ALPS||$10.00|
*Yield decreases by 2.2% pa every time a knock-out event occurs
During the initial offer period, you can subscribe for ALPS by completing the application form contained in the PDS. Once quoted on ASX, you can buy and sell them during the life of the investment through your broker.
During the investment term ALPS will pay 6.6% semi-annually, starting July 2005, based on the face value of $10.00 unit unless knock-out events occur.
On the issue date, the initial prices of a basket of 64 Australian companies selected from the top 200 ASX/ listed companies by market capitalisation are determined. A knock-out event occurs if any one of the companies within the basket falls in value by more than 50% from that initial price over the term. In this case, the yield will reduce by one-sixth (or 2.2% per year) for the remainder of the investment term.
The price of ALPS on the secondary market will fluctuate over the period to reflect accrued but unpaid coupons. Hence, investors who purchase them the day prior to the coupon payment will be entitled to the full coupon due. On the day the coupon is paid the secondary market price of ALPS should theoretically fall by the coupon amount. Other market factors including the prices of the shares in the reference basket and interest rates will also affect the market price.
What happens at expiry
You will receive a maturity notice approximately 20 days prior to the maturity date. There are two alternatives at maturity. You can either:
- take physical delivery of the delivery parcel (BHP Shares), or
- take a cash settlement.
If you do not make a decision, you will automatically receive the cash settlement amount equal to the issue price ($10.00) per unit of ALPS that you own.
The main risk associated with an investment in ALPS is a reduction in yield caused by the price of any of the 64 companies in the reference basket falling by more than 50%. If six knock-out events occur, the distribution is reduced to zero for the remainder of the term, from and including the half-year period in which the sixth event occurred.
Other risks are described in the PDS. All investors should consider the PDS carefully before making any investment decision in relation to this product.