Salt Investment Funds

Transcription

1 Salt Investment Funds Salt Javelin Fund Salt NZ Dividend Appreciation Fund Salt Listed Property Fund Salt Long Short Fund Prospectus dated 31 July

2 Key Information about the Salt Investment Funds Set out below is a snapshot of key information about certain funds within the range of unit trusts known as the Salt Investment Funds. You should read it in conjunction with the detailed information set out elsewhere in this prospectus, and with the Salt Investment Funds investment statement. Overview The Salt Investment Funds are a suite of unit trusts managed by us, Salt Investment Funds Limited, a wholly-owned subsidiary of Salt Funds Management Limited, a boutique investment management firm specialising in managing New Zealand-centric listed equity and property mandates. The trustee of the Salt Investment Funds is The New Zealand Guardian Trust Company Limited. A unit trust is an investment that pools your money with other investors. We invest that pooled money, and the Trustee supervises us. Available investment options Four separate unit trusts are offered under this prospectus: the Salt Javelin Fund, the Salt NZ Dividend Appreciation Fund, the Salt Listed Property Fund, and the Salt Long Short Fund. These are referred to as the Funds throughout this prospectus. Each Fund invests in different types of investments. You can choose to invest in one Fund or a combination of Funds. Your investment is applied towards units in the Fund you choose. The value of your units change to reflect the returns of those Fund(s) (either positive or negative), as well as the Fund s fees and expenses. The Funds invest as follows: Fund Salt Javelin Fund Salt NZ Dividend Appreciation Fund Salt Listed Property Fund Salt Long Short Fund Primarily invests in A portfolio of securities that represent our best ideas in the New Zealand and Australian equity markets. The Fund also has the ability to hold cash while it awaits compelling investment opportunities as determined by us. A portfolio of shares of New Zealand companies that may, in our opinion, pay high and sustainable dividends. A portfolio of shares of New Zealand and Australian property trusts, companies and other property related securities with exposure to commercial, residential, retail, tourism, industrial, medical, educational, rural, retirement, leisure and other property sectors. The Fund aims to deliver positive absolute returns in all market environments. In addition to holding long-only New Zealand and Australian securities, the Fund may, at our discretion, short sell securities, hold cash, lever its assets and 2

3 utilise active currency management to generate returns. However, the Fund does not borrow money except for settlement purposes and financial leverage will only occur through the use of short selling and derivatives. For more information, see section 6.5. Making investments Investments of any amount can usually be made into each Fund, provided the following minimums are met for each Fund: Initial investment $25,000 Additional lump sum investment $5,000 Regular investment $1,000 per month These minimums could change in the future see paragraph for more information. Investments in the Funds may also be made through an administration service approved by us. Any such investment will be held by the administration service s custodian on your behalf and different minimum investment levels may apply to the particular service that you use. Contact us for a list of approved administration services at any time. For more information, see paragraphs to and the Salt Investment Funds investment statement. Withdrawing your money and switching between Funds You can usually withdraw units from a Fund at any time provided you withdraw a minimum of $5,000 from that Fund and your remaining investment in the Fund is at least $25,000. You can also usually switch between Funds at any time provided you switch at least the minimum amount for an additional lump sum investment in the Fund you are switching to, as set out above, (or your whole unit holding in a Fund) and your remaining holding in the relevant Fund is at least $25,000. For more information see paragraphs to Principal risks The principal risks applying to all of the Funds that could affect your returns are investment risk (including market risk or volatility in the markets, changes in general economic conditions and the impact of changing interest rates, inflation and exchange rates), the risk of loss of key persons, the risk of key investors withdrawing, counterparty risk, liquidity risk, regulatory risk, and taxation risk. Please note that short selling risk, leverage risk, and credit risk are also principal risks that apply to the Salt Long Short Fund and could affect your returns. These unique risks mean that the Fund will not be suitable for all investors. For more information see section Investments in the Funds are not guaranteed. Fees and expenses Fees and expenses generally The following fees (plus any GST) are payable by each Fund, per annum: 3

4 Management fee Fund Fee (% of Fund s gross fund value) Salt Javelin Fund 0.85% Salt NZ Dividend Appreciation Fund 0.95% Salt Listed Property Fund 0.85% Salt Long Short Fund 1.50% Administration fee Up to: 0.10% for the Salt Long Short Fund 0.07% for every other Fund, of the relevant Fund s gross fund value, subject to a minimum annual fee of $30,000 per Fund Performance fee For the following two Funds only, the following percentage of the relevant Fund s return in excess of its performance target, which is the Reserve Bank of New Zealand Official Cash Rate plus 5% per annum: Salt Javelin Fund: 10% Salt Long Short Fund: 15% A high-water mark applies, and is explained in section Trustee fee Custodian fee Up to 0.06% of each Fund s gross fund value, subject to a minimum fee of $10,000 for the first year the Funds are in operation, and $20,000 per annum after the first year, which is spread across all of the Funds that have commenced operations Currently set as 0.018% of each Fund s gross fund value. This fee excludes transaction costs We can also agree to pay each of the Trustee and the administration manager special fees from a Fund for any additional services that they provide in respect of that Fund. At the Registration Date, we do not charge contribution, withdrawal, or switching fees (and do not intend to do so). However, transaction costs, which reflect the costs of buying and selling underlying investments, are reflected in the Funds unit prices (that is, a buy/sell spread is applied when you purchase or redeem units). GST is charged on some fees. In addition, expenses incurred in operating each Fund are usually deducted from that Fund. The additional expenses include audit and legal fees, and the costs of buying and selling the Fund s investments. Fees and expenses cap At the Registration Date, we have agreed to cap the maximum amount of fees and expenses, other than management fees, transaction costs, buy/sell spreads, borrowing and short-selling costs (where relevant), performance fees (where relevant), and other extraordinary or special 4

5 fees or expenses at the following percentage of each Fund s average daily gross fund value: Long Short Fund: 0.25% per annum, excluding GST All other Funds: 0.20% per annum, excluding GST. These fees and expenses may change in the future see paragraph 13.1 for more information. Tax Each Fund is a multi-rate PIE for tax purposes, meaning that tax is usually paid on your behalf at a rate approximating your marginal tax rate (but capped at 28%). For more information see section

6 Contents 1 Description of unit trusts 8 2 Managers and promoters 8 3 Registrar, custodian, auditors, advisers, and experts 11 4 Independence of unit trustee and any custodians 12 5 Unit trustee 12 6 Description of the unit trust and its development 13 7 Unit holder liability 37 8 Summary financial statements 38 9 Minimum subscription Guarantors Acquisition of business or equity securities Options and units paid up otherwise than in cash Interested persons Material contracts Pending proceedings Issue expenses Other terms of offer and units Financial statements and auditor s report Places of inspection of documents Other material matters Manager s statement Unit trustee s statement 52 Registered prospectus under the Securities Act 1978 In accordance with clause 6 of Schedule 4 to the Financial Markets Conduct Act 2013, this prospectus contains an offer of units in the Funds to which the Securities Act 1978 applies. Accordingly, this prospectus has been prepared in accordance with the Securities Act 1978 and the Securities Regulations The Financial Markets Conduct Act repealed a number of enactments on 1 December 2014, including the Unit Trusts Act However, under transitional arrangements in respect of the Financial Markets Conduct Act those repealed enactments will continue to apply to each Fund until the earlier of 30 November 2016 or the date the Fund opts in to the Financial Markets Conduct Act. A signed copy of this prospectus and copies of the documents required by section 41 of the Securities Act 1978 were delivered for registration to the Registrar of Financial Service Providers on 31 July 2015 ( Registration Date ). Legislation All legislation referred to in this prospectus is available online at 6

7 Glossary A glossary of defined terms used in the prospectus is set out at the end of this prospectus. Defined terms are generally capitalised throughout the prospectus. 7

8 1 Description of unit trusts 1.1 The Salt Investment Funds range of unit trusts are governed by a master trust deed dated 16 April 2014 ( Trust Deed ). The Funds offered in this prospectus are the: Salt Javelin Fund Salt NZ Dividend Appreciation Fund Salt Listed Property Fund Salt Long Short Fund (the Funds ). 1.2 Each of the Funds was established on 16 April 2014 in Auckland. The Funds are unit trusts under the Unit Trusts Act 1960 ( Act ). They offer a pooled investment providing exposure to different types of underlying investments (see section 6.5). Your investment in a Fund is represented by units purchased with investments you make. 1.3 Each Fund has a duration of 80 years from the date it was established unless it is terminated earlier (as described in paragraph of this prospectus). 1.4 Each Fund is created by its own establishment deed, dated the date of its establishment ( Establishment Deed ), that forms part of the Trust Deed. 1.5 There is no maximum number or amount of units in any of the Funds. 1.6 The price of units in each Fund varies each day. The issue price for units is the unit value of the particular Fund prevailing on the day they are issued, plus any transaction costs (our estimate of the total cost of acquiring further investments, which may be a deemed percentage), and any applicable contribution fees. The unit value is determined as the market value of all investments of the Fund, less the aggregate of the Fund s liabilities (other than PIE tax), including any costs, charges, and other outgoings incurred or accrued in connection with the Fund s liabilities which have not been paid, divided by the number of units on issue. 1.7 Contribution and withdrawal fees may be charged on the issue and redemption of units (see paragraphs and ). However, as at the Registration Date, switching, contribution, and withdrawal fees are not charged. The only deductions made for purchasing and selling units are transaction costs, which are incorporated into the unit price when units are issued or withdrawn. See paragraph for more information. 2 Managers and promoters The manager and its directors 2.1 Salt Investment Funds Limited (referred to as we, us, and our ) is the manager of the Funds. Our address is: Salt Investment Funds Limited Level 3, The Imperial Buildings 44 Queen Street Auckland 8

9 2.2 As at the Registration Date, our directors are: Matthew Goodson Managing Director CFA, BA, MCA (Hons, 1st) Auckland Matthew has more than 22 years experience in the finance sector. In addition to being a Director of Salt Investment Funds Limited, Matthew is also a Director and Shareholder of our parent company, Salt Funds Management Limited. As at the Registration Date, Matthew is the Portfolio Manager for the Salt NZ Dividend Appreciation Fund, Salt Listed Property Fund and Salt Long Short Fund. Matthew started his career as an Economist with Garlick & Co from before becoming Head of Research from He then spent seven years in New York working for BZW and Goldman Sachs JB Were as Director, Wholesale Equities before returning to New Zealand in 2004 to work for First NZ Capital also as Director, Wholesale Equities until During this time Matthew also managed a long short fund for First NZ Capital from Immediately prior to joining Salt Funds Management Limited, Matthew was employed for over four years as Portfolio Manager at BT Funds Management (NZ) Limited, a wholly owned subsidiary of Westpac Financial Services Group Limited. Matthew has a Bachelor of Arts degree and Masters in Commerce and Administration (First Class Honours) from Victoria University of Wellington and is a holder of the right to use the Chartered Financial Analyst designation. Paul Harrison Managing Director BCA, CA, MBA Auckland Paul has more than 25 years experience in the finance sector. In addition to being a Director of Salt Investment Funds Limited, Paul is also a Director and Shareholder of our parent company, Salt Funds Management Limited. As at the Registration Date, Paul is the Portfolio Manager for the Salt Javelin Fund. Paul started his career as an Accountant with Ernst & Whinney in He then spent nine years working as an Associate Director for Southpac Investment Management and five years as Investment Manager for Goldman Sachs JB Were Asset Management. Other roles have included Director and CFO for software company EstarOnline Limited and an Institutional Adviser for share broker Doyle Paterson Brown. Immediately prior to joining Salt Funds Management Limited, Paul was employed for over five years as Portfolio Manager at BT Funds Management (NZ) Limited, a wholly owned subsidiary of Westpac Financial Services Group Limited. Paul has a Bachelor in Commerce and Administration from Victoria University of Wellington and a Masters of Business Administration from Auckland University. He also holds the Chartered Accountant (CA) designation. 2.3 Our directors can be contacted at the address set out in paragraph Our address, our directors, and our directors addresses may change from time to time. You can obtain the current addresses and the names of our current directors by calling us on

10 Parent company 2.5 We are a subsidiary of Salt Funds Management Limited ( Salt ), a boutique investment management firm specialising in managing New Zealand-centric listed equity and property mandates. Salt does not guarantee any investment in the Funds. As at the Registration Date, the other key members of our and Salt s investment and management team are: David Oxley Head of Research BCom (Hons, 2:1), ACIS David has more than 23 years experience in the finance sector. He is employed by Salt Investment Funds Limited s parent company in the role of Head of Research and has overall responsibility for Salt s investment research process. David is also a shareholder of Salt Investment Funds Limited s parent company, Salt Funds Management Limited. David is a career investment analyst and has experience in both New Zealand and the United Kingdom. He began his career as Investment Analyst, UK Equities for Sun Alliance Investment Management in He then became Investment Analyst, Pan-European Equities for Royal & Sun Alliance Investment Management following his previous company s merger with Royal Insurance in He then took up a role as Investment Analyst and Team Leader for Pan-European Equities for Morley Fund Management in David moved to New Zealand in 2005 and joined ABN Amro Craigs (later Craigs Investment Partners) as Director, Senior Research Analyst. In 2011 he moved to the Guardians of New Zealand Superannuation as Senior Analyst, Active Return Strategy. Immediately prior to joining Salt Funds Management Limited, David was employed as Head of Research at BT Funds Management (NZ) Limited, a wholly owned subsidiary of Westpac Financial Services Group Limited. David has a Bachelor of Commerce degree, from the University of Birmingham (Honours 2:1) and holds the ACIS designation as an Associate member of the Institute of Chartered Secretaries and Administrators professional body. Anthony Sowerby Chief Operating Officer CFA, BSc(Tech) Anthony has more than 15 years experience in the finance sector. He is employed by Salt Investment Funds Limited s parent company in the role of Chief Operating Officer and has overall responsibility for operations, compliance and client relationship management. Anthony is also a Shareholder of Salt Investment Funds Limited s parent company, Salt Funds Management Limited. Anthony has held a variety of finance roles in both New Zealand and Ireland. He has held business development roles for KBC Asset Management from before returning home to New Zealand, where he was employed by AMP Financial Services. He then took a position with AMP Capital Investors in 2007 working firstly as Retail Sales Manager and then Business Development Manager for six years before leaving to join Salt. Anthony has a Bachelor of Science Technology, from Waikato University and is a holder of the right to use the Chartered Financial Analyst designation. 10

11 Details on other members of Salt s investment team can be found on our website at Other unit trusts 2.6 We do not manage any other retail unit trusts. We do manage one wholesale unit trust, the Salt Core NZ Equities Fund (although, as at the Registration Date, the Salt Core NZ Equities Fund has not yet commenced operation). Promoters 2.7 As at the Registration Date, Salt Funds Management Limited and any of its directors that are not also our directors are the promoters of the Funds. As at the Registration Date, Salt s directors are also our directors and therefore not promoters. The directors may change from time to time. You can find the current names of the promoters by contacting us at the address set out in paragraph 2.1. Administration and investment managers 2.8 We have appointed MMC Limited as administration manager ( Administration Manager ) to provide unit pricing and registry services for the Funds. 2.9 As at the Registration Date we undertake all the investment management functions in respect of the Funds. We have not appointed any separate investment managers, although we could do so in the future. Bankruptcy, insolvency, dishonesty convictions, and director bans 2.10 During the five years preceding the Registration Date, none of us, Salt, the Administration Manager, or any of our or their directors have been (as applicable): adjudged bankrupt or insolvent convicted of any crime involving dishonesty prohibited from acting as a director of a company placed in statutory management, voluntary administration, liquidation, or receivership. 3 Registrar, custodian, auditors, advisers, and experts 3.1 MMC Limited is the Funds registrar. 3.2 The New Zealand Guardian Trust Company Limited is the Funds custodian ( Custodian ). The Custodian may delegate some or all of its custodial functions from time to time. 3.3 PricewaterhouseCoopers are the Funds auditors. PricewaterhouseCoopers and its partners have obtained auditor licences under the Auditor Regulation Act Other than in its capacity as auditor, PricewaterhouseCoopers has no relationships with, or interests in, the Funds. 3.4 Ernst & Young is the Salt Long Short Fund s tax advisor. 3.5 The solicitors involved in the preparation of this prospectus are Kensington Swan. 3.6 No other professional advisers were involved in the preparation of this prospectus, and no experts are named in this prospectus. 11

12 4 Independence of unit trustee and any custodians 4.1 The Trustee and the Custodian are independent of us, Salt, and the Administration Manager. 5 Unit trustee 5.1 The New Zealand Guardian Trust Company Limited ( Trustee ) is the trustee of the Funds. Its address is: The New Zealand Guardian Trust Company Limited Level Queen Street Auckland 5.2 As at the Registration Date, the Trustee s directors are: Robin Albert Flannagan of Auckland, New Zealand James Earl Douglas of Auckland, New Zealand Andrew Howard Barnes of Auckland, New Zealand Timothy James Shaw of Auckland, New Zealand Christopher Robert Darlow of Auckland, New Zealand. 5.3 The Trustee s directors can be contacted at the Trustee s address set out above in paragraph The Trustee s address, directors, and directors address may change from time to time and can all be obtained from the Companies Office website or by calling the Trustee on or The Trustee was incorporated in New Zealand under the Companies Act 1955 on 7 September 1982 and was re-registered under the Companies Act 1993 on 23 April The ultimate holding company of the Trustee is Bath Street Capital Limited. Bath Street Capital Limited is incorporated in New Zealand. 5.7 The Trustee has been granted a licence under section 16(1) of the Financial Markets Supervisors Act 2011 to act as a trustee in respect of superannuation schemes, debt securities, unit trusts, and KiwiSaver schemes, and as a statutory supervisor for participatory securities, for a term expiring on 16 March A copy of the Trustee s licence, including the conditions on the licence, can be obtained at the FMA s website: and clicking on Help Me Comply, Supervisors, Licenced Supervisors, The New Zealand Guardian Trust Company Limited or on the Trustee s website: As at the Registration Date, all conditions and reporting obligations have been duly satisfied by the required dates. If you have any queries about the licence please contact the Trustee in the first instance. 5.9 None of the Trustee, Bath Street Capital Limited, or any other party guarantees any investment in the Funds The Trustee is entitled to an indemnity out of the assets of a Fund if it is held personally liable in respect of any debt, liability, or obligation incurred by or on behalf of that Fund or for any action 12

13 taken or omitted in connection with that Fund. The indemnity extends to the costs of any litigation or other proceedings in which liability is determined However, the Trustee is not entitled to be indemnified out of the assets of a Fund in respect of any liability for breach of trust where it fails to show the degree of care and diligence required of it in that capacity, having regard to the provisions of the Trust Deed and the powers, authorities, and discretions conferred by the Trust Deed. The Trustee is also expressly liable for any loss arising out of its own wilful default or wilful breach of trust In addition, the Trustee is entitled to be reimbursed for PIE tax paid or payable by it by cancelling relevant unit holders units. 6 Description of the unit trust and its development This section of the prospectus covers the following: Subject Paragraph Date of the Trust Deed and Establishment Deeds 6.1 Summary of the principal terms of the Trust Deed 6.2 Restrictions on investments 6.3 Investment and other material activities, and material developments, in the last five years 6.4 Investment objectives and policy 6.5 Investment performance 6.6 Distributions 6.7 Return of capital Date of the Trust Deed and Establishment Deeds The Trust Deed and each Establishment Deed are dated 16 April 2014, and have not been amended since that date Each Establishment Deed forms part of the Trust Deed (and references in this prospectus to the Trust Deed include each Establishment Deed, unless the context requires otherwise). 6.2 Summary of the principal terms of the Trust Deed This section of the prospectus contains a summary of the principal terms of the Trust Deed. The Trust Deed contains other provisions which govern the Funds. For details on how to view a copy of the Trust Deed, see section 19. Creation and structure of the Funds The Trust Deed allows us and the Trustee to establish new unit trusts within the Salt Investment Funds by entering into an Establishment Deed. We and the Trustee have entered into an Establishment Deed for each of the Funds. 13

14 6.2.3 To the extent we and the Trustee consider it necessary or appropriate in respect of the relevant Fund, each Establishment Deed sets out the trust particulars in relation to that Fund, being: a b c d e f g h i j authorised investments; investment strategy; frequency of valuation days; the effective valuation day for the issue of units; the period for processing withdrawals; limitations on borrowing; distribution policy; performance fees; any amendment of the Trust Deed applicable to the Fund; and any other matter we and the Trustee deem appropriate or necessary Each Fund commences on the date we specify in writing to the Trustee, or if we do not specify a date, the date we first accept payments for units in that Fund Each Fund is a single trust fund. This means that the assets of one Fund cannot be used to satisfy the liabilities of another. The Trustee holds the trust fund of each Fund (which includes all investments held by the Trustee in respect of the Fund, including the proceeds of selling any investments and any income earned on investments but not yet reinvested or distributed) in trust for the relevant unit holders, upon and subject to the terms and conditions contained or implied in the Trust Deed We can, after giving the Trustee and all affected unit holders at least two months written notice and subject to relevant law, amalgamate any Funds together or divide any Fund into separate Funds, by way of a deed amendment. We cannot do this during the period of any suspension (see paragraph ). Units The beneficial interest in each Fund is divided into units. Each unit confers an equal interest in that Fund. It does not confer any right or interest in the individual investments or any other part of that Fund or those of any other Fund. We may consolidate or subdivide units by notice to affected unit holders and the Trustee, and units can be denominated in part-units. Applications for units We can invite offers for units in any Fund and any such issue may be underwritten. This prospectus is an invitation in respect of the Funds You can apply for units in a Fund by completing the relevant application form and returning it to us with the required consideration (which must be cash, or if we permit, in a form other than cash such as existing investments). You can make a standing application for units, which means you apply for units in a Fund or Funds for an amount per month (or other period we determine), including by direct debit, without filling out a new application form. 14

15 Investments in the Funds can be made either directly, as outlined in paragraph 6.2.9, or through an administration service approved by us. Any such investment will be held by the administration service s custodian on your behalf and different minimum investment levels to those set out below may apply to the particular service that you use. Contact us for a list of approved administration services at any time We have an absolute discretion to accept or refuse to accept any application for units in whole or in part. If we reject an application we do not need to give reasons. If we reject an application, we will promptly refund the money paid. Interest will not generally be paid on application moneys refunded We can also redeem or treat as void any units that could or would result in the Fund losing its status as a portfolio investment entity. Where units are voided the applicant will be paid their subscription monies and (subject to maintaining equity between unit holders) any other compensation we consider appropriate We may set a minimum holding and/or application amount for any Fund. The minimum investment and holding amounts as at the Registration Date are: Type of minimum Minimum per Fund Minimum initial investment $25,000 Minimum additional lump sum investment Minimum regular investment $5,000 $1,000 per month We can waive these minimums either generally or in a particular case. We can also change these minimums from time to time. We will give you one month s notice if we increase these minimums. Contributions and how they are applied We will treat applications for units as a subscription for units in the relevant Fund(s) at the current issue price The issue price is the unit value plus any transaction costs (our estimate of the total cost of acquiring further investments, which may be a deemed percentage) The unit value is the amount calculated on the most recent valuation day (see paragraph ) by dividing the trust fund value of the relevant Fund by the number of units on issue. We calculate the trust fund value for a Fund each valuation day by deducting from the gross fund value of the Fund the aggregate of any accruals for fees and expenses (including our fees and the Trustee s fees). We calculate the gross fund value for a Fund by deducting from the aggregate of: a b c the cash held by the Fund; the market value (which is fixed by reference to market transactions, valuations, or our reasonable determination, depending upon the type of investment) of all other investments held by the Fund; the value of any other assets of the Fund (fixed by us, having regard to generally accepted 15

16 accounting principles); d the benefit of adjustments made to unit holders interests on account of PIE tax, the aggregate of the liabilities of the Fund, excluding PIE tax unless it has been recovered from unit holders but including all unpaid costs, fees, and charges of the Fund accrued to that date As at the Registration Date, valuation days occur each business day, although we could change this by giving written notice to the Trustee. Generally, if we receive a valid application before 1.00pm on a valuation day, we will issue units at the issue price set using the market value of the Fund s investments on that day. If we receive the application on or after 1.00pm, we will issue units at the issue price set using the market value of the Fund s investments on the next valuation day. However, we may defer processing applications if we consider it necessary or desirable We may charge a contribution fee of an amount determined by us from time to time (including for switching see paragraph ). As at the Registration Date we do not charge contribution fees. We may decide to charge a contribution fee in the future of up to 5% of the consideration paid for units We can, by notice to the Trustee, determine that no further units in a particular Fund or Funds will be issued for a specified period or until that Fund is terminated. Withdrawals You may make a withdrawal from any Fund by giving us a withdrawal notice. A withdrawal notice may be in writing or by electronic means. We have a discretion to accept verbal notices, but as at the Registration Date do not intend to do so. A withdrawal notice must specify the Fund you wish to withdraw from, the dollar amount or number of units to be withdrawn, and must comply with any specifications we prescribe. A withdrawal notice is irrevocable once given Withdrawals will be processed as soon as possible after we receive a valid withdrawal notice, and in any case for every Fund but the Salt Long Short Fund will be processed within 10 business days of receipt of that withdrawal notice. In the case of the Salt Long Short Fund, withdrawals will be processed within 15 business days of receipt of the withdrawal notice. However, if, in our opinion, it is not practical or desirable to do so on that valuation day by reason of any of the circumstances set out under Suspension of withdrawals and Large withdrawals below, we will process the withdrawal on the first valuation day we consider practicable. Unless we defer or suspend withdrawals, valid withdrawal notices received on a valuation day before 1.00 pm will be processed using the unit price set using the market value of the Fund s investments on that day. Withdrawal notices received on or after 1.00 pm will be processed using the withdrawal value set using the market value of the Fund s investments on the following valuation day The withdrawal value of a unit will be the unit value on the relevant valuation day less transaction costs (our estimate of the total cost of selling investments, which may be a deemed percentage) We may satisfy a withdrawal request by (through the Trustee) transferring investments of the Fund to you. If your withdrawal is for less than 5% of a Fund s trust fund value for the relevant valuation day, your and the Trustee s agreement is required before a transfer of investments can occur. These investments will have a market value equal to the amount that you would have received in cash (that is, after deduction of any applicable transaction costs). Where we 16

17 transfer assets to you, we will determine which investments to transfer to you after considering your and the other unit holders interests A withdrawal from a Fund is subject to the deduction of any duty or tax payable, the payment of any withdrawal fee, and our and the Trustee s right to be reimbursed for expenses (see paragraphs and ). As at the Registration Date we do not charge withdrawal fees. We may decide to charge a withdrawal fee in the future of up to 5% of the amount withdrawn The number of units withdrawn and the number of units remaining must satisfy the minimum requirements set by us from time to time, unless the withdrawal is for all of your units in the relevant Fund. The minimum withdrawal and holding amounts as at the Registration Date (which we can waive) are: Type of minimum Minimum per Fund Minimum withdrawal amount $5,000 Minimum remaining Fund holding after withdrawal $25, To satisfy a redemption we may direct the Trustee to realise investments of the Funds and/or borrow (if permitted in respect of a Fund) on behalf of a Fund to provide moneys to pay the amount withdrawn. Switching You can switch a dollar amount or number of units between Funds by giving us a switching notice that specifies the Fund or Funds you want to switch between. Any minimums applying to switches and minimum holdings must be met, and a notice is irrevocable once given unless we agree otherwise. Switching notices must comply with any specifications we prescribe. As at the Registration Date the minimum switch and holdings following a switch (unless the switch is for all units in the existing Fund) are: Type of minimum Minimum per Fund Minimum switch amount $5,000 Minimum remaining Fund holding after switch $25, Withdrawal and/or contribution fees may be charged if you switch between Funds. As at the Registration Date we do not charge either fee, although we may decide to do so in the future A switching notice takes effect as a withdrawal of units from the existing Fund and an application for units in the requested Fund(s). The provisions of the Trust Deed relating to withdrawals (including, for example, the ability to suspend withdrawals) apply with all necessary modifications We require unit holders to provide us with evidence of their identity before giving effect to any withdrawal or switch. We may decline to implement a switch in our sole discretion, including where the switch could or would result in a Fund losing PIE status. We do not need to give reasons where we decline to implement a switch From time to time we can set a minimum holding for a Fund or a unit holder, and if the a unit holder s holding falls below the relevant minimum, they will be deemed to have given a 17

18 withdrawal notice for their remaining units. Suspension of withdrawals If as a result of: a a decision to wind-up a Fund or Funds (see paragraph ); b c d e the suspension of trading on any exchange; financial, political, or economic conditions in any financial market; the nature of any investment; or the occurrence or existence of any other circumstance or event relating to the Fund or generally, we form the opinion in good faith that it is not practicable, or would be materially prejudicial to the interests of unit holders generally for units specified in a withdrawal or switching notice to be redeemed, we may suspend withdrawals and switches from that Fund by giving a notice to that effect to the Trustee and any unit holder of that Fund that gives or has given a withdrawal or switching notice that has not been given effect to A suspension may last up to three months, unless the Trustee agrees to an extension. We must cancel a suspension if the circumstances that gave rise to the suspension cease to apply. There is no limit on the period that a suspension can be extended for with the Trustee s agreement. Large withdrawals If a withdrawal or switching notice, or a series of withdrawal and/or switching notices have been received within three months and those notices in aggregate relate to more than 5% of the units on issue in a Fund at the time of the last notice (or any other percentage we specify by at least 30 days prior notice to unit holders and the Trustee), we can defer the redemption of those units We will give notice to the Trustee and affected unit holders of any deferral, and that notice will set out the intended dates of redemption of units. We are able to redeem affected units progressively by instalments with effect from one or more valuation days falling in a period we specify, and/or in total at the expiry of a period we determine. In each case, the period cannot be longer than 90 days unless the Trustee approves, and the Trustee cannot unreasonably withhold its approval. The withdrawal value of affected units will be calculated on the valuation days on which they are redeemed. Transfers and assignment of units You can transfer units to another person by completing and signing a transfer form approved by us The number of units transferred and the number of units remaining must satisfy the minimum requirements set by us from time to time. As at the Registration Date the minimum transfer and remaining holding amounts (unless the existing unit holder transfers all of his or her units) are: 18

19 Type of minimum Minimum per Fund Minimum transfer amount $5,000 Minimum remaining Fund holding after switch (both existing unit holder and transferee) $25, We may suspend transfers from time to time. We cannot suspend transfers for more than 30 working days in a calendar year without the Trustee s agreement. We may also decline a transfer, including where the transfer would or could result in an affected Fund losing its status as a portfolio investment entity. Before a transfer can occur, the existing unit holder must pay all duties, taxes, and other commissions, fees, and charges in respect of that transfer We will recognise the executors or administrators of a deceased unit holder (or in the case of joint unit holders, the surviving unit holder(s)) as having title to, or interest in, a deceased unit holder s units. However, if a unit holder sold or otherwise disposed of units and delivered a transfer instrument to the transferee prior to their death then we are able to register that transfer of units even if we are aware of the unit holder s death Any person who has authority to administer the estate of a mentally disordered person, or who becomes entitled to units due to the bankruptcy or liquidation of a unit holder, will be registered as the holder of those units, or be permitted to transfer these units, upon producing such evidence of capacity or title as we think sufficient Unless we determine otherwise, we will process a transfer as a withdrawal and subsequent application for units in the relevant Fund. However, the issue price for units issued will be the same as the withdrawal value for the units withdrawn to facilitate the transfer. This means that the transferee will receive the same number of units that the existing unit holder held, less any units redeemed to pay the existing unit holder s tax liability. Investments Each Fund is invested in authorised investments, which means any investment, security, derivative, interest, or estate, whether in New Zealand or any other country and whether legal or equitable, corporeal or incorporeal, freehold, leasehold, or some other tenure as agreed between us and the Trustee from time to time. Each Fund s particular authorised investments are set out in its Establishment Deed and listed in section When a Fund is established, the Establishment Deed will contain a brief statement of its investment strategy. Each Fund is invested in accordance with that investment strategy, and in accordance with any investment policy and guidelines for the Fund agreed between us and the Trustee from time to time see section We and the Trustee can change the authorised investments and investment strategy for a Fund by amending the Establishment Deed (see paragraph ). We can change the investment policy and guidelines for a Fund by agreement with the Trustee. We will give affected unit holders two months notice of any material changes to the investment strategy and investment objectives and policy for a Fund The assets of each Fund are vested in the Trustee or its nominee. We direct the Trustee in relation to the acquisition, sale, transfer, replacement, investment, management, amendment, modification, and disposition of the investments of a Fund, and the entering into of any 19

20 commitments or liabilities related to the authorised investments of a Fund The Trustee must refuse to act on a direction to acquire or dispose of any investment if, in the Trustee s opinion, the acquisition or disposition is contrary to the provisions of the Trust Deed, would result in a breach by the Trustee of any obligations or duties imposed on the Trustee by law, or is manifestly not in the interests of unit holders. The Trustee can also, before entering into any transaction, security, or liability, require that its liability is restricted or limited to its satisfaction to the investments of the relevant Fund. Dealings with related parties Unless the relevant transaction is on normal commercial arm s length terms, we cannot, without the prior approval of the Trustee: a b c cause any part of any of the Funds trust funds to be invested or lodged with us, any of our directors, or any of our related parties (as defined in the Financial Markets Conduct Act 2013); sell, purchase, or otherwise dispose of or acquire any asset or investment to or from one of our related parties, or a group investment fund, unit trust, KiwiSaver scheme, superannuation scheme, or other trust we or a related party manage; or enter into any contract, agreement, or other arrangement with a related party to provide management, consultancy, or other services to or in respect of a Fund Any required approval can be given in either specific or general terms, and cannot be unreasonably withheld by the Trustee. Distributions and bonus units We can distribute amounts from a Fund at any time, which may be made up of all or part of the income or capital of that Fund. If we do decide to make distributions, we will determine the amount to be distributed after giving prior notice to the Trustee, and in doing so may (in our discretion) take into account a range of factors, including the net income of the Fund, any tax that is or may become payable, and the cash flow requirements of the Fund Unless we decide otherwise and notify unit holders, each unit holder s entitlement to distributions will be calculated and distributed in proportion to the number of units they hold Distributions will either be paid to unit holders or if we allow, reinvested at the unit holder s direction. As at the Registration Date, distributions are not made see section If we recommend, and the Trustee accepts that recommendation, the Trustee will capitalise the whole or any part of the income or capital of a Fund and apply it towards paying in full new units to be issued and distributed as fully paid bonus units to unit holders as if those units were distributions. Valuation of investments The market value of investments in each Fund on any valuation day means the following: a For investments which are listed on a stock exchange, the value we determine with reference to the price quoted for the last sale of the investment on or before that valuation day. However, if there has been no such sale or if in our reasonable opinion the last sale is not an accurate measure of the value of the investment, the value will be the value that 20

21 we determine, acting reasonably and after giving prior notice to the Trustee, having regard to any information we consider appropriate, including the advice of a valuer. b c d For investments which are valued by the issuer of those investments, the most recent valuation made of those investments that we are aware of prior to the relevant valuation day. If, in our reasonable opinion, that valuation is not an accurate measure of the value of the investment, the value will be the value we determine using some other form of appropriate determination in respect of any specific investment from time to time as we determine and the Trustee agrees to. For real property investments, the value fixed by a valuer within the last 12 months. If, in our reasonable opinion, that valuation is not an accurate measure of the value of the investment, the value will be the value we determine using some other form of appropriate determination in respect of any specific investment from time to time as we determine and the Trustee agrees to. For any other investment, the value we fix according to proper prudent principles of valuation agreed with the Trustee or, failing agreement, according to principles of valuation determined by a valuer Where the required valuation information in relation to investments listed on a stock exchange or valued by the relevant issuer is not received within 24 hours of the time fixed for valuation of those investments, the value that applied on the previous valuation day will be used. Borrowing If allowed by the relevant Establishment Deed, the Trustee may, and must if we direct, borrow and raise money for the purposes of a Fund on any terms we and the Trustee think fit. We can give security from the relevant Fund for borrowings We can only borrow if we determine in good faith that it is necessary or desirable for the sole purpose of conducting the operation of the trust fund of any Fund (including facilitating the payment of withdrawals). In addition, borrowing can only occur if the principal amount owing will not exceed the limit on borrowing set out in the relevant Establishment Deed see section 6.5 for the limit (if any) on borrowing for each Fund In addition, the Trustee does not need to comply with any direction to borrow or grant security for borrowing in relation to a Fund unless satisfied that the above conditions are met and that: a b c its liability is restricted to the investments of the relevant Fund; investments belonging to another Fund will not become liable in respect of the relevant Fund s borrowing; and any security for borrowing or other obligations will not impose any unreasonable obligations on the Trustee. The Trustee The Trustee acts as trustee for the unit holders of each Fund and to hold the trust fund of each Fund in trust for those unit holders, upon and subject to the terms and conditions contained or implied in the Trust Deed The Trustee must: 21

22 a b c be a body corporate incorporated in New Zealand; not be an associated person of us (within the meaning of subpart YB of the Income Tax Act 2007); and otherwise be entitled by law to act as the trustee of the relevant Fund, including where required by law holding an appropriate license under the Financial Markets Supervisors Act 2011 (see paragraph 5.7) The Trustee must exercise reasonable diligence to ascertain whether or not any breach of the terms of the Trust Deed or of the terms of the offer of units in the Funds has occurred. The Trustee must do all the things that it is empowered to do to cause any such breach to be remedied (except if it is satisfied that the breach will not materially prejudice the interests of unit holders) The Trustee is entitled to a fee from each Fund of up to 0.075% plus any GST per annum of the gross fund value of that Fund as agreed with us. However, the Trustee is entitled to a minimum fee of $10,000 plus any GST for the first year the Funds are in operation, and $20,000 plus any GST per annum after the first year, which is spread equitably across all of the Funds that have commenced operations In addition, the Trustee is entitled to: a b c d special fees, which will be paid from the relevant Fund(s), for services of an unusual or onerous nature outside the Trustee s regular services (including, for example, convening meetings of unit holders, breaches of trust, and exercising discretions), as we agree with the Trustee from time to time; the reimbursement of expenses incurred in performing services in respect of each Fund; charge GST, any value added tax or duty, or similar tax payable in respect of its fees; and review its fee on an annual basis and increase its fee with our agreement by giving at least one month s prior notice to affected unit holders. See section 13.1 for details of the fees the Trustee charges as at the Registration Date The Trustee can be removed in the following ways: a b We can remove the Trustee with the approval of the High Court. We can remove the Trustee under section 23 or 38 of the Financial Markets Supervisors Act The Trustee may retire by giving us at least 90 days notice where: a b c all of the functions and duties of the position have been performed; another appropriately licensed person has been appointed and has accepted that appointment by agreeing to be bound by the Trust Deed, and all of the Funds investments have been transferred to that person; or the High Court consents We may appoint a replacement trustee if the Trustee is removed or resigns. If we fail or refuse to appoint a new trustee within 90 days, unit holders may do so by an extraordinary resolution at a meeting of unit holders of all of the Funds within the Salt Investment Funds. The outgoing 22

23 The Manager trustee is released from the date the replacement trustee becomes bound by the Trust Deed We are responsible for the management of the Salt Investment Funds and will use our best endeavours to ensure that the activities of each Fund are carried on in a proper and efficient manner To act as the manager of the Funds, we must: a be a company within the meaning of the Companies Act 1993; b c d have at least one director who is a New Zealand resident; not be an associated person (within the meaning of subpart YB of the Income Tax Act 2007) of the Trustee; and otherwise be a person entitled by law to act as the manager of each Fund Our powers include: a b c d e managing and making all decisions in relation to the acquisition and disposal of authorised investments; exercising of all voting powers attached to the investments of the Funds; borrowing money from any person and granting securities for that borrowing (by way of directions to the Trustee). Any restrictions on the borrowings of the Funds are detailed in section 6.5; investing the assets of each Fund (by way of directions to the Trustee see paragraphs and ) within any guidelines agreed with the Trustee; and with the Trustee s prior approval and agreement on the services to be provided by the auditor, appointing an auditor for the Funds We also have the power to: a b c delegate any or all powers, authorities, functions, and discretions under the Trust Deed; appoint any person to be our attorney or agent; and appoint any person on such terms as we in our discretion determine to be an agent or sub-manager in respect of the investments of any Fund. We remain liable for the performance of functions delegated From each Trust we are entitled to: a b a management fee of up to 2% plus any GST per annum of the Fund s gross fund value; and a performance fee, plus any GST, as specified in each Fund s Establishment Deed We may increase (up to the 2% maximum) the management fee in respect of a Fund after giving at least one month s prior notice to affected unit holders and the Trustee. We may also waive or reduce the management fee. See section 13.1 for details of the fees we charge as at 23

24 the Registration Date In the case of performance fees, both the amount and the basis of calculation may be amended by giving at least one month s prior notice to affected unit holders and the Trustee (for example, the benchmark hurdle rate or fee percentage could be changed) We are entitled to the reimbursement of expenses incurred in performing services in respect of each Fund, and to receive any value added tax or duty or similar tax payable in respect of the management fee including GST We will cease to hold office as manager of a Fund immediately if: a b c d we are removed by the High Court on the application of the Trustee, any unit holder, or the Financial Markets Authority; the Trustee certifies that it is in the interests of unit holders of any Fund that we cease to hold office as the manager of that Fund; the unit holders of any Fund by extraordinary resolution direct that we cease to hold office as manager of that Fund; or we have a receiver appointed or an order is made or a resolution is passed for our liquidation We may retire at any time by giving the Trustee at least 90 days written notice. Our retirement will not take effect until a new manager has been appointed and the new manager executes a deed agreeing to be bound by the Trust Deed Where we retire or are removed, the Trustee has the power to appoint a temporary replacement manager. Upon a vacancy in the office of manager, the Trustee will call an extraordinary meeting of unit holders to appoint a replacement manager in accordance with section 23(2) of the Act. The outgoing manager is released from the date the replacement manager becomes bound by the Trust Deed. The auditor We, with the Trustee s prior approval, appoint the auditor of each Fund. We also fix the auditor s fees, which are paid out of the trust fund of that Fund. We and the Trustee will agree on the services to be provided by the auditor The auditor may retire upon giving not less than 90 days notice to the Trustee. The auditor can be removed at any time by the Trustee (after consultation with us) or by an extraordinary resolution of unit holders of a Fund. Indemnities and limitations of liability We and the Trustee, in incurring any debts, liabilities, or obligations, or in taking or omitting any other action pursuant to the Trust Deed, are acting for and on behalf of unit holders and not in our personal capacities. The Trustee is not bound to make any payment to unit holders except out of the appropriate trust fund of a Fund, or be liable to unit holders to any greater extent than the investments of the relevant Fund We and the Trustee are entitled to an indemnity out of the assets of a Fund if either of us are held personally liable in respect of any debt, action taken, or omitted in connection with a Fund, or liability or obligation incurred by or on behalf of that Fund. This indemnity extends to the 24

25 costs of any litigation or other proceedings in which liability is determined However, neither we nor the Trustee are entitled to be indemnified out of the assets of a Fund in respect of any liability for breach of trust where we or the Trustee (as applicable) fail to show the degree of care and diligence required of us in that capacity, having regard to the provisions of the Trust Deed and the powers, authorities, and discretions conferred by the Trust Deed. We and the Trustee are also expressly liable for any loss arising out of our own or the Trustee s own (as applicable) wilful default or wilful breach of trust. We (but not the Trustee) are also liable where we have failed to use our best endeavours to ensure that the Funds are carried on in a proper and efficient manner Neither we nor the Trustee are responsible for any loss caused by the other or the other s agent, nor are either of us responsible for checking any information, document, form, or list supplied by one of us (or our respective agents) to the other. We and the Trustee are each entitled to act upon the opinion, advice, statements, or information of any solicitor, banker, accountant, broker, or other person that we or the Trustee (as applicable) believe to be expert in relation to the matters on which they are consulted, and neither of us are liable for anything done or suffered by either of us in good faith in reliance upon it. Unit holders rights Each unit holder of a Fund is entitled to: a depending on our election, within four months of the end of the Fund s accounting period or as otherwise prescribed by law: A receive a copy of the annual financial statements of the Fund, the auditor s report on those financial statements, and a summary of any amendments to the Trust Deed since the date of the last statement; or B receive a notice setting out where and how to obtain an electronic copy of the information described in paragraph (a)(a) above, and stating that a unit holder has a right to, within 15 working days of receiving that notice, request a copy of the information described in (a)(a), free of charge; and C if we elect to send a notice in accordance with paragraph (a)(b), receive a copy of that information free of charge if requested within 15 working days of receiving that notice; and b on request at any reasonable time inspect a copy of the Trust Deed and the register of the Fund and upon payment of a reasonable fee prescribed by the Trustee, obtain a copy of the Trust Deed. Unit holders may also request a copy of this prospectus, the Funds financial statements (once available), any certificate registered to extend the life of this prospectus, and any investment statement. Unit holder liability Unit holders are not liable to indemnify us or the Trustee in respect of any debt or liability incurred in respect of any Fund, except in respect of any tax paid or payable by us or the Trustee in respect of you or your units. Meetings of unit holders We will summon a meeting of unit holders of a Fund if we receive a written request from: 25

26 a b c the Trustee; 10% in number of all unit holders of the Fund; or unit holder(s) holding 10% of the value of the units in the Fund at the date we receive the request We may, after consultation with the Trustee, also convene a meeting of the unit holders of any Fund at any time We will give at least 14 days written notice of a meeting. Meetings are held in accordance with the procedural provisions set out in Schedule 2 of the Trust Deed. A quorum of persons holding 10% of the units in the relevant Fund is required before business can be transacted. If a quorum is not reached, unless the meeting was convened at the request of unit holders (in which case the meeting will be dissolved), the meeting will be adjourned to a time set by the chairman that is not less than 14 days after the original meeting date. If a quorum is not present at any adjourned meeting, the persons who are present will constitute a quorum An extraordinary resolution passed at a meeting of unit holders duly convened and held in accordance with the Trust Deed is binding on all unit holders Each unit holder is entitled to one vote and may appoint a proxy or attorney to vote on the unit holder s behalf. If a poll is called, each unit holder is entitled to one vote for every unit held. Ordinary resolutions are passed by a majority, extraordinary resolutions are passed by a majority of 75% of the votes cast and special resolutions are passed on a poll by a majority of 75% of the votes cast, being the votes of unit holders holding at least 25% of the units of the relevant Fund. Amendments to the Trust Deed We and the Trustee may amend the Trust Deed or any Establishment Deed in any of the following situations: a Where: A we and the Trustee agree the amendment will not have a material adverse effect on unit holders generally; or B a change in any law affecting the Funds occurs and as a result in our and the Trustee s opinion a change to the relevant Deed is necessary or desirable to make any provision of that Deed consistent with the law, and we notify affected unit holders in the next communication to be sent to those unit holders (which may be after the amendment takes effect). b Where either or both of us and the Trustee believe the amendment will have a material adverse effect on unit holders and the amendment is effected at least two months (or any lesser period the Trustee agrees to) after notice of the amendment has been sent to every affected unit holder, provided that the notice cannot be given if withdrawals have been suspended for the affected Funds (see paragraph ). Wind-up of the Funds A Fund will be wound up if: a we resolve to wind up that Fund with effect from a date specified in that resolution, which 26

27 must be at least 15 days after the date of the resolution unless the Trustee agrees otherwise, and give written notice of that resolution to the Trustee; b c an extraordinary resolution to that effect is passed by the unit holders in the Fund; or a period of 80 years from the date of the commencement of that Fund has passed Following one of the above wind-up events occurring, we are able to immediately suspend withdrawals, switches, and applications for units in respect of the relevant Fund. If we do so we will give written notice to affected unit holders and the Trustee Within 14 days of any of the above wind-up events occurring we will give unit holders in the relevant Fund notice of the winding up and of the Trustee s intention to distribute the assets of the Fund to them. Unless we invite unit holders to switch to another Fund that is not being wound up, from the date we give that notice no withdrawals, switches, or applications for units can be made in respect of the relevant Fund Upon the winding up of a Fund the assets of that Fund are realised and after payment of all taxes, claims, and liabilities (including contingent liabilities) the proceeds distributed to the unit holders that held units in that Fund immediately prior to winding up. If the Trustee believes it is expedient to do so, it can make interim payments or distributions (including in specie distributions of the relevant Fund s investments) on account of the funds to be distributed. 6.3 Restrictions on investments There are no restrictions on the investment of the funds of each Fund, other than as set out in each Fund s trust particulars (see paragraph 6.2.3) and investment objectives and policy (see section 6.5). 6.4 Investment and other material activities, and material developments, in the last five years Investment activities Since commencing investment activities on the date set out in the table below, each Fund listed has invested its funds in accordance with its investment strategy and objectives and policy: Fund Commencement Date Salt Long Short Fund 1 July 2014 Salt Listed Property Fund 12 November 2014 Salt NZ Dividend Appreciation Fund 1 July As we have not yet accepted any consideration for units in the Salt Javelin Fund, it has not commenced its investment activities. Material developments The Financial Markets Conduct Act came into full force on 1 December 2014, subject to a twoyear transition period. That transition period ends on 30 November 2016, although we may optin to the Financial Markets Conduct Act regime in respect of the Funds prior to that date. For practical purposes, the law that applied prior to 1 December 2014 continues to apply to the 27

28 Funds during the transition period. Investors in each Fund will be notified of any material changes arising out of complying with the Financial Markets Conduct Act No other material developments have occurred in respect of the Funds between their establishment on 16 April 2014 and the Registration Date. 6.5 Investment objectives and policy Each Fund has its own investment objectives and policies. Details as at the Registration Date are set out below The investment objectives form part of the investment guidelines for each Fund. We can change the investment objectives and policies in the manner set out in paragraph As at the Registration Date no changes are pending, although it is possible that changes will be made during the expected currency of this prospectus Salt Javelin Fund Authorised investments The authorised investments for this Fund are: ordinary shares, ordinary units, stapled securities, preference shares, convertible and converting notes, warrants, options, rights and other securities in corporations listed on the NZX operated by NZX Limited ( NZX ) and/or the Australian Securities Exchange ( ASX ), or if not then listed on the NZX and/or ASX, is (in our reasonable opinion) expected to be listed on the NZX and/or ASX within one year (or such longer period as we determine is reasonable from time to time whether generally or in relation to any particular category or case) from the date of purchase or subscription; derivatives (either exchange traded or over-the-counter) including but not limited to swaps, interest rate and forward rate contracts, forward foreign exchange contracts, options, and futures contracts; units and other prescribed interests in unit trusts or other pooled funds that invest in the investments referred to above, including unit trusts managed by us or our related parties; irrespective of whether the trust or fund is listed on the NZX and/or ASX; cash or cash equivalent securities; and any other investment, right, interest, obligation or property of any nature nominated by us and approved by the Trustee from time to time. As at the Registration Date, this includes entering into sub-underwriting arrangements in respect of shares only that will be listed on an exchange managed or administered by the NZX or ASX. Investment strategy Investment objectives The Salt Javelin Fund is a portfolio of securities that represent our best ideas in the New Zealand and Australian equity markets. The Fund also has the ability to hold cash while it awaits compelling investment opportunities as determined by us. The Fund s investment objective is to outperform the Reserve Bank of New Zealand Official Cash Rate +5% p.a. benchmark over a full market cycle by 28

29 and policy investing predominantly in New Zealand and Australian shares. Investment Limits: Sector Minimum (%) Maximum (%) NZ shares Australian shares 0 50 Cash or cash equivalents 0 30 The Fund takes an active approach to currency hedging. While generally fully hedged, the Fund s overseas assets may be partially hedged or unhedged at our discretion. The Fund actively invests in New Zealand and Australian shares and subsequent returns may be volatile. This Fund is likely to suit investors wanting to diversify their NZ and Australasian share exposure via a portfolio of our best stock ideas. It will also suit investors who have a longer term investment timeframe (at least five years) and who are prepared to accept a high degree of volatility. Borrowing Distributions Minimum investment amount Minimum withdrawal amount Minimum balance We do not intend to borrow in respect of the Salt Javelin Fund unless for settlement purposes. No borrowing may be made if the total amount of principal moneys borrowed by the Fund and outstanding would exceed 25% of the trust fund value unless otherwise agreed with the Trustee. We do not intend to make distributions although we reserve the right to amend this policy and make distributions of income and/or capital in the future. If we do make distributions, we will agree the terms for those distributions with the Trustee. $25,000 $5,000 $25, Salt NZ Dividend Appreciation Fund Authorised investments The authorised investments for this Fund are: ordinary shares, ordinary units, stapled securities, preference shares, convertible and converting notes, warrants, options, rights and other securities in corporations listed on the NZX operated by NZX Limited ( NZX ), or dual-listed on the NZX and the Australian Securities Exchange ( ASX ), or if not then listed on the NZX or dual-listed on the NZX and ASX, is (in our reasonable opinion) expected to be listed on the NZX or duallisted on the NZX and ASX within one year (or such longer period as the we determine is reasonable from time to time whether generally or in relation to any particular category or case) from the date of purchase or 29

30 subscription; derivatives (either exchange traded or over-the-counter) including but not limited to swaps, interest rate and forward rate contracts, forward foreign exchange contracts, options, and futures contracts; units and other prescribed interests in unit trusts or other pooled funds that invest in the Investments referred to above, including unit trusts managed by the us or our related persons; irrespective of whether the trust or fund is listed on the NZX or dual-listed on the NZX and ASX; cash or cash equivalent securities; and any other investment, right, interest, obligation or property of any nature nominated by us and approved by the Trustee from time to time. As at the Registration Date, this includes entering into sub-underwriting arrangements in respect of shares only that will be listed on an exchange managed or administered by the NZX or ASX. Investment strategy Investment objectives and policy The Salt NZ Dividend Appreciation Fund targets a portfolio of shares of New Zealand companies that may, in our opinion, pay high and sustainable dividends. The Fund s investment objective is to outperform the S&P/NZX 50 Gross Index over a full market cycle by investing predominantly in New Zealand shares. Investment Limits: Sector Minimum (%) Maximum (%) NZ shares Cash or cash equivalents 0 5 The Fund actively invests in New Zealand shares and subsequent returns may be volatile. This Fund is likely to suit investors wanting to diversify their NZ share exposure with a focus on companies that pay high sustainable dividends. It will also suit investors who have a longer term investment timeframe (at least five years) and who are prepared to accept a high degree of volatility. Borrowing Distributions Minimum investment amount Minimum withdrawal We do not intend to borrow in respect of the Salt NZ Dividend Appreciation Fund unless for settlement purposes. No borrowing may be made if the total amount of principal moneys borrowed by the Fund and outstanding would exceed 25% of the trust fund value unless otherwise agreed with the Trustee. We do not intend to make distributions although we reserve the right to amend this policy and make distributions of income and/or capital in the future. If we do make distributions, we will agree the terms for those distributions with the Trustee. $25,000 $5,000 30

31 amount Minimum balance $25, Salt Listed Property Fund Authorised investments The authorised investments for this Fund are: ordinary shares, ordinary units, stapled securities, preference shares, convertible and converting notes, warrants, options, rights and other securities in corporations listed on the NZX operated by NZX Limited ( NZX ) and/or the Australian Securities Exchange ( ASX ), or if not then listed on the NZX and/or ASX, is (in our reasonable opinion) expected to be listed on the NZX and/or ASX within one year (or such longer period as we determine is reasonable from time to time whether generally or in relation to any particular category or case) from the date of purchase or subscription; derivatives (either exchange traded or over-the-counter) including but not limited to swaps, interest rate and forward rate contracts, forward foreign exchange contracts, options, and futures contracts; units and other prescribed interests in unit trusts or other pooled funds that invest in the investments referred to above, including unit trusts managed by us or our related persons; irrespective of whether the trust or fund is listed on the NZX and/or ASX; cash or cash equivalent securities; and any other investment, right, interest, obligation or property of any nature nominated by us and approved by the Trustee from time to time. As at the Registration Date, this includes entering into sub-underwriting arrangements in respect of shares only that will be listed on an exchange managed or administered by the NZX or ASX. Investment strategy Investment objectives and policy The Salt Listed Property Fund targets a portfolio of shares of New Zealand and Australian property trusts, companies and other property related securities with exposure to commercial, residential, retail, tourism, industrial, medical, educational, rural, retirement, and other property sectors. As at the Registration Date, the other property sectors include leisure. The Fund may also invest in shares of New Zealand and Australian property trusts, companies and other property related securities with exposure to infrastructure sectors, but as at the Registration Date does not intend to do so. The Fund s investment objective is to outperform the S&P/NZX Property Sector Gross Index over a full market cycle by investing predominantly in New Zealand and Australian property and property-related shares. 31

32 Investment Limits: Sector Minimum (%) Maximum (%) NZ property and property related shares Australian property and property related shares 0 50 Cash or cash equivalents 0 5 The Fund takes an active approach to currency hedging. While generally fully hedged, the Fund s overseas assets may be partially hedged or unhedged at our discretion. The Fund actively invests in New Zealand and Australian property and property related shares and subsequent returns may be volatile. This Fund is likely to suit investors looking to invest into property related shares over a longer term investment timeframe (at least five years) and who are prepared to accept a high degree of volatility. Borrowing Distributions Minimum investment amount Minimum withdrawal amount Minimum balance We do not intend to borrow in respect of the Salt Listed Property Fund unless for settlement purposes. No borrowing may be made if the total amount of principal moneys borrowed by the Fund and outstanding would exceed 25% of the trust fund value unless otherwise agreed with the Trustee. We do not intend to make distributions although we reserve the right to amend this policy and make distributions of income and/or capital in the future. If we do make distributions, we will agree the terms for those distributions with the Trustee. $25,000 $5,000 $25, Salt Long Short Fund Authorised investments The authorised investments for this Fund are: ordinary shares, ordinary units, stapled securities, preference shares, convertible and converting notes, capital notes, debt instruments, warrants, options, rights and other securities in corporations listed on the NZX operated by NZX Limited ( NZX ) and/or the Australian Securities Exchange ( ASX ), or if not then listed on the NZX and/or ASX, is (in our reasonable opinion) expected to be listed on the NZX and/or ASX within one year (or such longer period as we determine is reasonable from time to time whether generally or in relation to any particular category or case) from the date of purchase or subscription; derivatives (either exchange traded or over-the-counter) including but not limited to swaps, interest rate and forward rate contracts, forward foreign 32

33 exchange contracts, options, and futures contracts; units and other prescribed interests in unit trusts or other pooled funds that invest in the investments referred to above, including unit trusts managed by us or our related parties; irrespective of whether the trust or fund is listed on the NZX and/or ASX; cash or cash equivalent securities; any other investment, right, interest, obligation or property of any nature we nominate and the Trustee approves from time to time (as at the Registration Date, this includes entering into sub-underwriting arrangements in respect of shares only that will be listed on an exchange managed or administered by the NZX or ASX); and stock borrowing, repos, short selling, or other derivative positions taken in respect of the above. Investment strategy The Salt Long Short Fund aims to deliver positive absolute returns in all market environments. In addition to holding long-only New Zealand and Australian securities, the Fund may, at our discretion, short sell securities, hold cash, lever its assets and utilise active currency management to generate returns. How the Fund invests Please read the following information carefully, as the Salt Long Short Fund has unique features that mean that it will not be appropriate for all investors. Further information on the risks that are specific to the Fund is set out in section We suggest that you speak to a financial advisor to help you determine if an investment in the Salt Long Short Fund is appropriate for you. Investment approach Based on our research and analysis we use forecasts to generate our view of the fair value for a company and attractive potential investment opportunities are identified when the share price of a company is well below our fair value (for long positions ) or well above our fair value (for short positions ). The ability of the Salt Long Short Fund to both buy shares with the objective of selling those shares at a later date and at a higher price to make a profit ( long positions ) and to sell shares ( short sell ), that have been lent to the Fund, with the objective of purchasing those shares at a lower price to make a profit ( short positions ) is the key distinguishing feature of the Fund compared to traditional equity investment funds. See Short selling below for more information on the difference between long positions and short positions. Short selling The Fund uses short selling as part of its investment strategy. Short selling involves the sale of a security that a seller, such as the Fund, has borrowed, to be subsequently repurchased in the future. Short selling is undertaken with the belief that the security can be repurchased at a lower price than it was initially 33

34 sold for. Short selling differs from long positions in that long positions are shares which the Fund has bought and owns with the objective of selling at a higher price than the Fund purchased it for. The Fund will make money on long positions if the share price increases while it will make money on short positions if the share price falls. Conversely, the Fund will lose money on long positions if the share price decreases and will lose money on short positions if the share price increases in the period before the Fund has to return the borrowed securities. Since there is no upper limit to a share price, the risk of loss on a short sale is theoretically infinite. We employ a number of risk management strategies to mitigate this risk which are explained further under Risk management. When looking to short sell a security and take on a short position, we adhere to a number of philosophies and strategies including: Poor quality cash-flow and financial leverage Companies which use aggressive accounting techniques, such that reported earnings differ sharply from the underlying free cashflows that the company actually generates, can be attractive shorts. Companies with steadily rising debt levels can be attractive short positions regardless of their reported earnings. Over-priced securities Companies trading above our assessment of fair value may be attractive short positions but we also require at least one other market related condition to be present such as an identifiable trigger potentially occurring which will likely negatively impact a company s share price within a specific period. Management quality and incentives Management behaviour and decisions invariably follow the incentives that are in place. Management incentives that are not aligned with shareholders tend to lead to poor future returns for shareholders. Risk management The Fund diversifies by holding a wide range of positions to reduce the amount of risk. The number of combined long and short positions at any one time will typically range between 50 to 90 shares (meaning the shares of 50 to 90 different companies). This is not a hard limit and the numbers may be smaller or greater at any point in time. This diversification: i) recognises any potential liquidity constraints on securities that trade in small volumes; ii) avoids significant performance volatility that can arise from having concentrated positions in a small number of securities; and iii) recognises that the potential losses on a short position are unlimited if the share price rises. A short position that we believe has a strong chance of being successful will rarely be as large as a long position that we also believe has a strong chance of being successful. This manages the risk of the theoretically unlimited losses from short positions. 34

35 The Fund manages liquidity risks by calibrating position size to the liquidity of the security. We continually review both our long positions and short positions to ensure that the reasons why we made the decision to invest in that way still exist. Long versus short positions The Fund focuses on investing in a range of both long positions and short positions to benefit from companies which we believe will rise in price (with respect to the longs ) or fall in price (with respect to the shorts ). The Fund s net equity exposure is the percentage difference in value between the Fund s long positions and short positions and provides a measure of the Fund s exposure to general market movements. Net equity exposure is calculated as the absolute value of the Fund s long positions minus the absolute value of the Fund s short positions, divided by its trust fund value (being its net assets see paragraph ). It is expected that the Fund s typical average net equity exposure over time will result in a +30% net equity exposure (i.e. the aggregate value of long positions will exceed the aggregate value of short positions by 30% of trust fund value). At various points over the investment cycle, this could vary quite markedly, with limits being -30% net equity exposure (i.e. the value of short positions exceed the value of long positions by 30% of trust fund value) and +60% net equity exposure (i.e. the value of long positions exceed the value of short positions by 60% of trust fund value). The maximum gross equity exposure (the combined value of long positions and short positions) of the Fund taking into account leverage through the use of short-selling and derivatives is 400% of the Fund s trust fund value. Gross equity exposure is calculated as the absolute value of the Fund s long positions plus the absolute value of the Fund s short positions, divided by its trust fund value. Typical gross equity exposure is intended to be in the % range. This means that, compared with an unleveraged fund, assuming the Fund had a gross equity exposure of 200% then: A 1% increase in return on equity assets held by the Fund will result in a 2% increase in return to investors; and A 1% decrease in return on equity assets held by the Fund will result in a 2% decrease in return to investors. Please note that the above examples have been provided for illustrative purposes only and any assumptions underlying these examples are hypothetical only. Gross equity exposure will be higher when we identify a large number of investable opportunities and it will be lower when fewer such opportunities can be identified. The Fund does not borrow money to generate financial leverage. Leverage will only occur through the use of short selling and derivatives. Due to the portfolio construction techniques described above, the Fund s return 35

36 is unlikely to reflect general equity market performance. To a larger degree than traditional equity investment funds, the investment performance of the Fund will depend on our skill in selecting, combining and implementing investment decisions. Investment objectives and policy The Fund s investment objective is to outperform the Reserve Bank of New Zealand Official Cash Rate +5% p.a. benchmark over a full market cycle. Investment Limits: Sector Minimum (%) Maximum (%) Gross equity exposure Net equity exposure Unlisted securities Cash or cash equivalents The Fund can invest in unlisted securities which have the intention of listing within 12 months (excluding IPOs). Maximum exposure to any single security is 15%. The Fund takes an active approach to currency hedging. While generally fully hedged, the Fund s overseas assets may be partially hedged or unhedged at our discretion. The Fund actively invests in New Zealand and Australian shares and may short sell securities and lever its assets so subsequent returns may be volatile. This Fund is likely to suit investors who are seeking positive returns from a portfolio of Australian and New Zealand share investments in all market cycles and who have a longer term investment timeframe (at least five years) and are prepared to accept that the Fund s returns can be volatile, most especially over the short term and in some periods may be negative. Borrowing While there is no limit under the Trust Deed on the amount that can be borrowed, in practice we do not intend to borrow in respect of the Salt Long Short Fund unless for settlement purposes. The Fund does not borrow money to generate financial leverage. Leverage will only occur through the use of short selling and derivatives. Distributions Minimum investment amount Minimum withdrawal amount Minimum balance We do not intend to make distributions although we reserve the right to amend this policy and make distributions of income and/or capital in the future. If we do make distributions, we will agree the terms for those distributions with the Trustee. $25,000 $5,000 $25,000 36

37 6.5.7 The Funds investment guidelines contain further detail regarding the type of investments that can be made. Please contact us if you would like additional information. 6.6 Investment performance Information on the investment performance of each Fund in the five years preceding the Registration Date is not yet available as the Funds were established on 16 April A description of the investment performance of the Funds that have commenced operations is set out below (excluding the Salt NZ Dividend Appreciation Fund, which commenced operations on 1 July 2015): Unaudited performance returns Fund Period Fund Return % Benchmark Portfolio Return % Excess % Salt Long Short Fund Salt Listed Property Fund 1 July 2014 to 31 March November 2014 to 31 March % 6.30% 10.40% 12.62% 11.22% 1.40% The performance of the above Funds has been calculated using the change in unit value (calculated in accordance with ) over the period. Accordingly, the returns have been calculated after fees and expenses but before PIE tax The benchmark portfolio returns have been calculated based on the return of the relevant benchmark (being the Reserve Bank of New Zealand Official Cash Rate +5% p.a. for the Salt Long Short Fund and the S&P/NZX Property Sector Gross Index for the Salt Listed Property Fund) over the period The returns have not been annualised. Past performance is not indicative of future performance. 6.7 Distributions As at the Registration Date none of the Funds make distributions of income or capital. Returns to unit holders are by way of changes in the value of their units The distribution policy for a Fund could change in the future. 6.8 Return of capital The principal and returns of the Funds are not guaranteed by any person or secured in any way. No person has made any undertakings to unit holders about the return of capital. 7 Unit holder liability 7.1 Unit holders do not incur any liabilities (including contingent liabilities) in relation to the Funds other than: a b the purchase price for units a requirement to indemnify us and the Trustee in respect of any tax paid or payable in respect of you and your units. 37

38 7.2 In the case of sub-paragraph 7.1b there is no limit on the potential liability that may be incurred, except that the amount of the liability will not be greater than the tax liability. 7.3 In addition neither we nor the Trustee can act as agent for a unit holder, incur liabilities on their behalf, or pledge their credit. No unit holder is liable to make any payment on account of the Funds (on insolvency, winding up, or otherwise) in addition to the amount that unit holder has agreed to pay for his or her units. 8 Summary financial statements 8.1 While the Funds first balance date was 31 March 2015, no financial statements are yet required to be prepared or registered under the Financial Reporting Act 1993 as at the Registration Date. 9 Minimum subscription 9.1 The minimum subscription that, in the opinion of our directors, must be raised in respect of the Funds to provide for the matters set out in clause 9 of Schedule 4 to the Securities Regulations 2009 is nil. 10 Guarantors 10.1 No person guarantees any investment in the Funds. 11 Acquisition of business or equity securities 11.1 No business or unlisted equity securities the consideration for which exceeded 20% of the total tangible assets of the relevant Fund were acquired for the purposes of any Fund at any time in the two years preceding the Registration Date. 12 Options and units paid up otherwise than in cash 12.1 No options to subscribe for units have been or are to be issued. No units have been or are to be issued for a consideration other than cash. However, during the currency of this prospectus we may issue units in exchange for investments transferred to a Fund, by using our power to accept non-cash consideration for units (see paragraph 6.2.9). 13 Interested persons 13.1 Remuneration for services and recovery of expenses Fees and expenses cap Set out below are details of the fees and expenses that are payable from the Funds. However, at the Registration Date, we have agreed to cap the maximum amount of fees and expenses, other than management fees, transaction costs, buy/sell spreads, borrowing and short-selling costs (where relevant), performance fees (where relevant), and other extraordinary or special fees or expenses at the following percentage of each Fund s average daily gross fund value: Long Short Fund: 0.25% per annum, excluding GST All other Funds: 0.20% per annum, excluding GST We may increase or remove the cap on fees or expenses for a Fund by one month s notice to affected investors. 38

39 Our fees and expenses We are paid fees out of each Fund for acting as the manager. As at the Registration Date, we charge the following fees (plus any GST): Management fee (% of each Fund s gross fund value) Salt Javelin Fund: 0.85% per annum Salt NZ Dividend Appreciation Fund: 0.95% per annum Salt Listed Property Fund: 0.85% per annum Salt Long Short Fund: 1.50% per annum Management fees are calculated and accrued as a percentage of the daily gross fund value of the relevant Fund, and paid monthly in arrears. Performance fee For the following two Funds only, we charge a performance fee of the following percentage of the Fund s return in excess of its performance target, which is the Reserve Bank of New Zealand Official Cash Rate plus 5% per annum: Salt Javelin Fund: 10% Salt Long Short Fund: 15%. The performance fee will only be paid if the relevant Fund s return based on the gross unit price, adjusted for imputation credits, any distributions made, and any accrued but unpaid performance fee, is greater than the return of the Reserve Bank of New Zealand Official Cash Rate plus 5% per annum over the performance period and the high-water mark unit price is exceeded (see below). Each Fund s performance fee is subject to a high-water mark. This means that the performance fee is only charged if and to the extent that the gross value of each unit in the relevant Fund at the end of a performance period, adjusted for imputation credits, any distributions made, and any unpaid performance fee that has accrued since the last high water mark was set, exceeds the previous high-water mark. The first high water mark is the unit price on commencement of the relevant Fund and is only ever reset to a higher unit price if a performance fee is payable to us, at which point the new high-water mark will be set at the relevant Fund s unit value on that day. We can also reset the high water mark for the Salt Javelin Fund only every three years following consultation with the Trustee. The first performance period for each Fund is from commencement of the Fund to the following 31 March, and then every 12 months up to and including 31 March each year. The performance fee is accrued and adjusted on a daily basis and paid in arrears We may change these fees or introduce new fees in the future. Where fees are increased we will give affected unit holders one month s prior notice. We can also waive or reduce the management fee at any time, either generally or in relation to a particular unit holder, category of unit holders, or transaction. 39

40 We are also entitled to reimbursement from each Fund for any expense we incur in acting as manager of that Fund. In practice, subject to the fees and expenses cap set out in paragraphs and , we intend to seek reimbursement of expenses, including for the Administration Manager s and Custodian s fees and expenses, as set out below, and the costs of borrowing and short-selling securities in respect of the Salt Long Short Fund only We are entitled to receive, in addition to our fees, any value added tax or duty or similar tax payable in respect of those fees including GST. As at the Registration Date, GST is charged at the rate of 15% on 10% of our fees. The proportion of our fee on which GST is charged is based on an industry guideline agreed with Inland Revenue. As at the Registration Date this arrangement is under review. That review could result in a change to the proportion of our fees on which GST is charged. Please contact us if you would like an update Under the Trust Deed the maximum fees that we can charge are: Contribution fee Management fees Performance fee 5% of the consideration for meeting the issue price of units. 2% plus any GST per annum of the gross fund value of each Fund. 10% of any excess performance for the Salt Javelin Fund and 15% of any excess performance for the Salt Long Short Fund see paragraph If a performance fee is introduced for any other Fund the limit on that particular fee will be set at the time. Withdrawal fee 5% of the amount withdrawn Subject to the above limitations and the fees and expenses cap set out in paragraphs and , there is no limit to the amount of remuneration that we can be paid or on the amount of expenses we can recover. The Trustee s fees and expenses The Trustee is paid a fee out of each Fund for acting as trustee. As at the Registration Date, the Trustee charges a fee of 0.06% per annum of the daily gross fund value of each Fund plus any GST. This is subject to a minimum fee of $10,000 plus any GST for the first year the Funds are in operation and $20,000 plus any GST per annum after the first year, which is spread equitably across all of the Funds that have commenced operations The Trustee s fee is accrued daily and paid quarterly in arrears. We and the Trustee may agree to change the amount of this fee from time to time. The Trustee may review and increase its fee on an annual basis with our agreement by giving at least one month s prior notice to affected unit holders The Trustee is entitled to reimbursement from the Funds for any expense it incurs in acting as trustee. In practice the Trustee intends to seek reimbursement of expenses The Trustee is also entitled to special fees, which will be paid from the relevant Fund(s), for services of an unusual or onerous nature outside the Trustee s regular services (including, for example, convening meetings of unit holders, breaches of trust, and exercising discretions), as we agree with the Trustee from time to time The Trustee is also entitled to receive, in addition to its fees, any value added tax or duty or similar tax payable in respect of its fee including GST. As at the Registration Date, GST is charged at the rate of 15% on the Trustee s fee. 40

41 The Trustee s fee is limited to the greater of the minimum fee described in paragraph and 0.075% plus any GST per annum of each Fund s gross fund value. However, there is no limit on the amount of expenses the Trustee can recover or special fees that we can agree to pay. The Administration Manager s fees and expenses The Administration Manager acts as the administration manager for the Funds and provides unit pricing and registry services. The Administration Manager is paid a fee for acting as administration manager, and is entitled to reimbursement of expenses incurred by it in so acting As at the Registration Date, we have agreed with the Administration Manager to an annual administration fee of the following percentages per annum plus GST of 15% of the gross fund value of each Fund: a for the Salt Long Short Fund, up to 0.10% b for every other Fund, up to 0.07%, subject to minimum annual fees of $30,000 per Fund MMC has agreed to waive the requirement for a minimum fee for the first three months following the launch of each Fund (that is, from the date the relevant Fund commences its investment activities). As at the Registration Date, the waiver period has expired in respect of the Salt Long Short Fund and the Salt Listed Property Fund. This fee is accrued daily and paid monthly in arrears. We can also agree to pay the Administration Manager special fees for additional services that the Administration Manager provides to a Fund from time to time These fees and any expenses are charged to us, rather than the Funds. Subject to the fees and expenses cap set out in paragraphs and , we intend to recover the amount of the fees (and any applicable GST or similar tax or duty payable in respect of those fees) as outlined above, as well as any expenses, from the Funds as an expense, as outlined in paragraph The Custodian s fees and expenses The Custodian is paid a fee for acting as custodian of the assets of each Fund, and is entitled to reimbursement of expenses incurred by it in so acting. As at the Registration Date, the custody fee is set at 0.018% plus GST per annum of each Fund s gross fund value. This fee excludes transaction charges. The custody fee may change from time to time This fee and any expenses are charged to us, rather than the Funds. However, subject to the fees and expenses cap set out in paragraphs and , we recover the amount of the fee (and any applicable GST or similar tax or duty payable but not recoverable in respect of such fee) as well as any expenses from the Funds as an expense, as outlined in paragraph The costs of underlying fund managers Where the Funds invest in underlying managed funds, some fees and expenses (for example, where an underlying fund manager charges a performance fee, fund expenses such as trustee fees, and the costs of buying and selling investments) will be incurred in the underlying funds in which Funds invest, impacting on returns to the Fund. As at the Registration Date the Funds exposure to other managed funds is expected to be very low. 41

42 13.2 Other direct or indirect material interests If you invest in a Fund through a third-party financial adviser, a trail commission may be paid to that person. However, as at the Registration Date no trail commissions are paid, and we intend that any trail commissions paid in the future will be paid from our management fee Directors and employees of us, the Trustee, the Custodian, the Administration Manager, or an associated person (including Salt), may hold units in the Funds from time to time. As at the Registration Date, the following directors and employees of us and Salt (either directly or through associated entities) hold units in the Funds: Salt Long Short Fund: Matthew Goodson, Paul Harrison, Anthony Sowerby, and David Oxley. Salt Listed Property Fund: Matthew Goodson. Salt NZ Dividend Appreciation Fund: Matthew Goodson Some of the assets of the Funds may be invested in securities of which we, Salt, the Trustee, the Custodian, the Administration Manager, or an associated person are the issuer, administration manager, investment manager, or trustee As at the Registration Date, transaction costs, associated with investors buying or selling units in a Fund and commonly referred to as buy/sell spreads, are reflected the Funds unit prices and therefore could affect returns. This can change at our discretion. The transaction costs reflect our estimate of the total cost of buying and selling investments, being the brokerage and other costs incurred when units are purchased or redeemed. As at the Registration Date, the buy/sell spread is 0.35% of funds invested into a Fund and 0.35% of funds withdrawn from a Fund. The spread is retained in the relevant Fund and ensures other investors entering and exiting the Fund do not adversely affect the returns on your investment None of us, Salt, the Trustee, the Custodian, the Administration Manger, or an associated person has had any other direct or indirect material interest in any Fund or in any contract or arrangement entered into on behalf of or in respect of any Fund at any time during the five years preceding the Registration Date, other than as set out under Material contracts below Investments in securities issued by interested parties During the two years preceding the Registration Date none of the value of any of the Funds assets has been represented directly or indirectly by securities of which an associated person of us, Salt, the Trustee, the Custodian, the Administration Manger, or an associated person is the issuer. 14 Material contracts 14.1 In the two years preceding the Registration Date, the following material contracts (not being contracts entered into in the ordinary course of business of a Fund) have been entered into in respect of the Funds: a In respect of all of the Funds: A An administration contract between us and MMC Limited dated 19 May 2014, under which we delegated various administrative functions to MMC Limited, including the provision of unit pricing and registry services. 42

43 B C The Trust Deed dated 16 April 2014 between us and the Trustee under which the master trust known as the Salt Investment Funds was established. Establishment Deeds dated 16 April 2014 between us and the Trustee under which each of the Salt Javelin Fund, Salt NZ Dividend Appreciation Fund, the Salt Listed Property Fund, and the Salt Long Short Fund were established. b In respect of the Salt Long Short Fund only, a global master securities lending agreement between the Trustee (as trustee of that Fund) and Macquarie Bank Limited dated 29 May 2014, pursuant to which we enter into securities lending transactions with Macquarie Bank Limited in respect of the Fund. 15 Pending proceedings 15.1 There are no legal proceedings or arbitrations pending as at the Registration Date that may have a material adverse effect on any Fund. 16 Issue expenses 16.1 There are no issue expenses, as we will pay the expenses of this issue out of our own moneys. 17 Other terms of offer and units 17.1 All other terms of the offer and the Funds (other than terms implied by law) not set out elsewhere in this prospectus are set out in the Trust Deed and the Establishment Deeds, copies of which have been registered with the Registrar of Financial Service Providers and are available for public inspection as set out in section Financial statements and auditor s report 18.1 While the Funds first balance date was 31 March 2015, no financial statements are yet required to be prepared or audited, or registered under the Financial Reporting Act 1993, as at the Registration Date. 19 Places of inspection of documents 19.1 Copies of: a b the Trust Deed, the Establishment Deeds, and any amendments to those Deeds the financial statements for the Funds referred to in paragraph 18.1 (when available) c the material contracts referred to in section 14 d the latest annual report for the Funds, if any (when available) may be inspected on request, and free of charge, during normal business hours at our offices (Salt Investment Funds Limited, Level 3, The Imperial Buildings, 44 Queen Street, Auckland), or at the Trustee s office (at the address in paragraph 5.1) Copies of these documents can also be obtained online by viewing our or the Funds files using the search the register or search other registers functions on the Companies Office website at 43

44 20 Other material matters 20.1 Except as outlined below there are no other material matters relating to the Funds Risks All investments involve some degree of risk that can affect your ability to recover the full amount of your investment or impact on the level of return Risk and return are related. Generally, the greater the level of risk, the greater the expected return over the longer term. As an investor, you need to determine your own level of risk tolerance before investing. You should seek advice from an authorised financial adviser to determine your risk tolerance level The principal risks associated with investments in all of the Funds are: investment risk key person risk key investor risk counterparty risk and risks relating to the performance of the parties involved in the Funds liquidity risk regulatory risk taxation risk In addition, the following principal risks apply to the Salt Long Short Fund only: short selling risk leverage risk credit risk These risks are explained in more detail below Because of these risks, it is reasonably foreseeable that you may receive a lower return than expected, or potentially lose some or all of the value of your investment. No person guarantees the payment of any money payable from the Funds, including the repayment of any investment in the Funds or the payment of any return on it. Investment risk Investment risk is the risk that returns from the Funds investments will be negative or lower than expected, affecting the value of your investment in the Funds Investments generally are affected by movements in market demand and supply, economic conditions, market sentiment, political events, natural disasters, and consumer demand. In addition, where investments are made outside of New Zealand, currency movements can affect performance The specific investment risks associated with investing in the Funds include: 44

45 a Equity risk - Equity investments (shares) are generally ownership interests in a business, company, or corporation. They offer the possibility of greater returns than cash and fixed interest, and tend to be more accessible and liquid than other securities. However, the risk factor with equity investments is relatively high, as the value is very much dependent on the performance of, and any specific issues relating to, the company that issued them, as well as the economic performance of the countries and markets they operate in. Equity investments in a company also rank lower than money owed to the company s creditors and bond holders. There are also extra costs due to brokerage services. As all of the Funds primarily invest in shares, they are all affected by these risks. b c Cash risk - Cash is suitable for short term requirements, but inflation may erode its value. Investment returns from cash investments are generally expected to be lower than for other assets (such as shares and property) and accordingly tend to be lower risk. However, where cash assets are placed on bank deposit there is a small risk of the bank defaulting, meaning it may not be able to pay interest or repay principal and resulting in some or all of the cash being lost. As all Funds can hold cash, they are affected by these risks. The Salt Long Short and Salt Javelin Fund are the most affected, as they are able to hold the largest amount of cash. Property securities risk - Property investments (in relation to the Funds) are generally investments in a property-owning entity (for example, listed property), and as such are exposed to the same risks as shares. In addition, the value of the underlying property (and therefore the property investments) are affected by demand, location, the quality of the property, market conditions, opinions, and the market for property investments. As all the Funds can hold property securities, they are affected by these risks. The Salt Listed Property Fund is the most affected as aside from its cash holdings it will only hold property and property related securities. d e f Currency risk - Funds that invest in overseas markets may have their returns impacted by the changes in the currency exchange rate between the overseas market currency and the New Zealand dollar. To help mitigate the potential impact of currency movements, Funds with foreign currency exposure use varying levels of currency hedging (see paragraphs 6.5.3, 6.5.5, and 6.5.6). Funds with exposure to foreign currencies are most affected and include those which are able to invest into Australia, which as at the Registration Date are the Salt Javelin Fund, the Salt Listed Property Fund, and the Salt Long Short Fund. Derivative risk - As the Funds may use a range of derivatives including forwards, futures, and options, the investment movements of the Funds may be more volatile when compared to a managed fund with no derivative exposure. As all Funds can hold derivatives, they are affected by these risks. Concentration risk - The Funds may have large exposures to underlying companies, geographical areas, or industries. An adverse impact on these exposure areas will have a greater impact than a more diversified portfolio. All Funds are affected by this risk. Key person risk As we are a boutique fund manager, the Funds are dependent on the continued involvement and commitment of our key investment personnel, specifically Matthew Goodson, Paul Harrison, and David Oxley. The loss of any of them, for whatever reason, could have an adverse effect on 45

46 the Funds. This risk is present for many New Zealand active fund management companies who have not outsourced investment management. Key investor risk We intend to accept investments into the Funds from wholesale investors. Generally, wholesale investors tend to invest relatively large amounts. If a wholesale investor (or multiple wholesale investors), or any other investor, that holds a large proportion of the units in a Fund decides to withdraw, it may require us to suspend or defer withdrawals from that Fund, or may impact on that Fund s viability going forward. As a result, we may consider winding up that Fund. In addition, the withdrawal of key investors may reduce the size of a Fund to such an extent that it may impact on our ability to implement the investment strategy of that Fund. Counterparty risk and risks relating to the performance of the parties involved in the Funds Counterparty risk is the risk that a party to a contract with a Fund defaults, fails to complete a transaction, or otherwise becomes unable to meet its financial obligations. If this occurs the full value of your investment may not be recovered In addition, various parties are involved in the operation of the Funds, including us, the Trustee, the Administration Manager, and in the case of the Salt Long Short Fund, the counterparty which the Fund sources its securities lending from. If any of these parties fail to properly perform their obligations to the Funds, the value of your investment in the Funds may be affected It may in turn mean that we are unable to pay a withdrawal from an affected Fund in full when requested. It may also mean that some of your investment is lost. Liquidity risk Liquidity risk is the risk that investments cannot be sold without loss of capital and minimum delay, due to either limited market depth for the trading of the investment in the secondary market or disruptions in the market place for the investment. Regulatory risk Regulatory risk is the risk of future changes to laws or regulations (including tax or unit trust legislation) that could affect the operation of the Funds or your investment in any of them An example of this is the Financial Markets Conduct Act 2013, which fundamentally changes the laws that regulate the structure and offering of unit trusts like the Funds and other collective investment vehicles in New Zealand. The Act came into full force on 1 December 2014, subject to a transition period of up to 2 years. For more detail see paragraph In addition, there is the risk that the Trust Deed or an Establishment Deed could be amended in a manner permitted by law that adversely affects your interests. Taxation risk Changes in taxation rates, policies, regulations and laws or tax treatment of an investment in a Fund may impact your investment returns and the effectiveness of the Fund s investment strategy (e.g. short selling in respect of the Salt Long Short Fund). We recommend you seek advice from a tax adviser before making an investment into a Fund. 46

47 Risks specific to the Salt Long Short Fund As noted above in section 6.5.6, there are a number of unique features relating to the way that the Salt Long Short Fund invests that means that the following are additional principal risks associated with an investment in that Fund: a b c Short selling risk: In undertaking short selling activities, the Fund is exposed to short selling risk. When short selling, the Fund borrows shares from a counterparty and sells these with the intention of buying them back at a later date and at a lower price, thereby making a profit. As the theoretical upper limit on a share price is unlimited, the potential loss is also unlimited. Additionally, there is a risk the securities lender may request return of the securities which gives rise to the possibility that shares will have to be bought at a time that is not of our choosing. The risk of loss from short selling is greater than holding a long position. Leverage risk: The Fund employs leverage through the use of short selling and derivatives. A Fund that utilises leverage has greater exposure to the value of market securities than a Fund which has not used leverage. This magnifies the potential gains and losses from investments and increases the volatility of the Fund s return compared to a Fund that has not used leverage. Credit risk: When borrowing shares from a counterparty to short, the Fund is required to post collateral in the form of cash or securities with the counterparty. Collateral acts as a form of guarantee that the shares borrowed by the Fund will be returned at the agreed time. The lender has the right to sell or lend the collateral to other parties. The Fund, therefore, is exposed to the credit worthiness of the lender in obtaining the collateral back if an adverse event occurred to the lender Due to these unique risks, the Salt Long Short Fund will not be appropriate for all investors. We strongly suggest that you consult an authorised financial adviser to discuss whether or not to invest in this Fund. Other risks An investment in the Funds is subject to other risks, including: a b c d Fund liquidity risk: The risk associated with an inability on the part of any of the Funds to meet monetary obligations in a timely manner, which arises where there is a mismatch between the maturity profile of investments and the amounts required to pay benefits (although the Funds investments are managed with a view to ensuring their cashflow requirements are met); Insolvency risk: The risk of one or more Funds becoming insolvent and being placed into receivership, liquidation, or statutory management, or being otherwise unable to meet their financial obligations during the term of your investment in it; Administration risk: The risk of technological or other failures impacting on the operation of the Funds or financial markets in general; Loss of PIE status risk: The risk of a Fund losing its PIE status and instead being subject to tax on its net investment income at a flat rate of 28% (although we have processes in place to manage compliance with the PIE eligibility requirements); and 47

48 e Winding up risk: the risk of a Fund being wound-up or changes to the way a Fund operates being made while you invest in it There may also be risks that are unknown at the Registration Date that may affect your investment in a Fund at a future point in time If any of these risks eventuate your investment in a Fund could be adversely affected Tax Tax will affect your returns. Tax laws are complex and can have different or further consequences than those described in this section. In addition, the information in this section is based on tax laws in force as at the Registration Date and is subject to change. You should seek independent professional tax advice before investing or withdrawing References in this section to us include a reference to your administration service provider, if that is how you invested and your provider is a proxy for unit holders under the Income Tax Act 2007, as they conduct the PIE tax administration for their clients. Portfolio investment entity tax Each Fund is a multi-rate portfolio investment entity. All of each Fund s taxable income (or loss) will be allocated between unit holders based on their proportionate interest in the Fund. We calculate tax payable on income allocated to each member at their nominated prescribed investor rate. Tax is then paid as described in this section You need to give us your IRD number and applicable prescribed investor rate when you first invest in a Fund. If you don t, you will be taxed on income allocated to you at the default rate of 28% The prescribed investor rates for New Zealand resident individuals are: If your taxable income 1 was and your taxable income plus your PIE income/loss was in the two income years 2 before the relevant tax year 3 for your prescribed investor rate is $14,000 or less $48,000 or less $48,001 - $70,000 either year 10.5% either year % $14,001 - $48,000 $70,000 or less either year 17.5% $48,001 or more any amount each year 28% any amount $70,001 or more each year 28% 1 Your taxable income is your worldwide income including income earned during any period you were not tax resident in New Zealand. 2 An income year is usually the period from 1 April to 31 March the following year, although Inland Revenue can approve alternative dates. 3 A tax year is always the period from 1 April to 31 March the following year. 4 If you are eligible for more than one prescribed investor rate you can choose the lowest rate. 48

49 The prescribed investor rates for other unit holders are: If you are a proxy, company, incorporated society, PIE, or registered charitable trust your prescribed investor rate is 0% a non-resident 28% trustees or superannuation scheme your choice of 0%, 17.5%, or 28% 2 testamentary trust your choice of 0%, 10.5%, 17.5%, or 28% 2 joint investor, partnership, or unincorporated your choice of 0%, 10.5%, 17.5%, or 28% 2 society 1 1 Joint investors should consider splitting their investments. If you do invest jointly, income will be allocated to the unit holder with the highest prescribed investor rate which may impact on their prescribed investor rate in the future. If more than one joint investor has the highest prescribed investor rate, income will be allocated to the joint investor named first. 2 If you are a trust and elect the 28% rate, beneficiaries will be unable to receive PIE income at rates lower than 28%. In addition, beneficiaries will not be entitled to a credit for or refund of any excess tax paid Inland Revenue may tell us to disregard a prescribed investor rate you have given us and apply a different rate instead. In addition, as set out in the table above if you are not resident in New Zealand for tax purposes, only the option of having tax deducted at 28% is available, and your investment could have additional tax implications for you in your own tax jurisdiction Each Fund s tax liability on PIE income allocated to you each year will ordinarily be deducted at the earliest of the following three times by cancelling units equal to the value of the tax liability: at the end of the income year (that is, after 31 March) if you make a withdrawal or switch to a different Fund, or transfer units to another person (including partial withdrawals, switches, or transfers) if at any time when the balance of your remaining investment is, or could potentially become, insufficient to cover the Fund s accrued tax liability on income allocated to you (we will consider potential market movements when determining whether your remaining investment is of sufficient value), in which case if you are making a partial withdrawal or switch a full withdrawal or switch will be required Any interest paid on money held in a bank account after unit holders units are cancelled to pay PIE tax but before that money is paid to Inland Revenue will be dealt with as we see fit. As at the Registration Date, we intend to pay any interest back into the relevant Fund. Your share of any tax credits for PIE tax losses or other excess tax credits a Fund you are invested in receives will usually be allocated to you by the issue of additional units. If you have elected the 10.5%, 17.5%, or 28% rate, you cannot include a loss attributed to you in your tax return If you have given us a 0% prescribed investor rate, if you have given us a rate that is lower than it should be, or if you are a trust that has not chosen the 28% rate and not allocated the income to beneficiaries on the appropriate tax rates, you will need to pay tax on PIE income that is allocated to you. This means that you will need to include PIE income allocated to you in your tax return, together with details of any PIE tax paid by us on your behalf. In all other cases, if you have given us the correct prescribed investor rate, the tax paid on income allocated to you will be a final tax and no obligation to file a tax return will arise in respect of this investment. 49

50 PIE income from a Fund may affect assistance provided by Work and Income, and is treated as income for working for families tax credits and student loan repayment obligations. In addition, if you are required to include PIE income in your tax return it will be taken into account in determining child support payments Each year we will give you an annual tax statement, which will include the amount of PIE income allocated to you and the amount of tax paid at your chosen prescribed investor rate. We will also ask you to confirm your IRD number (if not already provided) and prescribed investor rate You need to tell us if your correct prescribed investor rate changes or if you cease to be a New Zealand resident, as the rate for non-residents is 28%. If you do not do so, or if you give us a rate that is lower than it should be, you will be personally liable to pay any resulting tax shortfall, including any penalties or interest, and may need to file a tax return. If tax is overpaid because you have given us the wrong prescribed investor rate the overpaid tax is not usually refundable or creditable (although if you have chosen the 0% rate or are a trust and have chosen a rate other than 28% you can claim a credit for any tax paid on PIE income allocated to you) Withdrawals from the Funds and any distributions are not taxed as they are excluded income. Tax on investments made by all of the Funds Capital gains or losses made by a Fund on most holdings of New Zealand resident companies and Australian resident listed companies with franking accounts that are included on an approved index under the Australian Stock Exchange market rules are not taxable or deductible, although distributions from these holdings are taxable Other foreign shares (including shares in Australian resident companies not listed above) and funds held by a Fund will generally be subject to the Foreign Investment Fund ( FIF ) rules and are generally taxed under the fair dividend rate ( FDR ) method. Under this method, each Fund will be deemed to have derived taxable income equal to 5% per annum of the average daily market value of the shares for the relevant tax year. Dividends or other distributions received from investments taxed under this method are not taxable, although foreign tax credits may be available to offset fair dividend rate tax payable. Foreign currency hedges of shares and funds subject to fair dividend rate tax may also be taxed using a version of those rules (rather than under the financial arrangement rules) Foreign shares and funds held by a Fund are generally taxed under the FIF comparative value method (that is, on the basis of the annual change in market value plus distributions and any disposal gains) if they: offer guaranteed or fixed rate returns are non-participating redeemable shares are 80% or more invested in financial arrangements or fixed rate shares that are denominated in or hedged to New Zealand dollars are otherwise determined by Inland Revenue to be debt in economic terms Debt securities and other financial arrangements held by a Fund directly are taxed under the financial arrangement rules using the IFRS taxpayer method, which reflects financial reporting. Foreign exchange gains and losses may instead be taxed under a method similar to the FDR rules in some cases. 50

51 Tax on short selling investments of the Salt Long Short Fund Shares borrowed and subsequently sold by the Salt Long Short Fund (that is, shares sold short) that fall within the: a b category of shares for which capital gains or losses are not taxable or deductible (see paragraph ) will also be excluded from the calculation of taxable income. Any manufactured dividends (also known as dividend replacement payments) received on collateral will be taxable as income and manufactured dividends paid on borrowed shares will be considered tax deductible to the Fund. other foreign shares category of shares (see paragraph ) will likely be taxed under normal income recognition principles, whereby any income and gains arising from these transactions will be considered taxable income. Any manufactured dividends received on collateral will be taxable as income and manufactured dividends paid on borrowed shares will be considered tax deductible to the Fund Please contact us for details of the particular tax treatment applying to the investments of a Fund at any time. PIE tax advantages Investing in a PIE can provide tax advantages relative to direct investment. Capital gains made on most investments in New Zealand shares, and most Australian listed shares, are not taxable irrespective of the level of trading undertaken. In addition, because the prescribed investor rates at which tax is paid on PIE income are determined by investors taxable income over the past two tax years but are capped at 28%, and no other tax is generally payable by individual investors, there can be tax advantages if you are on a higher marginal tax rate Disputes handling All problems or complaints regarding your investment should be initially directed to us. In the event of this proving unsatisfactory, the Trustee can be contacted directly We and the Trustee are each a member of an independent dispute resolution scheme operated by Financial Services Complaints Limited ( FSCL ) and approved by the Ministry of Consumer Affairs. We have 40 days to respond to your complaint. If you are not satisfied by our or the Trustee s response to your complaint, you may refer the matter to FSCL by ing [email protected], calling FSCL on , or writing to Level 4, 101 Lambton Quay, PO Box 5967, Lambton Quay, Wellington Full details of how to access the FSCL scheme can be obtained on their website There is no cost to you to use the services of FSCL Listing of units The units in the Funds have not been approved for trading on a licensed market. It is not intended that the units in any Fund will be listed on any licensed market Costs of establishment and issue The Salt Investment Funds were established on 16 April A proportion of the expenses and costs of doing so incurred by us and the Trustee in establishing the Funds, including legal fees, (totalling approximately $97,000) are currently being recouped from the Funds before-tax investment earnings, in instalments, over a 5 year period. The costs for each of the Salt Javelin Fund, Salt NZ Dividend Appreciation Fund and Salt Listed Property Fund are $21,300, and the 51

52 cost for the Salt Long Short Fund is $33,100. In addition, the issue expenses associated with the prospectus for the Funds dated 30 January 2015 (of approximately $6,000 plus GST) will be recouped from the Funds before-tax investment earnings in the same manner, with those costs split evenly between the four Funds. Subject to the fees and expenses cap set out in paragraph , we intend to amortise these costs at a rate of 0.003% per month of each Fund s gross fund value over that period. 21 Manager s statement 21.1 While the Funds first balance date was 31 March 2015, there are currently no financial statements in respect of the Funds because the Financial Reporting Act 1993 only requires financial statements to be completed 5 months after the Funds first balance date. Therefore, our directors cannot give an opinion as to whether or not there have been any events which affect the Funds between the date of the most recent financial statements and the Registration Date as no financial statements have been prepared. 22 Unit trustee s statement 22.1 While the Funds first balance date was 31 March 2015, there are currently no financial statements in respect of the Funds because the Financial Reporting Act 1993 only requires financial statements to be completed 5 months after the Funds first balance date. Therefore, no statement by the Trustee in accordance with clause 22 of Schedule 4 of the Securities Regulations 2009 is required as no financial statements have been prepared. 52

53 Execution Signed by or on behalf of the directors of Salt Investment Funds Limited: Matthew Goodson Paul Harrison Signed on behalf of Salt Funds Management Limited as promoter by its two directors: Matthew Goodson Paul Harrison 53

54 Glossary Act Administration Manager Custodian Establishment Deed Gross fund value FSCL Fund Unit Trusts Act 1960, which continues to apply to the Fund under the transitional provisions of the Financial Markets Conduct Act 2013 MMC Limited, the administration manager for the Funds The New Zealand Guardian Trust Company Limited, which holds the assets of each Fund as custodian The establishment deed for each Fund A Fund s net assets, ignoring the aggregate of any accruals for fees and expenses (including our fees and the Trustee s fees), calculated as described in paragraph Financial Services Complaints Limited, which operates the dispute resolution scheme that we and the Trustee are members of A unit trust offered in this prospectus, which are the: Salt Javelin Fund Salt NZ Dividend Appreciation Fund Salt Listed Property Fund Salt Long Short Fund Gross equity exposure Longs or long positions Net equity exposure PIE PIR Registration Date Salt Shorting, The combined value of the Fund s long positions and short positions expressed as a percentage of the Fund s trust fund value. Gross equity exposure provides a measure of the extent to which leverage is being used Shares purchased and held by the Fund with the objective of selling these shares at a later date and at a higher price to make a profit The difference between the Fund s long positions and short positions expressed as a percentage of the Fund s trust fund value. The Fund has a net long exposure if the percentage amount invested in long positions exceeds the percentage amount invested in short positions, and has a net short exposure if short positions exceed long positions. Net equity exposure is a measure of the extent to which the Fund is exposed to general market movements Portfolio investment entity, a special type of investment vehicle for income tax purposes where tax is usually paid on your behalf at a rate approximating your marginal tax rate Prescribed investor rate, which is the rate at which your income in a PIE is taxed 31 July 2015 (being the date this prospectus was delivered for registration to the Registrar of Financial Service Providers) Salt Funds Management Limited, our parent company and a promoter of the Funds Shorting or short selling (also referred to as shorts and short positions ) is 54

55 short selling, shorts, and short positions Trustee Trust Deed Trust fund value we, us, and our borrowing shares the Fund from a counterparty and selling these with the intention of buying them back at a later date and at a lower price in order to return the borrowed shares back to the counterparty and realise a profit. However, if the subsequent purchase price is higher than the initial selling price, the Fund will incur a loss The New Zealand Guardian Trust Company Limited, the trustee of the Funds The trust deed governing the Funds and, unless the context requires otherwise, also includes each Establishment Deed The Fund s gross fund value less the aggregate of any accruals for fees and expenses (including our fees and the Trustee s fees) Salt Investment Funds Limited, the manager of the Funds 55