INFORMATION MEMORANDUM

Transcription

1 WHOLESALE INVESTORS INFORMATION MEMORANDUM PART 2 HIGHGATE HILL RESIDENCES INCOME CLASS T18 UNITS OFFER SKYRING INCOME FUND ARSN RESPONSIBLE ENTITY: ACN AFS LICENCE

2 TABLE OF CONTENTS 2

3 INFORMATION MEMORANDUM PART 2 3 This Information Memorandum (IM) Part 2 is issued by Skyring Asset Management Limited ACN (Responsible Entity, us, we and our) of 6 Moorak Street Taringa, QLD 4068, This IM Part 2 is dated 15th November This Part 2, and Part 1 with which it is distributed, make up the IM for the offer of Units in the Skyring Income Fund ARSN (Fund) to invest in a Loan Investment relating to a loan to Highgate Hill Future Property Pty Ltd ACN (Borrower). The offer under this Part 2 is restricted to wholesale clients (as defined in section 761G of the Corporations Act) and sophisticated investors under section 761GA of the Corporations Act (collectively Wholesale Investors). Each part of this IM must be read in conjunction with the other part. No part of this IM should be distributed without the other part. Terms defined in Part 1 equally apply to this Part 2 unless stated otherwise. If you wish to participate in this Offer you should read the IM, comprising Part 1 and Part 2, in its entirety.

4 1. OFFER DETAILS 4 The following table summarises the key features of an investment in this Offer. You should read this IM in full to properly understand your investment in this Offer and the Fund. DESCRIPTION LOAN DETAILS Offer SUMMARY The offer under the Part 2 is for Highgate Hill Residences Income T18 Wholesale Units (Units) which will offer investment exposure to a development loan, which will assist the funding of a property development being undertaken at Highgate Hill, Brisbane. This Offer is seeking to raise up to $5 million from Wholesale Investors to be advanced to continue funding the Development (Tranche 2 Loan or Loan). We may also agree to accept oversubscriptions of up to $1 million to be applied against future construction costs Earlier offers of T24 Wholesale Units and T24 Retail Units seeking $10.8 million were fully subscribed and have been advanced to the Borrower (collectively Tranche 1 Loan), in accordance with the previous offer documents. An offer of Highgate Hill Residences Income T18 Retail Units (T18 Retail Units) is also being undertaken pursuant to a product disclosure statement and is seeking to raise up to $5 million from Retail Investors (being investors who are retail clients as defined in section 761G of the Corporations Act), with provision for oversubscriptions of up to $1 million. Funds raised from the issue of T18 Retail Units will also be advanced to the Borrower and applied in funding the cost of the Development (Tranche 2 Retail Loan). Funds for the final Advance (Tranche 3 Loan), expected to be $15 million, will be raised in approximately six months from the date of this Offer. It is anticipated funds for the Tranche 3 Loan will be raised from a combination of an offer to Wholesale Investors and an offer to Retail Investors, though we have not yet determined the allocation of funds to be raised from Wholesale Investors and Retail Investors. Development The purpose of the Offer is to raise funds in order to provide development finance to assist with the construction of a five storey, 44 apartment development (Development) situated at 18, 20, 24, 26, 28 Jones Street and 8 Colton Street, Highgate Hill, Queensland (Property). The Development has approval from the Brisbane City Council. The Development will have two basement levels of parking comprising 91 resident spaces and seven visitor spaces as well as a resort style roof top swimming pool and recreational facilities including BBQ and lounge areas including amenities. In addition, the complex will have storage facilities for selected apartments. The Development will have a high level of finish with bespoke joinery, European appliances including multiple cooking facilities, fully integrated fridge/freezer, under bench wine and bar fridges for three bedroom plus apartments and ducted air conditioning throughout. Highgate Hill is approximately three kilometres south of the Brisbane CBD and approximately two kilometres south of South Bank. This is a premium development with full city views. The Borrower is targeting the owner occupier market and positioning the apartments as a premium inner city development.

5 1. OFFER DETAILS 5 DESCRIPTION LOAN DETAILS (cont.) Borrower Loan Amount Loan Purpose SUMMARY Highgate Hill Future Property Pty Ltd ACN (Borrower). The Borrower is the owner of the Property and will undertake the Development. Information about the Borrower is contained in section 2 of this Part 2. Up to $5 million (plus $1 million in oversubscriptions if applicable). The Tranche 2 Loan proceeds will be used for: a. Construction works, and other approved project costs $4,048,500 b. Interest retained $ 731,500 c. Offer costs and misc. costs $ 220,000 Total $5,000,000 Any oversubscriptions accepted will form part of the Tranche 2 Loan proceeds and be applied consistently with the above allocation. Funds raised from the offer of T18 Retail Units will also be advanced to the Borrower and applied in the same manner as described above. The Borrower will require further borrowings to fund the balance of the construction costs and pay other costs of the Development. Refer to the Further loans row below for details of the further loans. From the Tranche 2 Loan amount advanced to the Borrower, we will retain sufficient funds to cover the Borrower s interest payment obligation on the Tranche 2 Loan for the first 12 months and to cover the Borrower s interest payment obligation on the Tranche 1 Loan for the remaining 12 months of its loan term (as funds were retained from the Tranche 1 Loan amount to cover the Borrower s interest payment obligations for the first 12 months of that Advance). Additional funds will be retained from the final Tranche 3 Loan to meet the interest obligations for the remainder of both the Tranche 2 Loan term and the Tranche 2 Retail Loan term (as an amount will be retained from that Advance to cover interest payments for the first 12 months) and for the term of the Tranche 3 Loan. Loan Term 18 months from the date of the Tranche 2 Loan (which will occur within five Business Days of the issue of General Units). A minimum interest term of six months will apply.

6 1. OFFER DETAILS 6 DESCRIPTION LOAN DETAILS (cont.) Loan Facility Type Loan Drawdown SUMMARY Interest only for the term of the Tranche 2 Loan. The Tranche 2 Loan may be advanced in stages as funds are raised under the Offer, as described in the Application of funds summary below. Interest will accrue on the Tranche 2 Loan when funds are available for the Borrower even if the funds have not been drawdown. Where Tranche 2 Loan funds are to be used to meet construction costs, funds will be made available on certification from our quantity surveyor on a cost to complete basis, together with drawdowns based on project feasibility for non-construction costs. Interest on the Tranche 2 Loan for the first 12 months of the Loan term will be retained from the funds advanced. Interest Rate 9.5% per annum while the Borrower is not in default of its obligations as borrower, being the discounted interest rate. 19% per annum during any period while the Borrower is in default of its obligations as borrower, being the non discounted interest rate. The interest rate is fixed for the term of the Tranche 2 Loan. Interest Payment Frequency Interest is payable monthly in arrears during the term of the Tranche 2 Loan. From the Tranche 2 Loan amount advanced to the Borrower, we will retain sufficient funds to cover the Borrower s interest payment obligations on the Tranche 2 Loan (at the discounted interest rate) for the first 12 months of the Loan term. Interest for the remainder of the term of the Tranche 2 Loan will be retained from the Tranche 3 Loan (and interest on the Tranche 3 Loan and for the remaining 6 months of the Tranche 2 Loan term will also be retained from the funds advanced under that loan). Repayment of Loan It is anticipated the Borrower will repay the Tranche 2 Loan from apartment sale proceeds. Based on the feasibility provided by the Borrower there will be sufficient monies received from the sale proceeds to discharge this Tranche 2 Loan, and the Fund s existing and further anticipated Advances to the Borrower, in full. Security The Tranche 2 Loan will be secured by: (a) a registered first mortgage over the Property; and (b) a first-ranking general security agreement over the assets and undertaking of the Borrower.

7 1. OFFER DETAILS 7 DESCRIPTION LOAN DETAILS (cont.) Collateral Security Value of Security Property Loan-to-Valuation (LVR) Ratio SUMMARY The Loan Tranche 2 will not be supported by personal guarantees from the directors or owners of the Borrower. The Property has been independently valued by Expert Valuation Services Pty Ltd (Valuer) on 16 February 2017 at: (a) $8,000,000 (ex GST), being the current market value on an as is basis; and (b) $52,792,500 (ex GST and assuming the margin scheme is adopted), being the potential gross realisation value on an as if complete basis. Refer to section 5 of this Part 2 for further details about the Valuer s valuation. The LVR of all Advances is 67% based on the as if complete value of the Property. The Tranche 2 Loan will be advanced to fund construction work done, interest and ancillary costs. The Tranche 2 Retail Loan and the Tranche 3 Loan will also be used to assist fund construction of the Development (and meet fees and costs, including interest). It is a condition of each Advance that the LVR must not exceed 70% of the as if complete value of the Property during the term of the Advance. The balance of the funds expected to be required for the Development will be funded by the Borrower s equity. The Borrower has already contributed these funds which were applied in the purchase of the Property and in funding costs associated with obtaining development approval and building approval. Insurance for the Property Early Repayment Lump Sum Repayment Finance Documents As a condition of all Advances the Borrower is required to maintain a contractors all risks insurance to cover the construction and a public liability insurance of $20 million. The Borrower has the option to repay the Tranche 2 Loan facility at any time during the Tranche 2 Loan term, provided the Borrower has paid at least six months interest. The Borrower may also make partial repayments of the Tranche 2 Loan, provided that any principal repayment is at least $100,000 and subsequently in increments of $50,000. We, on behalf of the Fund, have entered into the following documents with the Borrower: (a) a letter of offer for the Tranche 1 Loan (Loan Agreement); (b) a registered first mortgage over the Property (Mortgage); and (c) a first-ranking general security agreement over the assets and undertaking of the Borrower (General Security Agreement), and we will also enter into a deed of variation to the Loan Agreement (Deed of Variation) to facilitate the making of the Tranche 2 Loan on the terms of the Loan Agreement (as varied), (collectively, Finance Documents).

8 1. OFFER DETAILS 8 DESCRIPTION LOAN DETAILS (cont.) Further Loans SUMMARY The Borrower anticipates it will require total borrowings of $35.8 million to complete the Development, including construction costs, interest on borrowings, statutory charges, professional fees, and finance fees and charges. This Offer relates to the second tranche of borrowings of $5 million required by the Borrower. Contemporaneously with this Offer, we are also undertaking an offer to Retail Investors under a product disclosure statement for raise $5 million which will also be advanced to the Borrower. We intend to undertake final offers, anticipated to be raised from a combination of an offer to Wholesale Investors to be made under an information memorandum and an offer to Retail Investors to be made under a product disclosure statement, and raise the funds necessary to provide the balance of funding required by the Borrower to complete the Development. The total Advances expected to be required by the Borrower (including the Tranche 1 Loan already advanced) are as follows: (a) Tranche 1 Loan of $10.8 million advanced to the Borrower in June 2017 ; (b) Tranche 2 Loan of $5 million which is anticipated to be required by the Borrower around approximately January 2018; (c) Tranche 2 Retail Loan of $5 million which is anticipated to be required by the Borrower around approximately January 2018; and (d) Tranche 3 Loan of $15 million which is anticipated to be required by the Borrower around approximately July The Tranche 1 Loan, Tranche 2 Loan, Tranche 2 Retail Loan and Tranche 3 Loan (collectively the Advances and each an Advance) will be on the same terms (other than the Loan term given the term of each Advance will expire at the same time which means the term of the Tranche 3 Loan will be shorter than the term of the Tranche 2 Loan and Tranche 2 Retail Loan which will, in turn, have a shorter term than the Tranche 1 Loan; the quantum of the application fee payable by the Borrower which varies between Advances, and, potentially, interest depending on the interest rates prevailing at the time the Tranche 3 Loan is made) with the exception of the loan repayment fee, as discussed at section 4 of this Part 2, which was payable by the Borrower for the Tranche 1 Loan (as that loan corresponds to the T24 Wholesale Units) and will be payable for the Tranche 2 Loan and not the Tranche 1 Loan (to the extent the loan corresponds to the T24 Retail Units), Tranche 2 Retail Loan or the Tranche 3 Loan). The Advances will be made pursuant to one Loan Agreement, with a deed of variation to be entered into for each of the Tranche 2 Loan, Tranche 2 Retail Loan and Tranche 3 Loan to facilitate the applicable Advance being undertaken on the terms of the Loan Agreement (as varied), and all will be secured by the Mortgage and General Security Agreement (that is, the Mortgage over the Property will secure all Advances). We will retain monies advanced under the Tranche 3 Loan to fund the interest payable by the Borrower for that Advance and the interest payable on the remaining 6 months of the term of the Tranche 2 Loan and Tranche 2 Retail Loan (as the interest for the first 12 months of the term of those Advances will be retained from funds advanced under those Advances). Repayment of the Advances by the Borrower will rank equally under the Loan Agreement and on a pro rata basis (based on the amount advanced and outstanding). For example, if the Advances had been made and the Borrower paid a lump sum principal repayment of $1 million, $301,600 would be applied toward repayment of the Tranche 1 Loan principal, $139,700 would be applied toward repayment of the Tranche 2 Loan principal, $139,700 would be applied toward repayment of the Tranche 2 Retail Loan principal and $419,000 would be applied toward repayment of the Tranche 3 Loan principal. However, we may, at our discretion, elect to apply a principal amount received from the Borrower toward repayment of Tranche 1 Loan in full or in part, in priority to repayment to the Tranche 2 Loan, Tranche 2 Retail Loan and Tranche 3 Loan, provided there is no significant subsisting event of default under the Finance Documents. If a significant event of default exists, any principal repayment made by the Borrower will be allocated between the Advances on a pro rata basis. This equal ranking also means that, unless we elect to allocate a principal repayment against the outstanding balance of the Tranche 1 Loan rather than pro rata between the Advances, any capital repayment will be made to all investors in each class at the same time irrespective of which Advance your Loan Investment relates to. Refer to the row headed Risks below for details of the risk for investors in this Loan Investment if we are unable to raise the amount required to fund the Tranche 2 Retail Loan or the Tranche 3 Loan.

9 1. OFFER DETAILS 9 DESCRIPTION LOAN INVESTMENT DETAILS Indicative Distribution Rate SUMMARY 11.00% per annum, comprising: (a) 8.00% per annum funded from the interest payable on the Loan; and (b) 3% per annum, funded from a loan repayment fee payable by the Borrower upon repayment of the Loan. The indicative Distribution rate is an estimate only and equal to the total of the interest rate payable by Borrower (less our management fee) plus the loan repayment fee payable by the Borrower. Further information about the indicative Distribution rate is provided below. The indicative Distribution rate is not a guaranteed return to investors and an investment in the Fund is subject to investment risk, including the loss of capital invested. You should refer to the row below headed Risks and section 7 of Part 1 for a discussion of the risks of investing in a Loan Investment and the Fund. The Distribution rate may be higher or lower, depending upon if extraordinary Fund expenses are incurred or if default interest is payable by the Borrower, and the payment of Distributions is dependent upon the Borrower paying interest and paying the loan repayment fee in accordance with its obligations. Distribution Frequency Distributions funded from the interest payable by the Borrower will, where available, be paid monthly within five Business Days after the last day of each month by direct debit to your nominated account. The Distribution funded from the loan repayment fee paid by the Borrower will be paid as soon as practicable after receipt by the Fund by direct debit to your nominated account. Investment Term 18 months from the date the Loan is made (which will occur within five Business Days of the issue of General Units). Opening Date 15th November Closing Date 14th March 2018*. * We reserve the right to vary this Closing Date without prior notice and may close the Offer early, extend the Offer, withdraw the Offer or accept late applications. You are encouraged to submit your Application Form as soon as possible..

10 1. OFFER DETAILS 10 DESCRIPTION SUMMARY LOAN INVESTMENT DETAILS (cont.) Minimum and Maximum Subscription Amounts The minimum subscription for this Offer is $2.5 million and the maximum subscription is $5 million. We intend to issue Units in January 2018 subject to the minimum subscription being achieved and, subsequently, we will issue further Units when the final subscription milestone is achieved (provided this occurs prior to the Closing Date) as follows: SUBSCRIPTION MILESTONE AMOUNT Minimum subscription $2,500,000 Final subscription $2,500,000 Total $5,000,000 The subscription milestones reflect the Borrower s funding requirements and funds raised will be advanced to the Borrower and be applied as described in the Application of funds row below. This Offer will not proceed unless the minimum subscription amount is raised by the Closing Date. If oversubscriptions are accepted, those Units will be issued at the same time as Units are issued upon the final subscription being achieved. Application of Funds Funds raised under each subscription milestone will be advanced to the Borrower and applied as follows: SUBSCRIPTION MILESTONE APPLICATION BY BORROWER Minimum subscription (a) Interest - $365,750 (b) Offer Costs - $110,000 (c) Construction & other - $2,024,250 Total - $2,500,000 Final subscription* (a) Interest - $365,750 (b) Offer Costs - $110,000 (c) Construction & other - $2,024,250 Total - $2,500,000 * Any oversubscriptions accepted will be advanced to the Borrower at the same time as the final subscription proceeds and applied consistently with the application of final subscription funds set out above. Issue Price The issue price is $1 per Unit. Minimum Investment $50,000 and then in increments of $10,000. Maximum Investment There is no maximum investment amount, subject to our right to refuse to accept any application at our sole discretion or to accept any application for an amount less than the amount indicated on the Application Form.

11 1. OFFER DETAILS 11 DESCRIPTION SUMMARY FEES AND OTHER COSTS (AMOUNTS INCLUSIVE OF NET GST) Management Fees and Fund Expenses Loan Application Fee We will receive a fee of 1.5% per annum of the value of the Loan amount, payable monthly in arrears. This equates to $6,250 per month on a Loan amount of $5 million. We will deduct our management fee from the interest received from the Borrower each month prior to the payment of Distributions to investors. We will pay ordinary Fund expenses associated with this Loan Investment from our management fees or other resources and not from the interest or other amounts payable by the Borrower. If extraordinary or unusual expenses are incurred we may choose to recover these costs from the interest or other monies paid by the Borrower. The Borrower will pay us a loan application fee of 4.4% of the Loan amount (including GST), being $220,000 (assuming a Loan amount of $5 million). The loan application fee is payable by the Borrower from its own resources when each stage (which reflects each subscription milestone) of the Loan is available for drawdown (and calculated on the amount available for drawdown for that particular stage). We will fund the commission payable to advisers from our loan application fee. Early Repayment Fee We are entitled to receive an early repayment fee equal to one month s interest, being $39,583 (assuming a Loan amount of $5 million and an interest rate of 9.5% per annum), if the Borrower repays the Tranche 2 Loan prior to its maturity. The early repayment fee is not a cost of the Fund or investors. Default Interest Fee Loan Repayment Fee If the Borrower is charged the non-discounted interest rate, we are entitled to receive 50% of the additional interest (being interest in excess of the discounted rate) paid by the Borrower. On a Loan amount of $5 million and a non-discounted interest rate of 19% per annum, we would receive $19,791 per month. The Borrower will pay a loan repayment fee to the Fund of 3% per annum of the Loan amount (including GST), being $225,000 (assuming a Loan amount of $5 million and a Loan term of 18 months). The loan repayment fee is calculated daily on the outstanding Loan balance and payable by the Borrower from its own resources upon the Loan being fully repaid. We will distribute the loan repayment fee to investors in this Loan Investment.

12 1. OFFER DETAILS 12 DESCRIPTION SUMMARY FEES AND OTHER COSTS (AMOUNTS INCLUSIVE OF NET GST) (cont.) Adviser Remuneration If your licensed or authorised financial adviser recommends you invest, or facilitates your investment, in the Fund we may pay your adviser a commission of up to 3.3% (including GST) of your investment amount. We will pay this commission to your adviser from our own resources (such as the loan application fee we receive from the Borrower) after your General Units are converted to Loan Investment Units and the Tranche 2 Loan is advanced to the Borrower. Further Information About Fees And Costs This amount of this commission, up to 3.3% of your investment amount, is negotiated by you and your adviser. For example, if you invested $100,000, are issued with 100,000 Units, and have agreed to pay your adviser a commission of 3.3%, of your investment amount, we will pay your adviser a commission of $3,300 upon conversion of your General Units to Loan Investment Units. Refer to section 4 of this Part 2 for further details of the fees and costs of this Offer.

13 1. OFFER DETAILS 13 DESCRIPTION ADDITIONAL INFORMATION SUMMARY Risks In addition to the risks set out in section 7 of Part 1, the following specific risks applying to an investment in the Loan Investment offered under this Part 2: LOAN MAY BE ADVANCED IN STAGES We are seeking to raise $5 million under this Offer to provide the Tranche 2 Loan. However, we will issue Units and advance funds subject to certain subscription milestones being reached, as detailed Minimum and maximum subscription amounts row above. There is a risk that we achieve the minimum subscription, issue Units and provide the Tranche 2 Loan to the Borrower but are unable to achieve the final subscription. Further, we are seeking to raise $5 million from Retail Investors to provide the Tranche 2 Retail Loan pursuant to a separate offer made under a product disclosure statement at the same time as undertaking this Offer. This Offer is not conditional upon raising funds under T18 Retail Units offer and vice versa. If we raise the minimum subscription under this Offer and do not raise the final subscription and/or do not raise all the funds sought under the offer of T18 Retail Units, the Borrower may seek to refinance the (as applicable) Tranche 1 Loan, Tranche 2 Loan and Tranche 2 Retail Loan advanced by the Fund (and we may not proceed with the Tranche 3 Loan) and, if the Borrower is unable to refinance these Advances, the Borrower may need to sell the Property. If the Borrower refinances any of the Advances, it will likely result in the term of your investment being shorter than expected. If the Borrower determines to sell the Property, delays in achieving the sale or if the sale price is significantly less than the market value it may impact the Borrower s ability to repay any of the Advances to the detriment of investors. AVAILABILITY OF TRANCHE 2 RETAIL LOAN AND TRANCHE 3 LOAN The Borrower will, in addition to the Tranche 2 Loan, require the Tranche 2 Retail Loan and Tranche 3 Loan to fund the Development. We aim to raise funds, under separate offer documents, to fund the Tranche 2 Retail Loan and Tranche 3 Loan. The fundraising for the Tranche 2 Retail Loan is being undertaken contemporaneously with this Offer and the fundraising for the Tranche 3 Loan is anticipated to occur approximately six months from the date of this Offer. There is no certainty we will be successful in raising sufficient funds for both the Tranche 2 Retail Loan and the Tranche 3 Loan or, if sufficient funds are raised for the Tranche 2 Retail Loan, that we will raise the funds required for the Tranche 3 Loan. If we are unable to raise funds, the Borrower may need to seek to refinance the Advances provided by the Fund or obtain mezzanine funding. Further, if we are unable to raise funds for the Tranche 2 Retail Loan and/or the Tranche 3 Loan, the Borrower will be unlikely to meet its interest payment obligations on the Tranche 2 Loan after the first 12 months of the Loan term, which would adversely impact our ability to pay monthly distributions to investors. If the Borrower is unable to secure further funding, either at all or on terms suitable to it, the Borrower may need to sell the Development to another party who has the financial capacity to finish the project. There is no certainty the Borrower will be able to secure a refinance or mezzanine facility, or find a purchaser of the Development, in a timely fashion or at all and such circumstance may adversely affect both the Borrower s ability to repay the Advances and the income returns received by investors.

14 1. OFFER DETAILS 14 DESCRIPTION SUMMARY ADDITIONAL INFORMATION (cont.) Borrowings Related Party Disclosure Existing Loan Investments The Fund does not intend to obtain borrowings in connection with this Loan Investment. The Borrower is not a related party of the Fund or the Responsible Entity. However, one of our directors, Mr David Mardell, is the sole director of the Borrower. An entity associated with Mr Mardell has an investment in the Future Asset Holdings Fund, the owner of the Borrower, which is on the same terms as other investors in that class. As at the date of this Part 2, the Fund has raised $10.8 million from the issue of T24 Wholesale Units and T24 Retail Units and those funds were applied to the Tranche 1 Loan. The Fund currently has no other Loan Investments on issue.

15 1. OFFER DETAILS 15 DESCRIPTION SUMMARY HOW TO INVEST IN THE OFFER Application Process Issue of Units To invest in the Loan Investment, read the IM, comprising Part 1 and Part 2, for the Fund in full and then: (a) complete, sign and detach the Application Form at the back of this Part 2 or download a copy of the IM and Application Form from our website and (b) pay your application monies by cheque or EFT and send your Application Form to us at the address shown on the Application Form. Bank account and cheque details are located on the Application Form and instructions for EFT are contained in the guide accompanying the Application Form. You must contact us for a reference number prior to paying by EFT. The issue of Units for the Loan Investment will occur in January 2018 subject to the minimum subscription amount being achieved (provided this occurs prior to the Closing Date) and a subsequent issue of Units will occur upon the final subscription milestone being achieved. Investors will initially be issued General Units which will convert to Loan Investment Units upon the Tranche 2 Loan being made, which is expected to be within five Business Days of the issue of General Units. The indicative Distribution rate shown above only applies to T18 Wholesale Units. The Distribution rate applying to General Units will equal the current interest rate earned on the Fund s bank account (less expenses and taxes). How to Contact Us? Call (within Australia) or (outside Australia) or refer to the Corporate Directory.

16 2. DETAILS OF THE BORROWER HIGHGATE HILL FUTURE PROPERTY PTY LTD The Borrower is a wholly owned subsidiary of the Future Asset Holdings Fund ARSN , a registered managed investment scheme of which Future Asset Management International Limited ACN AFSL (FAMI) is the responsible entity. The Borrower is a special purpose vehicle which was specifically established to purchase the Property and undertake the Development of behalf of the Future Asset Holdings Fund. The sole director of the Borrower is Mr David Mardell. David is also a director of the Responsible Entity. Information about David s skills and experience is set out in section 7.2 of the Part FAMI AND ITS DIRECTORS Future Asset Management International Limited ACN , an unlisted public company incorporated in Queensland, holds AFSL no FAMI s AFSL authorises it to operate registered managed investment schemes, including the Future Asset Holdings Fund of which the Borrower is a wholly owned subsidiary. FAMI Executive Directors GARY SCALLAN (DIP.BM, DIP.FP, DIP.ACC CUMLAUDE) DIRECTOR/ CHIEF EXECUTIVE OFFICER GOLD COAST Gary is the founder of FAMI and has over 35 years of international financial services experience. Gary founded, built and on sold National Finance Brokers and International Finance Group, which provided financial advisory and asset management services in South Africa and Europe. Gary immigrated to Australia in 2001 and has held a number of senior executive and corporate advisory positions including as CEO of a corporate superannuation asset management and advisory group. Gary focuses on product development and distribution. KEVIN CRANFIELD (MBA - MACQUARIE UNIVERSITY) DIRECTOR/ CHIEF FINANCIAL OFFICER SYDNEY Kevin is Managing Director of Bentleys NSW and specialises in audit, taxation, accounting and strategic business advice for high-net-worth individuals, family groups and clients in the middle market. He has acted as a professional advisor to a diverse range of businesses, including those in IT and communications, insurance brokers, car dealerships, manufacturing, property development and agribusiness.

17 3. FINANCE DOCUMENTS FINANCE DOCUMENTS On behalf of the Fund, we have entered into the following documents with the Borrower: (a) a letter of offer for the Tranche 1 Loan (Loan Agreement); (b) a registered first mortgage over the Property (Mortgage); and (c) a first-ranking general security agreement over the assets and undertaking of the Borrower (General Security Agreement), and we will also enter into a deed of variation to the Loan Agreement (Deed of Variation) ) to facilitate the making of the Tranche 2 Loan on the terms of the Loan Agreement (as varied), (collectively, Finance Documents). A summary of the terms, or expected terms, of the Finance Documents is set out on the following pages.

18 3. FINANCE DOCUMENTS LOAN AGREEMENT AND DEED OF VARIATION The Loan Agreement, as proposed to be varied by the Deed of Variation, will contain the following terms and conditions. This is a summary only and it is not a comprehensive statement of the anticipated rights and obligations of the parties under the varied Loan Agreement. Purpose and Use of Loan The purpose of a Loan is to provide development finance to assist with the construction of the Development. Further Advances We may make further advances to the Borrower and, unless provided for in the Loan Agreement or agreed otherwise, the terms and conditions of the Loan Agreement will apply to any further advance. Partial Repayment The Borrower may also repay the Tranche 2 Loan in part prior to maturity, provided that any principal repayment is at least $100,000 and subsequently in increments of $50,000. Conditions of Loan The making of the Tranche 2 Loan is subject to satisfaction of a number of conditions including: (a) that we raise the minimum subscription amount prior to the Closing Date; and (b) no significant event of default existing. Interest Interest on the Tranche 2 Loan will accrue daily during the Loan term commencing on the date funds are drawn down and ending on the date the Tranche 2 Loan is repaid. Interest is payable monthly in arrears during the term of the Tranche 2 Loan. Loan Repayment Fee The Borrower must pay a loan repayment fee of 3% (including GST) of the Loan amount, calculated daily on the outstanding Loan balance, to the Fund upon the Loan being fully repaid. Adequacy of Security The LVR must not exceed 70%.. Costs and Expenses The Borrower must pay all of our costs and expenses in relation to the Loan including: (a) the stamping, registration, variation and discharge of the Finance Documents; (b) the enforcement or waiver of any rights under the Finance Documents; and (c) any consent or approval we give under any Finance Document. Loan Term The term of the Tranche 2 Loan is 18 months from drawdown. The Borrower can repay the Loan at any time prior to expiration of the term provided the Borrower has paid at least six months interest. The interest rate is 19% per annum fixed for the term of the Loan. However, while no event of default is subsisting, we will accept interest at a discounted rate of 9.5% per annum.

19 3. FINANCE DOCUMENTS 19 Events of Default The Loan and any other monies payable under the Loan Agreement will become immediately payable by the Borrower if an event of default occurs. Events of default include: (a) the Borrower failing to pay any monies owing under the Loan Agreement when due; (b) if the LVR is more than 70% for a period of five Business Days; (c) the Borrower failing to perform any other obligation contained in the Finance Documents where such failure is not remedied within seven Business Days; (d) where any of the following occur: (iii) (iv) (v) he Borrower stops paying its debts or ceases to carry on business; any representation or warranty provided by the Borrower being incorrect or misleading in a manner we consider material; if, without our prior written consent: (A) the Borrower disposes of, or encumbers, its assets other than in the ordinary course of business; (B) any financial accommodation obtained by the Borrower becomes due and payable prior to the due date for repayment; or Assignment The Borrower may not assign or transfer its rights under the Loan Agreement without our prior written consent. We may assign our rights under the Loan Agreement at any time without the consent of, or the giving of prior notice to, the Borrower. Power of Attorney The Borrower irrevocably appoints us as its attorney to execute all documents and do all things necessary to give effect to the Loan Agreement and the transactions contemplated by it. (i) (ii) any action is taken to liquidate or wind up the Borrower, or the Borrower enters into administration; the Borrower becomes insolvent, is unable to pay its debts or enters into an arrangement with its creditors; (C) there is a change in control at either board or shareholder level of the Borrower; and (e) an event occurs which, in our opinion, prejudices the Borrower s ability to meet its obligations under the Loan Agreement.

20 3. FINANCE DOCUMENTS MORTGAGE AND GENERAL SECURITY AGREEMENT The Mortgage and General Security Agreement is registered in our name as responsible entity of the Fund and secures all Advances made to the Borrower. The following is a summary of the terms and conditions of both the Mortgage and General Security Agreement (each the Security Agreement). The summary is not a comprehensive statement of the rights and obligations of the parties under a Security Agreement. Restrictions on Dealing With Security Property The Borrower must not create any other security interest in relation to the Property (for the Mortgage) or its assets (for the General Security Agreement). The Borrower must not dispose of any assets except in the ordinary course of its business. Events of Default The Loan principal and any other outstanding monies will be immediately due and payable upon demand and the Security Agreement enforceable upon the occurrence of an event of default. Events of default include: (a) the Borrower failing to pay the secured money when due; (b) he Borrower failing to perform any obligation contained in any Finance Document; (c) any representation or warranty provided by the Borrower in connection with the Security Agreement being incorrect or misleading in a manner we consider material; (d) security over any asset of the Borrower becoming enforceable; (e) an application being made or resolution passed for the winding up of the Borrower or to appoint a receiver, liquidator or manager to the Borrower; (f) the Borrower granting any security interest which ranks in priority to, or equally with, the Security Agreement; (g) the Borrower alters its constitution in a manner which we believe is detrimental to our interests without our prior written consent; (h) there is a change in control at either board or shareholder level of the Borrower without our prior written consent; and (i) any other event or situation occurring which, in our opinion, prejudices the Borrower s ability to perform its obligations under the Finance Documents. Application of Money Received The money we receive in enforcing our rights under the Security Agreement must be applied in the following order: (a) firstly, in payment of any loss incurred by us for which we are indemnified by the Borrower under the Security Agreement; (b) secondly, in payment of the costs of appointing the receiver and of our, or our receiver s, expenses relating to the exercise of any power under the Security Agreement; (c) thirdly, in payment to the receiver of its remuneration; (d) fourthly, in payment to the Fund of any secured monies; and (e) lastly, to the Borrower. Expenses The Borrower agrees to pay or reimburse: (a) the costs of stamping, registration, variation and discharge of the Security Agreement; (b) the enforcement or waiver of any rights under the Security Agreement; and (c) any taxes or fees and penalties which Continuing Security The Security Agreement is a continuing security and remains in full force and effect until released by us and applies to all present and future monies owing to the Fund. Power of Attorney The Borrower irrevocably appoints us as its attorneys to do anything necessary to give effect to the Security Agreement. Assignment The Borrower may not assign its rights under the Security Agreement, except with our prior written consent. We may assign our rights and obligations under the Security Agreement, without the consent of, or the giving of prior notice to, the Borrower.

21 4. FEES AND COSTS 4.1 FEES AND OTHER COSTS This document shows fees and other costs that you may be charged. These fees and costs may be deducted from your money, from the returns on your investment or from the Fund assets as a whole. Information about taxes is set out in section 8 of the Part 1. You should read all the information about fees and costs because it is important to understand their impact on your investment. 21

22 4. FEES AND COSTS 4.2 FEES AND OTHER COSTS TYPE OF FEE OR COST AMOUNT HOW AND WHEN PAID FEES WHEN YOUR MONEY MOVES IN OR This OUT document OF THE shows FUND fees and other costs that you may be charged. These fees and ESTABLISHMENT FEE Nil The fee to open your investment costs may be deducted from your money, from the returns on your investment or from CONTRIBUTION FEE Nil The fee on each amount contributed to your investment the Fund assets as a whole. WITHDRAWAL FEE Nil Information about taxes is set out in section The fee on each amount you take out of your investment 8 of the Part 1. EXIT FEE Nil The fee to close your investment You should read all the information about MANAGEMENT COSTS fees and costs The management because it is fee important is 1.5% per to annum of the value of the applicable The fees and costs for managing your investment 1. understand Loan their Investment. impact on your investment. We will pay ordinary Fund expenses associated with this Loan Investment from our management fee or our other resources. Not applicable Not applicable Not applicable Not applicable The management fee is calculated and payable monthly in arrears and deducted from the Fund. This portion of the management fee will typically be paid from the interest paid by the Borrower prior to the payment of Distributions to investors. 22 Extraordinary expenses are paid from the Fund assets or, where applicable, will be charged to the Borrower as and when incurred. Please refer to Management fees and Fund expenses in the Additional explanation of fees and costs section below for further details. SERVICE FEES INVESTMENT SWITCHING FEE The fee for changing investment options Nil Not applicable 1 The amounts shown are necessarily estimates only of management costs. Actual amounts will differ from this estimate.

23 4. FEES AND COSTS ADDITIONAL EXPLANATION OF FEES AND COSTS Management Fee This is the fee payable to us for managing the Loan Investment and operating the Fund. The management fee will typically be paid from the interest paid by the Borrower and are not deducted from the amount you invest. However, if the Borrower defaults and we enforce the Fund s rights under the Finance Documents we may pay our management fee from amounts (if any) the Fund recovers from the Borrower. We will pay ordinary Fund expenses associated with this Loan Investment from our management fees or our other resources and not from the interest payable by the Borrower. We will also pay adviser commissions from our management fees or other resources. Under the Constitution, we are entitled to a maximum management fee for managing the Fund of up to 5.5% per annum of the value of each Loan Investment, calculated separately for each Loan Investment. Management Expenses Generally, we will pay the expenses incurred in connection with this Loan Investment or the Fund from our own resources and they will not form part of the management costs. Though any expenses relating specifically to an Advance (such as legal fees for preparing the Loan Agreement) will typically be payable by the Borrower, pursuant to the terms of the Loan Agreement. However, if extraordinary or unusual expenses are incurred we may choose to recover these costs from the Fund, from the interest payable by the Borrower or otherwise from the Borrower (if provided for in the Loan Agreement). Examples of this type of expense include the costs involved in: (a) convening a meeting of investors; (b) termination of the Fund; (c) amending the Fund constitution; (d) defending or bringing of litigation proceedings; or Interest Rates While the Borrower complies with its obligations under the Finance Documents, the Borrower will be entitled to a discounted interest rate. If the Borrower breaches a Finance Document, then the Borrower may be charged the non discounted interest rate (Default Interest). We are entitled to receive from the Fund up to 50% of Default Interest calculated and payable monthly in arrears. On a Loan of $5 million and a non-discounted interest rate of 19% per annum, we would receive $19,791 per month. We would seek to recover this fee from the interest payable by the Borrower. However, if we are unable to do so (for example, if the Borrower was unable to meet interest payments) and we enforce the Fund s rights under the Finance Documents we may pay this fee from proceeds (if any) the Fund recovers from the Borrower. We reserve the right to delay or waive payment of the above fees at our discretion. (e) replacement of the responsible entity.

24 4. FEES AND COSTS 24 Removal Fees Under the Constitution, we are entitled to a fee of 5.5% of the value of the Fund s assets if we are removed as the responsible entity of the Fund (other than as a result of a determination by ASIC or an Australian Court, or an acknowledgement by us, of gross negligence in the management of the Fund or a material fiduciary breach). For example, if the Fund s gross asset value was $10 million, we would be entitled to receive a removal fee of $550,000 if removed as responsible entity. The management fee estimate in the table in section 4.1 above does not include any removal fee. Loan Fees Payable by the Borrower Under the Constitution we are permitted to charge a borrower a loan application fee of an amount up to 5.5% of the value of the Loan Investment and an early repayment fee of an amount up to three months interest under the Loan Agreement. For this Loan, the Borrower will pay us a loan application fee of 4.4% of the Loan amount, being $220,000 assuming a Loan amount of $5 million. The loan application fee is payable by the Borrower from its own resources when each stage of the Loan is available for drawdown. From this fee we will pay the commission to advisers who recommended investors invest, or facilitated investors investing, in the Fund. We are entitled to receive an early repayment fee equal to one month s interest, being $39,583 (assuming a Loan amount of $5 million and an interest rate of 9.5% per annum), if the Borrower repays the Loan prior to its maturity. The early repayment fee is not a cost of the Fund or investors. We may, at our discretion, decide to have this fee paid directly to the Fund in order to assist in meeting the Fund s cash flow requirements. For this Loan, the Borrower will also pay the Fund a loan repayment fee of 3% per annum of the Loan amount, calculated daily on the outstanding Loan balance and payable upon the Loan being fully repaid. This fee is payable to the Fund and will be distributed, pro rata, to investors in this Loan Investment. Adviser Remuneration If your licensed or authorised financial adviser recommends you invest, or facilitates your investment, in the Fund we may pay your adviser a commission of up to 3.3% (including GST) of your investment amount. We will pay this commission to your adviser from our own resources (such as the loan application fee we receive from the Borrower) after your General Units are converted to Loan Investment Units and the Loan is advanced to the Borrower. This amount of this commission, up to 3.3% of your investment amount, is negotiated by you and your adviser. For example, if you invested $100,000, are issued with 100,000 Units, and have agreed to pay your adviser an commission of 3.3%, we will pay your adviser from our own resources a commission of $3,300 upon conversion of your General Units to Loan Investment Units

25 4. FEES AND COSTS 25 Differential Fee Arrangements We may negotiate different fee arrangements, such as fee rebates, waivers or reductions, for wholesale clients. Such differential fee arrangements will be by individual negotiation with us. Referral Fee If a person refers you to us or a financial adviser and you invest in the Fund, we may pay that person a referral fee of 0.5% of your investment amount. We pay any referral fees from our own resources and they are not a cost to investors or the Fund. Fee Entitlement Notwithstanding anything else contained in this IM, we are entitled to be paid our fees and reimbursed for Fund expenses from the assets of the Fund, prior to Distribution payments being made to investors in a Loan Investment. GST and Stamp Duty All fees stated in this IM include (if applicable): (a) GST less any reduced input tax credits; and Loan Sourcing Fee If a person introduces a loan to the Fund, generally a mortgage broker, we may pay that person a fee. Typically, this fee would be up to 50% of the loan application fee we receive from the borrower. Any loan sourcing fees we pay will be paid from fees we are entitled to receive and will not be a cost to investors or the Fund. (b) stamp duty. Incidental Fees We may charge fees where provided for under the Corporations Act. For example, a $10 fee to provide a copy of the Constitution.

26 5. VALUATION 26 The independent valuer has assessed the current market value of the Property at $8,000,000 (ex GST) on an as is basis and the potential gross realisation value of $52,792,500 (ex GST and assuming the margin scheme is adopted) on an as if complete basis. The key factors on which the independent valuation was based are summarised below. However, you should consider the complete valuation report, available on our website at prior to deciding to apply for Units under the Offer. MARKET VALUE ASSESSMENT DETAIL MATTER VALUER DESCRIPTION Expert Valuation Services Pty Ltd DATE OF VALUATION 16 February 2017 PROPERTY ADDRESS PURPOSE OF VALUATION VALUATION METHODOLOGY AS IS VALUATION The property comprises 18, 20, 24, 26, 28 Jones Street and 8 Colton Street, Highgate Hill, Queensland and more particularly described as Lots 54 and 58 to 62 on Registered Plan 11740, Parish of South Brisbane, County of Stanley, and Local Government Area of Brisbane City. First mortgage purposes Direct comparison VALUATION METHODOLOGY AS IF COMPLETE VALUATION PLANNING STATUS Potential gross realisation of the proposed units on an as if complete basis. Development approval for the Development has been granted. DEFINITION TERM MEANING MARKET VALUE GROSS REALISATION Market value is defined as the estimated amount at which an asset should exchange at the date of valuation between a willing but not anxious buyer and a willing but not anxious vendor in an arm s length transaction after proper marketing, wherein the parties had each acted knowledgably and without compulsion. The sum of the market values of the individual completed lots which a development can achieved over a specified selling period, assuming an orderly sale, between willing buyers and willing sellers, in an arm s length, after proper marketing, wherein the parties acted knowledgeably, prudently and without compulsion.

27 6. HOW DO I INVEST IN THE OFFER? To invest in this Loan Investment, and therefore the Fund, please read the IM, comprising both Part 1 and Part 2, and complete and lodge an original signed paper copy of the Application Form attached to this Part 2 in accordance with the instructions on that form. Completed Application Forms should be returned to: BY MAIL Investor Relations Skyring Asset Management Limited PO Box 1476 KENMORE QLD 4069 BY DELIVERY Investor Relations Skyring Asset Management Limited 6 Moorak Street TARINGA QLD 4068 The Application Form must be accompanied by payment of your application money. Payment of application money may be made by cheque made payable to Skyring Asset Management Limited ATF Skyring Income Fund and crossed not negotiable or electronically by EFT to our applications account. The Application Form contains details of how to pay your application money by EFT. If you pay the application money by EFT, the application receipt must still be returned to us by mail or delivery as specified above. If you submit your Application Form electronically, please print the receipt acknowledging lodgement of the Application Form and send to us accompanied by payment of your application money (if paying by cheque) or your application receipt (if paying by EFT). 27 CONTACT DETAILS Phone: (within Australia) (outside Australia) Fax: (07) investor@skyring.com.au Website: