NOTICE
This Information Memorandum (IM) is dated xx July 2023 (superseding the version dated 15 September 2021) and is issued by Specialised Investment and Lending Corporation Ltd., ACN 149 520 918, holder of AFSL number 407100, (Trustee), which is the trustee of the CHROME TEMPLE Investments Mach 1 Fund (Fund). The CHROME TEMPLE Investments Mach 1 Fund is established under the Trust Deed of the CHROME TEMPLE Investments Mach 1 Fund dated 09 October 2020 as amended from time to time (Trust Deed). The purpose of this IM is to provide information for prospective investors considering applying for the classes of units in the Fund known as “Alpha Round Units” and/or “Ordinary Units”.
The Trustee has appointed CHROME TEMPLE Investments Pty Ltd, (ACN 640 888 026) (Investment Manager) as the investment manager of the Fund under the Investment Management Agreement. The Investment Manager is a corporate authorised representative (number 001284056) of SILC Fiduciary Solutions Pty Ltd ACN 638 984 602, AFSL number 522145. The authority of the Investment Manager is limited to providing general advice and dealing by arranging services relating to the Fund and to wholesale clients only.
INTERESTS IN THE FUND
The Trustee may issue interests in the Fund as units. The Trustee may only issue interests in the Fund on receipt of a validly completed application in the form issued together with this IM (Application Form) and the receipt of cleared funds.
By applying for Alpha Round Units and/or Ordinary Units, the recipient agrees to be bound by the terms and conditions set out in this IM and the Application Form for those Units.
FUND NOT REGISTERED
The Fund, at the date of this IM, is not required to be, and is not, registered as a managed investment scheme pursuant to section 601ED of the Act.
RESTRICTIONS ON DISTRIBUTION
The distribution of this IM and the offering of interests in the Fund may be restricted in certain jurisdictions. No recipient of this IM in any jurisdiction may treat it as constituting an invitation or offer to apply for interests in the Fund unless, in the relevant jurisdiction, such an invitation or offer could lawfully be made to that recipient in compliance with applicable law.
No action has been taken to register or qualify interests in the Fund, the invitation to participate in the Fund, or to otherwise permit any offering of Fund interests in any jurisdiction other than Australia.
Prospective investors should inform themselves as to the legal requirements and consequences of applying for, holding, transferring and disposing of Units and any applicable exchange control regulations and taxes in the countries of their respective citizenship, residence, domicile or place of business. It is the responsibility of a prospective investor outside Australia to obtain any necessary approvals in respect of applying for, or being issued with, Units.
By receiving and viewing this IM, the recipient warrants that they are legally entitled to do so and the securities laws of their relevant jurisdiction do not prohibit them from acquiring interests in the Fund. Further, the person
receiving and viewing this IM warrants to the Trustee that they are a wholesale client as defined in section 761G of the Corporations Act 2001 (Cth) (Act) (Eligible Investor).
The Fund, the Trustee and the Investment Manager do not have any liability or responsibility to determine whether a person is able to apply for Units pursuant to this IM.
In particular, this product has not been and will not be registered under the US Securities Act or the securities laws of any state of the United States and may not be offered, sold, delivered or transferred in the United States or to, or for the account of, any “US Person” (as defined in Regulation S under the US Securities Act). Neither this IM nor any Application Form nor other material relating to this product may be distributed in the United States.
This IM has been prepared on the basis that prospective investors are wholesale clients or sophisticated investors, and not retail clients (all within the meaning of the Act). An offer of Units to sophisticated or wholesale investors does not require the giving of a Product Disclosure Statement in accordance with Division 2 of Part 7.9 of the Act.
Accordingly, this IM is not a product disclosure statement and has been prepared to provide background information only for investors considering applying for Units in the CHROME TEMPLE Investments Mach 1 Fund. This IM does not contain all of the information that would be included in a product disclosure statement issued under the Act. This IM has not been lodged with the Australian Securities and Investments Commission (ASIC) or any other government body.
NOT RESPONSIBLE FOR CONTENTS OF DOCUMENTS
The Trustee, the Investment Manager, or their related parties, officers, employees, consultants, advisers or agents have not carried out an independent audit or independently verified any of the information contained in this IM, nor do they give any warranty as to the accuracy, reliability, currency or completeness of the information or assumptions contained in this IM, nor do they, to the maximum extent permitted by law, accept any liability whatsoever, however caused to any person, relating in any way to reliance on information contained in this IM or any other communication relating to the issue of Units in the Fund.
This IM does not purport to contain all the information that a prospective investor may require in evaluating a possible investment in the Fund
TRUST DEED
This IM must be read in conjunction with the Trust Deed. Prospective investors should review the Trust Deed for further information regarding the rights and obligations of investors in the Trust. To the extent there are any inconsistencies between rights and obligations in the Trust Deed and this IM, the Trust Deed will prevail.
NOT REGULATED BY APRA
The Trustee is not authorised under the Banking Act 1959 (Cth) and is not supervised by APRA. Investments in the Fund are not covered by the deposit or protection provisions available to depositors who make a deposit with an Australian Authorised Deposit taking Institution (ADI).
APPLICATIONS
The Trustee reserves the right to evaluate any applications for Units and to reject any or all applications submitted, without giving reasons for rejection. The Fund, the Trustee and the Investment Manager are not liable to compensate the recipient of this IM for any costs or expenses incurred in reviewing, investigating or analysing any information in
relation to the Fund, in the course of submitting an application for Units or otherwise.
NO COOLING OFF RIGHTS
Investors do not have any cooling off rights in respect of Alpha Round Units and/or Ordinary Units issued in the Fund.
INFORMATION IS GENERAL ADVICE ONLY
In providing this IM, the Trustee has not taken into account the recipient’s objectives, financial situation or needs and accordingly the information contained in this IM does not constitute personal advice for the purposes of section 766B(3) of the Act (personal advice). Neither the Trustee, the Investment Manager, nor their related parties, officers, employees, consultants, advisers or agents warrant that an investment in the Fund is a suitable or appropriate investment for the recipient.
INDEPENDENT FINANCIAL ADVICE
BEFORE APPLYING FOR UNITS IN THE FUND, PROSPECTIVE INVESTORS SHOULD MAKE THEIR OWN INDEPENDENT ENQUIRIES ABOUT THE MARKET FOR COLLECTIBLE MOTOR VEHICLES AS INVESTMENTS AND CONSIDER, INDEPENDENT FROM THE INFORMATION IN THIS IM, THE REPUTATION AND STANDING OF THE TRUSTEE, THE INVESTMENT MANAGER AND OTHER MEMBERS OF THE CHROME TEMPLE GROUP. PROSPECTIVE INVESTORS SHOULD SEEK INDEPENDENT PROFESSIONAL ADVICE ON THE LEGAL FINANCIAL AND TAXATION CONSEQUENCES OF AN INVESTMENT IN THE FUND INCLUDING ADVICE ON THE STRUCTURE OF THE FUND AND LEVEL OF MANAGEMENT AND SERVICE FEES AND DISCUSS THEIR INDIVIDUAL FINANCIAL CIRCUMSTANCES AND THE SIZE OF THEIR PROSPECTIVE INVESTMENT WITH AN INDEPENDENT AUTHORISED FINANCIAL ADVISOR.
FORWARD LOOKING STATEMENTS
All statements of opinion and/or belief contained in the IM and all views expressed and all projections, forecasts or statements relating to expectations regarding future events or the possible future performance of the Fund represent the Fund’s own assessment and interpretation of information available to it as at the date of this IM and are provided for illustrative purposes only. In particular, the Trustee notes that past performance is not indicative of future performance. No representation is made or assurance given that such statements, views, projections or forecasts are correct or that the objectives of the Fund will be achieved. Prospective investors must determine for themselves what reliance (if any) they should place on such statements, views, projections or forecasts and no responsibility is accepted by the Fund, the Trustee, the Investment Manager and/or their advisers in respect thereof. Prospective investors are strongly advised to conduct their own due diligence including, without limitation, on the potential financial, legal and tax consequences to them of investing in the Fund.
NO GUARANTEE
Neither of the Fund, the Trustee, the Investment Manager, nor their related parties, officers, employees, consultants, advisers or agents, guarantee the repayment of capital invested in the Fund, the payment of income from the Fund or the performance of the Fund or an investment in the Fund generally. As with any investment there are inherent risks in investing in the Fund, including the risk that an investment in the Fund is speculative, that the investment may result in a reduction in, or total loss of, the capital value of the investment, loss of income and returns that are less than
expected or delays in repayment of capital or the distribution of income.
See Section 6 (Risk Factors) for further information about the risks involved in making an investment in the Fund.
TRUSTEE LIMITATION OF LIABILITY
Except in certain circumstances (including fraud, negligence or breach of trust by the Trustee), the Trustee enters into transactions for the Fund in its capacity as trustee of the Fund only, not in its own capacity, and its liability in relation to those transactions is limited to the assets of the Fund out of which it may be indemnified.
DISCLOSURE OF INTERESTS
The Trustee, the Investment Manager and their related parties and associates may also acquire units in the Fund on the same terms and with the same rights as other investors in the Fund.
CONFIDENTIALITY
The contents of this IM are:
● not intended to be disclosed to any person other than the person to whom this IM has been provided to by the Trustee;
● strictly confidential; and
● not to be reproduced, either in whole or in any part or parts, without the Trustee’s prior written consent and, if such written consent is given, only in accordance with that consent.
NO UNAUTHORISED STATEMENTS OR REPRESENTATIONS
The Fund, the Trustee and the Investment Manager are not responsible for any advice or information given, or not given, to potential investors by any other party distributing this product and, to the maximum extent permitted by law, accept no liability whatsoever for any loss or damage arising from potential investors relying on any information that is not in this IM when investing.
DEFINITIONS
Certain capitalised words and expressions used in this IM are included in Section 11 (Glossary).
The primary language of this document is English. This document may be translated into different languages. Any translations provided are for reference purposes only. If there is any inconsistency or conflict between the English version of this IM and versions of this IM in any other language, the English version prevails.
All references to $ amounts are references to Australian Dollars (AUD).
Any photographs, images or illustrations in this IM or the Application Form are included for illustrative purposes only and do not depict any assets held or to be held by the Fund.
2. INTRODUCTION OVERVIEW
By participating in the CHROME TEMPLE Investments Mach 1 Fund (Fund), investors will own interests in a portfolio of carefully selected vehicles of the present and past, overlayed with the vehicles of the future, intended to generate investor returns through the capital appreciation of those vehicles Investment in the Fund offers an opportunity to combine a passion for motor vehicles with long-term capital growth.
As the appointed Investment Manager of the Fund, CHROME TEMPLE Investments (CTi) has put together a team of industry professionals and experts across the automotive and financial sectors to capitalise on an opportunity to generate returns from investing in special motor vehicles – at CTi we like to think of it as an opportunity to nurture your passion while growing your wealth.
The investment activities of CTi will form part of a group of specialised businesses owned by CHROME TEMPLE Holdings (CTh) dedicated to serving and fuelling automotive enthusiasts The Fund will benefit from access to the group’s automotive expertise and a range of automotive service solutions through arm’s length service agreements
ABOUT THE PARTIES
CHROME TEMPLEGroup
CHROME TEMPLE Holdings Pty Ltd (ACN 642 404 144) is the parent company of CTi and CHROME TEMPLE Storage Pty Ltd (ACN 633 428 618) (CTs) and together these companies make up the CHROME TEMPLE Group (Group) The CHROME TEMPLE Group aims to create an ecosystem focused on high standards of operational and automotive excellence.
Bringing together a range of automotive services, the diversified businesses of the Group are intended to provide the Fund access to services and infrastructure of an exceptionally high standard. CTi will provide an expertly managed automotive investment portfolio of vehicles, and CTs will provide specialist storage and automotive services to preserve and enhance the value of the Fund's portfolio and by offering services at a discount to market, help reduce the Fund’s infrastructure cost of vehicle ownership
The Group’s structure provides the Trustee with control of the entire investment lifecycle from acquisition to maintenance through to divestment In addition, by structuring the Group in this way, it ensures operational and legal separation between the investment management responsibilities of CTi and facilities management and services provided by CTs
The Group’s proposition is the culmination of its founder’s, Lex Pedersen, lifelong ambition to couple automotive passion, culture, and capital growth. Lex is fuelled by an avid passion for all things loud and fast and has considerable experience as a private owner and investor in vehicles. As a private collector of vehicles, Lex has become an experienced manager of vehicle investments via his personal collection and superannuation fund.
In addition to vehicle investments and founding CHROME TEMPLE Group, Lex has an established record as an entrepreneur. He has founded and grown several start-ups including 1 Day Wraps Australia and was an early pioneer of Australian ecommerce as the co-founder of SurfStitch. Lex served on the Board of SurfStitch Group and more recent postings include providing strategic guidance to several emerging and established brands. International postings in EU and US broadened operational, cultural and automotive horizons, and proved vital in expanding strategic connections and networks in key global automotive markets. Lex has served as CEO of an Australian listed company, after successfully globalising and listing the company.
CHROME TEMPLE Investments
CHROME TEMPLE Investments Pty Ltd (ACN 640 888 026) is a wholly owned subsidiary of CHROME TEMPLE Holdings Pty Ltd (ACN 642 404 144) and has been appointed by the Trustee as the Corporate Authorised Representative (number 001284056) (CAR) of SILC Fiduciary Solutions Pty Ltd ACN 638 984 602, AFSL number 522145
The CTi team are skilled and experienced professionals drawn from the financial and automotive sectors. The Investment Manager’s vehicle history knowledge is reinforced by financial analysis and modelling of private, auction and public transactions.
CTi’s automotive experts have established connections to private collectors, dealerships, and auction houses which provide deep insights into trends, buyer and seller sentiments and outlooks. CTi's analysts will use market data to identify emerging patterns and leading trend indicators. Bringing together these descriptive and prescriptive elements, will allow CTi to identify opportunities across multiple variants for optimising the Fund’s management. The Fund will also benefit from:
● An actively managed acquisition pipeline utilised for capital deployment, class diversification management, and formulation of buy/sell hold strategies (refer to section 5 for further details of the Investment Process)
● Meticulous assessment and investment process that validates the vehicle’s scarcity, provenance, ownership, authenticity, and value-influencing features (refer to section 5 for further details)
● Access to fully insured vehicle transport and storage facilities through an aligned operational relationship with CTs
Lex is the appointed portfolio manager of the Fund. As the portfolio manager, Lex will be responsible for implementing the Fund’s investment strategy. CTi’s investment committee and portfolio manager, acting together, will perform the core management functions of the Fund.
CHROMETEMPLEStorage
CHROME TEMPLE Storage Pty Ltd (ACN 633 428 618) is a wholly owned subsidiary of CHROME TEMPLE Holdings Pty Limited (ACN 642 404 144) and was launched in Q4 FY2019 as a premium car storage and transport business.
CTs will serve as the operational and fixed infrastructure partner of the CTi Group, providing secure storage and services to the Fund under the terms of a Service Agreement between the Trustee and CTs dated 22 October 2020
CTs’ facilities will be insured for all risks with reputable insurance companies Vehicles stored at facilities are monitored by on-site security systems and 24/7 electronic surveillance (CCTV) Vehicles in the care of CTs will receive regular detailing, custom fitted vehicle protective covers, battery, fluid and pressure maintenance, and be stored with designated space between vehicles Only authorised personnel are allowed access to the vehicle storage area and only trained and screened personnel will be permitted to carry out vehicle movements. All movements will be made in fully enclosed, low-loading trailers.
With ambitions to redefine vehicle storage in Australia, CTi Fund vehicles stand to benefit from the CTs white glove service.
SpecialisedInvestmentLendingCorporation
Specialised Investment and Lending Corporation Ltd., ACN 149 520 918, AFSL 407100 (SILC) is the Trustee of the CHROME TEMPLE Investments Mach 1 Fund
SILC is an independent Australian funds management business that provides trustee, custodian and other services associated with funds management. SILC operates a number of entities that,
pursuant to the Act are licensed to conduct financial services businesses and to act as trustee for registered and unregistered schemes.
The Trustee’s key responsibilities are to operate the Fund in accordance with the Trust Deed and its duties and obligations under Australian law. The Trustee will have regard to the best interests of investors in all decisions that it makes with respect to the Fund.
The Trustee holds professional indemnity insurance and, in connection with its AFSL, is further required to adhere to specific requirements such as ensuring it has minimum net tangible assets and is subject to independent financial audit.
The Trustee is led by a management team that has a breadth of experience in the banking, funds management and financial services sector.
The Administration Manager, SILC Funds Administration Pty Ltd, is a related party of the Trustee. The fees paid by the Fund to the Trustee are set out in section 7.
3. SUMMARY OF THE OFFER SUMMARY OF KEY FEATURES
The table below is a summary of the key features of the Fund relevant to an investment in Units This is a summary only and is not intended to be exhaustive. You should read the whole of this IM to obtain more detailed information before considering a decision to invest in the Fund.
FUND NAME
TRUSTEE
INVESTMENT MANAGER
CHROME TEMPLE Investments Mach 1 Fund
Specialised Investment and Lending Corporation Ltd., ACN 149 520 918 is the trustee of the Fund, and will be responsible for holding title to the Fund’s assets.
CHROME TEMPLE Investments Pty Ltd, ACN 640 888 026 has been appointed as the investment manager of the Fund pursuant to an Investment Management Agreement with the Trustee and is responsible for managing the Fund’s assets and assisting the Fund achieve its investment objective.
ADMINISTRATION MANAGER
SILC Funds Administration Pty Ltd, ACN 628 993 386 is the administration manager of the Fund, and is responsible for, amongst other things, investor administration process (including applications for Units and maintaining the Unit registry) and Fund accounting.
INVESTMENT OBJECTIVE
To manage a portfolio of carefully selected vehicles of the present and past, and apply a view of the vehicles of the future to generate strong medium to long term returns through the capital appreciation of those vehicles.
UNITS
The Units comprise:
• Alpha Round Units; and
• Ordinary Units
Alpha Round Units and Ordinary Units will be issued as fully paid units.
INITIAL ISSUE PRICE
The initial issue price of the Units is
● Alpha Round Units $1; and
● Ordinary Units $1.
Thereafter units will be issued based on the underlying value of that Assets applicable to the particular class of Units and is calculated in accordance with the terms of the Trust Deed (Class Assets).
Units will be issued by the Trustee within 8 Business Days from the end of the calendar quarter in which completed applications (including full payment of application monies) are received.
TARGET RETURN
The Investment Manager seeks to deliver a total return to investors in the Fund of at least 8% per annum, net of Fees and Costs, as outlined in section 5 within an investment timeframe of 3-5 years from Initial Close Date
The Target Return is not a forecast, it is merely an indication of what the Fund aims to achieve and depends on the market for the underlying investment assets.
The Fund may not be successful in achieving the Target Return. The Trustee and the Investment Manager do not guarantee the capital value of the investments or any return from an investment in the Fund.
TERM The Fund has no fixed term and a reference to the Term of the Fund in this IM is to the period from date of establishment of the Fund to the date of termination of the Fund in accordance with the terms of the Trust Deed.
MINIMUM INVESTMENT TERM
A minimum investment term of:
● Alpha Round Units: 24 months
● Ordinary Units: 12 months
During the applicable Minimum Investment Term, withdrawals will not be permitted
FUND GUIDELINES AND RESTRICTIONS
The Investment Manager has developed a number of guidelines and portfolio asset allocation targets to ensure investors are exposed to a diversified portfolio of vehicles. These include:
- Maximum % allocation to a single vehicle
- Target maximum exposure to different types of vehicles as outlined in section 5
TARGET SIZE
The Investment Manager seeks to raise $20,000,000 at the launch of the Fund, with the intention to grow to $100,000,000 within 24 months of the Initial Close Date.
INITIAL CLOSE DATE 11 December 2020
This is an indicative date only. The Trustee may change or alter these dates at its absolute discretion and without notice.
MINIMUM INITIAL INVESTMENT AMOUNT
The Minimum Initial Investment Amount for each investor is
● Alpha Round Units: $100,000
● Ordinary Units: $100,000
Thereafter, in increments of $100,000.
The above is subject to the Trustee’s absolute discretion to accept applications for lesser or greater amounts.
FEES AND EXPENSES
Fees and expenses that Investors may be charged for in relation to the management and operation of the Fund are set out in section 7
A portion of Relevant Class Assets will be set aside for these fees and expenses however Investor returns will be calculated based on the number of corresponding Units held by each Investor.
FUND ESTABLISHMENT COSTS
The Investment Manager is entitled to be reimbursed the Fund establishment costs estimated to be approximately $75,000 over 3-years to the extent that such costs have been properly incurred by the Investment Manager. The Investment Manager may, in its absolute discretion, waive or defer any part of this cost recovery. Reimbursements will be paid from income earned.
WITHDRAWAL Liquidity is ordinarily provided by the realisation (sale) of Fund assets (vehicles). As such, the Fund is not expected to have a high level of liquidity nor liquidity in the short to medium term.
Alpha Round Units
Alpha Round Unit holders may only seek a withdrawal after the Minimum Investment Term of 24 months from unit Issue Date.
Ordinary Units
Ordinary Unit holders may only seek a withdrawal after the Minimum Investment Term of 12 months from unit Issue Date.
Withdrawal fee
Where the Trustee grants an Ordinary Unit holder its request to withdraw between 1224 months from unit Issue Date, a 5% withdrawal fee will be payable. Please refer to section 7 for more information.
Otherwise, subject to the applicable Minimum Investment Term and available liquidity, Investors may with a 6 months’ minimum notice period submit a Withdrawal Request to redeem some or all of their investment. Reinvested distributions may be withdrawn at the same time as the Units that relate to those distributions. The Trustee will process accepted withdrawals as at the end of June and December in each year (each a Withdrawal Processing Date).
Where there are insufficient funds to satisfy all Withdrawal Requests received at each Withdrawal Processing Date, Withdrawal Requests will be satisfied on a pro-rata basis. Investors will then automatically participate in each subsequent Withdrawal Processing Date until the amount specified in their Withdrawal Request has been fully redeemed.
WHO CAN INVEST Investment in the Fund is only available to parties (individuals above 18 years of age, trusts or bodies corporate) who are wholesale clients (as defined in section 761G(7) of the Act) or sophisticated investors (as defined by S761GA of the Act) meeting one of the following criteria:
● invests $500,000 or more in the Fund; or
● provides a certificate from a qualified accountant (available within the Application Form) or substantially in the form available on the Trustee’s website www.silcgroup.com that states the investor has net assets of at least $2.5 million or has a gross income for each of the last two financial years of at least $250,000; or
● is a professional investor (including the holder of an Australian financial services licence, a person who controls more than $10 million or a person that is a listed entity or a related body corporate of a listed entity).
KEY RISKS Investments in the Fund are subject to varying degrees of risks. Some of the key risks of investing are highlighted below:
● Market risk – Changes in market forces or general economic conditions can negatively impact the price of any specific vehicle, falling below the purchase price of the vehicle.
● Concentration/diversification risk – Restriction on the number of vehicle and exposure to the type, make or vintage.
● Liquidity risk – Due to the underlying asset not being on a listed market or exchange, it may take time to find a buyer at the desired price on the vehicle(s).
Please see Section 6 for a further description of the risks relevant to an investment in the Fund.
SUMMARY OF KEY BENEFITS
The Fund offers Investors an opportunity to participate in asset backed “passion investments” which are not typically available to individual investors with the aim of achieving an attractive Target Return on the investment.
Key benefits of investing in the Fund include:
• Identification, due diligence and management of Fund investments are undertaken and managed by an Investment Manager with extensive experience and track record across a variety of sectors and industries.
• Risk reduction through diversified portfolio management techniques.
• Access to exclusive investment opportunities which may not otherwise be available to individual investors.
• The Trustee is independent of the Investment Manager who will manage investments in accordance with this IM and the Trust Deed.
• Vehicle storage and maintenance in fully insured facilities, to protect the Fund’s assets and investments
• Accounting, financial reporting and tax affairs of the Fund managed by the Trustee to ensure independence, transparency and good governance.
4. FUND STRUCTURE
The Fund was established by a Trust Deed dated 09 October 2020. The Fund is an unregistered managed investment scheme which will invest in a portfolio of vehicles with the view to derive investment returns through capital appreciation over time. The vehicles may include new, used or vintage cars selected by the Investment Manager for the investment portfolio based on potential for capital growth, over the short and medium term The Trustee has appointed the Investment Manager as the investment manager of the Fund pursuant to the Investment Management Agreement.
The Fund assets will be held in the name of the Trustee as trustee of the Fund or a custodian (if one is appointed by the Trustee) for the benefit of the Investors within each class of Units. Unitholders will not have specific ownership of trust assets in the Fund but will, subject to the Terms of Issue, have a beneficial interest in the Fund assets. The capital value and investment returns held by the Trustee on behalf of Investors in the Alpha Round Units and Ordinary Units are all of the assets of the Fund.
CLASSES OF UNITS
Pursuant to the terms of the Trust Deed, the Fund may comprise multiple classes of units Investments in additional classes of units may, in accordance with the terms of the Trust Deed, be pooled with or segregated from the Units that are the subject of this IM. The capital value and investment returns for such units (for example a special category of vehicle or a vehicle investment opportunity that has other distinguishing features) will be held only for the beneficial interest of investors who hold those units. The terms of any such units will be set out in a separate information memorandum or supplementary information memorandum, as appropriate.
The Units that are the subject of this IM are Alpha Round Units and Ordinary Units which, subject only to the Minimum Investment Term and associated rights of withdrawal, rank parri passu amongst themselves and all other Units issued from time to time
ISSUE OF UNITS
Units in the Fund will be issued within 8 Business Days following the end of the calendar quarter in which the application for the Units and monies are received and accepted by the Trustee. The Trustee may at its absolute discretion, process applications and issue Units more or less frequently
UNIT PRICING
The initial issue price of the fully paid Units will be $1.00 per unit and thereafter, Units will be priced based on the underlying value of that Assets applicable to the particular class of Units and is calculated in accordance with the terms of the Trust Deed (Class Assets) Application monies must be paid in full at the time an application for Units is submitted.
DISTRIBUTIONS
Due to the illiquid nature of the Fund’s investments, it is not expected that there will be any regular cash distributions
The Investment Manager may determine in its absolute discretion to make a cash distribution, in which event, the distribution will be calculated and paid on the Distribution Date, subject to retaining sufficient funds to meet near term expenses and obligations of the Fund.
Any such distributions will be calculated based on the income earned from the Class Assets, after fees, costs and expenses that are related to the Alpha Round Units and Ordinary Units have been paid. Unitholders will receive a proportion of such distributions based on the number of Alpha Round Units and Ordinary Units they hold in relation to the total number of Alpha Round Units
and Ordinary Units on issue and the number of days they have held the Units for during the quarter.
In the event that an asset of the Fund is disposed of during the Term, the Investment Manager may, at its discretion, reinvest the proceeds or use all or part of them to make a distribution to the Unitholders.
WITHDRAWAL RIGHTS
The Fund is not expected to be highly liquid or liquid in the short term. Liquidity is ordinarily provided by the realisation of Fund assets.
Where Ordinary Unit holders seek to withdraw between 12-24 months from unit Issue Date, a 5% withdrawal fee calculated on the withdrawal amount will be payable. Please refer to section 7 for more information.
Otherwise, subject to the applicable Minimum Investment Term and available liquidity, Investors may with a six (6) months’ minimum notice period submit a Withdrawal Request to redeem some or all of their investment. Reinvested distributions may be withdrawn at the same time as the Units that relate to those distributions. The Trustee will process withdrawals on the Withdrawal Processing Date
Where there are insufficient funds to satisfy all Withdrawal Requests received prior to each Withdrawal Processing Date, Withdrawal Requests will be satisfied on a pro-rata basis. Investors will then automatically participate in each subsequent Withdrawal Processing Date until the amount specified in their Withdrawal Request has been fully redeemed.
Under the Trust Deed, the Trustee has the discretion to refuse the withdrawal of Units. Please note that a redemption of Units may have different taxation consequences based on your individual circumstances. See Section 8 of the IM for further information about taxation.
A Withdrawal Request form will be made available upon request by emailing investors@silcgroup.com
BORROWING POLICY
The Investment Manager is permitted to borrow on behalf of the Fund to increase the scale of the Fund’s investment portfolio. Borrowings are intended to be capped at 30% of the Fund’s NAV. The Investment Manager may also lend monies to the Fund from time to time where necessary at a maximum rate of prevailing cash rate plus 0.6% per annum. This loan will be unsecured.
Where applicable, liabilities including borrowings that are specifically referable to a specific class of units will be segregated from other classes of units.
Investors should note that any borrowings by the Fund (with respect to a class of units) will remain repayable by the Fund regardless of the performance of the underlying investment portfolio.
VALUATION POLICY
The portfolio’s asset value will be calculated at least quarterly using a framework for the valuation that is consistent with current industry practice and regulatory requirements. The assets of the Fund will be valued using market accepted methodologies to accurately and independently price all relevant Fund assets from time to time.
The value of the Fund’s portfolio shall be determined by aggregating the value of each investment forming part of or comprised in the investment portfolio and each investment shall be valued taking into account:
● cash – the face value of cash held in bank;
● vehicles – the value of the asset as assessed by an independent certified vehicle valuation expert.
The Trustee may request that the value of an investment be determined by a duly qualified valuer independent of the Trustee, having regard to the particular type or types of investment which are the subject of the valuation. The Trustee may request an audit of the inventory.
5. THE INVESTMENT STRATEGY / METHODOLOGY OVERVIEW
The Fund’s objective is to achieve returns through a portfolio of carefully selected vehicles of the present and past and apply a view of the vehicles of the future to generate investor returns through the capital appreciation of those vehicles.
INVESTMENT STRATEGY
CTi believes that passion and financial gain can co-exist when executed well and it is the Investment Manager’s view that we are at the precipice of a new automotive era - electric (EV) and autonomous (AV) vehicles, global emissions and regulatory restraints will significantly change the automotive landscape, diminishing the supply of vehicles that possess certain historic characteristics.
Vehicles that defy these regulatory restrictions present a particularly attractive investment opportunity as we approach a future in which motor vehicle choice is increasingly restricted to EV & AV vehicles. By understanding what lies ahead, the Fund is in a unique position to amass a collection of yesteryear’s toys to create tomorrow’s nest eggs.
To achieve the Fund’s investment objectives, the Investment Manager’s investment strategy is to take into account the future shape of the automotive industry and combine it with scarcity, proven provenance and tasteful aesthetic to identify, acquire, and sell vehicles that are visually and audibly raucous, have as many cylinders as will fit under the hood, analogue inputs such as manual gear boxes and as few interfering digital aides as possible
Vehicles that CTi will seek as investments on behalf of the Fund will possess the following characteristics or belong to:
● researched and verified pedigree
● providence
● scarcity
● well-preserved condition
● the greatest performing collector vehicle genres
● focus on high capacity, relatively low/pre tech
● low production numbered and largely analogue machines
INVESTMENT PROCESS
CTi understand that to achieve the anticipated returns for Investors there needs to be robust governance practices, investment processes and infrastructure which is fully integrated to provide a framework where both risk and reward are rigorously managed.
The governance process has been designed to ensure clear delineation of responsibilities between the Investment Committee, CTi investment team and the various parties, including CTs, who provide the related services including acquisition, sales and market monitoring roles.
The key procedures, processes and controls adopted have been tailored to the lifecycle of an investment selected by CTi for the Fund, summarised as follows:
• vehicle acquisition
• ongoing maintenance (preserve) and monitoring (track)
• vehicle sales
Within each phase of an investment’s life cycle, an asset must pass through four key stages: identification, assessment, validation/preparation and finally transaction. Each stage is designed to ensure that the asset meets/continues to meet the Fund’s objectives and guidelines, protocol is followed, proper authorisation is obtained, and that all the necessary checks, reviews and market testing is conducted.
If during the course of the process, a vehicle does not meet any of the specified criteria or validation steps, Investment Committee and/or Trustee approval is required before proceeding.
Investment Committee
The Investment Committee will comprise a majority of independent directors of the Investment Manager, advised from time to time by experts drawn from relevant sectors of the automotive industry. The Investment Committee have responsibility for formulating the Investment Manager’s overall investment strategy and policies, establishing investment guidelines, monitoring and overseeing the investment and divestment of assets to ensure compliance with the investment policies and guidelines.
AcquisitionandDisposalTeam
CTi works with various external and related parties to ensure it is able to locate potential vehicles for purchase and, in time, buyers. The costs of these services are outlined in the Section 7 of this IM.
PORTFOLIO GUIDELINES AND TARGET VEHICLE ALLOCATIONS
The investment policy of CTi classifies each vehicle as a Mk-I, Mk-II, Mk-III or Mk-IV. The purpose of the classification system is to facilitate diversification of the income and capital growth and to achieve a risk weighted balance between different classes of vehicles. Investment in Mk-I, Mk-II and Mk-III vehicle classes is generally intended to maximize the long-term growth of Fund assets, while the Mk-IV vehicle class is intended to yield short term margin on sales to generate current income, and mitigate the risk of decline in the capital value of other classes the Fund’s investments.
This vehicle classification system also informs the Investment Manager’s acquisition strategy for the Fund in terms of purchase price thresholds, targeted average annual yields and anticipated hold time before divestment.
Vehicle classification characteristics
VEHICLE CLASS DESCRIPTION
Mk-I Autonomous + Electric Antidote
CHARACTERISTICS
● High capacity engines
● 8+ Cylinders
● Pre or Early SMOG laws
● Analog inputs
● Preferably manual
● Minimal electronic aides/inhibitors
● Visually and audibly obnoxious
● Everything the future ISN’T
● Scarcity (<50 in AUS)
Mk-II Hen’s Teeth
● Rarely offered for public sale
● Low millage examples
● Increased overseas demand
● Tomorrow's classic
Mk-III Pre-Classic
● Hallmark indicators such as;
● Lineage
● Trends
● Contemporaries becoming outpriced (next in line)
● Mk-I qualities
● Mk-II qualities
● High yield, short hold opportunities
Mk-IV Inside line
● Vehicles accessed through extensive network.
● “Pre-Market” access
● Acquired well below market price
Vehicleclassificationtargetsandranges
The Investment Manager will diversify investments among these vehicle classes to balance the Fund’s portfolio with the goal of enhancing the total return of the portfolio while attempting to avoid undue risk concentration.
1 Represents an individual vehicle’s target return, based on the sale price appreciation over the vehicle’s acquisition price, excluding fees and costs.
PortfolioGuidelines/Restrictions
In addition to adhering to the abovementioned vehicle classification targets and thresholds, no single vehicle acquired by the Fund will represent more than 15% of the Fund’s total asset value.
6. RISK FACTORS
Like any investment, there are risks associated with investing in the Fund. There are a number of risk factors that could affect the performance of the Fund, the repayment of Investor’s capital and the payment of distributions. Certain risk factors will be beyond of the Trustee and the Investment Manager’s ability to control and measures taken to mitigate these risks may not be effective.
The following is a non-exhaustive list of the main risks associated with investment in the Fund. Investors should consider and weigh them up carefully and make their own assessment as to whether the Fund is a suitable investment before applying to invest in the Fund. It is strongly recommended that prospective Investors obtain independent professional advice before investing in the Fund.
Target Returns and distributions are not guaranteed and neither is the return of Investor’s capital.
Market risk
There is a risk that the market value of the Fund’s investments will fluctuate. This may occur as a result of factors such as economic conditions, government regulations, market sentiment, local and international political events, environmental and technological issues.
Concentration/diversificationrisk
It is possible that investments of the Fund could become concentrated, as several investments may be made in the same car type, make or vintage, and the value of one or more investment of the Fund may substantially affect the total return to the Fund.
Diversification is managed through the classification thresholds and targets. In addition, no single vehicle shall represent more than 15% of the Fund’s total asset value.
Liquidityrisk
Investors may not withdraw from the Fund during applicable Minimum Investment Terms. Liquidity is typically created through sale or divestment of Fund assets. In unusual or volatile market conditions, some assets may become more difficult than usual to sell. This would impact the Trustee's ability to meet Withdrawal Requests
This may represent a risk to Investors particularly where they require the return of their investment earlier or in the short term. Further, there is no guarantee that the Fund assets are able to be realised in a timely manner or at a specific price and as such may cause a delay in the ability of the Trustee to meet Withdrawal Requests.
The CTi team will use its connection to global networks and extensive experience in the key global vehicle markets to assist with vehicle divestments
Event risk
The value of the investment may be affected by an unforeseen event which may negatively affect the investment such as natural disaster events such as fire, flood or accident due to accidental or intentional act. These events may have a negative impact upon the operation and performance of the Fund.
These factors are outside the control of the Trustee and the Investment Manager, however the Investment Manager will ensure that assets are appropriately insured to mitigate such risks
Fraud risk
The Investment Manager will take all necessary precautions before acquiring the investment. A perpetrator or perpetrators may try to commit fraud by providing fraudulent paperwork, or misrepresenting ownership and title or failing to disclose third party interests in the relevant assets. The Investment Manager’s asset acquisition procedures will require thorough ownership and title assessment including checks against any relevant register of security interests, verification and validation for each vehicle prior to acquisition
Operationalrisk
The Investment Manager or Trustee may fail adequately to supervise and monitor key service providers or operational personnel to ensure that they adequately manage risk and support the Fund's Investment Objective. This may be due to a failure of the Trustee's or the Investment Manager's business systems or processes, technology, key service providers or human resources. There is also an inherent risk associated with the death or departure of key personnel of the Trustee, the Investment Manager, or other service providers
The Investment Manager’s governance, investment processes and infrastructure allow it to monitor compliance, automatically flagging any issues and prohibiting the process from continuing without special approval and authorisation. Information is saved onto a secure, cloud-based management system. These measures are designed to ensure that no individual possesses all the operational knowledge or key business information and aim to protect the operations against business continuity risk.
Insurance risk
The Investment Manager will ensure that vehicles are insured against loss (including during transportation) however there is a risk that an insurance provider provides inadequate or inappropriate cover, or that poor claims management, product design and pricing expose the insurer to financial loss or bankruptcy as they are unable to meet obligations under a claim. Insurance policies will be entered into or updated (as appropriate) whenever a vehicle is acquired by the Fund or valued in the course of the Fund’s operations. Policies will be held with reputable insurers
Conflict of interest risk
Potential conflicts of interest between different parties involved in the management or operation of the Fund may affect investment decisions or operational costs and efficiency Investment committee governance, conflicts policies and procedures require disclosure and identification of potential conflicts and are designed to resolve any actual conflicts if they arise
RisksassociatedwiththeperformanceoftheInvestmentManager
The success of the Fund is dependent on the Investment Manager identifying suitable investments for the Fund to make on terms which provide the Fund with an opportunity to meet its Investment Objectives The Fund's performance will depend largely on the experience, skill and diligence of the Investment Committee and Portfolio Manager and their exercise of reasonable skill and judgement in making investment decisions. The variations between reasonable expectation and actual performance for individual investment decisions may result in poor or negative returns. The selection of experienced and skilled individuals to the Investment Manager's investment committee and its governance policies and procedures are designed to minimise the risk of poor performance.
RisksassociatedwiththesolvencyandfinancialpositionoftheInvestmentManager
The financial performance of the Fund investment may be impacted by the financial performance of the Investment Manager.
If the Investment Manager either becomes insolvent or encounters financial difficulties, which mean that it is unable to perform its role under the Investment Management Agreement, then the Trustee may need to terminate the Investment Management Agreement. If that were to occur, then the Trustee would either need to find a replacement investment manager or wind up the Fund. This could result in Investors suffering a loss of capital or a diminished return on their investment in the Fund
Documentation risk
A deficiency in documentation could, in certain circumstances, adversely affect the return on an investment or the repayment of capital to Investors. Poor management of documentation and records may make it difficult for the Trustee to realise assets
The Investment Manager’s policies, protocols and governance will be supported by the Investment Manager’s technology systems and infrastructure. The system will allow the Investment Manager to audit each step of a vehicle sale or acquisition and link and consolidate the supporting documentation, so that information and work related to an asset is stored against its profile. The storage system is cloud-based and protected by enterprise-grade security to ensure businesses continuity.
Valuation risk
The valuation of an investment in a motor vehicle may be inaccurate or not accurately reflect its true value at the time the valuation is undertaken. If the valuation is incorrect, then it is possible that the investment is made on an overvalued basis or that a divestment is made at an undervalue resulting in under-performance of the Fund.
An independent vehicle valuation will be conducted at the relevant time in accordance with the Valuation Policy to validate the value of the Fund’s assets and to provide correlation between market values and the value of acquisition and disposals
7. FEES AND COSTS
This section sets out the fees and other costs that will be charged to the Fund for the management of the Fund and its assets. These fees will be charged to the Fund and deducted either from the money you apply to invest or income generated by the Fund
INVESTMENT MANAGEMENT FEES
The Investment Manager is entitled to receive a management fee calculated as 2.00% per annum of the funds under management (FUM) of the Fund for managing the assets and overseeing the operations of the Fund. The FUM of the Fund will be the value of the Fund investments, net of fees and costs.
This fee accrues daily based on the value of the FUM of the Fund and is charged semi-annually in advance. The Investment Manager may, in its absolute discretion, accept lower fees than it is entitled to receive or may defer payment of those fees at any time. If payment is deferred, the fee will accrue until paid.
Please refer the Explanatory Note below for more information on the Investment Management Fees.
PERFORMANCE FEE
A performance fee calculated as 20% per annum of outperformance net of fees is payable to the Investment Manager.
This fee is calculated on an annual basis and is subject to a high-water mark
Please refer the Explanatory Note below for more information on the highwater mark and how the performance fee is calculated
SERVICE FEES Transaction charges (acquisition and disposal of the Fund’s investments):
• Acquisition - between 1.00% and 2.5% of the vehicle’s purchase price capped at AUD$10,000 per vehicle plus disbursements;
• Disposal - between 0.85% and2.25% of the vehicle’s sale price capped at AUD$10,000 per vehicle plus disbursements
Fees for on-boarding services (inspection, servicing, detailing, photography, purchase/fitting of protective cover and preparation of fund vehicle bio and registration) storage and maintenance will be charged to the Trustee at rates negotiated by the Investment Manager on behalf of the Trustee of the Fund
The fee is payable to CTs
FUND ESTABLISHMENT COSTS Fund Establishment Costs comprised of legal and professional fees and disbursements incurred by the Investment Manager for the establishment of the Fund. The Investment Manager is entitled to be reimbursed the Fund establishment costs estimated to be approximately $75,000 over 3-years to the extent that such costs have been properly incurred by the Investment Manager. The Investment Manager may, in its absolute discretion, waive or defer any part of this cost recovery. Reimbursements will be paid from income earned
FUND OPERATION COSTS AND EXPENSES
All costs and expenses properly incurred in the establishment and operation of the Fund are reimbursable out of the Fund’s assets and will be apportioned fairly across classes of Units. If a cost or expense relates only to a specific class of Units, the cost or expense will be apportioned wholly to that class of Units. Fund costs and expenses accrue as they are incurred and paid or reimbursed monthly in arrears from the assets of the Fund.
These costs and expenses typically include fees payable to the Trustee* and day-to-day expenses such as professional fees relating to audit, accounting, tax and legal services, government charges, Fund compliance costs, vehicle storage, vehicle transportation, vehicle detailing, vehicle insurance, vehicle
photography, vehicle maintenance and care, and independent vehicle valuation costs.
Some of these fees are fixed and will fall as a proportion of the FUM of the Fund as the FUM of the Fund grows.
* The Investment Manager will pay all fees payable to the Trustee from its own cash flow (including Investment Management Fees that it earns). However, where the Investment Manager fails to pay these fees, the Trustee will be entitled to be paid from the Fund’s assets. Please refer the Explanatory Note below for more information.
Unless otherwise stated, all fees quoted in this IM are quoted exclusive of GST.
Subject to the Act and the Trust Deed, the Trustee or Investment Manager may agree with any prospective investor any fee arrangements with that prospective investor which are different to the fees set out in this section.
The Trustee may, in its absolute discretion, accept lower fees and expenses than it is entitled to receive, or may defer payment of those fees and expenses for any time. If payment is deferred, then the fee will accrue until paid. In addition, the Investment Manager or Trustee may waive, negotiate or rebate their fees, for example, in the case of a large investment amount.
Explanatory Notes to Fees & Costs
Where the Trustee is entitled to charge an additional fee for time spent on Fund operational matters, it will be at a rate of $350 per hour or part thereof. Some of these fees are fixed and will fall as a proportion of the FUM of the Fund as the FUM of the Fund grows.
TRUSTEE AND ADMINISTRATION MANAGER FEES
The Trustee and Administration Manager is entitled to be paid certain fees for its role as trustee and for undertaking administrative functions with respect to the Fund. The Investment Manager has agreed to pay these fees , out of its own cash flow, which may include the Investment Management Fee it earns. In the event that the Investment Manager does not pay these fees, they will be paid out of the assets of the Fund. These fees are:
• Trustee Fees;
The Trustee is entitled to a monthly fee of up to 0.150% per annum of the Fund’s gross asset value subject to a minimum fee of $1,750* per month
*Subject to an annual increase of 3.5% per annum on the anniversary of the date of the Trust Deed.
• Fund Administration Fees;
The Administration Manager is entitled to a fee of:
● $1,200 per month per Class; plus
● $50 per month per additional class of Units
● $50 per distribution per investor; and
● $50 per unit registry activity (Unit registry activity is defined as redemptions and transfers but excluding applications, distributions and reinvestments), and
• FACTA and CRS Reporting Fees
The Administration Manager is entitled to a fee of:
● $600 per report up to 10 individuals/entities;
● $20 per individual/entity thereafter if the Fund has foreign tax residents; and
● $100 per nil report, if the Fund has no foreign tax residents
PAYMENT BY INVESTMENT MANAGER
The Investment Manager has agreed to pay or reimburse these expenses from its own funds. Where the Investment Manager does not pay these fees, it will be paid from the assets of the Fund.
FEE CHANGES
The Trust Deed allows for higher fees to be charged than those detailed and specifies circumstances where additional fees may be charged. The Trustee will provide investors with at least 30 days’ written notice of any such fee imposition or increase.
REFERRAL FEES
The Investment Manager can offer referral fees or rebates at the Investment Manager’s sole discretion, provided this is at the Investment Manager’s own expense.
TERMINATION FEE
In the event that the Fund is terminated prior to the end of the 4-year term of which the Trustee is engaged as trustee for the Fund, a termination fee of 65% of the fees which would have been payable for the remaining term is payable.
PERFORMANCE FEES
The Investment Manager is entitled to a performance fee The performance fee is subject to a H ighWater Mark
The High Water Mark is equal to the greater of:
• zero; and
• the most recent Fund performance which resulted in a performance fee being payable to the Investment Manager. The Fund performance refers to the change in NAV of a units over the period and is calculated on a time-weighted basis and is adjusted to take account of any applications, redemptions and distributions and excluding any payment of, or provision for, the performance fee.
The performance fee for a period will be calculated using the following formula:
Performance Fee = P x ANAV x (B-C) (1+C)
Where
P = Performance fee rate (20% per annum)
ANAV = Average NAV for the period
B = Aggregate performance return for the period
C = High Water Mark for previous period where an performance fee was last payable.
If the performance of the fund for a period is lower than the High Water Mark no performance fee is payable for that year or any subsequent year until performance ultimately exceeds the High Water Mark. The performance fee is accrued in the unit price betw een calculation periods and is taken into account in application and redemption prices, but is only payable at the end of a year (unless otherwise notified). The accrual of the performance fee in the unit price can result in
different implied levels of performance fee for individual Investors depending on the timing of their investment over time.
This reflects the co-mingled nature of the Fund and the fact that the performance fee is charged against the performance of the Fund rather than against each individual investor.
Performance fee examples:
The examples provided below show how the performance fee is calculated. These examples are provided for illustrative purposes only and do not take into account the timing of cash flows, cumulative fund returns or the individual circumstances of an investor
• Scenario 1: Assuming average NAV for the fund for the year was $20.5 M and performance return for the year was +5.00% (all in excess of the High Water Mark) the performance fee payable, based on a performance rate of 20%, would be $205K ($20.5M x 5% x 20%).
• Scenario 2: The performance return for the year is +5.00%, however due to an intervening year of negative returns this is only +1.40% above the High Water Mark. With an average NAV of $20.5M the performance fee payable based on a performance rate of 20%, would be $57.4K ($20.5M x 1.40% x 20%).
• Scenario 3: The performance return for the year is +5.00%, however due to an intervening year(s) of negative returns this does not exceed the High Water Mark set when the performance fee was last paid. No performance fee would be payable for the year irrespective of the average NAV of the fund that year.
The exact amount of performance fees charged by the Fund is dependent on a number of factors, particularly the timing and relative value of periods of out-performance. Actual performance fees charged will vary, depending on the returns of a Fund and may be higher or lower than the estimated performance fees currently disclosed. Generally, the greater the investment performance of the Fund, the greater the performance fee and therefore the greater the overall management costs for the Fund.