King Irving Sura Pacific Alliance Fund. Information Memorandum

Transcription

1 King Irving Sura Pacific Alliance Fund Information Memorandum King Irving Funds Management Pty Limited ABN AFSL No: Dated: 1 July 2017

2 Important Information Trustee Investment Manager Custodian King Irving Funds Management Pty Limited AFSL SURA Investment Management Mexico, S.A. de C.V. Sociedad Operadora de Fondos de Inversión State Street Australia Limited ABN ABN Level 29 Chifley Tower, 2 Chifley Square SuraMexico S.A. Reforma 222 Level George Street Sydney NSW 2000 Mexico DF, Mexico Sydney NSW 2000 Telephone: This Information Memorandum (the Information Memorandum) is dated 1 July 2017 and is issued by King Irving Funds Management Pty Limited ABN , AFSL (the Trustee), in its capacity as trustee for the King Irving Sura Pacific Alliance Fund (the Fund). Investments in the Fund can only be made by investors receiving this Information Memorandum and completing the Application Form attached to this Information Memorandum. Wholesale investors This Information Memorandum is for an offer of units in the Fund (the Offer) to investors who qualify as wholesale clients under section 761G of the Corporations Act 2001 (Cth) (the Corporations Act) or 761GA of the Corporations Act, or to any other person who is not required to be given a regulated disclosure document under the Corporations Act. This Information Memorandum is not a product disclosure statement for the purposes of the Corporations Act and will not be lodged with the Australian Securities and Investments Commission (ASIC). This Information Memorandum is not required to, and does not, contain the information that would be required to be included in a product disclosure statement. Foreign investors The Offer is available to wholesale clients receiving the Information Memorandum within Australia and the Offer may be made available to select persons in other jurisdictions at the Trustee s discretion, provided the Offer is in accordance with applicable securities laws in those jurisdictions. Neither the Trustee, the Investment Manager nor any of its directors, members, associates or related entities, nor any person related to them represent that this Information Memorandum may be lawfully offered, in compliance with any applicable legislation or other requirements in any jurisdiction outside Australia, or under an exemption available under another jurisdiction, or assume any responsibility for facilitating any such distribution or offering. Disclaimer This Information Memorandum does not purport to be complete, accurate or contain all information that recipients may require to make an informed assessment of whether to invest in the Fund. No obligation is imposed on the Trustee, the Investment Manager nor any of their respective directors, members, associates, related entities or professional advisers or any other person related to them to advise a recipient of any information of which any party becomes aware of or any change to, or error in, the information contained in this Information Memorandum. No liability To the maximum extent permitted by law, neither the Trustee, the Investment Manager nor any of their respective directors, members, associates, related entities or professional advisors represent or warrant as to the accuracy or completeness of any statements, intent or opinions in this Information Memorandum, and no responsibility or liability will be accepted by any of the above-mentioned persons for any loss or damage, however arising and whether foreseeable or not, which results from any person acting in reliance in whole or in part on any information in the Information Memorandum or any information that is made available in connection with further enquiries, whether arising out of negligence, default or lack of care. Any person contemplating an investment in the Fund should make their own decision as to the sufficiency and relevance for its purposes of the information contained in this Information Memorandum after taking all appropriate advice from qualified professional persons. 2 Information Memorandum King Irving Sura Pacific Alliance Fund

3 The Custodian and Fund Administrator, State Street Australia Limited (State Street), has not authorised or caused the issue of this Information Memorandum and disclaims any legal liability concerning it. State Street s obligations concerning the Fund are limited to providing services under the agreements entered into it with the Trustee. State Street has no obligations to investors. Opinions, estimates, financial objectives and forecasts The Information Memorandum may contain various opinions or financial objectives concerning the anticipated future performance of the Fund, which may or may not be realised or be accurate. These opinions or financial objectives are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. As a result, actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. Any opinions, estimates or financial objectives expressed in this Information Memorandum are based on reasonable assumptions. These assumptions may not prove to be correct or appropriate. All proper enquiries have been made to ascertain or verify the foregoing, however the Trustee and the Investment Manager do not make representations or warranties as to the validity, certainty or completeness of any of the assumptions or the accuracy of the opinions, estimates, financial objectives or forecasts contained in this Information Memorandum. The Trustee has no intention to update or revise forwardlooking statements, or to publish prospective financial information in the future, regardless of whether new information, future events or any other factors affect the information contained in this Information Memorandum. Investment risk warning Neither the Trustee, the Investment Manager nor any of their respective directors, members, associates or related entities, guarantee the performance of the Fund or of the underlying assets, the repayment of capital or any particular rate of income or capital return. An investment in units in the Fund involves a level of risk and is not suitable for investors who are unable to sustain the loss of all or part of the sum invested, or who require guaranteed levels of return or liquidity. The Fund may be illiquid and/or there may be restrictions and limitations on the resale of units in the Fund. Prospective investors should conduct their own due diligence in relation to the acquisition of units in the Fund. A summary of the risks of an investment in the Fund is set out in the section Risks on Investing on page 14 of this Information Memorandum. No reliance This Information Memorandum is not investment advice, is general information only and does not take into account the investment objectives, financial situation or particular needs of any prospective investor. The Information Memorandum is not a recommendation to invest and by receiving and reading this Information Memorandum, and completing the Application Form, prospective investors agree that they: do not rely on the information in this Information Memorandum to make a decision to invest in the Fund; must assess their own appetite for the risks associated with an investment in the Fund and must make their own independent evaluation of these risks and the terms of the investment; and must consult and seek professional advice from their own advisors before making a decision to invest in the Fund. Information Memorandum King Irving Sura Pacific Alliance Fund 3

4 Contents Important Information 2 Contents 4 Features at a glance 6 King Irving Sura Pacific Alliance Fund overview 8 A fast growing region 8 Commitment to stable legal and regulatory systems 8 A key growth region within Emerging Markets 8 King Irving Funds Management 9 Our selection of SURA Asset Management 9 The Investment Manager SURA Investment Management 10 The Custodian and Fund Administrator State Street 10 The Fund 11 Applications 11 Unit Value 11 Distributions 11 Redemption and transfer of units 11 Suspension or delay of redemptions 11 Investment management process 12 Investment philosophy and objectives 12 The Investment Process Fundamentally based 12 Relative attractiveness of the industry 12 ESG 12 Portfolio construction 13 Liquidity 13 Borrowing and cash policy 13 Derivatives and currency hedging 13 Environmental social and governmental issues 13 Risks of investing 14 Fees and costs 15 Management fees and costs 15 Transaction costs 15 Differential fees 15 Maximum fee and fee waiver 15 Additional Investor information 16 Effective date of transactions 16 Information provided to Investors 16 Changes to the Fund 16 Fund information 16 The Constitution 16 Fund Auditor and Fund accounts 17 Term of the Fund 17 Related party and other interests 17 4 Information Memorandum King Irving Sura Pacific Alliance Fund

5 Rights of Trustee 17 No application for listing on stock exchange 17 Taxation information 18 Taxation of the Fund 18 Managed investment trust 18 Distributions 18 Franking credits 19 Foreign income tax offsets 19 Disposal or Redemption of units 19 Taxation of financial arrangements (TOFA) 19 Foreign accruals regime 19 Non-resident withholding tax 20 Goods and Services Tax (GST) 20 Tax File Numbers and Australian Business Numbers 20 US withholding tax and reporting under FATCA 20 Common Reporting Standard 20 Failure to comply with FATCA for the Common Reporting Standard 20 Privacy policy 21 Anti-Money laundering requirements 22 Fax and electronic correspondence conditions 22 Definitions 23 Application Form 25 Information Memorandum King Irving Sura Pacific Alliance Fund 5

6 Features at a glance About the Fund Type of Investment Trustee Investment Manager Custodian and Registry Fund Description Investment Objectives Investment Strategy Wholesale unit trust or managed investment scheme King Irving Funds Management Pty Limited SURA Investment Management State Street Australia Limited The Fund invests in a diversified Emerging Market portfolio of securities predominantly listed in the Pacific Alliance countries with the potential for capital growth and increased earnings. To provide investors with high growth and income over the medium to long term by investing in equities of companies located in the fast growing Pacific Alliance economic and trade bloc of Mexico, Colombia, Peru and Chile. The Fund aims to out perform the MSCI Latam Pacific Alliance Capped Index. The Fund will invest in equity securities predominantly listed, or to be listed, on the securities exchanges of countries forming part of the Pacific Alliance. Emerging Markets are inherently inefficient given their developing status, with high volatility relative to Developed Markets. The Investment Manager aims to exploit these inefficiencies to generate alpha through a bottom up process involving fundamental analysis of the companies within the investable universe. This is overlaid with the consideration of top down factors, including specific industry and ESG issues. The portfolio is generally comprised of securities and is relatively benchmark unaware and style neutral. There is a low allocation to cash, as the aim is to be fully invested in securities. Asset classes 1 Asset class Range of Fund value % Currency Hedging and Derivatives Policy Investment Timeline Minimum Initial Investment $5,000,000 Minimum Additional Investment or Redemption Equities and equity related securities Cash or cash equivalents Derivatives may be used to hedge the currency exposure of Fund Assets held by the Fund in one currency against movement in other currencies, and to trade in securities of a particular market. It is not the Investment Manager s intention to use derivatives to hedge the Fund s foreign currency exposure against movement in these currencies compared to the Australian dollar. Suggested minimum investment time frame is 5-7 years. $100,000 Distributions Distributions are paid once a year after financial year end as at 30 June. Redemptions Management Fee 2 Distributions may be reinvested or paid to the Investor s nominated account. Redemptions will be paid at the Redemption Price. The minimum Redemption Amount is $100, % p.a. of the Fund s Current Asset Value, calculated daily and paid monthly in arrears. 6 Information Memorandum King Irving Sura Pacific Alliance Fund

7 About the Fund Expense Recoveries Transaction costs Risks Notes: Properly incurred Fund expenses and liabilities may be reimbursed from the Fund. See page 15, Management fees and costs, for details. 0.45% of the Unit Value on the issue or redemption of units. All investments involve a certain amount of risk. Information about some of the risks associated with the Fund is set out on page This provides an indication of the intended investments of the Fund. Actual exposure may vary from time to time. 2. Unless otherwise stated, all fees quoted in this Information Memorandum are exclusive of GST. Information Memorandum King Irving Sura Pacific Alliance Fund 7

8 King Irving Sura Pacific Alliance Fund overview The King Irving Sura Pacific Alliance Fund provides Investors with access to companies listed on securities exchanges in the fast growing Emerging Market economic and trade bloc of the Pacific Alliance. The Fund is managed by a member of the leading investment management group in the region, SURA Asset Management S.A. (by Assets under Management and investors). Comprising the Latin American countries of Mexico, Colombia, Peru and Chile, the Pacific Alliance was formed in 2012 as an initiative to increase competitiveness through integration of these economies, and to allow for the free flow of capital, goods, people, and services amongst its members. A further objective is to expand trade between the Pacific Alliance and Asia-Pacific countries. Investments will be made in other countries upon the Pacific Alliance region expanding where the Investment Manager determines them to be compelling investment opportunities. A fast growing region The Pacific Alliance represents more than 55% of Latin America s exports, over 40% of its total Foreign Direct Investment flows and 40% of its GDP. The region is fast growing, driven by a number of factors including strong demographics and the growth of internal demand. With a collective GDP of US $2.2 trillion, the integration of a common market within the Pacific Alliance provides for efficiencies in accessing the region s securities exchanges. Mexico is the largest economy in the group and is positioning itself as a competitor to China for manufacturing, with low labor costs which challenge those of China and the United States of America. Chile and Peru went through a strong reform process in the 1990s, which now underpins their current strong growth trajectory. The IMF cited domestic consumption, record-low unemployment and wage growth in Colombia, Peru and Chile when it made recent GDP predictions of an average growth rate of 4% (IMF World Economic Outlook, 2015). Commitment to stable legal and regulatory systems The countries within Pacific Alliance share a focus on strong and transparent government and on openness to foreign investment. They are viewed by external commentators as having a history of relative stability and a stronger commitment to free trade and rule of law within Latin America. As a result, the Pacific Alliance Region offers a stable legal, political and regulatory environment which exploits trade opportunities within and outside of the region as a unique investment opportunity in Latin America. A key growth region within Emerging Markets The Fund provides direct access to investing in the fast growing Pacific Alliance region with the assistance of a local expert. Notwithstanding the ups and downs of the Global economic cycle, these economies will play an important role as part of the process of economic consolidation and growth in the Latin American region continues today and in the future to come. The Fund provides a unique position to exploit market opportunities in an area which we view as a key growth area within Emerging Markets. 8 Information Memorandum King Irving Sura Pacific Alliance Fund

9 King Irving Funds Management King Irving Funds Management is a specialist fund manager which provides investors with access to International investment managers not readily accessible to the Australian market. Managers are selected based on a variety of factors, including importantly, their likelihood of providing additional or new sources of growth and diversification for investor portfolios. We seek out active managers who are leaders in their markets. Naturally, these managers must have a strong local presence to provide them with an information edge, which we view as critical to the sustained generation of alpha. We see benefit in seeking growth through Emerging Markets, and specifically, in anticipated high growth regions. The full benefit of investing in these regions is unlikely to be achieved by investing in a Global Emerging Market strategy alone. Our investment manager due diligence processes includes the requirement of a proven and structured investment process implemented by a highly experienced investment team. We also require managers with a strong focus on risk management. It is imperative to our risk control processes that our selected manager operates in an environment which provides investors with the comfort of transparent markets and stable regulatory systems. The Fund portfolio is invested in accordance with the investment guidelines, performance objectives and risk management rules agreed with the Investment Manager and ourselves as Trustee as set out in the Investment Management Agreement. The Investment Manager decides the investments it will make in accordance with these agreed guidelines. Our compliance processes include the ongoing review of the Investment Manager and Fund portfolio to ensure that these guidelines, objectives and rules are met. Our Directors have a combined history of over 70 years in funds management, including investment manager selection, operations, compliance, regulation, due diligence and marketing. Our selection of SURA Asset Management SURA Asset Management S.A. (SURA Asset Management), embodies the above qualities we require in our selected manager through its leadership position in the Pacific Alliance growth markets of Mexico, Colombia, Peru and Chile. Their investment process is clearly articulated, well resourced with investment teams in each country, and backed by a culture of strong corporate governance. Prior to launch of the Fund, this capability has not been available outside of the Region. Previously, investors sought to extract value from these markets typically at arm s length, without the benefit of the local knowledge and resources of a Regional leader with a 30 year plus investment history. We view SURA Asset Management as a key factor to unlocking the potential for high growth from this fast consolidating Emerging Region. Information Memorandum King Irving Sura Pacific Alliance Fund 9

10 The Investment Manager SURA Investment Management SURA Asset Management is a regional asset manager, with local offices in each Country comprising the Pacific Alliance region, as well as in other Latin American (Latam) Countries. It is the parent company of SURA Investment Management Mexico, S.A. de C.V. Sociedad Operadora de Fondos de Inversión, the appointed manager for the Fund (SURA Investment Management). SURA Asset Management is the largest provider of mandatory and voluntary pensions in Latin America, with a top three ranking in the Mexican, Colombian, Peruvian and Chilean market as measured by assets under management and the number of clients. With over US$112 billion Assets under Management, 9 thousand employees and 17 million clients, SURA Asset Management have a presence in six countries within the Latin American region (numbers as at 30 September 2015). SURA Asset Management has more than 30 years experience in retirement and investment management, and acquired ING s Latin American asset management business in The Investment Manager and/ or its subsidiaries operate as regulated entities under the securities regulatory framework in each of the Pacific Alliance countries. SURA Asset Management s broad regional footprint in the mandatory pension funds segment provides economies of scale that represent a significant competitive advantage in the resourcing of its investment management business and processes. The Pacific Alliance is a region in which the manager has particularly a strong local presence, with local investment teams in each of the countries comprising the bloc and many years experience managing portfolios within these markets. The Fund has the benefit of a dedicated team of 42 investment professionals and 30 compliance and risk managers located across the Pacific Alliance region involved in the selection and management of securities on behalf of the Fund. SURA Asset Management is owned 71% by Grupo SURA, which is a member of the Dow Jones Sustainability Indices for its responsible and comprehensive management of business practices. Grupo SURA is listed on several stock exchanges. Indeed, Environmental, Social and Governance analysis (ESG) is an integral part of the Investment Manager s investment process, as in their experience, ESG is an important factor to take into account when investing in Emerging Markets. The remaining 29% of shares in SURA Asset Management are held by a group of local and international leading financial institutions and institutional investors, namely General Atlantic, International Finance Corporation, Bancolombia, Grupo Bolívar and Grupo Wiese. SURA Asset Management have a strong focus on ethics and compliance, as well as a strong and risk management framework. The Custodian and Fund Administrator State Street We have appointed State Street Australia Limited (State Street) as the Global Custodian and Administrator for the Fund. State Street is a long established and respected custodian in the Australian market. State Street s role is limited to holding the Assets as agent of the Trustee, and to administering the Fund Assets, including the provision of Fund accounting, unit registry services and unit pricing as an independent provider of these services. 10 Information Memorandum King Irving Sura Pacific Alliance Fund

11 The Fund The Fund is a wholesale managed investment scheme, or unit trust. In this structure, the investments of all investors in the scheme are pooled together and used to buy investments, which are managed on behalf of all the investors. The Trustee has day to day control over the operation of the Fund, including appointment and oversight of the Custodian and Investment Manager. By investing in the Fund, Investors can access securities from the broader market, utilising the local knowledge and skill of SURA Investment Management. Transaction and others costs incurred by the Fund in buying and selling securities are likely to be reduced due to the Investment Manager s expertise in operating in the Pacific Alliance markets. Applications The minimum application is $5 million, with subsequent investment amounts of $100,000. We may waive or increase the minimum application amounts at our discretion. Application money is deposited into a non-interest bearing account, pending processing. Unit Value The first units were issued at $1.00. Subsequently, the price of units will change from time to time as the market value of Fund Assets rises or falls. Each unit is a proportional interest in the Net Asset Value of the Fund, having regard to the total number of issued units. The value of units is determined by dividing the current Fund Net Asset Value by the number of units on issue, adjusted for Transaction Costs. Securities usually are valued at the closing price on the securities exchange on which they are listed. Any income entitlement or cash held for the Fund and any amount of GST recoverable by the Fund from the ATO are also included in the value of Assets and used to calculate the Unit Value. Generally, Liabilities are valued at cost. Distributions Fund income will be distributed annually to Investors typically within 20 business days after each 30 June. Investors can elect to reinvest distributions at the current Unit Value or distributions can be paid directly to the Investor s nominated account. The income of the Fund is paid to Investors in proportion to the number of units held by an Investor on 30 June. In certain circumstances, such as where there is a large redemption by an Investor, a special distribution will be made to ensure equity between investors, so that part of the Redemption Amount may consist of taxable income including any taxable gains. Redemption and transfer of units Investors may redeem some or all of their units by sending a Redemption Request to the Trustee. Payment of redemptions is made by deposit to the Investor s nominated bank account. Redemptions are usually processed within 5-10 business days after receipt of a correctly completed Redemption Request, although the Constitution allows longer in the circumstances described below. Where required due to the Fund s liquidity, the redemption of the units which are the subject of the Redemption Request may be staggered over a longer period. There may be a delay in processing redemption or application requests immediately after each Distribution Period on 30 June, when unit pricing is suspended pending processing of the Fund distributions. Investors may transfer their units in accordance with the Constitution. Transfers will not be effective until registered by the Custodian. We may refuse to register any transfer of units. Suspension or delay of redemptions Under certain circumstances, we may suspend the redemptions of units. These include: closure of a securities exchange or trading restrictions on a securities exchange or of a market where the Fund holds investments an emergency or other state of affairs such as declaration of a moratorium occurring in a country where the Fund holds investments where the manager of a fund in which the Fund has invested suspends redemptions if the sale of Assets are not able to be effected at prices which would be realised if they were sold in an orderly fashion over a reasonable period. Outstanding redemptions with Redemption Dates falling within a period of suspension will be effected within 5 Business Days after the suspension is lifted subject to the liquidity considerations referred to above. Any Redemption Request received during a period of suspension is considered to be received on the first Business Day after the suspension ceases. Information Memorandum King Irving Sura Pacific Alliance Fund 11

12 Investment management process Investment philosophy and objectives Emerging Markets are inherently inefficient, given their developing status, with high volatility relative to Developed Markets. SURA Investment Management s investment approach is based on exploiting these inefficiencies to generate alpha, using a disciplined, fundamentally based process and well resourced, local investment teams. Their investment philosophy is based on identifying and investing in securities which provide compounding superior growth in profits over the medium to longer term. The Investment Manager does so by identifying high quality businesses through in-depth fundamental research of each company in the investable universe. This universe is derived from the application of an initial quality screen to ensure that the Manager s requirements for financial information and liquidity are met. This disciplined process helps ensure an appropriate valuation is applied to all investment decisions. Top down type factors are included in determining the ultimate attractiveness of a company for investment. These relate to industry specific and ESG factors. The latter have proven to be an important factor in explaining company growth prospects, especially in inefficient markets with asymmetric information. Risk control and management are also a key part of the Investment Manager s corporate governance standards. The Fund will invest predominantly in equity securities listed, or expected to be listed, on the securities exchanges of the Pacific Alliance countries, most predominantly Mexico, Colombia, Peru and Chile. Where it is a more efficient way of expressing a stock idea, the Fund may also invest in securities listed on other stock exchanges where the company is directly related to the capital markets of the Pacific Alliance country. ADRs or ETFs may each be used up to a total of 15% of the Fund s market value, other than the use of ETFs for short term transactional purposes. The Fund aims to outperform the MSCI Latam Pacific Alliance Capped Index and to provide investors with high growth and income over the medium to long term (3-5 years). With an estimated target tracking error 4-6% p.a., the investment process is relatively benchmark unaware and also style neutral. The Investment Process Fundamentally based The Investment Manager employs a bottom-up process based on fundamental analysis of the companies within the investment universe. To enable an accurate comparison between companies, a uniform method for calculating financial data is employed to overcome any reporting differences within individual countries. Intrinsic to this process is the ranking of each company under a proprietary system which uses 10 year historical financial data including EPS, ROE, FCFF and EBITDA (wherever available) and 3 year forward modelling of key ratios such as P/E, FV and P/BV. An analysis of top-down factors is then applied to derive the final recommended securities weightings for the portfolio. This part of the process has two different areas of focus: 1. the relative attractiveness of the industry, and 2. ESG factors. Relative attractiveness of the industry This part of the process reviews the relative attractiveness of the industry in which the company operates, taking into account macro variables that can affect growth such as: the business and economic cycle; regulatory and technological change; level of competition; the competitive environment including disruptive trends; and barriers to entry. The primary question is: Can the observed returns be sustained in the future? ESG The second part considers the relative attractiveness of a particular company regarding its performance on environmental, social and governance considerations. This process assesses data relating to: sustainability such as water use; discrimination and human talent development; quality management, strategic clarity and success in project implementation; achievement of goals; and, more generally, any other catalyst of value attaching to the company in positive or negative terms. 12 Information Memorandum King Irving Sura Pacific Alliance Fund

13 The relevant question for this part of the process is, what are the non-financial risks of the company in producing sustainable returns for shareholders. The Investment Manager has regular meetings with all companies within the investment universe, usually several times during the course of a financial year. At certain stages of a market cycle the Portfolio may take into account factors such as volatility or momentum, or may have a bias to different size companies by capitalisation to take advantage of particular opportunities the Investment Manager sees in the market. This analysis can vary from country to country according to local investment factors. Portfolio construction The above process serves as the primary source of idea generation for the portfolio construction process. Securities weightings are driven by conviction, not market capitalisation. That is, the active position in each stock is not scaled depending on the size of the stock in the index, but rather, the active weight is a function of the Investment Manager s conviction. The total universe is comprised of 800 securities; the Portfolio will likely hold between securities in size. Typically the Portfolio is long only, but there may be cases where a stock idea is expressed through short selling to capture a desired underweight position (typically effected through securities lending). Buy and sell decisions are driven by changes in the Investment Manager s view on a company as driven by fundamental research and their conviction in its potential to generate outstanding risk adjusted returns. Liquidity Trading illiquid stocks can be difficult as well as expensive, so that the Investment Manager generally intends to invest in liquid securities. Liquid stocks are considered to be those with at least US$100 million of market capitalization and a minimum of US$500 thousand to US$1 million in average daily trading volume. Borrowing and cash policy It is not our intention to borrow money for the Fund other than to meet short-term liquidity requirements, or to gear or add leverage to the Fund. Cash will be held in bank-backed and similar deposit products. Derivatives and currency hedging The Fund may invest in Derivatives which can be used for hedging, risk control or to implement investment strategies. The investment mandate of the Investment Manager is not to use Derivatives to hedge the currency in which securities held by the Fund back to the Australian dollar or any other currencies. Derivatives such as options may be used from time to time to effect a short sale where the Investment Manager is of the view that this is the most efficient method of expressing a decision to underweight a security. Securities lending may also be used to effect an underweight position. Environmental social and governmental issues ESG factors are taken into account by the Investment Manager as an integral part of the investment process. That is, the Investment Manager does not use ESG simply to veto investment in a particular company but as an additional and critical element in their analysis and understanding of the issuer of the securities. Information Memorandum King Irving Sura Pacific Alliance Fund 13

14 Risks of investing All investments have some level of risk. Different strategies may carry different levels of risk, depending on the assets that make up the strategy. The following significant risks apply to the Fund: The repayment of capital or payment of income is not guaranteed. The value of units will vary in line with movement in the value of the Fund s Assets. Many factors drive asset prices, including profits made by companies and industries, economic cycles, matters relating to particular sectors or industries, investor demand, business confidence and government and central bank policies. The Fund invests in Emerging Markets which are subject to a greater risk of loss than investments in Developed Markets due to greater political, economic and regulatory uncertainty, additional volatility and low market liquidity. The Fund may invest in the securities of smaller to medium size companies by market capitalization compared to more Developed Markets. These securities may have a more limited market than that of a larger company or of a Developed Market. Accordingly, it may be more difficult to effect sales of these securities at an advantageous time or without a substantial drop in price than the securities of a company with a large market capitalisation or broad trading market. In addition, securities of small-to-medium-sized companies may have greater price volatility, as they are generally more vulnerable to adverse market factors such as unfavourable economic reports. If Fund investments are difficult to buy or sell, this can prevent sale of an investment in a timely fashion and at a fair price. If the Fund is required to liquidate assets to settle withdrawals, there is a risk that liquidation may be made on unfavourable terms, subjecting the Fund to loss. As the Fund invests in international investments, it is exposed to currency risks. Changes in the exchange rate between the Australian dollar and the currency of the Asset held by the Fund may lead to a loss of value of the Fund s Assets as expressed in Australian dollars. It may not be possible or practical to hedge against exchange rate risks. We may, but we are not obliged to, mitigate currency risks by using financial instruments which are foreign exchange contracts. Although these transactions are intended to minimise the risk of loss due to a decline in the value of the hedged currency, they also limit any potential gain that might be realised, if the value of the hedged currency increases. The Fund may invest in Derivatives which are contracts between two parties that usually derive their value from the price of an underlying physical asset or market index. Risks associated with using Derivatives, include the value of the Derivative failing to move in line with the underlying asset or index, potential illiquidity of the Derivative and counterparty risk (where the counterparty to the derivative contract cannot meet its obligations under the contract). The Trustee and Investment Manager have Derivatives policies in place including on the types of Derivatives used, controls on their use and the processes for assessing compliance with those controls. Short selling involves selling securities that may or may not be owned by the seller and then borrowing these securities for delivery to the purchaser with the obligation to replace the borrowed securities at a later date. A short sale involves the risk of a theoretically unlimited increase in the price of the particular investment sold short, which could result in the inability of the Fund holding the Derivative to cover the short position. The Fund does not hold any short positions currently, but may in future engage in short selling to capture a desired underweight position. The level of returns may vary and future returns may differ from past returns. The Investment Manager may not achieve its performance objectives or returns comparable to its peers. There may be changes of law or taxation applying to the Fund or its investments. The Fund could be terminated. 14 Information Memorandum King Irving Sura Pacific Alliance Fund

15 Fees and costs Management fees and costs We receive a fee for acting as the Trustee for administering and managing the Fund. The fee is inclusive of the fee of the Investment Manager. The management fee is 0.95% p.a. of the Current Asset Value of the Fund. This fee is deducted monthly in arrears from the Fund. The Constitution allows for the reimbursement of all properly incurred expenses or liabilities from the Fund and does not place any limit on the amount of expenses or liabilities that we can recover from the Fund. Normal expenses reimbursed include those relating to custody, registry, compliance, insurance and professional fees. However, we currently intend to limit the total amount of the normal expenses and the management fee reimbursed from the Fund to an Indirect Cost Ratio (ICR) of 1.25% p.a. We are also entitled to be reimbursed from the Fund for abnormal expenses or liabilities, such as the cost of unit holder meetings, defending legal proceedings, and the costs of terminating the Fund. These abnormal expenses are not generally incurred during the day-to-day operation of the Fund and are not necessarily incurred in any year. However, we do not pay these abnormal expenses out of the ICR, and if they arise, we reserve our right to be reimbursed for these expenses or liabilities from the Fund. Transaction costs Due to the nature of its investments, the Fund incurs Transaction Costs (also known as the Buy-Sell Spread). These are costs ordinarily associated with the purchase or sale of a particular Asset, and are costs Investors generally would have to pay if they bought or sold the securities of the Fund. The Issue Price and the Redemption Price of the Fund are determined by adding or subtracting, respectively, the Transaction Costs to the Unit Value. This allowance is not a fee received by us, but is paid to the Fund. The current Transaction Costs for the Fund is 0.45% for each application or redemption. These amounts may change without notice if Transaction Costs change. Differential fees We may rebate fees on an individual Investor basis as we determine in our absolute discretion. Rebated fees may be paid by the issue of units or by a refund after the end of the period for which the rebate relates. Maximum fee and fee waiver We may waive part of all of any of the fees described in this Fees and Costs section at our discretion, or defer payment of fees to which we are otherwise entitled. Under the Constitution we are entitled to a maximum management fee of 2.0% p.a. of the Current Asset Value of the Fund, but have determined that we will reduce our fee to 0.95% p.a. unless we notify Investors otherwise. Although the Constitution allows performance fees to be charged, we have determined that no performance fees will be charged for the Fund unless we notify Investors otherwise by providing at least 30 days prior notice. Information Memorandum King Irving Sura Pacific Alliance Fund 15

16 Additional Investor information Effective date of transactions Correctly completed Application Forms and Redemption Requests that are received by us before 2.00pm on a Business Day will generally take effect on the same day. Investors receive the Issue or Redemption Price applying on the Business Day the transaction is effective. An investor who submits an incomplete Application Form or Redemption Request will receive the Issue or Redemption Price on the Business Day the completed Application Form or Redemption Request is received, provided it is received before 2.00pm. Information provided to Investors Information is provided to Investors concerning their investment in the Fund as follows: A confirmation of investment or redemption on each activity. Quarterly reports showing additional investments, redemptions and changes in the Unit Value. An annual taxation statement after each 30 June. The audited annual financial report for the Fund is available free of charge to Investors after 31 October each year. The above information may at our discretion be provided to you by or through other electronic means. Information about the Fund, such as its composition and Fund performance, is subject to change from time to time. You can obtain a copy of this information free of charge by contacting Client Service on on any Business Day or by referring to our website, Changes to the Fund We may change the Investment Manager, the terms and conditions governing the operation of the Fund as set out in this Information Memorandum, or terminate the Fund. Notice will be given to Investors of any material changes. Fund information The Constitution The Fund was established by a Constitution dated 7 May 2015 (the Constitution). The Constitution sets out the legal rights, duties and obligations of the Trustee and Investors and includes the following: the rights, interests and liabilities of Investors as Unit Holders the duties and obligations of the Trustee investment, valuation and borrowing powers fees and expenses unit issue and redemption procedures convening and conduct of Investor meetings the duration and termination of the Fund distributions the limitation of the liability of Unit Holders to the Issue Price. The Constitution allows for more than one class of units to be offered to Investors. Currently there is only one class of units in the Fund. We may vary the terms of the Constitution in accordance with its terms by supplemental deed. Investment in the Fund is governed by the Constitution and nothing in this Information Memorandum limits or qualifies the powers and discretions conferred upon the Trustee. This Information Memorandum should be read in conjunction with the Constitution for the Fund. In the event of any inconsistency between the Constitution and this Information Memorandum, the Constitution prevails. 16 Information Memorandum King Irving Sura Pacific Alliance Fund

17 Fund information Fund Auditor and Fund accounts The annual accounts of the Fund and our AFSL are subject to annual independent audit by HLB Mann Judd, Chartered Accountants. The annual financial report of the Fund is available to Investors free of charge. Term of the Fund The Fund will commence on the first issue of units in the Fund. The Fund terminates on the earlier of: the 80th anniversary of the day before the Fund commenced, or the date specified by the Trustee in a notice given to Investors. On termination, the Fund will be wound up in an orderly fashion and the net proceeds distributed to Investors under the terms of the Constitution. Related party and other interests The Directors of the Trustee and the Investment Manager may invest from time to time in the Fund on the same basis as other Investors in the Fund. We and the Investment Manager may use services on behalf of the Fund provided by companies related to us on no worse than arm s length commercial terms. Rights of Trustee We may accept or decline all or part of an application without giving any reason. We may rely on the advice of lawyers and information supplied by bankers, accountants, valuers and other experts and will not be liable for their acts or omissions, provided we exercise care in their selection. We are not liable to any investor for making tax or similar payments. When acting in good faith and without gross negligence, as Trustee we: may be indemnified out of the Fund are not liable to Investors for loss or liability to any greater extent than the Fund Assets are not obliged to enter into any transaction unless our personal liability is excluded. We may retire as Trustee on giving notice to Investors and must retire where we cease to be properly authorised to act as trustee under Australian law. In these cases, we will discuss the orderly transition to a new trustee with the Investment Manager. No application for listing on stock exchange No application has been made for the units in the Fund to be listed on any stock exchange. Information Memorandum King Irving Sura Pacific Alliance Fund 17

18 Taxation information The taxation information in this Information Memorandum is of a general nature and is current as at its date. This information provides a general overview of the tax implications for Australian tax resident Investors that hold their units on capital account. The application of these laws depends on the individual circumstances of the Investor. The following comments should not be regarded as tax advice and it is recommended that Investors should obtain independent professional tax advice about their specific circumstances. This section applies to Australian resident Investors only (unless otherwise stated). Taxation of the Fund The Fund will be an Australian resident trust estate for Australian tax purposes. Trusts are generally flow-through vehicles and therefore, the Fund should not pay income tax in respect of its net income because the Fund will distribute its entire distributable income to Investors each year. Income earned, whether distributed or reinvested by or on behalf of the Investor, forms part of the assessable income for the Investor in the year of entitlement. However, for income distributed to Investors who are nonresidents of Australia for tax purposes or are under a legal disability (e.g. under the age of 18), the Fund may be required to withhold tax or be subject to taxation on their behalf. However, if for any reason there is taxable income to which no Investor is presently entitled, the Fund will be taxed at the highest marginal tax rate for that income. The Fund s investments and activities are likely to give rise to income in the form of dividends and capital gains or revenue or capital losses. Income from overseas companies may be taxable to Investors on an attribution basis. Any attributed income will be included in the tax distribution statement. If the Fund makes a loss for Australian tax purposes, the Fund cannot distribute the loss to Investors. However, in relation to revenue losses, subject to the Fund meeting certain conditions, the Fund may be able to take into account the losses (including to the extent the Fund has carried forward capital losses) to offset against income or capital gains (as appropriate) in subsequent years (whereas capital losses may be carried forward and applied only against future capital gains but are not subject to loss testing). Tax reform - Managed Investment Trust The Fund intends to qualify as an eligible Managed Investment Trust (MIT). When the Fund qualifies as a MIT, it intends to make an irrevocable election to apply the capital gains tax (CGT) provisions as the primary regime for taxation of gains and losses from the sale of certain qualifying investments (which include shares). Currency forward contracts are not included in the list of qualifying investments. Investors that are individuals or superannuation funds should then be entitled to the CGT tax concessions on distributions of capital gains from the Fund. The Fund may or may not make a further election to become an Attribution Managed Investment Trust (AMIT), which are subject to a separate taxation regime and, despite generally remaining flow-through vehicles, there are circumstances in which the trustee may be liable for either withholding or primary tax. Further, different characters of trust income are separately categorised and distributed as outlined in the AMIT Member Annual Statement (AMMA) in relation to each income year. Distributions Where an Investor is entitled to a share of the Fund s income for a Financial Year, the Investor will be liable to tax on their proportional share of the taxable income of the Fund. Investors will be assessed on their proportionate share of the Fund s tax net income in the Financial Year for which their entitlement to the distributable income arises, even though it may not have been received in that Financial Year. Distributions from the Fund may comprise different components including interest, dividends, net capital gains, other income, franking credits, foreign income, foreign income tax offsets and tax-deferred amounts. For Investors who hold their units on capital account, the tax-deferred income should not form part of their assessable income in the year that the tax-deferred distribution is paid. Instead, the Investor s cost base in the units will be reduced by the tax-deferred amount and may affect the CGT position of the investment. However, for those Investors who have a zero cost base in their units (on account of prioryear tax-deferred distributions having the effect of reducing the original cost-base in the units down to $Nil), or where the tax-deferred distribution exceeds the cost base of their investment, any tax-deferred amounts received should be treated as a capital gain of the Investor. Investors should maintain records of their adjustments. 18 Information Memorandum King Irving Sura Pacific Alliance Fund