Whiskey Futures Fund II LLC by Spirits Investment Partners

WHISKEY FUTURES FUND II LLC FEBRUARY 1, 2024

W H I SK EY F U T U R E S F U N D I I L L C OVERVIEW Over the past decade, there has been an unprecedented surge in demand for American whiskey, both domestically and internationally. With a resurgence of popularity of craft cocktails and a stream of new whiskey brands coming to market every month, the demand for American whiskey has never been stronger. While not common knowledge, most whiskey brands, small and large, buy inventory from third party producers. Many established brands with their own distilling operations also purchase whiskey inventory from third party contract producers in order to keep up with consumer demand for their products. When a new brand comes to market, they have likely sourced all of their aged whiskey inventory from third party producers, brand owners that may have surplus stocks of a particular type of whiskey, or from entities that have invested in whiskey inventory to hold and sell when it is mature. Over the past decade, increased consumer demand for craft whiskey brands and cocktails has driven up prices for aged whiskey inventory at an impressive rate. Unaged, or “new fill,” whiskey has, on average, appreciated in value more than 300% over a four-year period and continues to appreciate as it gets older. As an asset class, whiskey inventory has outperformed almost every other asset class. Moreover, as a non-correlated asset, whiskey inventory values are highly resilient against fluctuations in the stock market, interest rates, unemployment and even global pandemics, which has made bulk whiskey a highly compelling and attractive investment opportunity for private equity and high net worth individuals seeking alternative investment assets. INDUSTRY EXPERTISE Spirits Investment Partners (“SIP”) was founded by Marc Bushala in 2015 with a sector focus in alcohol beverage. The SIP portfolio (linked here) includes investments across the adult beverage ecosystem, including super premium whiskey and tequila brands, ready to drink (RTD) hard

seltzers, the production of distilled spirits, e-commerce platforms and direct investments in whiskey inventory. SIP has invested more than $250mm of capital across its portfolio of businesses over the past eight years. SIP currently owns over $120mm of whiskey inventory across its portfolio, including $20mm owned under the SIP Whiskey Futures Fund I LP, and has realized profits in excess of $25mm through active management of the inventory held in its brand portfolio alone. As an active investor, brand owner and producer in the American whiskey space, SIP has cultivated longstanding relationships with most of the major whiskey brand owners and contract producers. We have completed transactions worth in excess of $100mm of inventory as buyers and sellers of barreled whiskey with Diageo, Constellation, Bacardi, Beam Suntory, MGP, Bardstown Bourbon Company, Green River, TN Distilling Co., UltraPure and a long list of super premium whiskey brands, including marque brands such as Whistle Pig, Angel’s Envy, Uncle Nearest, High West and George Dickel, to name a few. In 2022, SIP launched its first fund dedicated to investment in bulk whiskey inventory. The SIP Whiskey Futures Fund I (“WFF I”) raised and deployed $20mm of equity for the acquisition of unaged whiskey over a 2.5-year investment period from a half dozen different producers. The inventory acquired under WFF I is slated to be sold to third parties over a two-year period as the inventory reaches maturity (typically four years of age). SIP has deep industry knowledge and extensive relationships which afford us the abiity to secure great buying opportunities and to time the market for optimal exits. SIP currently employs a full-time staff of 55 highly seasoned spirits professionals with expertise across sales, brand development, marketing, procurement, operations, regulatory compliance, accounting and finance. XL Ventures LLC is the parent company of SIP and is the General Partner / Sponsor for all of the non-passive investments in the portfolio.

THE OPPORTUNITY: The SIP Whiskey Futures Fund II, LLC (“WFF II” or the “Company”) is a SPV created for purpose of purchasing 3,600 barrels of high-quality aged Kentucky bourbon whiskey for a total purchase price of $8.6mm. The subject inventory is between 5.8 - 7.0 years old. A list of the inventory to be purchased in provided below.

PRODUCT DESCRIPTION

MASH BILL

Kentucky Straight

78 Corn / 13

Bourbon

Rye / 9 Malt

Kentucky Straight

78 Corn / 13

Bourbon

Rye / 9 Malt

ORIGIN STATE

AVERAGE AGE

QTY ON HAND

PRICE / BARREL

TOTAL COST

APPRAISED VALUE / BARREL

APPRAISED VALUE

APPRAISED VALUE VS. COST

5.25 Y

1,350

$2,200

$2,970,000

$2,900

$3,915,000

132%

6.75 Y

2,250

$2,500

$5,625,000

$3,300

$7,425,000

132%

3,600

$2,388

$8,595,000

$3,150

$11,340,000

132%

TOTAL

The subject inventory is expected to be held for one (1) year and then sold to third party brands or affiliate entities within the SIP portfolio of brands, including, but not limited to Heaven’s Door Spirits LLC and Rare Hare Spirits LLC. INDEPENDENT VALUATION: Gordon Brothers, a 3rd party appraisal firm, appraised the subject inventory in late December at ~32% above our purchase price. In general (and not surprisingly), we find that the appraisals come in quite conservatively. It is the Company’s view that the contracted purchase price is 30-40% below market. Additionally, whiskey inventory appreciates as it ages and expect value accretion of $250$300/barrel (approximately 10% increase in value) over the next 12 months. ADDITIONAL CONSIDERATION: Under the terms of the purchase agreement, the seller is responsible for warehousing the inventory at no charge for storage to the Company through October 31, 2024. The average cost for storage is $3.00 per barrel per month, resulting is a savings to the Company of approximately $93,000. CAPITAL STRUCTURE & INVESTOR RETURNS: The Company is issuing 45 Class A Preferred Units at $200,000 per unit for a total equity raise of $9.0mm. The Company has the right to increase the issuance to 50 Class A Preferred Units for a total equity raise of $10.0mm. The proceeds from this placement shall be used for the purchase of the subject inventory,third- party placement fees, fund expenses and storage and insurance of the inventory.

Class A Preferred Units will receive 100% return of capital invested, plus an 18% annualized preferred return from the closing date through the purchase date of the units. As an example, if the units are purchased 18 months from the issuance date, Class A preferred Units would be purchased at 1.27x initial capital invested. XL Ventures, LLC, the primary GP investing entity of SIP, will have the purchasing rights and re-purchase obligations of the Class A Units. Class A Preferred Units will have a contractual right to sell units to XL Ventures, LLC at any point in time after March 31, 2025. XL Ventures will have the contractual right to buy units from Class A holders at any point in time, but must do so at a minimum of 1.20x Class A Preferred Units initial investment amount. As an equity investment with a targeted hold period that is greater than one-year, investors may benefit from favorable long-term capital gains tax treatment. Please note, that the information provided herein does not constitute tax advice and is not intended to be relied upon for making any financial decisions. Investors should consult with a qualified tax advisor for personalized advice regarding their specific tax situation. TIMING: The favorable pricing of the subject inventory is due to the seller’s need to close of the transaction quickly. Over the past 8 years, SIP and its portfolio. Companies have benefitted from other similar spot purchase transactions. The due date for closing on this inventory purchase is February 15th. We request that investors fund their commitment by February 12th.

T E R M S H E E T S U M M A RY FUND NAME

•

SIP Whiskey Futures Fund II, LLC (DE)

SPONSOR

•

XL Ventures, LLC

•

The proceeds from this placement shall be used for the purchase of the subject bulk whiskey barrel inventory, third party placement fees, fund expenses and storage and insurance of the inventory

•

45 Class A Preferred Units at $200,000 per unit for a total equity raise of $9.0mm

•

SIP has right to increase the offering to 50 Class A Preferred Units for a total raise of $10mm

•

GP will not receive any fees in this offering

•

Class A Preferred Units will have a contractual right to sell units to XL Ventures, LLC at any point in time after March 31, 2025

•

XL Ventures, LLC will have the contractual right to purchase all Class A units from Class A holders at any time, but must do so at a minimum of 1.20x Class A Preferred Units initial investment amount

•

Payment for the purchase of the subject inventory must be completed on February 15, 2024

•

Investors are required to fund their commitment on or before February 12, 2024

LEGAL COUNSEL

•

Croke Fairchild Duarte & Beres LLC

TAX ADVISOR

•

RSM US, LLC

ELIGIBLE USES OF FUND PROCEEDS

ISSUANCE DETAILS

PREFERRED RETURN

FEES

CLASS A UNIT PUT RIGHTS

SPONSOR CALL RIGHTS

CLOSING DATE

SE N IO R M A NAG E M E N T T E A M MARC BUSHALA Chief Executive Officer Marc is a serial entrepreneur with a 30-year track record for creating and managing successful, dynamic businesses across the marketing services, real estate, food and beverage, media and entertainment sectors in the United States and Europe. Marc’s business savvy and creative spirit first drove him to launch two music television channels in Eastern Europe, with Sir Bob Geldof. With no rest for the wicked, he invested his earnings into what are now thriving real estate and hospitality portfolios, paving the way for his next feat – the spirits industry. Marc was formally President and CEO of Angel Share Brands, LLC, owner of Angel’s Envy Bourbon. Harnessing his broad expertise into an entrepreneurial ecosystem in the spirits sector, Marc founded SIP in 2015 for the creation, incubation, and growth acceleration of early-stage businesses. WILL PLUMPTON President Will Plumpton joined SIP as group President in January2024. Prior to joining SIP in 2024, Will spent the last 18 years at Magnetar Capital, a $14B multi-strategy hedge fund based in Evanston, IL. While at Magnetar, he served as COO for the Systematic Investing business unit and Head of Portfolio Finance for Magnetar globally. In his role of COO of Systematic Investing, he managed all aspects of the business unit’s operations, accounting, budget, operations, IT, legal, compliance, risk management and human resources. He also served as a member of Magnetar’s firm-wide Management, Operations and Investment committees, including co-chairing the firm-wide Investment Committee. At SIP, Will’s role will span across debt and equity capital markets, investor relations, finance and operations. ALEX MOORE Chief Operating Officer Alex joined SIP as Director of Operations and was quickly promoted to COO in October 2022. Offering experience in both spirits and canned alcoholic beverage categories, Alex began his distilling career at Breckenridge Distillery where he played an integral role scaling the company after its initial acquisition. In 2018, Alex co-founded Sneaky Fox Spirits as well as an Illinois based co-packing pilot plant for ready to drink cocktail innovation. At SIP, he utilizes his distilling experience and passion for innovative business to optimize operations and production across all brands. AL VALLEJO Chief Creative Officer Al is a self-proclaimed “graphics geek” with over 30 years of design and commercial print experience prior to joining SIP. Al has worked with companies of various size and industry worldwide to reach their target market through compelling visuals and storytelling by analyzing trends and consumer dynamics to develop innovative strategies that differentiate brands in the marketplace. TOBY LESTER Chief Technology Officer & E-Commerce Director Toby is a visionary and results-oriented executive leader with extensive experience leading global, technologyenabled transformation initiatives. As VP of Global Ecommerce at Brown-Forman Corporation, Toby managed core functions for the global strategy and execution of Jack Daniel’s ecommerce business. As a technology leader, Toby has provided strategic advisory services to C-Suite and management teams. He has leveraged his IT and industry experience to lead application development, ERP, SaaS, architecture design and cross-functional teams globally.

SE N IO R M A NAG E M E N T T E A M RYAN FORSYTH Executive Vice President of Sales, United States Ryan Forsyth has over 20 years of spirit industry sales & management experience. Starting his career in 1997 at Glazer’s Distributors in San Antonio. Ryan then transitioned into a supplier role in 2002 with Bacardi USA. He left Bacardi as a Regional Manager overseeing their business portfolio for all channels in multiple states. In 2009, he partnered with Incubrands Spirits Group (now Mahalo Spirits Group) as VP of SW Division. There he helped develop Angel’s Envy, Papa’s Pilar Rums and Suerte Tequilas. RONAN GILLESPIE Executive Vice President of Sales, Europe Ronan Gillespie founded Next Step International (2007), a leading business development consultancy that specializes in the Food & Beverage sector. Ronan joined SIP in 2019, bringing over 16 years of experience in the international drinks business with Irish Distillers Pernod Ricard, where he played a major role in the success of Jameson Irish Whiskey. Ronan’s key skills are in finding appropriate solutions through taking initiative, planning, negotiating, project management, and resource management. He holds a B.A. in International Marketing & Languages from Dublin City University, and speaks French, German, Italian and Spanish. ERIN STEINMAN VP of Special Projects Erin works directly with the executive team to help monitor the business, identify in growth opportunities, create operational best practices, and develop long-term strategic plans. Erin is a results-driven business analytics and finance leader who has spent considerable time working in commercial, corporate, and marketing environments. Prior to joining SIP, Erin spent a decade in various financial management roles at Pernod-Ricard, most recently as the Finance Director for New Brand Ventures, with CFO responsibility for Smooth Ambler Spirits. TAYLOR HENNING Director of Finance Taylor joined the SIP team in October 2023, from a private equity-backed seafood manufacturer where she led all finance and accounting related activities including month-end close, treasury functions, budgeting and liquidity forecasting, and managed teams across 3 manufacturing facilities. Prior to that, she worked for a family office in the Chicago suburbs providing due diligence on potential investment opportunities. Taylor spent the bulk of her career as an auditor at RSM, where she was part of the Heaven’s Door audit team and specialized in PE backed food and beverage companies. As the Director of Finance at SIP, Taylor manages the GAAP financials across the brands and leads financial reporting and analysis efforts to strategically report out results. RYAN MULLEN Financial Controller Ryan is a financial controller with over 10 years of experience in corporate accounting and financial planning, across a diversity of industries including spirits, healthcare, and advertising. He joined SIP shortly after the launch of Heaven’s Door Spirits, in 2018 and is responsible for financial reporting across all SIP brands. Some of his key contributions include managing audits for Stolen Spirits and Heaven’s Door, reviewing month-end close processes/reconciliations, and supporting budgeting/forecasting for all brands.

SE N IO R M A NAG E M E N T T E A M

WHITNEY READ Communications Manager Whitney is an innovative strategist with a relish for PR and digital marketing. By combining her creative savviness with a strategic mindset, she helps to clarify and develop brands, communicate their story, and connect with the right audiences through data, design and thinking outside the box. With a well-rounded understanding of how digital marketing, public relations, social media, and customer experience should come full circle, she knows it’s not coming up with the most creative idea that’s the difficult part but finding ways to work within budget and time constraints to turn an idea into the best strategic program. Whitney holds a degree in Marketing with a concentration in Sales Leadership from DePaul University in Chicago. NICOLE PEARLMAN Brand & Field Manager Nicole began her career in field marketing by developing and managing national sampling programs for adult beverage companies before moving on to build and execute large scale, experiential events for clients such as NFL and NHL. Upon her return to beverage Nicole worked with wine and spirit suppliers to develop on-premise programs and trade marketing initiatives. Time spent traveling the country and working in different markets elevated her ability to support brand needs as they related to different regions and demographics, such as building programs that were flexible and scalable, designed to fit specific goals and objectives. Nicole continues to bring her passion for the industry to SIP by creating unique and engaging field marketing programs that yield real results. KEN PIERCE Master Distiller Ken has been in the beverage industry for more than 40 years. His early days in the distilled spirits industry started with Barton Brands of Georgia. He started as Plant Chemist and later became Quality Control Manager. After six years the company transferred him to Bardstown, KY to its distillery now known as the Barton 1792 Distillery. Ken started his work in Bardstown as Senior Chemist, a short time later Chief Chemist, then Director of Distillation and Quality Assurance, before being named Master Distiller. During his time with Barton, he trained under the three previous Master Distillers. Pierce has been involved in all aspects of bourbon production from the evaluation of incoming grain to the selection of mature whiskey. Ken was instrumental in the development of 1792 Small Batch Kentucky Straight Bourbon Whiskey and its limited release expressions. Ken has been involved with the Six Mile Creek Distillery project as Master Distiller since 2016. He has been involved with the design, startup, and operation. TRAVIS TAYLOR Sr. Operations Manager, Heaven’s Door Distillery Travis Taylor comes with 15 years of distillery experience in the bourbon industry and was brought on as Senior Director to oversee and lead the site’s various functions. Travis began his career initially working as a distillery operator and holding titles of Processing and distillery supervisor, distillery manager, Director of Distillery Operations, Master distiller, and eventually becoming Senior Director for SIP. Travis has been the lead in several projects from improving existing production processes, to building distilleries in foreign countries. In the last 5 years Travis has focused on plant wide efficiency and sustainability implementation.

“You don’t need to appreciate Whiskey to profit from Whiskey appreciation.”