L1 Long Short Fund Limited

Chairman’s Letter

16 February 2018

Dear Investor,

On behalf of the Directors of the Company, I am pleased to present this Prospectus and offer you the opportunity to become a shareholder in L1 Long Short Fund Limited (ACN 623 418 539) (Company), a new listed investment company.

The Company is seeking to raise up to $500,000,000 under the Offer (before Oversubscriptions) and to obtain a listing on the Australian Securities Exchange (ASX). The Offer is open to investors in Australia and New Zealand.

The Company has been established to invest in a portfolio of predominantly Australian and New Zealand Securities, with up to 30% of the gross exposure allowed in Global Securities.  The Company’s objective is to deliver strong, positive, risk-adjusted returns to investors over the long term.

The Company’s portfolio will be managed by L1 Capital Pty Limited (Manager), which was founded in 2007 by Mr Raphael Lamm and Mr Mark Landau and has approximately $3 billion of funds under management (as at 31 December 2017).

The Manager’s existing unlisted L1 Capital Long Short Fund has a strong track record of historical performance, having delivered an average compound return of 36.9% p.a. (after fees) since it was launched in September 2014 up until December 2017. Over the same period, the S&P / ASX200 Accumulation Index (ASX200 AI) has achieved an average compound annual return of 6.9% p.a.  Importantly, the existing Fund’s historical returns have been achieved with significantly less volatility and market risk than the ASX200 AI. The existing Fund has also demonstrated historically strong downside protection during periods of market stress, outperforming the ASX200 AI in all months (up until 31 December 2017) where the ASX200 AI fell (17 separate occasions).

The investment strategy and processes that L1 Capital will apply to the Company’s portfolio are the same as those employed by the Manager for the existing unlisted L1 Capital Long Short Fund. However, investors should be aware that the historical performance of the existing unlisted L1 Capital Long Short Fund is not indicative of future performance of the Company’s portfolio and it is particularly important for investors to review carefully the risks associated with an investment in the Company. These risks are set out in detail in Section 5 and summarised in the Key Investment Risks Section at the beginning of this Prospectus.

The Company is also very pleased that the Manager has agreed to provide the following commitments to the Company, which the Board believes help align their interests with shareholders:

  1. The Manager has agreed to reimburse the company for all set up costs incurred. The Company will recover the initial set up costs from the Manager from Management Fees that would otherwise have been payable to the Manager. The Manager will not receive a Management Fee until those costs have been reimbursed in full;
  2. The Manager will pay for the vast majority of the Company’s ongoing operating costs, including ASX and ASIC fees, legal and registry costs and any fees charged by the Company’s administrator. For corporate governance reasons, the Manager will not pay for the Directors fees and associated expenses or audit expenses;
  3. The Manager has agreed that its owners will reinvest in the Company all of their after-tax proceeds from any Performance Fees generated from the Company and these Shares will be escrowed for up to 10 years from listing; and 
  4. Mr Raphael Lamm and Mr Mark Landau have each agreed to invest $5 million into the Company under the Offer.

You are encouraged to read the Prospectus carefully as it contains detailed information about the Company and the Offer.

On behalf of the Board, I look forward to welcoming you as a Shareholder in the Company.

Yours sincerely

Andrew Larke  |  Chairman