Information Memorandum

Transcription

1 Information Memorandum for the Caledonia Trusts and the Caledonia Zillow Trusts 2 February, 2015 Caledonia (Private) Investments Pty Limited ABN AFSL Level 7, Gold Fields House, 1 Alfred Street Sydney NSW 2000 PO Box R1760 Royal Exchange NSW 1225 T F E caledonia@caledonia.com.au

2 Caledonia (Private) Investments Pty Limited (ACN ) (AFS Licence No ) ( Investment Manager, our or we) is the Investment Manager and promoter of the Caledonia (Private) Investment Trust ( Caledonia Trust (Series A) ), the Caledonia Global Investment Trust ( Caledonia Trust (Series B) ), the Caledonia Australia Trust ( Caledonia Trust (Series C) ) and the Caledonia Small Caps Trust ( Caledonia Trust (Series D) ) (the Caledonia Trusts ) and the Caledonia Zillow Trust (Series A), the Caledonia Zillow Trust (Series B), the Caledonia Zillow Trust (Series C) and the Caledonia Zillow Trust (Series D) (the Caledonia Zillow Trusts and together with the Caledonia Trusts, the Trusts )). The Investment Manager has issued this Information Memorandum. Alfred Street Nominees Pty Limited (ACN ) (AFS Licence No ) ( Trustee ) is the Trustee of the Trusts. Note the return of capital and the performance of the Trusts is not guaranteed by any person or organisation, including the Trustee, the Investment Manager and the Administrator. This Information Memorandum invites you to apply for an interest in one or more of the Trusts. Units in a Trust are offered and issued by the Trustee subject to the Trust Deed of the relevant Trust. No-one other than the Investment Manager has responsibility for the preparation and accuracy of this Information Memorandum. Investments in the Trusts are subject to risk and market fluctuations. Investors should ensure that they understand the risks and where necessary seek independent professional advice before investing in the product. Investors should be aware that the risks may result in possible loss of income and principal and may involve delays with repayment. Unless otherwise stated, all information is provided as at the issue date of this Information Memorandum, being 2 February, Its delivery at any time after that date does not imply that the information contained in it is accurate, timely or complete at any time subsequent to the date on which this Information Memorandum was issued. The Investment Manager may, in its absolute discretion, but without being under any obligation to do so, update or supplement this Information Memorandum. Information contained in this Information Memorandum is general information only and does not constitute a recommendation or take into account your individual objectives, financial situation or needs. This Information Memorandum has not been, and is not required to be, lodged with ASIC under the Corporations Act. The Trusts are not required to be and are not registered as a Managed Investment Scheme under the Corporations Act. This offer to subscribe for units in the Trusts is only made to Wholesale Clients. The offer is personal to the person to whom it has been sent and the information contained in the Information Memorandum is provided on a confidential basis for the purpose of making a decision as to whether to invest, and is not to be reproduced or distributed to any other persons (other than professional advisers of the prospective investor receiving this Information Memorandum). This Information Memorandum does not purport to contain all the information that may be required to evaluate any transaction in relation to any Trust (or would be required if it were a disclosure document where required to be prepared under the Corporations Act). Any persons to whom this Information Memorandum has been sent, intending investors and their respective advisers, should conduct their own independent review, investigations and analysis of the relevant Trust and of the information contained, or referred to, in this document. Whilst every effort is taken to ensure the information in this Information Memorandum is accurate, its accuracy, reliability or completeness is not guaranteed. To the extent permitted by law, neither the Investment Manager nor the Trustee accepts any liability for any loss, liability, damage or expense which results from any act or omission of any person relying on the information provided in this document. Unless otherwise indicated, all fees quoted in this Information Memorandum are exclusive of the effect of GST and any input tax credit. References to A$ is a reference to the lawful currency of Australia unless the context otherwise requires. This offer is being made to investors who receive this Information Memorandum in Australia. This offer does not constitute an offer in any jurisdiction in which, or to any person to whom it would be unlawful to make such an offer.

3 Contents 1. Key Information About the Investment Manager and the Trustee THE INVESTMENT MANAGER THE TRUSTEE CALEDONIA THE TEAM Investment Objective and Strategy THE CALEDONIA TRUSTS THE CALEDONIA ZILLOW TRUSTS Investing and Withdrawing SUBSCRIPTIONS FOR TRUST UNITS REDEMPTIONS OF TRUST UNITS SUBSCRIPTION AND REDEMPTION PRICES FOR THE TRUST VALUING ASSETS Distributions Investment Risks GENERAL RISKS OF INVESTING KEY RISK FACTORS SPECIFIC TO THE TRUSTS ADDITIONAL KEY RISK FACTORS SPECIFIC TO THE CALEDONIA ZILLOW TRUSTS Taxation TAXATION OF THE TRUST CAPITAL / REVENUE ELECTION FOR MANAGED INVESTMENT TRUSTS (MITS) DISPOSAL OF INVESTMENTS BY THE TRUSTS TAXATION OF AUSTRALIAN RESIDENT INVESTORS TAX FILE NUMBER AND AUSTRALIAN BUSINESS NUMBER WITHHOLDING (FOR AUSTRALIAN RESIDENT INVESTORS ONLY) TAXATION OF NON-RESIDENT INVESTORS GOODS AND SERVICES TAX STAMP DUTY TAX REFORM Fees and Expenses MANAGEMENT FEE PERFORMANCE FEE ENTRY AND EXIT FEE OTHER FEES AND EXPENSES Additional Information TRUST STRUCTURE ADMINISTRATOR CUSTODIANS PRIME BROKERS AUDITOR SERVICE PROVIDERS ANTI-MONEY LAUNDERING & COUNTER-TERRORISM FINANCING AND ECONOMIC AND TRADE SANCTIONS REPORTING CONFLICT OF INTEREST POLICY PRIVACY CONFIDENTIALITY NO COOLING OFF PERIOD AMENDMENT OR WITHDRAWAL OF THIS INFORMATION MEMORANDUM ROUNDING APPOINTING AN AUTHORISED REPRESENTATIVE FATCA AMENDMENTS TO THE TRUST DEEDS ON 24 OCTOBER Definitions Directory Information Memorandum Page 3 of 27

4 1. Key Information The following table sets out some of the key information about the Trusts. Investors should read this Information Memorandum in its entirety before making a decision to invest in any of the Trusts. Investment Vehicles This Information Memorandum relates to an offer to invest in the: Caledonia Trust (Series A) Caledonia Trust (Series B) Caledonia Trust (Series C) Caledonia Trust (Series D) (each a Caledonia Trust and collectively referred to as the Caledonia Trusts ); Caledonia Zillow Trust (Series A) Caledonia Zillow Trust (Series B) Caledonia Zillow Trust (Series C) Caledonia Zillow Trust (Series D) (each a Caledonia Zillow Trust and collectively referred to as the Caledonia Zillow Trusts ). In this Information Memorandum, references to a Trust or Trusts are references to the Caledonia Trusts and the Caledonia Zillow Trusts. Investment Structure Each Trust is an unregistered wholesale Australian resident unit trust. Trustee Alfred Street Nominees Pty Limited (ACN ) (AFS Licence No ) Investment Manager Caledonia (Private) Investments Pty Limited (ACN ) (AFS Licence No ) Minimum Initial Investment A$500,000, subject to the Trustee's discretion to accept a lower amount. 1 Minimum Holding Amount Subscription Frequency Redemption Frequency Subscription Price Redemption Price A$250,000, subject to the Trustee's discretion to accept a lower amount. Applications will usually be accepted weekly, usually on a Thursday, and also on the last Business Day of each month. In general, redemptions may be made with 30 days notice either annually as at the end of the Financial Year or as at the first business day of each month. The Subscription Price will be the unit price determined with reference to the Net Asset Value of the relevant Trust(s) as at the close of business of the day on which the subscription for units is accepted. The Redemption Price will be the unit price determined with reference to the Net Asset Value of the Trust as at the close of business on the Redemption Date. If redemptions of units are accepted on less than 30 days notice or on a date other than a Redemption Date, a fee of up to 3% on the withdrawal amount (payable to the Trust) may be charged. 1 The minimum investment is subject to the investor meeting one of the Wholesale Client requirements. A minimum of A$500,000 per investment in each Trust applies to investors who do not otherwise satisfy one of the other Wholesale Client requirements. Information Memorandum Page 4 of 27

5 Fees and Costs Key Investment Risks Subscriptions Distributions A base Management Fee payable to the Investment Manager of 1.5% per annum of the Net Asset Value of a Trust, payable monthly in arrears. The Management Fee amount is exclusive of GST. An annual Performance Fee payable to the Investment Manager as set out below: In respect of (a) a unit in a Trust issued before 1 January, 2015 (Initial Primary Unit), (b) any unit issued in relation to a reinvestment in connection with (i) an Initial Primary Unit (Reinvestment Unit) or (ii) a Reinvestment Unit, a Performance fee of 10% of the increase in the Net Asset Value of your units in a Trust in excess of the relevant High-Water Mark. In respect of any other units, a Performance fee of 15% of the increase in the Net Asset Value of your units in a Trust in excess of the relevant High-Water Mark. The Trustee does not currently charge a separate trustee fee. Certain costs and expenses of operating a Trust are payable out of the assets or income of the Trust. Such costs may include, but are not limited to, prime brokerage fees and brokerage costs, audit fees and administration fees. Refer to Section 6 for a summary of the key risks of investing. Subscriptions for units in the Trusts should be made by completing the Subscription Agreement accompanying this Information Memorandum. Existing investors in a particular Trust should use an Additional Subscription Form which can be obtained by contacting the Investment Manager. Only Wholesale Clients 2 as provided for in the Corporations Act may apply for units in the Trusts. Refer to Section 5 for a summary of the Trusts distribution and reinvestment procedures. 2 Wholesale Clients as defined in Sections 761G(7) & 761GA of the Corporations Act. Information Memorandum Page 5 of 27

6 2. About the Investment Manager and the Trustee 2.1 THE INVESTMENT MANAGER Caledonia (Private) Investments Pty Limited has been appointed as the Investment Manager of each Trust under a management agreement and the Trustee has also delegated some of its powers to the Investment Manager. The Investment Manager is the holder of an Australian Financial Services Licence issued by ASIC (AFS Licence No ). The Investment Manager is controlled by its directors, all of whom hold shares in the Investment Manager. 2.2 THE TRUSTEE Alfred Street Nominees Pty Limited is the Trustee of the Trust. The Trustee is the holder of an Australian Financial Services Licence issued by ASIC (Licence No ). It is the specialist trustee services provider entity for Caledonia. 2.3 CALEDONIA Caledonia was established in 1992 as a private investment group, originally to manage the investment portfolio of members of the Darling family and, later, the Nelson and Vicars families. In 1998 we extended our investment management offering to a wider selection of clients. The stability and longevity of the firm have been important features, and over more than two decades, Caledonia has delivered strong, risk-adjusted, absolute returns compounding the original capital invested in 1992 at a rate in excess of 17% per annum. During this period, Caledonia has evolved and expanded its investment universe to take advantage of compelling investment opportunities. We started as a long-only investor in Australian equities and have since introduced international equities and short-selling to our portfolios. At different times we have also selectively invested in fixed income products, memberships of exchanges, and unlisted companies. Today, Caledonia is a long-short global equity manager, with a broad investment universe, managing what is best described as a High Conviction, Best Ideas portfolio. The founding investment managers remain with the firm and, with some key personnel additions, have provided great consistency to the overall investment philosophy and process. The founding family groups remain significant investors, and the rest of the investment management team also have large amounts of their net wealth invested in Caledonia, ensuring strong alignment of interests. Caledonia is independent and privately owned by its founders and senior managers. 2.4 THE TEAM The biographies for key Caledonia managers can be found on our website Information Memorandum Page 6 of 27

7 3. Investment Objective and Strategy This section of the Information Memorandum provides a summary of the Investment Objective and Strategy for the Trusts. 3.1 THE CALEDONIA TRUSTS The Caledonia Trusts are long-short global equity portfolios, with a broad investment universe. All funds other than the Caledonia Zillow Trusts that we manage for the founding families, the investment management team and our clients have the same portfolio of investments. Our objective is to deliver superior, risk-adjusted, absolute investment returns. Whilst our investment universe is broad, our focus is largely on listed equities, analysing companies in a variety of industries and geographies, taking into account a variety of valuation and risk factors. Our portfolio approach is best described as high conviction, whereby we focus our investments on deeply researched themes that we have identified as representing outstanding investment opportunities. 3.2 THE CALEDONIA ZILLOW TRUSTS The Investment Manager has established the Caledonia Zillow Trusts as special purpose unregistered wholesale unit trusts for the purpose of holding certain securities in two listed United States companies: Zillow, Inc. ( Zillow ) and Trulia, Inc. ( Trulia ) (together the Zillow Companies ), which are also held by the Caledonia Trusts. The Caledonia Zillow Trusts constituent documents are identical in all material respects to the terms of the constituent documents in respect of their corresponding Caledonia Trusts. In July 2014, Zillow and Trulia announced a proposed all-scrip merger of their businesses. On the date of this Information Memorandum the Zillow Companies are in the process of implementing this agreed merger. The Caledonia Zillow Trusts are long-only equity portfolios initially comprising shares in Zillow and Trulia. The Caledonia Zillow Trusts have been established solely to hold the Zillow Companies securities. A portion of each Caledonia Trust s Zillow and Trulia holding was transferred to establish each Caledonia Trust s corresponding Caledonia Zillow Trust. If the proposed merger is completed, each Caledonia Zillow Trust s portfolio will comprise the shares in the merged entity only. Information Memorandum Page 7 of 27

8 4. Investing and Withdrawing 4.1 SUBSCRIPTIONS FOR TRUST UNITS Minimum Initial Investment The minimum initial investment in each Trust is A$500,000, subject to the Investment Manager's discretion to accept a lower amount. 3 The Investment Manager may in its discretion raise or lower the minimum initial investment amount provided that the investor is a Wholesale Client. Subscription Acceptances In respect of each initial and additional investment, an investor must qualify as a Wholesale Client. Subscriptions are accepted at the absolute discretion of the Investment Manager. Rejected, invalid or incomplete Subscriptions will be returned to subscribers as soon as possible. Interest is not payable on rejected Subscription monies and the relevant Trust receives any interest earned. Subscription Process and Cut-Off Times Subscriptions can be made by completing the Subscription Agreement accompanying this document, and sending it to the Investment Manager, at the address shown on the Subscription Agreement. The Subscription Agreement must be received by the Investment Manager no later than 4pm (Sydney time) on Thursday of each week (or where Thursday is a public holiday, by 4pm the previous business day) or no later than 4pm (Sydney time) on the last day of the month (or where the last day of the month falls on a weekend or public holiday, by 4pm the previous business day) to qualify for Units to be issued at the Subscription Price determined on the relevant date. A subscription for units must include the amount required to be transferred to the Trustee (in cash or other property) in relation to that subscription. Funds must be cleared in the bank account specified in this section 4.1, no later than 4pm (Sydney time) on Thursday of each week (or where Thursday is a public holiday, by 4pm the previous business day) or no later than 4pm (Sydney time) on the last day of the month (or where the last day of the month falls on a weekend or public holiday, by 4pm the previous business day). The Investment Manager may accept Subscription Agreements and cleared funds after the 4pm cut-offs. In certain circumstances non-cash applications may be considered. The original executed copy of the Subscription Agreement should be sent to the Investment Manager. A copy may also be faxed to the Investment Manager on or ed to the Investment Manager at caledonia@caledonia.com.au with the original to follow. BANK ACCOUNT DETAILS Bank: UBS, AG, Australia Branch Account: UBS, AG, Australia Branch BSB: A/C#: Reference: Name of Subscriber and Trust Code Note please use the following Trust Code in your reference: Caledonia Trust (Series A) CPIUT Caledonia Trust (Series B) CGIUT Caledonia Trust (Series C) CAUST Caledonia Trust (Series D) CSMCT Caledonia Zillow Trust (Series A) CZTSA Caledonia Zillow Trust (Series B) CZTSB Caledonia Zillow Trust (Series C) CZTSC Caledonia Zillow Trust (Series D) CZTSD Please note: Funds must be transferred from a bank account in the name of the subscriber(s) as appears in the registration details on the Subscription Agreement. No third party payments will be permitted. Subsequent additional investments may be made by completing an Additional Subscription Agreement and sending it to the Investment Manager as above. Subscriptions will usually be accepted weekly, usually on a Thursday, and also on the last Business Day of each month. Early Subscriptions are recommended to ensure the deadlines are met, as Subscriptions received after these cut-off times for any particular subscription may be processed when subscriptions are accepted in the following week. The Trust receives any interest earned on unallocated Subscription monies. The Investment Manager generally aims to issue units on the day after the Subscription Price is determined. The Subscription Price will be the unit price determined as at the close of business on the day on which the subscription for units is accepted (see 4.3 below). Joint Subscriptions Where units are held in the name of two or more persons jointly, the Investment Manager will issue one investment confirmation for those units held in the name of all persons jointly owning such units. 3 The minimum investment is subject to the investor meeting one of the Wholesale Client requirements. A minimum of A$500,000 per investment in each Trust applies to investors who do not otherwise satisfy one of the other Wholesale Client requirements. Information Memorandum Page 8 of 27

9 4.2 REDEMPTIONS OF TRUST UNITS Minimum Redemption The minimum redemption is A$100,000 (or such lesser amount as the Trustee may determine). A requested partial redemption which would cause the investor's holding to fall below the minimum holding amount (based on the redemption price of the remaining units) of $250,000 or whatever minimum subscription amount the Investment Manager determines from time to time, will not be permitted. Redemption Processes and Cut-Off Times Investments may be redeemed on 30 days notice provided redemptions of units in the relevant Trust are not suspended and the relevant Trust has not been terminated. Investments can be redeemed by mailing, faxing or ing a Redemption Request to the Investment Manager. Redemption Requests which are initially received by fax or will be processed unless there is a suspension or termination. However, the original Redemption Request should follow in original format thereafter. The Redemption Request must be signed by the investor or authorised signatories and must specify the investor number, amount (in dollars or units) and account name, BSB number and account number of the bank account to which payment is to be made. Investors should note that redemption proceeds will only be paid into the original account in the name of the investor from which the subscription proceeds were received or, upon approval of the Trustee, to another account in the name of the investor. Normal bank charges apply. Redemptions are permitted monthly on the first business day following the last calendar day of each month (or such other times as the Investment Manager may determine) provided the Redemption Request is received by the Investment Manager at least 30 calendar days prior to the proposed Redemption Date and redemptions have not been suspended. The Investment Manager may at its discretion allow redemptions with longer or shorter notice periods. The Redemption Price will be the unit price determined by reference to the Net Asset Value of the Trust as at the close of business on the Redemption Date (see section 4.3 below). If the request is received after the deadline for receipt of requests for any particular Redemption Date, it will be treated as a request for redemption on the next relevant Redemption Date. Redemption amounts may include an income component. In the ordinary course of business, it is expected that proceeds from redemptions will be available within 14 calendar days after the finalisation of the relevant Net Asset Value. However, this may be delayed in certain circumstances. In-specie Redemptions Suspensions In certain situations which impact on the effective and efficient operation of a market for an asset of the Trusts (such as certain emergency situations and, if applicable, a restructure or reorganisation of the Trusts), where the Trustee considers it to be in the best interest of investors and as provided for in the Trust Deed, the Trustee is permitted to suspend for a period of up to 60 days (Suspension Period) the redemption or issue or both of units or the payment for the redemption of units or the determination of the new Net Asset Value during the Suspension Period. The issue and Redemption Price for units the subject of a Subscription Agreement or a Redemption Request received or deemed received during the Suspension Period shall be the value of the Subscription Price or Redemption Price next determined after the end of the Suspension Period. An investor s Redemption Request lodged during the Suspension Period is deemed to be lodged immediately after the end of the Suspension Period. Facsimile and Arrangements All Subscription Agreements and Redemption Requests which are initially received by fax or will be considered. However, the original Subscription Agreement or Redemption Request must follow by post or courier thereafter. Neither the Trust nor the Investment Manager shall be responsible for any misdelivery or non-receipt of any faxes or s. Investors who submit requests initially by fax or to the Investment Manager are advised to contact the Investment Manager by telephone on to confirm that the Investment Manager has received the faxed or ed request. Faxes sent to the Investment Manager shall only be effective when actually acknowledged by the Investment Manager. In the event that no acknowledgement is received from the Investment Manager within 5 days of submission of the request, the Investment Manager should be contacted by telephone on to confirm receipt by the Investment Manager of the request. The investor agrees that the foregoing shall also apply to any additional Subscription Agreements. 4.3 SUBSCRIPTION AND REDEMPTION PRICES FOR THE TRUST A Trust s unit price is calculated in accordance with the Trust Deed of the relevant Trust and is based on the relevant Trust s Net Asset Value and the number of units in a Trust on issue at the time of valuation. The unit price is the basis for the calculation of Subscription and Redemption Prices. Subscription Prices The Subscription Price will be the unit price determined with reference to the Net Asset Value of the relevant Trust as at the close of business of the day on which the subscription for units is accepted. There is no buy spread. The Trustee may determine to satisfy all or part of a redemption request by way of in-specie distributions of Trust Property to investors either with the consent of an investor, or without that consent if the Trustee reasonably considers it to be in the best interests of the investors. Information Memorandum Page 9 of 27

10 Redemption Prices The Redemption Price will be the unit price determined with reference to the Net Asset Value of the relevant Trust as at the close of business on the Redemption Date. If redemptions of units are accepted on less than 30 days notice or on a date other than a Redemption Date, a fee of up to 3% on the withdrawal amount (payable to the relevant Trust) may be deducted from the Redemption Price. 4.4 VALUING ASSETS When you invest, you are allocated a number of units in a Trust. Each of these units represents an equal undivided part of the portfolio of investments in the Trust. As a result, each unit has a dollar value or 'unit price'. The unit price is calculated by dividing the total asset value of the Trust, less its liabilities (the Net Asset Value), by the total number of units held by investors on that day. All unit prices are calculated to the nearest 4 decimal places of a dollar and the number of units issued are calculated and allocated to the nearest whole number. The Net Asset Value of the Trust includes the value of income accumulated since the previous distribution date. In determining the Net Asset Value of the Trust, the Trustee will follow the valuation policies and procedures adopted by the Trust. For the purpose of calculating the Net Asset Value, the Trustee shall, and shall be entitled to, rely on, and will not be responsible for the accuracy of, financial data furnished to it by the Administrator, market makers and/or independent third party pricing services. The Trustee may also use and rely on industry standard financial models in pricing any of the securities or other assets. Information Memorandum Page 10 of 27

11 5. Distributions Where a distribution of a Trust s distributable income is made, an investor s entitlement to the distributable income of the Trust is the specific Trust s distributable income for the period divided by the number of units on issue as at the relevant distribution date multiplied by the number of units held by the investor as at that same date. Investors who are presently entitled to the distributable income of the Trusts as at year end will be assessable on the net income of the Trusts for tax purposes (Net Taxable Income), in proportion to their entitlements to that distributable income that may have accrued to the investor. Investors' liability for tax in respect of the distributions of the Trust is determined by reference to the financial year in respect of which the entitlement arises. See Section 7 ( Taxation ) for further details. Units issued on the reinvestment of distributed income are issued at the Subscription Price effective immediately after the end of the distribution period for the relevant Trust. Automatic Reinvestment The Manager has determined that distributions in respect of Units in the Trusts will be reinvested by way of subscription for additional Units. Investors are taken to elect that all distributions in respect of the Units in the Trusts will be automatically reinvested under the Subscription Agreement. The Investment Manager will notify investors of any change in the reinvestment of distributions procedure or terms. Information Memorandum Page 11 of 27

12 6. Investment Risks 6.1 GENERAL RISKS OF INVESTING All investments are subject to varying risks and can rise and fall in value. Changes in value can be significant and they can happen quickly. Investors should be aware that there is no guarantee that the implementation of the Investment Objective and Strategy will succeed and losses to investors may occur. The return of capital and the performance of the Trusts are not guaranteed by any person or organisation, including the Investment Manager, the Trustee or the Administrator. Therefore each investor should carefully consider the risks of investing and where necessary seek professional advice as to the suitability of investing in the Trusts. Some of the significant risks of investing in the Trusts include, but are not limited to: a. Economic Conditions Changes in economic conditions, including, for example, interest rates, inflation rates, employment conditions, competition, technological developments, political and diplomatic events and trends, and changes in tax laws can affect substantially and adversely the business and prospects of a Trust s investments. None of these conditions are within the control of the Investment Manager and no assurances can be given that the Investment Manager will anticipate such developments. b. International Investing and Risk of Government Intervention There are additional risks where a Trust invests internationally, including political or economic instability in the country of issue, and the possible introduction of new laws or restrictions, government regulation of or intervention through regulation of their local markets, foreign exchange controls, restrictions on investments by foreigners or limits on the flows of investment trusts or risk of government expropriation of the assets of the companies in which a Trust holds interests. Regulatory intervention could also materially affect the ability of a Trust to give effect to its investment strategies. Such regulation or intervention could adversely affect a Trust s performance. c. Counterparty Risk Counterparty risk is the risk of loss caused by another party defaulting on its financial obligations either because they become insolvent or cannot otherwise meet their obligations to a Trust. A party defaulting on its obligations could subject a Trust to substantial losses because a Trust will still be required to fulfil its obligations on any transactions which were to have substantially offset other contracts. d. Market Risk Any investment made in a specific group of securities is exposed to the universal risks of the securities market. However, there can be no guarantee that proportionate losses equivalent to or greater than those of the overall market will not be incurred as a result of investing in such securities. e. Derivative Risk Derivatives, such as options, futures and swaps may also be utilised by any of the Trusts, for example, to manage risk (such as hedging currency exposure) or to gain exposure to investments. Derivative risks may include the value of the derivative failing to move in-line with that of the underlying asset, potential illiquidity of the derivative and counterparty risk where the counterparty to the derivative contract fails to meet its obligations under the contract. f. Foreign Exchange Risk Foreign exchange risk is the risk that a Trust is exposed to as a result of any unhedged investments that are denominated in foreign currencies. Returns to investors in AUD (the functional currency of each Trust) are affected by changes in foreign exchange rates. Negative AUD returns are possible even if foreign investments appreciate in value in their local currency. g. Foreign Taxation Trusts may trade on markets located in many jurisdictions around the world with different tax regimes, some of which may subject the Trusts to withholding or other taxation, which may impact returns. h. Operational Compliance Operational risk relates to the risk of loss resulting from inadequate or failed internal control processes, information technology systems or from external service providers, which may impact on the administration of a Trust. i. Tax Risk The Trusts or an investment in the Trusts can also be subject to tax risk on the basis that tax laws and relevant administrative practices are subject to change, possibly with retrospective effect. Information Memorandum Page 12 of 27

13 6.2 KEY RISK FACTORS SPECIFIC TO THE TRUSTS a. Reliance on the Personnel of the Investment Manager The trading expertise in respect of each Trust is largely dependent on the skills of the officers and employees of the Investment Manager. The loss of its services and any key personnel could materially and negatively impact the value of any of the Trusts. b. Liquidity Under certain conditions, liquidity of a particular market or security may be restricted, thus affecting the performance of the Trusts. Lack of liquidity or market depth can affect the valuation of any of the Trusts assets. Also a Trust s inability to readily dispose of its underlying investments may limit the Trust s ability to meet withdrawal requests. c. Short Selling The Investment Manager may engage in short selling as part of the Investment Strategy. Short selling involves selling a security that is not already held by the Trust, and this is generally done by borrowing the security from another party to make the sale. The short sale of a security can involve much greater risk than buying a security, as losses on a purchased security are restricted at most to the amount invested, whereas losses on a short position can be much greater than the initial value of the security. Additionally, there can be no guarantee that the securities necessary to cover a short position will be available for purchase. Short selling will also incur fees and other costs on the securities borrowed for sale by any of the Trusts. For a short sale to be profitable the return from the strategy must exceed these costs and, where losses are incurred on the strategy, these costs will increase the losses. d. Speculative Nature of Certain Investments Certain investments by any of the Trusts may be regarded as speculative in nature and involve increased levels of investment risk. An inherent part of a strategy may be to identify securities which are undervalued (or, in the case of short positions, overvalued) by the marketplace. Success of such strategy necessarily depends upon the market eventually recognising such value in the price of the security, which may not necessarily occur. Equity positions, including Initial Public Offerings, may involve highly speculative securities. e. Margin Risk Margin is the collateral that any of the Trusts are required to deposit with a counterparty in order to cover some or all of the credit exposure created by certain financial transactions. Collateral may include the pledge of securities or a cash deposit. Examples of such financial transactions may include the use of derivatives or short selling. Adverse price movements in the underlying financial instrument s value may result in losses to the investor. In such cases, the margin may be required or called by the counterparty to make good the loss. In such cases, the Investment Manager must either deposit additional funds with the counterparty or suffer mandatory liquidation of the pledged securities to compensate for the decline in value. In the event of a sudden, precipitous drop in the value of the Trust s assets, the Trust might not be able to liquidate assets quickly enough to pay off its margin debt. Such an event would adversely affect the Trust s investment. These risk factors are not a complete list of all the risks associated with investing in any of the Trusts. f. Limited Diversification The Investment Manager intends to seek to diversify a Trust s investments as it deems appropriate and consistent with the Trust s Investment Objective. Each Trust s portfolio is intended to be highly concentrated in a small number of investments. To the extent a Trust s investment portfolio is concentrated in a smaller number of investments, the portfolio will be subject to a greater level of volatility. g. Leverage Each Trust may borrow money. The amount of borrowings which the Trust may have outstanding at any time is closely monitored. Leverage can magnify both the gains and losses and investors may experience increased volatility in the value of their investments. h. Pledging a Trust s assets A Trust may pledge its securities in order to borrow for investment purposes. Assets held in the Trust are available as security for entering into hedging transactions. j. FATCA Risk The Trusts are Reporting Australian Financial Institutions under the IGA. Depending on your status for FATCA purposes, FATCA risk is the risk that the Fund may report information in relation to you and your unit holding to the ATO, who in turn discloses such information to the U.S. Internal Revenue Service. 6.3 ADDITIONAL KEY RISK FACTORS SPECIFIC TO THE CALEDONIA ZILLOW TRUSTS As the Caledonia Zillow Trusts invest 100% in the Zillow Companies, note the following additional key risks in respect of the Caledonia Zillow Trusts: a. Single stock portfolio The Caledonia Zillow Trusts are invested 100% in the Zillow Companies, and so may be subject to greater levels of volatility. b. International investments 100% of the assets in the Caledonia Zillow Trusts will be international investments. As noted under section 6.1 of the Information Memorandum, this means that the entire portfolios of the Caledonia Zillow Trusts will be subject to certain international risks. Information Memorandum Page 13 of 27

14 7. Taxation There are tax implications when investing, withdrawing and receiving income from any of the Trusts. The following information is of a general nature only. Given the complex nature of the Australian taxation system, and the fact that different taxation circumstances apply to different investors, the Investment Manager strongly recommends that investors seek the advice of a professional tax adviser. This tax information is current as at the date of this Information Memorandum. The levels and basis of tax may change in the future. 7.1 TAXATION OF THE TRUST Under normal circumstances, it is intended that all distributable income of the Trusts will be distributed to the investors in respect of a financial year such that the investors are liable to tax on the Net Taxable Income derived by the Trusts during each financial year. On the basis that investors are presently entitled at the end of each financial year to the distributable income of a Trust for that financial year, it is expected that the Net Taxable Income of the Trust will not be assessable at the trust level and will only be subject to tax at the investor level. In certain circumstances, investors may be liable for tax on the Trust s Net Taxable Income even if they have not received any distributions in cash. 7.2 CAPITAL / REVENUE ELECTION FOR MANAGED INVESTMENT TRUSTS (MITS) Legislation enables eligible MITs to make an irrevocable election to apply the Capital Gains Tax (CGT) regime as the primary code of taxing certain asset disposals. Eligible MITs (which include Australian managed investment schemes that are widely held or that are taken to be widely held) can irrevocably elect (in an approved form) to apply the CGT provisions as the primary code to tax gains and losses on certain eligible assets (primarily, shares in companies, units in unit trusts, rights and options over such assets but excluding assets that are derivatives, foreign exchange or any other investments that are subject to the 'financial arrangement' provisions), subject to certain integrity rules. However, where a MIT is eligible to make an election and it does not do so, any gains and losses on the disposal of those otherwise eligible assets (excluding land or certain interests in land) will be taxed on revenue account. Where a Trust qualifies as an eligible MIT and elects to treat the Trust s eligible assets on capital account, investors may obtain the benefit of the CGT discount and other tax concessions (where applicable) on distributions of capital gains they may receive. Each Trust has elected to do so. The capital account election will not apply in relation to the disposal of assets covered by that election in any year that the Trust fails to qualify as an eligible MIT. The ordinary tax rules will generally apply in relation to those years. 7.3 DISPOSAL OF INVESTMENTS BY THE TRUSTS The disposal of the underlying investments by the Trusts may result in an amount being included in the Net Taxable Income of the Trusts. Generally, an amount of income or gain arising on disposal of underlying investments will be included in Trust distributions. 7.4 TAXATION OF AUSTRALIAN RESIDENT INVESTORS Distributions of distributable income of the Trusts will be made at least on an annual basis. Distributions of income Investors who are presently entitled to the distributable income of the Trusts as at financial year end should be assessed on the Net Taxable Income of the Trusts, in proportion to their entitlements to that distributable income. An investor's share of the Net Taxable Income of any of the Trusts, whether distributed or reinvested, forms part of the assessable income for the investor in the year in which the entitlement arises, rather than when the distribution is made. A net capital gain will be included in the investor s assessable income. In the case where a Trust makes a loss for tax purposes, this loss cannot be distributed to investors. It may be available for recoupment against the Net Taxable Income of the Trust in future years, subject to certain conditions. Eligible investors may be entitled to offset, against tax payable, any franking credits in respect of dividends received by the Trust (subject to the qualified person rules). To the extent that the investor s share of the franking credits exceeds the investor s tax liability, the investor may be entitled to a refund of the excess, at least where the investor is an individual or a complying superannuation fund. Investors may also be entitled to claim a foreign income tax offset (foreign tax credit) for foreign tax paid or which is deemed to have been paid by the investor in relation to assessable income or capital gains received from the Trusts in relation to foreign investments. Disposal, transfer or redemption of units Investors will generally realise a capital gain or loss on disposal, transfer or redemption of their units in the Trusts (assuming that investors hold their units in the Trusts on capital account). Investors must include any realised capital gain or loss on disposal of their units) in the calculation of their net capital gain or loss. Certain investors (such as individuals, trusts and complying superannuation entities) may be entitled to a CGT discount where the investors have held their units in the Trust for at least 12 months prior to disposal, transfer or redemption. The CGT discount is 50% for an investor that is an individual or trust, and 33% for an investor that is a complying superannuation fund. The CGT discount does not apply to an investor that is a company. Information Memorandum Page 14 of 27

15 Where units are held by an investor as part of a business of investing or for the purpose of profit making by sale, gains may constitute ordinary income. Streaming on redemption Any undistributed income or gains, or those arising from investments sold or redeemed to meet the redemption, may be distributed or streamed to the redeeming investor, with the aim that remaining investors will not be adversely affected by such income or gains. The redeeming investor s redemption amount may therefore comprise a distribution of the income of a Trust. If such distribution occurs, the income component will be notified by the Investment Manager to the investor for the purpose of enabling the redeeming investor to determine the amount to be included in their assessable income in respect of the redemption. The Tax Laws Amendment (2011 Measures No.5) Act 2011 was enacted to enable the streaming of capital gains (and franked distributions). A Trust that qualifies as a MIT is able to elect to apply these streaming rules. It is expected that the Trusts will make this election, where eligible. For these purposes, the Australian Government is expected to extend the streaming rules for MITs until 1 July 2015 in order to coincide with the deferred start date of the proposed new MIT regime (discussed below). The streaming rules should automatically apply to a Trust in circumstances where the Trust does not qualify as a MIT but holds its eligible assets on capital account under general law. However, it is possible that income or gains (other than capital gains) may also be streamed to redeeming investors on redemption. Although the streaming of particular amounts (or quantum) of income should be effective in the context of the Trusts, a number of uncertainties still exist with respect to the streaming of the character of income that does not comprise capital gains (and franked distributions). For example, recent cases have cast doubt on the ability of a trust (such as the Trusts) to allocate a particular component of income (other than capital gains and franked distributions) to particular investors. Investors should monitor developments in this area as relevant. Other distributions It is also possible for investors to receive a tax deferred amount in relation to their distribution from the Trusts. This would arise where the distribution received from the Trusts exceeds the share of the Net Taxable Income of the Trusts which is to be included in the assessable income of an investor. In relation to these amounts, the CGT rules may require the cost base which is held by investors in their units to be reduced. Where such tax deferred amounts received by the investors exceed the cost base of the units, the excess is treated as a capital gain. At the end of each tax year (30 June) the Investment Manager will send investors the details of assessable income, capital gains, tax credits and any other relevant tax information with regards to the distribution from the Trusts in the relevant year, to include in the investor's tax return. Performance Fees Performance Fees, when incurred, are charged to each investor by the Investment Manager. Performance Fees do not form part of the Trust s Net Taxable Income. On this basis, an investor must seek their own taxation advice as to whether the Performance Fee can be incorporated into the underlying cost base of units held by the Investor, or as an allowable deduction for the income year to which it relates. The Investment Manager will provide a taxation invoice to investors, if and when, a Performance Fee is charged. Taxation of Financial Arrangements (TOFA) The TOFA rules represent a code for the taxation of receipts and payments in relation to financial arrangements. The rules contemplate a number of different methods for bringing to account gains and losses in relation to financial arrangements (including fair value, accruals, retranslation, realisation, hedging and financial records). The TOFA rules could affect the way that a Trust s Net Taxable Income is determined. The effect, if any, will depend on the nature of a Trust s investments and which elections it makes under TOFA. Investors should seek their own taxation advice in relation to the application of the TOFA rules to their investment. However, the TOFA rules should not apply to the units in the Trusts held by individual investors and other excluded investors. Foreign accruals regimes The Trusts may invest in foreign entities which means the Trusts could become subject to Australia s foreign accruals tax rules such as the Controlled Foreign Company ( CFC ) rules in limited circumstances. On the basis that any foreign investments made by the Trusts will consist of investments in large listed entities, it is not expected that the requisite CFC control tests would be satisfied such that the CFC rules should not apply. However, whether or not the relevant foreign accruals tax rules ultimately apply to the Trusts will, depend on, amongst other things, the level of interest held by each Trust (and its associates) in the foreign entities, and any future legislative developments in respect of these rules. 7.5 TAX FILE NUMBER AND AUSTRALIAN BUSINESS NUMBER WITHHOLDING (FOR AUSTRALIAN RESIDENT INVESTORS ONLY) It is not compulsory for investors to provide their Tax File Number (TFN) or Australian Business Number (ABN) to the Investment Manager, and it is not an offence if they decline to provide them. However, unless exempted, if the TFN and ABN are not provided, tax may be deducted from distributions at the highest personal marginal rate plus the Medicare levy. The ABN, TFN or an appropriate exemption can be provided on the Subscription Agreement. Information Memorandum Page 15 of 27