PDS-WEB Foreign Currency Options

7/28/2019 PDS-WEB Foreign Currency Options

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Fo CCy opoPdct dicl tatmnt | 06.10


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i

Australia and New Zealand Banking Group LimitedABN 11 005 357 522, Australian Financial ServicesLicence 234 527, is the issuer of the foreign currencyoptions offered in this Product DisclosureStatement (Pd) dated 1st June 2010.

References to anZ, us , our or wethroughout this PDS are references to Australia andNew Zealand Banking Group Limited. References toou or our throughout this PDS means theperson entering into a foreign currency option.

PP f thi Pd

This PDS is an important document. Its purpose isto provide you with key information about foreigncurrency options.

ANZ is providing you with this PDS so that youreceive key information about foreign currencyoptions to help you understand their risks, benefitsand costs, and to assist you in making an informeddecision about entering into foreign currencyoptions.

Foreign currency options are sophisticated financialproducts. These products may be unsuitable foryou if you are unfamiliar with foreign exchange

markets and the way that option products work.

Please read this PDS in full before deciding to enterinto a foreign currency option. If you decide to enterinto a foreign currency option, you should keep thisand any other documentation relating to theforeign currency option for future reference.

Gnal infmatin nly

The information in this PDS is general informationonly and does not take into account your personalobjectives, financial situation or needs. This PDSdoes not constitute advice and is not a

recommendation or opinion that foreign currencyoptions are appropriate for you.

Before entering into a foreign currency option, youshould give consideration to your objectives,financial situation and needs, and be satisfied thatthey will be met if you enter into a foreign currencyoption. We recommend that you consult yourindependent professional adviser about thesuitability offoreign currency options for you.

atalian ditibtin nly

The foreign currency options to which this PDSrelates are available to persons receiving the PDS(electronically or otherwise) in Australia, who areAustralian residents.

The distribution of this PDS in jurisdictions outsideAustralia may be restricted by law and therefore,persons into whose possession those documentscome should seek advice on and observe any suchrestrictions. Failure to comply with relevantlegislation may violate these laws. This PDS doesnot constitute an offer or invitation in any place inwhich, or to any person to whom, it would not belawful to make such an offer or invitation.

Pdatd infmatin

The information in this PDS is subject to change.Where new information arises that is materiallyadverse to the information in this PDS, ANZ willissue a new PDS or issue a supplementary PDSsetting out the new information.

Where new information arises that is not materiallyadverse to the information in this PDS, you will beable to find the updated information on ourwebsite anz.com or you can contact us using thedetails in the directory in Section 13 or call yourANZ Contact. A paper copy of the updatedinformation is available free on request.

xamPl in thi Pd

The examples are for illustrative purposes only. Youshould note that the actual prices and rates will varydepending on the terms of the foreign currencyoption and the factors listed in Section 3.1 of thisPDS.

dfinitin

To assist you in understanding this PDS, we haveincluded definitions in Section 12. The meaning ofsome italised words used in this PDS are set out inthat section.

cntact anZ

If there is anything in this PDS that you do notunderstand or if you have any questions you cancontact us using the details in the directory inSection 13 or call your ANZ contact. You can also goto our website at anz.com.

mpo Fomo


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Co

imPtant infmatin 2

1 Ky fat 4

2 What i a frign rrny pin? 5

3 hW d a frign rrnypinWK? 6

3.1 How are thepremium and strike ratedetermined? 6

3.2 How are foreign currency options settled onthe delivery date? 6

3.3 Can a foreign currency option be extended? 6

3.4 Can a foreign currency option be

terminated early? 74. What a th iGnificant bnfit

and diadvantaG f a frignrrny pin? 7

5 What a th iGnificant iK f afrign rrny pin? 8

6 ct f a frign rrny pin 9

6.1 Premium 9

6.2 Fees and charges 9

6.3 ANZ financial benefit 9

6.4 Settlement costs 96.5 Taxes and other costs 10

6.6 Changes to fees and charges 10

7 xamPl f hW frign rrnypin WK 10

8 tm f frign rrny pin 13

8.1 How do you enter into a foreigncurrency option? 13

8.2 Required Documentation 14

9 infmatin abt anZ 14

10 taxatin 14

11. additinal infmatin 15

11.1 Code of Banking Practice 15

11.2 What if you have a complaint? 15

11.3 Privacy and confidentiality 15

11.4 Telephone Recording 17

11.5 Anti-Money Laundering 18

11.6 Ethical Considerations 18

12 dfinitin 18

13 dicty 19


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1. Ky fat

tPic hiGhliGht minfmatin

Wh i th i? ustralia and ew Zealand Banking ru Liited B 11 005 357 522,ustralian Financial ervices Licence 234 527

ectin 9

What a WffinG?

foreign currency option is an agreeent between u and Z where, inexchange fr the ufrnt aent f a premium u have the right, but ntthe bligatin, t exchange ne currenc fr anther at an agreed exchangerate n an agreed date.

Z ffersput options and call options

ectin 2

What a thiGnificant

bnfit?

ntering int a foreign currency option rvides rtectin against adversecurrenc veents with the tential t financiall benefit fr favurable

currenc veents.

ectin 4

What a thiGnificantdiadvantaGand iK?

f a foreign currency option is nt exercised and exires n the expiry date thepremium u aid is an additinal cst t u.

other risks are exlained in ectin 5, including arket risk, crrelatin risk anderatinal risk.

ectins 4 and 5

What i th r? 2 business days t 2 ears. Lnger terms a be available n request. ectin 2

Which cncia ffd?

Z will qute st currencies. please cntact us fr a full range f currenciesffered.

ectin 2

What i thminimm cntactamnt?

iniu aunt.

What i th tyl fpin?

Z ffers urean stle options. ectin 2

What d i hav tPay?

yu ust a thepremium we agree with u. ectin 6

hW i it ttld? f u exercise the foreign currency option, n the delivery date u ustexchange currencies with Z.

ectin 3.2

can i vay th xpiryda?

Variatin t the agreed expiry date is nt eritted. ectin 3.3

can i tminataly?

f we agree, u can terinate earl but an aunt a be aable b r tu deending n the value f the foreign currency option n terinatin.

ectin 3.4

hW d i nt int

a frign rrnypin?

ntr int a foreign currency option is subject t Zs credit arval.

f u want t enter int a foreign currency option, u will need t tell Z thecurrency pair, the contract amount, the te f tin (put option r call option),the strike rate, the term and the currenc in which u wish t a thepremium.

please cntact us fr a foreign currency option.

ectin 8

tax he tax cnsequences f investing in a foreign currency option will deendun ur secific circustances. yu shuld seek ur wn indeendent taxadvice befre u enter int a foreign currency option.

ectin 10

cmPlaint Claint reslutin rcedures are rvided. ectin 11.2

n clinG ff here is n cling ff erid nce u have entered int a foreign currencyoption.

ectin 5


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2. What i a frign rrny

pin?A foreign currency option is an agreementbetween you and ANZ where, in exchange forthe upfront payment of a premium, you havethe right but not the obligation, to exercisethe option to exchange one currency foranother at an agreed rate (strike rate) on anagreed date (delivery date).

p and all pin

ANZ offers two types offoreign currencyoptions,put options and call options.The table below describes the differencesbetweenput options and call options.

ANZ only offers European style options.This means that the foreign currency option(whether aput option or a call option) can onlybe exercised on the expiry date. You mustnotify ANZ by the expiry time on the expirydate that you wish to exercise your foreigncurrency option.

If you exercise your foreign currency optionthere will be physical delivery of one currencyin exchange for the other currency at the strikerate on the delivery date. Please see Section 3.2

for further information on settlement offoreign currency options.

ntinG int an pin

If you want to enter into a foreign currencyoption, you will need to tell ANZ the currencypair, the contract amount, the type of option(put option or call option), the strike rate, theterm and the currency in which you want topay thepremium. ANZ will quote you thepremium if it agrees to enter into a foreigncurrency option with you. Please see Section 8for further information regarding entering into

a foreign currency option.

What i th r?

The term of the foreign currency option is thetime between the trade date, which is the dateon which you enter into a foreign currencyoption, and the expiry date. Once you enterinto a foreign currency option the expiry datecannot be varied. Please see Section 3.3 forfurther information.

What a frign rrny pind f?

Foreign currency options are commonly used tohedge foreign exchange risk at a future date.

Foreign currency options are commonly used:

> to protect foreign currency exposures againstadverse exchange rate movements; and

> to set a worst case exchange rate.

tyP dciPtin xamPl

p pin yu have the right but nt the bligatin t sellne currenc and receive anther currenc at thestrike rate, als called a vanilla ut tin

rter wants t receive a freign currenc inexchange fr lcal currenc (D), and btainrtectin against unfavurable exchange rateveents

all pin yu have the right but nt the bligatin t bune currenc with anther currenc at the strikerate, als called a vanilla call tin

xrter wants t receive lcal currenc (D) inexchange fr freign currenc, and btainrtectin against unfavurable exchange rateveents


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3. hW d a frign rrny

pinWK?3.1 hW a th pri and rikra

dtmind?

pri

In exchange for entering into a foreigncurrency option, you will pay ANZ apremium.ANZ determines thepremium on a transactionby transaction basis with reference to anumber of factors, including:

> transaction type (call option orput option);

> the nominated strike rate;

> currency pair;> expiry date;

> delivery date;

> current spot exchange rate;

> current forward exchange rate;

> the contract amount;

> market volatility of the underlying currencypair;

> current interest rates;

> ANZs internal f ixed and variable costs; and

> ANZs risk/ profit margin.

The table below summarises the impact someof the factors may have on thepremium. Thelist of factors is not exhaustive.

Determination of thepremium is a complex

process. The degree of influence that eachfactor has in the determination of thepremiumvaries from time to time, in accordance witheconomic conditions, such as currency andinterest rate movements and volatility.

YourANZ contactwill provide you with a quotefor thepremium for any proposed foreigncurrency option. Thepremium is generallyexpressed as a dollar amount.

Thepremium must be paid in cleared funds onthepremium payment date (generally twobusiness days after the trade date). If thepremium is not paid on thepremium payment

date, the foreign currency option willautomatically terminate and you will be liablefor any costs arising as a result of thetermination of the foreign currency option.

3.2 hW a frign rrny pinttld n th dlivry da?

If you exercise the foreign currency option bythe expiry time on the expiry date, the foreigncurrency option will be settled on the deliverydate, which is usually two business days afterthe expiry date.

This means that on the delivery date you willmake a physical delivery of one currency to usand we will make a physical delivery ofanother currency to you at the agreed strikerate. You must ensure that you have sufficientcleared funds in your nominated account (oras otherwise agreed) to settle the foreigncurrency option in this way.

It is your responsibility to inform ANZ by theexpiry time on the expiry date that you wish toexercise the foreign currency option.

3.3 can a frign rrny pinb

xtndd?After entering into a foreign currency option,you may not vary the agreed term or expirydate.

fact p pin pri(Ptctin aGaint a fall in thfrign xhang ra)

all pin pri(Ptctin aGaint a i in thfrign xhang ra)

Strike rate higher strike rate results in a higherpremium and a lwer strike rate results ina lwerpremium

lwer strike rate results in a higher premiumand a higher strike rate results in a lwerpremium

Vlatilit f the exchange rate Higher vlatilit results in higherpremium, lwer vlatilit results in lwerpremium

Expiry date n expiry date further in the future results in a higherpremium and an expiry date clser in the futureresults in a lwerpremium


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3.4 can a frign rrny pinb

tminatd aly?You may find that you have no further use foran existing foreign currency option. A foreigncurrency option may be terminated at any timebefore the expiry time on the expiry date,either:

> by agreement between you and ANZ; or

> in accordance with the master dealingagreement.

Where the foreign currency option isterminated by agreement between you andANZ, the amount payable on termination is as

agreed.

Where the foreign currency option isterminated in accordance with the masterdealing agreement, the amount payable isdetermined in accordance with those terms.

Termination of a foreign currency optioninvolves ANZ notionally buying back theforeign currency option from you.

ANZ will notionally buy back the foreigncurrency option at a price it determines usingthe same methodology it uses for determiningthepremium as set out in Section 3.1 above

and any costs applicable to the termination.ANZ will give you a quote for terminating theforeign currency option.

Depending on the current market conditions,the foreign currency option could be worthmore or less than the originalpremium. Youmay lose money by terminating the foreigncurrency option.

If early termination results in you having topay an amount to ANZ, you must ensure thatyou have sufficient cleared funds in yournominated account to meet the payment, oras otherwise agreed.

4. What a th iGnificant bnfit

and diadvantaG f a frignrrny pin?

What a th bnfit f a frignrrny pin?

The benefits of a foreign currency optioninclude:

> ability to lock in a worst case exchange rate(the strike rate) on a future date;

> flexibility to tailor the product to suit yourneeds such as the contract amount, thecurrency pair, and the term to protect againstadverse exchange rate movements;

> thepremium is a known cost for entering intothe foreign currency option;

> you can take advantage of favourablemovements in the exchange rate; and

> you can choose whether to exercise theforeign currency option or to let the optionexpire (not exercised). Unless you exercise theforeign currency option there is nocommitment or obligation to exchangecurrencies.

What a th diadvantaG f

a frign rrny pin?The disadvantages of a foreign currency optioninclude:

> you must pay thepremium on thepremiumpayment date

> if the foreign currency option expires and is notexercised, it is worthless and results in thepremium you paid being an additional cost toyou and the total transaction cost beinghigher than if you had not purchased a foreigncurrency option as thepremium is notrefundable;

> the expiry date or term cannot be extended;and

> you may not recoup the fullpremium paid ifthe foreign currency option is terminated priorto the expiry date.


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5. What a th iGnificant iK f

a frign rrny pin?Risks arise out of factors that are beyond yourcontrol. From the time of entering a foreigncurrency option with ANZ, risk factors may leadto unfavourable changes in the financialoutcomes of the foreign currency option.

Monitoring risks associated with a foreigncurrency option is your responsibility.

Prior to entering into a foreign currency option,you should carefully consider the followingrisk factors as well as the other informationeither contained in this PDS or of which you

are otherwise aware and consider whether aforeign currency option is suitable for you,given your individual objectives andcircumstances. We recommend that youobtain independent advice on the suitabilityof a foreign currency option for you.

clatin iK

Correlation risk is the risk that the value of aforeign currency option does not move in linewith that of the underlying exposure that youare seeking to hedge. This may occur whereyou seek to mitigate an exchange risk in one

currency by using another currency as a proxy.

For example, if you are concerned about thevalue of an investment in a European countrywithout a freely convertible currency and ANZis unable to deal in the currency of this countryyou may choose to deal in Euro as you considerit a close proxy to the currency of that country.As the Euro is not an exact proxy for thatcurrency, and the correlation relationshipbetween the currencies may change, you haveassumed some correlation risk.

maKt iK

Markets can be volatile and are subject to ahost of factors, including economicconditions, government regulations,legislation, market sentiment, local andinternational political events andenvironmental and technological issues.Market risk is the risk that the value of yourforeign currency option will change as a resultof a movement in the underlying market price.

As a result of market risk you may receive nofinancial benefit if the foreign currency optionhas expired with no value to you. This willhappen if at the expiry time on the expiry date,the current spot exchange rate is morefavourable to you than the strike rate and you

let the foreign currency option expire. As you

will have paid thepremium, thepremium willbe an additional cost to you and the totaltransaction cost will be higher than if you hadnot purchased a foreign currency option.

Also, as a result of market risk, earlytermination of a foreign currency option mayresult in you not re-couping the premium paidfor the foreign currency option you haveentered into.

cdit iK

You are reliant on ANZ meeting its obligationsto you under the foreign currency option, such

as making a payment on a delivery date. Thisreliance is an exposure known as credit risk orcounterparty risk.

The proceeds from the issue offoreigncurrency options are not set aside by ANZ tosatisfy its obligations under a foreign currencyoption and such obligations are unsecuredobligations of ANZ and will rank equally withother unsecured obligations of ANZ.Unsecured obligations of ANZ rank behindobligations that are mandatorily preferred bylaw including the rights of deposit holders andare subject to insolvency, banking and similar

laws affecting creditors rights. For furtherinformation on ANZ, see Section 9.

Likewise, ANZ assumes some credit risk intransacting with you in respect of paymentobligations you have under the foreigncurrency option. If you have to make a paymentto ANZ on the delivery date, you must ensurethat you have sufficient cleared fundsaccessible to ANZ to meet your paymentobligations. If you do not, you will be in breachof your obligations and ANZ may take furtheraction to recover any payments owed and anycosts involved with recovering those

payments.

Patinal iK

Operational risk arises out of the failure orinadequacy of systems, internal processes andpeople. It can also arise out of external eventssuch as acts of terrorism or natural disasters.

You are reliant on ANZ being able to price andsettle your foreign currency option accuratelyand on time. ANZ, in turn, is reliant on itsinternal operating processes, includingcommunications and computer networks.

During the term of a foreign currency option, it isANZs responsibility to manage these risks.Your foreign currency option may be adversely


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affected if ANZs operating processes, systems

or people for managing these procedures aredisrupted, inadequate or fail.

tminatin

If you wish to terminate your foreign currencyoption before the expiry date, the foreigncurrency option will be terminated atprevailing market rates. You may or may notrecoup thepremium you paid. Currencymarkets are highly volatile and the prices ofthe underlying currencies can fluctuaterapidly and over wide ranges and may reflectunforeseen events or changes in conditions.

Fluctuations in the underlying currencies willaffect the benefit or cost to you when youterminate a foreign currency option. For moreinformation on termination of a foreigncurrency option please refer to Section 3.4. Youshould also refer to the master dealingagreementas it provides for situations where aforeign currency option can be terminatedincluding for default under the contract.

lGal, tax and Glaty iK

Legal, tax and regulatory changes could occurduring the term of a foreign currency option,

which may adversely affect a foreign currencyoption. You should seek independent taxadvice before entering into a foreign currencyoption.

cnflict f intt

ANZ is a large commercial bank which dealswith many people and entities. ANZ and itsrelated bodies corporate may enter intotransactions and products with variouscounterparties that may be in conflict with orinconsistent with foreign currency options andANZ does not need to and will not consider

the impact on your foreign currency option.

n clinG ff

No cooling off period applies for foreigncurrency options.

th iK

The risks listed above are not exhaustive.There may be other risks that are relevant toyou when entering into a foreign currencyoption.

You should also be sure that a foreign currency

option is suitable for you before entering intoone. We recommend that you obtainindependent professional advice on thesuitability offoreign currency optionsto you.

6. ct f a frign rrny pin

This section describes fees and other coststhat may be charged in relation to a foreigncurrency option. You should read all theinformation about the fees, costs and charges,as it is important you understand their impacton your foreign currency option.

6.1 pri

When you enter into a foreign currency optionwith us, you are required to pay a premium toANZ for buying the foreign currency option.Thepremium must be paid in cleared funds onthepremium payment date (generally thesecond business day after the trade date). If thepremium is not paid on thepremium paymentdate, the foreign currency option willautomatically terminate and you will be liablefor any costs arising as a result of thetermination of the foreign currency option.

Please see Section 3.1 for further informationon how thepremium is determined.

6.2 f and chaG

An establishment fee may be payable by youprior to you entering into a foreign currency

option. The establishment fee, if any, will beset out in your facility letter or agreement withANZ and you will know what it is before youenter into a foreign currency option.

There are no other fees payable to ANZ whenyou enter a foreign currency option.

6.3 anZ financial bnfit

ANZ derives a financial benefit when enteringinto a foreign currency option.

6.4 ttlmnt ct

You may also be required to pay additionalcosts on settlement or termination dependingon the manner in which termination orsettlement payments are effected, includingtelegraphic transfers and international drafts.

Information regarding the current costs oftelegraphic transfers or international drafts iscontained in the respective product disclosurestatements for these products or otherdocuments relating to these products. Youcan ask yourANZ contactfor a free copy of therelevant product disclosure statements, or youcan access them at anz.com.

Additional costs may be payable for couriers,postage and other actions relating to foreigncurrency options.


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6.5 tax and th ct

You should consult your independent adviserswith respect to legal, tax, accounting andfinancial implications of entering into foreigncurrency options. The costs you incur in doingso will be for your own account.

6.6 chanG t f and chaG

The fees and charges set out in this documentmay change from time to time at ANZsdiscretion. If any fee changes affect existingholders offoreign currency options, we willadvise them at least 30 days prior to any suchfee changes taking effect by posting them on

our website anz.com. By entering into aforeign currency option you agree tonotification of changes as set out above.

7. xamPl f hW frignrrny pin WK

The examples in this section are for illustrativepurposes only. You should note that the actualprices and amounts will vary depending onthe terms of the foreign currency option andthe factors listed in Section 3.1 of this PDS. Toassess the merits of a foreign currency option

you will need to use the actual rates andfigures quoted to you at the time.

xamPl 1: imPt nt inta p pin

An Australian importer knows that it needs tomake a payment of USD 100,000 to anoffshore supplier in three months time. Theimporter needs to receive USD in exchange forAUD to make this payment.

The AUD/ USD spot exchange rate is 0.8850. Forvarious reasons, the importer is concernedthat the AUD/ USD spot exchange rate will fall

and as a consequence the importer wouldneed to pay more AUD. The importer wants toprotect itself against any unfavourableexchange rate movements but benefit fromany favourable exchange rate movements.

The importer contacts ANZ and tells ANZ thatit wants to enter into an AUDput option

against the USD as a foreign exchange risk

management exposure technique. Theimporter nominates a strike rate of 0.8700 andan expiry date of three months time.

Based on this information, ANZ quotes theimporter apremium (i.e. the price at whichANZ is willing to enter into theput option withthe importer) of AUD 3,000, explaining thatthe foreign currency option will have a strikerate of 0.8700 and a contract amountof USD100,000.

The importer accepts ANZs quotedpremium.At this point, the deal becomes binding onboth parties. The details of the deal are as

follows:

Theput option gives the importer the right butnot the obligation to exchange AUD into USDat the strike rate on the expiry date.

The outcome of theput option is determinedon the expiry date. There are two scenarios the AUD/ USD spot exchange rate has risen orthe AUD/ USD spot exchange rate has fallen, asagainst the strike rate of theput option.

rad da da

tanactin tyP Foreign currency option

Ptin tyP Put Option

rrny pair D/ D

nra an D 100,000

ll Z

by rter

rik ra: 0.8700

pri D 3000

pri paynda

2 business days fr tradedate

xpiry da hree nths fr tda

xpiry i 3:00 ()

calclatinaGnt:

Z

dlivry da 2 business days after theexpiry date

tcmat xPiy

ad/ d p xhang raabv 0.8700

ad/ d p xhang rablW 0.8700

rter wuld let the option exire. he irter

culd settle at spot exchange rate which is refavurable t it

rter wuld exercise the option and exchange at

the agreed strike rate 0.8700 n the delivery date


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What if th ad/d p xhang

raha in abv th rik ra?> Lets assume that the AUD/ USD spot exchange

rate on the expiry date is 0.9050. As the strikerate (0.8700) is lower than the current spotexchange rate, and the importer has the rightbut not the obligation to exercise the putoption, the importer would allow theputoption to expire and convert AUD into therequired USD 100,000 at the current spotexchange rate of 0.9050.

> So, how does theput option affect the amountof AUD the importer had to pay?

> Importer exchanged USD 100,000 at the spotexchange rate of 0.9050, paying AUD110,497.24

> Importer paid apremium on theput option ofAUD 3,000

> Total payment by the importer of AUD113,497.24 (AUD 110,497.24 + AUD 3,000)

> Effective exchange rate achieved is 0.8810(USD 100,000/ AUD 113,497.24)

So, by entering into the put option, althoughthe importer locked in an exchange rate of0.8700 and protected itself against the AUD/

USD spot exchange rate falling during the termof the foreign exchange option, the importerhas still been able to benefit from theappreciation of the AUD/ USD spot exchangerate since the trade date. In situations where aforeign exchange option is not exercised, thepremium paid impacts the overall amount theimporter paid. In this case the importer is AUD3,000 worse off (thepremium paid) forentering into theput option than if it had notentered into aput option and exchanged atthe prevailing spot exchange rate.

What if th ad/ d p xhang

rahad falln blW th rikra?

Lets assume that the AUD/USD spot exchangerate on the expiry date is 0.8400. As the strikerate (0.8700) is higher than the current spotexchange rate, the importer by notice to ANZby the expiry time on the expiry date exercisedtheput option.

Following the exercise of theput option, onthe delivery date (which is two business daysafter the expiry date) the importer and ANZwill exchange currencies.

> ANZ will pay the importer USD 100,000

> Importer pays ANZ AUD 114,942.52 (USD100,000/ 0.8700)

> So how does theput option affect the pricethe importer paid for USDs?

> The net amount the importer paid, afteradjustment for the cost of thepremium, is:

> Net amount AUD 117,942.52 (AUD 114,942.52 +AUD 3,000)

> Effective exchange rate achieved is 0.8480(USD 100,000/ AUD 117, 942.52)

So, by entering into the put option and lockingin a strike rate of 0.8700 the importerprotected itself against a subsequent fall inthe AUD/ USD spot exchange rate.

If the importer had not entered into aputoption and converted AUD to USD at the spotexchange rate on the expiry date (0.8400), itwould have paid AUD 119,047.61 (USD100,000/ 0.8400).

In this case the importer is AUD 1,105.09 (AUD119, 047.61 - AUD 117,942.52) better off forentering into theput option than if it had donenothing and not entered into aput option.


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xamPl 2: xPt nt int a

all pinAn Australian exporter knows that it will receivea payment of USD 100,000 from an offshoreclient in three months time.

The AUD/ USD spot exchange rate is 0.8850. Theexporter contacts ANZ and tells ANZ that itwants to enter into an AUD call option againstthe USD. The exporter nominates a strike rate of0.8900 and an expiry date of three months time.

Based on this information, ANZ quotes theexporter apremium (i.e. the price at which ANZ iswilling to enter into the call option with theexporter) of AUD 2,700, explaining that theforeign currency option will have a strike rate of0.8900.

The exporter accepts ANZs quotedpremium. Atthis point, the deal becomes binding on bothparties. The details of the deal are as follows:

The call option gives the exporter the right butnot the obligation to exchange USD into AUDat the strike rate on the expiry date.

The outcome of the call option is determinedon the expiry date. There are two scenarios the AUD/ USD spot exchange rate has risen orthe AUD/ USD spot exchange rate has fallen, asagainst the strike rate of the call option.

What if th ad/ d p xhang

rahad in abv th rik ra?Lets assume that the AUD/USD spot exchangerate on the expiry date is 0.9300. As the strikerate (0.8900) is better for the exporter than thecurrent spot exchange rate, the exporternotified ANZ by the expiry time on the expirydate that it exercises the call option.

On the delivery date, which is two business daysafter the expiry date the exporter and ANZ willexchange currencies.

> Exporter will pay the ANZ USD 100,000

> ANZ pays exporter AUD 112,359.55 (USD

100,000/0.8900)

So how does the call option affect the amountof AUD the exporter received for convertingUSDs?

The net amount the exporter received, afteradjustment for thepremium paid, is:

> Net amount AUD 109,659.55 (AUD 112,359.55- AUD 2,700)

> Effective exchange rate 0.912 (USD 100,000/AUD 109,659.55)

If the exporter had done nothing and

converted USD to AUD at the spot exchangerate (0.9300) on the expiry date, it would havereceived AUD 107,526.88 (USD 100,000/0.9300).

In this case the exporter is AUD 2,132.67 (AUD109,659.55 - AUD 107,526.88) better off forentering into the call option than if it had donenothing.

What if th ad/d p xhangraha falln blW th rikra?

Lets assume that the AUD/ USD spot exchangerate on the expiry date is 0.8500. As the strikerate (0.8900) is worse for the exporter than thecurrent spot exchange rate, the exporter hasthe right but not the obligation to exercise thecall option and the exporter would allow thecall option to expire unexercised.

rad da da

tanactin tyP Foreign currency option

Ptin tyP Call Option

rrny pair D/ D

nra an D 100,000

ll Z

by xrter

rik ra 0.8900

pri D 2,700

pri paynda

2 business days fr tradedate

xpiry da hree nths fr tda

xpiry i 3:00 dne ()

calclatinaGnt

Z

dlivry da 2 business days after theexpiry date

tcmat xPiy

ad/ d p xhang raabv 0.8700

ad/ d p xhang rablW 0.8700

xrter wuld exercise the tin and exchangeat the agreed strike rate 0.8700 n the delivery date

xrter wuld let the tin exire. he exrterculd settle at spot exchange rate which is refavurable t it


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The exporter could then convert USD 100,000

to AUD at the prevailing AUD/ USD spotexchange rate:

> Exporter received AUD 117,647.06 (USD100,000/ 0.8500)

> The net amount of AUD the exporter receivedfor converting USDs, after adjustment for thepremium paid, is:

> Net amount AUD 114,947.06 (AUD 117,647.06- AUD 2,700)

> Effective exchange rate 0.8699 (USD 100,000/AUD 114,947.06)

If the exporter had done nothing andconverted USD 100,000 to AUD at the spotexchange rate on the expiry date (0.8500), itwould have received AUD 117,647.06.

In this case the exporter is AUD 2,700 (AUD114,947.06- 117,647.06), worse off for enteringinto the call option than if it had done nothing,which is the amount of the premium it paid.

xamPl 3: imPt tminat ppin

An importer holds an existing AUD/USD putoption over USD 100,000 with an expiry date in

one months time at a strike rate of 0.8700. Theimporter had paid apremium of AUD 3,000 toacquire thatput option. The importer is nolonger required to make a payment in USD toits offshore supplier and wishes to cancel theforeign currency option.

To effect early termination, the importer isrequired to notionally sell theput option toANZ. ANZ agrees to notionally buy the putoption from the importer and based on thecurrent AUD/USD spot exchange rate, the strikerate, the contract amountand other factorsdescribed in Section 3.1, ANZ quotes a

premium of AUD 2,650. The importer acceptsthepremium.

Therefore, for terminating theput option thereis a net cost to the importer of AUD 350 (AUD3000 - AUD 2650).

8. tm f frign rrny

pin8.1 hW d y nt int a frign

rrny pin?

If you have made an assessment based onyour own knowledge and independentprofessional advice and, as a result, areinterested in entering into a foreign currencyoption, you should contact us using the detailsin the directory in Section 13 or call yourANZcontact. Before you can enter into a foreigncurrency option, ANZ will need to conduct acredit assessment to see if you satisfy ANZscredit requirements.

The next steps are:

> Contact us using the details in the directory inSection 13 or call your ANZ contactto ask for aforeign currency option.

> ANZ will provide you with the master dealingagreementthat will apply to your foreigncurrency option transaction.

> You will need to tell ANZ the currency pair, thecontract amount, the type of option (putoption or call option), the currency in whichyou want to pay thepremium, the strike rateand the expiry date.

> ANZ will then quote you the premium. Forfurther information on how this is derived seeSection 3.1.

> If you accept ANZs quote of thepremium youenter into a foreign currency option with ANZ.

> ANZ will send you a confirmation setting outthe terms and details of the foreign currencyoption you entered into including thecurrencies and values involved, thepremium,the strike rate and the expiry date.

> You need to carefully check the confirmation

and contact yourANZ contactimmediately ifthere is a discrepancy.

> If requested by ANZ, you must sign and returnthe confirmation in a timely manner. However,failure to do so does not affect the validity ofthe foreign currency option.

If you have any queries about a confirmation,contact yourANZ contact.


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8.2 qid dcmntatin

tm and cnditinA foreign currency option transaction is subjectto a master dealing agreement. There are twotypes ofmaster dealing agreements that weuse:

> standard terms and conditions; and

> ISDA master.

We will advise you whether the standard termsand conditions or ISDA masterwill apply as themaster dealing agreementfor your foreigncurrency option. If we agree that an ISDA masterwill apply, we will provide it to you and youwill be required to sign it prior to transacting aforeign currency option with us.

The master dealing agreementgoverns thedealing relationship between you and us andsets out the terms and conditions that applyto any foreign currency option you may enterinto with ANZ. If you do not have a copy of themaster dealing agreement, please contact ususing the details in the directory in Section 13or call yourANZ contactand a copy will beprovided to you free of charge. The standardterms and conditions are also available atanz.com.

The master dealing agreementis important.The master dealing agreementcovers anumber of important terms, includingobligations, payments, events of default, theright to terminate and the calculation of atransaction on termination. The master dealingagreementalso covers confirmations,calculation periods and assignment, amongstother things.

We recommend that you read the masterdealing agreementcarefully before enteringinto a foreign currency option with us and

consult your own independent professionaladviser regarding the legal consequences ofentering into a foreign currency option.

th dcmntatin

In addition to the master dealing agreementand the confirmation, ANZ may require you toprovide other documentation as part of theprocess of agreeing to enter into a foreigncurrency option with you (for example,security, amendments to trust or partnershipdeed). For further information on this, contactyourANZ contact.

9. infmatin abt anZ

ANZ is a company incorporated in theCommonwealth of Australia. ANZ holds anAustralian Financial Service Licence (AFSL No.234527). ANZ is a commercial bank offering awide range of banking services to itscustomers both domestically andinternationally.

ANZ world headquarters is located inMelbourne. It first opened as the Bank ofAustralasia in Sydney in 1835 and inMelbourne from 1838.

The ordinary shares of ANZ are listed on the

Australian stock exchange. Full details of theshare capital and net assets of ANZ arecontained in the financial statements that areavailable on the ANZ website anz.com.

Financial statements for ANZ are also lodgedwith the Australian Securities and InvestmentCommission. Copies of ANZs current financialstatements are available upon request.

10. taxatin

Depending on your particular circumstances,in general, gains from financial instruments

such as this product may be assessable eitheras a revenue gain or a capital gain (under thecapital gains tax regime). Conversely, lossesmay be deductible (or give rise to a capitalloss) if the relevant eligibility and availabilitycriteria are met. If the gains are subject to thecapital gains tax regime, concessions ordiscounts may be available to the extent thatyou are eligible. We do not know how you willbe required to treat this product or whether itcan or will be held on capital account and thussubject to the capital gains tax regime.

Taxation law is complex and changes over

time, as does the way it is interpreted. Theimpact that taxation law may have on you willdepend on your specific circumstances. Thisproduct may not provide a beneficial orappropriate tax outcome for you.

Accordingly when determining whether aforeign currency option is suitable for you, youshould consult your own independentadviser(s) regarding the tax and accountingconsequences of entering into a foreigncurrency option in light of your particularcircumstances.


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11. additinal infmatin

11.1 cd f banKinG Pactic

If the Australian Code of Banking Practice(coe) applies to you and if you are anindividual or if you are using our products andservices in connection with a small business,we are bound by the Code when we provideour products and services to you. A copy ofthe Code is available at anz.com.

11.2 What if y hav a cmPlaint?

If you have a complaint about any of ourproducts or services, ANZ has established

complaint resolution procedures that aim todeal with and resolve your complaint within10 working days.

For the fastest possible resolution to yourcomplaint:

> call ANZ on 1800 805 154

> talk to staff at your local ANZ branch orbusiness centre

> talk to yourANZ contactor send a letter to ANZCustomer Response Centre via:

Mail: Locked Bag 4050, South Melbourne

VICTORIA 3205Email: [email protected]

Fax: 1800 269 030

For more information about ANZs complaintresolution procedures, please ask for thebrochure entitled Resolving your complaintat any ANZ branch or business centre, or go toanz.com.

financial vic diPtltin chm

If you are not satisfied with the steps taken byANZ to resolve the complaint, or with theresult of ANZs investigation, you may wish tocontact the Financial Ombudsmans ServiceLimited (f), which is an amalgamation ofthe Banking and Financial ServicesOmbudsman, Financial Industry ComplaintsService Ltd and the Insurance OmbudsmanServices Limited. The FOS is an externaldispute resolution scheme that provides freeadvice and assistance to consumers to helpresolve complaints relating to financial serviceproviders.

financial mbdman vic

limitdGPO Box 3 Melbourne, Victoria 3000

Telephone: 1300 780 808

Facsimile: +61 3 9613 6399

Email: [email protected]

Internet: www.fos.org.au

atalian citi andinvtmnt cmmiin

Alternatively, the Australian Securities andInvestments Commissions (aic) websitecontains information relevant to complaining

about companies and people and describesthe types of complaints handled by ASIC.

To obtain further information contact the ASICInfo line:

Telephone: 1300 300 630

Fax: +61 3 5177 3999

Email: [email protected]

Internet: www.asic.gov.au

11.3 Pivacy and cnfidntiality

anZ Pivacy ntic and cnnt

individalWhen you deal with ANZ, ANZ is likely tocollect and use some of yourpersonalinformation. ANZs disclosure of non-personalinformation is subject to our general duty ofconfidentiality towards our customers. ANZexplains below when and how ANZ maycollect and use yourpersonal information. Thisclause applies to you if you are:

> A personal customer of ANZ or a non-incorporated customer of ANZ (for example, asole trader or firm) (each a custome); or

> A representative of a customer(for example, acompany director or officer or an authorisedsignatory) or some other kind of third partyrelevant to a customer(for example, anemployee or guarantor) (each a t t).


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cllctin f y Pnal

infmatin by anZIf you are considering acquiring, or haveacquired a product or service from ANZ, wemay collect yourpersonal information:

> to assist in providing information about aproduct or service;

> to consider your request for a product orservice;

> to enable ANZ to provide a product or service;

> to tell you about other products and servicesthat may be of interest to you;

> to assist in arrangements with otherorganisations (such as loyalty partners) inrelation to the promotion and provision of aproduct or service;

> to perform other administrative andoperational tasks (including risk management,systems development and testing, creditscoring, staff training, and market or customersatisfaction research);

> to prevent or investigate any fraud or crime (ora suspected fraud or crime); and

> as required by relevant laws, regulations,

Codes and external payment systems.

If you are a representative of a customeror anyother type ofthird party, ANZ is collecting yourpersonal information:

> to identify you;

> to consider the customers request for aproduct or service (including assessing theirapplication);

> to enable ANZ to provide the customerwiththe relevant product or service.

abnc f lvant Pnalinfmatin

If you do not provide some or all of theinformation requested, ANZ may be unable to:

> provide you with a product or service; or

> if you are a representative of a customeror anyother type ofthird party, to verify yourauthority to act on the customers behalf or toprovide the customerwith the relevantproduct or service.

dicl by anZ

Subject to ANZs general duties ofconfidentiality towards their customers, ANZmay need to disclose your information to:

> your referee(s);

> credit reporting or debt collection agencies;

> an organisation that is in an arrangement oralliance with ANZ for the purpose ofpromoting or using their respective productsor services (and any agents used by thatorganisation in administering such anarrangement or alliance);

>

any service provider ANZ engages to carry outor assist its functions and activities;

> regulatory bodies, government agencies, lawenforcement bodies or courts;

> other parties ANZ is authorised or required bylaw to disclose information to;

> participants in the payments system(including payment organisations andmerchants) and other financial institutions(such as banks);

> any person who introduces you to ANZ;

>

your authorised agents, or your executor,administrator or your legal representative.

Pivacy cnnt

By entering into a foreign currency option or byacquiring or continuing to hold a product orservice from ANZ, you agree that ANZ andeach of its related companies (includingsubsidiaries) (anZ comes) may exchangewith each other any information about you forthe purposes of:

> providing, managing or administering yourproduct or service;

> performing administrative and operationaltasks (including risk management, debtrecovery, exposure aggregation, systemsdevelopment and testing, credit scoring, stafftraining and market or customer satisfactionresearch); and

> complying with regulatory requirements andprudential standards.

You consent to ANZ disclosing any personalinformation collected by it in the course ofyour relationship with ANZ to:

>

any contractor or service provider ANZengages to provide services connected withyour relationship with ANZ; and


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> participants in the payments system

(including financial institutions, merchantsand payment organisations).

Any contractor, agent or service providerengaged by ANZ is contractually required toonly usepersonal information for ANZpurposes and to keep the informationconfidential.

Pmtin f th Pdct vic

Until you tell ANZ otherwise, ANZ may useyourpersonal information to promote itsproducts or services or those of its related

companies and alliance partners and discloseyourpersonal information to its relatedcompanies and alliance partners to enablethem or ANZ to market their products orservices.

Where you do not want ANZ to tell you aboutits products or services or those of its relatedcompanies or alliance partners, you maywithdraw your consent by calling 13 13 14 atany time or contacting yourANZ contact.

accinG y Pnalinfmatin hld by anZ

Subject to the provisions of the Privacy Act,you may access yourpersonal information atany time by asking to do so at any ANZbranch. ANZ may charge you a reasonable feefor access. If you can show that informationabout you is not accurate, complete and up todate, ANZ must take reasonable steps toensure it is accurate, complete and up to date.

cllctinG y nitivinfmatin

ANZ will not collect sensitive information

about you, such as health information,without your consent. If you give ANZpersonalinformation about someone else or directsomeone else to give their personalinformation to ANZ, please show them a copyof this clause so they may understand themanner in which theirpersonal informationmay be used or disclosed by ANZ inconnection with your dealings with ANZ.

athity t dicl cnfidntialinfmatin nn individal

This clause applies to you if you are anincorporated customerof ANZ. By enteringinto a foreign currency option or by acquiringor continuing to hold the product or servicefrom ANZ, you agree thatANZ companies mayexchange with each other any informationabout you for the purposes of:

> providing, managing or administering your

product or service;> performing administrative and operational

tasks (including risk management, debtrecovery, exposure aggregation, systemsdevelopment and testing, credit scoring, stafftraining and market or customer satisfactionresearch);

> promotion of products or services; and

> complying with regulatory requirements andprudential standards.

You authorise ANZ to disclose any confidentialinformation collected by it in the course of

your relationship with ANZ to:

> any contractor or service provider ANZengages to provide services connected withyour relationship with ANZ;

> participants in the payments system(including financial institutions, merchantsand payment organisations); and

> to its alliance partners to promote theirproducts or services.

Any contractor, agent or service providerengaged by ANZ is contractually required to

only use the information for ANZ purposesand to keep the information confidential.

11.4 tlPhn cdinG

Please note that telephone dealings with ANZin respect of entering into a foreign currencyoption are normally recorded.

This is standard practice in the financialmarkets and accordingly a standard procedurefor ANZ in entering into a foreign currencyoption with you. If it is not possible or practicalthat the conversation in respect of enteringinto a foreign currency option be recorded, ANZ

will discuss an alternative method forrecording it with you at the time.

Recorded telephone lines will be used toclarify any doubt over the content of aconversation. If a recorded telephone line isnot used, alternative means will be used forclarification purposes. YourANZ contactwilladvise you of the alternative means at thetime of entering the transaction.

If you do not wish to be recorded, pleaseadvise yourANZ contactimmediately, howeverwe will be unable to enter into a foreign

currency option with you.

11.5 anti-mny landinG

You agree that ANZ may delay, block or refuseto process any transaction without incurring


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any liability if ANZ suspects that:

(a) the transaction may breach any law inAustralia or any other country;

(b) the transaction involves any person(natural, corporate or governmental) thatis itself sanctioned or is connected,directly or indirectly, to any person that issanctioned under economic and tradesanctions imposed by the United States,the European Union or any country; or

(c) the transaction may directly or indirectlyinvolve the proceeds of, or be applied forthe purposes of, conduct which is

unlawful in Australia or any other country.You must provide all information to ANZwhich ANZ reasonably requires in order tomanage money-laundering or terrorism-financing risk or to comply with any laws inAustralia or any other country. You agree thatANZ may disclose any information concerningyou to any law enforcement body, regulatoryagency or court where required by any suchlaw, in Australia or elsewhere.

Unless you have disclosed that you are actingin a trustee capacity or on behalf of anotherparty, you warrant that you are acting on your

own behalf in entering into the transaction.

You declare and undertake to ANZ that theprocessing of any transaction by ANZ inaccordance with your instructions will notbreach any laws or regulations in Australia orany other country.

11.6 thical cnidatin

ANZ does not, and will not, take into accountany particular labour standards,environmental, social or ethical considerationsfor the purpose of selecting, retaining or

realising investments.

12. dfinitin

anZ, us, ou, we is Australia and New ZealandBanking Group Limited ABN 11 005 357 522AFSL 234527

anZ comes is ANZ and each of its relatedcompanies (including subsidiaries)

anZ cotctis yourANZ relationship manageror yourANZ markets advisor

anZ mets sois an ANZ employee whois responsible for the structuring, pricing anddistribution of financial products provided byANZs Global Markets division. Foreign currencyoptions are transacted with anANZ marketsadvisor*

anZ etos meis an ANZemployee who acts as an ANZ customersprime contact point (this could be anInstitutional Banking Manager, a CorporateBanking Manager, a Business BankingManager, an International Services Manager oranother Manager so designated) and who isresponsible for approving, or facilitatingapproval, of the provision of ANZs products tocustomers*

busess is a day on which ANZ is open for

business for foreign currency options in Sydneyc oto is a foreign currency option whereyou have the right but not the obligation tobuy the underlying currency with anothercurrency at the agreed strike rate, also called avanilla call option

coet omto is informationacquired by ANZ from and concerning you inthe course of the banker-customerrelationship and does not include publiclyavailable information

comto is a document that outlines the

commercial parameters of the foreign currencyoption

cotct moutthe amount of currency (andother currency equivalent) as agreed by youand us, which is covered by the foreigncurrency option as set out in the confirmation

cuec means the two currencies whichwill be exchanged on the exercise of a foreigncurrency option

ee te is the date on which theexchange of currencies takes place if youexercise the option.


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ece teexpresses the value of one

currency in terms of another currency forexample, in the exchange rate AUD/USD0.8805, one Australian Dollar is equal to0.8805 US Dollars (88.05 US cents)

eerse e is the expiry date

e te is the date on which your right toexercise the option expires, as stated in theconfirmation

e tme is the time of day that the optionexpires

oe cuec oto is a contract enteredinto with ANZ in accordance with this PDS and

includesput options and call options. For moreinformation please refer to Section 2

ow ece te will be the exchangerate at the time and date the option is enteredinto. It is the exchange rate applicable to thedelivery date of the option and where thedelivery date is more than two business daysafter the date the option is quoted.

ee, e are terms used in financialmarkets to describe the activity of mitigatingor reducing economic exposure to pricefluctuations in underlying markets such as

currencies, interest rates or commodities. Forexample, in reducing or mitigating youreconomic exposure to the fluctuation of theUnited States Dollar (USD) by entering into aforeign currency option, you are engaging inthe activity of hedging

ida mstemeans the International Swapsand Derivatives Association, Inc. MasterDealing Agreement as modified by ANZ andprovided to you, if applicable

mste e eemetis either thestandard terms and conditions or an ISDAmasteras advised by ANZ

oto is a foreign currency option

eso omto is information about anindividual

emum is the price payable by you to ANZ inconsideration for having the right but not theobligation to exercise the option

emum met te is the date on whichthepremium is payable. Thepremium is usuallypayable two business days after the trade date(the date the option is entered into)

ut oto is a foreign currency option where

you have the right but not the obligation to

sell one currency and receive another

currency at the agreed strike rate, also called avanillaput option

sot ece te is the exchange rate at thetime and date the option is entered into,where the delivery date is two business daysafter the date the exchange rate is quoted

st tems cotosmeans thedocument issued by ANZ titled Terms andConditions for Trading in Foreign Exchangeand Derivative Transactions, available atanz.com

ste te is the exchange rate at which the

parties have agreed to exchange thecurrencies if you exercise the option

tem the period from and including the tradedate to and including the expiry date

te te is the date on which you enter intoa foreign currency option

us, ou we is ANZ

ou, ouis the customer who is a party to aforeign currency option

13. dicty

nW th WalLevel 2, 20 Martin PlaceSydney NSW 200002 9226 6655

victia

Level 7, 100 Queen StreetMelbourne VIC 300003 9095 0233

qnland

Level 7, 324 Queen Street

Brisbane QLD 40001800 145 138

th atalia

Level 21, 11 Waymouth StreetAdelaide SA 500008 8218 8047

Wtn atalia

Level 7, 77 St Georges TerracePerth WA 600008 9323 8300

*ANZ relationship managers andANZ market advisors are representatives of Australia and New Zealand Banking Group Limited ABN

11 005 357 522, the holder of an Australian Financial Services Licence AFSL Number: 234527


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urblueisatrademarkofANZ.ItemNo.7499006.2010W183446

Documents

PDS-WEB Foreign Currency Options