LHC CAPI T AL. Information Memorandum An offering to wholesale clients

Transcription

1 Information Memorandum An offering to wholesale clients Date of Issue: 27 February, 2016

2 ABOUT THIS INFORMATION MEMORANDUM This Information Memorandum contains information about the Capital Australia High Conviction Fund (Fund) and is dated 27 February, This Information Memorandum is issued by Capital Partners Pty Limited ABN AFSL (), the trustee of the Fund. This Information Memorandum is intended solely for the use of the person to whom it has been delivered (Recipient) for the purpose of evaluating a possible investment in the Fund. It is not to be reproduced or distributed to any other person (other than professional advisers of the Recipient) without s prior consent. Offers made under this Information Memorandum are made exclusively to wholesale clients, as defined by the Corporations Act 2001 (Cth) (Act). This Information Memorandum is not, and is not required to be, a disclosure document or product disclosure statement within the meaning of the Act. This Information Memorandum may not contain the same level of disclosure as those documents and has not been, and is not required to be, lodged with the Australian Securities & Investments Commission. This Information Memorandum is not a recommendation to invest in the Fund and may not include all of the information that an investor needs to make an investment decision. does not take into account the individual circumstances of any investor, nor does it or any of its Specified Persons (defined below) give financial product advice with respect to this Information Memorandum. Accordingly, investors should make their own enquiries and obtain professional legal, financial, tax and accounting advice before making an investment decision with respect to the Fund. An investment in the Fund is subject to investment and other risks, including loss of income and capital invested. The information in this Information Memorandum is up to date at the time of preparation. may amend or withdraw this Information Memorandum at any time and may issue a new or amended Information Memorandum from time to time. If you are unsure about anything contained in this Information Memorandum or have questions, please contact. To the extent permitted by law, neither, the Investment Manager, the Administrator, the Prime Broker nor their respective affiliates, related bodies corporate, directors, officers, employees, representatives or advisors (Specified Persons) accepts any responsibility or liability (including in negligence) for any loss or damage suffered or incurred by the Recipient or any other person or entity however caused arising from or in connection with any act or omission directly in reliance upon or relating in any way to this Information Memorandum including, without limitation, the information contained in it, and from any errors or omissions however caused by the Recipient or any other person or entity placing any reliance on this Information Memorandum, its accuracy or reliability, and for the avoidance of doubt this exclusion of liability includes any cost, expense, loss or other liability directly or indirectly arising from, or in connection with, any omission from or defects, or any failure to correct any information, in this Information Memorandum or any other communication (oral or written) about or concerning them, or the issue of units in the Fund. Other than to the extent required by law, neither, nor any of the Specified Persons makes any representations or warranties, express or implied, as to the accuracy or completeness of any of the information contained in this Information Memorandum or any other information (whether written or oral) made available to investors, and each of such parties expressly disclaims any and all liability relating to or resulting from the use of this Information Memorandum or such other information by the Recipient. This Information Memorandum may contain assumptions, opinions, estimates and forecasts. Except to the extent implied by law, no representation or warranty as to the validity, certainty or completeness of any of the assumptions or the accuracy of the information, opinions, estimates or forecasts contained in this Information Memorandum is made by, nor any of the Specified Persons. Neither, nor any of the Specified Persons guarantees the rate of capital or income return of any investment in the Fund, the meeting of the investment objectives of the Fund, the performance of the Fund nor repayment of capital from the Fund. This Information Memorandum does not constitute and may not be used for the purpose of, an offer or solicitation in any jurisdiction or in circumstances in which such offer or solicitation is not authorised or where a regulated disclosure document is required. No person receiving a copy of this Information Memorandum in any jurisdiction may treat it as constituting an offer or invitation to that person to apply for units in the Fund unless, in the relevant jurisdiction, such an offer or invitation could lawfully be made to the person. THIS INFORMATION MEMORANDUM IS AN IMPORTANT DOCUMENT THAT SHOULD BE READ IN ITS ENTIRETY. INVESTORS SHOULD OBTAIN PROFESSIONAL ADVICE BEFORE MAKING AN INVESTMENT DECISION IN RELATION TO THE FUND. 2 Information Memorandum

3 TABLE OF CONTENTS 1. THE FUND AT A GLANCE 4 2. ABOUT CAPITAL 5 3. ABOUT THE TRUSTEE 6 4. ABOUT THE FUND 7 5. RISKS 9 6. FEES AND EXPENSES CONSTITUTION INVESTING IN THE FUND VALUATION TAX ADDITIONAL INFORMATION CONTACTS APPLICATIONS 21 3 Information Memorandum

4 1. THE FUND AT A GLANCE Fund Capital Australia High Conviction Fund (Fund) has been established as a wholesale unlisted unit trust. Trustee Capital Partners Pty Limited AFSL # ( or the Trustee) Investment Manager Capital Pty Ltd Corporate Authorised Representative # ( Capital or the Investment Manager) Administrator Custom House Fund Services (Australia) Pty Limited (Administrator) Prime Broker UBS AG, Australia Branch Auditor Ernst & Young Fund Objective To achieve superior absolute returns in all market environments with an emphasis on capital preservation Investment Type Long/short Australian and New Zealand equities Investor Eligibility Wholesale clients, as described in the Corporations Act, 2001 Investment Horizon 3 5 years Minimum Initial Investment AU$250,000 1 Minimum Additional Investment AU$100,000 1 Valuation Frequency Monthly Valuation Day Last Business Day of each calendar month Fees and Expenses Management Fee: 1.50% p.a. (+GST) of the Fund s Net Asset Value Performance Fee: 20.0% p.a. (+GST) of returns in a performance fee period exceeding the higher of the previous high water mark and the hurdle rate. Hurdle Rate Bloomberg Bank Bill Rate (AUD) (Hurdle). Buy/Sell spread Nil buy spread. Sell spread of 0.25%. 1 The Trustee has the discretion to waive the minimum amount. 4 Information Memorandum

5 2. ABOUT CAPITAL Capital is a specialist investment management company founded in June 2012 and is based in Sydney, Australia. Capital combines a fundamental, research driven investment strategy with a strong capability in risk management with a clear aim of producing absolute returns that are uncorrelated to general market conditions. Capital is the investment manager of the Capital Australia High Conviction Fund. The directors of Capital are Mr. Stephen Aboud and Mr. Marcus Hughes. Capital believes focus and alignment of interest are essential. The directors of Capital are investors in this Fund. Biographies of Capital s key executives involved in the investment management of the Fund are below: STEPHEN ABOUD Stephen has over 25 years experience in the Australian financial markets. Before establishing Capital, Stephen worked for Lanterne Strategic Investors for one year, where he established and managed the High Conviction Fund. Prior to that, Stephen worked for The Lowy Family Group for twelve years running a high conviction trading portfolio. Stephen was also a member of the Investment Committee which oversaw the worldwide investments of The Lowy Family Group. MARCUS HUGHES Marcus has over a decade of experience in Australian and European financial markets. Prior to establishing Capital, Marcus worked for over six years at Caledonia Investments, based in Sydney. Marcus was a senior member of the investment team and held the position of Portfolio Manager of the Australia Trust. Before joining Caledonia, Marcus was based in London for five years working with UBS AG and Citadel Investment Group (Europe) Limited. Marcus was a Portfolio Manager at Citadel, working within the Event Driven Equity Team for two years. Marcus was responsible for establishing and managing a highly concentrated portfolio of fundamental researched equity investments with supporting catalyst events. At UBS, Marcus was an analyst in the Mergers & Acquisitions division of the Investment Bank for three years. Marcus advised on a range of listed corporate transactions and maintained a specific focus advising private equity clients on leveraged buyouts of public listed companies. Marcus holds a Bachelor of Commerce (with merit) and a Masters of Advanced Finance from the University of New South Wales. Previously, Stephen spent three years at Deutsche Bank trading Australian equities on a proprietary basis as well as running the facilitation book. Stephen commenced his career at Macquarie Bank, spending seven years in the Equities Division, and held the position of Associate Director. 5 Information Memorandum

6 3. ABOUT THE TRUSTEE Capital Partners Pty Ltd is a trustee company and holds an Australian financial services licence No It issues units in the Fund to unit holders and is responsible for the day to day operations of the Fund. The Trustee has appointed the Investment Manager to provide the investment management services to the Fund. The Trustee receives fees for providing the trustee services. Capital receives a fee from the Trustee as long as it is a corporate authorised representative of the Trustee. The Trustee's objective is to ensure all unit holders are treated as required by law and that Capital invests the assets of the Fund in accordance with the contractual arrangements with the Trustee and in a manner consistent with the investment mandate outlined in this Information Memorandum. The Trustee does not guarantee unit holders will make a particular rate of return or that the value of their investment will not fall. Stephen Aboud and Marcus Hughes are directors of the Trustee and are also directors of the Investment Manager. They are required to comply with each of the Trustee s and the Investment Manager s conflicts of interest policies. 6 Information Memorandum

7 4. ABOUT THE FUND The Fund is an Australian unregistered managed investment scheme. FUND OBJECTIVE The Fund's investment objective is to achieve superior absolute returns in all market environments with an emphasis on capital preservation. INVESTMENT STYLE OF THE FUND Capital is a high conviction absolute return investment manager, and believes in allocating capital into a small number of high quality investment opportunities. Through its investment process, Capital seeks to identify companies where it believes there is a material difference between current stock market valuations and its assessment of intrinsic value. Capital allocates the Fund s capital into investments where this margin of safety is at its greatest. Capital seeks to own companies it considers undervalued relative to its assessment of intrinsic value. Capital will short sell the shares of companies it believes to be at a significant premium to their intrinsic value. Capital will also seek to identify or encourage events that may act as a catalyst for valuations to converge towards their intrinsic value. The emergence of catalyst events will also have an impact on how Capital allocates the Fund s capital between competing investment opportunities. INVESTMENT PROCESS OF THE FUND Capital will apply its investment process in determining how the Fund s capital will be allocated. The investment process utilises a six step framework for analysing investment opportunities. Using a consistent approach creates a platform of comparability between investments. The starting point for almost all investments the Fund will evaluate will be bottom-up stock selection. This stock idea will follow the investment process outlined below: (1) IDEA GENERATION Ideas are generated through traditional screening of financial metrics and industry mapping to identify bottlenecks. Extensive experience in the financial markets also provides the team with bespoke opportunities from existing networks and contacts. (2) FUNDAMENTAL VALUATION The investment team conducts rigorous analysis on a potential investment opportunity. This may typically include (but is not limited to) meeting management, competitors, customers, suppliers, industry experts and other interested stakeholders. The investment team will then form a view on the sustainable level of annual cash generation of the company and its longer term intrinsic value. (3) MACRO CONSIDERATIONS The investment team will identify key macroeconomic factors that may impact the intrinsic value of the company, analyse how sensitive valuation is to a change in these factors, and form a view on whether the risk to any such change in these factors is appropriately priced in. (4) CATALYST IDENTIFICATION The investment team view catalyst events as important facilitators of moving the price of a company towards its intrinsic value within a shorter time frame, and will seek to identify if a company has any such upcoming events which can serve as valuation catalysts. (5) INVESTMENT EDGE The investment team is consistently evaluating if we have an edge in assessing the intrinsic value of a company when compared to other market participants. This would typically manifest itself in having a stronger view on one of the key drivers contributing to the cash generation capability of a business than the market. (6) PORTFOLIO CONTRUCTION Investments are weighted to optimise identified catalysts and capital is concentrated where the team feels the best opportunities are. The portfolio is continually monitored and rebalanced as investment theses and risk profiles change. 7 Information Memorandum

8 4. ABOUT THE FUND CONTINUED PRUDENTIAL LIMITS AND GUIDELINES Capital will endeavour to work within the investment, allocation and other limits set out in this Information Memorandum. However, these should be viewed as objectives only and not as absolute limits. Where they are exceeded for any reason, for example due to market movements or the Fund s cash flows, Capital will endeavour to address the excess and effect such adjustments as necessary to meet the limits set out in this Information Memorandum. Investment Universe: Market Capitalisation and Portfolio Weighing Rules 1. No single stock to exceed 15% of the Fund at trade initiation Short Selling Rules 1. The market capitalisation for a short stock position must be above A$200m at trade initiation 2. No short position can exceed 15% of the Fund at trade initiation Market Exposure/Leverage Rules 1. Gross Exposure Limit 200% of Fund Net Asset Value 2. Net Exposure Limit 100% of Fund Net Asset Value Stop-Loss Rule The Fund will not enter into uncovered call or put positions. 8 Information Memorandum

9 5. RISKS Investment in the Fund carries certain risks. All investments have an inherent level of risk. Generally, there is a trade off between higher expected returns for higher expected risk (usually represented by the variability of fund returns). There is no guarantee that the Fund will achieve its investment objectives and unit holders should fully understand and be capable of assuming the risks of investing in the Fund. The key risks outlined below do not purport to be a complete explanation of all the risks associated with investing in the Fund. MARGIN BORROWING RISK The use of margin borrowing exposes the Fund to additional levels of risk including greater losses from investments than would otherwise have been the case had the Fund not borrowed to make the investments. In case of a sudden drop in value of the Fund's assets, the Fund might not be able to liquidate assets quickly enough to repay its borrowings, further magnifying the losses incurred by the Fund. SHORT-SELLING RISK The Fund may engage in short-selling. A short sale involves the risk of a theoretically unlimited increase in the market price of the particular investment sold short, which could result in an inability to cover the short position and a theoretically unlimited loss. LEVERAGE RISK The Fund may increase the amount of capital available for investment through the use of leverage. The Fund will limit any leverage to 200% of the latest available net asset value of the Fund. While the use of leverage can substantially improve the return on invested capital, unit holders should be aware that such use may also increase the adverse impact to which the portfolio of the Fund may be subject. DERIVATIVES RISK The Fund will use various derivative instruments. Risks associated with the use of derivative instruments include the values of the derivative failing to move in line with the underlying asset (a performance difference), the potential lack of liquidity of the derivative, the Fund may not be able to meet payment obligations as they arise, and the counterparty to the derivative contract may not meet its obligations under the contract. LIMITED LIQUIDITY An investment in the Fund provides limited liquidity since the interests are not freely transferable and unit holders may redeem their units only monthly. An investment in the Fund is suitable only for persons who qualify as wholesale clients (as defined by the Act). A withdrawing unit holder may, at the sole and absolute discretion of the Trustee, receive securities owned by the Fund in lieu of cash. The risk of loss and delay in liquidating these securities will be borne by the unit holder, with the result that such unit holder may receive less cash than it would have received on the date of withdrawal. MARKET RISK The market value of a security may move up and down, sometimes rapidly and unpredictably, based upon a change in an issuer's financial condition as well as overall market and economic conditions and significant external events (like natural disasters). Unit holders may lose money on an investment due to unpredictable drops in a security's value or periods of below-average performance in a given security or in the securities market as a whole. FUND RISK The Fund may terminate or the investment professionals could change. Investing in the Fund may give different results than investing directly in the market because investing in the Fund may have a different outcome, capital gains and expense profile outcome compared to direct investment. In addition, the results of investing in the Fund may be affected by the investment and withdrawal of other unit holders. CONCENTRATION RISK The Fund may invest a relatively high percentage of its assets into a relatively small number of securities, or into securities with a relatively high level of exposure to the same end markets. This may cause the value of the Fund's investments to be more affected by any single adverse economic, political or regulatory event than the investments of a more diversified investment portfolio. 9 Information Memorandum

10 5. RISKS CONTINUED COUNTERPARTY RISK The Fund may directly invest in swaps, synthetic or derivative instruments, repurchase agreements, certain types of options or other customised financial instruments and over-the-counter transactions. The contractual counterparties to a transaction or contract (such as a broker (including the Prime Broker) or other agent of the Fund or Capital) may fail to perform their obligations in the manner anticipated by the Fund, which may result in a reduction in expected returns to the Fund. REGULATORY RISK CONFLICTS OF INTEREST RISK Capital has a conflicts of interest policy to ensure that conflicts of interests identified and appropriately managed. The conflicts of interest policy outlines the monitoring, prevention and other compliance measures relating to the management of conflicts of interests. At all times, Capital attempts to prevent or manage conflicts of interests in accordance with this policy. The value or tax treatment of an investment or the effectiveness of a Fund's investment strategy may be adversely affected by changes in government (including taxation) policies, regulations and laws, or changes in generally accepted accounting policies or valuation methods. 10 Information Memorandum

11 6. FEES AND EXPENSES MANAGEMENT FEE The Fund will pay the Trustee (who in turn will pay this to Capital) a management fee of 1.5% per annum (exclusive of GST) of the net asset value of the Fund (Management Fee). The Management Fee will be calculated and paid monthly to the Trustee in arrears. PERFORMANCE FEE The Fund will (if applicable) pay the Trustee (who in turn will pay this to Capital) a performance fee (Performance Fee). The Performance Fee will be payable annually in arrears. In order to ensure that unit holders bear the Performance Fees according to the actual performance of their units, having regard to the different times and prices at which such units were issued, a new series of units (each series constituting a new class of units in the Fund) will be issued on each Subscription Day. The Performance Fee will accrue as at each Valuation Day and will be payable annually in arrears after the end of the relevant financial year. The Performance Fee will be equal to twenty percent (20%), exclusive of GST, of the increase in net asset value per unit of the relevant unit class (i.e. the relevant series) in issue over the high water mark (HWM) as increased by the Hurdle. Where units are redeemed part way through a year, the performance fee payable in respect of the units realised will be calculated as at the Valuation Day relating to the relevant Redemption Date. The HWM of a unit class (i.e. the relevant series) in the financial year in which the unit is issued is the Subscription Price of that unit. For subsequent financial years, the HWM is the greater of: (i) the net asset value per unit (after deduction of any Performance Fee) at the end of the last financial year where a Performance Fee was earned; and (ii) the Subscription Price of the Original Unit. HURDLE Bloomberg Bank Bill Rate (AUD) (Hurdle). ENTRY AND EXIT FEES The Fund does not currently charge an entry fee. For redemptions, an amount equal to 0.25% is effectively deducted from the Unit holder s redemption monies. This amount is retained by the Fund on account of the Investment Manager s estimate of costs associated with buying and selling assets represented by the relevant redemption and is not paid to the Investment Manager or Trustee. This Sell Spread may change at any time to reflect such costs. Such costs are an additional cost to you and will impact on the return on your investment. Such costs could include estimated brokerage and stamp duties, taxes and other charges and expenses from selling Fund investments. The amount is paid so as to mitigate any unfairness from a redemption affecting other Unit holders. OPERATING EXPENSES The Fund will bear all operating expenses including but not limited to, legal, accounting, auditing, and other professional expenses, research expenses (including technology and software expenses), including Administrator's fees, Prime Broker fees, brokerage, insurance costs, continuing offering fees and expenses, bank service fees, cash management fees and certain other expenses related to the purchase, sale or transmittal of Fund assets. The total quanta of these operating expenses are not expected to exceed 0.375% of the Fund's net asset value per annum. As soon as practicable after the last Valuation Day in each financial year, all units in each class which have borne a Performance Fee in respect of the relevant year will normally be consolidated into a single class, being the oldest class to have borne a Performance Fee in respect of the relevant year and the HWM for all units of the consolidated class will be the net asset value per unit of the consolidated class as at the last Valuation Day in the relevant financial year, after the payment of the Performance Fee. The Investment Advisor may, in its sole discretion, waive, rebate or reduce the Management Fee and/or the Performance Fee in respect of any particular investor or investors generally. 11 Information Memorandum

12 7. CONSTITUTION The Fund is governed by a constitution which binds the Trustee, as trustee, and the unit holders of the Fund (Constitution). The Constitution sets out the conditions under which the Trustee operates and the rights, responsibilities and duties of the Trustee in respect of the Fund. In particular, the right of the Trustee to retire and the ability of the Trustee to charge fees and recover expenses are included in the Constitution. The Trustee may alter the Constitution in certain circumstances if the Trustee reasonably considers that the change will not adversely affect unit holders' rights. Otherwise, the Trustee must obtain unit holders written consent, or approval by special resolution at a meeting convened for that purpose. The Fund may be terminated in certain circumstances stated in its Constitution. The Constitution contains provisions limiting the requirement of the Trustee to compensate unit holders. Generally, if the Trustee complies with its duties, it will not be required to compensate a unit holder for the loss unless required by law. The Constitution also contains provisions regarding the Trustee s liabilities and rights for reimbursement out of the Fund. UNIT HOLDERS RIGHTS TERMINATION The Trustee may terminate the Fund in a number of circumstances provided for in the Constitution including on written notice to unit holders. LIMITATION OF UNIT HOLDERS LIABILITY The liability of unit holders is limited by the Constitution to the amount of their investment. The Constitution provides that unit holders shall not be under any personal obligation to indemnify the Trustee (or its creditors) in respect of the liabilities of the Trustee in relation to the Fund. However, the Trustee cannot give an absolute assurance that a unit holder s liability is limited in all circumstances as the issue has not been finally determined in court. A copy of the Constitution is available free of charge on request by contacting the Trustee. The rights of a unit holder in the Fund are outlined in the Constitution. These include the right (subject to the other terms of the Constitution and this Information Memorandum) to: withdraw units; receive income and capital distributions; participate in distributions upon termination or winding up of the Fund; and call, attend and vote at unit holder meetings. Each unit a unit holder holds in the Fund gives that unit holder a beneficial interest in the Fund as a whole, but not in any particular asset of the Fund. Holding units in the Fund does not give a unit holder the right to participate in the management or operation of the Fund. The Trustee may issue different classes of units and may determine the rights, obligations and restrictions which will attach to the units within each class. The Trustee may refuse to register any transfer of units by a unit holder without providing any reason. 12 Information Memorandum

13 8. INVESTING IN THE FUND To apply for units in the Fund, please follow the following instructions in relation to the Application Documents (as defined below). Applications may be made only by written application using the accompanying Application Form. The Trustee may waive the minimum amount requirement in respect of certain unit holders. The Trustee has absolute discretion to accept or reject any applications received from prospective investors. All application money must originate from an account held in the name of the applicant; no third party payments will be permitted. Unit holders will be issued units in the Fund. A confirmation advice of unit holdings for applications accepted by the Administrator will be issued as soon as practicable and following the Trustee's acceptance of the application. Eligible investors Application Documents Method of Application Subscription Cut-Off Minimum Initial Investment Minimum Additional Investment Cooling off Method of Redemption Redemption Cut-Off Redemption Payment Rounding of Units Series Accounting Offers made under this Information Memorandum are made exclusively to wholesale clients, as defined by the Act. All new applicants into the Fund must provide the following documents: (a) Application Form (b) Schedule 1 on Wholesale Client/Sophisticated Investor certification and (c) KYC documents as described in the list which accompanies the Application Form. Copies of original executed and completed Application Documents may be faxed to the Administrator on , but no application will be processed until the Administrator has received properly completed original Application Documents. By 5pm on the last Business Day of the preceding month e.g. if an application is submitted at 4pm on the last Business Day of April, then the application money will be applied to subscribe for units on the first Business Day of May. AU$250,000 1 AU$100,000 1 As the Fund is only available to wholesale clients, there are no cooling off rights. Redemption Requests may be initially sent by facsimile to the Administrator on or ssg.aus@customhousegroup.com, however, payment of redemption proceeds will not be made until after the Administrator's receipt of the original properly completed redemption request (in the form attached to this Information Memorandum). Redemptions will generally be made monthly provided 30 days notice is given. Redemption proceeds will generally be paid within 60 days of calculating the redemption price of units on the applicable Valuation Day. Note: Redemption payment will be made to an account held in the name of the applicant, no third party payments will be permitted. Where subscription and redemption requests result in fractions of units being subscribed for or redeemed, subscribed units will be rounded down to the nearest whole number and redeemed units will be rounded up to the nearest whole number for the benefit of the Fund. The Fund adopts series accounting. In order to ensure that unit holders bear the Performance Fee according to the actual performance of their units, having regard to the different dates and prices at which such units were acquired, units are issued in separate series. Each series will reflect the Performance Fee accrued during the time that series has been on issue. All series of a particular class of units will be the same in respect of the rights, terms and conditions that attach to them, except for the Performance Fee accrual. 1 The Trustee has the discretion to waiver the minimum amount. 13 Information Memorandum

14 8. INVESTING IN THE FUND CONTINUED Transfer of Units Distributions Reporting Transferring units may have tax implications and you should consult your taxation adviser before you arrange any transfer of units. All transfers of units must be in writing and be made in such a usual form or the form as required under the Act or that the Trustee may from time to time accept. The Trustee may refuse to register any transfer of units in its absolute discretion without providing any reason. A unit holder may need or wish to transfer or sell its units rather than asking the Trustee to redeem them. Distributions (if any) will be made to unit holders annually. The Trustee s policy is to apply the proceeds of any Distribution to the issue of further Units to the unit holder (Reinvestment Plan). When distributions are reinvested, additional units are purchased using the net asset value per unit last determined before the close of business on the last day of the distribution period, after the distribution has been applied. However, the unit holder may elect to have the distribution received as cash. Where this election is made, the Distribution proceeds will be deposited into their nominated account (must be in the name of the unit holder as no third party payments will be made). An election to receive Distributions in cash may be made in writing to the Administrator at least 30 days prior to the last day of the relevant distribution period. Unit holders will receive: (i) a monthly report of the net asset value per unit - sent via ; (ii) an annual audited report from the Trustee upon written request; and (iii) such other information (including Fund fact sheets) as Capital determines in its discretion from time to time. 14 Information Memorandum

15 9. VALUATION UNIT PRICING Each unit represents an equal part of the net asset value of the assets that the Fund holds with respect to the units on issue. The unit price is calculated by taking the total value of the Fund's assets as at the relevant Valuation Day, adjusting for any liabilities to create the net asset value and then dividing the net asset value by the total number of units held by unit holders on that Valuation Day. The unit price will be rounded to four decimal places. In calculating the net asset value of the Fund, the Administrator may rely upon, and will not be responsible for the accuracy of, financial data furnished to it by third parties including automatic processing services, brokers, market makers or intermediaries, the Investment Manager, the Trustee and any other administrator or valuations agent. If and to the extent that the Trustee is responsible for or otherwise involved in the pricing of any of the Fund s assets, the Administrator may accept, use and rely on such prices, without verification, in determining the net asset value of the Fund and shall not be liable to the Fund, any investor or any other person in doing so. 15 Information Memorandum

16 10. TAX Investing in the Fund has tax implications, depending upon your particular situation. You should obtain professional advice on the tax implications of investing. This Information Memorandum provides Australian residents general information only, and should not be relied upon by you as it may not relate to your particular situation and tax laws may have changed since the issue of this Information Memorandum. TAXATION OF DISTRIBUTIONS The Fund is resident in Australia for tax purposes. The Fund should not generally be liable for income tax, as it will distribute all the distributable income of the Fund to unit holders each year. Your share of taxable income of the Fund for each year ended 30 June should be included as assessable income in your tax return for each such year, even if your distribution is reinvested as additional units in the Fund in the next year. Distributions may represent realised gains on disposal of investments as well as dividend income. Each year you will be sent a tax statement that will indicate the composition of your income. The Government has recently introduced reforms to the taxation arrangements for managed funds and further changes have been proposed. The Trustee will continue to monitor the developments in this area and the impact of the reforms on the taxation of the Fund. TAXATION OF DISPOSAL OF UNITS If you dispose of your units in the Fund (by way of redemption or otherwise) you may be subject to tax on any gain arising. A discount may be available on the capital gain on units held for 12 months. This discount is 50% for individuals, trusts, and 33 1 / 3% for complying superannuation funds. The discount is not available to companies. TAX FILE NUMBER AND ABN On your application form you may provide your Tax File Number (TFN), or advise your TFN exemption. Alternatively, if you are investing in the Fund on behalf of an enterprise, you may quote an Australian Business Number (ABN). It is not compulsory for you to quote a TFN, exemption or ABN, but if you do not then the Trustee is required to deduct tax from any income distribution payable to you at the maximum personal tax rate plus Medicare levy and any other applicable government charges. AUSTRALIAN GOODS AND SERVICES TAX GST should not be payable on the issue and redemption of units in the Fund and the resulting income distributions to unit holders. Fees, charges and commissions payable in respect of the management of the Fund may include a GST component. The Fund will generally be able to claim input tax credits and/or reduced input tax credits of at least 75% of GST incurred on most of its expenses. OFFSHORE INVESTORS You must receive this information memorandum within Australia, however, if you are not an Australian resident for tax purposes, please state in the application form your country of residence for tax purposes. If you are not an Australian resident, tax will be withheld from distributions of Australian sourced income at the prescribed rates. You may be subject to the tax laws in the country in which you are tax resident and should consult a taxation adviser before investing. Gains realised by you where you hold your units on revenue account will be taxable as ordinary income and will not qualify for the CGT discount. 16 Information Memorandum

17 11. ADDITIONAL INFORMATION PERSONAL INFORMATION Privacy laws apply to the handling of personal information by the Trustee. The Trustee may collect personal information about a unit holder from their Application Form to establish and then support the ongoing administration of their investment in the Fund, comply with Australian taxation laws, the Act, the AML Requirements and other laws and regulations. Personal information may also be used to advise unit holders of new developments relevant to their investment in the Fund. For legal and practical reasons, the Trustee will not be able to process an application or administer an investment without certain prescribed information. The Trustee may disclose a unit holder's personal information to external parties who provide services in relation to the Fund, their associates, related group entities or related bodies corporate (but only to the extent that any of these are involved with the Fund), or other parties such as providers of printing or postal services. Otherwise the Trustee will not disclose unit holders' personal information to any other external party unless required by law. The Administrator or their duly appointed agents may disclose, use, store and/or transfer (whether within or outside its country of domicile) and/or exchange personal information with any persons as necessary or appropriate to perform their services, provided any use of personal information will be in accordance with applicable law. This includes but is not limited to any affiliate for any and all purposes in connection with the provision of services under the relevant agreements between the Administrator and the Trustee. Unit holders may be entitled to gain access to their own personal information held by the Trustee. Unit holders have the right to ask the Trustee to correct information about them which is inaccurate, incomplete or out of date. Unit holders who would like access to their personal information or who have questions about the handling of personal information should contact the Trustee. ANTI-MONEY LAUNDERING AND COUNTER- TERRORISM FINANCING LAWS The AML Requirements regulate financial services and transactions in a way that is designed to detect and prevent money laundering and terrorism financing. The AML Requirements are enforced by the Australian Transaction Reports and Analysis Centre (AUSTRAC). In order to comply with the AML Requirements, the Trustee, the Administrator and their respective subsidiaries, affiliates, directors, officers, shareholders, employees, agents, permitted delegates and sub-delegates are required to, amongst other things: verify your identity and source of your application monies before providing services to you, and to reidentify you if they consider it necessary to do so; and where you supply documentation relating to the verification of your identity, keep a record of this documentation for 7 years or as required under relevant legislation. The Trustee, the Administrator or their respective subsidiaries, affiliates, directors, officers, shareholders, employees, agents, permitted delegates and sub-delegates (collectively the entities ), reserve the right to request such information as is necessary to verify the identity of an applicant and the source of the payment before applications can be processed. In the event of delay or failure by the investor to produce this information, the entities may refuse to accept an application and the application monies relating to such application or may suspend the payment of redemption proceeds if necessary to comply with AML Requirements applicable to them. The entities and their delegates shall not be liable to the applicant for any loss suffered by the applicant as a result of the rejection or delay of any subscription or payment of redemption proceeds. 17 Information Memorandum

18 11. ADDITIONAL INFORMATION CONTINUED The entities have implemented a number of measures and controls to ensure they comply with their obligations under the AML Requirements, including carefully identifying and monitoring investors. As a result of the implementation of these measures and controls: transactions may be delayed, blocked, frozen or refused where an entity has reasonable grounds to believe that the transaction breaches the law or sanctions of Australia or any other country, including the AML Requirements; where transactions are delayed, blocked, frozen or refused the entities are not liable for any loss you suffer (including consequential loss) caused by reason of any action taken or not taken by them as contemplated above, or as a result of their compliance with the AML Requirements as they apply to the Fund; and any of the entities may from time to time require additional information from you to assist it in this process. The entities have certain reporting obligations under the AML Requirements and are prevented from informing you that any such reporting has taken place. Where required by law, an entity may disclose the information gathered to regulatory or law enforcement agencies, including AUSTRAC. The entities are not liable for any loss you may suffer as a result of their compliance with the AML Requirements. APPOINTMENT OF AUTHORISED NOMINEE TO OPERATE ACCOUNT You may elect to appoint an authorised nominee to give instructions in relation to your investment. The relevant sections on the Application Form 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. By completing and lodging the relevant sections on authorised nominees on the Application Form you release, discharge and agree to indemnify the Trustee and the Administrator from and against any and all losses, liabilities, actions, proceedings, account claims and demands arising from the Trustee and/or Administrator acting on the instructions of your authorised nominee. You also agree that any instructions of your authorised nominee to the Trustee and/or Administrator, which are followed by the Trustee and/or Administrator, will be a complete satisfaction of the obligations of the Trustee, notwithstanding any fact or circumstance, including that the instructions were made without your knowledge or authority. You agree that if an authorised nominee s instructions are followed by the Trustee and/or the Administrator, you and any person claiming through or under you will have no claim against the Trustee and the Administrator in relation to the instructions. FACSIMILE ARRANGEMENTS Where copies of original executed and completed Application Documents may be initially sent by facsimile to the Administrator, no application will be processed until the Administrator has received the properly completed originals of the Application Documents. None of the Administrator, the Trustee or their duly appointed agents will be responsible to an applicant for any loss resulting from the non-receipt or illegibility of any application initially sent by facsimile or for any loss caused in respect of any action taken as a consequence of such facsimile believed in good faith to have originated from properly authorised persons. A redemption request must be made in the form approved by the Trustee and the Administrator, and it must be signed by the unit holder or the authorised signatories. A copy of this form is attached to this Information Memorandum. If required, please contact the Administrator for additional copies of this form. Redemption requests may be initially sent by facsimile, however, payment of redemption proceeds will not be made until after the Administrator's receipt of the original properly completed redemption request. If unit holders choose to send initially redemption requests by facsimile, they bear the risk of such requests not being received. Neither the Administrator nor the Trustee accept any responsibility or liability for any loss caused as a result of non-receipt or illegibility of any facsimile notice or for any loss caused in respect of any action taken as a consequence of such facsimile instructions believed in good faith to have originated from properly authorised persons. RELATIONSHIP WITH THE PRIME BROKER AND CUSTODIAN UBS AG, Australia Branch, have been appointed as the prime broker and UBS Nominees Ltd as custodian of the Fund. 18 Information Memorandum

19 11. ADDITIONAL INFORMATION CONTINUED RELATIONSHIP WITH THE ADMINISTRATOR The Fund has entered into an Administration Agreement (the Administration Agreement ) with Custom House Fund Services (Australia) Pty Limited (the Administrator ). The Administrator is responsible for assisting the Trustee to maintain the Fund s register of unit holders, for arranging the issue, redemption and valuation of units, for the preparation of unaudited statements for the Fund and for providing certain other administrative services in respect of the Fund. The Administration Agreement provides, inter alia, that the Administrator shall not be liable to the Fund or its investors for any acts or omissions in the performance of its services except for its own material breach of its obligations under the Administration Agreement and the Administrator is indemnified in acting as administrator except in the case of its own gross negligence, wilful misconduct or fraud. It is not the role of the Administrator to protect the rights and interests of the Fund s investors. The Administrator does not guarantee the return of any investment, any tax deduction availability or the performance of the Fund. The Administrator has no interest in relation to the Fund and has not received any inducements from the Trustee other than the remuneration it is entitled to receive under the Administration Agreement by way of administration fees according to its standard schedule of fees. The Administrator was not involved in preparing this Information Memorandum, and neither the Administrator nor any of its associated entities takes any responsibility for the contents of this Information Memorandum. 19 Information Memorandum

20 12. CONTACTS CAPITAL PTY LTD Anthony Salteri Operations Officer Phone: enquiries@capital.com CUSTOM HOUSE FUND SERVICES (AUSTRALIA) PTY LIMITED Phone: ssg.aus@customhousegroup.com 20 Information Memorandum

21 13. APPLICATIONS HOW TO INVEST: Complete the Application Form (below) and make payment in cash by bank wire transfer crediting into the following account: Bank: National Australia Bank Account Name: The Trustee for Capital Australia High Conviction Fund Account No: BSB No: SWIFT address: NATAAU3302S Reference: Capital Australia High Conviction Fund (Quoting full name of the applicant) The remitter should instruct the remitting bank to send a SWIFT advice (format MT 103) to Custom House advising details of remittance, including the name of the applicant(s), for ease of identification. Please send completed Application Form and all required KYC documents* to: Attn: Investor Relations Custom House Fund Services (Australia) Pty Limited PO Box A2224, Sydney South, NSW 1235, Australia Fax: Phone: ssg.aus@customhousegroup.com We advise sending a soft copy of the form (either via fax or ) to Custom House prior to sending original documents to the PO Box above so forms can be checked for any missing information. Applications below $500,000 must be accompanied by a Wholesale Investors certificate (Schedule 1) which can be found on page 26 of this document. Applicants should note the times by which Application Form must be received in order to be processed on a Subscription Day. Applicants should also note that cleared funds must be received into the account for value before 5pm on the relevant Subscription Day as specified in the IM. All application monies must originate from an account held in the name of the applicant. No third party payments will be permitted. *** Please note that Applications may be refused or not processed if the required KYC documents are not provided. *** 21 Information Memorandum

22 APPLICATION FORM: This Application Form relates to an Information Memorandum dated 27 February, 2016 ("IM") issued by Capital Partners Pty Limited ABN AFSL ( ), for the offer of units in the Capital Australia High Conviction Fund ("Fund"). Terms defined in the IM have the same meaning in this Application Form. The IM contains important information about investing in the Fund, and you are advised to read the IM before completing this Application Form. Please note that cut-off times apply as indicated in the IM. Funds received after the cut-off times for any particular Subscription Day may be processed at the next relevant Subscription Day. Please refer to the IM for the relevant cut-off times. *** For any enquiries regarding the application process, please call Custom House directly on *** PART 1: APPLICANT DETAILS Name: ACN/ABN/ARBN: Contact Name: Telephone No: Fax No: Address: Address:* Suburb/Town: State: Post Code: Date of Birth (if individual) Occupation (if individual) Nationality (if individual)/place of Incorporation Source of Funds Nature of Business * (No PO Boxes are accepted for registration purposes) Tax File Number: ABN: Collection of Tax File Numbers is authorised by law for taxation purposes. It is not an offence if you do not quote your Tax File Number or exemption information but if you do not provide us with that information then we are required to deduct tax from any income distribution at the highest marginal tax rate plus the Medicare levy. The applicant does not wish to quote a Tax File Number / The applicant is exempt from quoting a Tax File Number by virtue of: (a) being in receipt of the following pension, benefit or allowance (b) not being required to lodge an income tax return because 22 Information Memorandum