RG97 – MANAGING DRAFTING COMPLEXITIES Nathan Hodge Partner, King & Wood Mallesons

RG97 – Managing Drafting Complexities Product Disclosure Statement challenges Updating the PDS – when? Significant event notices Changes to periodic statements

Product Disclosure Statement challenges Statutory fees and costs table Second fees and costs table Additional Explanation of Fees and Costs

Statutory fees and costs table Minor changes to consumer advisory warning No changes to format of table or text of table Changes to fee definitions Indirect cost election Other challenges: not using the prescribed wording

Second fees and costs table (1) Commonly shows per investment option: investment fees and performance fees ICR buy/sell spread ASIC says must now disclose total transaction costs, and encourages: amount recovered from buy/sell spread balance which reduces returns

Second fees and costs table (2) Challenges: must show single ICR amount ICR disclosure vs transaction costs disclosure ie. bid/ask spread fees vs costs forward looking vs backward looking performance fees vs balance of investment fee / ICR

Additional Explanation of Fees and Costs Detailed changes to statutory fee example buy/sell spread example in note Detailed changes to “Defined fees” should you follow the exact wording? No changes to content requirements. But . . performance fee vs performance-related fee transaction cost disclosure, and bid/ask spreads buy/sell spreads vs no buy/sell spreads indirect costs

Updating the PDS – when? (1) PDS must be up-to-date at all times, subject to Class Order 03/237 What is material? PDS must not be materially misleading or deceptive Fees must be disclosed prospectively, costs retrospectively

Updating the PDS – when? (2) ASIC expects annual review of fees and costs Look at fees and costs for Year 0 (ie before PDS issued) and Year 1 (ie 12 months after PDS issued) costs for Year 0 materially greater than PDS, roll over PDS and if not, PDS Update costs for Year 1 materially greater than PDS, roll over PDS and if not, no PDS Update Changes to performance fees

Significant event notices Notify of material or significant changes to the PDS, but note timing concession for cost increases SEN at time of rolling PDS to comply with indirect costs rules increase in amount vs moving an amount SEN - ongoing Drafting a SEN piecemeal vs full table

Changes to periodic statements Same rules for annual statements and exit statements New rules to disclose “other fees” disclosure of buy/sell spread costs Actual indirect costs vs estimated disclose for the reporting period note use of estimates in “indirect cost” definition