8IP Australian Equity Impact Fund ABN 72 491 737 292 APIR ETL6826AU Information Memorandum Date issued 01 February 2017 Equity Trustees Limited (ABN 46 004 031 298 AFSL No 240975) Trustee Eight Investment Partners Pty Limited (ABN 22 139 616 783 AFSL 342 305) Investment Manager 1
This is the Information Memorandum ("IM") for Units in the 8IP Australian Equity Impact Fund (referred to as the "Fund") issued on 01 February 2017. This IM has been prepared and issued by Equity Trustees Limited (ABN 46 004 031 298 AFSL 240975) in its capacity as the trustee of the Fund (referred to throughout this IM as we, the "Trustee" or "Equity Trustees"). The issue of this IM is authorised solely by Equity Trustees. No other person (whether or not related to Equity Trustees) is responsible for any information contained in this IM. The investment manager of the Fund is Eight Investment Partners Pty Limited and is referred to throughout this IM as the "Investment Manager" or 8IP. The administrator of the Fund is White Outsourcing Pty Limited and is referred to throughout this IM as "White Outsourcing" or the "Administrator". This IM has not been, will not be, and is not required to be, lodged with the Australian Securities and Investments Commission ("ASIC"). It does not constitute a product disclosure statement, prospectus or other disclosure document within the meaning of the Corporations Act. This IM is prepared for your general information only. It is not intended to be a recommendation by the Trustee, the Investment Manager or any associate, employee, agent or officer of the Trustee, the Investment Manager, or any other person, to invest in the Fund. This IM does not take into account the investment objectives, financial situation or needs of any particular investor. You should not base your decision to invest in the Fund solely on the information in this IM. You should consider the suitability of the Fund in view of your financial position and investment objectives and needs. We recommend that you seek professional advice before making an investment decision. A glossary of important terms used in this IM can be found in the "Glossary of Important Terms" section. This IM does not constitute an offer of securities in the US or to any US Person as defined in Regulation S under the US Securities Act of 1933 as amended ("US Securities Act"). The Units in the Fund have not been, and will not be, registered under the US Securities Act or the laws of any State, and the Fund is not registered as an investment company under the US Investment Company Act of 1940, as amended. The Fund may not be offered or sold in the US to, or for, the account of any US Person (as defined) except in a transaction that is exempt from the registration requirements of the US Securities Act and applicable US state securities laws. The Trustee, the Investment Manager, the Administrator and their respective employees, agents or officers do not guarantee the success, repayment of capital or any rate of return on income or capital or investment performance of the Fund. Past performance is no indication of future performance. Units are offered and issued by the Trustee subject to the Trust Deed of the Fund, and on the terms and conditions described in this IM. You should read this IM and the Trust Deed for the Fund because you will become bound by them if you become a Unit holder of the Fund. The offer made in this IM is available only to persons receiving this IM in Australia (electronically or otherwise) who are Wholesale Clients. If you received this IM electronically, a paper copy will be provided free upon request. Please call Equity Trustees on +613 8623 5000 for a copy. This IM should be read together with the Trust Deed of the Fund. A copy of the Trust Deed is available from Equity Trustees by calling +613 8623 5000 or from the Investment Manager by calling +61 2 8262 2800. Certain information in this IM relating to the Fund is subject to change. Where considered appropriate by Equity Trustees, we will notify you in writing of any changes. Copies of any updated information may be obtained: by calling Equity Trustees on +613 8623 5000 by calling the Investment Manager on +61 2 8262 2800 A paper copy of any updated information will be provided free of charge on request. Unless otherwise stated, all fees quoted in the IM are inclusive of GST after allowing for an estimate for Reduced Input Tax Credits ("RITCs"). All amounts are in Australian dollars unless otherwise specified and all references to legislation are to Australian law unless otherwise specified. 2
Contents Fund at a glance... 4 About the Trustee... 6 About the Investment Manager... 6 About the Administrator... 6 About the Fund Investments... 7 Managing risk... 8 Investing and redeeming... 10 Keeping track of your investments... 13 Fees and other costs... 14 Taxation... 16 Other important information... 17 Glossary of important terms... 1 Application Form 3
Fund at a glance Name of Fund Trustee Investment Manager 8IP Australian Equity Impact Fund Equity Trustees Limited Eight Investment Partners Pty Limited Fund structure Structure Classes of Units The Fund is an open-ended, wholesale unit trust scheme. The Trustee may offer and issue separate classes of Units in the Fund. The Fund will invest primarily in Australian and New Zealand shares and cash. For more information, refer to the structure chart contained in this IM under About the Fund Investments. At the date of this IM, the Fund has only one class of Units, although the Trustee may issue different classes of Units in the Fund under the Trust Deed. Different classes of Units that are issued in the Fund will have rights to the specific assets of the Fund that have been acquired using the application monies paid by Unit holders to acquire those assets. Unit holders holding Units of a class will not have rights to other assets held by the Trustee on behalf of other classes of Unit holders in the Fund, though they may, under certain circumstances, be exposed to the losses of other classes. Investing in the Fund Minimum initial investment (AUD) Minimum additional investment (AUD) $100,000, unless the Trustee accepts a lower amount, in its absolute discretion. $10,000, unless the Trustee accepts a lower amount, in its absolute discretion. Minimum balance (AUD) Minimum redemption (AUD) Applications $100,000, unless the Trustee accepts a lower amount, in its absolute discretion. $10,000, unless the Trustee accepts a lower amount, in its absolute discretion. Only Wholesale Clients can apply for Units. Applications must be received at least 5 Business Days prior to the end of a month for the application to be processed at the end of that month at the application price applicable to that month. This minimum timing requirement can be waived in Equity Trustees sole discretion. The cut-off time for Applications on the last Business Day in which applications can be made for a month is 2:00pm (EST). Equity Trustees may accept or reject applications in its sole discretion. 4
Fund investments Investment objective and strategy Benchmark The Fund seeks to invest in companies with a measureable positive social or environmental impact with a secondary objective of maximising returns subject to risk. See About the Fund Investments in this IM for more information about the Fund s investment strategy. S&P/ASX All Ordinaries Accumulation Index Operational matters Income distribution Redemptions Distributions are paid annually from the underlying investments of the Fund. For more information, refer to the information under the heading "Distributions" in the Investing and Redeeming section of this IM. Redemption requests need to be received at least 5 Business Days prior to the end of each month. All redemption requests should be received by 2:00 pm (AEST) on the last Business Day on which redemption requests can be made for processing for the relevant month at the redemption price applicable to that month. Redemptions will be subject to the redemption limits and suspension events described in the Investing and redeeming and Fund liquidity sections of this IM. While the Trust Deed for the Fund allows for the charging of a redemption charge, none is currently charged. Liquidity Risks Generally monthy processing of applications and redemptions. An investment in the Fund is subject to risks, which are summarised in the Managing Risk section of this IM. Valuation Valuations are generally undertaken by the Investment Manager on a monthly basis but may be determined more frequently in accordance with the Trust Deed. Fees and Incentive Allocation Management costs Performance fee 1.39% of GAV calculated and accrued daily (inclusive of GST and RITC) The management costs will impact the returns received by Unit holders in the Fund. The management costs are described further in the Fees and other costs section of this IM. 20.50% (inclusive of GST and RITC) of the amount by which the Fund s performance exceeds the return of the S&P/ASX All Ordinaries Accumulation Index paid six monthly at June and December, with a high watermark. Buy/Sell Spread 0.40%/0.40%. 5
About the Trustee Equity Trustees Limited Equity Trustees Limited ( Equity Trustees ) was established in 1888, by an Act of the Victorian Parliament, to provide trustee and executor services. The company has evolved into a sophisticated financial services provider offering a broad range of products and services to a diverse client base. In addition to traditional trustee and estate management duties, the range of services offered by Equity Trustees includes portfolio management, superannuation, philanthropy and responsible entity services for external fund managers. Equity Trustees' responsibilities and obligations as the Trustee of the Fund are governed by the Corporations Act, the Fund's Trust Deed as well as general trust law. Equity Trustees has appointed Eight Investment Partners Pty Limited to act as the investment manager of the Fund and White Outsourcing Pty Limited to act as the administrator of the Fund. About the Investment Manager Eight Investment Partners Pty Limited Equity Trustees has appointed Eight Investment Partners Pty Limited as the investment manager of the Fund. 8IP is a specialist manager based in Sydney that is owned by its staff. Established in 2009, 8IP is focused on managing equity portfolios for retail and institutional investors. 8IP s boutique model and remuneration structure support its investment-led culture by aligning the interests of its investment team with those of its investors. Key team members have equity in the business and invest in its funds. 8IP is also the Investment Manager of the 8IP Australian Small Companies Fund, for which Equity Trustees is the Responsible Entity. About the Administrator White Outsourcing The Trustee has appointed White Outsourcing Pty Limited to act as administrator for the Fund. In such capacity, the Administrator performs all general administrative tasks for the Fund, including keeping financial books and records and calculating the Net Asset Value of the Fund. The Trustee has entered into an Administration Agreement with the Administrator, which governs the services that will be provided by the Administrator to the Fund. The Trustee may at any time, in consultation with the Investment Manager (subject always to the Trustee s duties and obligations under the law), select any other administrator to serve as administrator of the Fund. 6
About the Fund Investments Investment Objectives The Fund s investment objectives are to invest in companies with a measureable positive social or environmental impact, while seeking to generate an investment return in excess of the S&P/ASX All Ordinaries Accumulation Index over the long term. Investment Strategy The 8IP Australian Equity Impact Fund seeks to invest in companies listed primarily on the Australian Stock Exchange ( ASX ) that have a positive social and/or environmental impact. The purpose of the Fund is impact first. This means each company in the portfolio is selected for the positive impact that is achieved by their main business activity. The portfolio mainly comprises companies with small or mid-market capitalisations (i.e. outside of the top 100 ASX companies). This reflects the investable universe of positive impact companies listed on the ASX. 8IP is a small companies specialist and has a strong investment performance track record in this sector. For each potential portfolio company, the 8IP investment team ( Portfolio Managers ) seeks to establish that the main business activity has a positive social and/or environmental impact and that the impact can be measured over time. Companies that meet these criteria are included in the 8IP Impact Universe. The Portfolio Managers then analyse the corporate fundamental strength, including management, income statement, balance sheet, and cash flow statement. Provided that the corporate fundamental strength is assessed as investment grade, then an exit valuation is determined for each company. The Portfolio Managers construct the portfolio from the 8IP Impact Universe, selecting companies based on the potential return and the corporate fundamental strength. The Portfolio Managers consider a range of factors to determine the portfolio weighting for each company including the expected return, fundamental risk, liquidity, and diversification by impact category and industry. The key benefits of this Fund are: The main business activities of the portfolio companies have a positive social and/or environmental impact ( positive impact ) The positive impact is measurable and can be monitored over time The Fund is able to provide new capital to companies to enable them to increase their positive impact The Portfolio Managers can actively engage with the management of the companies to encourage them to increase their positive impact Generally, monthly processing is available for investors for applications and redemptions The Fund seeks to generate an investment return in excess of the S&P/ASX All Ordinaries Accumulation Index over rolling five-year periods. The portfolio is selected by experienced stock market investors with a specialisation and track record in ASX-listed small companies. Investment Guidelines The Fund will invest substantially all of its assets in securities of Australian and New Zealand companies, but may invest internationally. The Fund may invest in trusts that in turn invest in eligible securities. The target asset mix of the Fund is expected to be achieved within the following parameters: Maximum of 100% in securities listed on Australian or New Zealand exchanges Maximum of 10% in securities listed on international exchanges; Maximum of 10% of the portfolio in securities related to any one entity at time of purchase; Maximum cash weighting of 20% - this maximum may be exceeded at times, for example if the portfolio experiences strong inflows; Exchange traded derivatives may be used to manage the risk associated with cash inflows; No borrowing except for short term operational needs; No short selling; No gearing. The Investment Manager is not permitted to use derivative contracts, physical securities or any combination of the two to produce financial exposure that would result in the gearing of the portfolio (ie such that net share market exposure is greater than 100%). These parameters are targets only and the actual allocations may differ from time to time, as the value of assets change and opportunities for investment become available. 7
Managing risk Investment in any fund carries risks, including volatility of returns. Volatility refers to the degree to which returns may fluctuate around their long-term average. Each asset class, whether it is cash, fixed interest, property or Australian or international shares has associated investment risks and the return achieved by each will vary accordingly. You should be aware that an investment in the Fund contains risks and neither the performance of the Fund nor the security of your investment is guaranteed by Equity Trustees or the Investment Manager. Investments in the Fund are generally subject to risks, including possible delays in the payment of withdrawal proceeds and loss of income and/or capital. The following discussion of certain risk factors does not purport to be an exhaustive list or a complete explanation of all the risks involved in an investment in the Fund. We recommend that you talk to an adviser about the risks involved in investing in the Fund and how it might impact on your individual financial circumstances. Key Risks Market risk Investors should be aware that there are risks inherent in the holding of securities: An investment may fall in value due to changes in market sentiment or economic, technological, political or legal conditions. Past performance is no guide to the future. The value of units, and any income from them, can go down as well as up, particularly in the short term, meaning that an investment may not be returned in full. The tax treatment of the Fund may change and such changes cannot be foreseen. Where regular investments are made with the intention of achieving a specific capital sum in the future, this will normally be subject to maintaining a specified level of investment. International Investments Liquidity risk Portfolio turnover risk Derivatives risk The Fund invests in international investments which may involve certain risks, including fluctuations in foreign exchange rates, future political and economic developments and the possible imposition of exchange controls or other governmental laws or restrictions. Security prices in different countries are subject to different economic, financial, political and social factors. In addition, investments may be subject to non-recoverable withholding taxes. Investments that trade less can be more difficult or more costly to buy, or to sell, than more liquid or active investments. It may not be possible to sell or otherwise dispose of illiquid securities both at the price and within a time period deemed desirable by the Investment Manager. The Fund does not intend to trade, directly or indirectly, portfolio securities for the purpose of realising short-term profits. However, the Investment Manager will adjust the Fund s portfolio as considered advisable in view of prevailing or anticipated market conditions and the Fund s investment objective, and there is no limitation on the length of time securities must be held, directly or indirectly, by the Fund prior to being sold. Portfolio turnover rate will not be a limiting factor and will vary from year to year. Higher portfolio turnover rates involve correspondingly higher transaction costs, which are borne directly or indirectly by the Fund. In addition, the Fund may realise significant short term and long-term capital gains. The Fund may make use of exchange-traded derivatives, including, but not limited to, futures, options and contracts for differences, as part of its investment policy. Derivatives may be used to manage equity and foreign exchange risk, subject to the Investment Guidelines (see About the Fund Investments ). Derivatives are highly specialised instruments that require investment techniques and risk analysis different from those associated with equities and debt securities. The use of a derivative requires an understanding not only of the underlying instrument but also of the derivative itself. In particular, the use and complexity of derivatives require the maintenance of adequate controls to monitor the transactions entered into and the ability to assess the risk that a derivative transaction adds to a portfolio. As such, there can 8
be no guarantee or assurance that the use of derivatives will meet or assist in meeting the investment objectives of the Fund. Derivatives can be highly volatile and expose investors to a high risk of loss. The low initial margin deposits normally required to establish a position in such instruments permit a high degree of leverage. As a result, depending on the type of instrument, a relatively small movement in the price of a contract may result in a profit or a loss which is high in proportion to the amount of funds actually placed as initial margin and may result in unquantifiable further loss exceeding any margin deposited. In addition, daily limits on price fluctuations and speculative position limits on exchanges may prevent prompt liquidation of positions resulting in potentially greater losses. Fixed interest securities risk Fixed interest securities are particularly affected by trends in interest rates and inflation. If interest rates increase, capital values may fall and vice versa. Inflation will erode the real value of capital. In addition, companies may not be able to honour repayment on bonds they issue. Foreign exchange risk The Net Asset Value ( NAV ) of the Fund will be computed in the base currency (AUD) whereas the investments held for the account of the Fund may be acquired in other currencies. The Fund s NAV may change significantly when the currencies other than the base currency in which some of the Fund s investments are denominated strengthen or weaken against the base currency. Currency exchange rates generally are determined by supply and demand in the foreign exchange markets, and the perceived relative merits of investments in different countries. Currency exchange rates can also be affected in unpredictable ways by intervention by government or central banks, or by currency controls or political developments. In addition, currency hedging transactions, while potentially reducing the currency risks to which the Fund would otherwise be exposed, involve certain other risks, including the risk of a default by a counterparty. Additionally, where the Fund enters into cross-hedging transactions (e.g., utilising a currency different from the currency in which the security being hedged is denominated), the Fund will be exposed to the risk that changes in the value of the currency used to hedge will not correlate with changes in the value of the currency in which the securities are denominated, which could result in loss on both the hedging transaction and the value of the securities held by the Fund. Forward currency contracts and currency futures involve the possibility that the market for them may be limited with respect to certain currencies and, upon a contract s maturity, the possible inability to negotiate with the dealer to enter into an offsetting transaction. There is no assurance that an active forward currency contract market will always exist. These factors restrict the ability to hedge against the risk of devaluation of currencies in which a substantial quantity of securities are being held for the Fund and are unrelated to the qualitative rating that may be assigned to any particular security. Emerging markets risk Investment in emerging markets carries a higher risk than investing in mature markets. This is mainly because of the volatility of the markets, local regulations affecting those markets, and custody and registration arrangements in those markets, which may be less developed than in more mature markets. Legal risk Net Asset Value There is a risk that laws, including tax laws, might change or become difficult to enforce. Whilst the Fund may use the latest available published price in respect of each investment in order to calculate the NAV, it reserves the right to use more recent valuations where this is considered appropriate. Such valuations may be based on an estimate of a more recent price of any unit or share in an underlying investment fund or other collective investment undertaking in which the Fund invests obtained from or calculated on the basis of more recent information received from the underlying fund or undertaking, or any of its service providers or agents. 9
Investing and redeeming Investing in the Fund Only Wholesale Clients can apply for Units. Applications must be received at least 5 Business Days prior to the end of a month for the application to be processed at the end of that month at the application price applicable for that month. Making an application To invest, please complete and sign the application form attached to this IM. For initial applications the duly completed application form, together with the relevant certified identification documents, must be mailed to the Administrator via the following postal address: Attention: 8IP Australian Equity Impact Fund Unit Registry c/o White Outsourcing GPO Box 5482 Sydney NSW 2001 Cheques should be made payable to "Equity Trustees Limited as trustee for 8IP Australian Equity Impact Fund ". Alternatively, you can direct credit your application as follows: a/c name: Equity Trustees Limited ATF 8IP Australian Equity Impact Fund Application Account BSB number 012 006 Account Number: 836919308 If using direct credit, please send the original, completed application form via mail. Please note the application will not be accepted until cleared funds are received and that cash cannot be accepted. The minimum initial investment in the Fund is $100,000 subject to the Trustee agreeing to accept a lower amount, in its discretion. For additional applications Unit holders can apply for additional Units, and the minimum additional investment amount is $10,000 or such other amount as the Trustee determines from time to time. If payment is made by way of electronic transfer, then you must complete and duly sign the application form and fax it to: +61 9221 1194 Or mail to the Administrator: Attention: 8IP Australian Equity Impact Fund Unit Registry c/o White Outsourcing GPO Box 5482 Sydney NSW 2001 Under the Anti-Money Laundering and Counter- Terrorism Financing Act 2006 and the Foreign Account Tax Compliance Act (FATCA) applications made without providing all the information and supporting identification documentation requested on the application form cannot be processed until all the necessary information has been provided. As a result, delays in processing your application may occur. Equity Trustees reserves the right to refuse any application without giving a reason. If for any reason Equity Trustees refuses your application or the Administrator is unable to process your application to invest in the Fund, the Administrator will return your application money to you, subject to regulatory considerations, less any taxes or bank fees in connection with the application. You will not be entitled to any interest on your application money in this circumstance. Valuation of the Fund and application price of Units The value of the investments of the Fund and Unit prices are generally determined monthly. The value of a Unit reflects the value of the assets of the Fund less the liabilities of the Fund and is determined in accordance with the Trust Deed. The application price of a Unit is, in general terms, based on the NAV of the Fund divided by the number of Units on issue adjusted for transaction costs required for buying investments; this is known as the Buy Spread. At the date of this IM, the Fund has only one class of Units, although the Trustee may issue different classes of Units in the Fund under the Trust Deed. Where the Trustee issues classes of Units that are referable to specific assets in the Fund, the Unit price will be determined having regard to the value of the assets referable to that class. Similarly, where the Trustee will issue a new class of Units and assets acquired using the proceeds of issue of those Units will be specifically referable to that class of Units, the Unit price for the initial Units in that class will be an amount equal to the highest application price for any Units of any other class of Units on issue in the Fund at the relevant valuation time. Alternatively, if payment for additional Units is made by cheque, please follow the instructions given for initial applications above. 10
Making a redemption Subject to the redemption limitations described in this IM, Unit holders of the Fund can redeem all or a portion of their investments by written request to: Attention: 8IP Australian Equity Impact Fund Unit Registry c/o White Outsourcing GPO Box 5482 Sydney NSW 2001 The minimum redemption amount is $10,000. Refer below for "Terms and conditions for redemptions". Redemption price The redemption price of a Unit is based on the NAV of the Fund divided by the number of Units on issue adjusted for transaction costs required for selling investments which is known as the Sell Spread. As with the issue of Units, where Units in the Fund have been issued in a class of Units to which specific assets in the Fund are directly referable, the redemption price will be calculated on the basis of the NAV of the assets of the Fund which are directly referable to the class of Units adjusted for the relevant Sell Spread. The amount a Unit holder will receive on the redemption of their Units will be the redemption price, less any redemption charge which is applicable. At the date of this IM, no redemption charge is payable by investors. Access to funds on redemption Redemption requests need to be received in writing by 2pm at least 5 Business Days prior to the end of each month for processing for that month at the redemption price applicable to that month. Redemption proceeds will generally be paid within 21 days of acceptance of a redemption request subject to the following matters. Where we receive a large redemption request, we have discretion to determine that the redemption price applicable to that redemption request will be the first redemption price calculated following the expiry of five Business Days after the Business Day on which we have received and accepted the redemption request. For these purposes, a large redemption request is a request that is: in respect of 5% or more of the GAV of the Fund at the time the redemption request is received and accepted by us; or received on a day on which we receive aggregate redemption requests for 5% or more of the GAV of the Fund on that day. The Trust Deed also allows the Trustee to make payment up to 30 days after the date of a redemption request it has accepted if it considers that it is in the best interests of Unit holders to do so, which may be extended in exceptional circumstances. An Exceptional Circumstance is where it is not possible or not in the best interest of Unit holders for the Trustee to process redemption requests or pay the redemption price in respect of a redemption request the Trustee has accepted. Such circumstances may include but not necessarily limited to: restricted or suspended trading; extreme price fluctuation; and uncertainty in the market for an asset of the Fund. The Trustee reserves the right to change these redemption timeframes for the Fund subject to the above extensions of time. Fund liquidity The Fund invests, indirectly, a significant proportion of its assets in unlisted illiquid investments. Accordingly, the Trustee may not be able to satisfy redemption requests received from time to time. Under the Trust Deed, the Trustee has the power to deny any redemption request. The Trustee and Investment Manager are not required to and may not be in a position to give Unit holders any prior notice before redemption requests are denied or temporarily suspended. Terms and conditions for redemptions The Trustee may deny a redemption request if it is for less than the minimum balance amount determined by the Trustee from time to time and does not relate to the balance of a Unit holder s investment. Equity Trustees reserves the right to fully withdraw your investment if your investment balance in the Fund falls below the minimum balance amount as a result of processing your redemption request. We also reserve the right to fully withdraw a Unit holder s investments in the Fund, upon giving 30 days notice, if the minimum balance amount is increased and your holding falls below the new minimum balance amount. At the time of this IM, the minimum balance is $100,000. Equity Trustees will refuse to comply with any redemption request if the requesting party does not satisfactorily identify themselves as the Unit holder (or an authorised nominee of that Unit holder). Redemption payments will not be made to third parties (including authorised nominees) and will only be paid directly to the Unit holder s bank account held in the name of the Unit holder at a branch of an Australian domiciled bank. By lodging a facsimile redemption request the Unit holder releases, discharges and agrees to indemnify Equity Trustees from and against any and all losses, liabilities, actions, proceedings, account claims and demands arising from any facsimile redemption request. The Unit holder also agrees that any payment made in accordance with a facsimile redemption request shall be a complete satisfaction of the obligations of Equity Trustees, notwithstanding any fact or circumstance including that the payment was made without the Unit holder s knowledge or authority. The Unit holder agrees that if the payment is made in accordance with a facsimile redemption request, the Unit holder and any person claiming through or under them shall have 11
no claim against Equity Trustees in relation to the payment. In some circumstances (subject to the Corporations Act), where you make a large redemption request (5% or more of the units on issue at the start of the relevant distribution period), your redemption proceeds may be taken to include a component of distributable income. Distributions Distributions are intended to be made by the Fund annually as at 30 June ("Distribution Period"). A distribution comprises a Unit holder s share of any distributable income earned by the Fund (or the relevant class of Units in the Fund in which a Unit holder has invested). A Unit holder s share of any distributable income is generally based on the number of Units held by the Unit holder at the end of the Distribution Period. Generally, the income entitlements of Unit holders of the Fund will be distributed within 15 days after the date they are determined, although the distribution at the end of a financial year may take longer (for example, if there is a delay in completing an audit). Under the Trust Deed, the Trustee has 3 months after the end of any Distribution Period to make any distributions. If you are a Unit holder in the Fund, you can: have your distribution reinvested back into the Fund; or have your distribution directly credited to your nominated bank account. If you do not make an election when completing your application form, your distribution will automatically be reinvested. Applications for reinvestment will be taken to be received and accepted at the end of the relevant Distribution period. There is no Buy Spread on distributions that are reinvested. Moneys payable to a Unit holder will be reinvested where the Trustee attempts to pay the money by electronic transfer and the electronic transfer fails. Appointment of authorised nominee to operate account Unit holders may elect to appoint an authorised nominee to operate their account. If you wish to appoint an authorised nominee, then the relevant sections in the application form which is attached to this IM need to be completed, including the name and signature of the authorised nominee, the signature of the Unit holder and the date. Only Unit holders can appoint authorised nominees. If you appoint an authorised nominee we suggest that you ensure that: they cannot appoint another nominee; and the appointment lasts until cancelled by you in writing to the Trustee or by the Trustee (see below). If the Trustee determines that the circumstances require, the Trustee may cancel an appointment by giving the Unit holder 14 days' notice in writing. If an appointment is cancelled, the Trustee will not be obliged to act on the instructions of the authorised nominee. By completing and lodging the relevant sections on authorised nominees in the application form you release, discharge and agree to indemnify the Trustee from and against any and all losses, liabilities, actions, proceedings, account claims and demands arising from the Trustee acting on the instructions of your authorised nominee. You also agree that any instructions of your authorised nominee to the Trustee, which are followed by the Trustee, shall be a complete satisfaction of the obligations of the Trustee, notwithstanding any fact or circumstance, including that the instructions were made or varied without your knowledge or authority. For example, if instructions are varied, the Trustee will act only in accordance with the varied instructions. You agree that if the authorised nominee s instructions are followed by the Trustee, you and any person claiming through or under you shall have no claim against the Trustee in relation to the instructions. Powers of an authorised nominee An authorised nominee can, among other things: apply for additional Units; request that distribution instructions be altered; change bank account details; request redemption of all or part of your investment; and enquire as to the status of your investment and obtain copies of statements we are required to give you. However, redemption payments will not be made to third parties. If a company is appointed as an authorised nominee, the powers will extend to any director and authorised officer of the company. If a partnership, the powers will extend to all partners. 12
Keeping track of your investments The following statements will be provided to all Unit holders in the Fund, free of charge; A transaction confirmation statement, showing a change in the investor s holding. Such statement shall be provided when a transaction occurs; it may also be provided on request. Annual distribution, tax and confirmation of holdings statements for the relevant financial year. In addition, the following reports will be made available to all investors in the Fund: The Fund s half-yearly financial account (if applicable). The Fund s annual audited accounts for the relevant financial year; and Continuous disclosure notices in respect of the Fund after lodgement of the most recent Annual Report (if applicable). Enquiries and Complaints Equity Trustees seeks to resolve complaints over the management of the Fund to the satisfaction of Unit holders. If a Unit holder wishes to lodge a formal complaint please write to: Enterprise Risk Team Equity Trustees Limited GPO Box 2307 Melbourne VIC 3001 Australia Email: compliance@eqt.com.au Phone: 1300 133 472 Equity Trustees will acknowledge your complaint within 14 days of receipt and seek to resolve any complaint within 45 days of receiving the complaint. Financial Ombudsman Service (FOS) If we are unable to resolve your complaint, you may be able to seek assistance from the Financial Ombudsman Service ( FOS ). Financial Ombudsman Service GPO Box 3 Melbourne VIC 3001 Telephone: 1300 780 808 Email: info@fos.org.au Please include the Equity Trustees FOS membership number with your enquiry. It is 10395. FOS is an independent body that can assist you if Equity Trustees cannot. FOS may not consider a dispute where the value of a person s claim exceeds $500,000. FOS is only able to make a determination of up to $309,000 per managed investment claim (excluding compensation for costs and interest payments). These monetary limits and the FOS terms of reference do change from time to time. Current details can be obtained from the FOS website (www.fos.org.au). 13
Fees and other costs Management costs The management costs include Trustee fees, custody fees, administration fees, audit fees and other ordinary expenses related to the establishment and operation of the Fund. The management costs of the Fund* are as follows: Management costs* 1.39% (inclusive of GST and RITC) of the GAV of the Fund. The management costs are reflected in the Unit price of the Fund. Management costs do not include any performance fee expense (see below), transaction costs and abnormal expenses The Fund also carries a performance fee expense of 20.50% (inclusive of GST and RITC) of the return above the S&P/ASX All Ordinaries Accumulation Index paid six monthly at June and December ( Performance Fee Period ), with a high watermark. The performance fee is paid to the Investment Manager. The method for calculating the performance fee expense is as follows: As at the last day of each month the monthly investment return of the Fund (before performance fees) is calculated to determine the investment return of the Fund and whether the Performance Hurdle for that month has been exceeded. The performance hurdle is the monthly percentage movement in the S&P/ASX All Ordinaries Accumulation Index multiplied by the NAV (before performance fees) of the Fund for the previous month end ( Performance Hurdle ). The monthly investment return of the Fund is calculated by dividing the NAV (before performance fees) of the Fund adjusted for net changes in capital (including applications, redemptions and payments of cash distribution amounts) for that month, by the NAV (before performance fees) of the Fund for the previous month end. The monthly performance fee amount is then calculated at 20.50% (inclusive of GST and RITC) of the difference between the monthly investment return of the Fund and the Performance Hurdle. The performance fee amount can be a positive or negative amount depending on whether or not the Performance Hurdle has been exceeded. The performance fee amount is aggregated and, where the aggregate amount is positive, this amount is reflected in the month end unit price as an expense provision. * In addition to the management costs set out above, the Trustee may also charge any transaction costs and abnormal expenses to the Fund, subject to the Trust Deed, the Corporations Act and general law. Further information regarding fees and other costs What do the management costs pay for? The management costs include Trustee fees, investment management fees (other than any performance fees), custodian fees, administration fees and other ordinary expenses of the Fund. The Trustee s fee is calculated and accrued daily based on the GAV of the Fund and paid in arrears from the assets of the Fund within 14 days of the end of each month. The other management costs are payable or reimbursable out of Fund assets. The management costs reduce the NAV of the Fund and are reflected in the Unit price. Transaction and other costs All government taxes such as stamp duty and GST will be deducted from the Fund as appropriate. RITCs will also be claimed by the Fund where appropriate to reduce the cost of GST to the Fund. Buy/Sell Spread The Buy/Sell Spread reflects the estimated total cost of buying or selling assets of the Fund when investors invest in or withdraw from the Fund. The Buy/Sell Spread is an additional cost to the investor but is incorporated into the unit price and incurred when an investor invests in or withdraws from the Fund and is not separately charged to the investor. The Buy/Sell Spread is paid into the Fund and not paid to Equity Trustees or the Investment Manager. The estimated Buy/Sell Spread is 0.40% upon entry and 0.40% upon exit. The Buy/Sell Spread can be altered by the Trustee at any time to reflect the actual costs incurred by the Fund. The Trustee may also waive the Buy/Sell Spread in part or in full at its discretion. Abnormal expenses Subject to the Trust Deed, the Corporations Act and general law, in addition to the management costs, the Trustee may additionally recover abnormal expenses (such as the costs of Unit holders meetings, legal advice/proceedings and other irregular expenses). The Trust Deed does not place any limit on the amount of the abnormal expenses that can be paid from the Fund. Alternative forms of remuneration As a member of the Financial Services Council, the Trustee maintains an Alternate Forms of Remuneration Register. The register, which you can review by contacting us, outlines some alternative forms of remuneration that we may pay to or receive from Australian Financial Services licensees, fund managers or representatives (if any are paid or received at all in relation to the Fund). 14
Can the fees change? All fees can change without Unit holder consent, subject to the maximum fee amounts specified in the Trust Deed of the Fund. Reasons might include changing economic conditions and changes in regulation. Equity Trustees have the right to recover all proper expenses incurred in managing the Fund and as such these expenses may increase or decrease accordingly. We will notify Unit holders of any changes to fees and expenses in accordance with the law and the Trust Deed. The Trust Deed in some circumstances defines the maximum fees that can be charged for some fees described in this IM. Apportionment of fees and costs There is currently only one class of Units in the Fund. In circumstances where the Trustee issues different classes of Units in the Fund, the fees and costs will generally be apportioned by the Trustee across all Unit classes (on a pro-rata basis, having regard to the value of the assets in the Fund). However, fees and expenses which are directly referable to a particular class of Units will be charged to Unit holders in that particular class of Units. 15
Taxation Investing in a wholesale unit trust scheme (such as this Fund) is likely to have tax consequences. You are strongly advised to seek your own professional tax advice about the applicable Australian tax (including income tax, GST and duty) consequences and, if appropriate, foreign tax consequences which may apply to you based on your particular circumstances before investing in the Fund. The Fund is an Australian resident for tax purposes and does not pay tax on behalf of its members. Australian resident Unit holders are assessed for tax on income and capital gains generated by the Fund to which they become entitled. 16
Other important information Fund is not a registered managed scheme under the Corporations Act The Fund is not registered as a managed investment scheme under the Corporations Act and there is currently no intention to register the Fund as a managed investment scheme. Cooling off period No cooling off period applies to Units offered under this IM. Unit holder s liability The Trust Deed for the Fund provides that unless there is a separate agreement with a Unit holder, no Unit holder can be called on to contribute to the assets of the Fund or to the creditors of the Trustee in respect of the Fund if the Fund is liquidated or becomes insolvent. Therefore, it is expected that Unit holders will not be under any obligation if a deficiency in the assets of the Fund was to occur. However, this view has not been fully tested and so it is not possible to give an absolute assurance that a Unit holder s liability will be limited in all circumstances. In general, the liability of a Unit holder is limited to the amount (if any) which remains unpaid in relation to their subscription for Units and certain amounts in respect of tax. The Trustee is permitted to deduct certain amounts owed to the Trustee from amounts payable to Unit holders. Non-listing of Units The Units of the Fund are not listed on any stock exchange and no application will be made to list the Units of the Fund on any stock exchange. Termination of the Fund The Trustee may resolve at any time to terminate, liquidate and wind up the Fund in accordance with the Fund s Trust Deed. The Fund may otherwise terminate if required by law. A notice will be provided to Unit holders advising of the Fund s termination. Upon termination and after conversion of Fund assets into cash and payment of, or provision for, all costs and liabilities (actual and anticipated), the net proceeds will be distributed pro-rata amongst all Unit holders according to the number of Units they hold in the Fund. Our legal relationship with you You will receive Units when you invest. Subject to the rights, obligations and liabilities of a class, each Unit represents an equal proportionate beneficial interest in the assets of the Fund as a whole subject to liabilities, but does not give you an interest in any particular assets or property of the Fund. While at the date of this IM there is only one class of Units, we note in this regard that the Trustee may determine that it is appropriate to issue Units of different classes and may determine that specific assets of the Fund should be directly referable to particular classes of Units. Equity Trustees responsibilities and obligations, as the Trustee of the Fund, are governed by the Trust Deed of the Fund and the Corporations Act, as well as general trust law. The Trust Deed contains a number of provisions relating to the rights, terms, conditions and obligations imposed on both Equity Trustees, as the Trustee, and Unit holders. Some of the provisions of the Trust Deed are discussed elsewhere in this IM. Other provisions relate to a Unit holder s rights under the Trust Deed, and include: a Unit holder s right to share in any Fund income, and how we calculate it; what you are entitled to receive when you redeem or if the Fund is wound up; a Unit holder s right to redeem from the Fund - subject to the times when we can cease or delay processing redemptions see Access to funds on redemption and Fund liquidity referred to on page 11; the nature of the Units with identical rights attaching to all Units within a class; and a Unit holder s rights to attend and vote at meetings. There are also provisions governing our powers and duties, including: how we calculate Unit prices, the maximum amount of fees we can charge and expenses we can recover; when we can amend the Trust Deed - generally we can only amend the Trust Deed by deed, although we will generally only do so where we reasonably believe that the changes will not adversely affect Unit holders rights or if the amendments are approved at a meeting of Unit holders; when we can retire as the Trustee of the Fund, when permitted by the Trust Deed; when we can be removed as the Trustee of the Fund, when required by law or all the Unit holders; and our broad powers to invest, borrow money and generally manage the Fund - we do not currently intend to borrow funds to acquire assets for the Fund, although this is permitted under the Trust Deed of the Fund. The Trust Deed also deals with our liabilities in relation to the Fund and when we can be reimbursed out of the Fund s assets, for example: we are not liable for acting in reliance and good faith on professional advice; we can be reimbursed for any liabilities we incur in connection with the proper performance of our powers and duties in respect of the Fund. Copies of the Trust Deed are available, free of charge, on request from Equity Trustees. Indemnity Equity Trustees, as the Trustee of the Fund, is indemnified out of the Fund against all liabilities 17