References to "we", "us", "our", "company" and "fund" refer to Macquarie Equipment Leasing Fund, LLC. References to "our manager" refer to Macquarie Asset Management Inc.
Q1. What is Macquarie Equipment Leasing Fund, LLC and what does it do?
Q2. What are our investment objectives?
Q3. What types of equipment and other transactions will be in our portfolio?
Q4. Who is our manager, Macquarie Asset Management Inc.?
Q5. What happens after you invest and when can you expect to receive distributions?
Q6. Are there tax consequences and potential benefits of investing in us?
Q7. Will you be able to sell your investment in our shares?
Q8. Where can you find more information?
Q9. What is the benefit of participating in the DRP?
Q10. Who may participate in the DRP?
Q11. When will additional shares be purchased?
Q12. What is the purchase price of the shares purchased under our DRP?
Q13. How long will our DRP last?
Q14. How can you participate in our DRP?
Q15. How can you withdraw from our DRP?
Q16. Who will administer our DRP?
Q17. Will you be able to sell your investment in our DRP shares?
Q18. Where can you find more information?
We are an investment vehicle that will make investments in equipment and equipment leases. We may also make investments in other equipment related transactions which will allow us to directly or indirectly participate in the benefits and risks of equipment ownership or usage. Those transactions may include equipment trading transactions, residual value guarantees, forward purchase agreements, investments in companies which lease equipment, total lease return swaps, participation agreements, equipment purchase options and other transactions involving equipment. We will not enter into stock, bond or other exchange traded derivative contracts.
We are commonly referred to as an “equipment leasing fund” or “equipment leasing program.” Equipment leasing funds are often considered to be an alternative asset class, being non-correlated to traditional assets like stocks and bonds. Investments into alternative assets may provide diversification benefits for investors.
When you purchase shares of membership or limited liability company interest in Macquarie Equipment Leasing Fund, LLC, the capital you invest is pooled with the capital contributions of other investors. Those capital contributions are combined with borrowings and, after payment of fees and expenses, invested in equipment, equipment leases and other equipment related transactions. The transactions in which we invest will be originated and managed by Macquarie Asset Management Inc., our manager.
We anticipate that the majority of our revenue will be derived from:
Our principal investment objectives are to:
There is no assurance, however, that we will be able to meet our investment objectives.
Although the composition of our portfolio cannot be determined at this stage, we expect to invest in rail equipment, such as freight cars or locomotives, maritime equipment, aviation equipment, such as commercial jet engines, road transportation equipment, manufacturing equipment, mining and construction equipment, technological and communications equipment, utilities equipment and/or other types of equipment that our manager determines may meet our investment objectives. We expect to invest in equipment located both within and outside the United States.
The majority of our equipment investments will be accompanied by a corresponding lease with a corporate client. Typically, a client will select an item of equipment it requires for its business operations. We will then purchase that equipment and simultaneously lease it to that client for a fixed period. At the end of the lease period, the equipment is either returned to us, purchased by our client or is leased for a further period. To a lesser extent, we may purchase equipment for resale without a corresponding lease, or enter into other types of equipment related investments which will allow us to directly or indirectly participate in the benefits and risks of equipment ownership or usage. Those transactions may include equipment trading transactions, residual value guarantees, forward purchase agreements, investments in companies which lease equipment, total lease return swaps, participation agreements, equipment purchase options and other transactions involving equipment. We will not enter into stock, bond or other exchange traded derivative contracts.
When contemplating investments in equipment, our manager may consider a range of factors including the remaining economic useful life of the equipment, the anticipated residual value of the equipment, whether the equipment is new or used and the condition of the equipment, equipment registration and regulatory considerations, portfolio diversification, client considerations such as available financial information about the client and how essential the equipment is to the operations of the client, the cash flow profile of the equipment and the depth of the equipment market and exit mechanisms.
Our manager, Macquarie Asset Management Inc., is a member of the Macquarie Group Limited group of companies, which we refer to as the “Macquarie Group.” The Macquarie Group is a diversified international provider of banking, financial, leasing, advisory and investment services. As of January 31, 2009, the Macquarie Group operated in more than 60 offices in 27 countries and had approximately 12,800 employees, over 1,900 of whom were located across 25 offices in North and South America. As of December 31, 2008, the Macquarie Group had assets under management of approximately $171 billion. The Macquarie Group manages assets which provide valuable services in markets around the world.
Our manager is operated by the Macquarie Group’s equipment leasing division. As of December 31, 2008, the Macquarie Group’s leasing division had approximately $5.3 billion of equipment leases under management with 580 employees located in North America, Europe, Asia and Australia / New Zealand across six different leasing business lines. These employees variously specialize in all aspects of equipment leasing operations, from transaction origination to asset management and equipment remarketing.
Once our manager has accepted your subscription, you will receive a confirmation letter indicating our acceptance of your investment. We will hold our initial closing and our shares will be sold once a minimum of $2,500,000 in cash has been received within one year from the start of the offering, which may include the investment which will be made by our manager or its affiliates. Generally, we intend to begin making monthly cash distributions in the month following the first full month of operations after we have received a total of $2,500,000 in cash subscriptions. We may, however, elect not to make distributions until subscription funds have been invested, which could take as long as two years. If we elect to make distributions before funds have been fully invested, those distributions may be a return of capital.
We anticipate that our operations will continue for approximately eight years. Our operations are divided into three phases:
Cash distributions are expected to continue each month for the duration of the offering and operating periods. However, the amount and rate of cash distributions could vary and are not guaranteed.
We do not anticipate that we will pay federal income taxes. Instead, you will be taxed on your share of our net income.
All of our income or losses and other tax items will be passed through to you and our other members. Our manager anticipates that during our early years, income taxes with respect to your distributive share of income may be tax-deferred by operating losses and depreciation deductions available from equipment leased to clients under operating leases. The total depreciation deductions available will be reduced to the extent that our equipment is located outside the U.S. and to the extent that we hold indirect interests in equipment. The passive activity rules under the Code will apply to individuals and most likely to our other members. Thus, you should anticipate that your share of our net income or net loss in each of our taxable years generally will be characterized as passive activity income or loss. Under the passive activity rules, you may deduct your passive activity losses only against passive activity income, and not against active income or interest, dividends and other forms of portfolio income.
Employee benefit plans, such as qualified pension and profit sharing plans, Keogh plans and IRAs, are generally exempt from federal income tax, except that any net unrelated business taxable income, or UBTI, that exceeds a specific deduction of $1,000 in any taxable year is subject to tax. Other charitable and tax-exempt organizations are also subject to tax on UBTI. Most of our net income, if any, in a given year will constitute UBTI, either because the income is rental income from personal property or because we intend to use leverage to help build our portfolio.
You are urged to seek advice based on your individual circumstances from an independent tax advisor with respect to the tax consequences to you of an investment in us.
An investment in our shares is an illiquid investment and your ability to sell our shares will be extremely limited. You should only invest money that you can afford to have unavailable for at least eight years, net of distributions that are expected to be made to you during those years. Our shares will not be listed on any national securities exchange at any time and we will take steps to ensure that no public trading market develops for our shares. Our operating agreement allows you to request that we repurchase your investment in our shares from time to time, at a redemption price determined according to a pre-set formula. You should assume that the proceeds from a repurchase or sale, consisting of repurchase proceeds and distributions you received prior to repurchase, may be less than your original investment.
We have filed a registration statement on Form S-1 with the SEC regarding the shares we are offering by this prospectus and we will file periodic reports and other information with the SEC. These documents are available from the SEC’s website at http://www.sec.gov. Once you invest in us, you may contact our manager’s Investor Relations department regarding your account information. The telephone number is 866-965-7622. The address is Macquarie Asset Management Inc., Investor Relations, 225 Franklin St, 17th Floor, Suite 1700, Boston MA 02110.
You are urged to thoroughly discuss an investment in us with your financial, tax and legal advisors.
We have a distribution reinvestment plan, or DRP, that will allow you to have part or all of your distributions received from us during our offering period invested in additional shares. A copy of our DRP is included as Appendix C to our prospectus. You should read our DRP in its entirety before making any decision to participate.
The benefit of participating in the DRP is that the issue of shares under the DRP will not be subject to selling commissions or the dealer manager fee. This will allow you to purchase shares under the DRP at a price of $9.00 instead of $10.00. The monthly distributions that we expect to pay per share issued under our DRP will be the same as the distributions paid on our other shares. This effectively means that our rate of distribution on shares issued under our DRP, expressed as a percentage of the purchase price of the shares, will be higher than for our other shares. As with all other shares in this offering, an organization and offering expense allowance is payable to our manager from the proceeds from shares issued under the DRP. The O&O expense allowance is $0.1925 per share sold under the DRP.
Once you have made a minimum investment of $5,000 in our offering, you are eligible to participate in our DRP. Our DRP becomes effective once we receive our minimum offering amount of $2,500,000 in cash, which may include the investment which will be made by our manager or its affiliates. You may elect to have all or a portion of the cash distributions you receive during our offering period invested in additional shares pursuant to our DRP. We reserve the right to prohibit qualified plan investors from reinvesting their distributions if that participation would cause our underlying assets to constitute "plan assets".
We will invest distributions in additional shares as soon as administratively possible after the distribution date, but in any event not later than 30 days from the distribution date, to the extent that our shares are available for purchase. Investment of distributions in our shares will begin with the next distribution payable after we receive your enrollment form.
Our dealer manager and selling dealers will not receive selling commissions or dealer manager fees with respect to shares purchased through our DRP, so the purchase price will be $9.00. Our manager will be entitled to an organization and offering expense allowance of $0.1925 per share sold pursuant to the DRP, which represents 2.14% of the offering price of shares under our DRP. Our DRP allows the purchase of fractional shares. You are likely to receive fractional shares.
Our manager may terminate our DRP at any time in its sole discretion, although our DRP requires that participants receive ten business days notice of any termination that would have an adverse effect on the rights or obligations of a participant. Our DRP will terminate upon the earlier of the end of our offering period and the issuance of 800,000 shares under our DRP.
You may choose to invest all or a portion of your distributions during the offering period at any time by completing the enrollment form included in Appendix C to our prospectus or by completing any other form provided to you by our manager, Macquarie Capital (USA) Inc. or your broker. Your participation in our DRP will begin with the next distribution payable after receipt of your enrollment form.
You may withdraw from our DRP at any time by providing written notice to Macquarie Asset Management Inc., Investor Relations, 225 Franklin St, Suite 1700, 17th Floor, Boston MA, 02110. Your withdrawal from our DRP will not affect shares committed for purchase prior to the date of the withdrawal notice.
Our DRP will be administered by our manager, who can be contacted at:
Macquarie Asset Management Inc.
225 Franklin St, 17th Floor, Suite 1700
Boston MA 02110
Shares purchased through our DRP will be subject to the same transfer restrictions as all other shares sold in this offering. See Question 7 "Will you be able to sell your investment in our shares?" above.
We have filed a registration statement on Form S-1 with the SEC regarding the DRP shares we are offering by this prospectus and we will file periodic reports and other information with the SEC. These documents are available from the SEC’s website at http://www.sec.gov. Once you invest in us, you may contact our manager’s Investor Relations department regarding your DRP account information. The telephone number is 866-965-7622. The address is Macquarie Asset Management Inc., Investor Relations, 225 Franklin St, 17th Floor, Suite 1700, Boston MA 02110.
You are urged to thoroughly discuss an investment in us with your financial, tax and legal advisors.