FAQ

Frequently Asked Questions

Applications
What are the first steps?
Why can't I obtain a hard copy of the product disclosure statement?
Where do I send my application form?
What do I send?
What happens with my application?

About
How is the S&P/ASX 20 Index Calculated?
What happens if a new company enters the ASX Top 20?
Am I the beneficial owner of my shares?

Transacting
How are my initial funds invested?
How do I make additional investments?
Do I retain a minimum cash holding?
How does 2020 DIRECTINVEST BlueChip20 rebalance my portfolio?
How are my regular contributions invested?
When are dividends paid?
What happens with my dividends?
Can I make a partial withdrawal from my BlueChip20 account?
How can I close my BlueChip20 Account?

Reporting
Will I receive anything in the mail?
What on-line reporting do I receive?
What tax reports do I have access to on-line?

Margin Loan
What is margin lending and how does it work in relation to 2020DIRECTINVEST BlueChip20?
How does my optional 2020 DIRECTINVEST BlueChip20 loan work?
Do I pay a fee to open my 2020 DIRECTINVEST BlueChip20 loan account?
Who provides my 2020 DIRECTINVEST BlueChip20 loan?
If I choose to gear, what is the interest rate on my margin loan?
Is margin lending tax effective?
Do I have to make regular loan repayments?
What are the risks of borrowing to invest in the share market?
What is a margin call?


Please Contact Us if you have a question that you would like to ask us.

• What are the first steps?

1. You should read the appropriate BlueChip20 Product Disclosure Statement by clicking the appropriate association links and carefully consider whether to invest.
2. Decide on an initial investment size (minimum $5,000).
3. Calculate an amount that you can comfortably afford as a monthly contribution ($500).
4. If you wish to use the gearing option select the loan amount for both the initial investment (minimum initial loan of $5,000 and not more than the amount of your initial contribution) and monthly contribution (minimum $500 and not more than the amount of your monthly contribution). You will need to complete a separate application for gearing.

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• Why can't I obtain a hard copy of the product disclosure statement?
  

2020 DIRECTINVEST have brought this product to our clients with the intention to provide an innovative, low cost product. In doing so, we have created a product that is entirely electronic and online. We hope you appreciate that in order to provide you with the cheapest product possible, only electronic copies of the PDS will be available.

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• Where do I send my application form?

2020 DIRECTINVEST BlueChip20
Reply Paid 75099
Greenwich NSW 2065

• What do I send?

Checklist of what to send:

• BlueChip20 Application Form (4 pages)
• Nominated Representative Form (2 pages)
• Direct Debit Authority Form (1 page)

If you are getting an optional margin loan, please also send

• Margin loan application (1 page)
• CERTIFIED photocopy of your passport or driver's licence
• CERTIFIED photocopy of a utility bill with your name and current address on it

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• What happens with my application?

2020 DIRECTINVEST will have your account opened within 24 hours of receiving your completed application form. Once this account is set up, your original application will be forwarded to BlackRock Investment Managers on the same day to be processed for payment.

Where you've chosen Direct Debit, funds will be deducted from the nominated bank account on the same day as the application is received by BlackRock. Your funds will then be included in the next business day's rebalancing process. Where you've chosen BPay, your funds will be included in the rebalancing process on the next business day after your deposit is received.

• How is the S&P/ASX 20 index calculated?

Standard & Poor's is recognised internationally as Australia's principal investable equity index. The S&P/ASX 20 index includes actively traded and highly liquid securities that are among the 20 largest securities listed on the ASX. It is the narrowest capitalisation-based index in the S&P/ASX index family, covering 46% of the Australian equity market capitalisation.

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•  What happens if a new Company enters the ASX Top 20?

The key benefit of the BlueChip20 strategy is the ability to constantly accumulate a direct share ownership in Australia's top 20 companies. When the market capitalisation of a company increases, such that it becomes one of the top 20 stocks, it will be automatically purchased for you.

The shares in the company it has replaced will be sold, with proceeds reinvested into the new company.

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• Am I the beneficial owner of my shares?

• How are my initial funds invested?

The investment process begins with an initial contribution (minimum $5,000). Upon receipt of this initial contribution, if you choose to gear, the first loan draw down also occurs (minimum $5,000 and not more than the amount of your initial contribution). These amounts will be determined by you and your financial adviser. These funds are also placed in your 2020 DIRECTINVEST BlueChip20 investment cash account.
If you choose to gear, the combined funds will then be used to purchase shares in the S&P/ASX Top 20 Index in the approximate ratio of their market capitalisation.
For example, if your initial contribution is $5,000, the loan is $5,000 and BHP represents 15% of the S&P/ASX Top 20 Index, you will buy BHP shares to the value of $1,500. If CBA represents 10%, you will buy CBA shares to the value of $1,000.

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• How do I make additional investments?

When you open a BlueChip20 account you will be issued with a BPAY Biller and Customer code that is unique to your account. Simply make a BPAY transfer at your bank or via internet banking.

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• Do I retain a minimum cash holding?

A cash balance of approximately 2% of your total investment will be retained to cover fees. Interest is paid on any cash that is retained in your 2020 DIRECTINVEST BlueChip20 cash account.

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• How does 2020 DIRECTINVEST BlueChip20 rebalance my portfolio?

From time to time, your share portfolio may be rebalanced to reflect the changing values of the companies you own, or to retain your 2% cash position. This will be undertaken automatically through the buying or selling of shares within your portfolio. The purpose of this is to seek a return on your portfolio that is consistent with the return of the ASX Top 20 Index.

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• How are my regular contributions invested?

Your monthly contributions will be used to buy those shares that your portfolio is the most underweight in at the time. This process occurs automatically and ensures that your portfolio reflects, as closely as possible, the performance of the S&P/ASX Top 20 Index.

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• When are dividends paid?

Dividends are paid depending on the schedule of distribution by the individual companies therefore are subject to vary according to their reporting periods. Because you have direct ownership of the shares, unlike a managed fund, you will not receive regular income distributions but rather dividends from individual companies the same as if you purchased the shares independently and individually.

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• What happens with my dividends?

Your dividends are directed to your interest-bearing deposit account linked to your Personal Portfolio. The funds will then be reinvested across your share portfolio (subject to maintaining the minimum cash balance of 2%).
Alternatively, you can also choose to have your dividends paid into a separate cash account within your personal portfolio which is not included for reinvestment and is paid into your linked nominated bank account on the first of each month.

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• Can I make a partial withdrawal from my BlueChip20 account?

If you wish to withdraw from your 2020 DIRECTINVEST BlueChip20 account, you may instruct BlackRock to partially withdraw your investment.

You may instruct the withdrawal to be a nominated cash amount where your shares will be sold and the cash deposited into your nominated bank account.

If you wish for the withdrawal to be effected partly in cash and partyly by way of a transfer of securities, the nominated value of shares will be sold down and the cash deposited into your nominated bank account and the nominated shares will be in-specie transferred to you.

You may also wish to make the withdrawal by way of nominating specific shares to transfer in-specie to you.

To request a partial withdrawal, please complete and return the withdrawal request form.

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• How can I close my BlueChip20 Account?

If you wish to close your 2020DIRECTINVEST BlueChip20 Account, you may instruct BlackRock to withdraw all of your investment.

If you have a margin loan and you wish that withdrawal to be effected by way of a transfer of all of the securities to you, BlackRock will not act on your instruction until you have paid directly to Equity Margins Limited the balance of your Loan in full (including all accrued interest and charges).

If you wish that withdrawal to be effected partly in cash and partly by way of a transfer of all of the securities to you, BlackRock will arrange for the balance of margin lending clients to be repaid in full (including all accrued interest and charges) out of the cash component of the withdrawal. If that component is insufficient, BlackRock will not act on your instruction to transfer any securities to you until you have paid the balance of Loan directly to Equity Margins Limited.

If you wish that withdrawal to be effected wholly in cash, BlackRock will arrange for the balance of your Loan (if gearing option chosen) to be repaid in full (including all accrued interest and charges) out of that cash. If the net amount of cash realised by BlackRock is less than the balance of your Loan, you will be required to pay the shortfall directly to Equity Margins Limited.

To request an account closure, please complete and return the account closure form

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• Will I receive anything in the mail?

No. The 2020 DIRECTINVEST BlueChip20 was specifically designed to be a cost effective online product, therefore all account information and your Personal Portfolio is viewed online. You will receive nothing in the mail unless you elect to receive a hard copy of the Annual Financial Report. By applying for an Account you agree to obtain reports electronically.

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• What on-line reporting do I receive?

BlueChip20 recognises that you may want access to your share portfolio 24/7.

BlueChip20 delivers web based reporting to you day and night. Your share portfolio details are updated daily, so you can log on at any time and check the value of your shares and any trading activity.

You can also see your current investment loan balance, dividend payments, cash activity and monitor the performance of your portfolio.

• What tax reports do I have access to on-line?

Buying direct shares in twenty companies on a regular basis would normally generate significant paperwork. But when you invest through BlueChip20, all this is taken care of for you.

The cost base of your shares is automatically adjusted with each trade and all dividend payments are recorded and paid to your account. Any corporate actions are automatically actioned and recorded.

Complete and concise records, available on-line at any time, simplify the preparation of your annual tax return.

• What is margin lending and how does it work in relation to 2020DIRECTINVEST BlueChip20?

If you have chosen the optional gearing facility, your obligation to repay your linked BlueChip20 Loan (including interest and fees) is secured over your BlueChip20 Account (that is, all your interest in the shares and cash held for you in BlueChip20). An investment loan of this nature is often referred to as a margin loan.

More than half of Australia's adult population now invests in the share market, a figure which is high in global terms, and increasingly margin lending is a common way through which Australian investors increase their participation in the share market. (Source: ASX.)

Many Australians would list the family home as their largest asset, and often finance it through a mortgage, even though this primary investment produces no income. An equity portfolio can produce income, a manageable cashflow and hopefully capital growth over the term of the investment

• How does my optional 2020 DIRECTINVEST BlueChip20 loan work?

If you choose to gear your investment, you will establish a linked investment loan account.
The draw down on your loan account can be either:

• An amount that matches your initial contribution and each month's instalment dollar for dollar; or
• An initial amount and monthly draw down amount that you nominate

Minimum initial optional loan: $5,000
Maximum initial optional loan: the amount of your initial contribution

Minimum monthly draw down: $500
Maximum monthly draw down: the amount of your monthly instalment contribution

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• Do I pay a fee to open my 2020 DIRECTINVEST BlueChip20 loan account?

There are no loan establishment fees for individual investors that choose to gear. However a company or trust may be required to pay an establishment fee (currently less than $200).

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• Who provides my 2020 DIRECTINVEST BlueChip20 loan?

Equity Margins Limited, a wholly owned subsidiary of Merrill Lynch & Co, Inc, provides your 2020 DIRECTINVEST BlueChip20 loan.

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• If I choose to gear, what is the interest rate on my margin loan?

For the latest interest on your BlueChip20 loan please visit the Equity Margins Limited website.

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• Is margin lending tax effective?

In Australia, depending upon individual circumstances, margin lending can be tax effective through the use of tax deductions for interest paid and franked dividends. These benefits can make the concept of borrowing to invest in an equity portfolio attractive.  

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• Do I have to make regular loan repayments?

No. Your BlueChip20 loan is an interest only loan. Interest is calculated monthly and added to your account. The loan has no set time period and will continue for as long as your BlueChip20 account remains open. Should you wish to reduce your loan balance at any time, BlueChip20 will sell shares to the value of your loan repayment and use the proceeds to reduce your loan balance.

Except where a margin call has been made, you may not repay part of your loan by a direct cash payment from you to Equity Margins Limited.

• What are the risks of borrowing to invest in the share market?

It is essential that the concept of gearing or leverage is understood.

In deciding to borrow to invest, you need to appreciate that while gearing can increase returns through capital growth and greater dividends, it can also have a similar negative impact when markets fall.

A dollar for dollar draw down strategy represents a 50% gearing ratio. A gearing ratio not exceeding 50% is available on both the Initial Contribution and the Monthly Instalment Contribution. If the amount of your Initial Contribution is the minimum amount of $5,000 and the amount of your Monthly Instalment Contribution is the minimum amount of $500, your gearing ratio will be 50% at the time each amount is invested. You should be aware that the higher the gearing ratio, the greater the risk of margin calls and of capital loss.

The suitability of gearing in your particular circumstances is a decision that should be made in consultation with your adviser.

At a gearing level of 50%, a move in the underlying value of the portfolio will magnify the result on the equity in the portfolio by two times. A 10% gain will produce a return on equity of 20% less any borrowing costs — a 10% loss will mean a drop in equity value of 20% plus any borrowing costs.

If the price of the shares included in your portfolio grows, the gearing ratio of the portfolio will reduce. This is an important measure of ongoing success of your strategy. Growth within a portfolio can also provide greater loan capacity.

In the same way, if the price of shares included in your BlueChip20 Portfolio falls, then the overall gearing ratio of the Portfolio will rise and there may be a margin call made.

Additional draw downs outside the regularly Monthly Loan Draw Downs can be made. Provided that the additional draw down will not result in the Security Value being less than the Security Value of the Portfolio so a margin call in respect of your Loan would not be made, an additional draw down need not be accompanied by a contribution by you of an equal (or any) amount. Before requesting any additional draw down, you should consult your financial adviser and consider carefully the impact on the strategy employed from the outset.

If at anytime you wish or are required to realise your holding in BlueChip20 and the amount of your Loan (and interest and fees) were to exceed the net proceeds of the sale of your BlueChip20 holding, you could be required to make a cash payment to the lender to make up the shortfall.

• What is a margin call?

When you open your BlueChip20 Account, you have the option of opening a Loan account with EML. Your obligation to repay this Loan (including interest and fees) is secured over your BlueChip20 Account.

However, your obligation to repay the principal and pay interest is not limited to the value in your Account. So, if the value in your Account is less than the amount required to meet payments to EML, then you will have to use your other funds to make the payments.

Also, if at any time the sum of the principal and interest on the Loan (which is referred to as Secured Liabilities) exceeds the amount that the lender has allowed as the value at that time of your BlueChip20 Portfolio (which is referred to as Security Value) a margin call is made and the amount of the Loan must be reduced. The Security Value of your Portfolio will not be the total market value of the Shares held for you; the Security Value of your Portfolio will generally only be between 40% and 70% of the market value of the shares that make up that holding at that time. A margin call is to be satisfied by the sale by BlackRock of sufficient shares in your Portfolio and payment to the Lender using the net proceeds. The lender will notify you if it makes a margin call. Unless you pay the margin call by 2pm on the following business day, BlackRock will notify you if all or part of your BlueChip20 Portfolio is sold following that call.

If at any time you wish to close your Account, or the lender exercises a right to close your Account and the net proceeds of the sale of all your interest in your BlueChip20 holding is less than the amount of your Loan at the time (including interest and fees), you would be required to make a cash payment to the lender to make up the balance.