Australian Product Disclosure Statement

This is a Product Disclosure Statement (PDS), dated 27 March 2023, and was prepared by HiFX Australia Pty Ltd ACN 105 106 045; AFSL 240 917 (trading as ‘Xe’, ‘Xe.com’ or ‘Xe Australia’) (Xe Au), as the issuer of over-the-counter foreign exchange contracts (FX Transactions). It describes the key features of FX Transactions, their benefits, risks, the costs and fees of undertaking a FX Transaction and other related information. FX Transactions are sophisticated financial products so you should read this PDS and the Terms in full before making any decision to invest in them.

This PDS is designed to help you decide whether the FX products described in this PDS are appropriate for you.

1.2 No advice by this PDS

This PDS does not constitute a recommendation or opinion that products offered by Xe Australia are appropriate for you.

In undertaking a FX Transaction, you are making an investment in a financial product and hence are subject to investment risk. We recommend that you take all reasonable steps to fully understand the outcomes of utilising the products provided by Xe and as such you need to understand and accept the risks of investing in FX Transactions.

The information in this PDS is general only and does not consider your personal objectives, financial situation and needs. This PDS does not constitute advice to you on whether FX Transactions are appropriate for you.

1.3 Copies

The information in this PDS is up to date at the time it was prepared but is subject to change at any time.

If new information is materially adverse to you, we will issue either a new PDS or a supplementary PDS containing the new information. If new information is not materially adverse to you, you will be able to find updated information on our website at www.xe.com (our website) or by calling us using the contact details given in the Directory adjacent.

A copy of this PDS and the Terms can be found on our website or you can call Xe Australia to request that a copy of them be provided to you free of charge.

1.4 Jurisdiction

The offer under this PDS is available to persons receiving the PDS within Australia only. This PDS does not constitute an offer to any person to who, or in any place in which, it would be illegal to make that offer.

1.5 Financial amounts

All financial amounts expressed in this PDS are in Australian Dollars (AUD) unless otherwise stated.

1.6 Our service

Xe Money Transfer is provided by Xe Australia.

Xe Australia specialises in providing foreign currency dealing services to both Corporate and Consumer clients who need to buy or sell foreign currencies for a commercial purpose or take physical delivery of the currency purchased, i.e. as part of their day-to-day business activities, thereby needing to settle foreign invoices (payments) and convert foreign currency receipts.

FX Transactions are requested, agreed, issued and managed on the terms set out in our Terms.

This PDS describes the FX Transactions which are issued to you in accordance with the Terms and Conditions. You should read this PDS in whole and the Terms and Conditions before making a decision to deal in financial products covered by this PDS.

1.7 Australian Financial Services Licence

Xe Australia holds an Australian Financial Services Licence (AFSL) 240 917. Xe Australia is authorised by its AFSL to:

(a) provide financial product advice (to Wholesale clients ONLY);

(b) deal in a financial product; and

Xe Australia provides financial services in the following financial products:

(d) Foreign Exchange value today transactions

(e) Foreign Exchange value Tomorrow transactions

(f) Foreign Exchange value Spot transactions

(g) Foreign exchange forward contracts; and

(h) Non-Deliverable Forward Exchange Contracts (NDF)

The value date for any currency pair you elect to transact in must be business days in both countries. For example, if you elect to transact in AUD against USD value tomorrow, and it is a public holiday in the USA on that date, then the next business day will be applied to your transaction.

1.8 HiFX AUSTRALIA OFFICE DIRECTORY

HiFX Australia Pty Ltd Level 5, 28 Margaret Street, Sydney NSW 2000 Australia

Telephone: 1800 875 483
Email: help@support.xe.com
Via our website

Section 2. Overview of Key Features

2.1 Key features of Foreign Exchange Contracts (FX Transactions)

The term foreign exchange (FX) describes the simultaneous purchase of one currency and sale of another currency at an agreed Exchange Rate. Unlike financial products traded on an Exchange, FX Transactions are not standardised but are individually tailored to the particular requirements of the parties involved in the contract.

The variables involved in the negotiation of a FX Transaction are:

(a) the currencies exchanged;

(b) the amount of such currencies;

(d) the Value Date of the FX Transaction.

FX Transactions mature on a Value Date (a predetermined date which can be any Business Day acceptable to the two parties of the contract) where the date may range from either the same day or be a forward date. FX Transactions (are deliverable contracts and will involve an obligation to give or to take delivery of currency at the Value Date. Delivery terms are agreed at the outset of each individual FX Transaction.

A summary of the key features of FX Transactions are provided below:

(a) FX Transactions are over-the-counter financial product issued by Xe Australia. They are not exchange-traded.

(b) FX Transactions facilitate the exchange of currencies and result in physical payments being undertaken on delivery date. You send us your Sold Currency and we will send you your Bought Currency.

(c) FX Transactions enable clients to protect themselves from adverse exchange rate fluctuations by providing cash flow certainty.

2.2 Nature of a FX Transaction

A FX Transaction is an agreement between two parties to exchange one currency (Sold Currency) for another currency (Bought Currency) at an agreed Exchange Rate on a date (Contract Date) for delivery at a pre-determined date (Value Date), where the date may range from either the same day or the agreed forward date, depending on the type of FX Transaction you have chosen.

Determining Exchange Rates

A Foreign Exchange Rate is the price of one currency (the base currency) in terms of another currency (the terms currency).

For example, the Exchange Rate AUD/USD 0.95 means one Australian dollar is equal to, or can be exchanged for 95 US cents.

2.3 Foreign Exchange Products

Xe Australia offers the following types of FX Transaction products:

Value Today FX Transactions – This is a FX Transaction where settlement will take place by the end of the Business Day on which the transaction was entered into.

Value Tomorrow FX Transaction- This is a FX Transaction where the value Date is one (1) business day after the trade date

Spot FX Transaction – This is a FX Transaction where the Value Date is two (2) Business Days after the trade date

Forward FX Transaction - This is a FX Transaction where the Value Date is more than two (2) Business Days after the trade date

Non Deliverable Forward Exchange Contracts (NDF) - A NDF is a type of FEC that is net-cash settled on the value date.

The above five products can also be requested by placing a Market Order (limit and stop loss orders) which are designed either to optimise your exposure to the market or to limit your loss by instructing that a FX Transaction be executed at a pre-determined price (Exchange Rate).

2.4 Key features, benefits & risks

Value Today FX Transactions; Value Tomorrow and Spot transactions

How does a Value today, value tomorrow and spot transaction work?

When you enter into a transaction with Xe Australia, you nominate the amount of currency to be bought or sold, the two currencies to be exchanged and the value date of the transaction (Value today, tomorrow or spot).

Xe Australia will determine the Exchange Rate applicable to the trade based on the currencies and the Value Date that you have nominated.

The Exchange Rate that Xe Australia provides you for Value Today and Value Tomorrow transactions are determined by Xe Australia adjusting its Spot Rate. This adjustment can be either an addition or subtraction and reflects the costs or benefits associated with the Interest Rate Differential between the currencies that are being exchanged.

On the Value Date you are required to deliver the currency that you are exchanging in accordance with the Exchange.

Rate determined by Xe Australia and agreed by you at the Trade Date. Upon receipt of the currency you are selling, Xe Australia will pay you or your nominated beneficiary the amount of currency that you have purchased. Xe Australia will deliver payment to you or your nominated beneficiary by initiating a Wire Transfer to a bank.

Example

You are an importer and need to make a payment of USD 100,000.00 to an offshore supplier in two business days. You need to sell AUD and buy USD to make this payment.

You wish to enter into a Spot Contract with Xe Australia today to fix a Foreign Exchange Rate where you buy USD 100,000.00 and sell AUD in 2 business days. You contact Xe Australia and ask for a Foreign Exchange Rate. Xe Australia quotes you a Foreign Exchange Rate of AUD/USD 0.7690.

If you accept this quote (which can be done verbally), a Spot Contract is entered into between you and Xe Australia.

The AUD equivalent is calculated by dividing the USD amount by the current AUD/USD Foreign Exchange Rate:

USD 100,000.00 ÷ AUD/USD 0.7690 = AUD 130,039.01

By entering into the Spot Contract with Xe Australia, on the Settlement Date you must buy USD 100,000.00 from Xe Australia in exchange for AUD 130,039.01.

This example is used for illustrative purposes only. Actual exchange rates will depend on actual market rates on the date of Calculation.

2.5 Costs of a Spot Contract

Xe Australia sets its Foreign Exchange Rate to you by applying a Retail Mark-up to the wholesale exchange rate that it receives from its hedging counterparties and/or liquidity providers. Xe Australia determines this Retail Mark-up by taking account of a number of factors, including:

(a) the size of the transaction measured by the Notional Amount, where the smaller the Notional Amount the larger the Retail Mark-up may be;

(b) the currency pair where the less liquidity in the pair the greater the Retail Mark-up may be;

(d) the time zone you choose to trade in where if trading on public holidays or weekends may see increased Retail Mark-ups; and

(e) the frequency with which you trade with Xe Australia, where the more frequently you transact, the Retail Mark-up may be reduced.

Using the example in 2.4 above, let us assume Xe Australia can access a wholesale AUD/USD Foreign Exchange Rate from its counterparty of 0.7700. As Xe Australia has offered the client a Foreign Exchange Rate of 0.7690, there is a Retail Mark-up of 10 points (or 0.0010) on the wholesale rate that Xe Australia can access. The cost to Xe Australia of acquiring USD 100,000 is therefore AUD 129,870.13 and the cost to the client is AUD 130,039.01. This results in a margin to Xe Australia of AUD 168.88 on the transaction.

2.6 BENEFITS OF A Value today, value tomorrow and spot contract

The primary benefit of these Contracts is to allow you to make and receive foreign currency payments, giving you the ability to transact in foreign trade offshore.

Spot Contracts can be settled in less than two business days if we are in receipt of cleared funds for payment. Along with paying and receiving funds directly from suppliers or clients, Spot Contracts can also be used to settle letters of credit.

2.7 RISKS OF Value today, value tomorrow and spot contracts

Once the agreed Exchange Rate has been set on the Trade Date, you will not be able to take advantage of favourable Exchange Rate movements that occur after the Trade Date and prior to the Value Date. By protecting against potential unfavourable Exchange Rate movements, you are not able to take advantage of favourable Exchange Rate movements.

Delays in Wire Transfers and Drafts, whilst rare, can occur. These can be caused for a variety of technical and administrative reasons outside the control of Xe Australia.

If you choose to cancel or amend the FEC after the Trade Date you will be required to pay any fees, costs, or losses incurred by Xe associated with the cancellation or amendment. The extent of these fees, costs or losses depends on the contract and market conditions when you give us Instructions to cancel or amend the trade.

2.8 Key features, benefits & risks

Forward Exchange Contracts (FEC’s)

What is a FEC?

A FEC is a binding agreement between you and Xe Australia in which one currency is sold or bought against another currency at an agreed Exchange Rate on an agreed date beyond two (2) Business Days in the future. Unlike Spot Contracts, a Forward Exchange Contract almost eliminates the uncertainty of fluctuating exchange rates by locking in a price today.

Xe Australia considers that FECs are only suitable for businesses that understand and accept the risks involved in dealing in Financial Products involving foreign Exchange Rates.

2.9 Benefits of a Forward Contract

Some of the benefits of utilising a Forward Exchange Contract for hedging purposes are as follows:

(a) A Forward Exchange Contract is a simple method of covering foreign exchange risk, without having to worry about unfavourable movements in exchange rates.

(b) Overcomes the problems in budgeting as you can now budget at a fixed rate of exchange.

(c) You can choose to settle the whole amount of the contract on one date, or you can take parts of the amount throughout the contract period.

(d) Allows you to set your pricing and rest assured that your costs will not increase.

2.10 Risks of a Forward Contract

The specific risks associated with a Forward Exchange Contract include the following:

(a) A Margin Deposit (usually around 10%) of the total transaction is required to enter into a Forward Exchange Contract. You may be required, on short notice, to provide an Additional Margin Deposit if your Forward Exchange Contract goes OTM. A failure to pay an Additional Margin Deposit when required can result in the enforced liquidation of your position as well as additional losses.

(b) Entering into a Forward Exchange Contract locks in the exchange rate for the future delivery date, which precludes any potential financial benefit (or loss) resulting from subsequent Foreign Exchange Rate movements.

(c) If the underlying purpose for entering into the transaction changes, and you seek to change or cancel the Forward Exchange Contract, losses may be incurred.

2.11 How does a Forward Contract work?

To take out a Forward Exchange Contract, you need to advise us of the Notional Amount, both currencies involved and the Settlement Date you would prefer. Pricing of the Forward Exchange Contract will depend on a number of factors, including the Settlement Date chosen, the current Spot Rate and, in each currency pair, the current interest rates and current forward exchange rate (comprised of the interbank, professional market rate plus credit, risk and liquidity premiums).

2.12 Forward Points

Forward Points are a fraction of the Quote Currency that are added to, or subtracted from, the Spot Rate to create the Forward Exchange Rate applicable to your specific Forward Exchange Contract.

For example, 50 Forward Points in a AUD/USD exchange rate quote, would equal 0.50 cents of the Quote Currency (USD). The calculation of the Forward Points is based on a number of factors including, but not limited to, the following:

(a) The differing interest rates prevailing in the two currencies nominated in the Forward Exchange Contract.

(b) The volatility and unpredictability of the exchange rates of the two currencies in the Forward Exchange Contract.

Once you have committed to a Forward Exchange Contract, you will receive a confirmation with all relevant details.

Example

You need to make a payment of USD 100,000.00 to an offshore supplier in 12 months. You need to sell AUD and buy USD to make this payment.

You wish to enter into a Forward Exchange Contract with Xe Australia today to fix a forward Foreign Exchange Rate at which you will buy USD 100,000.00 and sell AUD in 12 months.

Assume the following:

(a) The current AUD/USD spot exchange rate is 0.7600.

(b) Xe offers you a forward Foreign Exchange Rate of 0.7240.

If you enter into the Forward Exchange Contract with Xe Australia, on the forward Settlement Date you must buy USD 100,000.00 from Xe Australia in exchange for AUD 138,121.55 (USD 100,000.00 ÷ 0.7240). If you entered into a Spot Contract on the forward Settlement Date instead of a Forward Exchange Contract, then you would have to buy USD 100,000 for AUD 146,198.83 (USD 100,000 ÷ 0.6840). The cost of the Forward Exchange Contract is AUD 8,077.28 lower than the cost of using a Spot Contract. However, if the AUD/USD exchange rate increases over the term of the Forward Exchange Contract, then you would not receive any of the benefits of that increase, and the cost of the Forward Exchange Contract would be greater than the costs of a Spot Contract.

This example is used for illustrative purposes only. Actual exchange rates will depend on actual market rates on the date of calculation.

For more information on how a forward contract rate is determined please contact your dealer or Xe Australia representative.

2.13 Components & features of a FEC

The term of a FEC can range between three (3) days to one (1) year depending on your needs and your credit terms with Xe Australia. A term longer than one (1) year may be considered by Xe Australia on a case-by-case basis. Xe Australia, at its sole discretion will determine whether it will offer you a facility to be able to transact in FEC including the maximum time frame (Trade Date to Value Date). Generally we will take into account a number of factors including but not limited to:

(a) current financial position;

(b) period of incorporation if applicable;

(d) credit history; and

(e) previous history as a Client of Xe (if applicable).

2.14 Rollover

At any time up to the Value Date you may ask Xe Australia to extend the Value Date of your FEC. Xe refers to this as a Rollover. All Rollovers are subject to prior approval by Xe Australia and may be declined at our sole discretion. We will only approve Rollovers where there is an underlying business purpose and will also consider:

(a) the extent to which your FEC is “In-The-Money” (ITM);

(b) the extent to which your FEC is “Out-of-The-Money” (OTM): or

For Rollovers where the FEC is deeply OTM, Xe may require you to close the FEC, settle any liabilities owing to Xe Australia, and enter into a new FEC equivalent to your request for the Rollover at market Exchange Rates.

If Xe Australia agrees to extend your Value Date, the Exchange Rate of your FEC will be altered. The new Exchange Rate will reflect a number of factors including:

(a) your existing Forward Exchange Rate from the last Trade Date of the FEC;

(b) the Spot Rate at the time the Rollover is contemplated;

(d) market interest rates of the currencies involved in the Rollover consistent with the new Value Date.

It will also reflect any funding implications where your FEC is either ITM or OTM. This is determined by Xe Australia comparing the value of your FEC with the prevailing market Spot Rate. If you are an importer and the value of your FEC is greater than the prevailing market rate you will have an ITM position (and will thereby be extending credit to us); if the value of your FEC is less than the prevailing market rate you will have an OTM position (and Xe Australia will thereby be extending credit to you}, The opposite ITM and OTM scenario applies if you are an exporter. If Xe Australia agrees to a Rollover we will send you a Confirmation detailing the amendment as agreed by you and Xe Australia.

(a) Pre-Delivery of a Fixed FEC and an Open Date FEC

After entering into a FEC you may wish to bring the agreed Value Date closer to Value Spot. This is called a Pre-Delivery. If Xe Australia agrees to the Pre-Delivery we may carry out an Exchange Rate adjustment to the original Forward Exchange Rate to reflect this earlier delivery or Value Date. You should note that while in normal trading conditions an adjustment for Pre-Deliveries or Rollovers may be somewhat marginal for a Fixed FEC, in times of extreme Volatility in the foreign exchange market that the adjustment may be significant. There will be no Exchange Rate adjustment for an Open Date FEC. It should also be noted that there is a contract to effect full delivery of the FEC no later than the Value Date and any agreement to effect a Pre-Delivery is at Xe Australia’s sole discretion.

(b) Partial Pre-Delivery of a Fixed FEC and an Open Date FEC

You may also wish to bring the agreed Value Date closer to Value Spot on a portion of the Notional Amount of your FEC. If Xe Australia agrees to this, we may carry out an Exchange Rate adjustment to the original Forward Exchange Rate on that portion of the amount that you wish to pre-deliver. There will be no Exchange Rate adjustment for an Open Date FEC. The balance of the remaining Notional Amount, after the partial Pre-Delivery of the FEC, shall remain due at the original Exchange Rate on the original Value Date,

Xe Australia may agree to close a FEC, or a portion of the Notional Amount of your FEC, in the event that you no longer require the currency that you have agreed to purchase on the Value Date. Xe Australia’s decision to agree to a close-out is at all times discretionary and in each case will be subject to payment by you of any costs that we incur in terminating and unwinding your FEC including any OTM position in relation to your FEC.

(d) Termination of a FEC

Once entered a FEC may only be terminated by Xe Australia in limited circumstances, which are set out in full in our Terms and Conditions. These circumstances include:

(i) Failure to pay an Initial Margin or Margin Call;

(ii) If you are insolvent, appoint a receiver or administrator to your business or cease to carry on your business;

(iii) If you dispute the validity of a Forward Exchange Contract; or

(iv) For any other reason set out in the Terms and Conditions.

Where Xe Australia terminates a FEC for any of these reasons you will be liable for any losses and expenses that Xe Australia incurs as a result.

2.15 Key features, benefits & risks

Non-Deliverable Forward Exchange Contracts (NDF)

(a) What is a NDF?

Non-Deliverable Forward (NDF) is a type of FEC that is net- cash settled on the Value Date. This means that there is no exchange of currencies at Settlement; instead a single dollar amount will be payable by either you to Xe Australia, or Xe Australia to you. This amount is calculated by reference to the difference in value of the predetermined AUD or foreign currency amount to be bought or sold (the “Notional Amount") at the agreed Exchange Rate and the value of the Notional Amount that you have agreed to buy or sell at the prevailing Spot Rate. NDF’s are typically used for currencies that are subject to exchange control restrictions in their particular domestic market that limit access to the currency. Your Xe Australia Representative can provide you currencies offered as a NDF for example, Malaysian Ringgit (MYR), Korean Won (KRV), Philippine Peso (PHP), and Chinese Renminbi (CNY). We may however agree to enter into an NDF for a freely tradable currency.

When you enter into a NDF you nominate the Notional Amount of the non-deliverable currency that you wish to purchase or sell, the Reference Currency and the Value Date. Xe will then determine the NDF Contract Rate and the Fixing Date (which will usually be two (2) Business Days before the Value Date),

The two possible outcomes on the Value Date are:

(i) If the NDF Contract Rate is more favourable to you than the Spot Rate on the Fixing Date, Xe Australia will pay you the difference in the Reference Currency.

(ii) If the NDF Contract Rate is less favourable to you than the Spot Rate on the Fixing Date, you will be obligated to pay Xe Australia the difference in the Reference Currency.

Whether the NDF Contract Rate is more or less favourable will depend on whether you are buying or selling the Notional Amount of the non-deliverable currency and what the prevailing Spot Rate is on the Fixing Date.

Benefits of an NDF

(i) NDFs are available in a wide range of currencies and provide means of negating foreign exchange risk in markets where physical delivery is not possible.

(ii) An NDF works like a regular forward contract, but with no physical delivery of the underlying currency pair.

(iii) An NDF provides protection against adverse movements in the exchange rate of the currency pair during the term of the contract.

(iv) The NDF is tailored to your needs – the fixing date and notional amount are chosen by you.

Risks of an NDF

(i) An NDF provides no protection against adverse movements in the currency markets at the time of paying the net difference.

(ii) When an NDF involves emerging market currencies, the markets are inherently less liquid and more exposed to fluctuations than the markets for major currencies.

(iii) You are unable to participate in favourable movements in the spot rate.

(iv) Cancellations or adjustments may result in a cost to you.

(b) Settlement of an NDF

NDFs are non-deliverable, which means there is no physical exchange of currencies between you and us. Settlement occurs through a single payment either from us to you or from you to us in the Reference Currency as described above.

At any time during the term of a FEC or NDF, Xe Australia may require you to make a payment as security for your payment obligations on the Value Date. When you open a FEC or NDF with Xe Australia, you immediately create a liability to us (at the Trade Date not the Value Date), which can increase with adverse market movements. Over the life of a FEC or NDF, as the Spot Rate moves, the Mark to Market value of the contract may be ITM or OTM or At-the-Money (ATM). That is, if the contract had to be cancelled at any time, it would result in a gain (if ITM), a loss (if OTM) or breakeven (if ATM). To manage this Market Risk Xe Australia may initially secure the contract by requiring you to pay an amount of money, which shall be determined by Xe Australia at its sole discretion and deposited with Xe Australia as security in connection with a FEC or NDF. We call this an Initial Margin. During the term of the contract Xe Australia may also require you to make additional payments to further secure your FEC or NDF Contracts you hold with us. We call these payments Margin Call. Alternatively, Xe Australia may apply a Credit Limit against the Market Risk or a combination of a Credit Limit, Initial Margin and/or Margin Call.

All Initial Margin and Margin Call payments will be applied to satisfy your payment obligation on the Value Date.

2.16 Your suitability

If we ask you for your personal information to assess your suitability to undertake Xe Australia transactions, and we accept your application to open an Account with Xe Australia, this is not personal advice or any other advice to you. You must not rely on our assessment of your suitability since it is based on the information you provide, and the assessment is only for our purposes of deciding whether to open an Account for you and is separate from your decision to undertake FX Transactions. You remain solely responsible for your own assessments of the features and risks and seeking your own advice on whether these FX Transactions are suitable for you.

2.17 ASIC Benchmark Disclosure

Australian Securities and Investments Commission (ASIC) has introduced benchmarks for over-the-counter derivatives which include margin foreign exchange transactions such as our Forward FX Transactions.

It is important to note that the benchmarks are not mandatory and are not law. ASIC has introduced them by way of stating in its Regulatory Guide 227 ASIC’s expectations. Not meeting the benchmarks is not an indication of breaches or failures. Rather, the benchmarks in RG 227 require prominent disclosure in a PDS as to whether an issuer of FX Transactions (such as Xe Australia) meets the benchmarks or, if not, the reasons why they are not met are explained in the PDS.

The following table summarises the benchmarks applying to Xe Australia’s Forward FX Transactions, whether it meets them and, if not, why not.

The table also refers you to other Sections of this PDS for more information on relevant topics (to avoid duplicating the information in this PDS).

ASIC RG 227 Benchmark

Xe Australia

Benchmark 1: Client Qualification If an issuer meets this benchmark, the PDS should clearly explain: that trading in FX Transactions is not suitable for all investors because of the significant risks involved; andhow the issuer’s Client qualification policy operates in practice. If an issuer does not have such a policy in place, or one that does not incorporate all the elements described in RG 227.40, it should disclose this in the PDS and explain why this is so.

Xe Australia meets this benchmark, save it does not have a client qualification/suitability policy. Xe Australia is of the view that since its Clients are not speculative traders and Forward FX Transactions must be fully paid for, it does not require a client qualification/suitability policy. It is simply in the business of servicing clients who buy or sell foreign currency for their business or commercial purposes.

Benchmark 2: Opening Collateral If an issuer meets this benchmark, the PDS should explain the types of assets the issuer will accept as opening collateral. If an issuer accepts non-cash assets as opening collateral (other than credit cards to a limit of $1000), the PDS should explain why the issuer does so and the additional risks that using other types of assets (e.g. securities and real property) as opening collateral may pose for the investor. This includes, for example, the risks of ‘double leverage’ if leveraged assets are accepted as opening collateral.

Xe Australia does not meet this benchmark because it does not require opening collateral in order for the Client to establish an Account to begin undertaking Forward FX Transactions. Xe Australia allows the Client to pay the Initial Margin after the Forward FX Transaction is agreed.

Benchmark 3: Counterparty Risk - Hedging If an issuer meets this benchmark, the PDS should provide the following explanations: (i) a broad overview of the nature of hedging activity the issuer undertakes to mitigate its market risk, and the factors the issuer takes into account when selecting hedging counterparties; and (ii) details about where investors can find the issuer’s more detailed policy on the activities it undertakes to mitigate its counterparty and market risk. If an issuer does not meet this benchmark, it should disclose this in the PDS and explain why this is so. The PDS must include information about the significant risks associated with the product: s1013D(1)(c). The PDS should also provide a clear explanation of the counterparty risk associated with FX Transactions. The PDS should explain that, if the issuer defaults on its obligations, investors may become unsecured creditors in an administration or liquidation and will not have recourse to any underlying assets in the event of the issuer’s insolvency.

Xe Australia meets this benchmark. Xe Australia clearly sets out it’s policy on hedging Forward FX Transactions in 2.11of this PDS. This PDS complies with the requirements to include information about the significant risks associated with the Forward FX Transactions (see 2.10) and also provides an explanation of the counterparty risk associated with Forward FX Transactions (see Section 6).

Benchmark 4: Counterparty Risk – Financial Resources If an issuer meets this benchmark, the PDS should explain how the issuer’s policy operates in practice. If an issuer does not meet the requirement on stress testing, it should explain why and what alternative strategies it has in place to ensure that, in the event of significant adverse market movements, the issuer would have sufficient liquid resources to meet its obligations to investors without needing to have recourse to Client money to do so. An issuer should also make available to prospective investors a copy of its latest audited annual financial statement, either online or as an attachment to the PDS.

Xe Australia would meet this benchmark except for one feature. Xe Australia does not meet this benchmark due to copies of its latest audited annual financial statement being unavailable online or as an attachment to the PDS.

Benchmark 5: Client Money If an issuer meets this benchmark, the PDS should clearly: (i) describe the issuer’s Client money policy, including how the issuer deals with Client money and when, and on what basis, it makes withdrawals from Client money; and (ii) explain the counterparty risk associated with the use of Client money for derivatives. If an issuer does not have such a policy in place, or one that does not incorporate all the elements described above, it should disclose this in the PDS. If an issuer’s policy allows it to use money deposited by one Client to meet the margin or settlement requirements of another Client, it should very clearly and prominently explain this and the additional risks to Client money entailed by this practice. An issuer’s Client money policy should be explained in the PDS in a way that allows potential investors to properly evaluate and quantify the nature of the risk, if any, to Client money.

Xe Australia believes it meets this benchmark in all respects. Xe Australia does not require moneys paid by a Client (as Margin in respect of Forward FX Transactions) to be paid into a Client Moneys Trust Account, instead those moneys are paid directly to Xe Australia. Xe Australia does not require the Client to pay money as Initial Margin for Forward FX Transactions into a Client Moneys Trust Account because the Client pays Initial Margin after the Forward FX Transaction is issued by Xe Australia. Section 5 of this PDS explains Xe Australia’s client moneys policy in respect of FX Transactions. If a Client does pay in advance of entering into a FX Transaction (which occurs very infrequently), Xe Australia requires the money to be paid into a Client Moneys Trust Account.

Benchmark 6: Suspended or halted underlying assets If an issuer meets the benchmark, the PDS should explain the issuer’s approach to trading when underlying assets are suspended or halted. If an issuer does not meet this benchmark, it should disclose this in the PDS and explain why this is so, as well as the additional risks that trading when underlying assets are suspended may pose for investors. To provide a full explanation of this aspect of the product, an issuer should explain any discretions it retains as to how it manages positions over halted or suspended assets, and how it determines when and how it uses these discretions. This should include disclosure of any discretions the issuer retains to: (a) change the margin requirement on a position; (b) re-price a position; or (c) close out a position.

This benchmark does not apply to Xe Australia since the FX Transactions are for exchange of currencies (no underlying assets) except FX Options reference the currencies, for which there are deep and liquid markets. There is no further “trading” to close out an FX Transaction.

Benchmark 7: Margin Calls If an issuer meets this benchmark, the PDS should explain the issuer’s policy and margin call practices. If an issuer does not have such a policy in place, or one that does not incorporate all of the elements described above, it should disclose this in the PDS and explain why this is so. To provide full and accurate information about this aspect of FX Transaction trading, the PDS should clearly state that trading in FX Transactions involves the risk of losing substantially more than the initial investment. This will ensure the issuer meets its obligation to include in the PDS information about the significant risks associated with the product: s1013D(1)(c).

Xe Australia describes its Margin policy in 3.6 of this PDS. Xe Australia may make Margin Calls by any means of notice permitted by its Terms, including by telephone call, email or through its on-line platform to the Client or its authorised person. For as long as the Client is a party to a Forward FX Transaction, it is fundamental that the Client remains contactable during trading hours using the contact details given to Xe Australia from time to time. The Client's failure to be contactable or to receive notice of a Margin Call at any contact address does not affect the validity of the Margin Call or the Client's obligation to satisfy it.

Section 3. How to Undertake a Foreign Exchange Transaction

3.1 Establish an account

In order to transact with us you will first need to establish an Account by completing Xe Australia’s Account application form.

By opening an Account, you agree to our Terms. The Terms govern your FX Transactions (described by this PDS) and are set out in the document which came with your application form and this PDS.

3.2 How your orders get executed and FX Transactions are issued

The following steps show how you can undertake a FX Transaction with Xe Australia:

(a) Via Online Services

(i) Read this Product Disclosure Statement and the Financial Services Guide provided to you;

(ii) Read the Terms provided;

(iii) Complete and submit the application form online;

(iv) Provide necessary identity documents (if applicable);

(v) When your application is accepted by Xe Australia, the Terms act as an agreement between you and us. A copy of the Terms is available on our website at www.xe.com You will be provided with an account number and security information in order to log onto Xe Australia’s online platform;

(vi) Log onto Xe Australia’s online platform using the security information provided to place your Order;

(vii) You will enter into a FX Transaction with Xe Australia when Xe Australia accepts your Order;

(viii) A confirmation is sent subsequently and is confirmation of the FX Transaction entered into online. The confirmation gives details of the Transaction including the amount of Bought Currency, the Exchange Rate and the Value Date, or the Initial Margin amount due in respect of a Forward FX transaction; and

(ix) You must provide details of your onward payment instructions (including the beneficiary’s name and physical address).

(b) Over the Phone

(i) Read this Product Disclosure Statement and the Financial Services Guide provided to you;

(ii) Read the Terms provided and return the application form together with necessary identity documents. When your application is received and accepted by Xe Australia, the Terms act as an agreement between you and us. A copy of the Terms is available on our website at www.xe.com;

(iii) Contact your Xe Australia Representative to discuss your currency transaction. We endeavour to digitally always record telephone conversations to ensure that instructions can be verified in the event of a dispute;

(iv) Based on the quotations received, you will enter into a FX Transaction with Xe Australia, when Xe Australia accepts your Order;

(v) Once you have agreed with Xe Australia over the phone to buy currency at an agreed rate, you have by that agreement entered into a FX transaction. A confirmation is sent subsequently and is confirmation of the transaction. The confirmation gives details of the transaction including the amount of Bought Currency, the Exchange Rate and the Value Date, or the Initial Margin due if it is a Forward FX Transaction; and

(vi) You must then provide us details of your onward payment instructions (including the beneficiary’s name and physical address). This can be done either by using the online client platform or emailing the dealer.

(i) Read this Product Disclosure Statement and the Financial Services Guide provided to you;

(iii) Send us your instruction to enter into a FX transaction via email. Upon receipt we will enter into your requested FX Transaction. The transaction will be binding on you when we process your email. You acknowledge that, if you choose to book a FX transaction by email, it may not be processed immediately;

(iv) A confirmation is sent when your email is processed and is confirmation of the transaction. The confirmation gives details of the transaction including the amount of Bought Currency, the Exchange Rate and the Value Date, or the Initial Margin due if it is a Forward FX Transaction; and

(v) You must then provide us details of your onward payment instructions (including the beneficiary’s name and physical address). This can be done either by using the online platform or by way of email.

3.3 Confirmations of FX Transactions

By providing Xe Australia with an email you have consented to FX Transaction confirmations being sent electronically. It is your obligation to review the confirmation immediately to ensure all details are accurate (including the name and address of beneficiaries being paid) and to report any discrepancies immediately. The contents of the confirmation are deemed to have been accepted and cannot be disputed after 2 hours of your receipt.

Once you have entered an Order into Xe Australia’s online platform, the online system summarises the main features of your transaction. This is a preliminary notification for your convenience and is not designed to be a confirmation as required by the Corporations Act.

3.4 Settling Transactions

On the day of you entering into a FX Transaction, Xe Australia will send you a confirmation as highlighted above which will advise you of the amount(s) and the date(s) upon which you will need to send money to Xe Australia.

Once your FX Transaction reaches the Value Date (i.e. the settlement date for your contract), and Xe Australia has received all of the balance of your Sold Currency in cleared funds and the beneficiary’s name and physical address, Xe Australia then instructs its bank to send the Bought Currency via international payment systems to your nominated account.

All transactions are effected electronically and Xe Australia retains detailed records of all settlement transactions.

On the Value Date of your FEC you are required to deliver the currency that you are exchanging to us in accordance with the agreed Exchange Rate. Upon receipt of cleared funds from you or your customer we will pay your nominated beneficiary or you the currency that you have agreed to purchase. Xe Australia can settle the physical delivery of your FEC by initiating a Wire Transfer. Funds that are paid into a Holding Balance may only remain there for thirty (30) days, after which time you need to elect to make payment to yourself or a beneficiary by a Wire Transfer.

3.5 Forward FX Transactions – Margin Call Obligations

Forward FX Transactions are subject to ongoing Margin obligations (Margin Calls) imposed by Xe Australia. The sub-headings under this section relate to Forward FX Transactions only.

Here are the key features of Margining which are explained further in this section:

(a) Initial Margin is an upfront partial payment to Xe Australia for the Forward FX Transaction which has been issued to you. The amount of Initial Margin you pay is credited to your Account;

(b) When you have Forward FX Transactions, you are also liable to meet all Margin Calls for additional payments to Xe Australia;

(c) The timing and amount of each Margin Call will depend on movements in currency prices and the facts that impact the market price of the currency;

(d) You have an obligation to meet the Margin Call even if Xe Australia cannot successfully contact you;

(e) There is no limit as to how often Margin Calls may be made but typically Margin Calls are unlikely to be made more than daily; and

(f) You have a risk of your Forward FX Transactions being Closed Out if you do not meet the requirements of a Margin Call.

3.6 Margin Policy

Xe Australia’s Margin policy is available free of charge on request. The main principles are:

(a) Each Client is required to pay, after issuance of a Forward FX Transaction, a minimum required amount of Margin – Initial Margin. The minimum amount is determined by Xe Australia based on a number of factors, including the currencies exchanged, the Value Date, the amount of the currencies exchanged, the amount which Xe Australia is required to pay its Hedge Counterparty and Xe Australia’s risk assessment of the client;

(b) Each Client is required to pay Initial Margin following issuance of the Forward FX Transaction in order to minimise credit risk to Xe Australia and therefore benefit all other Clients;

(c) Each Client is required to pay the required Margin even if Xe Australia pays less to its Hedge Counterparty for a corresponding Hedge Contract. This is to minimise the risk of any one Client imprudently benefiting from other Clients’ FX Transactions;

(d) Each Client’s Account is promptly assessed for Margin requirements according to market movement so that no Client is intentionally benefited from other clients’ FX Transaction exposure. This unintended outcome could occur if, for example, the Client’s Margin requirements are not adjusted in line with market changes or the credit risk on the Client;

(e) Each Client is required to pay Margin Calls promptly and that is managed within the requirements of the Margin policy, so that no Client receives any substantial benefit or waiver which imprudently jeopardises Xe Australia and therefore increases the risks of other clients to Xe Australia; and

(f) The total amount of Margin required of and paid by Clients transacting in Forward FX Transactions is more than Xe Australia is required to pay its Hedge Counterparties, with the surplus being retained in a Client Moneys Trust Account dedicated only for managing Hedge Contracts and paying Clients or Xe Australia the amounts to which they are entitled. This enhances the liquidity of Xe Australia to meet its own margin calls from its Hedge Counterparties by having sufficient funds readily available and protecting those funds from other uses within Xe Australia.

3.7 Paying Margin

You must pay the Initial Margin after the Forward FX Transaction is issued to you.

Separately, you must pay any Margin Call when we require (see below).

To pay Margin you must pay the funds to Xe Australia into the Client Moneys Trust Account. Your Margin payment to Xe Australia is effective only when Xe Australia has received your payment into the Client Moneys Trust Account in cleared funds.

Xe Australia does not pay interest on Margin payments.

3.8 Margin Calls

Your Account balance must be more than the minimum amount of Margin cover required by Xe Australia for your Forward FX Transactions. If not, a Margin Call may be made and you are obliged to meet Margin Calls by paying the required amount by the time stipulated in the Margin Call.

(a) We will only make Margin Calls on a Business Day during 8:00 a.m. to 6:00 p.m. (Sydney time);

(b) If no time for payment is stipulated in the Margin Call, then payment is required within 24 hours of the Margin Call being made. Sometimes, however (such as in unusually volatile market conditions or rapidly falling market prices), little or no time may be stipulated for paying a Margin Call (that is, immediate payment is required) or more than one Margin Call may be made on a day; and

(c) If you do not answer the telephone on the number you give us, or you do not read the emailed Margin Call which was sent to the email address you gave us, you remain liable to meet the Margin Call. That is why it is important that you are contactable during those hours on a Business Day.

3.9 Your Margin Defaults

If you do not ensure that you meet your obligation to pay Margin Calls (even those requiring immediate payment), some or all of your Forward FX Transactions may be Closed Out and the resulting realised loss deducted from any proceeds or value of the Closed Out FX Transactions. Any losses resulting from Closing Out your positions will be debited to your Account(s) and you may be required to provide additional funds to Xe Australia to cover any shortfall.

It is your responsibility to pay Margin and meet Margin Calls on time and in cleared funds, so please keep in mind the possibility of delays in the banking and payments systems. If your payment is not credited by Xe Australia by the time you are required to meet the Margin Call, some or all of your positions may be Closed Out. Xe Australia may not give you any grace period.

3.10 Pre-deliveries and Rollovers of Forward FX Transactions

Xe Australia may, in its absolute discretion:

(a) allow delivery of a Forward FX Transaction earlier than the Value Date, however that will likely result in an adjustment to the Exchange Rate; and

(b) allow an extension to a date later than the Value Date, however, Xe Australia may either adjust the current Forward FX Transaction for a new Exchange Rate or Xe Australia may Close Out the existing Forward FX Transaction at the existing Exchange Rate and enter into a new Forward FX Transaction on agreed terms appropriate to the extension.

3.11 Closing a Forward FX Transaction

A Forward FX Transaction can be Closed Out before and up to the Value Date in the following circumstances:

(a) as agreed in the Terms; or

(b) by agreement between you and Xe Australia.

Key Close Out events under the Terms include:

(a) a breach of a Term by you;

(b) your insolvency or bankruptcy; or

There are some other termination events set out in the Terms (which you should read carefully) which give us discretions. While we consider it is very unlikely that we will need to rely on them except in highly unusual cases, you should be aware that we have the discretion to terminate your FX Transaction if:

(a) Xe Australia determines that the value of all of your FX Transactions represents a substantial net unrealised loss to you such that the continued transacting, or failure to terminate, one or more of your FX Transactions will or is likely to materially prejudice you or your capacity to perform the FX Transactions (which is a safety measure for you and us, such as if we do not think you are monitoring your deteriorating positions);

(b) Xe Australia determines there is a material risk of you being unable to comply with your obligations to Xe Australia as and when they fall due, which could be based for example on you telling us that you will not be able to pay the remaining balance of the Sold Currency but that date has not yet occurred; or

(c) Xe Australia considers termination of one or more FX Transactions is necessary or desirable for its own protection, including (without limitation and by way of example only) when volatile market conditions exist.

If we Close Out your contract we may terminate the Terms between us. We may set off all or any part of any Margin paid by you against any amount actually or contingently due and payable by you to Xe Australia.

If your circumstances change and you no longer require a FX Transaction for your commercial purposes, Xe Australia might agree to you Closing Out a FX Transaction before the Value Date by you entering into an equal and opposite transaction with Xe Australia using the prevailing market rates.

If the contract is Closed Out because your circumstances have changed and the Close Out gives rise to a profit, you will receive the profit amount (including any Margin) and a confirmation advising all details. Under no circumstances will Xe Australia be liable to pay you any profit arising from the Close Out of a transaction if you are in breach of a Term.

If the Close Out gives rise to a loss you will be required to pay Xe Australia the amount of the loss. Your Margin amount (if any) will be offset against the amount owing to Xe Australia and a confirmation will be issued advising all details.

You will be liable for any loss, costs, fees, charges or other expenses, including interest, incurred by Xe Australia in consequence of the Close Out.

You should be aware that your investment in a Forward FX Transaction might suffer a loss, depending on the market value of your Forward FX Transaction at termination compared with the total cost of your investment in that Forward FX Transaction up to the time of termination.

Section 4. Market Orders

Xe Australia may, in its discretion, accept a Market Order from you to enter a FX Transaction if the price moves to or beyond a level of Exchange Rate specified by you.

4.1 What is a Market Order?

If Xe Australia accepts the Market Order and it is later able to execute it, a FX Transaction will arise at the time the Market Order is executed. A Spot FX Transaction or a Forward FX Transaction (depending on your Market Order) comes into existence when the Market Order is executed by Xe Australia.

In your Market Order you nominate an Exchange Rate ("Target Rate"). When it is reached, we execute it by making a Spot FX Transaction at that point (or as close as possible to the Target Rate – see below).

You can amend or cancel your Market Order by telephone at any time before the Target Rate is reached. However, once the Target Rate is reached and the Order is executed by Xe Australia, you are bound by the FX Transaction and so you must settle the transaction in accordance with the details of the relevant Spot FX Transaction or Forward FX Transaction which you requested (please see Section 2 of this PDS for details of Spot FX Transactions and Forward FX Transactions).

4.2 Types of Market Order offered

We offer three types of Market Orders,

(1) Stop Loss Order;

(2) Limit Orders; and

(3) One Cancels the Other.

You can choose to place a Stop Loss Order to provide some risk protection. For example, if you cannot afford to have a rate worse than a specific rate because you need certainty, perhaps for purchasing a house, but want to hold out for a better rate than is currently on offer, you might request a Market Order nominating your preferred Exchange Rate as the Target Rate.

A Limit Order can be used to target a better Exchange Rate than currently offered by Xe Australia.

You may also choose to execute a One Cancels the Other Order which is a combination of a Stop Loss Order and Limit Order. When you place a One Cancels the Other Order, you place two Market Orders, and need to set limit and stop levels. When one level is reached, one of the orders will be executed, either the stop or the limit, and the other will be cancelled.

4.3 Terms of Market Order

The key terms of a Market Order may be summarised as follows:

(a) For each Market Order, on the Target Rate being reached, Xe Australia will enter into a Spot FX Transaction or Forward FX Transaction (as applicable) with you on the terms of the Market Order.

(b) Although your Market Order, if agreed, is not a transaction by itself, we agree to execute it subject only to market conditions. Usually, we will accept and commit to your Market Order from the time that your instructions are received by us. We will promptly let you know if we do not accept it.

(c) You may cancel a Market Order at any time before the Target Rate is executed by giving us notice by telephone. You may not cancel a Market Order after the Target Rate has been executed, whether or not we have notified you that the Target Rate has been executed. When the Target Rate is executed, we will issue a FX Transaction and you will be bound by it.

(d) The Target Rate will be deemed to have been executed only when we determine that our Exchange Rates have reached or exceeded that level.

You may find that, in some cases, the Exchange Rate spikes (also referred to as “gaps”) with the result that the Exchange Rate you have nominated in your Stop loss Order has been exceeded but has changed before we are able to execute the Market Order at or near your nominated Target Rate. If this occurs, we will fill your Stop Loss Order at the best Exchange Rate available to us in the prevailing market conditions. Because of this we cannot guarantee Stop Loss Target Rates (this is called “slippage”).

Section 5. Client Moneys

5.1 Use of Client Moneys in advance of entering into FX Transaction

It should be noted that moneys that you pay after agreeing a FX Transaction with Xe Australia are not paid into a Client Moneys Trust Account, instead those moneys are paid directly to Xe Australia. A Client may, if they want to, pay moneys in advance of entering into a FX Transaction. If this occurs, the moneys paid must initially be deposited into a Client Moneys Trust Account (see below on “Client Moneys Trust Account”).

Moneys paid by you to Xe Australia after issuance of a FX Transaction are deposited into Xe Australia’s Client Moneys Trust Account. You make your deposit by electronic or telegraphic transfer. All funds must be cleared funds in our bank account before they will be counted towards the balance on your Account.

When you make a payment which is deposited into Xe Australia’s Client Moneys Trust Account, you are making payments which will be used as part payment for your FX Transaction.

5.2 Client Moneys Trust Account

The commentary under this section only applies when you pay money in advance of entering into a FX Transaction.

If you wish to pay money in advance of entering into a FX Transaction, Xe Australia requires those moneys to be initially deposited into a Client Moneys Trust Account.

The moneys paid by you into the Client Moneys Trust Account are held for you while they remain there and for that time are segregated from Xe Australia’s own funds.

You should be aware that, for Client Moneys Trust Account:

(a) Individual Client accounts are not separated from each other.

(b) All Clients’ moneys are combined into one account.

(d) Moneys and other assets in a Client Moneys Trust Account belonging to non-defaulting Clients are potentially at risk of being withdrawn and not being re-paid to the Client even though they did not cause the default because an issuer of FX Transactions in the same position as Xe Australia is permitted by law to use the moneys to pay itself for its hedge of your Forward FX Transaction. Also, the law allows someone in the position of Xe Australia to use Client moneys in the Client Moneys Trust Account to meet obligations incurred by Xe Australia in connection with margining, guaranteeing, securing, transferring, adjusting or settling dealings in derivatives by Xe Australia, including dealings on behalf of people other than the Client whose moneys were deposited into the Client Moneys Trust Account.

(e) Although Xe Australia is obliged to describe to you the above features and risks of the Australian law on Client Moneys Trust Account, Xe Australia has no intention of using those rights. Xe Australia will not withdraw a Client’s moneys from a Client Moneys Trust Account unless it is for one of these purposes:

(i) to repay the Client;

(ii) to pay for a FX Transaction issued to the Client; or

(iii) to the Client who specifically directs and authorises the withdrawal in writing.

5.3 Use of Client Moneys in Client Moneys Trust Account

The commentary under this section only applies when you pay money in advance of entering into a FX Transaction.

You would only make a payment into the Client Moneys Trust Account if you are paying before agreeing a FX Transaction with Xe Australia. If you subsequently enter into a FX Transaction with Xe Australia, Xe Australia will withdraw from the Client Moneys Trust Account sufficient amount of your moneys to pay for the FX Transaction.

If money is to be withdrawn from the Client Moneys Trust Account for any other purpose (other than repayment to the Client) you must give Xe Australia a written direction to do so.

Those moneys withdrawn from the Client Moneys Trust Account are received by Xe Australia for its own account and are not held on trust for you nor are they invested for your benefit.

Section 6. Counterparty Risk

6.1 Your Counterparty Risk on Xe Australia

When you deal in FX Transactions, you have a counterparty risk with Xe Australia, on the basis Xe Australia is the product issuer, that it will perform its obligations to you.

The only significant part of your counterparty risk on Xe Australia is whether it will have the financial resources at the time it is required to pay you the amounts it owes you. The following description helps you understand the important aspects of your counterparty risk on Xe Australia.

6.2 Your Credit Exposure to Xe Australia

You have credit exposure to Xe Australia because you pay Xe Australia to settle your FX Transaction. Your credit exposure to Xe Australia for Spot FX Transactions and Same Day FX Transactions is short lived, since they are settled within two Business Days and on the day, respectively.

For Forward FX Transactions, your payment of Initial Margin and any later payment to meet a Margin Call is part payment towards the full amount you owe to settle the Forward FX Transaction. In the unlikely event of Xe Australia not performing its contract, your credit exposure to Xe Australia benefits from the amount of your Margin which is held in the Client Moneys Trust Account for you (see below).

So, in short, you should consider whether Xe Australia will have the financial resources to pay you the amount it owes you at the time for settlement of your FX Transaction.

Your credit risk on Xe Australia is managed and reduced by:

(a) Xe Australia applying its risk management policy, so that it prudently runs its business.

(b) Xe Australia applying its Margin policy, so it maintains liquidity by not being over exposed to any of its Clients.

(d) Xe Australia holding its surplus funds from Clients’ Margin payments in a Client Moneys Trust Account.

(e) Xe Australia complying with its AFSL obligations to maintain surplus liquid funds and to always maintain capital adequacy.

6.3 Xe Australia hedges its own FX exposure

Your credit risk on Xe Australia is reduced because Xe Australia hedges its FX Transactions with you, so Xe Australia has the funds to pay you out on settlement. Xe Australia is in the business of providing you with currency services, not a speculative dealing business.

Once an Order for a Forward FX Transaction is agreed with a Client, Xe Australia will manage the position with other FX Transactions it has agreed to by making transactions (in its own name, on its own account) with one of several market participants it chooses from (referred to here as a Hedge Counterparty). This hedging does not require an exact hedge of each individual FX Transaction (because there could be at any time a lot of Clients’ FX Transactions covering a lot of combinations of variables) so the net positions are hedged by Xe Australia within limits and in accordance with Xe Australia risk management policies, such that, over time Xe Australia has limited or no direct market exposure to later changes in the value of the FX Transaction.

In order to enter into those transactions, Xe Australia is required to pay for its hedge or to deposit its monies (as security) with the relevant Hedge Counterparty to maintain Xe Australia’s open Hedge Contracts. Xe Australia funds this payment obligation to its Hedge Counterparty from a Client Moneys Trust Account, which in turn is funded partly from its own capital and partly from Client payments of Margin to Xe Australia.

6.4 Risks from Xe Australia’s Hedge Counterparty

Xe Australia may use a number of Hedge Counterparties from time to time (thereby spreading the risks and not having concentration risk with one counterparty). Since Xe Australia hedges the net positions within limits, individual hedge contracts might not directly relate only to one FX Transaction. The particular Hedge Counterparties used by Xe Australia may change from time to time and may not be known by Xe Australia in advance of your FX Transaction.

Since Xe Australia is liable to you as principal on the FX Transaction, Xe Australia could be exposed to the insolvency of its Hedge Counterparty, or other defaults which affect the Hedge Counterparty. It is possible that Xe Australia’s Hedge Counterparty may become insolvent, which could affect Xe Australia’s financial capacity to meet its obligations to you since Xe Australia is also exposed to those Hedge Counterparties performing their contracts with Xe Australia. While Xe Australia is not restricted in its choice of Hedge Counterparties, to reduce this risk, Xe Australia undertakes risk management in its selection and monitoring of its Hedge Counterparties, all of whom are part of large reputable and regulated global banking groups.

6.5 Solvency of Xe Australia

Whenever you consider your credit risk with Xe Australia you should consider how to assess the solvency of Xe Australia.

The Xe Australia directors’ report and maintain audited annual financial reports.

The solvency of Xe Australia should not be assessed only by reference to historical financial information about Xe Australia. Xe Australia solvency also depends on its capitalisation as it changes, its cashflow, all of its business risks, its client and transaction concentration risks, its counterparty risks for all of its business, its risk management systems and actual implementation of that risk management.

You should take into account all of those factors and not just rely only on past financial statements since that could become out of date.

6.6 Payments to you in Xe Australia’s insolvency

In the unlikely event of Xe Australia becoming insolvent, here is how you can be paid for any net credit balance in your Account:

(a) All of the FX Transactions and all of the Hedge Contracts will be terminated. This will lead to a net amount owing as between Xe Australia and each Client, and a single net amount owing as between Xe Australia and each Hedge Counterparty;

(b) The precise amounts and timing of payments to Clients will not be known until the net position with all of the Hedge Counterparties is known;

(c) Xe Australia will use reasonable efforts to reclaim any monies held on trust for it by Hedge Counterparties. (The Hedge Contracts ordinarily would give a net amount owing by one party to the other and that should lead to a surplus owing to Xe Australia which ought to be funded by the payments made by Xe Australia to its Hedge Counterparty. Xe Australia’s right to payment of the net amount is a “Benefit” held on the Client Moneys Trust Account and, when paid to Xe Australia, those payments become part of the “surplus” also held on the Client Moneys Trust Account);

(d) Xe Australia will need to assess whether it can feasibly sue to recover anything owed by the Hedge Counterparty;

(e) Xe Australia will need to assess when amounts are prudently available to pay Forward FX Transaction clients and it may choose to pay out interim amounts; and

(f) Xe Australia will need to assess fair and reasonable allocation to Clients, having regard to, for example any amounts paid from the Client Moneys Trust Account, Account balances and amounts recovered from the Hedge Counterparty.

Section 7. Significant Risks

Using FX Transactions involves a number of significant risks. You should seek independent advice and consider carefully whether FX Transactions are appropriate for you given your experience, financial objectives, needs and circumstances.

7.1 Other significant risks

You should consider these other significant risks involved in FX Transactions:

Key risks

Important issues

Not a regulated market:

The FX Transactions offered by Xe Australia are over-the-counter financial products and are not covered by the rules of an Exchange. You will be unable to transfer your contract with Xe Australia to another party i.e., it cannot be traded on an Exchange. If you want to exit your Forward FX Transaction, you will need to enter into a Close Out Transaction with Xe Australia. You can reduce your risk by carefully reading this PDS, the Terms and taking independent advice on the legal and financial aspects relevant to you.

Market disruptions:

A market disruption may mean that you may be unable to deal in FX Transactions when desired, and you may suffer a loss as a result of that. Common examples of disruptions include the “crash” of a computer-based trading system.

Market Orders and slippage:

It may become difficult for us to execute your stop loss Market Order at your pre-determined rate. This can, for example, happen when there is a significant change in the Exchange Rate over a short period due to extreme market volatility (referred to as gapping). Hence Stop Loss Orders, if placed, may not limit your losses to the agreed Target Rate (referred to as slippage). You should consider placing Stop Loss Orders in light of the fact that slippage may occur in volatile conditions. For further information, we refer to Section 4: “Market Orders”.

Online services:

You are responsible for the means by which you access the online services or your other contact with Xe Australia. If you are unable to access the online services, it may mean that you are unable to undertake FX Transactions so you may suffer loss as a result of that. Xe Australia may also suspend the operation of the online services or any part of it, without prior notice to you. Although this is considered to be a very low risk since it would usually only happen in unforeseen and extreme market situations, Xe Australia has discretion in determining when to do this. If the online services are suspended, you may have difficulty contacting Xe Australia, you may not be able to contact Xe Australia at all, or your Orders may not be able to be executed. There is a moderate to high risk that Xe Australia will impose volume limits on Client Accounts or filters on trading, which could prevent or delay execution of your Orders, at your risk. You have no recourse against Xe Australia in relation to the availability or otherwise of the online services, nor for their errors and software. Please review the Terms for any particular online services.

Conflicts:

Transacting with Xe Australia carries an automatic risk of there being a conflict of interest because: (i) Xe Australia acts as principal in the FX Transactions with you and sets the price of the FX Transactions; (ii) it may be transacting with other persons, at different prices or rates; and (iii) Xe Australia will be transacting with market participants. The policy used by Xe Australia is that, as principal, it issues the FX Transaction to you based on the price it gives you, not by acting as broker to you. Xe Australia obtains its price by dealing with its own Hedge Counterparties. You can reduce the risks to you of unfavourable pricing or opaque pricing (meaning it is unclear how it relates to the underlying market) by monitoring Xe Australia FX Transaction pricing compared with other foreign exchange pricing in the underlying market available to you from other sources.

Xe Australia’s powers on default, indemnities and limitations on liability:

If you fail to pay amounts, Xe Australia has extensive powers under the Terms to take steps to protect its position. For example, Xe Australia has the power to Close Out your FX Transactions and to determine the rates of currency exchange applicable at that time. Additionally, under the Terms you agree to indemnify Xe Australia for certain losses and liabilities, including, for example, in default scenarios where you have misrepresented to Xe Australia. You should read the Terms carefully to understand these matters.

Systems Risk:

Xe Australia relies on a number of technology solutions to provide you with efficient foreign exchange services. In this regard Xe Australia relies on banks and third party international settlement system providers to assist in currency transfers between accounts which Xe Australia will not be able to control and is not liable to you for this.

Section 8. Costs, Fees and Charges

Xe Australia does not charge commissions for you to enter into a FX Transaction. Xe Australia earns its revenue from the spread between the price Xe Australia achieves on its Hedge Contracts and your FX Transaction price. This spread will vary in accordance with the size of the FX Transaction, the type of product transacted, and the currencies involved.

8.1 Transfer Fee

(a) Costs and Fees

You will be charged a transaction fee for using our Wire Transfer service. The transaction fee we charge for each Wire Transfer varies from transaction to transaction and from Customer to Customer. This fee is separate to the Exchange Rate conversion that will apply to converting one foreign currency to another.

The transaction fee we charge you will depend upon:

(i) the amount and type of foreign currency to be transferred (more exotic currencies usually incur higher fees);

(ii) the number and frequency of Wire Transfer you conduct through Xe (an existing relationship may result in reduced fees); and

(iii) the country that the funds are sent to (some countries are more expensive than others to deal with.

8.2 Third party fees

In some cases, we may not be able to send a payment directly to the beneficiary bank and will use a correspondent bank to make the payment. The correspondent bank may charge a fee for making the payment to the beneficiary bank and those fees may be deducted from the amount remitted to the beneficiary bank. The beneficiary bank may also deduct or charge a fee upon receiving a payment sent by us. These third party fees are beyond our control; we receive no benefit from them and we cannot necessarily predict when they will be charged or the amount of the fees. You therefore need to bear in mind that the amount you are sending may not always be exactly the same as the amount received into the beneficiary account.

8.3 Interest

Xe Australia charges interest on overdue amounts on a daily basis at the rate of five percent per annum above Xe Australia’s principal bank's base lending rate from time to time from and including the due date until payment is received in cleared funds. This rate is available from Xe Australia on request.

Section 9. General Information

9.1 Discretions

Xe Australia has discretions under the Terms which can affect your Orders and FX Transactions. You do not have any power to direct how we exercise our discretions.

When exercising our discretions, we will comply with our legal obligations as the holder of an AFSL. We will have regard to our policies and to managing all risks (including financial, credit and legal risks) for ourselves and all of our Clients, our obligations to our counterparties, market conditions and our reputation. We will try to act reasonably in exercising our discretions, but we are not obliged to act in your best interests or to avoid or minimise a loss on your Account.

Our significant discretions are:

(a) whether to accept your Order (including to Close Out a position);

(b) determining Margin requirements, especially the amount of Initial Margin, any later Margin Call amount and the time we require you to meet any Margin Call;

(d) setting Premiums for FX Options; and

(e) following a default, Closing your positions and setting the Closing Value.

Our other discretions include:

(a) opening and closing your Account;

(b) any risk limits or other limits we impose on your Account;

(d) interpretation, variation and application of our policies;

(e) whether to agree to rolling or pre-delivering Forward FX Transactions; and

(f) paying interest on Accounts.

Our discretions can give you a risk, although this is assisted by our legal obligations, our policies and our wish to act reasonably in exercising our discretions. You should see Section 7 on Significant Risks.

9.2 Policies

Xe Australia has a number of policies that may affect your FX Transactions. The policies are guidelines that Xe Australia (including all of its staff) is expected to follow but policies are not part of the Terms and do not give you additional legal rights or powers.

We may change, amend, withdraw, replace or add to our policies at any time without notice to you. Our policies may help you understand how we operate but all the important information is set out in or referred to in this PDS so you should only rely on this PDS and not on the policies.

The policies are available by contacting us and we will send you a copy free of charge.

9.3 Anti-Money Laundering Laws

Xe Australia is subject to anti-money laundering and counter-terrorism financing laws (AML laws) that can affect your FX Transactions. If your Account is established, Xe Australia may disclose your personal information or delay or block transactions on your Account for the purposes of the AML laws or under Xe Australia’s AML laws procedures, without liability to you for any loss that arises due to that occurring.

If you request a payment to be made by us (in US dollars) to be paid and cleared into a US bank account, by accepting our Terms, you acknowledge and warrant that the beneficiary of the payment is not a person, group or entity associated with a country sanctioned by US laws and regulations.

9.4 Taxation implications

FX Transactions will have taxation implications for Clients, depending on the current tax laws and administration, the nature of the Client for tax laws, the terms of the transactions and other circumstances. These are invariably complex and specific to each Client. You should consult your tax adviser before transacting in these financial products.

The following information should be regarded as general information only.

9.5 Cooling off

There is no cooling off arrangement for FX Transactions. This means that you do not have the right to return the FX Transaction, nor request a refund of the money paid to acquire the FX Transaction. If you change your mind after entering into a FX Transaction with Xe Australia, you must close it out, pay any Transaction costs and take the risk of incurring a loss in doing so.

9.6 Ethical considerations

Labour standards or environmental, social, or ethical considerations are not taken into account by Xe Australia when making, holding, varying or Closing Out FX Transactions.

9.7 Jurisdictions

The FX Transactions offered by this PDS are available only to persons receiving the PDS in Australia.

The distribution of this PDS in jurisdictions outside Australia may be subject to legal restrictions. Any person who resides outside Australia who gains access to this PDS should comply with any such restrictions and failure to do so may constitute a violation of financial services laws. The offer to which this PDS relates is not available to USA investors.

9.8 Dispute resolution

Xe Australia wants to know about any problems you may have with the service provided to you so we can take steps to resolve the issue. If you have a complaint about the financial product or service provided to you, please submit a complaints form online, which can be found in our Help Centre article, How to make a complaint.

Xe Australia will try to resolve your complaint quickly and fairly. Upon receiving your complaint, we will acknowledge the receipt of it within 24 hours or, if that's not possible, as soon as practicable of written receipt of your complaint and we will use our best endeavours to try to resolve your complaint within 30 days of receipt of your written complaint.

If you are not satisfied with our response, you may lodge a complaint with the Australian Financial Complaints Authority (AFCA):

Online: www.afca.org.au

Email: info@afca.org.au

Phone: 1800 931 678 (free call)

Mail: Australian Financial Complaints Authority GPO Box 3 Melbourne VIC 3001

Xe Australia is a member (Member 11671) of the AFCA complaints resolution scheme. The service provided to you by AFCA is free.

The Australian Securities and Investments Commission (ASIC) also has an Information line on 1300 300 630 which you may use to make a complaint and obtain information about your rights.

9.9 Privacy

All of the information collected by Xe Australia, in the application form or otherwise, is used for maintaining your Account and for the purpose of assessing whether you would be suitable as a Client.

Xe Australia has obligations under, and has procedures in place to ensure its compliance with, the Privacy Act 1988.

Significantly, these include the following:

(a) Collecting personal information

In collecting personal information, Xe Australia is required to collect only information which is necessary for the purpose described above and ensure that collection of the information is by fair and lawful means; and to take reasonable steps to make you, the individual, aware of why the information is being collected and that you may access the information held by us. If necessary, Xe Australia also collects information on directors of a corporate client or agents or representatives of the client. Xe Australia may be required by law to collect information, such as for taxation purposes or to identify persons who open or operate an account.

Xe Australia may take steps to verify information given to it, such as consulting registries, referees, employers or credit agencies. This information will not be disclosed to any other person although Xe Australia may disclose this information to its related bodies corporate if you intend to use the services of any of those related bodies corporate.

(b) Using the personal information

Once Xe Australia has collected the information from you, Xe Australia will only use the information for the purposes described above unless you consent otherwise.

Personal information may be disclosed to:

(i) any person acting on your behalf, including your adviser, accountant, solicitor, executor, attorney or other representative;

(ii) related bodies corporate of Xe Australia if you use, or intend to use, services of those other corporations;

(iii) any organisations to whom Xe Australia outsources administrative functions;

(iv) brokers or agents who refer your business to Xe Australia (so that we may efficiently exchange information and administer your account);

(v) regulatory authorities; and

(vi) as required or permitted by law or by court order.

This information will not be disclosed to any other person without your consent.

You may access your personal information held by Xe Australia (subject to permitted exceptions), by contacting Xe Australia. We may charge you for that access.

As Xe Australia is obliged by law to take reasonable steps to ensure that the personal information used is accurate, up to date and complete, please inform us immediately if any personal information provided has changed.

Xe Australia has implemented and maintains secure protection of all personal information obtained from misuse, loss, unauthorised access, modification or disclosure.

The information will be destroyed or de-personalised if Xe Australia no longer requires the information for the purpose referred to above.

Section 10. Glossary

10.1 Glossary

Account means your account with Xe Australia established under the Terms, including all Accounts and all Transactions recorded in them.

Australian Dollars or A$ means the lawful currency of the Commonwealth of Australia.

Bought Currency is the currency received by the Client in return for the Sold Currency.

Business Day means any day except a bank or public holiday throughout Australia or a Saturday or Sunday.

Client refers to the person who has the Account with Xe Australia.

Client Moneys Trust Account means an account (however named or styled) maintained by Xe Australia for the purposes of the Corporations Act 2001 (Commonwealth) to hold client moneys.

Close Out, Closed Out and Closing Out in relation to a Transaction means discharging or satisfying the obligations of the client and Xe Australia under the transaction and this includes matching up the Transaction with a Transaction of the same kind under which the Client has assumed an offsetting opposite position.

Closing Value means the value of the FX Transaction as determined by Xe Australia.

Contract Date means the date the FX Transaction was agreed to by Xe Australia.

Exchange means the market operated by the ASX, ASX 24 (formerly the Sydney Futures Exchange) operated by Australian Securities Exchange Limited (ABN 83 000 943 377), the Australian Clearing House operated by ASX Clearing Corporation Limited (ABN 45 087 801 554), or any other exchange or market in which Xe Australia participates from time to time, whether directly or through agents or other market participants.

Exchange Rate expresses the value of the Bought Currency in terms of the Sold Currency and vice versa.

Forward FX Transaction means a FX Transaction whose Value Date is later than two business days after the Transaction is entered into.

FX Transaction means a foreign exchange contract between the Client and Xe Australia to purchase and deliver currency (including Forward FX Transactions, Spot and Same Day FX Transactions).

Hedge Contract means a contract, deed, agreement or other instrument between Xe Australia and a Hedge Counterparty, including master agreements, individual transactions (whether written or not) and credit or collateral arrangements for them, for or in relation to foreign exchange transactions (whether or not other transactions are possible under those arrangements) including payments to Hedge Counterparties as security or collateral for those transactions.

Hedge Counterparty means any bank, related body corporate of a bank or other regulated financial corporation which is a counterparty to Xe Australia or its Hedge Contracts (for the avoidance of doubt, this does not include the Client).

Xe Representative means the representative of HiFX Australia.

Initial Margin means the amount which you are required to pay to Xe Australia as the Initial Margin cover for a Forward FX Transaction.

Limit Order means a Market Order to buy or sell one currency against another when and if a pre-determined target exchange rate is reached. The Market Order remains good until cancelled unless stipulated otherwise.

Margin means the amount credited to the Account and is part payment for the Bought Currency.

Margin Call means a request from Xe Australia for you to post more funds into your Account.

Market Order means an Order to buy or sell one currency against another when and if a pre-determined target Exchange Rate is reached. The Market Order remains good until cancelled unless specified otherwise.

One Cancels the Other is a type of Market Order which consists of both a Stop Loss Order and a Limit Order

Order means any order placed by you to enter into a FX Transaction.

Same Day FX Transaction is a FX transaction whose value date is the same day as the Contract Date.

Sold Currency is the currency sold by the Client in return for receiving from Xe Australia the Bought Currency.

Spot FX Transaction is a FX Transaction whose Value Date is 2 Business Days from the Contract Date.

Stop Loss Order means a Market Order to buy or sell one currency against another when a pre-determined target Exchange Rate is reached as specified by the Client. The Market Order remains good until cancelled unless stipulated otherwise.

Target Rate means the rate at which a Market Order is executed, being the Exchange Rate specified by the Client for the Market Order plus Xe Australia’s margin over the wholesale exchange rate Xe Australia is able to obtain from its hedge counterparties.

Terms means the terms of your Account with Xe Australia for all of your Accounts by which you deal in Transactions (as amended from time to time). Variations or additional terms may be notified to you from time to time in accordance with your current Terms.

Transaction means any of the kind of FX Transactions which are traded under the Terms.

Trustee means the trustee at the relevant time of the Trust.

Value Date means the date agreed between the Client and Xe Australia for delivery and settlement of the currencies under a FX Transaction.

Xe means Xe Australia, a trading name of HiFX Australia Pty Ltd (ABN 78 105 106 045) whose registered office is at Level 5, 28 Margaret Street, Sydney NSW 2000 Australia. HiFX Australia holds an Australian Financial Services Licence (AFSL 240 917) and is regulated by the Australian Securities and Investments Commission.

HiFX Australia Pty Ltd

Xe Australia’s Product Disclosure Statement

Contents

Section 1. Important Information

Section 2. Overview of Key Features

Section 3. How to Undertake a Foreign Exchange Transaction

Section 4. Market Orders

Section 5. Client Moneys

Section 6. Counterparty Risk

Section 7. Significant Risks

Section 8. Costs, Fees and Charges

Section 9. General Information

Section 10. Glossary

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HiFX Australia Pty Ltd

Xe Australia’s Product Disclosure Statement

Contents

Section 1. Important Information

Section 2. Overview of Key Features

Section 3. How to Undertake a Foreign Exchange Transaction

Section 4. Market Orders

Section 5. Client Moneys

Section 6. Counterparty Risk

Section 7. Significant Risks

Section 8. Costs, Fees and Charges

Section 9. General Information

Section 10. Glossary

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