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KARARA MARKET NEUTRAL PLUS FUND
INFORMATION MEMORANDUM
DATED 16 APRIL 2019
FOR AN OFFERING OF SERIES 1 UNITS TO WHOLESALE INVESTORS
TRUSTEE: PERPETUAL TRUST SERVICES LIMITED ABN 48 000 142 049 AFSL NO. 236648
INVESTMENT MANAGER: KARARA CAPITAL PTY LIMITED ABN 34 134 075 157 AFSL NO. 333318
CONTENTS
1. KEY FEATURES AT A GLANCE ............................................................................................................................ 3
2. ABOUT PERPETUAL AND KARARA CAPITAL ...................................................................................................... 5
3. ASIC BENCHMARK AND DISCLOSURE PRINCIPLES ............................................................................................ 7
4. HOW THE FUND INVESTS ............................................................................................................................... 10
5. PORTFOLIO GUIDELINES ................................................................................................................................ 12
6. FEES ............................................................................................................................................................... 12
7. RISK FACTORS ................................................................................................................................................ 14
8. TAXATION...................................................................................................................................................... 16
9. INVESTMENTS, WITHDRAWALS AND DISTRIBUTIONS.................................................................................... 16
10. ADDITIONAL INFORMATION .......................................................................................................................... 20
11. COMPLETING THE APPLICATION FORM ......................................................................................................... 23
12. APPLICATION FORM ...................................................................................................................................... 27
CORPORATE DIRECTORY ................................................................................................................................................. 40
CONTACT DETAILS FOR
KARARA CAPITAL’S CLIENT
SERVICE TEAM:
Telephone: (03) 8612 7100
Fax: (03) 8612 7111
Email: [email protected]
Website: www.karara.com.au
Post: Level 33
101 Collins Street
Melbourne Vic 3000
This Information Memorandum (“IM”) is dated 16 April
2019 and is issued by Perpetual Trust Services Limited
ABN 48 000 142 049, AFSL No. 236648. References to
“Perpetual” or the “trustee” throughout this IM, unless
the context requires otherwise, are references to
Perpetual Trust Services Limited as trustee of the Karara
Market Neutral Plus Fund (“the Fund”). A reference to
“Fund” is to the Karara Market Neutral Plus Fund.
References to “Karara Capital” are references to Karara
Capital Pty Limited ABN 34 134 075 157 AFSL No. 333318,
who is the investment manager of the Fund. A reference
to “the Administrator” is a reference to Link Fund
Solutions Pty Limited ABN 44 114 914 215, and a
reference to “the Custodian” and/or “the Prime Broker” is
a reference to Deutsche Bank AG (London Branch).
The information in this IM is subject to change from time
to time and may be updated by Perpetual and made
available to you. When necessary, Perpetual will issue a
updated IM.
You may only apply for units in the Fund if you have
received this IM in Australia and are a ‘wholesale client’
as that term is defined in section 761G of the
Corporations Act.
This IM offers one class of units in the Fund, being
Series 1. All references to units in this IM are references
to Series 1 units in the Fund. Other classes of units in the
Fund with different fee structures may be offered under
other offer documents.
Perpetual reserves the right to refuse to accept an
application in whole or in part.
This document is not required to be lodged with
Australian Securities and Investments Commission
(“ASIC”) and does not contain information that may be
expected to be found in a prospectus, product disclosure
statement or other regulated offer document. The Fund is
not required to be and is not registered as a managed
investment scheme under the Corporations Act 2001.
The Fund is governed by the Constitution and the
Application Form.
Important notice: An investment in the Fund is not a
deposit with or other liability of any of Perpetual,
Karara Capital and their related bodies corporate and
is subject to investment risk including possible delays
in repayment and loss of income or principal invested.
None of Perpetual, Karara Capital and their related
bodies corporate guarantees any particular rate of
return on the units, the performance of the Fund or
the repayment of capital from the Fund.
Perpetual and Karara Capital make no
recommendations in relation to this IM or the offer of
units pursuant to this IM. Only information and
representations contained in this IM may be relied
upon as having been authorised by Perpetual. No
person is authorised to give any information or make
any representation not contained within this IM.
This IM contains general information only and does not
take into account your individual objectives, financial
situation and particular needs. You should consider
whether the information in the IM is appropriate for
you in light of your objectives, financial situation and
needs. It is important that you read the entire IM
before making any decision to invest. You should also
consider the risk factors that could affect the Fund’s
financial performance. All these factors should be
considered in light of your particular investment
needs, objectives and financial circumstances
(including financial and taxation issues). You should
seek professional advice from a broker, financial
adviser or other professional adviser before deciding
whether to invest. Some of the risk factors that you
should consider are set out in Section 7: Risk Factors.
This IM does not constitute, and may not be used for
the purpose of, an offer or solicitation in any
jurisdiction other than Australia.
A reference to “business day” throughout this IM and
any of its attached documents means a day other than
a Saturday or Sunday on which banks are open for
general banking business in Sydney. References to ‘$’
in this Information Memorandum are to Australian
dollars unless the context otherwise requires.
Page | 3
1. KEY FEATURES OF THE FUND AT A GLANCE Key features Karara Market Neutral Plus Fund
Fund name Karara Market Neutral Plus Fund, an unregistered managed investment scheme.
Investment objective The investment objective of the Fund is to outperform the RBA Cash Rate (after fees) over rolling 5-year
periods.
Investment strategy The Fund will seek to provide investors with a return profile that is consistent and uncorrelated to other
asset classes.
The fund is an absolute return fund that aims to generate positive returns in all market environments by
reducing the majority of market risk, focussing on capital preservation and exploiting individual stock mis-
pricings. The Fund will utilise fundamental research to achieve this.
Investment time horizon Karara Capital suggests an investment horizon of at least 5-years.
Benchmark RBA Cash Rate.
Investments The Fund will typically invest in securities listed (or to be listed) on the Australian Securities Exchange (ASX),
Australian exchange traded derivatives and Australian denominated cash. The Fund may also invest in
Global REITs listed on developed market exchanges (typically Global REITs held by the Fund will be listed on
share markets located in the USA, Japan, Singapore, Hong Kong, UK and New Zealand).
Investment exposures The following guidelines will apply to managing the Fund:
• Target number of positions: Between 30 and 100 (combined Long and Short)
• Maximum GROSS Exposure: 400% (200% Long and -200% Short) of the Net Asset Value of the
Fund (NAV)
• Maximum NET Equity Exposure: +80% of NAV
• Minimum NET equity Exposure: -50% of NAV
• Maximum individual security exposures1:
o ASX 100 securities: +/- 30% of NAV
o ASX101-200 securities: +/- 20% of NAV
o Ex-200 securities: +/- 10% of NAV
o Global REITs: +/- 10% of NAV
Asset type Range (long and short) %
of NAV
Asset Allocation • ASX listed REITS, property related securities, Utilities related
securities and Infrastructure related securities
• Other ASX-listed securities comprising sectors not listed above.
• Global REITs listed on developed market exchanges
• Derivatives
• Cash
0% to 200%
0% to 100%
0% to 40%
0% to 40%
0% to 150%
Distributions Semi-annually as at 31 December and 30 June. Generally payable within 30 days and paid to your
nominated bank account or reinvested in additional units.
Eligible investors Wholesale investors as defined within section 761G of the Corporations Act
Minimum initial investment2 $250,0003
Minimum additional
investment2
$25,000
Minimum balance2 $250,000
Minimum withdrawal2 $25,000
Fees • Contribution fee: Nil
• Withdrawal fee: Nil
• Management fee: 1.50% pa of the Fund’s net assets payable from the Fund calculated and payable
monthly in arrears.
• Performance fee: 20% of excess performance above benchmark (after fees are adjusted to add back any
performance fees accrued but not yet paid) provided specified performance hurdles are met as set out in
section 6.2 of this IM. Accrued monthly and paid annually as at 30 June.
• Buy/Sell Spread +/- 0.25%4
Fund expenses Capped at 0.20% pa of the Net Asset Value.
Applications Monthly, with notice to be received by 2.00pm AEST on the last business day of the month
Withdrawals Monthly, with notice to be received 10 days prior to the last business day of the month, with withdrawal
proceeds generally paid within 10 business days of the end of month to your nominated bank account.
Page | 4
Key features Karara Market Neutral Plus Fund
Unit pricing Monthly, and available from Karara Capital’s website www.karara.com.au
Reporting The following reports will be sent to you:
• application and withdrawal confirmations
• monthly investor statements
• monthly investment fund report
• annual tax statements
• annual investment fund report
• distribution statements
• annual audited financial statements of the Fund are available upon request
Key service providers to the Fund
Trustee Perpetual Trust Services Limited
Investment Manager Karara Capital Pty Limited – responsible for:
• managing the Fund’s investments
Prime Broker & Custodian Deutsche Bank AG (London Branch) – responsible for:
• Custody of the Fund’s assets;
• Clearing and settlement functions;
• Provision of credit facilities, stock borrowing, foreign exchange and margin financing; and
• Brokerage and dealing when executing transactions for the Fund.
Administrator Link Fund Solutions Pty Limited – responsible for:
• Investment accounting, fund accounting, unit pricing calculations; and
• Unit registry
All fees quoted are inclusive of the impact of GST and net of any reduced input tax credits available to the Fund.
1 Maximum security exposure except where the maximum individual security exposure exceeds the stated limit due to market movements. In such
circumstances, the Investment Manager will dispose of any securities within a reasonable period.
2 Or other such amounts as Perpetual may determine from time to time without prior notice to unitholders. Perpetual may also in its absolute
discretion waive the minimum amounts.
3 The minimum investment is subject to the investor qualifying as a ‘wholesale client’ as defined within s.761G of the Corporations Act. A minimum
initial investment of $500,000 applies to investors who do not otherwise satisfy the eligible investor requirements.
4 In some circumstances, Perpetual may accept application monies, or pay withdrawal proceeds in-specie with consent. The buy/sell spread may not
apply in these circumstances.
Page | 5
2. ABOUT PERPETUAL AND KARARA CAPITAL
2.1 PERPETUAL TRUST SERVICES LIMITED
Perpetual Trust Services Limited, the Trustee of the Fund,
is part of the Perpetual Limited group of companies which
has been in operation for 130 years.
Perpetual Limited is a member of the Financial Services
Council (FSC). The standards of the FSC (FSC Standards)
apply to relevant activities conducted by Perpetual Limited
as well as certain other entities related to the FSC member,
including Perpetual. Perpetual complies with FSC
Standards including FSC Standard No. 1: Code of Ethics &
Code of Conduct. However, it has appointed service
providers to provide certain services in relation to the
Fund, some of which may not be members of the FSC.
Where a service provider is a member of the FSC,
Perpetual has taken reasonable steps to ensure that the
service provider will comply with all FSC Standards in
providing the services in relation to the Fund. Where a
service provider is not a member of the FSC, prior to the
appointment of the service provider, Perpetual has
undertaken all appropriate and reasonable due diligence,
establishes and maintains compliance monitoring, and
complies with all applicable laws in relation to the
appointment. Accordingly, you may not receive the full
benefit or protection of the FSC Standards in relation to
any services which are delegated to or provided by a
service provider.
As the Trustee, Perpetual is responsible for the operation
of the Fund and must act in accordance with the
constitution of the Fund.
Perpetual is permitted to deal with the assets of the Fund
as if it were the absolute and beneficial owner of them.
Perpetual is permitted to appoint delegates and agents to
assist it in exercising its powers and carrying out its
functions on such terms as it thinks fit. Perpetual has
appointed Karara Capital as the investment manager of the
Fund. Perpetual is able to terminate Karara Capital’s
appointment under the Investment Management
Agreement at any time in circumstances, including but not
limited to:
• A receiver is appointed with respect to the assets
and undertakings of Karara Capital;
• Karara Capital goes into liquidation, ceases to
carry on business in relation to its activities as
Investment Manager or materially breaches or
fails to observe or perform any duty or obligation
under the agreement and fails to rectify the
breach within a reasonable period;
• It is required to do so by law; or
• The Fund terminates.
Link Fund Solutions Pty Limited as the administrator of the
Fund and Deutsche Bank AG (London Branch), N.A. as the
prime broker and custodian of the assets of the Fund.
2.2 KARARA CAPITAL
Karara Capital is a specialist investment management
company focusing on the active management of Australian
equities. Karara Capital manages the Karara Investment
Funds as well as Australian equities mandates with
institutional investors.
Karara Capital is wholly owned by its employees, which
aligns their interests with those of their investors. As a
privately owned business Karara Capital is free to make
independent investment decisions.
At the core of Karara Capital’s team are its three Executive
Directors and majority shareholders: David Slack, Rohan
Walsh and Luke Sinclair, who between them have built a
successful track record managing Australian equities
spanning over 30 years. Supporting them is a team of
experienced investment professionals.
David Slack – Managing Director, Chief Investment Officer
(CIO)
B.Ec. (Hons), Fellow of FINSIA
As CIO, David is responsible for evaluating and overseeing
Karara Capital’s overall investment philosophy and
process. In addition, he has day-to-day responsibility for
co-managing client portfolios.
Prior to joining Karara Capital, David was a co-founder and
Joint Managing Director of Portfolio Partners Limited, a
major Australian fund manager which managed $5.3 billion
at the time it was sold to Norwich Union in 1998. Prior to
that, David was a founding executive director of County
NatWest Investment Management Limited (now Invesco
Australia), where he held the position of Head of
Australian Equities for nine years.
He is a former non-executive director of Victorian Funds
Management Corporation and, before joining Karara
Capital, was its deputy Chairman and Chair of the Board
Investment Committee.
David has over 40 years’ investment management
experience.
Rohan Walsh – Director
B.Sc. (Hons), Grad. Dip. App Fin & Inv.
Rohan joined Karara Capital in 2007. Together with Luke
Sinclair he is responsible for co-managing the Karara
ASX300 strategy.
Prior to joining Karara Capital, Rohan headed the
Australian equities team at Invesco, a position he held for
12 years. Rohan was responsible in this position for
developing the team and overseeing the investment
process. Preceding this, he was a senior Investment
Manager within County NatWest’s Australian equities
team with David for five years.
.
Page | 6
2. ABOUT PERPETUAL AND KARARA CAPITAL cont.
Rohan began his career working in the petroleum
exploration industry. Later he joined Barclays Bank and
then moved to the investment management division of the
State Bank of Victoria.
Rohan has over 30 years’ investment experience
Luke Sinclair – Director
B.Sc. (Hons), MA, CFA
Luke is responsible for co-managing the Karara ASX300
strategy.
Prior to joining Karara Capital, Luke worked with Rohan for
eight years in the Australian Equities team at Invesco. He
was responsible for financial analysis and security selection
in various industry sectors over this time. From 2001 he
was a senior Investment Manager of the Australian
Equities portfolio at Invesco.
Before joining Invesco, Luke was an Investment Manager
at Jardine Fleming Asset Management and responsible for
stock analysis and managing Australian equity portfolios.
Luke has over 20 years’ investment experience.
2.3 KARARA CAPITAL’S VISION
Karara Capital’s vision is to deliver superior investment
returns to investors.
Key to delivering this vision is Karara Capital’s commitment
to:
An established investment approach
Karara Capital employs a rigorous investment approach
that is patient, research intensive and forward looking.
Karara Capital's objective is to identify companies that it
believes possess positive attributes that can be purchased
at attractive prices and that will deliver superior returns
over time.
Small investment team
Karara Capital considers that small investment teams
perform better than larger ones as people management
has the potential to detract from effective portfolio
management.
Talented and empowered professionals
Karara Capital’s investment team comprises people who
have strong technical skills and a thorough understanding
of economics, portfolio theory and behavioural finance.
Creativity, independent thinking and temperament are
valued characteristics. The key talent of the Karara
Capital’s investment team lies in their ability to identify
where market expectations are wrong.
Business culture
Karara Capital fosters a performance orientated, creative
and collegiate business culture. Employee equity
participation in the business gives Karara Capital the ability
to attract, develop and retain top investment talent and
create a positive work environment and culture.
2.4 INVESTMENT MANAGEMENT
Key Decision Maker of the Fund
Andrew Smith – Investment Manager
B.Com, B.Sc., Grad. Dip. App Fin & Inv.
Andrew is the key individual responsible for managing the
Fund and devotes a substantial proportion of his time
executing the Fund’s investment strategy.
Prior to joining Karara, Andrew was a senior portfolio
manager and equity partner at Freehold Investment
Management, a real estate and infrastructure specialist
manager. Andrew was responsible for a market leading
absolute return fund and for dedicated REIT and
infrastructure portfolios. Prior to Freehold, Andrew held
senior positions at several respected funds management
firms including Goldman Sachs, APN Property Group and
Portfolio Partners. During Andrew’s tenure at Goldman
Sachs Asset management he was a member of the global
investment team. Whilst at APN, Andrew created and
launched the APN Asian REIT fund. He was co-manager for
this fund and researched investment ideas across the
region.
Andrew has over 20 years’ investment experience.
Investment Team
Andrew is a member of and can draw on the expertise of
Karara Capital’s team of proven investment professionals.
The key success factor in the investment team lies in their
ability to work together to identify where market
perceptions and expectations are wrong.
Page | 7
3. ASIC BENCHMARK AND DISCLOSURE PRINCIPLES
The Australian Securities and Investments Commission (‘ASIC’) has released benchmarks and disclosure principles to assist investors to
make a more informed decision. This section of the IM addresses the improved disclosure requirements in accordance with ASIC
Regulatory Guide 240. The requirements of ASIC Regulatory Guide 240 apply to responsible entities of hedge funds registered with
ASIC. However, ASIC encourages other issuers to disclose against the benchmarks and apply the disclosure principles. Accordingly,
while the Fund is not required to make these disclosures, it has generally sought to disclose in accordance with ASIC’s guidance.
3.1 DISCLOSURE BENCHMARKS
ASIC BENCHMARK SUMMARY REFERENCE
Valuation of assets: The Fund meets this benchmark by holding ASX-listed (or to
be listed) securities, Global REITs listed on developed market
exchanges, Australian denominated cash and Australian
exchange traded derivatives only. OTC derivatives are NOT
permitted.
Valuations of the Fund and its underlying investments are
undertaken by the Fund’s Administrator Link Fund Solutions
Pty Limited.
For additional information in relation to
the valuation of assets please refer to
page 19 of the IM, 9.5 Unit Pricing.
Periodic reporting: The Fund meets this benchmark by providing investors with
the following information:
Monthly reporting:
• NAV of the Fund and Redemption Price of Units;
• Details of any changes to key service providers
including any changes in related party status;
• Net performance returns;
• Any material changes to the Fund’s risk profile and
strategy; and
• Any material changes to the primary investment
personnel responsible for managing the Fund.
The above information will be included within the monthly
investment fund report that will also be available on Karara
Capital’s website at www.karara.com.au
Annual reporting:
• Asset allocation of the Fund by asset type;
• Liquidity profile as at year-end;
• Maturity profile of the Fund’s liabilities as at year-
end;
• The Fund’s leverage ratio as at year-end;
• Details on derivative counterparties engaged;
• Annual investment returns of the Fund since
inception; and
• Details of any changes to key service providers
including any changes in related party status.
The above information will be included within the annual
investment fund report that will also be available on Karara
Capital’s website at www.karara.com.au
For additional information in relation to
Reporting please refer to page 23 of the
IM, 10.3 Reporting.
Page | 8
3. ASIC BENCHMARK AND DISCLOSURE PRINCIPLES cont.
3.2 DISCLOSURE PRINCIPLES
ASIC
DISCLOSURE
PRINCIPLE
SUMMARY REFERENCE
Investment
strategy:
The investment objective of the Fund is to outperform the RBA Cash Rate (after fees)
over rolling 5-year periods.
The Fund aims to generate absolute returns in line with long term equity returns
while targeting a lower risk profile, as measured by fund volatility. Generating returns
that are uncorrelated (i.e. Performance doesn’t necessarily rise/fall when equity
markets do) and preserving capital are priorities for the Fund.
The Fund uses long and short positions to target absolute returns. Shorting serves two
main purposes; to profit from falling stock prices and to reduce total portfolio risk.
To build the portfolio Karara Capital undertake a process of:
• Security analysis;
• Security valuation;
• Portfolio construction; and
• Position sizing.
The Fund will typically invest in securities listed (or to be listed) on the Australian
Securities Exchange (ASX), Australian exchange traded derivatives and Australian
denominated cash. OTC derivatives are NOT permitted.
The Fund may also invest in Global REITs listed on developed market exchanges
(typically Global REITs held by the Fund will be listed on share markets located in the
USA, Japan, Singapore, Hong Kong, UK and New Zealand).
The key dependency underpinning the investment strategy is the research, analysis,
skill and experience of the investment manager.
There are a number of risks associated with investing in the Fund. Key risks include
the use of Leverage, Short Shelling and Derivatives. The investment manager’s
approach to managing risk is set out in section 7.
The investment manager may adjust the guidelines applying to the investment
strategy from time to time without notice to the unitholders (any material change will
be notified to investors as soon as possible and/or be notified on Karara's website).
For additional information
in relation to the
investment objective and
strategy of the Fund please
refer to section 4 – How
the Fund Invests.
For additional information
in relation to the Fund
investments please refer
to section 5 – Portfolio
Guidelines.
For additional information
in relation to the Key Risks
associated with investing
in the Fund please refer to
section 7 – Risk Factors.
Investment
manager:
The Investment Manager of the Fund is Karara Capital Pty Limited.
Andrew Smith, has overall responsibility for the Fund’s investment decisions and is
supported by a team of investment professionals.
For additional information
please refer to section 2 –
About Perpetual and
Karara Capital.
Fund structure: The Fund is an Australian unregistered managed investment scheme. The Fund
invests directly in its investments. A diagram of the Fund’s structure is set out in
section 1.2.
In addition to Karara Capital, the other key service providers are set out in the Table
of Key Features of the Fund at Section 1 and section 10.5 and 10.6. Perpetual as
Trustee regularly monitors the service providers to ensure compliance with their
contractual service obligations. There are no related party relationships and all
arrangements are on arm’s length terms.
There are various risks associated with this structure including counterparty risk.
For additional information
please refer to sections
10.5 – Prime Broker and
Custodian and section 10.6
Administrator
For additional information
please refer to section
7.13 – Counterparty and
service provider risk.
Page | 9
3. ASIC BENCHMARK AND DISCLOSURE PRINCIPLES cont. ASIC
DISCLOSURE
PRINCIPLE
SUMMARY REFERENCE
Valuation,
Location and
Custody of
Assets:
In determining the Net Asset Value of the Fund, the assets of the fund will normally
be valued as follows:
Exchange traded assets: exchange traded securities that are regularly traded are
valued at their last traded price. Other investments traded through a clearing firm
will be valued by reference to the most recent official settlement price quoted by
that clearing house or exchange.
Currencies: any non-Australian dollar value will be converted into Australian
Dollars at the rate determined by the Administrator in accordance with their
valuation policy.
The Fund will typically invest in ASX-listed (or to be listed) securities, Australian
exchange traded derivatives and Australian denominated cash.
The Fund may also invest in Global REITs listed on developed market exchanges
(typically listed on share markets located in the USA, Japan, Singapore, Hong Kong, UK
and New Zealand).
The Prime Broker and Custodian hold the Fund’s assets. Cash may also be held on
deposit with one or more Australian banks.
For additional information
in relation to the Fund
investments please refer to
section 5 – Portfolio
Guidelines.
For additional information
please refer to section 10.5
– Prime Broker and
Custodian and section 10.6
Administrator.
Liquidity: The Investment Manager expects to realise at least 80% of the Fund’s assets, at the
value ascribed to those assets in calculating the Fund’s Net Asset Value, within 10
days.
Leverage: The Fund may from time to time use leverage to magnify the Fund’s exposure to
investments. Leverage may be obtained by the Fund borrowing securities from the
Prime Broker to invest and by investing in derivatives. A worked example of the
impact of Leverage is provided in section 7.11.
The Fund’s maximum Gross exposure is 400% (200% Long and -200% Short) of the Net
Asset Value of the Fund.
The Prime Broker has a security interest over the Fund as collateral and the Fund is
subject to counterparty risk with respect to the Prime Broker. The assets of the Fund
may also be transferred to the Prime Broker as collateral.
For additional information
please refer to section 4.8 –
Leverage and section 7.11 –
Risks associated with
Leverage
For further information
please refer to section 10.5
- Prime Broker and
Custodian.
Derivatives: The Fund may use derivatives as part of its investment strategy to obtain exposure,
leverage the portfolio and achieve a short position. The Fund may use Australian
exchange traded derivatives only (typically futures contracts). OTC derivatives are
NOT permitted.
The Investment Manager will transact with regulated and reputable brokers as
Derivative counterparties following due diligence. Australian exchange traded
derivative transactions are cleared through the ASX, which reduces the counterparty
risk.
There are a number of risks associated with investing in derivatives. Key risks include
the use of Leverage, Short Selling and also Counterparty Risk.
For additional information
in relation to the Key Risks
associated with investing in
Derivatives please refer to
section 7 – Risk Factors.
Short Selling: The Fund utilises short selling with the aim of generating alpha from falling stock
prices and to reduce overall share market risk and total portfolio risk. Short selling
involves selling borrowed securities with the intention of buying the securities back,
at a later date, at a lower price.
To manage the risk associated with short selling the Fund may utilise ‘Stop-Loss
Limits’ on short positions held by the Fund.
For additional information
in relation to Short Selling
please refer to section 4.7 -
Short Selling and Section
7.10 - Risks associated with
Short Selling.
Withdrawals /
Redemptions
Unitholders can redeem/withdraw from the Fund monthly with notice to be received
by the registry 10 days prior to the last business day of the month.
Withdrawals may be suspended and/or in limited circumstances as set out in section
9.7. Unitholders will be notified in writing of any material changes to their withdrawal
rights.
For further information
please refer to section 9.7 –
restrictions Applying to
Withdrawals and
Applications
Page | 10
4. HOW THE FUND INVESTS4.1 INVESTMENT OBJECTIVE
The Fund aims to generate absolute returns in line with
long term equity returns while targeting a lower risk
profile, as measured by fund volatility. Generating returns
that are uncorrelated (ie. Performance doesn’t necessarily
rise/fall when equity markets do) and preserving capital
are priorities for the Fund.
4.2 INVESTMENT STRATEGY
The Fund uses long and short positions to target absolute
returns. Shorting serves two main purposes; to profit from
falling stock prices and to reduce total portfolio risk.
To build the portfolio Karara Capital undertakes a process
of:
• Security analysis;
• Security valuation;
• Portfolio construction; and
• Position sizing.
4.3 SECURITY ANALYSIS
The Fund will seek to achieve its objective by utilising
fundamental analysis. Fundamental analysis utilises
original, independent and security specific research. The
essence of this research is driven by ‘change’. This can
come in any manner of forms such as; management,
strategy, acquisition/divestment, outlook for a company’s
products/services, return on invested capital, the balance
sheet, momentum, sentiment, regulation or
macroeconomic. Our investment decisions are based on
the identification and interpretation of change. Karara
Capital need to assess how significant the change is, has it
been reflected in the stock price, and is a re-rating likely?
4.4 SECURITY VALUATION
When evaluating a security and considering the ‘changes’,
Karara Capital derives a valuation that is the summation of
our knowledge and insight. Peer review is undertaken to
ensure the merits of each particular investment case. Our
final valuation is compared to the current stock price. If a
sufficient upside or downside is present, Karara Capital will
take either an active long or short position.
4.5 PORTFOLIO CONSTRUCTION
A significant portion of our value-add comes from being
able to make active stock decisions in a timely fashion.
The Fund has four general areas of alpha generation.
Relative valuation, fundamental long, fundamental short
and event driven. Understandably some of these
classifications have a natural overlap.
Relative valuation – this is often referred to as ‘pairs’
trading. Essentially Karara Capital are trying to match up
pairs of securities that have similar characteristics from
within similar ASX sectors. Karara Capital are looking for a
relative pricing dislocation to exploit. This could be based
upon the dividend yield or price to earnings ratio. This
form of investing requires regular rebalancing to capture
the available alpha.
Fundamental long – the Fund may take a standalone long
position in a security where it has undergone our security
analysis and valuation process. The company’s prospects
within an industry may not be being appropriately
recognised by its market price or market rating.
Fundamental positions are generally held for the medium
to long term (6-12 months).
Fundamental short – this is effectively the opposite of a
fundamental long. Karara Capital will take this position
when Karara Capital believes a company’s share price is
trading above our derived valuation.
Event driven – frequently Karara Capital observes special
situations whereby mispricing occurs. These can be caused
by merger and acquisition activity, initial public offerings,
equity placements, recapitalisations, Australian de-listings,
buybacks, acquisitions & divestments and index
rebalancing. These events differ in nature and have varying
expected timeframes to play out.
4.6 POSITION SIZING
Individual stock positions are selected with reference to
the deviation to our valuation, stock volatility, stock
liquidity and price & earnings momentum. Generally the
largest stock positions will be in lower risk large
capitalisation stocks. Higher risk small capitalisation stocks
will be held at relatively smaller sizes.
4.7 SHORT SELLING
The Fund utilises short selling with the aim of generating
alpha from falling stock prices and to reduce overall share
market risk and total portfolio risk.
Short selling involves selling borrowed securities with the
intention of buying the securities back, at a later date, at a
lower price. To manage the risk associated with short
selling the Fund may utilise ‘Stop-Loss Limits’ on short
positions held by the Fund.
The Fund’s maximum GROSS short exposure will be -400%
of the Fund’s Net Asset Value. The maximum NET short
exposure is -50% of the Fund’s Net Asset Value.
4.8 LEVERAGE
Leverage is a tool which may be utilised by the Fund to
magnify exposures beyond the assets available to the Fund
by increasing the level of investible assets. The Fund may
borrow securities to invest and may invest in Derivatives
that have the same effect as borrowing. This could
enhance returns, although it may also increase losses.
Borrowing or leverage may produce more volatile returns
compared to investing without making use of borrowing or
leverage.
The Fund’s maximum GROSS exposure is 400% (200% Long
and -200% Short) of the Net Asset Value of the Fund.
Leverage is a means by which GROSS exposure can be
increased above 100%.
The Fund may use the assets of the Fund as security for
any monies and securities borrowed or collateral for
Derivatives or Short Selling.
Page | 11
5. PORTFOLIO GUIDELINES.
THE KARARA MARKET NEUTRAL PLUS FUND
The Fund will typically invest in securities listed (or to be
listed) on the Australian Securities Exchange (ASX),
Australian exchange traded derivatives and Australian
denominated cash. The Fund may also invest in Global
REITs, Infrastructure related securities and Utilities related
securities listed on developed market exchanges*.
Although the Fund is authorised to invest in Australian
exchange traded derivatives, OTC derivatives are NOT
permitted.
INVESTMENT OBJECTIVE
The investment objective of the Fund is to outperform the
RBA Cash Rate (after fees) over rolling 5-year periods.
An investment in this Fund is not intended to be of a short-
term nature. Karara Capital suggests an investment
horizon of at least five years. Although Karara Capital have
suggested a minimum investment horizon for an
investment in this Fund, you should regularly review your
investment decision with your professional adviser as your
investment requirements or market conditions may
change.
FUND PERFORMANCE
To obtain up-to-date performance information, please visit
the Karara Capital website www.karara.com.au or contact
a client service representative on (03) 8612 7100.
* Developed market exchanges as defined by MSCI. Typically
Global REITs held by the Fund will be listed on share markets
located in the USA, Japan, Singapore, Hong Kong, UK and New
Zealand
INVESTMENT RESTRICTIONS
Investment Exposures
Target number of
positions:
30 - 100 (combined Long and Short)
Maximum NET Equity
Exposure:
+80% of the Net Asset Value of the Fund
(NAV)
Minimum NET Equity
Exposure:
-50% of NAV
Maximum GROSS
Exposure
400% (200% Long and -200% Short) of NAV
Maximum individual
security exposure*
ASX100 securities +/- 30% of NAV
ASX101-200 securities +/-20% of NAV
Ex-200 securities +/- 10% of NAV
Global REITs +/- 10% of NAV
* Maximum security exposure except where the maximum individual
security exposure exceeds the stated limit due to market movements. In
such circumstances, the Investment Manager will dispose of any securities
within a reasonable period.
Asset Allocation
Range (Long and Short)
% of NAV
ASX listed REITs, property related
securities, Infrastructure related securities
and Utilities related securities.
0% to 200%
Other ASX-listed securities comprising
sectors not listed above
0% to 100%
Global REITs, Infrastructure related
securities and Utilities related securities
listed on developed market exchanges
(excluding Australia)
0% to 40%
Derivatives 0% to 40%
Cash 0% to 150%
Note: These guidelines may be adjusted from time to time without notice
to the unitholders (any material change will be notified to investors as
soon as possible and/or be notified on Karara's website).
Page | 12
6. FEES
6.1 MANAGEMENT FEE
Karara Capital will be paid a management fee of 1.50% p.a.
(inclusive of GST and net of any reduced input tax credits
available to the Fund) of the value of the Fund’s net assets
referable to the Series 1 class of units. The Fund’s
constitution allows Perpetual to charge a management fee
of up to 4% p.a (inclusive of GST) of the Net Asset Value of
the Fund.
The management fee is calculated monthly and is paid
from the Fund monthly in arrears.
6.2 PERFORMANCE FEE
The Fund’s constitution allows Perpetual to charge a
maximum performance fee of 25% of excess performance
of the Series 1 unit class where the performance for the
class exceeds the benchmark for the class over a financial
year. The benchmark is the RBA Cash rate.
At the date of this IM, the performance fee is 20%
(inclusive of GST and net of any reduced input tax credits
available to the Fund) of excess performance by which the
Series 1 unit class outperforms the RBA Cash Rate over a
financial year, provided:
• the Series 1 unit class outperforms the RBA Cash
rate by 2% per annum (Performance Hurdle).
The performance fee (if any) is paid to Karara Capital.
Any entitlement to a performance fee will be paid annually
in arrears within 60 days of the end of the financial year. If
the return on the Series 1 unit class in any year is less than
the benchmark return, this under-performance will be
carried forward and applied against the return on the
Series 1 unit class in the following and any subsequent
years. A performance fee will not accrue until any under-
performance has been recovered. This represents a high
water mark.
The performance fee is calculated monthly. Individual
calculations for each month (as detailed below) are
aggregated on a financial year to date basis and, where
positive (taking into account any under-performance which
has been carried forward), are reflected in the unit price.
The formula for determining the performance fee for a
month is:
A x 20% x (TP - BP)
where:
A: the Net Asset Value (NAV) of the Series 1 unit
class at the end of the immediately preceding month
(adjusted to add back any performance fees which have
accrued but have not been paid) and adjusting for any
change in the NAV as a result of applications,
withdrawals and distributions during the month.
TP: the percentage change in the NAV of the Series 1 unit
class from the end of the immediately preceding
month to the end of the current month after
adjusting to neutralise any reduction in the NAV as a
consequence of:
• entitlements to distributable income where the
end of the current month coincides with the end
of a distribution period; and
• any performance fees which have accrued but
have not been paid.
BP: the Benchmark expressed as a percentage time-
weighted adjusted for any increases or decreases in
the RBA Cash rate over the current month.
Worked examples of the Performance Fee
The below examples are for the purpose of illustrating how
performance Fees may be calculated only. Each example
assumes the investment return of the Fund and the
Benchmark is steady during the period. The examples also
assume no applications or withdrawals are made during
the period.
Example 1 – Fund performance exceeds the Performance
Hurdle
The adjusted Fund NAV at the beginning of the period is
$500,000 and at the end of the period is $530,000.
Therefore the investment return for the period is 6% as 6%
x $500,000 = $30,000. The Benchmark return for the
period is 2% and the Performance Hurdle for the period is
4% (Benchmark return +2%).
The Performance Fee will be calculated as:
$500,000 x 20% x (6% - 2%) = $4,000.00
Example 2 – Fund performance does NOT exceed the
Performance Hurdle
The adjusted Fund NAV at the beginning of the period is
$500,000 and at the end of the period is $515,000.
Therefore the investment return for the period is 3% as 3%
x $500,000 = $15,000. The Benchmark return for the
period is 2% and the Performance Hurdle for the period is
4% (Benchmark return +2%).
NO performance fee is payable as the Fund performance
does not exceed the Performance Hurdle.
The performance fee is calculated on the performance of
the Series 1 units and not on the performance of your
investment in the Fund. As a result, the actual
performance fee payable on your investment in the Fund
may be affected by the timing of your applications and
withdrawals.
6.3 NORMAL EXPENSES
Perpetual has the power under the Fund’s constitution to
be reimbursed for all expenses properly incurred in
operating the Fund. This includes reimbursement from the
Fund for the custody, administration, accounting and audit
expenses incurred in respect of the Fund on an on-going
basis. The level of expenses that can be reimbursed from
the Fund is capped at 0.20% per annum. Where the
expenses exceed 0.20% per annum, the residual expenses
will be paid by Karara Capital.
Page | 13
6. FEES cont.
6.4 ABNORMAL EXPENSES
Subject to the Corporations Act, Perpetual is entitled to be
paid or reimbursed from the Fund’s assets for any
abnormal expenses incurred in relation to the proper
performance of its duties in respect of the Fund. Any
abnormal expenses (such as investor meetings, changes to
the constitution and defending or pursuing legal
proceedings) will be paid out of the Fund. These costs are
expected to be incurred fairly infrequently.
6.5 TRANSACTION COSTS
The Fund may incur transaction costs (such as brokerage,
settlement costs, clearing costs and stamp duty) when
buying and selling the Fund’s assets. Transaction costs may
be incurred in the day-to-day management of the Fund’s
investment portfolio, or when investors enter or exit the
Fund.
When transaction costs are incurred by changing the
Fund’s investment portfolio, the transaction costs are paid
out of the Fund’s assets and are reflected via a reduction in
the Fund’s unit prices.
When transaction costs are incurred because investors
choose to buy or sell units, transaction costs are estimated
and incurred by those investors via a buy/sell spread, with
a view to ensuring that other investors do not bear these
costs.
The buy/sell spread is not a fee paid to Perpetual or Karara
Capital, but is retained in the Fund to cover estimated
transaction costs. Reinvested distributions do not incur a
buy spread.
Currently, the Fund charges a buy/sell spread of 0.25% for
investments into or out of the Fund. This is incorporated
into the application price and withdrawal price of units in
the Fund. The buy/sell spread may change in the future.
In some circumstances, Perpetual may be able to accept
application monies, or pay withdrawal proceeds in-specie.
The buy/sell spread may not apply in these circumstances.
6.6 BORROWING COSTS
Any costs associated with the Fund borrowing securities
(including interest, establishment fees, government
charges and securities lending fees) are deducted from the
Fund’s assets and reflected in the unit price.
The Fund will pay the securities lender an ongoing fee on
borrowed securities. The ongoing fee varies on a security
by security basis but is usually within the range of 0.5%-
5.0% per annum of the market value of the security.
6.7 GOVERNMENT CHARGES
Government charges such as state taxes will be applied to
your investment as appropriate.
All fees quoted are inclusive of the impact of GST and are
net of any reduced input tax credits available to the Fund.
Reduced input tax credits will be claimed by Perpetual.
Information on GST is set out in section 8.5.
6.8 DIFFERENTIAL FEES
Subject to the Corporations Act, Perpetual and Karara
Capital may charge lower fees, rebate or waive fees for
certain investors or a class of investors (provided all are
wholesale). The terms on which different fees may be paid
and rebates or waivers provided are entirely at Perpetual
and Karara Capital’s discretion.
6.9 CHANGES TO FEES AND EXPENSES
Fees may increase or decrease for many reasons, including
changes in the competitive, industry and regulatory
environment or simply from changes in costs. Perpetual
may increase the fees at any time up to the maximum
specified in the constitution, by giving you 30 days written
notice.
6.10 BENEFITS RECEIVED
As a result of the brokerage paid by the Fund, Karara
Capital may use Commission Sharing Agreements (“CSA’s”)
with brokers to pay for the supply of investment research-
related products and services to Karara Capital. Karara
Capital will only use products or services in this way where
they believe they can reasonably be expected to assist in
the provision of investment services to the Fund and/or
assist in the performance of investment decision making.
Page | 14
7. RISK FACTORS
There are a number of risks associated with an investment
in the Fund, either specific to the Fund or general
investment risks, which may materially and adversely
affect the future financial performance and financial
condition of the Fund.
This section describes a number of risks associated with an
investment in the Fund. This list of risks is not exhaustive.
Many of these risks are outside the control of Perpetual
and Karara Capital and there can be no guarantee that the
Fund will achieve its stated objectives. In particular, there
can be no guarantee of the Fund’s capital, rate of return on
capital or generation of income or of the investment
performance of the Fund.
Before making any investment decision relating to the
Fund, you need to carefully consider whether the
investment is suitable for your personal financial position,
risk tolerance and investment timeframe.
7.1 MARKET RISK
Market risk refers to the risk that certain events may occur
and have a negative impact on the share prices of listed
securities within a particular market. These events may
include changes in economic, social, technological,
political, legal or accounting conditions, as well as market
sentiment. Shares of companies with a small or medium
market capitalisation may be subject to these risks to a
greater extent than shares of other companies with larger
market capitalisations.
7.2 SECURITY-SPECIFIC RISK
As the Fund will hold securities in companies listed on the
ASX and other developed market exchanges, they will be
subject to the risk of changes in share prices. Various
factors can affect share prices such as changes in
government and central bank policies, economic cycles
and the level of business confidence. Also, changes to a
company’s market, its market position, technology, cost
structure, and management may impact on the value of
the Fund’s investments in those securities. The share
prices of individual companies are also dependent upon
the financial circumstances of the company, namely
revenue, earnings and cash flow.
7.3 DERIVATIVES RISK
A derivative is a financial instrument that derives its value
from the price of another asset (including securities) or
market index. Where derivatives are held, losses may arise
where there is an adverse movement in the value of the
asset that underlies the derivative or where the Fund or a
counterparty to a derivative contract is unable to meet its
obligations under that contract.
7.4 LIQUIDITY RISK
Liquidity risk is the risk that an investment held by the
Fund may not be easily converted into cash with little or no
loss of capital and minimum delay, for example, because of
either inadequate market depth or disruptions in the
market place. Shares of companies with a small or medium
market capitalisation may be subject to these risks to a
greater extent than shares of other companies with larger
market capitalisations.
7.5 INTEREST RATE RISK
Interest rate movements may adversely affect the general
business, financial and economic climate worldwide, and
hence the value of the assets of the Fund. In addition, to
the extent that investors use debt to fund their investment
in the Fund, interest rate movements may adversely affect
them.
7.6 OPERATIONAL RISK
Operational risk is the risk associated with a breakdown in
the investment and administrative procedures or controls
that Perpetual and Karara Capital employ to manage the
Fund and its investments, possibly as a result of staff
changes, human error or technological breakdown.
7.7 STRUCTURAL RISK
The Fund is subject to the risks arising from its unit trust
structure. Investing in a unit trust is not the same as
investing directly in securities, as the income and capital
returns of a unit trust may be affected by applications and
withdrawals made by investors of different unit classes. In
addition, the Fund can change its constitution and its fees,
the trustee or the investment manager of the Fund can
change and the Fund can be terminated.
7.8 REGULATORY AND TAX RISK
The Fund may be adversely impacted by any changes to
the regulatory and tax environments in Australia. The
potential tax risks include the ability of the Fund to
maintain the current tax treatment of trusts in Australia.
As Perpetual and Karara Capital each hold an Australian
Financial Services Licence and operate within the regulated
financial services industry, they are subject to compliance
risks. Perpetual and Karara Capital have ongoing
obligations which include compliance with licensing,
conduct and disclosure regulations.
7.9 MANAGEMENT AND KEY MAN RISK
Management risk is the risk that an investment
management strategy used by the Fund may fail to
produce the intended result. In managing the Fund assets
Karara Capital will apply the investment approach
described in this IM. However there is no guarantee that
this investment approach will produce the intended
return.
In addition, any staff changes may impact on Karara's
ability to successfully implement its investment approach
in managing the Fund.
Page | 15
7. RISK FACTORS cont.
7.10 SHORT SELLING
The Fund may undertake short selling. Short selling
involves selling securities that may or may not be owned
by the Fund and borrowing the same securities for delivery
to the purchaser, with the obligation to return the
borrowed securities at a later date. For example, the Fund
may borrow a share from the Prime Broker and sell that
share for $100. If the price of that share decreases to $75,
then the Fund will make a profit of $25 when it buys that
share and returns it to the Prime Broker. However, if the
price of that share increased to $115, then the Fund will
make a loss of $15. Establishing a short position involves a
higher level of risk than establishing a long only position in
a security as there is no limit on maximum loss, given that
the price of the underlying security could theoretically rise
without limit. In practice, the position would normally be
closed out by purchasing the shorted security at a
predetermined price to cap the level of potential loss
(stop-loss limit).
There is no guarantee the Fund will be able to purchase
the security at a price that would generate a positive
return or buy sufficient amounts of the security to satisfy
the Fund’s obligations to return the security to the entity
that lent them. This could cause loss to the Fund. To
manage the risk associated with short selling the Fund may
utilise ‘Stop Loss Limits’ on short positions held by the
Fund.
7.11 LEVERAGE
Leverage is a tool which may be utilised by the Fund to
magnify exposures beyond the assets available to the Fund
by increasing the level of investible assets. The Fund may
borrow securities to invest and may invest in Derivatives
that have the same effect as borrowing. This could
enhance returns, although it may also increase losses.
Borrowing or leverage may produce more volatile returns
compared to investing without making use of borrowing or
leverage. Borrowing of securities is typically sourced from
the Prime Broker.
Worked example
A worked example of the impact of Leverage on
investment returns and losses is set out below.
This example assumes the maximum anticipated level of
leverage i.e. 200% GROSS exposure. The example further
assumes that the Fund is fully invested. This will mean for
each $100,000 invested, the GROSS exposure will be
$200,000
• A 1% increase in the return on assets of the Fund
results in a 2% increase in return to investors
($2,000 gain for the GROSS exposure of
$200,000); and
• A 1% decrease in the return on assets of the
Fund results in a 2% decrease in return to
investors ($2,000 loss for the GROSS exposure of
$200,000)
In the above example, if no leverage were used, the GROSS
exposure on $100,000 invested would be $100,000:
• A 1% increase in the return on assets of the Fund
results in a 1% increase in return to investors
($1,000 gain for the GROSS exposure of
$100,000); and
• A 1% decrease in the return on assets of the
Fund results in a 1% decrease in return to
investors ($1,000 loss for the GROSS exposure of
$100,000)
Please note the above example has been provided for
reference purposes only. Any assumptions underlying
these examples are hypothetical only.
7.12 FOREIGN EXCHANGE RISK
The Fund may invest in securities listed on a foreign
developed sharemarket and therefore the Fund may have
foreign currency exposure. Foreign exchange fluctuations
may have a positive or adverse impact on the investment
returns of the Fund. The Fund’s foreign currency exposure
may be over or under hedged or not hedged at all. It may
not always be possible to hedge all foreign currency
exposures and there is no guarantee that hedging will be
successful. Generally, a long position will be matched with
a short position of similar size to minimise foreign
exchange movements.
7.13 COUNTERPARTY & SERVICE PROVIDER RISK
Default by any of the Fund’s counterparties or Service
Providers (e.g. Prime Broker and Custodian) may cause
losses to the Fund. The Fund’s investments may be
borrowed, lent or otherwise used by the Fund’s Prime
Broker and Custodian. Any cash the Prime Broker and
Custodian receives on the Fund’s behalf will not typically
be subject to the client protections conferred by relevant
laws. The Fund will rank as an unsecured creditor to the
Prime Broker and Custodian in the case of its insolvency.
Accordingly, the Fund may not be able to recover
equivalent assets in full should the Prime Broker and
Custodian in such circumstances. Counterparties and
Service Providers may also hold security over the Fund’s
assets so that they rank ahead of unitholders in recovering
the assets of the Fund. We will seek to appoint
counterparties and service providers that have a low risk of
defaulting, although these risks cannot be entirely
eliminated. The Investment Manager will transact with
regulated and reputable brokers as derivative
counterparties following due diligence. The Fund is
authorised to invest in Australian exchange traded
derivatives only, which are cleared through the ASX,
reducing the derivative counterparty risk.
Refer section 10.5 for further details relating to the Prime
Broker and Custodian.
7.14 MANAGING RISKS
While all risks cannot completely be eliminated, Perpetual
and Karara Capital aim to manage the impact of these risks
through the use of consistent and carefully considered
investment guidelines and compliance procedures.
However, investors should note that not all risks can be
foreseen and managed. Your decision to invest in the Fund
should be taken with these risks in mind and you should be
comfortable that the risks outlined previously are in line
with your personal risk profile.
Page | 16
8. TAXATION
An investment in the Fund has potential tax implications
depending on your personal circumstances.
This taxation summary provides an overview of the
Australian taxation implications, as at the date of this IM,
for Australian resident investors investing in a Fund (see
Section 8.5 for a discussion on the taxation of non-resident
investors).
The comments below are general in nature and are current
as at the date of this IM. The consequences of investing in
the Fund will vary from investor to investor. You should be
aware that the applicable taxation laws might change over
the life of your investment in the Fund.
Perpetual strongly recommends that all investors in the
Fund obtain professional taxation advice about the
implications of investing in the Fund, regardless of whether
their units in the Fund are held on capital or revenue
account, or as trading stock.
8.1 TAXATION OF THE FUND
The Trustee of the Fund is a resident of Australia for tax
purposes. The Trustee intends to distribute all of the
income of the Fund to investors at the end of each
financial year (see Section 9.4). Where this is the case, the
Fund should not be liable for income tax.
The Fund will generally not be liable to pay income tax on
the basis that:
• where the Fund is not an Attribution Managed
Investment Trust ("AMIT"), investors are
'presently entitled' to all of the Fund’s
distributable income; or
• where the Fund is an AMIT, all taxable income is
intended to be attributed to investors for each
income year.
To the extent that investors are not presently entitled to,
or (where the Fund is an AMIT) attributed with, any of the
Fund's income, then the Fund will be subject to tax on that
income at the highest marginal rate (plus Medicare levy
and any other applicable government charges).
The AMIT provisions in the tax legislation apply to
qualifying managed investment trusts that make an
irrevocable election to become an AMIT. The practical
consequences for Australian resident investors should be
similar whether the Fund is an AMIT or not.
Information will be posted on Karara Capital’s website
(www.karara.com.au) if the Trustee elects for the Fund to
enter into the AMIT regime.
Furthermore, it is intended that the Fund will not
undertake any activities that would result in it being
regarded as a public trading trust (which would result in
the Fund effectively being taxed as a company).
If the Fund incurs a tax loss, for taxation purposes, that tax
loss cannot be passed on to investors. However, unutilised
tax losses may be carried forward by the Fund, subject to
the satisfaction of the loss recoupment rules. Carried
forward revenue losses can be used to offset assessable
income derived by the Fund in a subsequent year.
However, carried forward capital losses can only be offset
against capital gains realised by the Fund.
8.2 TAXATION OF AUSTRALIAN RESIDENT INVESTORS
Income earned by the Fund, whether distributed, retained
or reinvested, can form part of the assessable income for
unitholders in the year of entitlement or attribution
(where the fund is an AMIT). This means that you may be
required to pay tax on income that has not yet been
distributed to you, or where you have elected to re-invest
distributions back into the Fund.
You should be taxed on your share of the Fund’s taxable
income, which may include both a capital and income
component (e.g. trust distributions, dividends, franking
credits and capital gains).
Investors will receive a tax statement annually. The
statement will include information to be included in your
tax return.
If the Fund elects into the AMIT regime, Perpetual will be
able to accumulate part or all of the Fund’s income in the
Fund, in which case the income of the Fund that is
attributed to you will be more than the distribution that
you receive. If this occurs, the Fund’s unit price would only
fall by the amount of the actual distribution and not by the
additional amount attributed to investors. Investors would
need to increase the cost base of their units for tax
purposes by the amount that has been attributed to them
but not paid as a distribution. This information will be
provided on your annual tax statement.
You should be aware that the taxation position of the Fund
may change at any time. Additionally, as investors are able
to move out of the Fund at different times, it is possible
that taxation liabilities in respect of gains that have
benefited past investors may have to be met by
subsequent investors.
8.3 FRANKING CREDITS
The Fund may derive dividend income which may be
franked for tax purposes. In this instance, your share of the
Fund’s taxable income may include franking credits.
Subject to various conditions, you may be able to use these
credits as a tax offset to reduce your tax payable.
Perpetual recommends that you seek independent
professional taxation advice with respect to your
entitlement to franking credit tax offsets, including the
implications of the 45 day rule.
Page | 17
8. TAXATION cont. 8.4 WITHDRAWALS AND TRANSFERS
Where units are held as capital assets, any transfer or
withdrawal of units will be treated as a disposal for capital
gains tax ("CGT") purposes. A capital gain will arise where
the capital proceeds (excluding income distributed at the
time of disposal) exceeds the original (or adjusted) cost
base of the units.
Individuals, trusts and complying superannuation entities
may be eligible for CGT concessions in relation to capital
gains made with respect to units which are held for at least
12 months. The CGT concessions will not be available
where you hold units in the Fund on revenue account.
A capital loss will arise where the capital proceeds are less
than the original reduced (or adjusted reduced) cost base
of the units. Capital losses may only be offset against
current or future capital gains of the investor, where the
loss recoupment rules are satisfied.
8.5 TAXATION OF NON-RESIDENT INVESTORS
If you are a non-resident investor (for tax purposes) in the
Fund, Perpetual strongly recommends that you obtain
advice based on your particular circumstances. Non-
resident investors should seek their own independent
taxation advice regarding their local, as well as Australian,
taxation obligations.
As a non-resident, distributions from the Fund may be
subject to:
• Australian income tax; and/or
• withholding tax (depending on your country of
residence and the nature and amount of the
distribution),
both of which will be withheld by Perpetual.
8.6 GOODS AND SERVICES TAX (GST)
The acquisition of units, receipt of distributions and
subsequent disposal or redemption of units in the Fund
should not be subject to GST, regardless of whether the
investor is registered for GST.
GST will generally be incurred on various acquisitions made
by the Fund. The Fund may be able to claim input tax
credits and/or reduced input tax credits ("RITCs") of at
least 55% of the GST incurred.
The receipt of distributions should not give rise to any GST
consequences, as such amounts are considered to be
outside the scope of GST. Unless otherwise stated, all fees
quoted in this IM are quoted on a GST inclusive basis and
net of any applicable RITCs referable to the Fund.
It is recommended that investors seek independent advice
with respect to the GST consequences arising from their
investment.
8.7 FOREIGN TAXATION
Where the Fund’s investments have a connection with a
foreign jurisdiction, there may be Australian and foreign
taxation consequences.
Australian residents are required to include in their
assessable income their share of any foreign taxes paid by
the Fund. Australian residents will normally be entitled to a
tax offset for foreign taxes paid by the Fund. If foreign tax
offsets are included in your distribution, you must
determine your entitlement based on your individual
circumstances.
8.8 PROVISION OF TAX FILE NUMBER (TFN),
EXEMPTIONS AND AUSTRALIAN BUSINESS NUMBER
(ABN)
You can choose whether or not to provide your TFN on
your Application Form. If you do not provide your TFN or
TFN exemption details, Perpetual is required to withhold
tax up to the highest marginal rate plus Medicare Levy and
any other government charges from any income
distributions made to you. Investors that hold units as part
of an enterprise may quote their ABN instead of their TFN.
The Australian Taxation Office (ATO) can provide more
information about TFNs and ABNs.
8.9 US TAX WITHOLDING AND REPORTING UNDER
THE FOREIGN ACCOUNT TAX COMPLIANCE ACT
(“FATCA”)
The United States of America has rules (known as FATCA)
which are intended to prevent US persons from avoiding
tax. Broadly, the rules may require the Fund to report
certain information to the ATO, which may then pass the
information on to the US Internal Revenue Service (IRS). If
you do not provide this information, we will not be able to
process your application.
In order to comply with these obligations, Perpetual will:
• collect certain information about you and
undertake certain due diligence procedures to
verify your FATCA status; and
• provide information to the ATO in relation to
your financial information required by the ATO
(if any) in respect of any investment in the Fund.
8.10 COMMON REPORTING STANDARD (“CRS”)
The CRS is a global standard for the collection, reporting
and exchange of financial account information on foreign
tax residents. The requirements are similar to those which
exist under FATCA, however, the CRS applies to a greater
number of countries.
Australia has signed the OECD Multilateral Competent
Authority Agreement on Automatic Exchange of Account
Information. This agreement enables CRS information to
be exchanged between the tax authorities of the
jurisdictions that have adopted CRS legislation.
The Trustee is required to collect certain information
about foreign tax residents and provide it to the ATO.
Further, the ATO may pass this information on to tax
authorities in other jurisdictions.
Page | 18
9. INVESTMENTS, WITHDRAWALS AND DISTRIBUTIONS
9.1 HOW TO MAKE AN INVESTMENT
The minimum initial investment amount (and minimum
balance to be maintained) is $250,000 for eligible investors
investing in the Fund (Perpetual may waive or vary this
from time to time). A minimum initial investment (and
minimum balance to be maintained) of $500,000 applies to
investors who do not otherwise satisfy the eligible investor
requirements.
To invest in Series 1 units, you must complete the
Application Form contained within or accompanying this
IM. You can only apply for investment in the Fund if you
have received this IM within Australia.
Forward the completed Application Form, together with
your cheque or bank confirmation of funds transfer, to the
Fund’s Administrator:
BY POST
Attention: Karara Unit Registry
Link Fund Solutions Pty Limited
GPO Box 5482
Sydney NSW 2001
BY FAX (refer Section 10.4)
Link Fund Solutions Pty Limited
Fax: 02 9221 1194
BY EMAIL
Your investment monies can be remitted from any
financial institution in Australia to the Custodian’s
nominated bank account. Please include a bank
confirmation of funds transfer together with your
Application Form. Account details are as follows:
Perpetual Trust Services Limited as Trustee of Karara
Market Neutral Plus Fund
BSB: 012-003
Account Number: 8380-95277
<Application name>
The number of units issued to you is determined by
dividing your investment amount by the applicable unit
application price (see Section 9.5 on how the unit
application price for Series 1 units is calculated).
If your correctly completed Application Form and cheque
or bank confirmation of funds transfer are received and
accepted by the Administrator:
• by 2.00pm AEST on the last business day of the
relevant month, your investment will be processed
using the unit application price for the last business
day of that month. If your application is received
after this time, it will be returned to you.
Generally, units will be issued on the business day
immediately following acceptance of your application (see
Section 9.7 for further information).
If this is your first investment in a Fund, you will be sent an
Investor ID number. You should retain this for all future
transactions in respect of the Fund.
9.2 ADDITIONAL INVESTMENTS
Additional investments can be made at any time in writing
(including by facsimile – refer Section 10.4). The minimum
amount for additional investments is $25,000 (or such
other amount as Perpetual may determine from time to
time).
9.3 HOW TO MAKE A WITHDRAWAL
You are permitted to make withdrawal requests but
Perpetual is only required to satisfy such requests while
the Fund is ‘liquid” (as defined in the Corporations Act) and
the request is for at least the minimum withdrawal
amount (unless the request relates to the balance of your
holdings in the Fund). The minimum withdrawal amount is
$25,000 (or such other amount as Perpetual may
determine from time to time). If your withdrawal request
results in your remaining investment falling below the
minimum balance (currently $250,000), Perpetual reserves
the right to treat your withdrawal request as a full
withdrawal of your investment. If a holding is less than the
minimum balance (currently $250,000), Perpetual may
(after giving 30 days’ notice), redeem the holding without
the need for a withdrawal request.
To withdraw from the Fund, fax or post your withdrawal
request to the Administrator (see Section 9.1 for postal
address details).
BY FAX (refer Section 10.4)
Link Fund Solutions Pty Limited
Fax: 02 9221 1194
If you request the withdrawal of a number of units, the
withdrawal value of your investment is determined by
multiplying the number of units by the unit withdrawal
price (see Section 9.5 on how the unit withdrawal price is
calculated).
If your withdrawal request is received and accepted by the
Administrator:
• 10 days prior to the last business day of the relevant
month, your withdrawal will be processed using the unit
withdrawal price for the last business day of that month.
If your request is received after this time, it will be taken to
be received on the next business day and processed on the
last business day of the following month using the unit
withdrawal price for that month.
The proceeds from your withdrawal will usually be
available within ten business days of calculation of the
relevant unit withdrawal price. However, in accordance
with the Fund’s constitution, Perpetual may take up to 21
days to pay you. Further, in certain circumstances,
Perpetual may suspend withdrawals (see Section 9.7 for
further information).
Page | 19
9. INVESTMENTS, WITHDRAWALS AND DISTRIBUTIONS cont.
Your withdrawal proceeds will be deposited into your
nominated Australian financial institution account.
Cheque payments will not be made.
Please note, withdrawals will not be paid in cash, nor will
they be paid into a third party account.
9.4 DISTRIBUTIONS
The Fund may earn income from its investments, including
trust distributions and dividends. The Fund may also
generate capital gains or losses from the sale of
investments.
Generally, distributable income is calculated semi-annually
(as at 31 December and 30 June), and paid to investors
within one month of the last day of the distribution period.
Perpetual reserves the right to make additional
distributions during the year.
Your entitlement to the distributable income of the Fund
in respect of Series 1 units is calculated on a pro rata basis
by reference to the number of units you hold at the end of
the distribution period compared to the number of Series 1
units on issue at the end of the distribution period.
Following the determination of the income to be paid to
investors the Fund’s unit price will fall to reflect the
reduced value of the Fund following the payment of the
distribution to investors (in other words, it is priced to
exclude the distribution entitlement).
You may have distributions paid directly to your
nominated Australian financial institution or you can
reinvest your income in additional units in the relevant
Fund. If Perpetual does not receive written instructions on
how you want your distribution paid, Perpetual will
reinvest the amount into the relevant Fund. Proceeds of
electronic transfers that have been unsuccessful on three
occasions will be reinvested in units on behalf of the
investor at the applicable application price.
9.5 UNIT PRICING
Generally, the unit price of the Karara Market Neutral Plus
Fund is determined on the last business day of each
month.
The unit price of Series 1 units is calculated by:
• establishing the Fund’s NAV and the NAV
attributable to the Series 1 unit class
• dividing the NAV attributable to the Series 1 unit
class by the number of Series 1 units on issue to
investors at the time the unit price is calculated
to determine the NAV per unit
• for unit application prices increasing the NAV per
unit by the buy spread percentage (to allow for
transaction costs)
• for unit withdrawal prices, decreasing the NAV
per unit by the sell spread percentage (to allow
for transaction costs).
In determining the Fund’s NAV, the assets owned by the
Fund are normally valued at the end of day close of market
valuations.
The Fund’s NAV includes the value of the unrealised gains
and any income and realised gains not yet distributed. At
the end of a distribution period the Fund’s NAV may
decline as it is adjusted to reflect the amount of any
distribution. Consequently, if you invest just before a
distribution, you may receive back some of your capital as
taxable income.
All investor transactions are processed using a forward
pricing methodology. Therefore, if your instruction is
received by the Administrator:
• 10 days prior to the last business day of the
relevant month, the unit price applied to your
transaction will be the price calculated based
upon close of market valuation for the last
business day of that month.
9.6 CLASSES OF UNITS
Units may be offered in the Fund in one or more classes,
and Perpetual has the discretion to issue more classes of
units. Classes do not constitute separate trust funds. Units
of the same class confer equal interests and rights and
investors holding units of different classes must be treated
fairly.
Only the Series 1 class of units is offered in respect of the
Fund under this IM. Other classes of units with different
fee structures may be offered under other offer
documents.
9.7 RESTRICTIONS APPLYING TO WITHDRAWALS AND
APPLICATIONS
In certain emergency situations that impact the effective
and efficient operation of a market for an asset in the Fund
or in circumstances where Perpetual otherwise consider it
to be in investors’ interests, Perpetual may suspend
processing all applications or withdrawals for the Fund.
Applications or withdrawals received during the
suspension will be processed using the application or
withdrawal price applicable when the suspension is lifted.
Large Withdrawal Requests
Perpetual can in certain circumstances delay or stagger the
payment of large withdrawal requests. For example, if a
Unitholder requests the withdrawal of units representing
more than 5% of the number of units on issue in the Fund
and/or the aggregate of withdrawal requests represents
more than 10% of the number of units on issue in the
Fund, Perpetual has the right to stagger the withdrawals
into five separate withdrawal requests over five successive
months
If the Fund is not liquid
If the Fund becomes non-liquid (as defined by the
Corporations Act) withdrawals can only be made subject to
Page | 20
10. ADDITIONAL INFORMATION
an offer made according to the Corporations Act.
Perpetual has no obligation to offer an opportunity to
withdraw from the Fund whilst the Fund is non-liquid.
10.1 ELIGIBLE INVESTORS
You must be a wholesale investor as defined in section
761G of the Corporations Act to invest directly in the Fund. A minimum initial investment of $500,000 applies to
investors who do not otherwise satisfy the eligible investor
requirements.
10.2 CONSTITUTION
Perpetual’s responsibilities and obligations are governed
by the Fund’s constitution, the Corporations Act and
general trust law. The constitution of the Fund contains
various provisions that relate to the rights, terms,
conditions and obligations imposed on you and Perpetual.
Some of the constitution’s key provisions include those
relating to:
• your powers and rights;
• the Fund’s commencement, duration and
termination;
• unit pricing;
• investor meetings;
• Perpetual’s powers (such as its investment powers),
its right to charge fees and recover expenses and its
right to be indemnified;
• how Perpetual handles complaints; and
• your liability (although your liability as an investor in
the Fund is limited by the Fund’s constitution to the
value of your Series 1 units (subject to any tax
liability), the effectiveness of this limitation has not
been conclusively determined by the courts and
therefore no absolute assurance can be given that
your liability as an investor in the Fund is limited in
every situation).
Under the Fund’s constitution, the Fund may borrow
money and grant security.
Perpetual may, in accordance with the Corporations Act,
terminate the Fund or close it to new investors at any
time. Perpetual may amend the Fund’s constitution in
accordance with its terms and the Corporations Act.
A copy of the Fund’s constitution is available free of charge
by contacting Karara Capital.
10.3 REPORTING
Investors in the Fund will receive the following reports and
statements:
• Application and Withdrawal Confirmations
specifying details relating to your transactions
• Monthly Statement specifying holdings and the value
of your investment
• Monthly Investment Fund Report specifying Fund
NAV, redemption price of units, details of any
changes to key service providers including any
changes in related party status, net performance
returns, any material changes to the Fund’s risk
profile and strategy and any material changes to the
primary investment personnel responsible for
managing the Fund.
• Annual Investment Fund Report specifying asset
allocation of the Fund by asset type, liquidity profile
as at year-end, maturity profile of the Fund’s
liabilities as at year-end, the Fund’s leverage ratio as
at year-end, details of derivatives counterparties
engaged, annual investment returns of the Fund since
inception and details of any changes to key service
providers including any changes in related party
status.
• Distribution Statement after each distribution is paid.
At the end of each financial year, you will receive a
Consolidated Distribution Statement that will help to
simplify your record keeping by providing the total
amount of the income paid to you over the past 12
months.
• Tax Statement on an annual basis.
The Fund’s audited financial statements are available by
the end of September each year. Perpetual is not required
to send you a copy unless you request a copy. For a free
copy, please contact Karara Capital.
You may choose to receive a copy when completing the
Application Form.
Updated information in relation to the Fund will be
available from the Karara Capital website at
www.karara.com.au or by contacting Karara Capital on
(03) 8612 7100 or emailing [email protected].
Page | 21
10. ADDITIONAL INFORMATION cont.
10.4 FAXED INSTRUCTIONS
You can give withdrawal instructions and additional
investment instructions by facsimile to the Administrator.
You should retain a copy of every facsimile instruction that
you send along with the record of transmission.
By using the facsimile facility to send instructions to Link
Fund Solutions, Karara Capital or Perpetual (collectively,
“the Entities”), you acknowledge that there is a risk that
fraudulent requests may be made by a third party.
Accordingly, you should be aware of the following
conditions on the use of the fax facility:
• Your faxed instructions will only be processed if
received in full. The Entities are not responsible for
any loss or delay that results from a facsimile not
being received.
• A facsimile receipt confirmation from the sender’s
machine is not evidence of receipt of the facsimile by
the Entities.
• Subject to the Corporations Act, the Entities are not
responsible for any fraudulent or unauthorised
facsimile transactions and will not be liable for any
losses, expenses or other damages incurred.
• You agree to release and indemnify, on a joint and
several basis, the Entities and their respective
officers, employees and agents against any liabilities
whatsoever as a result of any facsimile
communication that purports to be on your behalf.
10.5 PRIME BROKER AND CUSTODIAN
Deutsche Bank AG (London Branch), has been appointed as
the Fund’s Prime Broker. The services provided by the
prime broker may include the provision to the Fund of
margin financing, clearing, settlement, stock borrowing
and foreign exchange facilities. The Fund may also
authorise Deutsche Bank AG (London Branch), other
members of the Deutsche Bank group of companies and
other brokers and dealers for the purposes of executing
transactions for the Fund.
Deutsche Bank AG (London Branch), has also been
appointed as the Fund’s Custodian.
The Custodian’s role is limited to holding the assets of the
Fund as Perpetual’s agent. The Custodian does not hold
the assets for you and has no direct relationship with you.
The Custodian has no supervisory role in relation to the
operations of the Fund and has no liability or responsibility
to you.
10.6 ADMINISTRATOR
Link Fund Solutions Pty Limited has been appointed as the
Administrator of the Fund. As a result of this, certain Fund
administration functions have been outsourced to the
Administrator, including unit registry, unit pricing and
some accounting functions.
10.7 RIGHT TO CHANGE TERMS AND CONDITIONS
Perpetual reserve the right to change the terms and
conditions (subject to the constitution and Corporations
Act) set out in this IM, as applicable to the Fund, by giving
investors not less than 30 days’ written notice.
10.8 MONITORING OF KEY SERVICE PROVIDERS
Perpetual has entered into service level agreements with
the service providers and will, with the assistance of Karara
Capital, regularly monitor the performance of the service
providers against the service standards set out in the
relevant agreements.
10.9 RELATED PARTY TRANSACTIONS
Perpetual and Karara Capital may use the services of
related parties in the management of the Fund and pay
fees for their services at arm's length commercial rates.
The types of related party services that may be used in the
management of the Fund include broking, underwriting,
futures trading and clearing.
From time to time, directors and employees of Perpetual
and Karara Capital may hold units in the Fund.
All related party transactions are conducted on arms'
length normal commercial terms and conditions.
10.10 CONFLICTS OF INTEREST
Karara Capital acts as the investment manager to other
client portfolios and the compensation Karara Capital
receives for managing each portfolio may vary to the
compensation it receives for managing the Fund. Such
other clients may have investment objectives or may
implement investment strategies similar to those of the
Fund.
Karara Capital may also take action with respect to the
other clients that differs to the Fund. To the extent that a
particular investment is suitable for both the Fund and
other clients, such investments will be allocated between
the Fund and the other clients pro rata based on assets
under management or in some other manner that is fair
and equitable under the circumstances to ALL clients. In
addition, purchase and sale transactions may be effected
between the Fund and other client portfolios for cash
consideration at the current market price of the particular
securities.
As a result of the foregoing, Karara Capital may have
conflicts of interest in allocating its time and activities
between the Fund and its other client portfolios, in
allocating investments among the Fund and the other
client portfolios, and in effecting transactions between the
Fund and other client portfolios.
Karara Capital has implemented internal policies and
procedures to ensure any conflicts of interest arising in
relation to managing the Fund are readily identified and
appropriately managed.
Page | 22
10. ADDITIONAL INFORMATION cont.
10.11 LABOUR STANDARDS AND ETHICAL, SOCIAL
AND ENVIRONMENTAL CONSIDERATIONS
When making investment decisions, including selecting,
retaining or realising an investment, Karara Capital takes
into account labour standards and ethical, social and
environmental considerations to the extent that they
impact the sustainability and performance of a business
and thus the performance of the investment. Karara
Capital does not have a predetermined view or policy of
selecting, retaining or realising investments based
specifically on such considerations or standards.
10.12 COOLING-OFF PERIOD
No cooling-off period applies to an investment in the Series
1 units of the Fund.
10.13 INQUIRIES AND COMPLAINTS
Perpetual has established procedures for dealing with
complaints. If an investor has a complaint, they can contact
Perpetual during business hours. Contact details can be
found in the Corporate Directory section of this IM.
Perpetual will use reasonable endeavours to deal with and
resolve the complaint within a maximum period of 45
days.
10.14 CONSENT
Karara Capital has consented to the statements made
about it being included in this IM, in the form and context
that they appear. Karara Capital has not withdrawn its
consent before the issue date of this IM.
Deutsche Bank AG (London Branch) has consented to the
statements made about it being included in this IM, in the
form and context that they appear. Deutsche Bank AG
(London Branch) has not withdrawn its consent before the
issue date of this IM.
There are no statements in this IM made by, or based on a
statement made by, the Administrator, Link Fund
Solutions.
10.15 PRIVACY
Perpetual collects personal information from you in the
application and any other relevant forms to be able to
process your application, administer your investment and
comply with any relevant laws. If you do not provide
Perpetual with your relevant personal information,
Perpetual will not be able to do so.
Privacy laws apply to its handling of personal information
and Perpetual will collect, use and disclose your personal
information in accordance with Perpetual’s privacy policy,
which includes details about the following matters:
• the kinds of personal information Perpetual collects
and holds
• how Perpetual collects and holds personal
information
• the purposes for which Perpetual collects, holds, uses
and discloses personal information
• how you may access personal information that
Perpetual holds about you and seek correction of
such information (note that exceptions apply in some
circumstances)
• how you may complain about a breach of the
Australian Privacy Principles (APP), or a registered
APP code (if any) that binds Perpetual, and how
Perpetual will deal with such a complaint
• whether Perpetual is likely to disclose personal
information to overseas recipients and, if so, the
countries in which such recipients are likely to be
located if it is practicable for Perpetual to specify
those countries.
Perpetual’s privacy policy is publicly available at our
website at www.perpetual.com.au or you can obtain a copy
free of charge by contacting Perpetual. A copy of the
Karara Capital’s privacy policy is publically available at
www.karara.com.au. A copy of the Fund Administrator’s
privacy policy is publically available at
www.linkfundsolutions.com.au
Page | 23
11. COMPLETING THE APPLICATION FORM
To invest in the Fund, please complete all relevant sections
of the Application Form and forward your completed
Application Form, together with your cheque or bank
confirmation of funds transfer to:
BY POST
Attention: Karara Unit Registry
Link Fund Solutions Pty Limited
GPO Box 5482
Sydney NSW 2001
BY FAX (refer Section 8.4)
Link Fund Solutions Pty Limited
Fax 02 9221 1194
If you need assistance, please contact Karara Capital’s
Client Service team on (03) 8612 7100.
11.1 VERIFYING THE IDENTITY OF NEW INVESTORS
Under Australian anti-money laundering and
counterterrorism financing legislation (“AML Legislation”),
Perpetual is required to verify the identity of prospective
investors. Generally the information and/or certified
documentation required to verify a prospective applicant’s
identity is detailed within the relevant section of the
Application Form, however in some instances additional
information and/or identification may be required.
The AML Legislation requires that Perpetual keep any
documentation that you supply to it relating to your
identity for a period of seven years after the end of your
relationship with Perpetual.
To satisfy our obligations under the AML Legislation,
Perpetual has implemented a number of measures and
controls including carefully identifying and monitoring
investors. As a result:
• Transactions may be delayed, blocked, frozen or
refused where Perpetual has reasonable grounds to
believe that the transaction breaches the law or
sanctions of Australia or any other country;
• Where transactions are delayed, blocked, frozen or
refused Perpetual is not liable for any loss you suffer
(including consequential loss) as a result of
Perpetual’s compliance with the AML Legislation; and
• Perpetual may from time to time require additional
information from you to assist in this process.
Providing complete and accurate information will enable
Perpetual to process your application efficiently and to
meet its obligations under the AML Legislation. Failure to
provide the requested information and/or certified
documentation may prevent or delay the processing of
your application.
Perpetual also has certain reporting obligations under the AML
Legislation and is prevented from informing you that any such
reporting has taken place. Where required by law, Perpetual may
disclose your information to regulatory or law enforcement
agencies, including AUSTRAC, which is responsible for regulating
the AML Legislation.
11.2 INDIVIDUALS (INCLUDING THOSE ACTING AS TRUSTEE
OR CUSTODIAN, OFFICE HOLDERS INCLUDING INDIVIDUAL
TRUSTEE AND ANY BENEFICIAL OWNERS IDENTIFIED)
The easiest form of verification to use is an Australian passport or
State or Territory driving licence showing your photograph or a
passport that contains your photograph and signature. The name
provided on the Application Form should agree exactly to that on
the relevant form of identification. Otherwise you can prove your
identity by providing two pieces of non-photographic evidence,
one from each of the columns below.
ONE of the following
documents, AND
ONE of the following
documents
• Birth certificate • Commonwealth, State
or Territory financial
benefits notice (less
than 12 months old)
• Commonwealth
citizenship certificate
• Tax notice (less than
12 months old)
• Pension card issued
by Centrelink
• Local utilities provider
notice (less than 3
months old)
• Foreign citizenship
certificate or birth
certificate
Page | 24
11. COMPLETING THE APPLICATION FORM cont.
11.3 TRUSTS
Different types of trusts are listed below. The list should be
used to determine:
• the type of trust, and
• whether or not your trust is regulated
for the purposes of completing section 3A of the
Application Form.
Type of trust Whether
regulated or not
Discretionary trust
(including family trust)
Not regulated
Unit trust Not regulated
Probate trust Not regulated
Self-managed superannuation
fund - within the meaning of
section 19 of the Superannuation
Industry (Supervision) Act 1993
(Cth)
Regulated by the
Australian Taxation
Office (ATO)
Managed investment scheme
registered by ASIC
Regulated by ASIC
Other superannuation fund:
Regulated superannuation fund,
an approved deposit fund, a
pooled superannuation trust, or a
public sector superannuation
scheme, within the meaning of
the Superannuation Industry
(Supervision) Act 1993 (Cth),
including small APRA regulated
funds
Government superannuation
fund established by legislation
Regulated by APRA
or other relevant
legislation
Other, please specify where
indicated in section 3A of the
Application Form
Verifying the name of the trust
Perpetual needs to verify the name of the trust to comply
with anti-money laundering and counter-terrorism
financing regulations. You can provide a:
• properly certified copy of the trust deed, or
• properly certified extract of the trust deed, or
• notice (such as notice of assessment) issued by the
ATO within the last 12 months, or
• a letter from a solicitor or qualified accountant
verifying the name of the trust.
Unregulated trusts
For trusts not regulated by the ATO, ASIC or the Australian
Prudential Regulatory Authority (APRA) in addition to the
information you have provided in the Application Form
Perpetual require the following information:
• General details for all trusts:
- the full name;
- the full business name (if any);
- the type of trust; and
- country where the trust was established;
• Beneficiary details:
- the full name of each beneficiary; and
- Beneficiaries membership classes (for example,
investors, family members of name person, etc).
• Beneficial owner details:
- the full name, address and role of the individuals
that directly or indirectly control* the Trust
• Trustee details:
- Identification information for all of the trustees
(individual or company information).
• Settlor details:
- the full name of the settlor.
* includes control by acting as trustee; or by means of
trusts, agreements, arrangements, understandings and
practices; or exercising control through the capacity to
direct the trustees; or the ability to appoint or remove the
trustees.
The information should be supplied on a separate sheet of
paper and provided to us with your Application Form.
Unregulated trusts: verifying details
For unregulated trusts, Perpetual needs to verify the
details outlined above. You can provide a properly
certified copy of the trust deed which includes the details
of the trust, trustees, beneficiaries, settlors and appointers
(where applicable).
11.4 CORPORATE TRUSTEES OR COMPANIES For corporate trustees and other companies that are
proprietary (or private) companies, in addition to the
information provided on the Application Form Perpetual
requires the following information:
• the full name of each director; and
Page | 25
11. COMPLETING THE APPLICATION FORM cont.
• the full name, address and role of each individual who holds
one or more direct or indirect shareholdings 25% or more of
the company’s issued capital, and if no individuals meet this
requirement, the full name, address and role of each
individual who directly or indirectly control* the company.
• the full company name (as registered by ASIC);
• company type, proprietary (private) or public (listed);
• the address of registered office**;
• the address of principal place of business**;
• if public (listed) the name of the relevant market/exchange;
and
• if a subsidiary of a listed company the name of the holding
company, and market/exchange of holding company.
* includes exercising control through the capacity to determine
decisions about financial or operating policies; or by means of
trusts, agreements, arrangements, understanding & practices;
voting rights of 25% or more; or power of veto. If no such person
can be identified then the most senior managing official/s of the
company (such as the managing director or directors who are
authorised to sign on the company’s behalf).
** street address is required (street, suburb, state, postcode,
country) – PO Box is not acceptable.
The information should be supplied on a separate sheet of paper
and provided to us with your Application Form. Perpetual needs
to verify such information and you can provide a certificate of
registration or incorporation issued by ASIC or the relevant foreign
registration body (must show full name of company, name of
registration body, company identification number and type of
company – private or public); or the most recent company
statement issued by ASIC.
11.5 PARTNERSHIPS
For all partnerships, provide the full name, address and role of
each individual who holds 25% or more of the partnership or are
entitled (either directly or indirectly) to exercise 25% or more of
the voting rights, including power of veto, and if no individuals
meet this requirement, the full name, address and role of each
individual who directly or indirectly control* the partnership.
* includes exercising control through the capacity to determine
decisions about financial or operating policies; or by means of
trusts, agreements, arrangements, understanding and practices. If
no such person can be identified then the most senior managing
official/s of the partnership (such as the managing partner or
senior managing official).
For partnerships not regulated by a professional association, in
addition to the information provided on the Application Form we
require the following information:
• General details for all partnerships:
- full name;
- full business name (as registered with any state of
territory business name authority);
- country in which the partnership was established;
- any membership body regulated the partnership.
• Partner Information:
- the full name of each partner;
- the full residential address (you cannot provide a PO
Box) of each partner; and
- individual identification for one of the partners (date of
birth).
The information should be supplied on a separate sheet of paper
and provided to us with your Application Form.
For all partnerships, Perpetual needs to verify the partnership
name and you can provide a copy of the partnership agreement.
For partnerships regulated by a professional association,
Perpetual needs to verify such membership and you can provide
an original current membership certificate.
11.6 PROVIDING CERTIFIED COPIES OF DOCUMENTS
If you have been asked to provide a certified copy of a document
in the Application Form, please ensure:
• the certified copy includes the statement “I certify this to be
a true copy of the original document”; and
• is signed by an eligible certifier (please refer to Section 11.7
below).
The certifier must state their qualification or occupation to
confirm their eligibility to certify the document.
Please note, the copy actually signed by the certifier must be
submitted with your Application Form.
11.7 WHO CAN CERTIFY DOCUMENTS?
Eligible certifiers include:
• Judge, Magistrate,
Lawyer
• Certified practicing or chartered
accountant with 2+ years membership
• Justice of the
Peace
• Police officer
• Notary public • Australian Post employee with 2+
years of continuous services
• Officer of a
financial institution
with 2+ years
continuous service
(with one or more
institution)
• Authorised representative of an
Australian Financial Services Licensee
with 2+ years continuous service (with
one or more Licensee) (this may
include your financial adviser).
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CORPORATE DIRECTORY
TRUSTEE
Perpetual Trust Services Limited
ABN 48 000 142 049
AFSL No. 236648
Level 18, 123 Pitt Street
Sydney NSW 2000
Phone: (02) 9229 9000
Fax: (02) 8256 1419
Website: www.perpetual.com.au
INVESTMENT MANAGER
Karara Capital Pty Limited
ABN 34 134 075 157
AFSL No. 333318
Level 33, 101 Collins Street
Melbourne Vic 3000
Phone: (03) 8612 7100
Fax: (03) 8612 7111
Website: www.karara.com.au
Email: [email protected]
ADMINISTRATOR
Link Fund Solutions Pty Limited
ABN 44 114 914 215
GPO Box 5482
Sydney NSW 2001
Phone: (02) 9547 4311
Fax: (02) 9221 1194
Website: www.linkfundsolutions.com Email: [email protected]