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SVA SOCIAL IMPACT FUND

INFORMATION MEMORANDUM
FOR THE SVA SOCIAL IMPACT FUND
4 APRIL 2012
IMPORTANT NOTICES

Purpose of Information Memorandum any of their respective related entities, associates,


officers, employees or agents disclaims all and any
This document has been prepared solely responsibility or liability for any loss or damage
in connection with the offer of Units which may be suffered by any person relying upon
in the SVA Social Impact Fund (Fund) any information contained in, or any omissions
described herein. It has been prepared from, this document.
on a confidential basis for distribution
If information in this Information Memorandum
only to persons who qualify as “wholesale changes, and it is not a material change, we may
clients” as defined in section 761G update the information by posting the updated
of the Corporations Act 2001 (Cth) information on our website www.socialventures.
(Corporations Act). The offer of Units com.au or an Investor can also obtain this
in the Fund is set out entirely in this information by calling SVA on +612 8004 6700.
Information Memorandum (Information
Reliance on Information Memorandum
Memorandum) and applications for Units
will only be offered to persons receiving The information contained in this Information
this Information Memorandum in Memorandum has been furnished by the Trustee,
Australia, or other jurisdictions only where SVA and Third Link, but no assurance is given by
the Trustee, SVA and Third Link or anyone else
it is lawful to do so.
named in or associated with the issue of this
As the Fund is not required to be registered Information Memorandum as to the accuracy or
under the Corporations Act this Information completeness of this information. The information
Memorandum is not required to and does not contained in this Information Memorandum is
include all the information that would be required general information only and does not take into
in a product disclosure statement, and an Investor account your objectives, financial situation or
is not provided with the protections afforded to an needs. Prospective Investors should read this
investor in a managed investment scheme that has Information Memorandum in its entirety and
been registered under the Corporations Act. before acting on the information contained in this
Information Memorandum and should consider
Responsibility for Information
the appropriateness of the information in this
The Fund is a managed investment scheme Information Memorandum having regard to their
which is not registered with the Australian objectives, financial situation and needs. Where
Securities and Investment Commission (ASIC) appropriate, prospective Investors should seek
and this Information Memorandum has not been independent professional advice.
lodged with ASIC. The investment manager and
Neither the Trustee, SVA, Third Link nor any of their
administrator of the Fund will be Social Ventures
respective related entities, associates, officers,
Australia Limited (ACN 100 487 572) (SVA) who is a
employees or agents guarantees the performance
corporate authorised representative of Third Link
of the Fund, the rate of income, the return of capital
Investment Managers Pty Limited (ABN 31 128 965
to the Investors, any particular rate of return or any
702 AFSL 321611) (Third Link). This Information
taxation consequences of any investment made in
Memorandum dated 4 April 2012 has been issued
the Fund. The Trustee, SVA, Third Link or any related
by SVA.
party, officer, director or associate will not provide
To the fullest extent permitted by law neither the any liquidity or secondary market support for
Trustee, SVA, Third Link nor any of their respective dealing in Units of the Fund.
related entities, associates, officers, employees or
DEEWR is not responsible for the issue of
agents, provides or accepts any representations
this Information Memorandum and takes no
or warranties, express or implied, as to or assumes
responsibility for and does not guarantee the
any responsibility or liability for the authenticity,
performance of the Fund, the rate of income, the
origin, validity, accuracy or completeness of, or any
return of capital to the Investors, any particular
errors or omissions in, any information, statement
rate of return or any taxation consequences of any
or opinion contained in this document or in any
investment made in the Fund.
accompanying, previous or subsequent material
or presentation in relation to this Information The Information Memorandum should be read
Memorandum or the Fund. To the maximum extent in conjunction with the Fund’s Constitution
permitted by law, the Trustee, SVA, Third Link and which is available from SVA. To the extent of any

B | SVA SOCIAL IMPACT FUND ISSUE NUMBER 1 | 4 APRIL 2010


2012
inconsistency between this Information Memorandum
and the Constitution the provisions of the Constitution CONTENTS
will prevail.

This document does not constitute an offer or Letter from the Chief Executive Officer 2
invitation in any place where, or to any person whom, it
1. Key Terms 3
would be unlawful to make such an offer of invitation.
No action has been taken to register or qualify the units 2. Indicative Dates 5
or the offer or otherwise to permit a public offering
3. Investment Overview 6
of the units in any jurisdiction. The distribution of this
document in jurisdictions outside of Australia may be 4. Overview of Social Ventures Australia 7
restricted by the laws of those jurisdictions. A failure
to comply with these restrictions may constitute a 5. Investment Strategy and Process 10
violation of the laws in those jurisdictions. The Trustee 6. Risks of Investing in the Fund 14
reserves the right to change or supplement the terms
and conditions in this document. 7. Grant 16

Confidential 8. Investing in the Fund 17

This Information Memorandum and all of the 9. Transfer of Units 18


information contained in it must not be disclosed to
10. Redemption of Units 18
any person or replicated in any form without the prior
written consent of SVA. 11. Distributions 19
Interpretation 12. Valuations 19
All references to dollars are in Australian dollars.
13. Fees and Other Costs 19
Capitalised terms in this Information Memorandum
are defined terms and they are listed in the ‘Glossary’ 14. Taxation Issues 21
section on page 27 or defined elsewhere in the
15. Other Important Information 24
Information Memorandum. Days are calendar days
unless otherwise specified as Business Days. 16. Glossary 27
References to the “our”, “us” or “we” throughout this Application Form
Information Memorandum are references to Social
for Units in the SVA Social Impact Fund 29 -34
Ventures Australia ACN 100 487 572 in its capacity as
the Manager of the Fund. Corporate Directory Inside back cover

ISSUE NUMBER 1 | 4 APRIL 2012 SVA SOCIAL IMPACT FUND | 1


4 April 2012

Dear Investors,

On behalf of SVA, it is my pleasure to invite you to become an investor in the SVA


Social Impact Fund (“the Fund”). SVA’s vision for the Fund is that it will act as a
catalyst for the development of the social finance market in Australia, a market
which will meet the needs of investors seeking opportunities that achieve both a
social purpose and a financial return.

The Fund aims to improve both economic and social inclusion for Australian
communities with entrenched disadvantage, while increasing the range of
financing options available to Australian social enterprises, and ultimately
M ichael T raill decreasing their reliance on grant funding. Social enterprises are essentially
businesses trading for a social purpose, and although the sector is still
developing, it is recognised around the world as an innovative and sustainable
model for achieving long-lasting social impact.

Australian social enterprises want to increase their activities, improve


performance and scale and achieve long-term financial sustainability. However,
they are currently restricted by an absence of a suitable capital market willing to
provide investment to achieve social impact. As social enterprises serve a dual
purpose, blending commercial focus with social purpose, government subsidies
and philanthropic donations remain inadequate and are often not appropriate
for the growth and scale of these social enterprises. Further, current commercial
finance models premised purely on financial return, are also not suitable.

SVA has a vision to develop funds in the broader social finance sector, funds that
provide both social and financial returns. SVA sees the SVA Social Impact Fund
as a crucial step in the implementation of this vision and already has a strong
pipeline of identified investment opportunities.

SVA’s long term vision is that the Fund will provide an evidence base and
enable key learning that will inform the development of future funds, building
confidence in the social finance market to ‘crowd-in’ new investors. The Fund
will also encourage and nurture collaborations between social finance investors,
Governments and other stakeholders, to create a more sustainable marketplace
for social impact investments across Australia.

This Information Memorandum contains details of the offer and provides an


overview of the Fund’s terms and objectives. Please read it carefully before
deciding whether to invest in the offer.

Yours faithfully,

Michael Traill
CEO, Social Ventures Australia

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1. KEY TERMS
Important Note: The table below provides a summary only of the key terms of the Fund. You should read this Information
Memorandum in full prior to making a decision to invest in the Fund.

Key Term Description

Fund SVA Social Impact Fund

Fund structure Australian domiciled, unregistered managed investment scheme.

Investment Manager and Social Ventures Australia Limited (ACN 100 487 572) (SVA). SVA is a corporate authorised
Administrator representative of Third Link Investment Managers Pty Limited (ACN 128 965 702, AFSL 321611)
(Third Link).

Trustee and Custodian The Trust Company (Australia) Limited (ACN 000 000 993, AFSL 235145) (Trustee)

Fund Auditor Ernst & Young

Investment Objective The Fund aims to achieve attractive investment returns whilst making a meaningful social impact,
through providing financing to Australian social enterprises. These social enterprises are focused
on positive social change including improving education, employment and life outcomes for
disadvantaged members of the community.

Grant Subject to the preparation and execution of the Funding Agreement, the Department of Education
Employment and Workplace Relations, on behalf of the Commonwealth Government of Australia
(DEEWR), will settle on the Trustee the Grant of $4 million as trust capital of the Fund pursuant to
a Deed of Settlement and in connection with the Social Enterprise Development and Investment
Funds (SEDIF) grants program in support of social enterprise development.

Signing of the Funding Agreement is a condition precedent to receipt of the Grant and the
establishment of the Fund. In the event that the Funding Agreement is not signed, DEEWR will not
make the Grant and any money received by the Trustee or SVA on behalf of Investors (including any
interest on the refunded amount) will be refunded.

The Grant is expected to be subject to a number of terms and conditions which are described in
more detail in Section 7. The Grant funds are primarily to be used to meet all costs of the Fund
including but not limited to management and trustee fees, capacity building grants, as well as any
losses or asset impairment suffered by the Fund. Importantly, at no time will the Grant form part of
the asset base for the purposes of calculating the NAV.

Target Returns The Fund aims to generate an internal rate of return (IRR) of 9 - 13%, whilst also making a
meaningful social impact in disadvantaged communities.

Portfolio Construction Investments will range from $150,000 to $1 million. SVA intends to cap any single investment at
15% of the FUM at the time of making the investment, subject to SVA’s discretion to exceed the
cap in limited circumstances.

Broadly, the Fund intends to invest in a portfolio indicatively broken down as follows:

• 60% loans, for an expected term of 5-7 years at target rates of 8-10% p.a.;

• 20% subordinated debt in companies limited by guarantee, at target rates of 10-14% p.a.; and

• 20% equity (either preferred or ordinary share capital) in suitable private companies,
with target IRRs of 12-18%

Eligible Investors Wholesale clients as defined in section 761G of the Corporations Act.

Initial Offer Period 4 April 2012 to 21 May 2012, or such dates as SVA and the Trustee may determine.

Initial Offer Price $1.00 per Unit

Minimum Initial Subscription $50,000

Additional Subscriptions After the close of the initial offer period, prospective and existing Investors may subscribe for
additional Units on a quarterly basis on each Subscription Date.

Additional Subscription Price Units issued after the initial offer period will be issued at the NAV per Unit as at the
Subscription Date.

ISSUE NUMBER 1 | 4 APRIL 2012 SVA SOCIAL IMPACT FUND | 3


1. KEY TERMS continued

Key Term Description

Minimum Additional Subscription $20,000

Minimum Aggregate Fund The Fund will not launch until it receives aggregate Subscriptions of at least $4 million
Subscriptions

Distributions The Trustee and SVA intend to make annual distributions of profit, including capital gains. No
capital distributions will be made until after the fifth anniversary from the Commencement Date.

Investor Reporting Semi-annual fund performance report concerning fund investments.

Detailed annual performance and social impact report concerning fund investments.

Audited annual accounts within 120 days of Financial Year end.

Annual regulatory reporting (such as income tax and distribution statements).

First Reporting Period The first semi-annual fund report will cover the period from the Commencement Date until
31 December 2012.

The first annual reporting period for the audited accounts, regulatory reporting and detailed
annual report, will cover the period from the Commencement Date until 30 June 2013.

Fees & Expenses (excluding GST)

Trustee Fee $35,000 p.a. payable quarterly in arrears (indexed at CPI).

Management Fee $250,000 p.a. payable quarterly in arrears (indexed at CPI), subject to a cap at 5%p.a. (excl GST) of
FUM. The Management Fee will be used to cover Fund Expenses.

Entry Fee The Trustee waives its entitlement to an entry fee under the Constitution until such further notice.

Redemption Fee The Trustee waives its entitlement to a redemption fee under the Constitution until further notice.

Impact Reporting Fees ●● $10,000 p.a. (excl GST) for the first two years from the Commencement Date, and

●● $5,000 p.a. (excl GST) thereafter,

payable to SVA from the assets of the Fund to cover the cost of social return on investment
reporting.

Fund Expenses Fund Expenses will be paid by SVA out of its Management Fee except that:

(a) for the first three years from the Commencement Date only, to the extent that the amount of
Fund Expenses in respect of a Financial Year exceeds the amount of the Management Fee up to
a cap of 1% p.a. (excl GST) of FUM. SVA will be reimbursed such an amount from the assets of
the Fund; and

(b) notwithstanding (a), initial establishment costs, which we expect to be approximately $75,000
(excl GST), will be recovered from the assets of the Fund on the Commencement Date.

Abnormal Expenses Abnormal Expenses are those expenses which are not ordinarily incurred, or expected to be
incurred, during the usual operation of the Fund (such as costs of holding extraordinary Investor
meetings, changes to law (including tax and stamp duty), changes to the Constitution, and
defending or pursuing legal proceedings). Abnormal Expenses will be recovered from the assets of
the Fund. Fund Expenses are not Abnormal Expenses.

Transfers Investors may transfer their Units with the prior consent of the Trustee, such consent not to be
unreasonably withheld.

Redemptions Subject to SVA and the Trustee’s absolute discretion, Investors will not be permitted to redeem
some or all of the Investor’s Units until after the fifth anniversary of the Commencement Date.
Thereafter, SVA and the Trustee intends to allow annual redemptions subject to a discretionary cap
on total redemptions, in respect of each Redemption Date, of 15% of NAV as at the Redemption
Date (or such other percentage as SVA and the Trustee may determine) and subject to the liquidity
of the Fund’s assets.

Key Risks Details concerning key risks are set out in the ‘Risk of Investing in the Fund’ section on page 14.

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2. INDICATIVE DATES
Fund Launch

Initial offer open 4 April 2012

Initial applications and application monies received 18 May 2012

Initial offer close 21 May 2012

Initial allotment 21 May 2012

Despatch of first Semi-Annual Fund Report 31 March 2013 (for the period ending 31 December 2012)

Despatch of first Investment Report & Audited 30 September 2013 (for the period ending 30 June 2013)
Accounts

Post Financial Close

Additional applications and allotments Anticipated quarterly subscriptions.

Redemptions Anticipated annual redemptions from the fifth anniversary following the
Commencement Date subject to a discretionary cap of 15% p.a. of NAV and
liquidity of Fund assets.

Distributions Anticipated annual distributions of profit, including capital gains.

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3. INVESTMENT OVERVIEW
3.1 Fund Objective The Grant is expected to be subject to a number of
terms and conditions. More information about the
The Fund objective is to achieve attractive investment
purpose and the proposed terms of the Grant is
returns whilst making a meaningful social impact,
set out in Section 7.
through providing financing to Australian social
enterprises. The Fund will also seek to achieve the 3.4 Fund Structure
objectives of the Commonwealth’s SEDIF program.
The Fund is an Australian domiciled, unit trust and
These objectives are as follows
a managed investment scheme that will not be
In the short term: registered with ASIC under the Corporations Act.
●● Provide a catalyst for market development; The Fund will be established by the constitution
●● Test capacity for and existing barriers to social of the Fund which may be amended from time to
impact investment and access to capital for social time. The Trust Company (Australia) Limited is the
enterprise; trustee and custodian for the Fund and SVA will
●● Capacity building for social enterprise; and be the investment manager and administrator
●● Target investment in priority areas for impact. of the Fund.

In the longer term: 3.5 Investment Objective


●● Support development of infrastructure to build
Social enterprises are businesses that trade for
market place for social investment;
a social purpose, typically having the following
●● Support innovative product development; and
characteristics:
●● Attract longer term investment in priority areas
for impact. ●● explicit social aims;
●● commercial orientation;
3.2 Fund Overview ●● social ownership;
The SVA Social Impact Fund is an unregistered ●● social accountability;
managed investment scheme. It will invest in ●● socially entrepreneurial drive;
positive social change predominantly through ●● use of profits for community benefit; and
social enterprises seeking to improve employment, ●● socially inclusive values base.
education and life outcomes for disadvantaged Social enterprises provide a range of solutions
communities throughout Australia. The Fund will to deeply entrenched social or environmental
provide financing to Australian social enterprises issues, ranging from new approaches to delivering
that may not otherwise have access to capital and public services, to advancements in technology,
that require funding to grow their impact and to financial inclusion, to child care, to community
build their sustainability. recycling etc.
3.3 Grant SVA intends to use the Grant along with matched
Following the preparation and execution of the investor funding, to launch the Fund to offer
Funding Agreement, DEEWR will settle on the Fund Investors the opportunity to achieve potentially
the Grant as trust capital of the Fund in support of attractive investment returns whilst making a
Australian social enterprise development. The Grant meaningful social impact in the following social
is primarily to be used to meet all costs of the Fund enterprise transactions, including:
including but not limited to management and trustee ●● Loans to suitable social enterprises for an
fees, capacity building grants, as well as any losses expected term of 5 -7 years at reasonable rates
or asset impairment suffered by the Fund. and terms (at an interest rate of 8 -10% p.a.);
Investors should note that until the Funding ●● Subordinated debt in companies limited by
Agreement has been prepared and executed by all guarantee (with an expected return of 10 -14%
parties, DEEWR is under no obligation to make the p.a.); and
Grant or pay the Grant monies. However, the payment ●● Equity (either preferred or ordinary share
of the Grant monies is a condition precedent to capital) in suitable private companies (with
the establishment of the Fund and if the Funding expected IRRs of 12 -18%).
Agreement is not executed, any money received
by the Trustee on behalf of Investors (including any
interest on the refunded amount) will be refunded.

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4. OVERVIEW OF SOCIAL VENTURES AUSTRALIA
4.1 Details about SVA member of the Social Innovation, Enterprise and
Entrepreneurship Alliance (SIEE Alliance), which
SVA was established by The Benevolent Society, The
has a working group on social finance, headed by
Smith Family, WorkVentures and AMP Foundation
Social Traders and Foresters Community Finance.
in 2002 as an independent non-profit organisation
to invest in social change by helping to increase the ●● Experience in Social Finance: SVA will draw
impact and build the sustainability of social sector upon its proven track record of innovative
participants. SVA brings 10 years experience of financial products for investors, as seen through
investing, supporting, as well as offering consulting loans to Fair Business, North Queensland
services to some of Australia’s most promising and Green Solutions and Bonsai Social Firm and
innovative social ventures. SVA’s investments are the sub-ordinated debt program raised as
focused on high potential organisations that are part of the GoodStart syndicate. In 2009, SVA
fostering solutions to some of the most pressing played a pivotal role in orchestrating the
challenges facing our Australian communities and GoodStart syndicate comprising four non-
provide funding and strategic support to carefully profit organisations – SVA, Mission Australia,
selected non-profit partners. Benevolent Society and Brotherhood of St
Laurence. Through the development of a new
SVA has been pioneering work in Australia to social capital model, the syndicate was able
support the development of social enterprises. to raise funds to successfully bid for 650 ABC
With an increasing focus on social enterprise from Learning Centres and is now running these
government, the commercial sector and the non- centres with business disciplines for social
profit sector, SVA’s work is targeted at developing purpose. The GoodStart transaction has to date
the sector in Australia. SVA employs 46 full time been the largest social finance deal completed
equivalents, located in Sydney (headquarters), in Australia.
Melbourne, Brisbane and Canberra.
●● Strong Pipeline of Investments: The Fund’s
The investment team at SVA is comprised investment pipeline will be maintained and
of professionals from the non-profit sector developed through SVA’s close links to the Fund’s
complemented by highly experienced staff Development Partners and sector alliances such
from the corporate world who have previously as the SIEE Alliance.
operated as accountants, lawyers, investment ●● Focus on Investor Relations: Through SVA’s
bankers, consultants, marketing experts and investor relations, Social Finance and Consulting
business managers. SVA believe they have a strong teams, Australian Philanthropic Services and
competitive advantage over other fund managers Third Link Investment Managers Pty Limited,
in this space via: SVA has experience in developing and nurturing
●● Experience with Social Enterprises: SVA the social investment market in Australia and
has over a decade of experience of providing encouraging philanthropists to give more and
investment and support to Australian social invest strategically.
enterprises in disadvantaged areas and clearly ●● Commitment to Innovation: SVA will seek
understands the investment needs of social to link the Fund’s investment experience with
enterprises. SVA will work with its existing international learning as they develop over time.
networks in these communities, referrals from The Fund’s Reference Committee, which brings
local employment coordinators with whom SVA together the Development Partners, Government
has established relationships and the Fund’s representatives and other key Investors in the
Development Partners to ensure investment is Fund on an annual basis, will act as a forum for
targeted at priority areas of impact. discussion on any lessons learnt from the Fund to
Development Partners in the sector include: date and other innovations in the Australian and
Brotherhood of St Laurence, Mission Australia, international social finance sector.
The Benevolent Society, Indigenous Business The following case study has been included in this
Australia, Reconciliation Australia, The Australian Information Memorandum for illustrative purposes
Community Foundation, Social Traders, Social only. It is not a current investment of the Fund nor is
Firms Australia, Job Futures, Jobs Australia, it intended to suggest that the Fund will enter into
The Difference Incubator (Donkey Wheel such an investment in the future on the same terms.
House), The Centre for Social Impact and the
School for Social Entrepreneurs. SVA is also a

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4. OVERVIEW OF SOCIAL VENTURES AUSTRALIA continued

Case study – SVA’s role in GoodStart


SVA’s role in the transaction of the ABC Learning Centres was two-fold:

(a) developed and delivered the GoodStart capital structure and


aligned capital providers; and

(b) convener, facilitator, driver of the syndicate and the acquisition,


and key capital raiser – SVA negotiated for and on behalf of the
syndicate, acted as an intermediary, sourced capital and expertise
from SVA’s philanthropic network and sourced advisory input.

The capital structure of the acquisition resembled that of a private


equity transaction and the mix and sources of capital was pioneering
for the non-profit sector in Australia. The funding package included
senior debt financing from the National Australia Bank as well as
$45million of subordinated funding (including $15 million medium-
term loan from DEEWR).

The $30million of the $45 million of subordinated debt represented


social investment funds raised from private investors and
philanthropists in the form of 12% coupon yielding subordinated
notes demonstrating SVA’s strong links to investors prepared to invest
in enterprises and accept reasonable commercial returns below
conventional market returns, provided there is clear evidence of
social impact. The innovative structure and the size of the transaction
solidified SVA’s position as a market leader.

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4. OVERVIEW OF SOCIAL VENTURES AUSTRALIA continued

4.2 Key SVA Personnel Kevin Robbie – Executive Director, Victoria and
Employment Team
The key SVA personnel who will be involved
with the Fund are the members of the SVA Social Kevin has been a Director with SVA for over three
Impact Fund Investment Committee (Investment years. Within SVA, Kevin is responsible for leading
Committee) and the Portfolio Manager. SVA’s work around employment creation for people
excluded from the labour market. This includes
(a) The Investment Committee
development of new social enterprise investment
The Investment Committee will make all funding models. Kevin has over 20 years
investment decisions. Members include Michael experience in the community sector in the UK,
Traill (CEO), Ian Learmonth (Executive Director, including seven years as Chief Executive of Forth
Social Finance), Kevin Robbie (Executive Director, Sector, one of Scotland’s leading social enterprises.
Employment) and two independent members. Kevin has experience in creating multi-stakeholder
All investment approvals will be reported to the partnerships across Europe. Prior to joining SVA,
Fund Manager and the Trustee. The Investment Kevin was on secondment to the UK Government’s
Committee has the primary approval discretion Cabinet Office as an advisor on both social return
over each investment made by the Fund. Further on investment and the role of social enterprise
information on the role of the Investment in creating employment for those seriously
Committee is set out at Section 5.3. disadvantaged in the labour market.

A brief biography of the current members of the (b) The Portfolio Manager
committee is set out below.
The Portfolio Manager is responsible for
Michael Traill – CEO, Social Ventures Australia administering the investment process including
making recommendations to the Investment
Michael joined SVA as founding CEO in 2002
Committee, portfolio and industry monitoring
after 15 years as a co-founder and Executive
and ensuring compliance with mandates. The
Director of Macquarie Group’s private equity arm,
Portfolio Manager is also responsible for constantly
Macquarie Direct Investment. Michael is Vice Chair
monitoring macro and micro factors that may
of GoodStart Childcare Ltd, a Director of the Opera
impact specific investment risk. Additionally, the
Australia Capital Fund, Documentaries Australia
Portfolio Manager is responsible for conducting
Foundation and the advisory board of MLC Private
ongoing monitoring and regular asset and
Equity. He holds a BA (Hons) from Melbourne
portfolio scenario planning and stress testing to
University and an MBA from Harvard University.
identify Fund performance risks.
Ian Learmonth – Executive Director, Social Finance
The Portfolio Manager of the Fund is Emily Martin,
Ian joined SVA in 2011 to lead the Social Finance who will report directly to Ian Learmonth. A brief
initiative. Ian was formerly an Executive Director biography is set out below.
of Macquarie Bank for 12 years and has over 20
Emily Martin – Portfolio Manager, Social Finance
years of investment banking experience in Sydney,
Hong Kong and London. He has been involved in Emily joined SVA’s Social Finance team in 2012
establishing and leading a number of businesses specifically to work on the impact fund. She
in Asia & Europe including asset and structured brings with her experience in the Social Finance
finance, UK retail funds, direct investment in carbon market gained through her work on Social Benefit
and renewable energy (including wind and solar Bond proposals within the Not-for-profit sector.
projects) as well as providing corporate advice Prior to her work in Social Finance, Emily was a
in the renewable energy sector. Ian has degrees Director and Portfolio Manager at Westpac Bank,
in Law and Commerce from the University of overseeing a structured credit portfolio. She has
Queensland. Ian is a director of the Belvoir Theatre. over 10 years capital markets banking experience
gained in Sydney and London. During her time in
banking she has been involved in both investing
and structuring of debt and equity investments,
with a specific focus on structured credit products.
Emily has a Bachelor of Laws (First Class Honours)
and a Bachelor of Business from the University of
Technology Sydney, and is a CFA charterholder.

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5. INVESTMENT STRATEGY AND PROCESS
5.1 The Investments The average investment from the Fund is
expected to be $500,000 with a proposed range
The Fund aims to achieve attractive investment
of investments from $150,000 to $1,000,000.
returns whilst making a meaningful social impact,
SVA intends to restrict the value of individual
through providing financing to Australian social
investments to a concentration limit of 15%
enterprises. The Fund will target social enterprises
of FUM i.e. no one individual investment will
focused on improving education, employment and
account for more than 15% of FUM at the time
life outcomes for disadvantaged members of the
the investment is made. However, in exceptional
community. SVA’s previous experience of tailoring
circumstances, there may be the need for a larger
social finance investment packages, suggest that
scale commitment outside of the proposed 15%
the funds invested will be best suited for social
concentration limit.
enterprises that are at an early or growth stage in
their life cycle. During the investment process, due diligence
investigations, covering operational, credit,
The Fund will provide financing to Australian social
legal and liquidity risk, will be assessed and
enterprises that may not otherwise have access to
documented. Risk for each future investment
capital. Depending on the capacity of the social
opportunity will be aggregated across the Fund’s
enterprise to use growth capital, the Fund will
portfolio and assessed on a whole of portfolio
provide an innovative combination of
basis.
the following:
5.2 The Investment Pipeline
●● Loans – loans where the interest rate, principal
repayment terms and security requirements are Australia wide Pipeline
less stringent than commercial banking loan SVA has experience in identifying, supporting and
arrangements. Loan facilities will be tailored investing into organisations across Australia and
by SVA to the ability of the social enterprise to will not be limited by office location. Similarly, both
meet the terms of the loan. The Fund will target SVA Consulting and SVA’s network of consultants
loans of 5 -7 years at 8 -10% p.a. It is expected (for example organisations such as Matrix on
that approximately 60% of the Fund will be Board or independent consultants) ensure that
invested in loans. applications for funding and capacity building
●● Subordinated debt – covering a range of can be nationwide.
financial products including subordinated Identifying Investment Ready Social Enterprises
debt and profit participating loans. The Fund The Fund will build on SVA’s experience in
will target subordinated debt of seven years at connecting with and facilitating the development
10 -14% p.a. It is expected that up to 20% of the of the social enterprise sector in Australia through
Fund will be invested in subordinated debt. its Social Enterprise Hubs and more recently
●● Equity investments – will be equity (ordinary or through Government contracts including the Jobs
preference share capital) issued by an Australian Fund, three projects funded by the Queensland
social enterprise. The Fund will target equity Government and a new project in Western Australia
investments that can be realised within seven due to be launched in April 2012. SVA will work
years of investment with expected IRRs of 12- closely with the Fund’s Development Partners
18%. It is expected that up to 20% of the Fund who, as experts in the social enterprise sector,
will be invested in equity. will provide a pipeline of social enterprises they
The percentages noted above are indicative only have identified as investment ready as at the
and are subject to change as determined by SVA. Commencement Date. The Fund will be promoted
to other sector development partners involved in
The investments will be tailored to meet the needs
the SIEE Alliance (such as Social Traders) and it is
of the social enterprises and the economic and
envisaged that some of the investments for the
social outcomes sought by the Fund. Any decisions
Fund will also come through this source.
regarding security will be made by SVA taking into
account the size of the loan, the potential impact of The case studies opposite have been included
a default under the loan on the assets of the Fund in this Information Memorandum for illustrative
and the individual circumstances of the specific purposes only. They are not current investments
social enterprise. SVA expect that most loans made of the Fund, nor is it intended to suggest that the
by the Fund will be unsecured, with security only Fund will enter into such investments in the future
taken in limited circumstances. on the same terms.

10 | SVA SOCIAL IMPACT FUND ISSUE NUMBER 1 | 4 APRIL 2012


5. INVESTMENT STRATEGY AND PROCESS continued

Case Study of an equity investment – STREAT Capacity Building – helping enterprises


become investment ready
STREAT is a Melbourne based social enterprise providing a supported pathway
SVA has extensive experience with over 50 social
to employment for homeless and disadvantaged youth. Its innovative model
enterprises in assisting in financial and strategic
uses food and coffee carts to take youths off the street, providing them
planning, business structuring and resourcing
with traineeships that help them develop work and life skills. SVA has been
through partnerships between government,
working with STREAT around a possible equity investment to assist STREAT
philanthropists and the community sector. This
with their replication and growth plans. STREAT, a non-profit organisation
form of support is known as capacity building.
with DGR status, is planning to establish a propriety limited company as a
A number of SVA’s Development Partners who
subsidiary, to attract equity investors. Social investors would buy shares in
specialise in working with early stage social
this new company, STREAT Enterprises Pty Ltd, while STREAT would retain
enterprises also provide forms of capacity building
up to 50 per cent of the ownership. A separate board would be established
in order to support the growth of social enterprises
to oversee the company. STREAT will match all investor commitments with
in Australia.
the same value in the form of operational knowledge and support. STREAT is
forecasting anticipated returns to shareholders of up to 12%p.a. In a select number of cases (with a maximum
amount of $50,000 per annum) SVA may elect
to make a contribution of up to $25,000 to
new or existing social enterprises as a capacity
building grant to assist the enterprise to become
‘investment ready’. The exact amount of funding
will be based on the needs of the project. The
grant will be given for a specific activity or piece
of work that will have been identified during
the due diligence process for investments. For
example, grants may be provided for helping an
organisation to better articulate and track their
social impact, establish better financial planning or
a fundraising or operational strategy. All decisions
around a capacity building grant will be made by a
Case Study – North Yarra Community Health member of the Investment Committee, based on a
recommendation from the Portfolio Manager.
North Yarra Community Health (NYCH), a community healthcare organisation
located in the inner Melbourne suburbs of Collingwood, Carlton and Fitzroy, Receipt of a capacity building grant should be
has developed a new business opportunity to provide private GP services distinguished from an investment by the Fund.
in the area as a means of generating profits to fund NYCH’s social mission Social enterprises that receive capacity building
in community healthcare work. NYCH took part in Social Traders’ Crunch grants must still complete the formal approval
Program in 2010-2011 where it received capacity building support in process before having loan or equity funding
developing its business plan. NYCH was also matched with business mentors approved, including approval by the Investment
who offered business and financial advice through the planning stage. As Committee. The process is set out in further detail
a graduate of the Crunch Program with a solid business plan, Social Traders’ in Section 5.3 below.
introduced NYCH to SVA’s Social Finance team in July 2011 for potential
5.3 The Investment Process
investment. SVA has since conducted due diligence on NYCH and NYCH
has proposed a social finance package of investment. The investment process outlined below is currently
used by SVA and is designed to thoroughly test the
social enterprise’s ability to take on an investment
package from the Fund.
Investment Criteria
Throughout the investment process, SVA intends
to examine the social enterprises against key
investment criteria, including:

ISSUE NUMBER 1 | 4 APRIL 2012 SVA SOCIAL IMPACT FUND | 11


5. INVESTMENT STRATEGY AND PROCESS continued

Investment Criteria Description


Australian-based ●● Being based in Australia or affecting change in Australia
Leadership and governance ●● The leadership, governance and team behind the business
Suitability assessment ●● The compatibility of the investment with the Fund’s overall strategy
●●  arket research (i.e. the need for the business, its potential for social
M
impact and their competition)
●● Analysis of the predicted outcomes of investment
Organisational Readiness ●● Operating plan and comprehensive strategic/business plan
●● Existence of processes and support services such as finance,
marketing and communications, and human resources
Financials ●● Financial projections
●● Preparation of a financial model and financial evaluation of the
project’s expected returns, including an analysis of expected cash
flows, as well as an assessment of the project’s anticipated timing.
Risk Analysis ●● Identification and analysis of the potential risks associated with the
investment opportunities including development, finance and
project risks

Investment Process
The investment process outlined below is currently SVA will encourage applications from social
used by SVA and is designed to test the social enterprises known to it via its existing investment
enterprise’s ability to take on an investment pipeline (set out in further detail at 5.2) and will
package: also receive applications from the Fund webpage.
Step 2 Due Diligence Process
1 2 An SVA manager will carry out due diligence
Asset Due
Origination Diligence investigations on each potential enterprise,
examining their business plan and financials, as
well as meeting with the social entrepreneur,
Investment
Committee and reviewing the enterprise’s Board and
governance structure. The due diligence process
4
Ongoing 3 may involve external experts at different stages.
Portfolio Investment
Management Decision Each applicant social enterprise will be invited
to pitch to the Fund’s Commerce Panel made up
of independent business experts and pro bono
Step 1 Asset Origination supporters. The panel will serve an advisory
function, recommending areas for improvement
All social enterprises will be required to complete
in order to get the organisation investment ready.
an online Expression of Interest (EOI) form as the
The Commerce Panel does not have the authority
first step in applying for funding. An application fee
to make investment decisions, all investment
of $1,000 will be applicable to all social enterprises
decisions will be made by the Investment
that pass the initial screening of the EOI and are
Committee.
subjected to detailed due diligence. The timing of
the fee will be clearly explained to all enterprises During the due diligence process, an investment
from the beginning to make sure that only those package for each applicant social enterprise will be
serious about funding apply. In a select number of specifically designed and tailored to their needs,
cases SVA may grant a capacity building bursary to based on the predicted impact of the investment,
cover this fee if the social enterprise in question is the confidence in the entrepreneur and any other
proposing to replicate a proven social enterprise issues arising from the due diligence process and
model but is at early stages of growth at the time risk analysis. Where needed, assistance in the
of applying for investment). Applicant social documentation of investments will be provided by
enterprises will be assessed according to the above pro bono supporters.
investment criteria to maintain consistency with
the fund’s overall strategy.

12 | SVA SOCIAL IMPACT FUND ISSUE NUMBER 1 | 4 APRIL 2012


5. INVESTMENT STRATEGY AND PROCESS continued

Step 3 Investment Decision manage investments and to monitor the Fund


As set out in further detail at Section 4.2(a), the against key performance indicators. Each social
Investment Committee will consist of Michael enterprise will be allocated an SVA manager, who
Traill, Kevin Robbie and Ian Learmonth, and two will work closely with the organisation through
independent members. The Investment Committee the period of, and following, investment. Social
will make all final investment decisions on behalf enterprises in the portfolio will be expected
of the Fund. to report to the SVA manager against key
performance outcomes, such reports to be made
The Investment Committee will make its decision available to the Portfolio Manager.
based on the applicant social enterprise’s business
plan and financials, the proposed capital structure The Portfolio Manager will conduct portfolio and
and a recommendation form (including full due industry monitoring to ensure compliance with
diligence analysis), which will be completed by the investment criteria. The Portfolio Manager will
the Portfolio Manager. Decisions will be made by constantly monitor macro and micro factors that
consensus. may impact specific investment risk. Additionally,
the Portfolio Manager will conduct ongoing
Step 4 Ongoing Portfolio Management
monitoring of the social enterprises (aided by
SVA has developed a portfolio management regular reports from the SVA managers), along with
strategy for both social enterprises and Investors regular asset and portfolio scenario planning and
that will be applied to the Fund. SVA will utilise stress testing to identify Fund performance risks.
existing infrastructure and systems in place to

5.4 SVA Social Impact Fund


The Trust
Company
The Fund is a unit trust and a managed investment (Australia) Ltd
(Trustee)
scheme that will not be registered with ASIC under
the Corporations Act. The Fund is domiciled in Social
Trust Deed Governed by investors
Australia and proposes to issue a single class of Fund Trust Deed (Unit holders)
Management
Units. Investors may only invest by submitting Agreement
SVA
an original Application Form (attached to this (Fund Manager) SVA Social Impact Fund
(Unit Trust)
Information Memorandum) subscribing for Units.
Relevant funding Fund
The Fund structure is shown in this diagram. Agreement DEEWR
documentation (Grant funder)

Social enterprises
(investee)

5.5 Trustee and Custodian in Australia and New Zealand with the same
intention, to act as a trustworthy agent. In 2011,
The Trust Company (Australia) Limited will act
The Trust Company Limited acquired New Zealand
as trustee and custodian for the Fund. The Trust
Guardian Trust Ltd, which added further reach
Company (Australia) Limited is a wholly owned
and scale to the business as well as supporting
subsidiary of The Trust Company Limited. The
its clearly defined strategic goal to become the
Trust Company Limited began in 1885 as “The
leading trustee within the Asia Pacific region.
Union Trustees, Executors and Administrators
Company Limited”. The main purposes for trading The Trust Company Limited have also had an
were to act as a trustworthy agent to hold and office in Singapore since 2006 which has made an
manage businesses and financial assets for families increasing contribution to the group over the past
travelling back to England for long periods and to two years.
take on the role of executor/administrator of Services provided by The Trust Company Limited
a deceased estate. include wills and estate planning, financial
The company has since grown and amalgamated planning, power of attorney services, funds
with other prominent trustee companies to management and setting up tax-effective
become one of the largest trustee companies charitable trusts which support the community.

ISSUE NUMBER 1 | 4 APRIL 2012 SVA SOCIAL IMPACT FUND | 13


5. INVESTMENT STRATEGY AND PROCESS continued

It also act as a responsible entity, wholesale Its funds under management for corporate clients
trustee, trustee for structured finance products, is currently around $140 billion and for personal
superannuation trustee and undertake property clients is over $3 billion. As the only trustee
and mortgage custody services. licensed to provide corporate trustee services in
Australia, New Zealand and Singapore, its clients
The Trust Company Limited is a publicly listed
benefit from the experience, ingenuity and
company with offices in Australia, Singapore and
genuine local knowledge of our dedicated teams.
New Zealand with a current market capitalisation
of around $160 million.

6. RISKS OF INVESTING IN THE FUND


All investments involve some degree of risk. An Prospective Investors are advised to review the
investment in the Fund will involve a number of description of the Fund’s target investments and
risks that may impact on the income generated and the other disclosure in this document to determine
value of the Fund and its investments. This Section their own view on the future performance of the
outlines key risks that could affect the performance Fund. The value of an investment in the Fund may
of the Fund (however, please note that these risks go up or down.
may not be an exhaustive list). Many of these risks
6.4 Investment risk
are outside of the control of the Trustee and SVA,
however appropriate mitigation measures will The Fund will be investing in social financial
be applied where possible. products made available to Australian social
enterprises. The social finance market is an
6.1 Risk of revocation of Grant
emerging market and there is little historical data
There is a risk that SVA or the Trustee breaches the available to assess the risk of the financial products
terms of the Funding Agreement and DEEWR will and social enterprises. Due to the untested nature
be entitled to revoke the Grant. SVA will attempt to of the market there is the risk that Investors may
mitigate this risk by creating a number of checks lose their entire investment and receive no return
and balances to ensure that it carries out its role as of either capital or income. SVA’s experience in
expected under the Funding Agreement. There will working with Australian social enterprises, and
also be regular meetings with DEEWR to ensure any stringent due diligence of the social enterprises
deviations from DEEWR expectations are addressed in which the Fund invests, will assist in mitigating
at an early stage. this risk.

6.2 Liquidity risks 6.5 Tax risk


An investment in the Fund will be illiquid and The tax treatment and tax risk of an investment in
there is no established secondary market in which the Fund is discussed in ‘Taxation issues’ in Section
to sell Units. Investors will be reliant on principal 14. Tax laws are subject to continuous change,
repayments from the underlying Fund investments which can operate retroactively and may or may
for redemption of their units. Principal repayments not have an adverse impact on Investors.
from the underlying Fund investments will not be
We recommend that Investors seek independent
distributed to Investors until at least five years from
tax advice on the tax treatment of their investment.
the Commencement Date and subject to a cap on
total redemptions in respect of each Redemption 6.6 Due diligence risk
Date of 15% of the NAV of the Fund as at the
There exists a risk that material items that
Redemption Date and the liquidity of the assets
could affect the performance of individual
of the Fund.
investments of the Fund may not be identified
6.3 Target fund return during the investment process and due diligence
investigations. SVA will attempt to manage this risk
Neither SVA, the Trustee, nor any other person
through the use of a due diligence checklist which
guarantees that the Target Fund Return will
will be applied to all investments.
be achieved from all or any of the Fund assets.

14 | SVA SOCIAL IMPACT FUND ISSUE NUMBER 1 | 4 APRIL 2012


6. RISKS OF INVESTING IN THE FUND continued

6.7 Dependence on key personnel 6.12 Entity risk


The performance of the Fund is reliant on a number When a security in a company or other entity is
of key personnel employed by SVA and SVA’s ability purchased, an Investor is exposed to many of the
to attract and retain quality staff. The loss of staff risks to which the individual company or other
members could potentially have an adverse impact entity is itself exposed. These risks may impact the
on the Fund’s performance. SVA will attempt to value of a security in the company. They include
manage this risk by involving a number of senior such factors as changes in management, actions of
and experienced people in the management of the competitors and regulators. SVA will endeavour to
Fund. Furthermore, SVA has a strong track record of manage this risk through a thorough due diligence
recruiting a high calibre of candidates over the last of each investment, including meetings with senior
10 years. managers and analysis of market conditions and
competitors.
6.8 Sourcing suitable investment
opportunities 6.13 Fund risk
The Fund’s performance may be limited by SVA’s Fund risk refers to specific risks associated with the
ability to source suitable investment opportunities. Fund, such as termination and changes to fees and
expenses. Your investment in the Fund is governed
Sourcing suitable investments may be difficult
by the terms of the constitution for the Fund, as
due to the emerging nature of the social finance
amended from time to time. There is also a risk that
market, which may make it difficult to acquire
investing in the Fund may give different results
quality investment opportunities within the forecast
from holding the underlying assets of the Fund
timeframe or for the prices anticipated in line with
directly because of income or capital gains accrued
this strategy. This could have a negative impact on
in the Fund at the time of investing, and the impact
the Fund’s performance and result in Investors being
of investments into and withdrawals out of the
more greatly exposed to the underperformance
Fund by other Investors. SVA aims to manage
of any of the individual Fund investments. SVA will
these risks by monitoring the Fund and acting in
endeavour to limit such risk through a multi-faceted
Investors’ best interests.
approach to the investment pipeline, including
analysis of SVA’s existing venture partners, discussions 6.14 Regulatory risk
with Development Partners and providing
The risk that the value or tax treatment of an
information about the Fund on SVA’s website.
investment in the Fund or its underlying assets,
6.9 Operating expenses or the effectiveness of the Fund’s investment
strategy may be adversely affected by changes
The Fund’s expenses might be greater than
in government (including taxation) policies,
anticipated, adversely impacting the net income
regulations and laws, or changes in generally
of the Fund. This may be caused by higher than
accepted accounting policies or valuation methods.
expected rates of inflation, unforeseen expenses
The regulatory environment for funds is evolving
and other factors.
and, subject to change, which may adversely affect
6.10 Manager risk the ability of the Fund to pursue its investment
strategies.
By investing in the Fund, Investors delegate their
control over operations and investment decisions 6.15 Other risks
to SVA. The success of the Fund depends largely
The risks listed are not exhaustive, however,
on SVA’s performance and the performance of its
they are the most material risks that relate to the
external service providers.
Fund. The above and other risks may impact the
6.11 Credit risk future performance of the Fund and the value of
the Units. There is no guarantee as to the future
There is a risk that one of the Australian social
performance of the Fund in terms of distributions,
enterprises in which the Fund has invested will
capital appreciation or return of capital.
default on its obligations due to insolvency or
financial distress, resulting in an adverse effect on
the value of the Fund’s investments and hence
the NAV per Unit. SVA will attempt to manage this
risk through a thorough due diligence of each
investment.

ISSUE NUMBER 1 | 4 APRIL 2012 SVA SOCIAL IMPACT FUND | 15


7. GRANT
7.1 The Funding Agreement These Events of Default are expected to include :

The Funding Agreement refers to the agreement to ●● Failure by the Trustee to operate the Fund in
be entered into on or prior to the Commencement accordance with the Constitution in a material
Date between DEEWR, the Trustee and SVA in respect;
relation to the payment of the Grant. DEEWR and ●● Failure to operate the Fund in accordance
SVA are in the process of preparing the Funding with SVA’s business plan, this Information
Agreement, the material terms of which have been Memorandum and the SEDIF objectives;
agreed, however the parties have not yet finalised ●● Encumbering the Fund’s assets for purposes other
this agreement. than in respect of the Fund;
Execution of the Funding Agreement is a condition ●● A material change to the Constitution without
precedent to receipt of the Grant and the DEEWR’s consent;
establishment of the Fund. In the event that the ●● The Trustee ceasing to hold the necessary
Funding Agreement is not executed, DEEWR will authorisations to operate the Fund or an
not make the Grant and any money received by insolvency event in respect of the Trustee occurs
the Trustee on behalf of investors (including any and a replacement trustee approved by DEEWR
interest on the refunded amount) will be refunded. not being appointed within a reasonable time; or
7.2 Settlement of Grant ●● The winding up of the Fund during the term of
the Funding Agreement
Following the signing of the Funding Agreement,
DEEWR on behalf of the Commonwealth The Funding Agreement will be effective for an initial
Government of Australia (Government) will settle term of three years from the Commencement Date.
funds for the amount of $4 million (Grant) on the However, after three years from the Commencement
Trustee as trust capital of the Fund pursuant to a Date, most of the conditions imposed on the Trustee
Deed of Settlement and in connection with the and SVA will cease to apply except that it will still be
SEDIF grants program. a requirement that:
●● Redemptions are not permitted until after the
7.3 Purpose of the Grant
fifth anniversary of the Commencement Date; and
The SEDIF grants program has both short and long ●● In the calculation of the NAV, the amount of the
term objectives, which are described in Section 3.1. Grant (as reduced over time by Fund expenses,
DEEWR has assessed the objectives of the Fund capacity building grants, and asset losses and
and considers that these are consistent with the impairments) will be deducted from the asset
objectives of the SEDIF grants program. base.
The Grant will be applied to the payment of fees The breach of these remaining conditions will be
and expenses of the Fund, capacity building grants, considered an Event of Default under the Funding
and asset losses and impairments. The amount of Agreement. Accordingly, if these conditions were
the Grant (as reduced over time by fund expenses, breached, DEEWR would be entitled to revoke its
capacity building grants and asset losses and Grant. On the occurrence of such an event, the
impairments) will be deducted from the asset base. relevant amount of the Grant to be returned to
At no time will the Grant form part of the asset base DEEWR will be reduced by all expenses of the Fund
for calculation of the NAV. including appropriately incurred management fees
7.4 Revocation of Grant as well as all losses suffered or expected on loans,
subordinated debt or equity investments.
DEEWR, the Trustee and SVA intend to enter into a
Funding Agreement prior to the Commencement The process for the handling of the return of the
Date of the Fund. This agreement will contain the funds (including the management of the assets
conditions precedent and conditions subsequent during the recovery period) will be agreed at the
of the settlement of the Grant as well as the time of the relevant breach.
situations whereby DEEWR is entitled to revoke To the extent that an Event of Default occurs and the
the Grant and require the return of such amounts Grant is revoked, Investors will be entitled to return
(Events of Default). of their capital in priority to the return of the Grant
to DEEWR.

16 | SVA SOCIAL IMPACT FUND ISSUE NUMBER 1 | 4 APRIL 2012


7. GRANT continued

7.5 Winding up of the Fund Fund, capacity building grants and payment of
the Trustee fee, Management Fee and Abnormal
If the term of the Funding Agreement has expired
Expenses, then a condition of the Grant funding
and the Fund is to be wound up (other than as a
will be that any such amount must be paid by
result of an Event of Default under the Funding
the Trustee directly to SVA and not distributed to
Agreement) at a time when the amount of the
Unitholders. This money must then be applied
Grant held by the Fund has not been reduced to
by SVA for a purpose which is consistent with the
nil through losses on investments made by the
objectives of the SEDIF grants program.

8. INVESTING IN THE FUND


8.1 Investor Eligibility Additional investments will be deemed to have
been made on the terms of the then current
An offer to invest in the Fund is made only to
Information Memorandum.
wholesale clients (as defined in section 761G of the
Corporations Act). All additional applications will only be accepted
if received by at least 3:00pm (Sydney time), two
8.2 Initial subscriptions and applications
Business Days prior to the Subscription Date
The minimum initial investment is $50,000. Units together with cleared application monies, which
issued in connection to the initial offer period, will be may be made in accordance with the ‘Payment
issued at the initial offer price of $1 per Unit. options’ below.

An application for Units in respect of the initial offer The Trustee will not accept applications received by
period must be made on an original Application facsimile without prior agreement and unless it is
Form attached to this Information Memorandum. satisfied with all details disclosed in the Application
New applications must also provide supporting Form and associated client identification documents
identification documents as part of the requirements have been received. The Trustee may in its discretion
of AML/CTF identification/verification. accept or reject an application.

All initial applications will only be accepted if 8.4 Anti-Money Laundering and Counter
received by at least 3:00 pm (Sydney time) on Terrorism Financing
18 May 2012 or such later date as SVA advises
Prospective investors must provide certain
together with cleared application monies, which may
information as required by the Trustee as part of
be made in accordance with the ‘Payment options’
the Fund’s client identification documents under
below. The Trustee will not accept initial applications
the Anti-Money Laundering and Counter Terrorism
received by facsimile without prior agreement.
Financing regime (AML/CTF Law). A prospective
The Trustee may in its discretion accept or reject investor’s interest in Units cannot be registered
an application. If accepted, Units will generally be without having provided this information.
issued on the immediately following Business Day
The Trustee and SVA may provide to the Australian
after the close of the initial offer.
Taxation Office, or any other government
8.3 Additional subscriptions and department or agency, information regarding
applications prospective investors, investments, income, or any
other information requested by those organisations.
After the close of the initial offer period, prospective
and existing Investors may subscribe for additional See the ‘AML/CTF acknowledgement’ section on
Units on the last Business Day of each Calendar page 26 for further detail.
Quarter or on such other dates as SVA and the
Trustee may determine in its absolute discretion
(Subscription Date). The minimum additional
investment is $20,000. Units will be issued at the NAV
per Unit determined on the date of issue (or such
other date as SVA and the Trustee determines in its
absolute discretion). The NAV will be calculated in
accordance with the Constitution (see Section 12).

ISSUE NUMBER 1 | 4 APRIL 2012 SVA SOCIAL IMPACT FUND | 17


8. INVESTING IN THE FUND continued

8.5 Payment options 2. Direct Deposit

There are two options for payment: If you wish to make an investment by direct
deposit, please contact SVA for further details.
1. Cheque payments Where funds are electronically transferred or
Cheques should be crossed ‘Not negotiable’ and deposited directly to the bank account, details of
made payable to: the deposit should accompany the Application
The Trust Company (Australia) Limited Form. The Trustee will accept notice of electronic
as trustee for SVA Social Impact Fund transfer of funds as if deposited and cleared.

and mailed to: Physical cash will not be accepted at any time.

Social Ventures Australia Limited


Suite 1, Level 6
6 -10 O’Connell Street
Sydney NSW 2000

9. TRANSFER OF UNITS
Investors will not be permitted to transfer Units a Unit Holder until the transfer has been entered in
except with the trustee’s prior consent, such the register of Unit Holders. However, prospective
consent not to be unreasonably withheld. If a investors should note that there is unlikely to be a
transfer is permitted, a transferee does not become secondary market in Units.

10. REDEMPTION OF UNITS


10.1 Redemptions 10.3 Payment of redemption proceeds
Subject to SVA and the Trustee’s absolute Payment of redemption proceeds will generally
discretion, Investors will not be permitted to be made within 60 days of the Redemption Date.
redeem some or all of their Units until after the A redemption request is irrevocable once made
fifth anniversary of the Commencement Date. (other than with the Trustee’s consent).
Thereafter, SVA and the Trustee intends to allow
Redemptions will be paid in accordance with the
annual redemptions on such date as SVA and the
Constitution and the redemption proceeds will
Trustee determine in their absolute discretion
be based on the NAV of the Fund as at the close
(Redemption Date) subject to:
of market on the Redemption Date following the
●● The Trustee’s right, at its discretion, to cap total receipt of the redemption request, divided by the
redemptions in respect of each Redemption number of Units on issue as at that time and date.
Date at 15% of NAV as at the Redemption Date
Redemption proceeds will consist of an amount
(or such other percentage as the Trustee may
representing the Redemption Price plus an amount
determine); and
representing distributable income. Investors will
●● The liquidity of the Fund’s assets as at the
be advised of the breakdown of such amounts at
Redemption Date.
a later date.
●● Further, the Trustee retains the discretion to
suspend redemptions and to compulsorily 10.4 Deferred redemptions
redeem Units in accordance with the If redemption requests received by the Trustee in
Constitution. respect of a Redemption Date exceed 15% of the
10.2 Redemption process NAV of the Fund as at the Redemption Date, the
Trustee and SVA may, at their absolute discretion,
Redemption requests must be received at least scale down redemption requests for each redeeming
60 Business Days before the relevant Redemption Investor on a pro-rata basis. Unsatisfied redemption
Date (or such lesser period as the Trustee may requests as a consequence of this scaling down will
allow) otherwise the request will be held over for be deferred to the next Redemption Date without
consideration for the following Redemption Date. priority over subsequent redemption requests.

18 | SVA SOCIAL IMPACT FUND ISSUE NUMBER 1 | 4 APRIL 2012


10. REDEMPTION OF UNITS continued

11. DISTRIBUTIONS
Due to the nature of investment returns, annual The calculation of an Investor’s income distribution
distributions may comprise income and/or capital. in respect of a distribution period is generally as
SVA and the Trustee intends to make annual follows:
distributions to Investors commencing one year
A is the number of Units held by
after the establishment of the Fund. SVA and the
the Investor at the end of the
Trustee may in their discretion set distribution AxC
distribution period;
periods of different durations. SVA and the Trustee B
intends to make distribution payments shortly B is the number of Units held by
after the end of the relevant distribution period. all Investors at the end of the
Investors will receive distributions (if made) of their distribution period; and
share (based on their proportionate holding of C is the distributable income for the
Units at the end of the distribution period) of any distribution period.
income and/or return of capital.

12. VALUATIONS
The NAV of the Fund will be calculated in Unitholders should note that at no time will the
accordance with the Constitution at 5:00pm Grant monies be included in the asset base for the
(Sydney time) on the last Business Day of each purposes of calculating the NAV. In calculating the
Financial Year, or such other times and dates as NAV, the amount of the Grant monies (as reduced
SVA and the Trustee may determine in their over time by Fund expenses, capacity building
absolute discretion. grants and asset losses and impairments) will be
deducted from the asset base.

13. FEES AND OTHER COSTS


This document shows fees and other costs that you The Management Fee will be $250,000 p.a. (excl
may be charged for the Fund. These fees and costs GST), accrued daily and payable in arrears on the
may be deducted from your principal investment, last Business Day of each quarter. The Management
from the returns on your investment or from Fund Fee is subject to a cap of 5%p.a. (excl GST) of the
assets as a whole. FUM of the Fund.

Tax details are set out in the ‘Taxation issues’ section The Management Fee is payable out of the assets
on page 21 of this Information Memorandum. of the Fund and will be increased annually by the
percentage increase in the Consumer Price Index
You should read all the information about fees and
released by the Australian Bureau of Statistics for
costs, because it is important to understand their
the year ending 31 March.
impact on your investment.
13.3 Entry Fee
13.1 Trustee Fee
The Trustee is entitled under the Constitution to
The Trustee will charge a trustee and custodial fee for
charge an entry fee of up to 1% (excl GST) of the
providing its services as trustee and custodian for the
consideration in respect of an application for Units
Fund (Trustee Fee). The Trustee Fee will be $35,000
which has been accepted. However, currently the
p.a. (excl GST) , accrued daily and payable in arrears
Trustee waives its entitlement to an entry fee until
on the last Business Day of each quarter. The Trustee
further notice.
Fee is payable out of the assets of the Fund and will
be increased annually by the percentage increase in 13.4 Redemption Fee
the Consumer Price Index released by the Australian
The Trustee is entitled under the Constitution to
Bureau of Statistics for the year ending 31 March.
charge a redemption fee of up to 1% (excl GST) of
13.2 Management Fee the redemption proceeds of Units which have been
redeemed in accordance with the Constitution.
This is a fee collected by SVA for its services as
However, currently the Trustee waives its
investment manager in overseeing the operations
entitlement to a redemption fee until further notice.
of the Fund and/or for providing access to a Fund’s
underlying investments.

ISSUE NUMBER 1 | 4 APRIL 2012 SVA SOCIAL IMPACT FUND | 19


13. FEES AND OTHER COSTS continued

13.5 Impact Reporting Fee 13.8 Waiver


A fee of $10,000 p.a. (excl GST) in the first two years The Trustee may, in its absolute discretion, waive its
from the Commencement Date, and $5,000 p.a. right to the fees it is entitled to receive under the
(excl GST) thereafter, will be payable to SVA from Constitution from time to time.
the assets of the Fund to cover the cost of social
13.9 Changing the fees
impact investment reporting.
The Trustee may change the amount of any fees
13.6 Fund Expenses
in this Information Memorandum (including
All the Fund Expenses, being the usual costs of increase fees up to the maximums set out in the
the Fund including expenses associated with the Constitution) without your consent on 30 days’
operation, administration and management of the advance notice to you. In accordance with the
Fund and the Fund’s assets, the promotion of the Constitution and subject to law, the Trustee may
Fund, dealing in the Fund’s investments, insurance, vary the amount of abnormal expense recoveries
valuations, custody, the maintenance of the Fund’s and the buy/sell spread at any time without your
registers, the keeping of financial records, the consent or notice.
payment of the Fund’s advisers, communications
The Trustee may introduce and increase fees at
with Investors, complying with the law and
its discretion, including where increased charges
any request of relevant regulatory bodies and
are due to Government changes to legislation,
authorities and the handling of complaints will be
increased costs, significant changes to economic
paid by SVA out of its Management Fee except that:
conditions and/or the imposition of increased
(a) for the first three years from the processing charges by third parties.
Commencement Date only, to the extent that
the amount of Fund Expenses in respect of However, the Trustee cannot charge more than the
a Financial Year exceeds the amount of the maximum fees permitted under the Constitution.
Management Fee up to a cap of 1% p.a. (excl 13.10 Taxation
GST) of the FUM of the Fund, SVA will be
Tax details are set out in the ‘Taxation issues’ section
reimbursed such an amount from the assets of
on page 21of this Information Memorandum.
the Fund; and
(b) notwithstanding 13.6(a), initial establishment 13.11 GST
costs, which we expect to be approximately Unless stated otherwise, all fees and costs outlined
$75,000 (excl GST), will be recovered from the in this Information Memorandum are inclusive
assets of the Fund on the Commencement of GST less any Reduced Input Tax Credit (RITC)
Date. entitlement where applicable.
13.7 Abnormal Expenses The following table summarises the GST treatment
The Trustee may recover abnormal expenses of fees.
(such as costs of holding extraordinary Investor We note that the GST Regulations are proposed to
meetings, changes in law (including tax and stamp be amended from 1 July 2012 which, if enacted,
duty), changes to the Constitution, and defending will have the effect of increasing some fees. This is
or pursuing legal proceedings) from the assets because, under the proposed changes and subject
of the Fund (Abnormal Expenses). Abnormal to certain exceptions, “recognised trust schemes”
Expenses are not ordinarily incurred, or expected to (which includes the Fund) will only be eligible for
be incurred, during the usual operation of the Fund a reduced input tax credit (RITC) of 55% of the GST
and are not necessarily incurred in any given year. it pays on an acquisition rather than the prevailing
The management costs outlined above do not rate of 75%.
include any Abnormal Expenses. Fund Expenses are
not Abnormal Expenses. We note that the Entry Fee and the Redemption Fee
have not be included in the following table on the
basis that they are not intended to be charged. To
the extent that either or both of the Entry Fee and
the Redemption Fee is charged, GST may apply.

20 | SVA SOCIAL IMPACT FUND ISSUE NUMBER 1 | 4 APRIL 2012


13. FEES AND OTHER COSTS continued

Fee/Cost Amount (inc GST pre 1 July 2012)

Trustee Fee $35,875 being $35,000 plus GST amount $3,500 less RITC amount of
$2,625

Management Fee $256,250 pa being $250,000 plus GST amount of $25,000 less RITC
amount of $18,750

Impact Reporting Fee $10,000 plus GST amount of $1,000 less RITC amount of $750

$5,000 plus GST amount of $500 less RITC amount of $375

14. TAXATION ISSUES


The following is a general tax summary of the key 14.1 Tax treatment of the Fund
Australian income tax, stamp duty, and goods and
The Fund is an Australian resident trust for
services tax (GST) implications of investing in the
Australian tax purposes. The Trustee intends to
Fund for individuals that are Australian resident
limit the investment activities of the Fund to
taxpayers.These individuals are assumed to hold
ensure that it is treated as a ‘flow through’ entity
their Units in the Fund on capital account and to
for the purposes of Australian tax, i.e. so that the
be dealing at arm’s length.
provisions in the Tax Act that tax certain trusts in a
The information in this summary is general in manner similar to a company should not apply. The
nature. This information does not constitute legal Trustee, as responsible entity of the Fund, should
or tax advice and does not seek to address all of not be liable to tax on the Fund’s net (taxable)
the tax issues that may be relevant to a prospective income, on the basis that the Fund will have an
investor. Taxation issues are complex and amount of distributable income each income
taxation laws, their interpretation and associated year that will be wholly distributed to Investors
administrative practices may change over the term each financial year. Instead, you (and each other
of an investment. Investor) will be required to include your share of
All references in this tax summary to legislative the net (taxable) income of the Fund in your own
provisions are to provisions of the Income Tax assessable income in the financial year to which
Assessment Act 1936 and the Income Tax Assessment the distribution relates. This takes into account
Act 1997 (together, the ‘Tax Act’), unless otherwise income that has been reinvested, or for which
stated. the entitlement has arisen but it has not yet been
distributed to you.
The tax treatment will vary according to individual
circumstances and prospective investors are 14.2 Net Income of the Fund
advised to seek their own independent tax advice The net income of the Fund should take into
in respect of their proposed investment in the account the following amounts:
Fund. All tax liabilities are, and will remain, the
(a) interest received on the loans and subordinated
responsibility of each Investor. The Trustee is not
debt held by the Fund;
responsible for any taxation or penalties incurred
(b) Dividends (or dividend equivalent payments)
by Investors in any circumstance.
paid in respect of the equity investments of the
The taxation summary is based on the Australian Fund, including any franking credits attached
taxation laws in force and the administrative to the dividends (or dividend equivalent
practices of the Australian Taxation Office (the payments);
ATO) generally accepted as at the date of this IM.
(c) Any loss on repayment of the loans and
Any of these may change in the future without
subordinated debt held by the Fund (which
notice and legislation introduced to give effect
would be a loss of an income nature);
to announcements may contain provisions that
(d) Any gain or loss on any disposal of the loans
are currently not contemplated and may have
and subordinated debt held by the Fund (which
retroactive effect.
would be a gain or loss of an income nature);

ISSUE NUMBER 1 | 4 APRIL 2012 SVA SOCIAL IMPACT FUND | 21


14. TAXATION ISSUES continued

(e) Any “net capital gain” on repayment or disposal 14.4 CGT treatment
of the loans, subordinated debt or equity
The cost base of your Units for CGT purposes will
interests held by the Fund (note that the capital
include, among other things, the amount paid
gains tax cost base of the loans, subordinated
to acquire the Units and any incidental costs. As
debt and equity investments may be reduced
discussed above, where you receive a distribution
to the extent that the Grant could be said to be
in excess of your share of the net income of the
a recoupment of the cost base of those assets);
Fund, the amount of the distribution not included
and
in your assessable income will reduce the cost base
(f ) any expenses or fees that the Fund incurs in your Units. If Investors receive distributions of
from time to time, including any interest on non-assessable amounts that exceed their cost
borrowings by the Fund; and base in their Units, they would make a capital gain
For the purposes of calculating the net income to the extent of the excess.
of the Fund, a 50% discount would be applied to You may make a capital gain or capital loss when
capital gains made on assets the Fund had held for you dispose of your Units. As a general rule, where
at least 12 months. the proceeds on disposal of your Units are greater
14.3 Tax treatment of Investors than the cost base of those Units, you will make a
capital gain. The amount of proceeds on disposal
The Constitution provides that Investors are will depend on whether or not you withdraw from
presently entitled to their proportionate share the Fund and redeem your Units or whether you
of trust income. Investors will receive an annual dispose of your Units to a third party.
distribution statement which will identify the
If you withdraw from the Fund and redeem
components of their distributions.
your Units, your total redemption proceeds may
As discussed above, for the purposes of calculating comprise both a distribution of income from the
the net income of the Fund, a 50% discount would Fund and a payment for the redemption of your
be applied to capital gains made on assets the Units. In these circumstances, only the component
Fund had held for at least 12 months. Investors relating to the payment for the redemption of Units
would be required to gross up the capital gain will be relevant in determining whether or not you
component of Fund distributions. An Investor make a capital gain or loss.
would then be able to apply its own capital
Where you are able to assign or sell your Units to
losses, if any, against the trust capital gains before
a third party, the total sale proceeds you receive
applying the relevant discount percentage if any,
for this assignment will be taken into account in
which is also 50% for individuals and 331/3 for
determining whether you make a capital gain or
complying superannuation funds, to any remaining
capital loss.
capital gains.
Where CGT discount treatment applies, this means
Distributions from the Fund may include non-
that only half (if you are an individual (or trust) or
assessable amounts including a return of capital.
two thirds (if you are a complying superannuation
Such amounts are not taxable as income to the
entity) of any capital gain on Units which are held
Investors when distributed but rather will reduce
for more than twelve months will be included in
the cost base of the Units held in the Fund for the
your assessable income.
purposes of determining a capital gains tax liability
on the disposal of the Units. If you make a capital loss on the disposal of your
Units, this loss will only be able to be offset against
If the trust is in a tax loss or net capital loss position
capital gains you derive from other sources and not
for a financial year, this loss cannot be distributed
against other ordinary income, like distributions
to you, i.e. used by you to offset other income.
or wages. However, capital losses can be carried
However, such a loss may be able to be carried
forward and used to offset capital gains you may
forward and deducted against future income of
make in later years.
the Fund if, in the case of a tax loss, the Fund meets
certain requirements in relation to the continuity
of persons with an interest in the Fund.

An investment in Units in the Fund should


generally not be regarded as a financial
arrangement subject to the TOFA rules.

22 | SVA SOCIAL IMPACT FUND ISSUE NUMBER 1 | 4 APRIL 2012


14. TAXATION ISSUES continued

14.5 Tax file number 14.8 Tax Reform


If you do not provide a tax file number or claim The Australian Government has announced that
a valid exemption (or in certain circumstances it is proposing to implement a new tax system for
provide an Australian Business Number), the managed investment trusts. The rules are intended
Trustee will be required to deduct tax from your to provide greater certainty in relation to the tax
distributions at the highest marginal tax rate treatment of managed investment trusts, however,
plus Medicare levy (currently 46.5%). Any tax file no legislation has been introduced as at the date
number you provide will be reported to the ATO by of this Information Memorandum. On the basis of
the Trustee in connection with your investment. current information, the rules would apply from
1 July 2013.
14.6 Stamp duty
On the basis that the assets of the Fund will not
comprise land or an interest in land (such as a
lease), you should not have to pay stamp duty in
any State or Territory other than New South Wales
upon the transfer, issue or redemption of Units.

On the basis that the register on which the Units


will be kept will be located in New South Wales,
a transfer or an agreement to transfer your Units
will give rise to a liability for stamp duty in New
South Wales. Duty on the transfer or an agreement
to transfer your Units will be payable at the rate
of 0.6% of the greater of the sale price (if any) and
the value of the Units that you are transferring. The
purchaser will be the person liable to pay the duty.

Depending on the nature of the asset, stamp duty


may be payable on the acquisition of the assets
by the Fund. This will be a transaction cost for the
Fund which may affect the value of your Units.

14.7 GST
GST will not apply to the issue or redemption
of Units. GST may apply to the fees charged to
the Fund and some other expenses of the Fund
(including on the acquisition of certain types of
assets). The Fund may be entitled to a reduced
input tax credit equal to 75% of the GST paid in
respect of certain expenses. GST may also apply
to fees and commissions charged to you by your
financial adviser. You should obtain independent
advice as to whether any input tax credits are
available for any such GST, as it will depend on
your personal circumstances.

ISSUE NUMBER 1 | 4 APRIL 2012 SVA SOCIAL IMPACT FUND | 23


15. OTHER IMPORTANT INFORMATION
15.1 Keeping you informed adverse information, we will publish the updated
information on our website:
SVA will provide Investors with two reports each
http://www.socialventures.com.au
year. Investors will receive a semi-annual Fund
Performance Update and an annual Investment A copy of the updated information will be available
Report that will provide detailed accounts of the free of charge upon request by contacting the
social impact of the Fund, and the annual statutory Trustee.
accounts. These are explored in more detail below. 15.3 Our legal relationship with investors
Fund Performance Update
The Corporations Act, general law and the
Produced on a semi-annual basis this report Constitution set out the rights and interests of the
will provide a brief update of the Fund’s overall Unitholders in the Fund as investors and also set
performance including current value of the Fund, out the rights, duties and obligations of The Trust
number of enterprises in the Fund portfolio and Company (Australia) Limited as the Trustee of
total funds committed and invested. the Fund.
Investment Report
15.4 Constitution
Each Investor will also receive an annual
Investment Report which will provide a more The Fund is governed by its Constitution. The main
detailed report outlining overall progress of the provisions of the Constitution are summarised
Fund including: below. The Constitution is legally binding between
the Trustee and each Unitholder. To the extent
(a) Financial performance: current FUM of the of any inconsistency between this Information
Fund, number of social enterprises in Fund Memorandum and the Constitution, the
portfolio, total funds committed and invested provisions of the Constitution will prevail. Subject
and statutory audited accounts. to the Corporations Act, The Trust Company
(b) Social Impact: overall summary of social impact (Australia) Limited, as the Trustee, may amend the
of Fund based on targets including qualitative Constitution. A copy of the Constitution is available
and quantitative information (for example for inspection free of charge at the offices of SVA
number of jobs created and case studies of during normal business hours.
social enterprises), percentage of enterprises 15.5 Rights and liabilities of Investors
that are on track in delivery of social impact.
Each Unit carries with it an equal beneficial interest
(c) Benchmarking of Fund performance: Fund
in a Fund as a whole but not in any particular asset
performance compared with suitable peers.
of that Fund. Fund income is only distributed to
The first Fund Performance Update will cover the registered Unitholders entitled to a distribution as
period from the Commencement Date until at the last Business Day of the distribution period.
31 December 2012. Unitholders may not interfere with the Trustee’s
powers or exercise any rights in respect of any
The first Investment Report will cover the period
investment of the Fund. Under the Constitution
from the Commencement Date until 30 June 2013.
and the Corporations Act unit holders may:
For the avoidance of doubt, there will be no interim
version of these reports covering the period from (a) transfer Units in a Fund;
the Commencement Date until 30 June 2012. (b) requisition, attend and vote at meetings of
Information will also be provided to Investors to a Fund;
enable Investors to complete taxation returns. (c) share in the income and capital distributions
of a Fund; and
15.2 Up-to-date information
(d) participate in the winding up of a Fund.
Certain information in this Information
Memorandum may change from time to time. This Generally, the Constitution limits an Investor’s
includes but is not limited to potential changes liability to the Trustee to the value of that
which we have identified. Where we indicate to you Unitholder’s investment in a Fund. However, no
that we will give notice of such changes, or where absolute assurance can be given due to the fact
the updated information includes no materially that this has not been tested in superior courts.

24 | SVA SOCIAL IMPACT FUND ISSUE NUMBER 1 | 4 APRIL 2012


15. OTHER IMPORTANT INFORMATION continued

15.6 Liability of The Trust Company 15.9 Dealing with complaints


(Australia) Limited as the trustee
The Fund has procedures in place for dealing with
Subject to the Corporations Act, except in the case complaints. The Complaints Officer for the Fund will
of its own fraud, gross negligence, or wilful default, seek to acknowledge receipt of your complaint in
the Trustee is not liable to any greater extent to writing as soon as reasonably practicable and in any
which it is entitled to be and is in fact indemnified event within 30 days from receipt, and address your
out of the Fund. complaint within 60 days. Investors with enquiries
should contact the Complaints officer. Notification of
15.7 Retirement and removal of The Trust
any complaint should be made in writing addressed
Company (Australia) Limited as the trustee
to:
The Trust Company (Australia) Limited may be Attn: Complaints Officer
removed from a Fund in the circumstances set Social Ventures Australia Limited
out in the Constitution and the Corporations Act, Suite 1 Level 6
including where Unitholders pass an extraordinary 6 -10 O’Connell Street
resolution to remove The Trust Company (Australia) Sydney NSW 2000
Limited as the Trustee. The Trust Company
(Australia) Limited may also retire voluntarily 15.10 Privacy
and must call a meeting of Unitholders who may The Trustee, SVA and Third Link must comply with
choose a replacement by extraordinary resolution. the Privacy Act. This Act generally regulates the
15.8 Termination of the Fund collection, storage, quality, use and disclosure of
personal information. The Trustee, SVA and Third Link
The Trustee may terminate the Fund at any may collect personal information from Investors to
time by giving notice to Unitholders or in the provide its products and services. The Corporations
circumstances provided in the Corporations Act, Act requires the Trustee, SVA and Third Link to
including pursuant to an extraordinary resolution collect some personal information about you. In
passed by Unitholders. However, if the Fund most cases, Investors have rights to access their
is terminated during the term of the Funding personal information. The Trustee and SVA can use
Agreement, this will be an Event of Default under your personal information to assess your application
the Funding Agreement, which will trigger DEEWR’s for the investment product and, if you obtain the
right to revoke the Grant. product, to manage that product. The Trustee and
Where the Fund is terminated, the Trustee must SVA may disclose information to related entities, and
sell all the assets of the Fund and distribute the anyone acting on the Trustee or SVA’s behalf such as
net proceeds to Unitholders in proportion to the external service suppliers who supply administrative,
number of Units held. For the avoidance of doubt, financial or other services to assist the Trustee and
any remaining Grant monies will not be distributed SVA in providing financial services, anyone you have
to Unitholders. The Funding Agreement will require authorised, or government departments or agencies.
that, provided the Fund is not being wound up due If the Trustee or SVA are not able to collect all the
to an Event of Default under (or in default of ) the personal information they require, they may not be
Funding Agreement, any remaining Grant monies able to assess your application for the investment
be paid to SVA, who will be obligated to utilise any product or manage the product.
such money for a purpose which is consistent with Please note that if you provide personal information
the SEDIF grants program. to the Trustee or SVA about another person, you
warrant that you are authorised by that person to
do so and that you have informed that person of the
information in this Privacy section.

Enquires regarding access to personal information


must be in writing and addressed to:

Attn: Privacy Officer


Social Ventures Australia Limited
Suite 1 Level 6
6 -10 O’Connell Street
Sydney NSW 2000

ISSUE NUMBER 1 | 4 APRIL 2012 SVA SOCIAL IMPACT FUND | 25


15. OTHER IMPORTANT INFORMATION continued

15.11 Terms and conditions of 15.12 AML/CTF Acknowledgement


applications and redemptions
By applying to invest in the Fund you warrant that:
Units in the Fund will only be allocated following
(a) You comply and will continue to comply with
receipt and acceptance by the Trustee of a
applicable anti-money laundering (AML) and
completed Application Form, accompanying this
counter-terrorism financing (CTF) laws and
Information Memorandum, plus any required
regulations, including but not limited to the law
documentation. The Trustee has absolute discretion
and regulations of Australia in force from time
to accept or reject any application. Please refer to
to time (AML/CTF law).
the ‘Investing in the Fund’ section on page 17 for
further information on applications. Please note (b) You are not aware and have no reason to
that the Trustee may require additional information suspect that:
or documentation about the Investor(s) in addition (i) The monies used to fund your investment in
to those detailed in the Application Form before a Fund have been or will be derived from or
accepting any applications. related to any money laundering, terrorism
Redemption requests will only be processed financing or similar activities illegal under
following receipt and acceptance by the Trustee applicable laws or regulations or otherwise
of a properly authorised instruction. The Trustee prohibited under any international convention
has absolute discretion to accept or reject any or agreement (“illegal activity”); or
redemption request. Please refer to ‘Redemption of (ii) The proceeds of your investment in a Fund
Units’ section on page 18 for further information. will be used to finance any illegal activities.

(c) You will provide us with all additional


information and assistance that we may
request in order for us to comply with any
AML/CTF Law.

(d) You are not a ‘politically exposed’ person or


organisation for the purposes of any AML/CTF
Law.

(e) You acknowledge that the Trustee may, in its


sole and absolute discretion but otherwise
in accordance with the law, vary the terms of
this Information Memorandum or alter the
arrangements in respect of any Fund, where the
Trustee is required to do so due to changes in
AML/CTF Law.

By applying to invest in the Fund, you also


acknowledge that we may decide to delay or
refuse any request or transaction, including by
suspending the issue or withdrawal of Units in
a Fund, if we are concerned that the request or
transaction may breach any obligation of, or cause
us to commit or participate in an offence under any
AML/CTF Law, and we will incur no liability to you if
we do so. You further acknowledge that the Trustee
is under no obligation to inform you of its intention
to do any of the above, or the fact that is has done
any of the above, nor is the Trustee obliged to
provide you with its reasons for any such actions.

26 | SVA SOCIAL IMPACT FUND ISSUE NUMBER 1 | 4 APRIL 2012


16. GLOSSARY
Abnormal Expenses means out-of-pocket expenses incurred GST means Goods and Services Tax. GST has the meaning given
by the Trustee (or SVA) in managing and administrating the in the GST Law.
Fund which are not generally incurred in the usual operation of GST Law has the meaning given in A New Tax System (Goods and
the Fund and in any given year and excludes all Fund Expenses. Services Tax) Act 1999 (Cth).
AML/CTF Law means the Anti-Money Laundering and Counter- Information Memorandum means this Information
Terrorism Financing Act 2006 (Cth) as amended from time to time. Memorandum dated 4 April 2012 as amended or replaced from
Application Form means an application form attached to this time to time.
Information Memorandum. Investor(s) or Unitholder(s) means a person name in the Fund’s
ASIC means the Australian Securities and Investments register of unitholders as a holder of Units.
Commission or if it ceases to exist, any regulatory body or Investment Committee means the SVA Social Impact Fund
authority as then serves substantially the same objects. Investment Committee currently consisting of the members
AFSL means an Australian Financial Services Licence. identified in Section 4.2(a).
Business Day means any day excluding a Saturday or Sunday Investment Manager means Social Ventures Australia Limited
on which banks are open for business in Sydney, Australia. (ACN 100 487 572) the investment manager of the Fund.
Calendar Quarter means 31 March, 30 June, Investment Report means as defined in Section 15.1.
30 September and 31 December of each year. Management Fees has the same meaning as the fee described
Commencement Date means the date that the Fund is in Section 13.2.
established. NAV or Net Asset Value means the total assets minus the
Constitution means the constitution of the Fund, as amended total liabilities of the Fund, Units or portfolio in question, as
or replaced from time to time. determined in accordance with the Constitution.
Corporations Act means the Corporations Act 2001 (Cth), as NAV per Units means NAV of the Fund divided by the total
amended from time to time. number of Units on issue as at the date of calculation.
Custodian means The Trust Company (Australia) Limited Portfolio Manager means such portfolio manager appointed
(ABN 000 000 993). by SVA from time to time, currently identified in Section 4.2(b).
DEEWR means, unless otherwise specified as a specific state Privacy Act means the Privacy Act 1988 (Cth) as amended from
or territory government body, the Department of Education time to time.
Employment & Workplace Relations on behalf of Commonwealth Redemption Date means the last Business Day of each Financial
Government of Australia. Year and/or such other days as the Trustee may determine.
Deed of Settlement means the deed poll executed by DEEWR. Redemption Price means the Unit price calculated in accordance
Development Partners means currently those partners with the redemption price procedures set out in the Constitution.
indicated in Section 4.1. RITC means a “reduced input tax credit” as defined in the A New
Financial Year means, for the first Financial Year, the period Tax System (Goods and Services Tax) Act 1999 (Cth) as amended
from the Commencement Date to the following 30 June and from time to time.
thereafter the 12 month period ending on 30 June of each year. Subscription Date means the last Business Day of each Calendar
FUM means funds under management which will consist of the Quarter or such other dates as the Trustee may determine in its
Grant and Investors funds. absolute discretion that prospective Investors and Investors may
Fund means the SVA Social Impact Fund. subscribe for additional Units following the close of the initial
offer period.
Funding Agreement means the agreement to be entered into
on or prior to the Commencement Date between DEEWR, the SIB means social impact bonds.
Trustee and SVA in relation to the payment of the Grant monies. SIEE Alliance means Social Investment Enterprise and
Fund Expenses means all usual costs of the Fund including Entrepreneurship Alliance.
expenses associated with the operation, administration and SVA means Social Ventures Australia Limited
management of the Fund and the Fund’s assets, the promotion (ABN 94 100 487 572).
of the Fund, dealing in the Fund’s investments, insurance, Target Fund Return means a targeted financial return of the
valuations, custody, the maintenance of the Fund’s registers, the Fund.
keeping of financial records, the payment of the Fund’s advisers,
communications with Investors, complying with the law and any Third Link means Third Link Investment Managers Pty Limited
request of relevant regulatory bodies and authorities and the (ABN 31 128 965 702, AFSL 321 611).
handling of complaints. Trustee means The Trust Company (Australia) Limited
Grant means the amount of $4 million settled on the Trustee (ABN 000 000 993) the trustee of the Fund.
as the trustee of the Fund as trust capital, pursuant to the Deed Units mean units of the Fund.
of Settlement.

ISSUE NUMBER 1 | 4 APRIL 2012 SVA SOCIAL IMPACT FUND | 27


APPLICATION FORM
FOR UNITS IN THE SVA SOCIAL IMPACT FUND

This is an application form for the SVA Social


Impact Fund (Fund) issued by The Trust Company Please complete all the sections indicated.
(Australia) Limited Individual, joint or sole trader –
(ACN 000 000 993, AFSL 235415). must complete section A1, B, C, D, E and F
This Application Form accompanies the Partnership –
Information Memorandum dated 4 April 2012. must complete A1, A4, B, C, D, E and F
It is important that you read the Information Australian Company –
Memorandum in full and the acknowledgements must complete A1 (Directors), A2, B, C, D, E and F
contained in this Application Form before applying
to participate in the Fund. The Trustee will Trust with Individuals as Trustee –
provide you with a paper copy of the Information must complete A1 (Trustees), A3, B, C, D, E and F
Memorandum including any supplemental Trust / Super Fund with Corporate Trustee –
Information Memorandum and the Application must complete A1 (Directors), A2 (Company),
Form, on request without charge. A3, B, C, D, E and F
This Application Form may only be distributed Other: Please contact SVA.
to persons who qualify as “wholesale clients” as
defined in section 761G of the Corporation Act 2001
(Cth).

Applicants can only participate in the Fund on


receipt of:

●● this Application Form,


●● verification of the applicant’s identity, and
●● payment of the application monies in full.
This Application Form and application monies must
be received by SVA by 3:00 pm on 18 May 2012 or
such later date as SVA advises.

Note: Capitalised terms used in this Application


Form and not defined herein, shall have the
meaning given in the Information Memorandum.

28 | SVA SOCIAL IMPACT FUND ISSUE NUMBER 1 | 4 APRIL 2012


APPLICATION FORM
SVA Social Impact Fund
Section A1 – Individuals / Sole Trader
(including individuals acting as trustee and corporate directors and partners)

Applicant 1 (Your name MUST match your ID exactly.)


All individuals must provide certified copies of photo identification, such as passports, driver’s licenses or
similar government issued photo ID.

Title: Given Names (in full): Surname:

Date of Birth (dd/mm/yyyy): Country of Citizenship:

Are you an Australian resident for tax purposes? l Yes l No


If no, please specify your country of tax residence:

Australian Tax File Number (TFN): OR

Exempt from quoting a TFN (Exemption details):

Residential Address:

City/Suburb/Town: State: Postcode: Country:

Email Address:

Telephone (home): Area code: Number:

Telephone (business hours): Area code: Number:

Mobile:

Fax: Area code: Number:

Applicant 2 (Your name MUST match your ID exactly.)


All individuals must provide certified copies of photo identification, such as passports, driver’s licenses or
similar government issued photo ID.

Title: Given Names (in full): Surname:

Date of Birth (dd/mm/yyyy): Country of Citizenship:

Are you an Australian resident for tax purposes? l Yes l No


If no, please specify your country of tax residence:

Australian Tax File Number (TFN): OR

Exempt from quoting a TFN (Exemption details):

Residential Address:

City/Suburb/Town: State: Postcode: Country:

Email Address:

Telephone (home): Area code: Number:

Telephone (business hours): Area code Number:

Mobile:

Fax: Area code: Number:


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ISSUE NUMBER 1 | 4 APRIL 2012 SVA SOCIAL IMPACT FUND | 29


APPLICATION FORM continued

COMPLETE THIS PART IF INDIVIDUAL IS A SOLE TRADER

Full Business Name (if any) ABN: ABN:

Principal Place of Business (if any):


(PO Box is NOT acceptable)

City/Suburb/Town: State: Postcode: Country:

Email Address:

Telephone (home): Area code: Number:

Telephone (business hours): Area code: Number:

Mobile:

Fax: Area code: Number:

Section A2 – Australian Corporations & Corporate Trustees

Must provide a certified copy of an ASIC search on the company name or certificate of registration.

Full name of the company


as registered by ASIC: ABN:

Registered Office Address (PO Box is NOT acceptable):

City/Suburb/Town: State: Postcode: Country:

Principal Place of Business (if any):


(PO Box is NOT acceptable)

City/Suburb/Town: State: Postcode: Country:

Main Contact:

Email Address

Telephone (home): Area code: Number:

Fax: Area code: Number:

Company Type:

Name of Directors (in full): Note: Each director must also complete A1

Is the company an Australian resident for tax purposes? l Yes l No


If no, please specify your country of tax residence:

Australian Tax File Number (TFN): OR

Exempt from quoting a TFN (Exemption details):


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30 | SVA SOCIAL IMPACT FUND ISSUE


ISSUE
NUMBER 4 1|
NUMBER |31 MARCH
4 APRIL 2012
2010
APPLICATION FORM continued

Section A3 – Trusts or Super Fund

Must provide certified copy of the first few pages of the trust deed or ATO website extract or ATO communication.

Name of trust or fund:

Country of establishment:

Date of establishment: ABN:

Business name of the Trustee (if any):

NOTE: Individual trustees must complete A1; corporate trustees must complete A2.
Type of trust:

l Regulated trust (SMSF)


l Registered managed investment scheme
l
 Unregistered managed investment scheme with only wholesale clients which does not make
small-scale offerings under section
1012E of the Corporations Act 2001:

l Government superannuation fund:


l Other:
If other, please specify (e.g. family, unit, charitable, estate):

Are you an Australian resident for tax purposes? l Yes l No


If no, please specify the trust’s or fund’s country of tax residence:

Australian Tax File Number (TFN): OR

Exempt from quoting a TFN (Exemption details):

NOTE: Only the trustee(s) will be recognised as the Investor, however, we are required to record details of the individual beneficiary.

BENEFICIARY 1

Name: ABN (if applicable):

BENEFICIARY 2

Name: ABN (if applicable):

BENEFICIARY 3

Name: ABN (if applicable):

BENEFICIARY 4

Name: ABN (if applicable):

Section A4 – Partnerships

Must provide certified copy of the Partnership Agreement or ATO correspondence in the past 12 months or Certificate of Registration.

Full Name of the partnership:

Full Business Name of partnership registered in any State or Territory (if applicable):

Business of Partnership:

Country of Establishment: Date of Establishment:

Australian Tax File Number (TFN): OR

Exempt from quoting a TFN (Exemption details):


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ISSUE NUMBER 1 | 4 APRIL 2012 SVA SOCIAL IMPACT FUND | 31


APPLICATION FORM continued

How many partners are there?:

Each partner’s details (in capitals):

Full Name: Partnership Share:

Full Residential Address:

Full Name: Partnership Share:

Full Residential Address:

Full Name: Partnership Share:

Full Residential Address:

Full Name: Partnership Share:

Full Residential Address:

NOTE: One partner MUST complete A1.

Section B – Contact Details

Please specify if contact details is different to those provided in Section A or if joint investors,
please indicate the preferred contact details:

Postal Address:

City/Suburb/Town: State: Postcode: Country:

Email Address:

Telephone (home): Area code: Number:

Telephone (business hours): Area code: Number:

Mobile:

Fax: Area code: Number:

Section C – Investment Details (must complete)

Total investment amount: $


Total no. of Units (at $1.00 per Unit): Units

For Australia applicants: Please tick the box below to advise how your payment will be made.

l Payment by cheque (Please complete Sections D)


l Electronic Funds Transfer (EFT) (Please complete Section D and provide a clear reference when EFT funds)
Section D – Bank Account Details

All applicants must complete this section by providing details of an Australian banking institution.
The nominated bank account must be in the name of the applicant.

Bank Name/Institution:

Branch name and address:

City/Suburb/Town: State: Postcode: Country:

BSB: Account Number:

Account Name:

Reference No. (if EFT):


When giving instructions to us about your investment please indicate who has authority to operate your account
(e.g. any one to sign / all to sign / other):
Please complete the signature page (Section F) of this Application Form.
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32 | SVA SOCIAL IMPACT FUND ISSUE NUMBER 1 | 4 APRIL 2012


APPLICATION FORM continued

Section E – Declarations & Signatures


By completing the Application Form you:
(a) declare that before executing this Application Form, you have fully read and understood the Information Memorandum, the
Constitution and this Application Form and have made your own independent investigation and appraisal of the taxation, legal,
economic and credit aspects associated with the investment, including seeking professional, taxation and legal advice as it
deems appropriate in respect of the Units before deciding whether to subscribe for Units pursuant to this Application Form;
(a) agree to be bound by the Constitution and the terms of the Information Memorandum;
(b) acknowledge that this Information Memorandum does not constitute an offer in any jurisdiction in which, or to any person of
whom, it would be unlawful to make the offer;
(c) represents and warrants that you are not prohibited by law from receiving the Information Memorandum or executing this
Application Form;
(d) declare that you are a “wholesale clients” for the purposes of section 761G of the Corporations Act;
(e) declare that you have power to make an investment in the Fund in accordance with the terms of the Information Memorandum,
the Constitution and this Application Form;
(f ) declare that you have full legal capacity to execute this Application Form and have taken all action that is necessary to authorise
the execution of this Application Form;
(g) if this Application Form is signed under power of attorney, the attorney declares that he or she has not received notice of
revocation of that power;
(h) in the case of joint applications, you each agree to hold the Units as joint tenants and acknowledge that, unless otherwise
stated, either Investor is able to operate the account;
(i) declare that, if investing as a trustee on behalf of a superannuation fund or trust, you are acting in accordance with your
designated powers and authority under the trust deed. In the case of superannuation funds, you also confirm that the funds are
complying funds under the Superannuation Industry (Supervision) Act;
(j) declare that if investing as a trustee on behalf of a self managed superannuation fund (SMSF) that an investment under the Fund
is an appropriate investment for your SMSF;
(k) declare that, if you are investing as a company or incorporated association, you confirm that you are an officer of the company
or incorporated association and that you have the authority to bind the company or incorporated association to the investment;
(l) acknowledge that neither the Trustee, SVA nor Third Link, their related body corporates and related entities (as defined in the
Corporations Act, any other members of their respective groups, or any of their directors or associates or any other entity,
guarantees the performance of, or the repayment of capital invested in, or income from, the Fund, or that the Fund will achieve a
particular rate of return;
(m) acknowledge that an investment in the Fund is subject to investment risk, including possible loss of capital invested, and agree
that those risks are appropriate for a person in your circumstances and with your investment objectives;
(n) acknowledges that the applicant has not relied in any way whatsoever on any statements made by, or purported to be made
by, the Trustee, SVA or Third Link, their related body corporates and related entities, any other members of their respective
groups, any of their directors or associates, agents or service providers in relation to this investment, other than as set out
in the Information Memorandum, the Constitution or this Application Form and acknowledge that neither the Trustee, SVA
or Third Link, their related body corporates and related entities, any other members of their respective groups, any of their
directors or associates, agents or service providers have made, and the Information Memorandum, this Application Form and
the Constitution do not contain, any regarding the suitability or appropriateness of the investment in the Units, given your
investment objectives, financial situation or particular needs or the tax consequences of making this investment in Units;
(o) declare that all information provided in this Application Form or any other information provided in support of the subscription
for Units in the Fund is true and correct;
(p) agree to the collection, use and disclosure of your personal information provided to the Trustee, SVA or Third Link, their related
body corporates and related entities, any other members of their respective groups, any of their directors or associates, agents
or service providers;
(q) acknowledge that all information relating to this Application Form or any subsequent information relating to the investment in
the Fund may be disclosed to any service provider. This authority will continue unless revoked in writing by you;
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4 APRIL
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2010 SVA SOCIAL IMPACT FUND | 33
APPLICATION FORM continued

(r) agree to give all further information or personal details and provide assistance to the Trustee, SVA, Third Link or their nominees,
if required to allow them to meet their obligations under anti-money laundering (AML), counter-terrorism financing (CTF) and
taxation legislation;
(s) warrant that:
(i) y ou comply and will continue to comply with applicable AML and CTF Laws, including but not limited to the law and
regulations of Australia in force from time to time;
(ii) you are not aware and have no reason to suspect that:
(A) the application monies have been or will be derived from or related to any money laundering, terrorism financing
or similar activities illegal under Applicable Laws or otherwise prohibited under any international convention or
agreement (illegal activity); or
(B) the proceeds of your investment in the Fund will be used to finance any illegal activities;
(iii) you are not a ‘politically exposed’ person or organisation for the purposes of any AML/CTF Law;
(t) acknowledge that the Trustee may, in its sole and absolute discretion but otherwise in accordance with the law, vary the terms
of this Application Form or alter the arrangements in respect of the Fund, where the Trustee is required to do so due to changes
in AML/CTF Law;
(u) acknowledge that we may decide to delay or refuse any request or transaction, including by suspending the issue or
withdrawal of Units in the Fund, if we are concerned that the request or transaction may breach any obligation of, or cause us to
commit or participate in an offence under any AML/CTF Law, and the Trustee, SVA and Third Link will incur no liability to you if
we do so. You further acknowledge that the Trustee, SVA and Third Link is under no obligation to inform you of their intention
to do any of the above, or the fact that they have done any of the above, nor are they obliged to provide you with their reasons
for any such actions;
(v) acknowledge that the Trustee, SVA and Third Link will rely on the representations given in this Application Form, and you agree
to indemnify the Trustee, SVA and Third Link against any loss or claim of or against the Trustee, SVA and Third Link to the extent
that the loss or claim arises from or is connected with any breach of any of the representations contained in this Application
Form; and
(w) acknowledges that until any Units are issued to you, you have no interest in the Fund.

Section F – Signature

Signature of Applicant 1:

Name of Applicant 1: Date:

Tick capacity – mandatory for companies: l Sole Director l Director l Secretary

Signature of Applicant 2:

Name of Applicant 2: Date:

Tick capacity – mandatory for companies: l Sole Director l Director l Secretary


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36 | SVA SOCIAL IMPACT FUND ISSUE NUMBER 1 | 4 APRIL 2012


CORPORATE DIRECTORY
TRUSTEE / CUSTODIAN

The Trust Company (Australia) Limited


Level 15, 20 Bond Street
Sydney NSW 2000

INVESTMENT MANAGER / ADMINISTRATOR

Social Ventures Australia Limited


Suite 1, Level 6
6 -10 O’Connell Street
Sydney NSW 2000

Phone: 02 8004 6700


Fax: 02 8004 6701
Email: info@socialventures.com.au
Website: www.socialventures.com.au

LEGAL AND TAX ADVISERS

Allen & Overy


Level 25
85 Castlereagh Street
Sydney NSW 2000

AUDITORS

Ernst & Young


Level 33, Ernst & Young Centre
World Square
680 George Street
Sydney, NSW 2000

ISSUE NUMBER 1 | 4 APRIL 2012 SVA SOCIAL IMPACT FUND | 37