Product Disclosure Statement

Transcription

1 Lowell Capital Limited HVT Land Scheme (ARSN ) Product Disclosure Statement Responsible Entity: Lowell Capital Limited (Lowell) (ABN ) AFSL [ : _23]

2 Important Notices This document This Product Disclosure Statement (PDS) is dated 30 June 2014 and relates to an offer to acquire interests in the Lowell Capital Limited HVT Land Scheme ARSN (Fund). Responsible Entity and issuer of this PDS Lowell as the Responsible Entity of the Fund has prepared this PDS based on information within its knowledge or provided by its advisors. Lowell is the issuer of the PDS and the Units offered under it. Risk factors In considering the prospects for the Fund, potential investors should consider the risk factors detailed in Section 7 of this PDS. You should carefully consider these factors in light of your personal investment objectives, financial situation or particular needs (including financial and taxation issues) and seek professional advice from your licensed financial advisor and taxation advisor before deciding whether to apply for (or subsequently dispose of) units in the Fund. Electronic PDS This PDS may be viewed online at The website and its contents do not form part of this PDS and are not to be interpreted as part of, nor incorporated into, this PDS. Persons who receive the electronic version of this PDS should ensure that they download and read the entire PDS. The Offer constituted by this PDS is only available to persons within Australia. General advice only Any opinions expressed in this PDS are general in nature and do not take into account your personal circumstances, financial situation, investment objectives or needs. Accordingly nothing in this PDS should be construed as a recommendation by Lowell that an investment in units in the Fund on the terms and conditions of this PDS is appropriate for you. You should seek advice from your professional and appropriately licensed (financial and tax) advisor before making any decisions in relation to the Units offered under this PDS or your interest in the GSHVT Projects. Glossary Certain capitalised words and expressions used in this PDS are defined in the Glossary at Section 13. Updated information Information in this PDS is subject to change. Any updated information which is not materially adverse will be posted on Lowell s website. You can obtain it from by calling Lowell on or by reception@terraincapital.com A paper copy of the updated information will be provided free of charge on request. Questions Questions relating to the Offer can be directed to Lowell on or reception@terraincapital.com. Alternatively, you should contact your licensed financial advisor and taxation advisor. Disclaimer Your investment in Units is not an investment in, or a deposit with or other liability of Lowell Capital Limited, or any other member of the Lowell group. Your investment is subject to investment and other risks, including possible delay in repayment and loss of income and capital invested. An investment in the Fund is entirely different from an investment in the GSHVT Projects. None of Lowell, the Forestry Manager, nor the Custodian nor any of their respective directors, officers or associates gives any guarantee or assurance as to the performance of the Fund or the underlying assets in the Fund or the repayment of capital from the Fund or any particular rate of capital or income return from the Fund. Entities related to Lowell may invest in, lend to or provide other services to the Fund. Unit Holders should note the disclosure of the involvement of certain entities affiliated with Lowell set out in Section Past performance of investment in property assets is no indication of future performance. The Custodian and the Forestry Manager have not authorised or caused the issue of this PDS. The Custodian and the Forestry Manager make no representations as to the truth or accuracy of the contents of this PDS other than references to its name. The Custodian and the Forestry Manager do not make any representation regarding, or accept any responsibility for, any statements or omissions in or from any other parts of this PDS. [ : _23] Product Disclosure Statement Page i

3 Corporate Directory Directors Michael Ramsden (Chairman) Oliver Carton Don Carroll Company Secretary Lisa Ratcliffe Registered Office Lowell Capital Limited (ABN) AFS Licence No Chapel Street Richmond, VIC 3121 Phone: reception@terraincapital.com Website: Auditor to the Fund Hayes Knight Audit Level 12, 31 Queen Street Melbourne, VIC 3000 Custodian The Trust Company (Australia) Limited (ACN) AFS Licence No Level 15, 20 Bond Street Sydney NSW 2000 [ : _23] Product Disclosure Statement Page 1

4 Table of Contents Page no Corporate directory 1 Table of contents 2 Chairman s Letter 3 Item 1 Introduction and Summary of Offer 5 Item 2 Details of the Offer 24 Item 3 Property Portfolio 34 Item 4 Financial Information 35 Item 5 Funding 44 Item 6 Operation of the Fund 45 Item 7 Significant Risks 50 Item 8 Responsible Entity s Financial Position 56 Item 9 Fees and Other Costs 58 Item 10 Taxation 64 Item 11 Material Documents 67 Item 12 Additional Information 71 Item 13 Glossary 73 [ : _23] Product Disclosure Statement Page 2

5 Chairman s letter As advised previously Lowell has been considering the restructure of the 2007 and 2008 tree schemes referred to in this PDS as the GSHVT Projects as well as the Fund which owns the land on which the tree schemes operate - to provide a more efficient and better funded operation. The Directors of Lowell consider the best way to do this is to voluntarily wind up those tree schemes, and then offer growers the opportunity to participate in the Fund as a combined land and trees scheme on the terms set out in this PDS. Whether the Fund proceeds, and becomes a combined land and trees scheme, is dependent on certain preconditions being met. The preconditions include the members of both the GSHVT Projects voting to wind them up and the Fund taking over certain debts of those Projects. Originally growers invested in the GSHVT Projects - first into a 2007 scheme and then a 2008 scheme - which each invested in African Mahogany plantations in the Northern Territory and Teak plantations in Queensland. Soon after planting trees in respect of the 2008 Scheme, Great Southern group went into receivership. Many of the trees were not properly established or maintained by either Great Southern group or the receiver appointed over the group's assets. In 2010 Lowell took over as Responsible Entity (RE) for the projects and growers were asked to pay $100 per woodlot per year for a 5 year period. No sooner had Lowell taken over than it had to defend a major legal action against the liquidator of Great Southern HVT Holdings Pty Ltd (In Liquidation) (Liquidator) seeking to cancel all the leases. Lowell agreed to release some of the leases on the properties if it could purchase the remainder of the properties from the Liquidator in the then newly created Fund. Lowell needed to borrow in the Fund on the security of the properties to effect this: approval of this arrangement was the subject of the Grower approval meetings held in June and July 2012 because the tree schemes and the growers held the leases over those properties. Lowell has subsequently sold properties to pay off the $3m of debt plus costs of the transaction and other running costs such as accounting, interest payments, audit and legal. During this period a cyclone also greatly impacted the teak properties. Most of the land on which those teak plantations were initially established, all of which are located in Queensland, has now been sold through that process. If the GSHVT Projects had continued as originally planned with Lowell as RE, growers in the GSHVT Projects would have owned African Mahogany interests and Teak interests in two separate schemes and locations, but approximately 50% of the net proceeds of sale following harvest would have been payable to Lowell and the forestry manager, AMAT. Under the current proposal to wind-up the GSHVT Projects and raise investment moneys from growers under this PDS for the Fund, growers who have continued their investment in the GSHVT Projects will have the opportunity to own a proportional interest in a scheme which owns only African Mahogany trees and, importantly, also the land on which those trees stand. Additionally, the members' rights to net distributions will be far higher as Lowell and AMAT's right to 50% of net proceeds of sale will be removed and replaced with an entitlement of AMAT to 5% of the Net Proceeds of Sale and 25% of the net profit attributable to Commercial Thinnings. In addition Lowell will be entitled to 3% of Net Proceeds of Sale. It is proposed not to continue the GSHVT Projects in their current form, largely due to: low Grower participation at a level which cannot support the ongoing costs of operating those projects; lack of alternative sources of income on leasehold properties; higher than expected operating costs associated with the teak properties; reduced plantation size due to: 1. the Liquidator taking over part of the estate; and 2. Lowell selling more of the estate to repay debt related to the acquisition of the land; and significant flood and cyclone damage within the estate. By continuing the African Mahogany plantations in the re-capitalised Fund: the Fund will own and manage the subject land and all trees and Unit Holders will therefore have a proportional investment in both the land and the trees standing on the land; there will be a reduction in current administrative and other costs, currently being incurred across 3 managed investment schemes (the GSHVT Projects, together with the Fund), to a single managed investment scheme; the Fund can focus on management of African Mahogany plantations in the Northern Territory, which plantations are in considerably better condition than the Queensland teak plantations (most of which have now been sold); and easier to manage as they are located on one property; and there will be a removal of the significant profit share agreement with Lowell and AMAT in respect of the GSHVT Projects, increasing Unit Holders' proportionate interest in any net returns generated by the Fund. 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6 Given the above, Growers who participated in the restructure in 2010, and who participate in the Fund pursuant to this PDS, will in the Board's opinion be in a better overall position than if the GSHVT Projects were wound-up and attempts made to otherwise realise the assets of those projects. The Board considers the Fund will represent a more cost effective scheme, which owns land as well as trees, and which can better take advantage of the fact that the Mahogany trees are exposed to less risk of cyclone and other costs associated with Teak plantations. Accordingly, Lowell considers that the restructure proposed under this PDS represents the best option for Growers as a whole to preserve and realise their investments. [ : _23] Product Disclosure Statement Page 4

7 1. Introduction 1.1. Summary of the Offer This section provides the basic terms of the Offer and a summary of the key features of the Fund, including annual fees and ongoing contributions payable by a Unit Holder. To fully understand these matters, you should read the whole PDS and consult your financial advisor and taxation advisor before deciding whether to apply for Units in the Fund. Offer Opens 29 July 2014 Closing Date 22 August 2014 Issue Price per Unit $10 Annual Contribution Payments Minimum Investment $10 Issue Date 30 June 2014 Despatch of Unit certificates 3 September 2014 * The above dates are indicative only and subject to extension without notice. $10 - $15 (subject to Unit Holder approval above this level The Fund is illiquid and is unlikely to pay distributions until final harvest of the Trees, which is anticipated to be 12 years after the Closing Date and/or sale of the NT Property Compliance with benchmarks and disclosure principles for agribusiness managed investment schemes In accordance with Regulatory Guide 232 published by ASIC (RG232), the following table sets out on an 'if not, why not' basis, the Fund's compliance with the benchmarks and disclosure principles contained in RG 232 and details of where you may further information about these matters in this PDS. RG232 Benchmarks Benchmark 1 Fee structures The scheme is structured so that either: (a) investors are required to pay annual fees (or contributions) to the responsible entity that are sufficient to fund the operation of the agribusiness scheme for the relevant financial year; or (b) the up-front fees (or contributions) investors pay when they invest is sufficient to cover the operation of the agribusiness scheme until the proceeds of sale of produce are available and this money is held on trust for the investors in that agribusiness scheme. The Fund's position and further information Unit Holders are required to make annual Contribution Payments under the Fund. The amount, calculation of and the fees and costs met by the annual Contribution Payments are discussed at sections 2.7, 6.8 and 9.3. Lowell considers that the fees are structured so that the Fund is able to generate funding on an ongoing basis, but also that second Thinnings revenue will likely be sufficient to meet the ongoing costs of operating the Fund after approximately 5 years. However, to the extent that Thinnings proceeds are insufficient, Unit Holders must pay annual Contribution Payments to make up the difference. The risks associated with the fee structure and mechanisms in place to address these risks are discussed at section 2.7 and section 7 Comply [ : _23] Product Disclosure Statement Page 5

8 RG232 Benchmarks Any fees (or contributions) received by the responsible entity from investors in the agribusiness scheme are: (a) held separately from the other assets of the responsible entity for the benefit of the investors in that agribusiness scheme, are only available for the operation of that agribusiness scheme and are subject to annual audit; and (b) only used by the responsible entity to meet any expenses that are incurred in the operation of that agribusiness scheme during the period to be covered by the payment, including the portion of the responsible entity s fees that is proportionate to its duties that have been properly performed during that period. The Fund's position and further information The funds raised from the issue of the Units offered under this PDS, together with the sum of annual Contribution Payments are: (a) held separately from the other assets of Lowell for the benefit of Unit Holders; (b) only available for the operation of the Fund; (c) subject to annual audit; and (d) only used by Lowell to meet expenses incurred in the operation of the Fund during the period to be covered by the payment, including the portion of Lowell's fees that is proportionate to its duties properly performed during the period. To the extent that funds raised or made as Contribution Payments exceed what is required, those funds will be applied to meeting the above costs of operating the Fund in the subsequent period, and may reduce the amount of Contribution Payments required in that period. Comply Benchmark 2 Responsible entity or related party ownership of interests in the agribusiness scheme The responsible entity and its related parties own less than 5% in aggregate by value of the interests in the agribusiness scheme except for any interests acquired through the default by a member of the agribusiness scheme. Lowell holds 4,615 class A interests in the GSHVT Projects (amounting to 4,615 'Eligible Interests'). Accordingly, it stands to benefit from subscribing for its proportional entitlement to Units in the Fund subject to paying the subscription amount per Unit. This represents 10.06% in aggregate by value in the Fund, subject to the adjustments described in section 2.3. Lowell also stands to benefit from subscribing for its proportionate entitlement to Shortfall Units, if any are available. Lowell intends if necessary to (but it is not bound to and does not guarantee that it will) apply for its maximum entitlement to Shortfall Units in order to increase the likelihood the Minimum Subscription is reached and the Fund is viable. Its maximum prospective Unit Holding via that mechanism, based on no or very few subscriptions by current Growers in the GSHVT Projects, would be 30.19%. Lowell acquired all of these interests as a result of the members of the GSHVT Projects failing to make annual contributions which made available class A interests in the GSHVT Projects. Lowell acquired those class A interests in consideration for forgiving debt owed to Lowell by the relevant GSHVT Project at the same price per class A interest as class A interests were available to Growers making increased contributions. Lowell considers therefore that it is arguable that all of the units it acquires in the Fund, should be disregarded for the purposes of this benchmark. Further, as Lowell obtained interests by debt forgiveness, that action benefitted all members who remain in the û [ : _23] Product Disclosure Statement Page 6

9 RG232 Benchmarks Benchmark 3: Annual reporting to members The responsible entity provides members with a report at least annually that contains relevant scheme-specific information. Benchmark 4: Experts Where the responsible entity engages an expert to provide a professional or expert opinion on the agribusiness scheme, and the expert opinion is disclosed to retail investors in a way that may lead them to place reliance on the expert s expertise, the responsible entity only engages an expert that is independent. The Fund's position and further information relevant GSHVT Project. However, as Lowell will own its Units in the Fund as an indirect consequence of breaches by members of a different scheme (the GSHVT Projects) it discloses that it does not comply with this benchmark. As discussed in section 12.2, in all cases where the Fund transacts with a related entity, Lowell will either conduct the transaction on commercial terms and at arm s length, that is, on terms and conditions no more favourable than would apply if the other party were not a related party of Lowell, or Lowell will obtain the prior approval of Unit Holders. Section 12.3 confirms that Lowell will make available documents lodged with ASIC via Lowell's website, In addition Lowell will provide updates to Unit Holders regarding information relevant to the Fund through its website. Lowell has engaged Hayes Knight Corporate Pty Ltd to comment on: the historical Statement of Financial Position as at 31 December 2013; the historical Statement of Financial Performance for the 6 months to 31 December 2013 of the Fund; the Pro Forma Balance Sheet for the 12 months to 31 March 2015 (Anticipated Balance Sheet); the Pro Forma Cash Flow Statement for the 12 months to 31 March 2015 (Anticipated Cash Flow); and the Pro Forma Profit and Loss for the 12 months to 31 March 2015 (Anticipated Profit and Loss). Hayes Knight Corporate Pty Ltd is independent of Lowell and the Fund. Hayes Knight's comments are contained in the Assurance Report attached to this PDS. A Forester's Report describing the condition of the Northern Territory African Mahogany plantations is also attached to this PDS. The Forester's Report was prepared by John Turner (Forester's Report). John Turner is independent of Lowell and the Fund. The Forester's Report attached to this PDS contains: (a) a summary of the instructions to the expert; (b) the qualifications held by the expert and Comply [ : _23] Product Disclosure Statement Page 7

10 RG232 Benchmarks The Fund's position and further information the relevance of these to the opinion; (c) whether the expert has experience in the commodity in the geographical location being considered or proposed, or in any other subject matter of the opinion; (d) the proportion of the expert s work with the responsible entity; and (e) whether the responsible entity requires the expert to maintain professional indemnity insurance. The Assurance Report attached to this PDS contains the scope of Hayes Knight Corporate Pty Ltd's engagement. Comply Benchmark 5: Appointing and monitoring service providers The responsible entity only engages key service providers (whether directly or indirectly on behalf of the agribusiness scheme investors) necessary for the operation of the agribusiness scheme where: (a) the engagement is subject to a written agreement approved by the board of the responsible entity in accordance with a documented policy; (b) the agreement is subject to annual review against set performance criteria or measures; and (c) the agreement is subject to certification by the board, at the time each agreement is entered into, that the agreement is on an arm s length basis. Lowell engages key service providers in accordance with the Fund's compliance plan (Compliance Plan). Compliance with the Compliance Plan ensures that all key service providers are engaged on the basis that: (a) the engagement is subject to a written agreement approved by the Board in accordance with the Compliance Plan; (b) the agreement is subject to annual review against set performance criteria or measures; and (c) where an agreement is entered with a related party of Lowell, the agreement is subject to review by the Board, at the time each agreement is entered into, to ensure that the agreement is on an arm s length basis. The Board has resolved that each agreement with key service providers is subject to review by the Board, at the time each agreement is entered into, to ensure that the agreement is on an arm s length basis. Further information as to the terms of Lowell's engagement of key service providers is contained at sections 11.4, 11.5 and [ : _23] Product Disclosure Statement Page 8

11 RG232 Disclosure Principles The Fund's position Comply Disclosure Principle 1: Investor financing arrangements If the responsible entity or a related party is providing finance, or expects to receive payment for arranging finance, for investors in the agribusiness scheme to fund an investment into the scheme, the responsible entity should clearly and prominently disclose in the PDS: (a) the details of the financier; (b) any amounts paid to the responsible entity or related party in relation to the finance; (c) that the investor should obtain and read the finance agreement before entering into the finance facility; and (d) unless the proposed finance facility is non-recourse, that the investor will remain liable to repay the amount lent or made available under the finance agreement should the scheme fail. The responsible entity should also ensure that, as far as practicable, investors receive a copy of the finance agreement before entering into the finance facility. Lowell is not providing or arranging finance for proposed Unit Holders to subscribe. Not applicable. Disclosure Principle 2: Track record of the responsible entity in operating agribusiness schemes The responsible entity of an agribusiness scheme should disclose the experience and resources it has available to operate the agribusiness scheme and the agribusiness enterprise. Sections 6.1, 6.2, 6.3 discuss Lowell's experience and ability in operating agribusiness schemes. Where the responsible entity has operated other agribusiness schemes, it should disclose: (a) the number of agribusiness schemes it currently operates; (b) the types of agribusiness scheme being operated; (c) the period of time that it has been operating the agribusiness schemes; and (d) whether any of the agribusiness schemes operated by the responsible entity have produced, or are producing, positive returns net of contributions for the investors in those agribusiness schemes. Lowell is currently the responsible entity for 3 agribusiness managed investment schemes comprising the Fund and the GSHVT Projects. Each of the agribusiness schemes Lowell operates is in the area of Forestry. Lowell has been operating these schemes for 5 years. None of the agribusiness schemes Lowell is currently operating have produced, or are producing, positive returns net of contributions for investors in those agribusiness schemes. More details of Lowell's experience may be found at section 6.1. Matters relating to Lowell's operation of the GSHVT Projects may be found throughout the PDS, including at sections 2.1, 2.7, 6.13, Disclosure Principle 3 Responsible entity's financial position [ : _23] Product Disclosure Statement Page 9

12 RG232 Disclosure Principles The Fund's position Comply The responsible entity should disclose a summary of its financial position in any PDS, including details of any known unfunded obligations in respect of the schemes it operates. The responsible entity should disclose if it: (a) is reliant on funding from external or related parties to perform the functions and obligations to members in relation to the agribusiness scheme; (b) has entered into guarantees or indemnities with external or related parties; or (c) is a member of a tax consolidation group. It should also disclose the measures it has in place to address the risks arising out of these arrangements to its financial position and its ability to meet its obligations in relation to the agribusiness scheme. If the responsible entity is reliant on funding from external or related parties to perform its functions and fulfil its obligations in relation to the agribusiness scheme, it should disclose the extent of the reliance. If the responsible entity has entered into any guarantee or indemnity with external or related parties, it should explain: (a) what each guarantee or indemnity is, including the names of the parties to the guarantee; and (b) the potential implications of entering into these arrangements on the financial position of the responsible entity if the other parties are unable to meet their obligations. The value of the Fund is disclosed in the Anticipated Balance Sheet contained at section 4.5 of this PDS. Subject to the dispute described in section 2.7, the Fund has no current borrowing. Set out in section 8 is a summary of Lowell's own financial position being a summary of its statement of financial position and statement of changes in equity as most recently audited. There are unfunded obligations in respect of the GSHVT Projects. As discussed in section 2.5, Lowell proposes to procure a release of these unfunded obligations through either the conversion of debt into Increased Interests in the GSHVT Projects or by assuming those debts as an obligation of the Fund. Lowell would then evaluate the merits of then converting that debt into Units after the Closing Date. Lowell: (a) is not reliant on funding from external or related parties to perform the functions and obligations to unit holders in relation to the Fund; (b) has not entered into guarantees or indemnities with external or related parties; (c) is not a member of a tax consolidated group. Not applicable. Not applicable. [ : _23] Product Disclosure Statement Page 10

13 RG232 Disclosure Principles The Fund's position Comply If the responsible entity is a member of a tax consolidated group, it should disclose details of: (a) whether a tax-sharing agreement is in place and the parties to the tax-sharing agreement; and (b) if no tax-sharing agreement is in place, the potential implications of not having this. Not applicable. Disclosure Principle 4: Land, licences and water The responsible entity should disclose the arrangements entered into to secure rights of access or tenure to the resources and infrastructure required to operate the agribusiness scheme, including any land, licences or leases, and water required, and whether these arrangements: (a) provide for access for the life of the agribusiness scheme; and (b) are entered into on an arm s length basis. As discussed in section 3, the Fund's strategy is the sale of all the QLD Properties and the retention and management only of the NT Property. Should the Preconditions be satisfied, the Head Leases, to which each of the properties of the Fund is subject, will be terminated. Accordingly, ownership of the NT Property and any remaining QLD Property ensures access for the life of the Fund. While the Lender held registered mortgages over the NT Property and remaining QLD Property, Lowell had brought action in the Supreme Court of Victoria to have these mortgages removed on the basis that the Debt Facility has been fully repaid. As at the date of preparation of this PDS, settlement terms have been agreed with the Lender and executed and the Lender has released its mortgages. As noted at section 2.1, the Fund does not currently own all the trees standing on the Properties. Upon (and depending upon) the winding-up of the GSHVT Projects, the Fund will own all trees standing on the NT Property and any remaining QLD Property ensuring use of the Trees for the life of the Fund. The NT Property is being managed by the Forestry Manager in accordance with the Forestry Management Agreement and good silvicultural practice. Lowell has appointed the Forestry Manager on an arm's length basis under the terms of the Forestry Management Agreement summarised at section Under the Forestry Management Agreement, it is the Forestry Manager's responsibility to procure appropriate resources to maintain the Trees. [ : _23] Product Disclosure Statement Page 11

14 RG232 Disclosure Principles The Fund's position Comply The responsible entity should disclose: (a) the risks associated with these arrangements; (b) the consequences of a failure by the responsible entity to pay amounts due under these arrangements, and any breaches of these arrangements or agreements underlying these arrangements; and (c) any measures the responsible entity has implemented, or will implement, to address these risks. The responsible entity should disclose the identity, where known, of the owner of the resources and infrastructure referred to in RG , the terms of use and whether security has been given over these assets. The responsible entity should disclose (where applicable) for any leases, licences, rights or infrastructure required for the operation of the agribusiness scheme: (a) whether the responsible entity treats the leases and licences or rights as scheme property; (b) the identity of the parties to the leases, licences and/or rights; and (c) whether any action in relation to a lease, licence or right needed for the operation of the agribusiness scheme, which is not an obligation of the responsible entity, could endanger the relevant lease, licence or right. Disclosure should clarify the risk of this occurring and how it may affect the agribusiness scheme. The risks associated with the Forestry Management Agreement arrangements and the consequences of breaching or terminating this agreement are disclosed in sections 7.5, 7.6 and The Fund's strategy is for Properties which it owns to be: free from all leasehold or other third party interests as a condition of the proposal under this PDS proceeding; and free from any mortgages. Any infrastructure or resources required to manage the Properties is, or will be, owned by the Forestry Manager. The Fund's use of the Properties as owner is subject only to the rights to access the land granted to the Forestry Manager under the Forestry Management Agreement, the terms of which are summarised at section11.4. While the Lender held registered mortgages over the NT Property and remaining QLD Property, Lowell had brought action in the Supreme Court of Victoria to have these mortgages removed on the basis that the Debt Facility has been fully repaid. As at the date of preparation of this PDS, settlement terms have been agreed with the Lender and executed and the Lender has released its mortgages. As discussed above, once the Head Leases are terminated the Trees will become Fund property. The remaining rights and infrastructure required to manage the Properties is subject to the Forestry Management Agreement and therefore subject to the risks and consequences of breaching or terminating this agreement as disclosed in sections 7.5, 7.6 and 11.4 (and any subsequent difficulties in finding a replacement forestry manager). [ : _23] Product Disclosure Statement Page 12

15 RG232 Disclosure Principles The Fund's position Comply If land, licences or water assets are, or are proposed to be, used as security for borrowings by the responsible entity, the responsible entity should disclose the level of actual or proposed gearing, and the risks associated with this gearing, in the PDS and in the report provided to members under Benchmark 3. Lowell does not propose to use any scheme property, other than the Properties themselves, as security for borrowings of the Fund. Lowell has no current intention to borrow against the Properties but may do so in the future as part of its capital management processes, provided doing so is in the best interests of the Unit Holders. If it does so, it does not propose to borrow against more than 30% of the value of the Properties. Disclosure Principle 5: Replacement of the responsible entity The responsible entity should disclose whether there are any restrictions on the ability of any replacement responsible entity to access the resources required to continue to operate the agribusiness scheme (including but not limited to any leases, licences, land, water and money held for the purposes of operating the scheme). The responsible entity should disclose: (a) whether the responsible entity or related parties are eligible for any payment or fee that is payable if the responsible entity is replaced, or is to be replaced, and, if so, the amount or method for calculation of this fee; (b) the effect of a change in responsible entity on any agreements entered into between investors and the responsible entity or other parties in relation to the agribusiness scheme; (c) any obligation to repay fees already paid to the responsible entity to the incoming responsible entity if the responsible entity changes; and (d) the risk to, and impact on, investors if the responsible entity changes. As discussed at section 11.2, there are no significant restrictions on a replacement responsible entity's ability to continue to operate the Fund. As discussed at section11.6, upon a change in responsible entity: (a) Lowell is entitled to agree with a replacement responsible entity to be reimbursed by or to receive a benefit from the replacement responsible entity; (b) Lowell must vest all Fund property in the new responsible entity and the new responsible entity becomes bound by the Forestry Management Agreement; (c) Lowell is only entitled to fees on an accrual basis and where it ceases to perform its duties as responsible entity of the Fund, its fees will be adjusted on a proportionate basis. There is otherwise no obligation on Lowell to repay any fees already paid to it to an incoming responsible entity; and (d) as discussed at section 7.7, there is a risk that the Fund, and thus the Unit Holders indirectly, will be required to meet expenses resulting from the retirement or removal of Lowell and consequent appointment of the new responsible entity Compliance with benchmarks and disclosure principles for unlisted property schemes In accordance with Regulatory Guide 46 published by ASIC (RG46), in addition to being considered an agribusiness managed investment scheme, the scheme may be considered an unlisted property scheme. the following table sets out on an 'if not, why not' basis, the Fund's compliance with the benchmarks and disclosure principles contained in RG46 and details of where you may further information about these matters in this PDS. [ : _23] Product Disclosure Statement Page 13

16 RG46 Benchmarks Benchmark 1 Gearing policy The responsible entity maintains and complies with a written policy that governs the level of gearing at an individual credit facility level. Benchmark 2 Interest cover policy The responsible entity maintains and complies with a written policy that governs the level of interest cover at an individual credit facility level. Benchmark 3: Interest capitalisation The interest expense of the scheme is not capitalised. The Fund's position and further information There is no credit facility representing borrowings against the Fund's land. The Fund does not have a written policy that governs the level of gearing at an individual credit facility level. Gearing is covered by the Fund's risk management policy. Lowell has no current intention to borrow against the Properties but may do so in the future as part of its capital management processes, provided doing so is in the best interests of the Unit Holders. If it does so, it does not propose to borrow against more than 30% of the value of the Properties. There is no credit facility representing borrowings against the Fund's land. The Fund does not have a written policy that governs the level of interest cover at an individual credit facility level. Gearing is covered by the Fund's risk management policy. Lowell has no current intention to borrow against the Properties but may do so in the future as part of its capital management processes, provided doing so is in the best interests of the Unit Holders. If it does so, it does not propose to borrow against more than 30% of the value of the Properties. There is no credit facility representing borrowings against the Fund's land. Where the Fund does have borrowing, the interest expense of the Fund is not capitalised. Comply û û Benchmark 4: Valuation policy The responsible entity maintains and complies with a written valuation policy that requires: (a) a valuer to: (i) be registered or licensed in the relevant state, territory or overseas jurisdiction in which the property is located (where a registration or licensing regime exists), or otherwise be a member of an appropriate professional body in that jurisdiction; and (ii) be independent; (b) procedures to be followed for dealing with any conflicts of interest; (c) rotation and diversity of valuers; As set out in the Chairman's Letter, the Fund has originated from a restructure of tree schemes and as such there is no specific policy for the valuation of land except as set out below. There is no current intention to acquire new land or sell the NT Property, therefore Lowell considers a specific policy on valuations is unnecessary. As noted at section 6.10, the Constitution allows the Properties to be valued at any time and requires the Properties be valued at least: once before 30 June 2015; once every 3 years thereafter until 31 March 2023; and û [ : _23] Product Disclosure Statement Page 14

17 RG46 Benchmarks (d) valuations to be obtained in accordance with a set timetable; and (e) for each property, an independent valuation to be obtained: (i) before the property is purchased: (A) for a development property, on an as is and as if complete basis; and (B) for all other property, on an as is basis; and (ii) within two months after the directors form a view that there is a likelihood that there has been a material change in the value of the property. The Fund's position and further information annually thereafter, Under the Constitution, Lowell may determine valuation methods and policies for each category of the Fund's property and may change them from time to time. However, every valuation method determined by Lowell must be consistent with the range of ordinary commercial practice for valuing that category of the Fund's property. To cater for unforeseen circumstances, Lowell will formally adopt, prior to the Closing Date, a written valuation policy which complies with the requirements set out in benchmark 4 of RG46. Comply Benchmark 5: Related party transactions The responsible entity maintains and complies with a written policy on related party transactions, including the assessment and approval processes for such transactions and arrangements to manage conflicts of interest. Benchmark 6: Distribution practices The scheme will only pay distributions from its cash from operations (excluding borrowings) available for distribution. Lowell maintains and complies with a written policy on related party transactions and conflicts of interest, including the assessment and approval processes for such transactions and arrangements to manage conflicts of interest. In all cases where the Fund transacts with a related entity, it will either conduct the transaction on commercial terms and at arm s length, that is, on terms and conditions no more favourable than would apply if the other party were not a related party of Lowell, or Lowell will obtain the prior approval of Unit Holders. In general terms, arm s length terms and conditions will be determined in accordance with ASIC Regulatory Guide 76 Related Party Transactions. Lowell's compliance plan in respect of the Fund sets out the processes by which such conflicts must be monitored by the Compliance Committee, mitigated and, if necessary, reported to ASIC. Lowell will only pay distributions from the Fund from cash from operations (excluding borrowings) available for distribution, other than any final distribution after the sale of the Fund's land which Lowell expects will be sold after final harvest. [ : _23] Product Disclosure Statement Page 15

18 RG46 Disclosure Principles The Fund's position Comply Disclosure Principle 1: Gearing ratio Responsible entities should disclose a gearing ratio for the scheme calculated using the following formula: Gearing ratio = Total interest-bearing liabilities Total assets Based on the Anticipated Balance Sheet set out in section 4.5, as at 30 June 2014 the Fund is expected to have a gearing ratio of 0% as the Fund is not expected to have any interest bearing liabilities. This also represents the gearing ratio as at the Issue Date. The liabilities and assets used to calculate the gearing ratio should be based on the scheme s latest financial statements. The latest financial statements would usually be the latest audited or reviewed financial statements, except where the responsible entity is aware of material changes since those statements. If the responsible entity does not base the gearing ratio on the latest financial statements, it should disclose the source(s) and date of the information used to calculate the ratio. If members contributions (other than borrowings from members) are classified as liabilities in the financial statements, they should be excluded from liabilities in calculating the gearing ratio. If the scheme has material off-balance-sheet financing, the responsible entity should disclose the following gearing ratios: (a) a look through gearing ratio that takes into account such financing; and (b) a gearing ratio based on liabilities disclosed in the scheme s financial statements. Responsible entities should also explain to investors what these ratios mean in practical terms and how investors can use the ratios to determine the scheme s level of risk. If the responsible entity is unable to calculate the gearing ratio and/or the look through gearing ratio, this should be disclosed with the reasons why the ratio(s) cannot be calculated, an explanation of the risks and impact of being unable to calculate the ratio(s), and the steps being taken by the responsible entity to address these risks. Disclosure Principle 2: Interest cover ratio The interest cover ratio gives an indication of an unlisted property scheme s ability to meet As stated above, the gearing ratio is based on the Historical Balance Sheet and Anticipated Balance Sheet, which have each been reviewed by Hayes Knight Corporate (you should refer to their Assurance Report, which is attached as Annexure 1, and the financial information included in section 4). Unit Holders' contributions are not classified as liabilities in the financial statements. The Fund does not have any off-balancesheet financing. Lowell considers the gearing ratio is not currently materially relevant to Unit Holders as there is no credit facility representing borrowings against the Fund's Properties and Lowell has no current intention to borrow against the Properties. Lowell may do so in the future as part of its capital management processes, provided doing so is in the best interests of the Unit Holders. If it does so, it does not propose to borrow against more than 30% of the value of the Properties. Not applicable. Based on the Anticipated Balance Sheet set out in section 4.5 as the Fund is not expected [ : _23] Product Disclosure Statement Page 16

19 RG46 Disclosure Principles The Fund's position Comply the interest payments from earnings. Responsible entities should disclose the scheme s interest cover ratio calculated using the following formula and based on the latest financial statements: Interest cover ratio = (EBITDA unrealised gains + unrealised losses) / Interest expense to have any interest-bearing liabilities as at 30 June Accordingly, Lowell considers the Fund does not have any relevant interest cover ratio. This also represents the position as at the Issue Date. The EBITDA (earnings before interest, tax, depreciation and amortisation) and interest expense figures used to calculate the interest cover ratio should be consistent with those disclosed in the scheme s latest financial statements. The latest financial statements would usually be the latest audited or reviewed financial statements, except when the responsible entity is aware of material changes since those statements. If the responsible entity does not base the interest cover ratio on the latest financial statements, it should disclose the source(s) and date of the information used to calculate the ratio. The figures used to calculate the interest cover ratio are consistent with those disclosed in the Fund's latest financial statements, being both the most recent audited financial statements and the financial statements reviewed on the basis described in the Assurance Report, which is attached as Annexure 1, and the financial information included in section 4. If the responsible entity is unable to calculate the interest cover ratio (e.g. in a property development or when the interest is capitalised), it should disclose the reasons why it is unable to calculate the ratio and provide an explanation of the arrangements it has entered into to meet the payment obligations related to the borrowed funds and the risks associated with these arrangements. As stated above, as the Fund is not expected to have any interest-bearing liabilities as at 30 June Lowell considers the Fund does not have any relevant interest cover ratio. Lowell is not aware of any reason it could not calculate the interest cover ratio should it, in the future, determine it is in Unit Holders' interests to borrow against the Properties. Many retail investors may not understand what interest cover means. Responsible entities should explain how investors can use the interest cover ratio to assess the scheme s ability to meet its interest payments. Disclosure Principle 3 Scheme Borrowing If a scheme has borrowed funds (whether on or off balance sheet), responsible entities should clearly and prominently disclose: (a) for each borrowing that will mature in five years or less the aggregate amount owing and the maturity profile in increments of not more than 12 months; (b) for borrowings that will mature in more than five years the aggregate amount owing; (c) the amount (expressed as a percentage) by which either the operating cash flow or the value of the asset(s) used as security for the facility must fall before the scheme will breach any covenants in any credit If the Fund did have borrowings, Unit Holders could use the interest cover ratio to better understand the ability of the Fund to continue to pay expenses and distributions after the payment of interest on those borrowings. As described in further detail in sections 6.9 and 7.2 it is unlikely that distributions will be payable prior to final harvest and/or sale of the NT Property. As discussed in further detail in section 5.2 the Fund no longer has any borrowings. Lowell has no current intention to borrow against the Properties but may do so in the future as part of its capital management processes, provided doing so is in the best interests of the Unit Holders. If it does so, it does not propose to borrow against more than 30% of the value of the Properties. [ : _23] Product Disclosure Statement Page 17

20 RG46 Disclosure Principles The Fund's position Comply facility; (d) for each credit facility: (i) the aggregate undrawn amount; (ii) the assets to which the facility relates; (iii) the loan-to-valuation and interest cover covenants under the terms of the facility; (iv) the interest rate of the facility; and (v) whether the facility is hedged; (e) details of any terms within the facility that may be invoked as a result of scheme members exercising their rights under the constitution of the scheme; and (f) the fact that amounts owing to lenders and other creditors of the scheme rank before an investor s interests in the scheme. If borrowings and credit facilities will mature within 12 months, the responsible entity should make appropriate disclosure about the prospects of refinancing or possible alternative actions (e.g. sales of assets or further fundraising). If the responsible entity has no reasonable grounds for commenting on the prospect of refinancing or possible alternative actions, it should state this and explain why to investors: see Regulatory Guide 170 Prospective financial information (RG 170) at RG RG Responsible entities should explain any risks associated with their borrowing maturity profile, including whether borrowings have been hedged and, if so, to what extent. Not applicable. Not applicable. Responsible entities should also disclose any information about scheme borrowing and breaches of loan covenants that is reasonably required by investors. Responsible entities should update investors about the status of scheme borrowings and any breaches of covenants through ongoing disclosure. Not applicable. Disclosure Principle 4: Portfolio diversification A responsible entity should disclose the current composition of the property scheme s direct property investment portfolio, including: (a) properties by geographic location by number and value; (b) non-development properties by sector (e.g. industrial, commercial, retail, residential) and development projects by number and value; (c) for each significant property, the most recent valuation, the date of the valuation, whether the valuation was performed by an independent valuer and, The current composition of the Fund's property portfolio is set out in section 3. The historical statement of Financial Position as at 31 December 2013 and the Anticipated Balance Sheet reflects the value of the Qld Properties at $23,830 on an inventory basis, which is measured at the lower of cost and net realisable value, and reflects the value of the NT Property at $1,024,703 on a noncurrent asset basis at the lower of cost and net realisable value/book value. The Directors' opinion, having only received an appraisal and not an independent valuation, is that the market value of the NT [ : _23] Product Disclosure Statement Page 18

21 RG46 Disclosure Principles The Fund's position Comply where applicable, the capitalisation rate adopted in the valuation; (d) the portfolio lease expiry profile in yearly periods calculated on the basis of lettable area or income and, where applicable, the weighted average lease expiry; (e) the occupancy rate(s) of the property portfolio; (f) for the top five tenants that each individually constitute 5% or more by income across the investment portfolio, the name of the tenant and percentage of lettable area or income; and (g) the current value of the development and/or construction assets of the scheme as a percentage of the current value of the total assets of the scheme. Property is in excess of the value applied in the financial statements, which is based purely on the Fund's cost of acquiring the land in Prior to 30 June 2015, Lowell will obtain an independent valuation in accordance with the Fund's valuation policy, which is discussed in section The Directors have not obtained independent valuations of either the Qld Properties or the NT Property for the purposes of this PDS for reasons including: as stated above, Lowell has committed to obtaining an independent valuation of the NT Property in accordance with the Fund's valuation policy by 30 June 2015; Lowell has no current intention to sell the NT Property until at least after final harvest of trees standing on the land some years from now; the Issue Price of, and ongoing Contributions Payments for, a Unit has not been set by reference to the assets in the Fund, including the NT Property. Instead those amounts have been set by reference to Lowell's expectations of the costs of operating the Fund; Lowell intends to dispose of all remaining Qld Properties prior to 31 December 2014; the Directors' desire to allow Growers to consider the offer under this PDS before incurring significant further costs in the GSHVT Projects; and the Directors considering the costs of obtaining the valuations outweighing the benefit of that information to Growers, given all of the above circumstances. The Directors are also of the opinion that, while the Fund may meet the definition of a property scheme under RG46, only members and creditors of the GSHVT Projects will be offered the opportunity to invest in the Fund, and as such the current value of the NT Property should be considered alongside each of the factors listed above. Disclosure should cover the responsible entity s investment strategy on these matters, including its strategy on investing in other unlisted property schemes, whether the scheme s current assets conform to the investment strategy and an explanation of any significant variance from this strategy. A responsible entity should also provide a clear description of any significant non-direct property assets of the scheme, including the value of such assets. Lowell's strategy is the sale of all remaining QLD Properties and the retention and management only of the NT Property. As at the date of preparation of this PDS, the only remaining QLD Property is the Erkilla property. As disclosed in the Fund's Anticipated Profit and Loss set out in section 4.3 and Anticipated Cash Flow Statement set out in section 4.4 Lowell intends to sell the [ : _23] Product Disclosure Statement Page 19

22 RG46 Disclosure Principles The Fund's position Comply remaining QLD Property before 30 December Responsible entities of unlisted property schemes involved in property development should also disclose for each significant development asset: (a) the development timetable with key milestones; (b) a description of the status of the development against the key milestones identified; (c) a description of the nature of the funding arrangements for the development (including the sources of funding and repayment strategies if borrowing is used to fund the development); (d) the total amounts of pre-sale and lease pre-commitments, where applicable; (e) whether the loan-to-valuation ratio for the asset under development exceeds 70% of the as is valuation of the asset; and (f) the risks associated with the property development activities being undertaken. The responsible entity for any scheme that has over 20% of its property assets in development based on an as if complete basis should ensure that the scheme is clearly identified as a development and/or construction scheme. The Fund is not involved in property development. Not applicable. Disclosure Principle 5: Related party transactions Responsible entities that enter into transactions with related parties should describe related party arrangements relevant to the investment decision. The description should address: (a) the value of the financial benefit; (b) the nature of the relationship (i.e. the identity of the related party and the nature of the arrangements between the parties, in addition to how the parties are related for the purposes of the Corporations Act or ASX Listing Rules for group structures, the nature of these relationships should be disclosed for all group entities); (c) whether the arrangement is on arm s length terms, is reasonable remuneration, some other exception applies, or we have granted relief; (d) whether scheme member approval for the transaction has been sought and, if so, when (e.g. if member approval was obtained before the issue of interests in the scheme); (e) the risks associated with the related party As discussed in detail sections 2.1 and 12.2: (a) one of the Preconditions is for the Growers of the GSHVT Projects voting to wind-up those schemes. (b) there are transactions related to the winding-up of the GSHVT Projects which are related party transactions as they involve Lowell acting in different capacities, the details of which are set out in section Lowell has sought the approval of Growers in the 2007 GSHVT Project and 2008 GSHVT Project for the related party transactions described in paragraph (b) above. [ : _23] Product Disclosure Statement Page 20

23 RG46 Disclosure Principles The Fund's position Comply arrangement; and (f) whether the responsible entity is in compliance with its policies and procedures for entering into related party transactions for the particular related party arrangement, and how this is monitored. Disclosure Principle 6: Distribution practices If a scheme is making or forecasts making distributions to members, the responsible entity should disclose: (a) the source of the current distribution (e.g. from cash from operations available for distribution, capital, unrealised revaluation gains); (b) the source of any forecast distribution; (c) whether the current or forecast distributions are sustainable over the next 12 months; (d) if the current or forecast distribution is not solely sourced from cash from operations (excluding borrowings) available for distribution, the sources of funding and the reasons for making the distribution from these other sources; (e) if the current or forecast distribution is sourced other than from cash from operations (excluding borrowings) available for distribution, whether this is sustainable over the next 12 months; and (f) the impact of, and any risks associated with, the payment of distributions from the scheme from sources other than cash from operations (excluding borrowings) available for distribution. As discussed in further detail at sections and 7.2, the Fund is unlikely to pay distributions until final harvest of the Trees and/or sale of the NT Property. In the meantime, it is intended that proceeds of thinning the plantations will help to meet ongoing administrative and operational costs, thereby reducing the annual Contribution Payments required to be made by Unit Holders. Disclosure Principle 7: Withdrawal arrangements If investors are given the right to withdraw from a scheme, the responsible entity should clearly disclose: (a) whether the constitution of the scheme allows investors to withdraw from the scheme, with a description of the circumstances in which investors can withdraw; (b) the maximum withdrawal period allowed under the constitution for the scheme (this disclosure should be at least as prominent as any shorter withdrawal period promoted to investors); (c) any significant risk factors or limitations that may affect the ability of investors to withdraw from the scheme, or the unit price at which any withdrawal will be made (including risk factors that may affect the ability of the responsible entity to meet a promoted withdrawal period); As discussed in further detail at sections 6.9 and 7.2, the Fund is illiquid and you are unlikely to be able to access your investment until the end of the Fund. Under the Constitution: if the Fund is liquid, Unit Holders have a right to withdraw subject to limited restrictions; if the Fund is illiquid, Unit Holders only have a right to withdraw if Lowell makes a withdrawal offer in accordance with the Corporations Act. Lowell does not propose to make withdrawal offers if the Fund is illiquid. If the Fund becomes liquid, Lowell will advise all Unit Holders of the procedure to withdraw from the Fund in accordance with the Constitution. û [ : _23] Product Disclosure Statement Page 21

24 RG46 Disclosure Principles The Fund's position Comply (d) a clear explanation of how investors can exercise their withdrawal rights, including any conditions on exercise (e.g. specified withdrawal periods and scheme liquidity requirements); and (e) if withdrawals from the scheme are to be funded from an external liquidity facility, the material terms of this facility, including any rights the provider has to suspend or cancel the facility. The responsible entity should ensure that investors are updated on any material changes to withdrawal rights through ongoing disclosure. For example, investors should be informed if the responsible entity knows that withdrawal requests will be suspended during an upcoming withdrawal period for whatever reason. If the Fund becomes liquid, Lowell will advise all Unit Holders of their right to withdraw, and the procedure for withdrawing, from the Fund in accordance with the Constitution. Responsible entities should also clearly disclose if investors have no withdrawal rights. Lowell refers to the commentary regarding Unit Holders' withdrawal rights. Disclosure Principle 8: Net tangible assets The responsible entity of a closed-end scheme should clearly disclose the value of the net tangible assets (NTA) of the scheme on a per unit basis in pre-tax dollars. We consider that responsible entities should calculate the NTA of the scheme using the On the basis of the Stated Basis of Preparation set out in section 4.6 and the Anticipated Balance Sheet set out in section 4.5 the NTA of the Fund on a per unit basis (for 43,089 units) as at 30 June 2014 is $ However, Lowell's directors note the Anticipated Balance Sheet set out in section 4.5 was prepared on the basis the Closing Date would be on or before 30 June 2014, when the number of Units on issue was assumed to be 43,089. The NTA of the Fund on a per unit basis for 45,859 units (but otherwise on the basis of the Stated Basis of Preparation) as at 30 June 2014 is $ This assumes full participation of all holders of Eligible Interests but no Growers pay up outstanding contributions to the GSHVT Projects prior to the Closing Date. The Anticipated Balance Sheet reflects the value of the NT Property on a non-current asset basis at the lower of cost and net realisable value/book value. The Directors' opinion, having only received an appraisal and not an independent valuation, is that the market value of the NT Property is in excess of the value applied in the financial statements, which is based purely on the Fund's cost of acquiring the land in Prior to 30 June 2015, Lowell will obtain an independent valuation in accordance with the Fund's valuation policy, which is discussed in section Lowell has calculated the NTA of the Fund using the following formula: [ : _23] Product Disclosure Statement Page 22

25 RG46 Disclosure Principles The Fund's position Comply following formula: NTA = (Net assets intangible assets +/ any other adjustments) / Number of units in the scheme on issue NTA = (Net assets intangible assets +/ any other adjustments) / Number of units in the scheme on issue The responsible entity should disclose the methodology for calculating the NTA and details of the adjustments used in the calculation, including the reasons for the adjustments. The first answer under this Disclosure Principle 8 discloses the methodology for calculating the NTA. No relevant adjustments to the NTA have been made, and Lowell does not consider any adjustments necessary. Responsible entities should also explain to investors what the NTA calculation means in practical terms and how investors can use the NTA calculation to determine the scheme s level of risk. Given the Fund's circumstances - it is an illiquid scheme which is not yet generating cash (and will not for some time generate surplus cash), Lowell has determined the Issue Price under this PDS, and the Contribution Payments during the Initial 1 Year Period (and the cap on Contribution Payments) by reference to the Fund's cash needs. That is, the amount of cash required to meet the Fund's operating and administrative expenses. Lowell considers this a more appropriate basis for setting the Issue Price and Contributions Payments than the NTA of the Fund on a per unit basis. Section 7.3 identifies the risks associated with the Fund's investments including that the Properties may not be sold readily. If any one or more of these risks eventuate, there is a risk the NTA of the Fund on a per unit basis could be materially less. In time Lowell considers the above NTA approach would likely become less reliable given its exclusion of intangible assets. As the Trees get closer to maturity, the net present value of the trees would be a relevant consideration in determining Unit values. To the extent the above NTA approach would not adequately take account of the net present value of the Trees, then another valuation methodology would likely be more suitable. [ : _23] Product Disclosure Statement Page 23

26 2. The Offer 2.1. Summary Background to the Fund Lowell established the Fund to acquire the land on which the plantations in the Great Southern 2007 High Value Timber Project ARSN and the Great Southern 2008 High Value Timber Project ARSN (GSHVT Projects) are situated. The land was purchased from the liquidator of Great Southern HVT Holdings Pty Ltd at what Lowell considers was a substantial discount to the unencumbered market value. This was funded externally by Lowell borrowing from a third party financier at a high rate of interest and which has charged significant fees. This finance was the only form of finance able to be secured by Lowell. Since the transaction Lowell has been carefully undertaking a staged sale of the Teak properties in Queensland to repay the debt, to pay the costs of the transaction by which the Fund purchased the land, and to pay for the operating costs of the Fund. Lowell issued 2 previous PDS offering units to Growers which were not successful due to the low take up by eligible Growers (being existing Growers in the GSHVT Projects): accordingly all subscriptions were returned. Lowell believes that if the assets of the Fund included those of the GSHVT Projects, and the Fund had as its purpose the maintenance and management of all land and trees on the subject land with that land limited to the Northern Territory land on which the Mahogany trees are located - then this would result in significant benefits for all stakeholders which cannot be realized by the Fund in its current structure. Those benefits to stakeholders would include: The Fund owning and managing the subject land and all trees situated thereon. As the Fund owns the land Lowell may, subject to available funds, explore in the future alternate uses for parts of the land not suitable for plantations for the benefit of members. Such uses may include agistment or production of hay. There are no current plans to do so; Consolidation of current administrative and other costs, currently being incurred across 3 managed investment schemes (the GSHVT Projects, together with the Fund), to a single managed investment scheme (the Fund above); Consolidating the Fund's assets to focus on management of African Mahogany plantations in the Northern Territory, which plantations are in considerably better condition than the Queensland teak plantations and easier to manage as they are located on one property; Consolidation of the Fund's assets by undertaking further sales of land on which those Queensland teak plantations are situated, which land is more readily sold than the Northern Territory land, and which trees may have become financially unviable to maintain; Increased ease of managing a single tract of land (the NT Property) in order to achieve the Fund's objectives; Reduction of the significant profit share agreement with Lowell and AMAT in respect of the GSHVT Projects, increasing the Unit Holders' proportionate interest in any returns generated by the Fund; The benefit of potential income and capital returns from the sale of the remaining Queensland properties, thinnings of the Trees, harvesting of the Trees and sale of the Fund's properties following harvest. Lowell believes that the return to Growers will be maximised by them becoming Unit Holders in the Fund, followed by management of the Fund s properties to harvest when the trees have reached maturation and increased in value. Lowell considered other options such as a winding up of the GSHVT Projects and the Fund, followed by a sale of the Fund properties, or a continuation of the GSHVT Projects in their current form, but Lowell s opinion is that the costs and likely returns associated with other options means the restructure proposal represents the best option for Growers to preserve and realise their investments. Conditionality The Fund is not currently entitled to exclusively occupy all of the plantations which it owns in the Northern Territory and Queensland (the Properties), nor ownership of all the trees standing on the Properties, which rights are the property of the GSHVT Projects and the relevant Growers. Accordingly the investment opportunity under this PDS is entirely conditional upon (Preconditions): Growers in the 2007 GSHVT Project voting to wind-up that scheme and authorising the Lessee to surrender all leases relating to the relevant land, and terminate all other relevant Scheme documents. Growers in the 2008 GSHVT Project voting to wind-up that scheme and authorising the Lessee to surrender all leases relating to the relevant land, and terminate all other relevant Scheme documents. [ : _23] Product Disclosure Statement Page 24

27 Eligible Growers applying to subscribe for at least 70% of the Units available under the Offer. Any other conditions for each of the GSHVT Projects being wound-up being satisfied. Amendment of the Fund's Constitution to reflect the arrangements described in this PDS: the Third Variation Deed will have been submitted to ASIC by the time this PDS is available to applicants. If any of the Preconditions are not satisfied then the issue of Units under this PDS will not proceed and all application moneys will be returned to Applicants. In that case, Lowell as responsible entity of the GSHVT Projects together with the Growers and creditors in those projects, will need to make their own separate assessments of each GSHVT Project's future and act accordingly Structure Set out below is a visual representation of the anticipated structure of the Fund if the Preconditions are met and the issue of Units under this PDS proceeds Intended maximum applications and applications amount The maximum number of Units which may be issued pursuant to the Offer under this PDS is the total of: the number of Units which may be applied for by the GSHVT Project Growers (determined by reference to the eligibility criteria set out in part 2.4); and the number of Units which may be applied for by the GSHVT Project Creditors (determined by reference to the factors set out in part 2.5). In relation to this, please see the question 'What is being offered?' in part 2.7. To the extent that the actual number of Units applied for is less than the maximum number of Units which may be applied for, the Responsible Entity will be free to accept Shortfall Applications for a number of Units equal to the difference between those two figures (Shortfall Units), in the manner set out in part Eligibility to apply for Units - GSHVT Project Growers Only Growers in the GSHVT Projects are eligible to apply for units as described in this part 2.4. Valid applications must be received prior to the Closing Date. Every application will be subject to satisfaction of the Preconditions. The number of Units for which a Grower will be entitled to apply will be in proportion to the Eligible Interests they hold in the GSHVT Projects in aggregate. Eligible Interests are described below. The date at which a Grower's entitlement will be determined is at the Closing Date: [ : _23] Product Disclosure Statement Page 25

28 (a) (b) (c) (d) (e) Woodlots held by Growers in the GSHVT Projects for which the Grower has pre-paid all Additional Contributions ($400) or has paid all Additional Contributions for each of 2010, 2011, 2012, 2013 and 2014 ($500) prior to subscribing (Eligible Woodlots Class A); Woodlots held by Growers in the GSHVT Projects for which the Grower has paid 4 Additional Contributions for the period ($400) prior to subscribing (Eligible Woodlots Class B); Woodlots held by Growers in the GSHVT Projects for which the Grower has paid 3 Additional Contributions for the period ($300) prior to subscribing (Eligible Woodlots Class C); Woodlots held by Growers in the GSHVT Projects for which the Grower has paid 2 Additional Contributions for the period ($200) prior to subscribing (Eligible Woodlots Class D); Interests relating to Increased Contributions or interests issued by Lowell equivalent to a Non-Contribution Additional Fee but limited to one increased interest for each $100 Increased Contribution (not one increased interest for each Class A Interest) (Increased Interest). The Unit entitlement for each Eligible Interest is as follows: Eligible Interest Number of Units (all to be issued at $10.00 per Unit) Application Form Reference Eligible Woodlot Class A 5 per Woodlot Item 1(a) Eligible Woodlot Class B 4 per Woodlot Item 1(b) Eligible Woodlot Class C 3 per Woodlot Item 1(c) Eligible Woodlot Class D 2 per Woodlot Item 1(d) Increased Interest An interest relating to an Increased Contribution or an interest issued by Lowell equivalent to a Non-Contribution Additional Fee 1 per Increased Interest Item 1(e) Timing A Grower's entitlement to Units is set out in the application form accompanying this PDS. If a Grower has not paid all contributions in respect of the GSHVT Projects, thus affecting the size of their entitlement to Units, then they may seek to make arrangements to pay outstanding contributions to the GSHVT Projects prior to the Closing Date, and increase their entitlements. However, Lowell will only accept outstanding contributions to the extent that other participants have not already paid 'Increased Contributions' in respect of the outstanding contributions. The number of outstanding 'Annual Contributions' creates an annual cap on 'Increased Contributions' which can be made. Thus the total of Increased Contributions, together with the amount of outstanding contributions paid, cannot exceed that cap. Growers with both Eligible Woodlots and Increased Interests Growers who have an entitlement in relation to either Eligible Woodlots Class A or Eligible Woodlots Class B, and Increased Interests, may apply for Units under both entitlements. By way of example, a Grower who holds 5 Eligible Woodlots Class B in the 2007 GSHVT Project may apply for 20 Units (4 Units for each Woodlot). Increased Interests The most common circumstance in which Increased Interests have arisen under the GSHVT Projects relates to additional payments of annual contributions to the GSHVT Projects. If Growers in either GSHVT Project did not pay all annual contributions in respect of their woodlots ($100 per annum for 5 years), then for each $100 annual contribution which was not paid, Lowell could accept 'Increased Contributions' from other Growers up to a 'Contribution Cap' (which is the total of unpaid contributions). In return for: each $100 Increased Contribution, a participating Grower received an entitlement to 20% of net proceeds of sale relating to one Woodlot in respect of which contributions were unpaid; and. each $400 Increased Contribution, a participating Grower received an entitlement to 100% of net proceeds of sale relating to one woodlot in respect of which contributions were unpaid. [ : _23] Product Disclosure Statement Page 26

29 These Increased Contributions entitled the participating Growers to share in the 'Non-Contribution Additional Fee' (being the cumulative total of forfeited rights to share in net proceeds of sale in respect of Woodlots), and Lowell converted that 20% entitlement by issuing to each participating Grower a Class A Interest for each 20% Entitlement that Grower had accrued. The offer is only open to: As referred to in this section members of the GSHVT Projects who hold Eligible Woodlots or Increased Interests; As referred to in the following section 2.5, certain creditors owed money by the GSHVT Projects Eligibility to apply for Units - GSHVT Project Creditors The GSHVT Projects have or had significant creditors, all of whom must be dealt with in the process of windingup each GSHVT Project. These creditors are eligible to apply for units as described in part 2.3 and this part 2.5. Valid applications must be received prior to the Closing Date. Every application will be subject to satisfaction of the Preconditions. Some of these GSHVT Project Creditors arranged to convert part or all of their debt in the GSHVT Projects into an Increased Interest prior to the date of this PDS. Those creditors will therefore be eligible to apply for Units on the basis set out in section 2.3 above and this part 2.5. Valid applications must be received prior to the Closing Date. Every application will be subject to satisfaction of the Preconditions. Concerning the need to deal with GSHVT Project Creditors, to the satisfaction of Lowell in its capacity as responsible entity of each of the GSHVT Projects, Lowell as responsible entity of the Fund has agreed to give an indemnity in respect of any debts owed by each of the GSHVT Projects to AMAT and Real Management Services Pty Ltd (RMS) on the condition that Lowell in its capacity as responsible entity of each of the GSHVT Projects undertakes to use any available cash in the winding-up to repay debt owed by that scheme to its creditors, including to both AMAT and RMS. If there are any such GSHVT Project Creditors after the Closing Date (that is, creditors who have not already converted their debt into Increased Interests in the GSHVT Projects, and applied for Units in the Fund), then the Constitution allows Lowell to convert those debts and any other debts owed by the Fund into Units if those creditors later agree. To the extent possible, Lowell would prefer to convert debt into Units as part of its capital management processes and to assist with managing the Fund's cash flow requirements. The rate at which those debts may be converted into Units is as follows: For the period up to 6 months after the Closing Date, one unit in consideration for each full $110 in debt converted into Units; and From 6 months after the Closing Date, one unit in consideration for the conversion of an amount of debt equal to the greater of $110, and the current Unit price as determined under the Constitution. Ultimately, the overriding consideration in relation to GSHVT Project Creditors will be whether Lowell in its capacity as responsible entity of each of the GSHVT Projects is satisfied with the arrangements for dealing with those creditors, which is a precondition to the Offer Eligibility to apply for Shortfall Units Growers who are eligible to apply for Units may also indicate on their Application Form that they wish to apply for Shortfall Units and the number of Shortfall Units for which they are applying. Each Grower's entitlement to Shortfall Units will be determined by reference to 2 times the number of Eligible Interests that Grower holds. By way of example, a Grower who holds 5 Eligible Woodlots Class B in the 2007 GSHVT Project may apply for 40 Units (8 Units for each Woodlot) and consequently up to 80 Shortfall Units. If the relevant Shortfall Units are available, then Growers will be bound to acquire the number of Shortfall Units for which they applied. As set out under benchmark 2 of section 1.2, Lowell has 4,615 Eligible Interests. Additionally, AMAT has 10,565 Eligible Interests as a result of the previous conversion of debt in the GSHVT Projects into Increased Interests. Lowell currently intends to apply for their maximum entitlement to Shortfall Units in order to increase the likelihood that the Minimum Subscription is reached as this is the level at which Lowell considers the Fund will be viable. Lowell understands that AMAT may also elect to do this. However, neither Lowell nor AMAT are obliged to apply for that maximum entitlement, and their current intention to do so must not be interpreted as a guarantee to do so, nor an agreement to underwrite the subscription. Shortfall Units will be issued at the price of $10 per Unit. Every application will be subject to satisfaction of the Preconditions. The Responsible Entity will issue the Shortfall Units as follows: [ : _23] Product Disclosure Statement Page 27

30 If the Responsible Entity receives applications from eligible Growers for a number of Shortfall Units which is less than or equal to the total of available Shortfall Units then the Responsible Entity will issue all Shortfall Units to those eligible Growers; and If the Responsible Entity receives applications from eligible Growers for a number of Shortfall Units which is more than the total of available Shortfall Units, then the Responsible Entity will issue the Shortfall Units proportionally to those eligible Growers by reference to the number of Shortfall Units applied for by them. Lowell considers that the eligibility criteria along with the Shortfall mechanism enables Growers of the GSHVT Projects to maintain their proportional interest in the Fund, while encouraging all Growers to take up additional Units so that the Minimum Subscription is reached and the Fund is viable Key Features of The Offer FEATURE SUMMARY FOR MORE DETAILS SEE What is being offered? What are the terms of the Offer? 45,859 Units in the Fund at $10 each to raise $458,590, subject to: any Growers in the GSHVT Projects making additional contributions as contemplated by section 2.4; or any subscription or conversion in respect of an HVT Creditor, as contemplated by section 2.5, which would increase the maximum which may be raised. For example if all Growers with outstanding contributions made arrangements to pay up within the cap referred to in section 2.4, there will be 52,860 units on offer. In that scenario, up to $528,600 would be raised under the PDS. Regardless of the total number of Units in the Fund offered under this PDS (the Units Limit): if all of those Units are subscribed for there will be no Shortfall Units available; and the number of Shortfall Units available will not result in the number of Units being issued exceeding the Units Limit. The Fund is a unit trust and a managed investment scheme registered under the Corporations Act (ARSN ). Growers may apply for their eligible entitlement to Units in the Fund. The price of each Unit will be $10. Section 5.1 Section 1.3 How much is the annual Contribution Payment? Unit Holders will be required to make an annual Contribution Payment. The annual contribution payment will be $10. The first payment will be due 4 weeks after the date the last of the Preconditions is satisfied. This payment will be fixed for the first year. In subsequent years the amount will be determined dependent upon the cash requirements for the Fund. Lowell has relied upon information provided by third parties and has prepared a budget of the costs associated with operating the Fund (including holding the Fund s investments) for the year ending 30 June Lowell estimates these costs will total approximately $550,000 for the year ending 30 June 2015 and for each year after that until final harvest subject to CPI increases and other unforeseen cost increases. The second payment will be due 1 July 2015 and consequently, Unit Holders will be required to pay 3 amounts in the next 14 months of the Fund's operation (as a combined scheme) as follows: the Issue Price of $10 per Unit by the Closing Date; a Contribution Payment of $10 per Unit due 4 weeks after the Section 5.3 [ : _23] Product Disclosure Statement Page 28

31 FEATURE SUMMARY FOR MORE DETAILS SEE date the last of the Preconditions is satisfied; and a Contribution Payment of up to $15 per Unit, subject to the below qualification, due 1 July The amount of the Contribution Payment will be influenced by a number of factors including the take up of Units and ongoing costs. However, the annual Contribution Payments will be capped at $15 per Unit per annum, above which Lowell will be required to call a meeting of Unit Holders to determine whether the annual Contribution Payments should be increased, or another option should be taken such as winding up of the Fund. It is intended that, after second Thinnings due in 5 years' time, or if the assets of the Fund are sold, no further payments will be required. There is also an attendant risk, however, that the Thinnings will be delayed or will not produce sufficient income, such that annual Contribution Payments will still be required. How do I invest? When will Units be issued? Can a Unit Holder lose their interest in the Fund? What are the significant features and potential benefits of investing in the Fund? By completing the Application Form and paying the Issue Price for the Units. Provided that the Preconditions are met, Lowell will issue Units to Applicants on the Issue Date to those Applicants that have paid the Issue Price. Unit holders who fail to make their Contribution Payment in 2014 or subsequent years will be given a notice requiring payment within 30 days. If the Unit Holder does not pay the Contribution Payment within 30 days, Lowell may determine that the Unit and any distributions or other money payable to the Unit Holder are forfeited in accordance with the Constitution. The Constitution then allows Lowell to manage a process by which the Units may be offered for sale, and sold if the purchaser pays the relevant unit price and all amounts outstanding in respect of that Unit. Any surplus is returned to the defaulting Unit Holder. If there is a deficiency, then it must be paid by the Unit Holder. The benefits and features of investing in the Fund include: the value of the Properties held as long term assets (that is, not for sale) in the Fund's Anticipated Balance Sheet is $1,024,703, see discussion below). In the Directors' opinion the market value of the Properties is likely higher than this value, and accordingly any difference in those two values represents a potential benefit available to Unit Holders; instead of the stakeholders in respect of both the Fund and the GSHVT Projects meeting administrative and other costs associated with operating 3 separate managed investment schemes, those costs are reduced to the operation of one scheme; removing the complexity of the structure of the GSHVT Projects, with separate Grower agreements to be replaced with single Fund agreements for the benefit of all Growers; the potential for Unit Holders to participate in any capital growth in the value of the Properties at completion of the Fund including by participating in the proceeds generated by land sales at the end of the Fund; focussing efforts on viable plantations being the Mahogany Trees on the NT Property - and participating in the benefits of selling the non-viable or less profitable plantations and trees; continued participation of Growers in any increase in the value Section 2.8 Section 2.12 Section [ : _23] Product Disclosure Statement Page 29

32 FEATURE SUMMARY FOR MORE DETAILS SEE of the trees; share of final distributions from sale of trees; executable strategy for elimination of debt across the 3 projects, by finalising Queensland land sales, and conversion of GSHVT Project Creditor debts into Units; reduced participation in profits on the sale of the trees by Lowell and AMAT, with the removal of their entitlement under the GSHVT Projects from approximately 50% of proceeds, replaced with an entitlement of AMAT to 5% of the Net Proceeds of Sale and 25% of net profit attributable to Commercial Thinnings. In addition Lowell will be entitled to 3% of Net Proceeds of Sale; reduced participation in profit on the sale of the trees by Lowell, with the removal of its entitlements to the Non-Contribution Additional Fee; and flexibility for Lowell to undertake a sale of the land and trees before harvest of the trees, if deemed in the Unit Holders' best interests, to generate quicker final return and winding-up of the Fund. How have the Fund's Properties been valued? Does the Fund have debt? The historical statement of Financial Position as at 31 December 2013 and the Anticipated Balance Sheet reflects the value of the Qld Properties on an inventory basis, which is measured at the lower of cost and net realisable value, and reflects the value of the NT Property on a non-current asset basis at the lower of cost and net realisable value/book value. The Directors' opinion, having only received an appraisal and not an independent valuation, is that the market value of the NT Property is in excess of the value applied in the financial statements, which is based purely on the Fund's cost of acquiring the land in Prior to 30 June 2015, Lowell will obtain an independent valuation in accordance with the Fund's valuation policy, which is discussed in section The Directors have not obtained independent valuations of either the Qld Properties or the NT Property for the purposes of this PDS for reasons including: as stated above, Lowell has committed to obtaining an independent valuation of the NT Property in accordance with the Fund's valuation policy by 30 June 2015; Lowell has no current intention to sell the NT Property until at least after final harvest some years from now; the Issue Price of, and ongoing Contributions Payments for, a Unit has not been set by reference to the assets in the Fund, including the NT Property. That value has been set by reference to Lowell's expectations of the costs of operating the Fund; Lowell intends to dispose of all remaining Qld Properties prior to 31 December 2014; the Directors' desire to allow Growers to consider the offer under this PDS before incurring significant further costs in the GSHVT Projects; and the Directors considering the costs of obtaining the valuations outweighing the benefit of that information to Grower, given all of the above circumstances. Some existing GSHVT Projects debt will be assumed by the Fund to enable the GSHVT Projects to be wound up and as consideration for Sections 4 and 7 Section 4 [ : _23] Product Disclosure Statement Page 30

33 FEATURE SUMMARY FOR MORE DETAILS SEE the surrender of leases by those Projects. The Fund had a high cost debt secured by a mortgage (Debt Facility) with the Lender. Lowell has been in dispute with the Lender regarding whether any amount was still owing under the Debt Facility. As at the date of preparation of this PDS settlement terms have been agreed and executed and the Lender has released its mortgages. You should refer to the financial information for the Fund set out in Section 4. What is the expected life of the Fund? What are the significant risks of investing in the Fund? The expected life of the Fund is 12 years, by which time the African Mahogany trees, which stand on the NT Property should be ready for final harvest. The property could be sold earlier at the discretion of Lowell and proceeds distributed to Unit Holders. The significant risks of investing in the Fund include: The Fund may run out of funds. This may conceivably happen at any time, but including if: o o only the minimum subscription is made by applicants, meaning that a smaller number of Unit Holders must meet all the Fund's costs, and those Unit Holders fail to pay all Contribution Payments in the future; for any other reason, Unit Holders fail to make their Contribution Payments annually (which is a significant issue in the GSHVT Projects), and in either case the Contribution Payments actually made are insufficient to meet the Fund's ongoing costs and expenses. This could lead to: o o o a dilution of Unit Holders' interests, for instance if Lowell needs to raise additional capital and elects to do so from third parties rather than Unit Holders; increased annual Contribution Payments (after the Initial 1 Year Period) if Lowell needs to raise annual contributions to meet shortfalls and Unit Holders' pass a special resolution agreeing to an increase of annual Contribution Payments above $15 per annum; a need to wind-up the Fund if those other measures cannot be pursued or are unsuccessful, with the subsequent forced sale of the Fund's assets at an inopportune time, and before maturation of the Trees, or at a time when the value of those assets is depressed. You are required to make the annual Contribution Payments, possibly for the remaining life of the Fund. However, your financial circumstances may change, meaning you are not in a position to make those payments. In those circumstances, you will be in default under the Constitution and your Units may be forfeited and sold to third parties. This may occur at an inopportune time, when the value of those Units is depressed. You would also be liable to pay the relevant amounts if the forfeited Units could not be sold, or were sold but did not realize sufficient funds to pay the relevant amounts. The remaining QLD Property may not be readily sold, as and when required, due to prevailing market conditions or other factors beyond Lowell s control this would affect how ongoing Section 7 [ : _23] Product Disclosure Statement Page 31

34 FEATURE SUMMARY FOR MORE DETAILS SEE costs are met, and may require higher annual Contribution Payments. The Anticipated Balance Sheet reflects the value of the NT Property on a non-current asset basis at the lower of cost and net realisable value/book value. There is a risk that this valuation may be inaccurate, which would affect the value of the Fund's property. Risks associated with litigation/ contingent liabilities Lowell has been served with proceedings in the Magistrates' Court of South Australia and the County Court of Victoria by RMS, which was engaged to provide certain services in respect of the GSHVT Projects and the Fund. There is a dispute between the parties about these services and whether moneys are payable by Lowell to RMS. RMS claims that there are amounts totalling approximately $183,000 plus costs owing in respect of the GSHVT Projects and the Fund, but has not broken these claimed amounts down between the schemes. Although Lowell will vigorously defend these proceedings, Lowell and the Fund have an exposure in respect of the amounts claimed by RMS, which exposure extends to litigation costs that cannot be accurately quantified at this time. The costs of the proceedings, and any damages or costs awards made in respect of the proceedings, will be met from the Fund. What are the ongoing costs and amounts payable by the Fund? All of the ongoing costs in operating the Fund are payable out of the assets of the Fund, including the Responsible Entity Fee, fees paid to the Fund's Custodian and Auditor, legal costs, borrowing costs, compliance costs, rates and taxes, insurance and other fees and costs of operating the Fund. The anticipated costs of operating the Fund annually are $550,000. Section 9 What are the tax implications for Unit Holders? What procedures are in place to deal with Unit Holder complaints? Is there a cooling-off period? Where can I get further information? Where can you lodge your application? General information about the significant tax implications of the Fund is outlined in section 10. Lowell provides a complaints handling and dispute resolution process for Unit Holders and is a member of an external complaints resolution body. There is no cooling-off right for Unit Holders, as the Fund is not liquid. By calling Lowell on or ing reception@terraincapital.com Lowell Capital Ltd 8 Chapel Street RICHMOND, VIC 3121 Fax: Section 10 Section 6.18 Corporate directory Application Form [ : _23] Product Disclosure Statement Page 32

35 2.8. How to apply for Units (other than Shortfall Units) You can only apply for Units by completing and lodging the Application Form accompanying this PDS. Applications are due by no later than 5.00pm AEST on 22 August 2014 (unless Lowell in its absolute discretion extends this date), which is the Closing Date of the Offer. Applications must be completed and lodged in accordance with the instructions in the Application Form. Applicants must calculate the Units they are entitled to apply for based on their Eligible Interest as explained in 2.4 above and insert this in their Application Form. By completing and returning an Application Form, each Applicant gives a series of acknowledgments, including having read this PDS in its entirety. Lowell reserves the right to cancel the Offer at any time, in which event all application monies will be refunded without interest. Lowell may reject an application for Units, in which case, it will refund the application monies without interest. The Fund will keep any interest earned prior to the issue of Units in a trust account, to be applied for the benefit of all Unit Holders if the issue of Units proceeds. If it does not proceed, then Lowell will retain the interest to cover its costs How to apply for Shortfall Units A person can only apply for Shortfall Units by completing the relevant section of the application form. Applicants must specify the number of Shortfall Units they are applying for and insert this in their application form. By completing and returning an application form, each Applicant gives a series of acknowledgments, including having read this PDS in its entirety. Lowell reserves the right to cancel the Offer at any time, in which event all application monies will be refunded without interest. Lowell may reject any application for Shortfall Units, in which case, it will refund the application monies without interest. The Fund will keep any interest earned prior to the issue of Units in a trust account, to be applied for the benefit of all Unit Holders if the issue of Units proceeds. If it does not proceed, then Lowell will retain the interest to cover its costs Minimum investment/subscription If you are a Grower, then the minimum investment or application amount is $10.00, the Issue Price of a Unit. Additional application amounts must be in multiples of $ Otherwise, the minimum investment or application amount is $110. Additional application amounts must be in multiples of $ Minimum subscription The minimum subscription for this Offer is 70% of the Units being offered under this PDS (Minimum Subscription). If the Minimum Subscription is not reached, Lowell will not issue Units and will return all application monies received pursuant to this PDS. If the Minimum Subscription is not reached, Lowell will consider what is in the best interests of Growers and would consider all available options in respect of the GSHVT Projects and the Fund Issue of Units Closing Date Units will only be issued to Applicants if, by the Closing Date (22 August 2014), they have submitted their Application Forms and, in the case of Growers, paid the Issue Price in relation to the Units for which they have applied. Also, Units will only be issued if the Preconditions have been satisfied by the Closing Date Final Structure If 100% of the Units are taken up then, subject to any additional Units issued as referred to in section 2.4, there will be 45,859 units. If there is a shortfall following the issue of Units and all Shortfall Units then all parties will have an increased percentage in the final fund. A larger shortfall may lead to corresponding need for higher annual Contribution Payments by Unit Holders after the Initial 1 Year Period. The Anticipated Balance Sheet, set out in section 4.5 sets out a balance sheet for the Fund for the 12 months to 30 March 2015 assuming that each of the Preconditions are satisfied. [ : _23] Product Disclosure Statement Page 33

36 3. Property Portfolio A number of properties in QLD and NT were acquired by the Fund under the Land Transaction which settled on 12 July Of these two remain, being the properties set out below. Property Location Project Year Total Area (Ha) Planted Area (Ha) Tree crop Anticipated Balance Sheet valuation ($) Erkilla Abergowie QLD Teak 23,830 Whatfor Douglas Daly NT , ,900 Mahogany 1,024,703 [ : _23] Product Disclosure Statement Page 34

37 4. Financial Information 4.1. Introduction This section includes: at the Fund's historical Statement of Financial Position as at 31 March 2014 (Historical Balance Sheet); at the Fund's Pro Forma Profit and Loss for the 12 months to 31 March 2015 (Anticipated Profit and Loss). at the Fund's Pro Forma Cash Flow Statement for the 12 months to 31 March 2015 (Anticipated Cash Flow); at the Fund's Pro Forma Balance Sheet for the 12 months to 31 March 2015 (Anticipated Balance Sheet); and at notes describing the pro forma adjustments and the basis on which the above financial information was prepared (Stated Basis of Preparation). Lowell engaged Hayes Knight Corporate Pty Ltd to review the Anticipated Balance Sheet, Anticipated Profit and Loss and the Anticipated Cash Flow Statement as well as the Fund's Historical Balance Sheet and the Fund's historical Statement of Financial Performance for the 9 months to 31 March Hayes Knight Corporate Pty Ltd's comments are contained in the Assurance Report attached to this PDS. Ultimately, Lowell determined not to include the Fund's historical Statement of Financial Performance for the 9 months to 31 March 2014 in the PDS as Lowell considers it would not assist a Grower to determine whether or not to subscribe for Units. At the time Lowell engaged Hayes Knight Corporate Pty Ltd, Lowell expected the Closing Date would be on or before 30 June As a consequence of the Closing Date being a date after 30 June 2014, Lowell expects the number of Eligible Interests held by Growers as at the Closing Date, and consequently the maximum number of Units which may be applied for by Growers, to be different to the number of Eligible Interests relied upon by Hayes Knight Corporate Pty Ltd in forming Assumption 1 set out in the Stated Basis of Preparation. As set out under the response to the question 'What is being offered?' in part 2.7, the maximum number of Units which may be issued pursuant to the Offer under this PDS is 45,859 Units in the Fund at $10 each to raise $458,590, subject to: any Growers in the GSHVT Projects making additional contributions as contemplated by section 2.4; or any subscription or conversion in respect of an HVT Creditor, as contemplated by section 2.5, which would increase the maximum which may be raised. Hayes Knight Corporate Pty Ltd assumed number of Units which would be issued pursuant to the Offer under this PDS to be 43,089, based on the expected number of Eligible Interests for a Closing Date prior to 30 June [ : _23] Product Disclosure Statement Page 35

38 4.2. Fund Historical Statement of Financial Position at 31 March 2014 ASSETS Current Assets Cash and cash equivalents 177,177 Receivables 209,245 Inventories 23,830 Current tax asset - GST 8,420 Total Current Assets 418,672 Non-current Assets Land 1,024,703 Deferred tax assets 71,950 Total Non-current Assets 1,096,653 Total Assets 1,515,325 LIABILITIES Current Liabilities Trade and other payables 26,840 Related party loans 221,223 Current tax liabilities - income tax 382,867 Contingent Liabilities 150,000 Total Current Liabilities 780,930 Net Assets attributable to unitholders 734,395 Liabilities attributable to unitholders 734,395 Net Assets - [ : _23] Product Disclosure Statement Page 36

39 4.3. Pro Forma Profit & Loss April March 2015 Apr 14 - Jun 14 Jul 14 - Sep 14 Oct 14 - Dec 14 Jan 15 - Mar 15 Sales Sale of Property - 120, Maintenance Fee - 430, Total Sales - 550, Direct Costs Cost of Sales - 23, Total Direct Costs - 23, Sales Gross Profit - 527, Sales Gross Profit % 0% 96% 0% 0% Overheads Responsible Entity Fee 37,500 37,500 37,500 37,500 Forestry Management fee 25,000 25,000 25,000 25,000 Other Administration Costs 25,000 25,000 25,000 25,000 Plantation Expenses 50,000 50,000 50,000 50,000 GSHVT Liabilities assumed 202, Total Overheads 340, , , ,500 OPERATING PROFIT (340,285) 389,560 (137,500) (137,500) Other Expense Provisions Deferred Tax Asset - 27, Total Provisions - 27, Total Other Expense - 27, EBITDA (340,285) 361,752 (137,500) (137,500) EBIT (340,285) 361,752 (137,500) (137,500) Net Finance Costs Profit before Income Tax (340,285) 361,752 (137,500) (137,500) Income Tax Expense (102,086) 116,868 (41,250) (41,250) Net Profit after Tax (238,199) 244,884 (96,250) (96,250) Movement in Retained Earnings (238,199) 244,884 (96,250) (96,250) Cumulative Retained Earnings 496, , , ,580 [ : _23] Product Disclosure Statement Page 37

40 4.4. Pro Forma Cash Flow April March 2015 Apr 14 - Jun 14 Jul 14 - Sep 14 Oct 14 - Dec 14 Jan 15 - Mar 15 Cash Inflow Sales Sale of Property 209, ,000 - Maintenance Fee - 426,581 47,398 - Total Sales 209, , ,398 - Equity Additions Settlement Sum 430, Total Equity Additions 430, Total Cash Inflows 640, , ,398 - Cash Outflow Costs General Trade Creditor 20,130 6, Responsible Entity Fee 27,500 41,250 41,250 41,250 Forestry Management fee 18,333 27,500 27,500 27,500 Other Administration Costs 18,333 27,500 27,500 27,500 Plantation Expenses 36,667 55,000 55,000 55,000 GSHVT Liabilities assumed 40, ,671 40,557 - Total Costs 161, , , ,250 Income Tax Paid 130, GST Paid - (22,170) 29,339 (13,750) Total Cash Outflows 291, , , ,500 Net Cash Inflow/(Outflow) 348, ,120 (53,748) (137,500) Opening Bank 177, , , ,743 Net Cash Movement 348, ,120 (53,748) (137,500) Closing Bank 525, , , ,243 [ : _23] Product Disclosure Statement Page 38

41 4.5. Pro Forma Balance Sheet April March 2015 Apr 14 - Jun 14 Jul 14 - Sep 14 Oct 14 - Dec 14 Jan 15 - Mar 15 Current Assets Bank Accounts 525, , , ,243 Receivables - 167, Inventory 23, Total Current Assets 549, , , ,243 Non Current Assets Land 1,024,703 1,024,703 1,024,703 1,024,703 Total Non Current Assets 1,024,703 1,024,703 1,024,703 1,024,703 TOTAL ASSETS 1,573,904 1,886,592 1,665,446 1,527,946 Current Liabilities Payables General Trade Creditors 57,127 50,417 50,417 50,417 GSHVT Liabilities assumed 162,228 40, Total Payables 219,355 90,974 50,417 50,417 GST (22,170) 29,339 (13,750) (13,750) Income Tax 150, , , ,729 Loans Payable 221, , , ,223 Provisions Contingent Liabilities 150, , , ,000 Deferred Tax Asset (71,950) (44,142) (44,142) (44,142) Total Provisions 78, , , ,858 Total Current Liabilities 646, , , ,476 TOTAL LIABILITIES 646, , , ,476 NET ASSETS 927,086 1,171,970 1,075, ,470 Capital and Reserves Settlement Sum 430, , , ,890 Retained Earnings 496, , , ,580 Total Capital and Reserves 927,086 1,171,970 1,075, ,470 TOTAL EQUITY 927,086 1,171,970 1,075, ,470 [ : _23] Product Disclosure Statement Page 39

42 4.6. Stated Basis of Preparation Pro Forma Adjustments Assumption 1 All Units on issue are fully subscribed but no Growers pay up outstanding contributions to become eligible for additional Units Subscription Price = $10 per Unit (1*Eligible Interest = 5 Units in new scheme) 2007 Scheme Eligible Interests 3,930 - New scheme = 18, , Scheme Eligible Interests 5,013 - New Scheme = 24, ,150 Total Subscription 430,890 DR Cash and Cash Equivalents 430,890 CR Settlement Sum 430,890 Assumption 2 GSHVT 2007 & 2008 Liabilities are taken up by Lowell Capital Ltd HVT Land Scheme GSHVT 2007 & 2008 Trade Creditors at 31 March ,785 DR Trade and Other Payables 202,785 CR GSHVT Expenses Basis of preparation The financial Information has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations, and complies with other requirements of the law. The functional currency is in Australian Dollars and the level of rounding is to the nearest dollar. Statement of compliance The financial information complies with Australian Accounting Standards. The Scheme is a profit entity. The accounting policies set out below have been applied in preparing the financial information. Financial Instruments Initial recognition and measurement Financial assets and financial liabilities are recognised when the Scheme becomes a party to the contractual provisions to the financial instrument. For financial assets, this is equivalent to the date that the Scheme commits itself to either purchase or sell the asset (ie trade date accounting is adopted). Financial instruments are initially measured at fair value plus transaction costs. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm s length transactions, reference to similar instruments and option pricing models. Classification and subsequent measurement Financial instruments are subsequently measured at amortised cost using the effective interest method or cost. Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less repayments made and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method. [ : _23] Product Disclosure Statement Page 40

43 The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying amount with a consequential recognition of income or expense in profit or loss. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised. Financial liabilities Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process as well as when the financial liability is derecognised. Impairment of financial assets At the end of each reporting period, the responsible entity assesses whether there is objective evidence that a financial asset has been impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a loss event ) having occurred, which has an impact on the estimated future cash flows of the financial asset(s). In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults. For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if the directors of the responsible entity establish that the carrying amount cannot be recovered by any means, at that point the anticipated loss is charged to the allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the allowance account. When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the Scheme recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss event that has occurred is duly considered. Derecognition of financial instruments Financial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised when the related obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. c) Cash and cash equivalents Cash comprises current deposits with banks. Cash equivalents are short-term highly liquid investments readily convertible to known amounts of cash, subject to an insignificant risk of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or any other purposes. d) Revenue and income Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts Land is regarded as sold when the significant risks and returns have been transferred to the buyer, which is normally on unconditional exchange of contracts. For conditional exchanges, sales are recognised only when all the significant conditions are satisfied Revenue recognition relating to the provision of services is determined with reference to the stage of completion of the transaction at the end of the reporting period and where the outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure is recoverable Revenue is deferred when fees are received upfront but where associated services are yet to be performed. Any consideration deferred for more than one year is treated as a financing arrangement and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue [ : _23] Product Disclosure Statement Page 41

44 Revenue and income comprise realised gains on land for sale, interest income and other income e) Expenses All expenses are recognised in the income statement on an accruals basis. Included in other expenses is insurance, rates and land tax paid by the Scheme. g) Income tax The income tax expense (benefit) for the year comprises current income tax expense (benefit) and deferred tax expense (benefit). Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (benefit) is charged or credited directly to equity instead of profit or loss when the tax relates to items that are credited or charged directly to equity. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. h) Application and redemptions Applications received for units in the Scheme are recorded net of any entry fees payable prior to the issue of units in the Scheme. Redemptions from the Scheme are recorded gross of any exit fees payable after the cancellation of units redeemed. The application and redemption prices are determined as the net assets attributable to unit holders of the Scheme adjusted for the estimated transaction costs, divided by the number of units on issue on the date of the application or redemption. i) Redeemable units All redeemable units issued by the Scheme provide investors with the right to require redemption for cash and give rise to a financial liability. In accordance with the Constitution, the Scheme is contractually obliged to redeem units at redemption price, which includes an allowance for transaction costs incurred by the Scheme on disposal of its assets required to fund the redemptions. j) Unit Prices The unit price is based on unit price accounting outlined in the Scheme s constitution. k) Goods and services tax Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST), recoverable from the Australian Taxation Office (ATO): i). where the amount of GST incurred is not recoverable from the taxation authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense; or ii). for receivables and payables which are recognised inclusive of GST. The net amount of GST recoverable from the Australian Taxation Office is included in receivables in the balance sheet. l) Payables [ : _23] Product Disclosure Statement Page 42

45 Trade payables and other accounts payable are recognised when the Scheme becomes obliged to make future payments resulting from the purchase of goods & services. m) Receivables Trade receivables and other receivables are recorded at amortised cost less impairment. n) Critical Accounting Estimates and Judgments The directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Scheme. Revenue Recognition When a contract for the sale of a property upon completion of construction is judged to be a construction contract (see revenue recognition policy for sales of property under development), revenue is recognised using the percentage-of-completion method as construction progresses. The percentage of completion is estimated by reference to the stage of the projects and contracts - determined based on the proportion of contract costs incurred to date and the estimated costs to complete. Classification of Land Inventory comprises of land that is held for sale in the ordinary course of business. Principally, this is commercial land located in Qld that the Scheme intends to sell. Taxes The Scheme is subject to income and capital gains taxes in numerous jurisdictions. Significant judgement is required to determine the total provision for current and deferred taxes. The Scheme recognises liabilities for current taxes based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income and deferred tax provisions in the period in which the determination is made. Deferred tax assets and liabilities are recognised on a net basis to the extent they relate to the same fiscal unity and fall due in approximately the same period. p) Inventory Inventory consists of land acquired for sale in the ordinary course of business, rather than held for rental or capital appreciation, is held as inventory property and is measured at the lower of cost and net realisable value. Cost includes freehold land and government charges Net realisable value is the estimated selling price in the ordinary course of business, based on market prices at the reporting date The cost of inventory property recognised in the statement of profit or loss and other comprehensive income on disposal is determined with reference to the specific costs incurred on the property sold. [ : _23] Product Disclosure Statement Page 43

46 5. Funding 5.1. Source and application of funds Under this Offer, and subject to the possibility of Growers participating to a greater extent as referred to in section 2.3, Lowell proposes to raise up to $458,590 (45,859 Units at $10.00 each see heading 'What is being offered?' at paragraph 2.7). These funds will be used to partially fund the costs of issuing this PDS and to give effect to the structure of the Fund and the Offer as described in this PDS. Lowell has incurred one-off costs (see Section 9.3.3), which either have been paid or will be paid in the future, using the funds received from the on-sale of Properties and the Fund's raised under this Offer. As stated above, funds raised under this Offer will be used to meet the costs of the Fund and costs of the Offer Debt Facility The Fund had a high cost debt secured by a mortgage (Debt Facility) with the Lender. Lowell has been in dispute with the Lender regarding whether any amount was still owing under the Debt Facility. As at the date of preparation of this PDS settlement terms have been agreed and executed and the Lender has released its mortgages. You should refer to the financial information for the Fund set out in Section Annual Contributions Payments As noted in sections 7 and 9 Unit Holders will be required to make an annual Contribution Payment. The first payment will be due 4 weeks after the date the last of the Preconditions is satisfied. This payment will be fixed at $10 for the first year. In subsequent years the amount will be determined dependent upon the cash requirements for the Fund. The second payment will be due 1 July 2015 and consequently, Unit Holders will be required to pay 3 amounts in the next 14 months of the Fund's operation (as a combined scheme) as follows: the Issue Price of $10 per Unit by the Closing Date; a Contribution Payment of $10 per Unit due 4 weeks after the date the last of the Preconditions is satisfied; and a Contribution Payment of up to $15 per Unit, subject to the below qualification, due 1 July Lowell has relied upon information provided by third parties and has prepared a budget of the costs associated with operating the Fund (including holding the Fund s investments) for the year ending 30 June Lowell estimates these costs will total approximately $550,000 for the year ending 30 June 2015 and for each year after that until final harvest subject to CPI increases and other unforeseen cost increases.. You should also refer to the 12 month Anticipated Profit and Loss Statement and 12 month Anticipated Cash Flow set out in sections 4.3 and 4.4. The amount of the Contribution Payment will be influenced by a number of factors including the take up of Units and ongoing costs. However, the annual Contribution Payments will be capped at $15 per Unit per annum, above which Lowell will be required to call a meeting of Unit Holders to determine whether the annual Contribution Payments should be increased, or another option should be taken such as winding up of the Fund. It is intended that, after second Thinnings due in 5 years' time, or if the assets of the Fund are sold, no further payments will be required. There is also an attendant risk, however, that the Thinnings will be delayed or will not produce sufficient income, such that annual Contribution Payments will still be required. [ : _23] Product Disclosure Statement Page 44

47 6. Operation of the Fund 6.1. About the Responsible Entity Lowell is the responsible entity for a number of managed investment schemes including the Fund and the GSHVT Projects. It is licensed to carry on a financial services business and to act as responsible entity of the Fund. This includes responsibility for compliance with the Constitution and compliance plans, and ongoing satisfaction of legislative and regulatory requirements. In carrying out its duties, Lowell must comply with the Corporations Act, the Constitution and financial services laws and must, among other things: act honestly and in the best interests of Unit Holders; exercise care and diligence; and act in the best interests of Unit Holders and, if there is a conflict between the Unit Holders interests and its own interests, give priority to the Unit Holders interests. Lowell has established compliance plans and supporting compliance procedures, which are applied to ensure that Lowell continues to meet its obligations. A constitution and compliance plan have been prepared for the Fund which describe the key processes, systems and structures that Lowell uses to ensure compliance with the Corporations Act, the Constitution and financial service laws. In summary, Lowell s role as Responsible Entity generally incorporates the following: (a) (b) (c) (d) (e) registering the Fund; conducting all Fund administration; issuing disclosure documents; establishing compliance plans and monitoring against regulatory and legislative requirements ;and appointing and monitoring of external service providers (forestry management, audit and custody services). Lowell currently operates 3 agribusiness schemes in the area of forestry, including the GSHVT Projects. Lowell has been operating these agribusiness schemes for 5 years. At this stage, none of the agribusiness schemes operated by Lowell have produced, or are producing, positive returns net of contributions for the investors in those agribusiness schemes The Board of Lowell The Board is responsible for monitoring the activities of the Fund, which includes oversight of the Forestry Manager. All acquisitions, developments, disposals and appointments require the approval of the Board The Directors of Lowell Capital Michael Ramsden (Chairman) Oliver Carton (Director) Don Carroll (Director) Appointed 01/06/2007 BEc, LLB, F.Fin Mr Ramsden is a qualified lawyer with more than 25 years experience in the corporate finance industry. He has been extensively involved in investment banking and insurance, including corporate advisory, fixed income, futures trading, cross border transactions, foreign exchange and funds management in the United Kingdom and Australia. Mr Ramsden s skill base includes equity raising, funds management and general corporate advice. Mr Ramsden is also Chairman of Australian Mines Ltd, Managing Director of Terrain Capital Pty Ltd AFSL number , a director of the Victoria Racing Club Ltd and previous director of D & D Tolhurst (stockbrokers) and executive chairman of the listed Terrain Australia Limited. Appointed 22/10/2010 BJuris, LLB Mr Carton is a qualified lawyer with over 24 years experience in a variety of corporate roles. He currently runs his own consulting business and was previously a Director of Chartered accounting firm KPMG. Prior to that he was senior legal officer with ASIC. Mr Carton has significant corporate governance experience and is currently director or company secretary of a number of listed and unlisted companies, ranging from Lowell Capital Limited to the not for profit Melbourne Symphony Orchestra Pty Ltd. Appointed 21/09/2009 BE(Mining), MAusIMM, MAICD Mr Carroll has extensive experience in the development and marketing of minerals and energy products. Mr Carroll held a number of senior positions with BHP Billiton including General Manager Minerals Marketing Asia, President BHP Billiton Japan, President BHP Billiton India, and was a Director and CEO of Guinea Alumina Company. Mr Carroll has a Bachelor Degree in Mining Engineering from Sydney University, and is on the board of listed company Energio Board Function The Board seeks to perform the following key functions: (a) (b) provide strategic direction; protect and promote the best interests of Unit Holders; [ : _23] _061.docx Product Disclosure Statement Page 45

48 (c) (d) oversee the Forestry Management Agreement between Lowell and the Forestry Manager; and by delegation to the compliance committee, monitor risk management, compliance and financial and other reporting requirements Board Policies The Board has adopted a number of policies covering a range of matters dealt with by the Board and its sub committees which are aimed at providing best practice corporate governance standards. The policies cover the following subjects: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) Conflicts of Interest; Breach and Incidents Reporting; Unit Holder Communication; Related Party Transactions; Risk Management; Service Agreements; Privacy of Consumer Information; Complaints Handling and Dispute Resolution; Property Valuation; Investment Management Guidelines; Accounting, Administration and IT policies and procedures; Anti-Money Laundering Policies; (m) Legal and Regulatory; and (n) Code of Conduct policies The Forestry Manager AMA Teak Pty Ltd (the Forestry Manager) provides forestry management services in relation to the Fund. The services are primarily concerned with ensuring that the Fund's assets comprised of plantations are maintained in accordance with good silvicultural practice. The Forestry Manager and its principals are experienced silviculturalists, with extensive experience in the provision of forestry services to other managed investment schemes and currently provide these services to other schemes managed by Lowell Compliance committee The Board has established a compliance committee to monitor Lowell s compliance with the compliance plan. This committee meets at least quarterly and comprises the two independent directors and the Compliance Manager, and is chaired by the independent member who is not associated with the Board Capital Management The principal aim of Lowell s capital management framework for the Fund is to deliver desirable long term strategic outcomes for Unit Holders including the provision of a low risk land asset platform to enable realisation of the combined land and trees situated on Fund land, including by delivering a capital gain for Unit Holders when Properties are sold. The Fund will focus its efforts on divesting its nonviable Properties (being all of the QLD Properties), and realising the value of the African Mahogany plantations which are situated on the NT Property. As set out in the Forester's Report, these plantations are viable and stand to produce a return to Unit Holders on final harvest, anticipated to be 12 years after the Closing Date. In the meantime, it is intended that proceeds of thinning the plantations will help to meet ongoing administrative and operational costs, thereby reducing the annual Contribution Payments required to be made by Unit Holders. By operating the Fund's land free from the interests of the GSHVT Projects, the additional benefit for the Fund is that Lowell expects that the Fund's land will be sold after final harvest, with any net proceeds to be distributed to Unit Holders. Lowell will seek Unit Holders' approval to either sell the Fund's land after final harvest or to do anything else with the Fund's land after this time. Under the terms of this Offer, the number of Units offered is referred to in section 2.7. The Fund's ongoing administrative and operational costs will be met from sales of the QLD Properties, moneys raised under this Offer and the annual Contribution Payments made by Unit Holders and, if possible, from the proceeds of any thinning undertaken on the land. If necessary, the Fund may also raise additional capital in the future to assist with administering and operating the Fund. The Forestry Manager will continuously monitor the condition and value of the Properties and the fixed assets to ensure they are being appropriately maintained. The Forestry Manager will prepare annual operating budgets and recommend an annual Contribution Payment in order to maintain sufficient liquidity in the Fund Distribution Policy The Fund will make final distributions after the Fund terminates and the Properties are sold. In the event that sufficient properties are sold and the transactions generate funds which are surplus to requirements, Lowell will consider the payment of interim distributions. At other times, the Fund will be illiquid and it is unlikely that distributions will be payable. When Lowell makes distributions to Unit Holders, Lowell will only pay distributions by electronic transfer to the Unit Holders nominated bank or other Australian financial institution accounts specified in the Application Form. Lowell will [ : _23] _061.docx Product Disclosure Statement Page 46

49 require your banking details to be specified in the Application Form as no cheques will be issued for distributions. Unit Holders should note that Lowell does not guarantee that distributions will be paid to Unit Holders. Prospective Unit Holders should carefully review Section 7 (Significant Risks) and Section 10 (Tax) before making a decision to acquire Units in the Fund Valuation Policy ASIC s regulatory guidance (RG 46 and RG 120) provides that obtaining an independent property valuation once every 3 years is good practice to satisfy the obligation to obtain regular property valuations under the Corporations Act. The Constitution allows the Properties to be valued at any time and requires the Properties be valued at least: once before30 June 2015; once every 3 years thereafter until 31 March 2023; and annually thereafter. At each reporting date, the carrying value of the Properties will be determined in accordance with the Australian accounting standards, which requires that investment properties be recorded at fair value, reflecting market conditions. The gain or loss arising from any change in the fair value of the investment property is recognised in the income statement for the period in which it arises. To cater for unforeseen circumstances, Lowell will formally adopt, prior to the Closing Date, a written valuation policy which will require, amongst other things: (a) a valuer to: (i) be registered or licensed in the relevant state, territory or overseas jurisdiction in which the property is located (where a registration or licensing regime exists), or otherwise be a member of an appropriate professional body in that jurisdiction; and (ii) be independent; (b) procedures to be followed for dealing with any conflicts of interest; (c) rotation and diversity of valuers; (d) valuations to be obtained in accordance with a set timetable; and (e) for each property, an independent valuation to be obtained: (i) before the property is purchased: (A) for a development property, on an as is and as if complete basis; and (B) for all other property, on an as is basis; and (ii) within two months after the directors form a view that there is a likelihood that there has been a material change in the value of the property The Custodian The Trust Company (Australia) Limited has been appointed as the Custodian to hold the application monies and title to the Properties, as directed by a proper instruction from Lowell Compliance and the Fund The Corporations Act, the Constitution, the Fund s compliance plan and general Australian law regulate the operation of the Fund and the responsibilities and duties of Lowell (and its directors and officers) as the Fund s Responsible Entity. The Board is responsible for the overall corporate governance of Lowell and the operation of the Fund. The Board has accepted that they must exercise their functions diligently and in the best interests of Unit Holders. To achieve this objective the Board has adopted a structure and policies as described below. Lowell has adopted a compliance plan and established an independent compliance committee to monitor its compliance in relation to the Fund. The compliance plan sets out the methods that Lowell will follow in relation to the Fund to ensure that it is complying with the Corporations Act and Constitution. The compliance plan was lodged with ASIC when the Fund was registered as a managed investment scheme. Lowell appoints an independent auditor who will audit the compliance plan annually and report their findings to the Board and to ASIC Conflicts of interest The Corporations Act also imposes a specific duty on Lowell, as an AFSL holder, to manage conflicts of interest. Lowell has an internal policy to manage existing and future conflicts of interest, including potential conflicts between the Fund, Lowell and other funds that Lowell operates. The compliance plan for the Fund includes references to Lowell s policy for dealing with conflicts of interest. Various roles and/or investments held by Lowell and any of its representatives may give rise to conflicts of interest (discussed in further detail in part 6.14), including: Lowell s role as Responsible Entity of the Fund; Lowell's role as Responsible Entity of each of the GSHVT Projects (noting however that those Projects will be wound up if the Fund proceeds); a director of Lowell, Mr Ramsden, is also a former director of the Forestry Manager, and controls less than 10% of the shares in the Forestry Manager; Lowell engaged Terrain Capital Limited to provide advice to it in relation to the offer to be made under the PDS. Mr Ramsden is a director of Terrain (and Lowell) and may be remunerated by Terrain for his services; [ : _23] _061.docx Product Disclosure Statement Page 47

50 Lowell holding Units in the Fund if the Offer under this PDS proceeds. When providing general advice on Units, each Lowell representative is required to disclose the extent to which (if any) they have a legal or beneficial interest in the Units, whether they are related to or associated with Lowell as issuer, and whether they are likely to receive financial or other benefits depending on whether their advice is followed. The Compliance Manager is responsible for advising all directors, officers and representatives of their obligation to disclose any conflicts, and to disclose any interests that they or their associates may hold in the Fund. The Compliance Manager maintains a register recording all reported conflicts and potential conflicts, and tables the register at each quarterly compliance meeting. The Board is ultimately responsible for controlling conflicts, assisted by the Compliance Manager and the compliance committee. Each may obtain independent expert advice, in order to resolve the conflict and determine whether and if so what action it should take Identification and management of conflicts Lowell has established procedures in accordance with ASIC s Regulatory Guide 181 Licensing: Managing conflicts of interest to ensure that any conflict of interest in respect of the directors, compliance committee members and key staff is disclosed and appropriately dealt with. In addition to being the Responsible Entity for the Fund, Lowell is also the responsible entity of other registered managed investment schemes, including the GSHVT Projects. Conflicts that may arise include property acquisitions and disposals between Lowell and related parties, the provision of the forestry management services to the Lessee by AMAT (previously related to Lowell), in carrying into effect termination of the Head Leases, and addressing issues of conflict of duties in Lowell's role as lessor and lessee. The relevant conflicts of interest in respect of the Fund and the Offer under this PDS are: Lowell acts as responsible entity of each of the Fund, the 2007 GSHVT Project and the 2008 GSHVT Project: accordingly, Lowell must delineate its duties in respect of each of these managed investment schemes. This PDS is provided only in respect of the Fund and the interests of existing or prospective Unit Holders in the Fund. Growers in the GSHVT Projects must obtain their own advice and consider the information issued to them by Lowell in respect of the separate GSHVT Projects. Those separate roles also mean that if any issues arise in the process of terminating the Head Leases then Lowell will be in a position of conflict between its respective duties. If these issues could not be resolved, then Lowell may need to seek directions from a Court of competent jurisdiction as to how to resolve the issues. Lowell holds 4,615 class A interests in the GSHVT Projects (amounting to 4,615 'Eligible Interests'). Accordingly, it stands to benefit from being issued with its proportional entitlement to Units in the Fund - and possibly Shortfall Units also subject to paying the subscription amount per Unit. When the GSHVT Projects are wound up, then Lowell will have only one appointment as responsible entity rather than 3: on one view this will benefit Lowell because it will manage the same assets but will be governed by only one set of, considerably simpler, scheme documents. While this could be considered as giving rise to a conflict, Applicants may also take the view that this is likely of benefit to all stakeholders Compliance Committee A key element of the Fund s corporate governance framework is the compliance committee, which is a sub-committee of the Board. Please refer to section 6.7 for further information about the structure of the compliance committee. In summary, the role and responsibilities of the compliance committee is to: (a) (b) (c) (d) monitor to what extent the Lowell complies with the Fund s compliance plan and to report on its findings to the Board; report to the Board: (i) (ii) any breach of the Corporations Act involving the Fund; or any breach of the provisions included in the Constitution in accordance with section 601GA of the Corporations Act; of which the committee becomes aware or that it suspects; report to ASIC if the compliance committee is of the view that Lowell has not taken, or does not propose to take, appropriate action to deal with a matter reported above; assess at regular intervals whether the compliance plan is adequate, report to the Board on the assessment and make recommendations to the Board about any changes that it considers should be made to the Fund s compliance plan. The compliance committee meets regularly and makes recommendations to the Board on matters arising from each of the abovementioned matters Lowell s obligations as an AFSL holder Lowell has obligations under its AFSL and under the Corporations Act. [ : _23] _061.docx Product Disclosure Statement Page 48

51 Those obligations include ensuring that financial services are provided efficiently, honestly and fairly (in addition to the conflict management obligations referred to above). Lowell must also ensure that its representatives are competent to provide the financial services under its AFSL, and do so complying with all legal requirements Independent Professional Advice Lowell s directors and committees may obtain independent professional or other advice at the reasonable cost of Lowell (in its personal capacity). It is intended that Lowell s directors and compliance committee members will consult the Chairman of Lowell before obtaining such advice Complaints Lowell has appointed the Compliance Manager to act as the complaints officer, with authority to review any complaints from Unit Holders or holders of other instruments. The role and responsibilities of the complaints officer include receiving and processing complaints, reviewing and considering complaints in a timely manner and communicating directly with Unit Holders in relation to complaints. A Unit Holder may make a complaint by lodging it at the following address: The Complaints Officer Mr Steven O'Connell Compliance Manager Lowell Capital Limited PO Box 1136 South Melbourne VIC 3205 Business (03) Fax: (03) steveno@lowell.net.au If the complainant is dissatisfied with the decision of Lowell or if a complaint is not resolved within 45 days following receipt of the complaint, the complaints officer will inform the complainant of the reasons for the delay and/or explain that the complainant has the right to refer the complaint to the Financial Ombudsman Service Limited (FOS) for determination. The complainant may also take any appropriate lawful action. Lowell is a member of FOS which is an independent external dispute resolution scheme approved by ASIC, member number Unit Holders can contact FOS by telephone on , or write to: Financial Ombudsman Service Limited GPO Box 3 Melbourne VIC 3001 Website: [ : _23] _061.docx Product Disclosure Statement Page 49

52 7. Significant Risks 7.1. Risk factors The risk factors associated with an investment in Units in the Fund fall into the following broad categories: (a) (b) (c) (d) (e) risks associated with investing in the Fund; risks associated with the Fund s investments; risks associated with funding; risks associated with the management structure of the Fund; and other risks. Lowell considers that the summary below, which is not exhaustive, represents the significant risk factors of which potential Unit Holders should be aware. The risks, if they occur, could materially affect the value of Units, the size of contributions required to be made by Unit Holders, the size and timing of distributions and the underlying value of the Fund s Properties and returns to Unit Holders. Some risks may be unforeseen or unknown to Lowell and other risks, currently believed to be immaterial, could turn out to be material. Lowell recommends that potential investors examine the contents of this PDS in its entirety and consult their professional advisors before deciding whether or not to invest in the Fund Risks associated with investing in the Fund Risk The Fund will not pay distributions You may not be able to access your investment during the life of the Fund The Fund may run out of funds. Description of risk The Fund is illiquid and is unlikely to pay distributions until final harvest of the Trees and/or sale of the NT Property. This means that Unit Holders are unlikely to receive any return from the Fund, save for the balance of any expected rental income and proceeds from the sale of properties (after debt and other expenses). Lowell will seek approval from Unit Holders after final harvest of the Trees to either sell the Fund's land or do anything else with the Fund's land after that time. You are unlikely to be able to access your investment until the end of the Fund. Lowell does not propose to make withdrawal offers if the Fund is illiquid. The Fund may run out of funds. This may conceivably happen at any time, but including if: only the minimum subscription is made by applicants, meaning that a smaller number of Unit Holders must meet all the Fund's costs, and those Unit Holders fail to pay all Contribution Payments in the future; for any other reason, Unit Holders fail to make their Contribution Payments annually (which is a significant issue in the GSHVT Projects), and in either case the Contribution Payments actually made are insufficient to meet the Fund's ongoing costs and expenses. This could lead to: a dilution of Unit Holders' interests, for instance if Lowell needs to raise additional capital and elects to do so from third parties rather than Unit Holders; increased annual Contribution Payments (after the Initial 1 Year Period) if Lowell needs to raise annual contributions to meet shortfalls and Unit Holders' agree by special resolution to an increase of annual Contribution Payments above $15 per annum; a need to wind-up the Fund if those other measures cannot be pursued or are unsuccessful, with the subsequent forced sale of the Fund's assets at an inopportune time, and before maturation of the Trees, or at a time when the value of those assets is depressed. If the Fund is wound up, Unit Holders rank behind all creditors of the Fund Contribution payments may change Unit Holders will rank behind all creditors of the Fund in the event of winding up. This means that, if there is a shortfall of funds, Unit Holders will not receive a full (or any) return of capital. The annual Contribution Payment has been set at $10 including GST per unit per annum, fixed for the first year (the Initial 1 Year Period). If the numbers of Unit Holders of the Fund reduces over time, the level of administrative and operational [ : _23] _061.docx Product Disclosure Statement Page 50

53 Risk You may forfeit your unit if you do not meet annual Contribution Payments Debt Facility Sale of remaining QLD Property The taxation treatment of Units may change Litigation risk for the Fund Description of risk costs per Unit will increase; however, so will the value of each Unit. In setting the initial annual Contribution Payment, Lowell has relied upon information provided by third parties and has prepared a budget of the costs associated with operating the Fund (including holding the Fund s investments) for the year ending 30 June Lowell estimates these costs will total approximately $550,000 for the year ending 30 June 2015 and for each year after that until final harvest subject to CPI increases and other unforeseen cost increases. You should also refer to the 12 month Anticipated Profit and Loss Statement and 12 month Anticipated Cash Flow set out in sections 0 and 4.4. These costs may change, and if these costs increase, the amount of the Contribution Payment may increase or decrease after the Initial 1 Year Period. The amount of the Contribution Payments may also increase or decrease after the Initial 1 Year Period due to a number of other factors including the take up of Units and the number of Unit Holders who make their annual Contribution Payments. However the annual Contribution Payments will be capped at $15 per Unit per annum, above which Lowell will be required to call a meeting of Unit Holders to determine whether the annual Contribution Payments should be increased, or another option should be taken such as winding up of the Fund. Lowell's objective is that from the time that Thinnings is undertaken (approximately 5 years following the Closing Date), the net proceeds available from those Thinnings will be sufficient to meet the ongoing costs of operating the Fund. You are required to make the annual Contribution Payments, possibly for the remaining life of the Fund. You are required to make 3 of these payments in the first 14 months after you apply for Units, being: the Issue Price of $10 per Unit by the Closing Date; a Contribution Payment of $10 per Unit due 4 weeks after the date the last of the Preconditions is satisfied; and a Contribution Payment of up to $15 per Unit, subject to the below qualification, due 1 July However, your financial circumstances may change, meaning you are not in a position to make those payments. In those circumstances, you will be in default under the Constitution and your Units may be forfeited and sold to third parties. This may occur at an inopportune time, when the value of those Units is depressed. You would also be liable to pay the relevant amounts if the forfeited Units could not be sold, or were sold but did not realize sufficient funds to pay the relevant amounts. The Fund had a high cost debt secured by a mortgage (Debt Facility) with the Lender. Lowell has been in dispute with the Lender regarding whether any amount was still owing under the Debt Facility. As at the date of preparation of this PDS settlement terms have been agreed and executed and the Lender has released the mortgages it held. The financial information for the Fund set out in Section 4 has been prepared on the basis that the settlement has been effected on the agreed terms. The remaining QLD Property may not be readily sold, as and when required, due to prevailing market conditions or other factors beyond Lowell s control this would affect how ongoing costs are met, and may require higher annual Contribution Payments. An outline of the taxation features of an Australian taxpayer investing in the Units is set out in Section 10. It is a general outline only and Unit Holders should seek independent advice in relation to their own taxation position. Lowell has been served with proceedings in the Magistrates' Court of South Australia and the County Court of Victoria by RMS, which was engaged to provide certain services in respect of the GSHVT Projects and the Fund. There is a dispute between the parties about these services and whether moneys are payable by Lowell to RMS. RMS claims that there are amounts totaling approximately $183,000 plus costs owing in respect of the GSHVT Projects and the Fund, but has not broken these claimed amounts down between the schemes. [ : _23] _061.docx Product Disclosure Statement Page 51

54 Risk Description of risk Although Lowell will vigorously defend these proceedings, Lowell and the Fund have an exposure in respect of the amounts claimed by RMS, which exposure extends to litigation costs that cannot be accurately quantified at this time. The costs of the proceedings, and any damages or costs awards made in respect of the proceedings, will be met from the Fund Risks associated with the Fund s investments Risk Properties may not be able to be sold readily Early sale of Properties may have adverse effects General economic conditions will impact on the Fund The valuation of the Properties may not be accurate Value of Properties may not increase Damage to the Plantations may reduce rental yield Change in discount rates used in valuing Description of risk The Properties are highly illiquid assets (i.e. cannot be immediately sold to generate cash). The Fund may not be able to sell them at their reasonable value in a timely manner if the Fund faces solvency issues. This could result in a reduction in the value of Units and returns to Unit Holders. It is possible that if the Fund faces solvency issues, the Fund's Properties may have to be sold before harvest. An early sale (forced or otherwise) may have a material adverse effect on the Fund s financial performance, financial position, cash flows, distributions, growth prospects or Unit price if those sales must be undertaken in an abridged time frame, distressed situation, or soft or deteriorating property market. The proceeds may also be affected by the value of the trees standing on the land, and external market forces such as the price of wood chips, availability of resources to process and transport wood products, and general market for timber and related products. The operation of the Fund is affected by a variety of general economic and business conditions, including inflation, interest rates and exchange rates, access to debt and capital markets, and government fiscal, monetary and regulatory policies. Changes in inflation, interest rates, commodity prices and other economic conditions may affect the value of the Fund s assets. Property values and, therefore, the level of growth in value of the Properties, may be affected by these factors, in addition to the risks associated with an investment in any agricultural property. The historical statement of Financial Position as at 31 December 2013 and the Anticipated Balance Sheet reflects the value of the Qld Properties on an inventory basis, which is measured at the lower of cost and net realisable value, and reflects the value of the NT Property on a non-current asset basis at the lower of cost and net realisable value/book value. Accordingly, there is a risk that the Properties are valued higher than set out in the Anticipated Balance Sheet and, accordingly, this should be taken into account when assessing whether or not to participate in the Fund. The value of the Properties may fall as well as rise leading to losses or gains. There is no certainty as to the state of the property market during the life of the Fund and no guarantee can be given as to the resale value of the Properties when they are sold: this applies whether the Properties are sold before, or after, harvest and the Fund's intended investment period. There are a number of general risks associated with investing in this type of property and associated plantations which may affect the value of the Properties, including: (a) general changes in agricultural property values; (b) variances in yield for Plantation Produce on the Properties, due to general economic conditions, a fall in consumer demand, adverse movements in foreign currency exchange rates and/or the imposition of new levies, imposts or taxes; and (c) variance in the price received for Plantation Produce, due to general global economic conditions, a fall in consumer demand, adverse movements in foreign currency exchange rates and/or the imposition of new levies, imposts or taxes. Income of the Fund will depend upon the amount of Plantation Produce available for harvest. If any Plantations are damaged by fire, flood or windstorm, the Fund s income will be reduced as there will be less Plantation Produce available for sale. The Fund may not maintain insurance for this purpose. The future valuations of the Properties will be undertaken using a variety of methods, including the application of discounted cash flow analysis. The valuations will [ : _23] _061.docx Product Disclosure Statement Page 52

55 Risk Properties may reduce value of the Fund s assets Insurance Description of risk therefore be sensitive to the choice of discount rate used. Lowell s directors intend to use market determined discount rates, adjusted for the level of risk, in performing the valuations. If discount rates increase, it may lead to a reduced valuation. The market s valuation of the Fund s assets will also be susceptible to movements in comparable discount rates, which may affect the Fund s financial performance, financial position, cash flows, distributions, growth prospects and Unit price. Lowell will seek to insure the Plantation and other Fund assets, with the premiums to be met as a cost of the Fund, subject to Lowell considering that the premiums and the quantum of insurance cover offered and available, are reasonable and in the best interests of the Unit Holders. If they are not, Lowell may not take out insurance Risks associated with funding Risk Limited access to funding may affect the Fund s financial position Unit holdings may be diluted by future capital raisings Description of risk The Fund s ability to meet its ongoing costs and expenses may partly be dependent on its ability to access funding from external sources, which may be in the form of debt, equity or quasi-equity. There can be no assurance that any such funding will be available to the Fund on favourable terms, or at all, if required. If adequate funds are not available on acceptable terms and no other reasonable options are available, then Lowell may not be able to continue to operate the Fund and, or alternatively, may be forced to sell all of the Properties. This may occur at an inopportune time with the value of the Fund's assets are depressed, and prior to the Trees' maturation. This may have a material adverse effect on the Fund s financial position, financial performance, cash flows, distributions, growth prospects and Unit price. It may also result in the need to wind-up the Fund. Future capital raisings by the Fund may dilute the proportional holdings of Unit Holders, particularly if that capital is raised by issuing units to third parties other than existing Unit Holders, or is raised from Unit Holders but you are unable or unwilling to participate in that capital raising. This may have a material adverse effect on the Fund s financial performance, distributions, growth prospects and Unit price Risks associated with management structure of the Fund Risk Reliance on the Forestry Manager Conflicts of interest with other Lowell managed funds Conflicts of interest Description of risk Unit Holders will have no control over the day-to-day operations, including investment decisions of the Fund. Unit Holders must rely on the judgement of Lowell (and its Board) and the Forestry Manager, their delegates and, in particular, on the judgement of their respective principals, officers and employees to advise on the conduct and affairs of the Fund. The Fund s success depends, in large part, on the performance of this management team. There can be no assurance that Lowell or the Forestry Manager will be able to retain its key personnel. In addition, both Lowell and the Forestry Manager have rights to terminate the Forestry Management Agreement in certain limited circumstances and accordingly there can be no assurance that the Forestry Manager will remain the Forestry Manager of the Fund, nor can there be any assurance that the Fund could remove the Forestry Manager of its own accord or that a suitable replacement would be found. See section 11.4 for further details of the termination provisions under the Forestry Management Agreement. Refer to sections 6.13 for a discussion of each potential conflicts of interest in greater detail. Acquisition opportunities There are no formal arrangements or obligations requiring Lowell to introduce transactions to the Fund directly or through the Forestry Manager and the Fund will not have priority to any investment opportunities within the Fund s investment profile which are identified by the Forestry Manager or Lowell. Accordingly, Lowell and the Forestry Manager can identify investment opportunities for themselves, for other current or future entities. Related party transactions [ : _23] _061.docx Product Disclosure Statement Page 53

56 Risk Description of risk Lowell has 4,615 class A interests in the GSHVT Projects (amounting to 4,615 'Eligible Interests') and may apply for Units in the Fund proportionate to its Eligible Interests. There is a risk that Lowell's interest as responsible entity of the Fund will conflict with its interest as a Unit Holder, and that it will act in a way which favours its interest as a responsible entity. By operation of the Offer under this PDS, and the Shortfall mechanism, Lowell could apply for between 4,615 Units based on the number of Eligible Interests (which would be approximately 10.06% of Units), and up to an additional 9,230 Units (as Shortfall Units) (which could amount to up to another 20.13% of Units) should it have the opportunity to and elects to take up its full allocation of Shortfall Units. However Lowell is required by law if those circumstances give rise to a conflict between the members interests and its own interests, to give priority to the members interests. In addition, Lowell is under Corporations Act duties to ensure the Fund is viable and does not trade while insolvent, and will only operate the Fund if the Minimum Subscription is reached. Again, Lowell's compliance plan in respect of the Fund sets out the processes by which such conflicts must be monitored by the Compliance Committee, mitigated and, if necessary, reported to ASIC Risks associated with the trees Risk The Trees may not grow as well as intended Risk of fire Description of risk The Forester's Report sets out the current condition of the African Mahogany trees standing on the NT Property, The objective of the Fund is to sell the QLD Properties (and the trees standing thereon), and manage only the African Mahogany trees. The condition of those African Mahogany trees may change over time, including on account of prevailing climatic conditions (flood, drought, wind) on the one hand, and the impact of fertilising, pests, weeds, vermin and fire on the other. While Lowell has engaged the Forestry Manager to provide services to the Fund to ensure these forestry management services are provided properly in respect of the Fund, there is a risk that the Trees do not grow as well as anticipated as a result of: these factors and the resources available to Lowell, and the Forestry Manager, to provide suitable or even adequate silvicultural services; the impact which these factors may have regardless of the amount of silvicultural care: good silvicultural practices are not enough to ensure that these factors do not impact adversely on the Trees and the ultimate quantum of Plantation Produce. Fire is a risk to the Trees and the value of the Properties, although the relatively high rainfall received in respect of the Properties does mean the fire risk is reduced to some extent. It is planned to insure against fire provided available premiums are reasonably priced compared to the risk. Fluctuations in timber price Pests, disease, weeds As the Fund has a long investment horizon, with clear fell harvesting not occurring in all likelihood until the period between years after the Closing Date, it is not possible to predict the then prevailing prices which could be achieved when selling the Plantation Produce. This observation applies equally in respect of the sale of Plantation Produce following Thinnings. There is also the chance that, at the time when the timber is to be harvested and sold, the prevailing market conditions at that time may not reflect long term trends, resulting in a reduced return to the Fund. The prevailing market conditions may be represented by domestic and overseas demand and the relative position of those economies, exchange rates, freight costs, the existence of other sources of timber and possibly an over supply of available timber. Pests can impact adversely on the Trees' health and growth rates. The impact on the African Mahogany trees should be less severe given that the Trees are now established, rather than seedlings. [ : _23] _061.docx Product Disclosure Statement Page 54

57 Risk Management risks Single species, single plantation 7.7. Other risks Risk Unforeseen circumstances may arise in respect of the Fund Complex legal documentation Risk upon replacement of responsible entity Description of risk Likewise disease can impact upon the health of Trees, with consequences for yield and growth rates. In severe cases, disease can result in loss of trees even if those trees are mature. The prevalence of weeds in the plantation also has an impact of the overall health of the Trees. If the plantation becomes overgrown then the Trees must compete with weeds for water and soil nutrients. The Forestry Manager will be responsible under the Forestry Management Agreement for all silvicultural care of the Trees. Accordingly, if the Forestry Manager does not meet its obligations under that agreement for instance by failing to ensure that all relevant risks to the Trees are appropriately managed and mitigated - then would impact adversely on the Trees and, ultimately, on the availability of Plantation Produce. If the Forestry Manager fails to perform to an extent that Lowell is required to find a replacement manager, or if the Forestry Manager becomes unable to provide the forestry management services (say, on account of its insolvency or loss of key personnel), then there is a risk that: a replacement manager cannot be found; a replacement manager will not perform better than the existing Forestry Manager; or the costs and expenses associated with replacing and engaging the replacement manager are greater than the costs and expenses which would otherwise have been paid to the Forestry Manager: this may impact on returns to Unit Holders or in increases in the annual Contribution Payment required of Unit Holders. The Trees are all of the one variety and stand on the one plantation. Accordingly, the risks discussed herein relating to the Trees are amplified by the absence of diversification of the Fund's assets. Accordingly, the adverse impact of these risks, if they occur, has a greater likelihood of affecting all of the Trees. Description of risk Major unforeseen circumstances may occur in respect of the Fund, Lowell or their assets and affect the ability of the Fund or Lowell to meet their obligations. Such circumstances in respect of the Fund or Lowell, may include major litigation; natural disaster; significant industrial action; loss of major customers or suppliers, an inability to meet debts as and when they become due and payable, or other causes of business interruption. Such disruptions can have a significant impact of the Fund. It may result in the need to find a new responsible entity, raise additional capital and thereby dilute Unit Holders' proportional entitlements in the Fund, sell Properties together with the Trees standing thereon, or winding-up the Fund before final harvest. All of these disruptions can impact adversely on Unit Holders by increasing costs and reducing (or extinguishing) income and capital available for distribution to Unit Holders. The contracts between the Fund and other parties are fundamental to the success of the investment for Unit Holders. The terms of the documents in many cases contain various representations and indemnities given by the Fund to other parties. Any loss suffered by a party may lead to a claim against the Fund and losses incurred may be paid out of the Fund assets and result in a reduction of the Fund assets. To better appreciate the risks associated with documentation, Unit Holders should also read the summary of Material Documents which is set out in section 11. Should Lowell retire or be removed as responsible entity for any reason, the particular risk and impact on investors of a change in responsible entity is increased expenses associated with the retirement or removal of Lowell as well as the appointment of the new responsible entity. [ : _23] _061.docx Product Disclosure Statement Page 55

58 8. Responsible Entity's financial position A summary of Lowell's financial position, being a summary of its statement of financial position and statement of changes in equity as most recently audited is set out below. A full set of Lowell's financial statements for the year ended 30 June 2013 can be downloaded from Lowell s website, An unaudited Statement of Financial Position as at 31 March 2014 and Statement of Financial Performance for the 9 months to 31 March 2014 has been reviewed by Hayes Knight Corporate and you should refer to their Assurance Report, which is attached as Annexure 1, and the financial information included in section 4. [ : _23] _061.docx Product Disclosure Statement Page 56

59 [ : _23] _061.docx Product Disclosure Statement Page 57

60 9. Fees and Other Costs 9.1. Consumer Advisory Warning Before setting out the fees and other costs of the Fund, we are obliged under Australian Law to provide you with the following Consumer Advisory Warning. Specific information about fees and costs is available at Section 9.2. DID YOU KNOW? Small differences in both investment performance and fees and costs can have a substantial impact on your long term returns. For example, total annual fees and costs of 2% of your fund balance rather than 1% could reduce your final return by up to 20% over a 30 year period (for example reduce it from $100,000 to $80,000). You should consider whether features such as superior investment performance or the provision of better member services justify higher fees and costs. You may be able to negotiate to pay lower contribution fees and management costs where applicable. Ask the Fund or your financial advisor. TO FIND OUT MORE If you would like to find out more, or see the impact of fees based on your own circumstances, the Australian Securities and Investments Commission (ASIC) website has a managed investment fee calculator to help you check out different fee options Fees and Other Costs This section shows fees and other costs that you may be charged. You may be invoiced for these fees and costs, or the fees and costs may be deducted from your money, from the returns on your investment or from the Fund assets as a whole. Tax information is set out in Section 10 of this PDS. You should read all of the information about fees and costs, because it is important to understand their impact on your investment. All fees referred to in this section 9.2 are inclusive of GST less any applicable reduced input tax credits. TYPE OF FEE OR COST AMOUNT HOW AND WHEN PAID Fees when your money moves in or out of the Fund Unit establishment/ transfer fee The fee to register your investment Contribution fee The fee on each amount contributed to your investment either by you or your employer Withdrawal fee The fee on each amount you take out of your investment Termination fee The fee to close your investment A fee of up to $55 for processing and registering each assignment or transfer of Units Nil Nil Nil Payable directly by the Unit Holder upon receipt of an invoice Not Applicable Not Applicable Not Applicable Management Costs The fees and costs for managing your investment Annual Contribution Payment $10 per Unit fixed for the Initial 1 Year Period $10 - $15 per Unit per annum for the period after the Initial 1 Year Period The annual Contribution Payment is estimated at $10 per Unit per annum after the Initial 1 Year Payable annually in advance from 1 July Unit Holders will be invoiced for this amount annually. Invoices are generally issued and payable in the period between 1 June and 31 July. [ : _23] _061.docx Product Disclosure Statement Page 58

61 TYPE OF FEE OR COST AMOUNT HOW AND WHEN PAID Period, and until Thinnings: the precise amount is subject to the number of Unit Holders remaining in the Fund and depends on no significant cost increases. The amount is capped at $15 per Unit per annum: if the annual Contribution Payment required is more than $15 to meet the Fund's expenses, then Lowell will call a meeting of Unit Holders to consider options for the Fund. Service fees Investment Switching Fee The fee for changing investment options Nil Not Applicable 9.3. Additional Explanation of Fees and Other Costs Unless expressly stated otherwise, references to fees in this section 9.3 are stated exclusive of GST Taxation and Stamp Duty Income and capital which you receive from the Fund will be subject to tax. Also, your investment in the Fund will attract a stamp duty liability in Queensland and possibly in the Northern Territory. Please refer to section 10 'Taxation' for further general information in respect of taxation Annual Contribution Payment The annual Contribution Payment is calculated on an annual basis and is fixed for the Initial 1 Year Period. The annual Contribution Payment will be the principal source of income for the Fund and must cover administrative and operational costs, including Transactional and Operational Costs (paragraph below), expenses in the nature of the 'Ongoing Expenses' below (paragraph below), as well as the following management costs, which are further explained in sections to below: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) Responsible Entity Fee (but not the Deferred Management Fees); Forestry Management Fee; Property Management Fee Registry Maintenance Fee; Custodial Fee; Audit Fees; Legal Costs; Interest Costs; Compliance Costs; Rates and Taxes; Liability Insurance; and Administration Transactional and Operational Costs Lowell has incurred the following one-off costs associated with this PDS, and will incur operational costs, which either have been paid or will be paid in future, using the funds raised under this PDS, future annual Contribution Payments, or future borrowing or raising of capital: (a) Printing and postage fees - $17,000. (b) Terrain Capital fees - $100,000. (c) Hayes Knight Corporate fees - $15,000 [ : _23] _061.docx Product Disclosure Statement Page 59

62 (d) Legal fees and other professional services - $250, Ongoing Expenses Ongoing expenses represent the operating expenses incurred in the day-to-day operation of the Fund. There is no limit in the Constitution on the amount that can be reimbursed for expense recoveries, in the proper performance of the Responsible Entity s duties in respect of the Fund. Such reimbursable expenses, taxes and liabilities include, but are not limited to (and some of which may have accrued prior to the date of this PDS): (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) setting up the Fund, including obtaining taxation advice, legal advice, appointing external consultants, negotiating the purchase of the Properties, appointing a manager, preparing this document and any amendments to it (for example, drafting and stamping them as well as lodging them with the ASIC); obtaining approval from Growers in the GSHVT Projects to facilitate the acquisition of the Properties; making Offers or invitations in respect of Units (including the Offer under this PDS), including costs of preparing, lodging, registering, distributing, advertising and promoting any Offer documents including a product disclosure statement, prospectus or information memorandum; marketing and promoting the Fund; underwriting arrangements in respect of the Fund; any further actual or proposed purchase, sale or other dealing with Scheme Property (including investigating and making inquiries into property intended to be acquired for the Fund); the insurance, custody, valuation, maintenance and improvement of Scheme Property; the costs of managing or overseeing any contract or proposed contract relating to the Fund; the administration or management of the Fund and its assets (including financial institution fees and expenses associated with the use of computers for the Fund); calling and holding Meetings, communicating with Unit Holders and implementing any resolution passed by Unit Holders; appointing or engaging any agent (including the Forestry Manager), delegate, custodian, advisor or other person in relation to the Fund (including legal expenses on a full indemnity basis); preparing and auditing tax returns and accounts of the Fund; (m) the retirement or removal of the Responsible Entity, Fund auditor or Compliance Plan auditor as well as the appointment of a new one; (n) (o) (p) (q) (r) (s) (t) any court proceedings, arbitration or other dispute concerning the Fund (including proceedings against the Responsible Entity); the setting up and operation of any compliance committee (including any fees paid to, or insurance premiums in respect of, the compliance committee members); preparing, implementing, amending and auditing of the Compliance Plan; regulatory and legislative compliance in respect of the Fund (including complying with any request or requirement of ASIC); terminating and winding up the Fund; taxes imposed on the Fund or the Responsible Entity in relation to the Fund (but not taxes on the Responsible Entity s own income); and any liability arising in respect of the Fund's assets (for example, calls on shares). [ : _23] _061.docx Product Disclosure Statement Page 60

63 9.3.5 Responsible Entity Fee The Responsible Entity Fee payable to the Responsible Entity is $150,000 per annum plus GST, indexed annually from 30 June 2013 to the greater of 3% or CPI. Each Unit Holder pays a portion of this fee, calculated as the percentage of Units held by the Unit Holder against the total Units on issue. An example is given in the table at 9.4 below. Additionally the Responsible Entity will be paid a fee equal to 3% of Net Sale Proceeds at final harvest. This is the 'Deferred Management Fee' described at paragraph (c), an example of which is given in the table at paragraph The 'Deferred Management Fee' is funded by Net Sale Proceeds at final harvest and is not funded by annual Contribution Payments Forestry Management Fee AMAT is to be paid a management fee of $60 plus GST per hectare of land on which there are trees standing. AMAT will also be paid the deferred management fees set out at paragraph plus 5% of Net sale Proceeds of Sale, plus 25% of net profit attributable to Commercial Thinnings. These are the 'Deferred Management Fees' described at paragraphs (a) and (b), examples of which are given in the table at paragraph The 'Deferred Management Fees' are funded by by Net Sale Proceeds at final harvest or from profits attributable to Commercial Thinnings and are not funded by annual Contribution Payments Property Management Fee In the event Lowell provides property management services to the Fund, Lowell will be entitled to a property management fee that is commercially and reasonably appropriate in the circumstances, provided that the property management fee does not exceed the amount charged to the Fund, by the immediately previous provider of property management services, indexed at the greater of 3% or CPI. Lowell does not intend to charge a Property Management Fee as at the date of this PDS. If it decides to, then it will give Unit Holders 21 days' written notice Registry Maintenance Fee There is payable to Lowell a Registry Maintenance Fee, commencing at, and capped at a maximum of $12,000 plus GST per annum, and indexed annually from 30 June 2013 to the greater of 3% or CPI. Each Unit Holder pays a portion of this fee, calculated as the percentage of Units held by the Unit Holder against the total Units on issue. An example is given in the table at 9.4 below Acquisition, Asset Disposal and Selling Agent Fees When the Fund acquires or disposes of real property the Responsible Entity may be entitled to an Acquisition Fee in the case of an acquisition and may be entitled to an Asset Disposal Fee and/or Selling Agent Fee in the case of a disposal. A worked example of these fees that would be applicable in relation to the acquisition or disposal of a $500,000 property is set out in the table below. This example is illustrative only Asset Acquisition Fee TYPE OF FEE OR COST The fee payable on acquisition of real property with a purchase price of $500,000 CALCULATION OF AMOUNT Minimum Fee (0%) Maximum Fee (2.50% of gross acquisition price) AMOUNT IN $ Nil $13,750 plus $1,375 GST Asset Disposal Fee The fee payable on real property disposed by the Fund with a gross sale price of $500,000 Selling Agent Fee Fee payable to Responsible Entity or other party that provides selling agent services to the Fund for real property with a sale price of $500, % of the gross sale price $8,250 plus $825 GST 2.0% of gross sale price $11,000 plus $1,100 GST Capital works, development and other services fees Lowell may be required to undertake capital works, development or other property-related services for the purposes of development or improvement of the Fund s property. If this is the case, Lowell will be entitled to a [ : _23] _061.docx Product Disclosure Statement Page 61

64 fee which is commercially and reasonably appropriate in the circumstances. Because of the uncertainty of the capital works and development which may need to be undertaken in relation to the Properties over the term of the Fund, it is not possible to estimate the amount of such fees. Lowell will first obtain estimates from at least 2 third party service providers and will not charge in excess of the highest quote for those services Deferred Management Fees Additional management fees will be paid from Net Proceeds of Sale as follows: (a) (b) (c) AMAT will be paid 25% of the net profit attributable to Commercial Thinnings (net profit being calculated after payment of all costs and expenses of thinnings, and after provision for reasonable future operational costs of the Fund); AMAT will be paid 5% of Net Proceeds of Sale and Lowell will be paid 3% of Net Proceeds of Sale. A worked example of these fees that would be applicable in relation to generation of either net profit attributable to Commercial Thinnings, or Net Proceeds of Sale, of $500,000 in either case is set out in the table below. This example is illustrative only. TYPE OF FEE OR COST Deferred Management Fee Commercial Thinnings The fee payable to the Forestry Manager in respect of any net profit attributable to Commercial Thinnings Deferred Management Fee Net Proceeds of Sale The fee payable to the Forestry Manager in respect of any Net Proceeds of Sale. Deferred Management Fee Net Proceeds of Sale The fee payable to Lowell in respect of any Net Proceeds of Sale. CALCULATION OF AMOUNT 25% of the net profit attributable to Commercial Thinnings 5% of the Net Proceeds of Sale 3% of the Net Proceeds of Sale AMOUNT IN $ $125,000 plus $12,500 GST $25,000 plus $2,500 GST $15,000 plus $1,500 GST The 'Deferred Management Fees' are funded by Net Sale Proceeds at final harvest or from profits attributable to Commercial Thinnings and are not funded by annual Contribution Payments Redemption Provision It is not anticipated that the Fund will be liquid. However, Unit Holders will have a right to request redemption of Units while the Fund is liquid. Under the Constitution, the Responsible Entity may determine a redemption provision to allow for costs and disbursements, commissions, expenses, legal fees, brokerage, stamp duty, tax and other costs that may be incurred or are expected to be incurred in connection with the realisation and conversion into cash of certain of the Properties or the valuation and transfer of the Fund's property to satisfy a particular redemption request. The redemption provision will be applied to the amount that would otherwise be payable to a Unit Holder making a redemption request for the redemption of their units. This aims to ensure that other Unit Holders are not impacted by the transaction costs associated with the redemption of units from the Fund by a particular Unit Holder. The redemption provision is an additional cost to you. However, it is not a fee paid to Lowell Capital and is retained in the Fund to cover the actual transaction costs incurred Indirect Cost Ratio (ICR) The ICR is a measure of the ongoing fees and costs (Management Costs) you can expect to pay if you invest in the Fund. It is defined in ASIC Regulatory Guide 97 as The methodology for calculating management costs that are not deducted directly from a member s or product holder s account. The ICR includes investment management fees including Lowell's fees and other expenses, but excludes: (a) (b) direct costs, that you would incur if you invested directly in the underlying asset (e.g. the property management fee); and Fund transaction costs (such as the stamp duty on the purchase of any property investment) that would be incurred by someone investing directly in the underlying assets, [ : _23] _061.docx Product Disclosure Statement Page 62

65 as these expenses are built into the price of the asset purchased or sold and are, therefore, borne by the Fund. The ICR (inclusive of GST and net of any applicable Reduced Input Tax Credits) for the Fund is expected to be 47%. This ratio has been assessed across the life of the Fund including by reference to the impact of the Deferred Management Fees. The example of Annual Fees & Costs in section 9.4 assesses only the annual Contribution Payment, against the costs of operating the Fund each year Taxes Tax information is set out in Section 10 of this PDS Example of Annual Fees & Costs The worked examples in this section are illustrative only. This table gives an example of how fees and costs for this product can affect your investment over a one year period. You should use this table to compare this product with other managed investment products. Example Per Unit Investments of $50,000 made to the Fund (see note 1) Contribution Fees Not applicable Not applicable PLUS Management Costs EQUALS Cost of Fund And, if you leave the fund early, you will not be charged withdrawal fees. Between $10, prescribed for initial 1 Year Period and $15, following Initial 1 Year Period And, for every $50,000 investment in the Fund, which would entitle you to apply for 455 Units, for which you will be charged $4,550 per year - $6,825 per year. If you had an investment of $50,000 in the Fund, represented by 455 Units, you would be charged fees from $4,550 to $6,825 What it costs you would depend on what Lowell sets as the annual Contribution Payment amount for that year. Additional fees may apply: Unit registration/transfer fee - $55. Notes: 1 The calculations are based on an investment of $50,000 in the Fund under this PDS the law requires the PDS to use the example of $50,000. Because Increased Interests, and Eligible Woodlot Classes B D require an investment of $110 per unit (and because that is the rate at which creditor can convert) in the GSHVT Projects convertible into Units in the Fund - the above example allocates 455 Units to the $50,000 investment. By way of example, if an Eligible Applicant held Eligible Woodlots Class B then that applicant would hold 114 Woodlots in the GSHVT Projects and be eligible to apply for 455 Units. 2 The calculations are based on Contribution Payments of between $10 which is prescribed for the Initial 1 Year Period, and the maximum annual Contribution Payments for the period thereafter of $15. [ : _23] _061.docx Product Disclosure Statement Page 63

66 10. Taxation The following is a summary of the Australian income tax implications of an investment in the Units and is based on the income tax law as at the date of this PDS. We recommend that you consult your own professional advisor as the summary contained in this section is necessarily general in nature. Each investor s taxation position will depend on their individual circumstances. It should be noted that taxation laws can change at any time and such change may have adverse taxation consequences on the Unit Holders concerned. The taxation position for Unit Holders and the Fund are discussed separately below Taxation The Fund and distributions The Fund is likely to be taxed as a company because it is not investing in land for the purpose or primarily for the purpose of deriving rent. This will ultimately impact upon returns to Unit Holders. The tax treatment of the Fund can change from year to year. At commencement, the Fund is to be taxed as a company and therefore any distributions would be made on an after tax basis. Distributions paid by the Fund will be franked to an appropriate extent having regard to available franking credits. Lowell will provide Unit Holders with the appropriate documentation showing franking details. It is expected that this will be done annually, after each period ending 30 June, in respect of all distributions paid in the year ended on that 30 June. While the Fund is taxed as a company, the precise manner of application of the franking provisions to the Fund depends on whether the Fund is treated as a public company or a private company under tax law. Lowell expects the Fund to be taxed as a private company, and the information in this Section 10.1 has been prepared on that basis. Lowell will inform Unit Holders if the taxation status of the Fund changes Taxation Implications of investing The taxation information that follows is of necessity general in nature. The tax implications for Unit Holders may differ depending on their individual circumstances. In particular, the information may not apply to a Unit Holder who is regarded as a trader or who holds Units as part of a business activity. Accordingly, Unit Holders are advised to seek professional tax advice in relation to their own positions. This Section is not, and is not intended to be, taxation advice to any Applicant for Units Australian resident Unit Holders The information in this Section 10.3 assumes that a Unit Holder is an Australian resident for tax purposes and is an individual or company which holds its investments in the Fund on capital account or is a complying superannuation fund. Where this Section refers to any amount being included in the cost base of a Unit for capital gains tax purposes, the amount so included should be net of any input tax credit which the Unit Holder received for that amount. (a) Subscriptions and Contribution Payments Please note that deductions may not be available to Growers who elect to apply for Units either in respect of the subscription amounts or the annual Contribution Payments. (b) Income Distribution For Unit Holders who are individuals, complying superannuation funds, or companies, a distribution received will be included in the assessable income of the Unit Holder. Where the distribution is partly or wholly franked, the amount received will be grossed up to reflect the level of franking. A tax offset equal to the gross-up will be available to offset the tax otherwise payable on the Unit Holder s taxable income. An individual or a complying superannuation fund will be entitled to a tax refund to the extent that the tax offsets exceed the total tax payable on its taxable income. A company will be able to convert any such excess into an equivalent grossed-up tax loss available for carry forward. A company will also obtain a franking credit in its franking account for an amount equal to the gross-up. (c) Sale of Units Where a Unit Holder sells Units, a capital gain or loss may arise for capital gains tax purposes. The gain or loss would be expected to be the difference between: (i) (ii) the sale price; and the Unit Holder s application monies (where the Units were issued to the Unit Holder, the Unit Holder s purchase price and purchase fee (where the Units were transferred to the Unit Holder by Lowell), or the Unit Holder s purchase price plus the transfer fee (where the Unit Holder purchased [ : _23] _061.docx Product Disclosure Statement Page 64

67 the Units from someone other than Lowell). Costs relevant to selling Units (being the transfer fee) may also be included. Where relevant, individuals and complying superannuation funds may be eligible to have any gain discounted for capital gains tax purposes (by one-half and one-third respectively) if the Units are held by the individual or complying superannuation fund for more than 12 months. (d) Redemption of Units If Units are redeemed they will be redeemed at net scheme value subject to adjustment for costs incurred in connection with the redemption. The redemption price of a Unit will be treated as disposal proceeds for capital gains tax purposes. Certain provisions in the tax law can, in appropriate cases, treat part of an amount received upon redemption as an unfranked dividend. Lowell does not expect those provisions to operate in relation to redemption of the Units in the Fund. A capital gain or loss may arise for capital gains tax purposes on a redemption of a Unit. The gain or loss would be expected to be calculated as the difference between: (e) (i) (ii) the redemption price; and the sum of the redemption fee and the Unit Holder s application monies (where the Units were issued to the Unit Holder), the sum of the redemption fee and the Unit Holder s purchase price and purchase fee (where the Unit Holder purchased the Units from Lowell), or the sum of the redemption fee and the Unit Holder s purchase price and transfer fee (where the Unit Holder purchased the Units from someone other than Lowell). Imputation benefits. Unit Holders will be subject to the same rules as shareholders in companies in relation to qualifying for the franking benefits described above Non-resident Unit Holders Unit Holders who are not residents of Australia for tax purposes will be liable to Australian dividend withholding tax on any part of their distribution which is neither fully franked nor paid out of the Fund s foreign dividend account. Generally, the rate of tax is: (a) 15% in the case of the residents of most countries with which Australia has double taxation agreement; and (b) 30% in the case of residents of countries with which Australia does not have any such agreement Goods and Services Tax (GST) GST will generally be incurred on each of the fees and charges that apply to the Fund. GST for which the Fund is liable in respect of any matters arising under the Constitution including the performance of any obligations, will be deducted from the assets of the Fund. In specified circumstances, the Fund may receive a credit from the Australian Taxation Office for the GST amount paid. Any of these payments and credits will be reflected in the unit price of the Fund Stamp Duty Queensland As the Fund holds land in Queensland, an acquisition of Units by Growers will constitute a trust acquisition for the purposes of the Duties Act 2001 (Qld) (Qld Act) and therefore be subject to Queensland transfer duty unless the Fund constitutes a public unit trust. To constitute a public unit trust, the Fund must be either a widely held unit trust or a pooled public investment trust. Lowell considers the Fund does not currently satisfy the requirements of a public unit trust for the purposes of the Qld Act, but is likely to satisfy these requirements if the Preconditions are satisfied and Units are issued under the Offer. The Queensland Commissioner of State Revenue (Queensland Commissioner) has a discretion to treat the Fund as a widely held trust if the Queensland Commissioner is satisfied that the Fund will satisfy the requirements of a widely held unit trust within one year of the first issue of units to the public. Therefore, without the Queensland Commissioner exercising his discretion as set out above, the issue of Units to Growers under the PDS will be subject to Queensland transfer duty. The amount of duty payable by each Grower will be calculated based on the proportion of the market value of Queensland land that the issued units represent. Lowell does not currently intend to apply for the Queensland Commissioner to exercise his discretion given the relatively low value of the Queensland property. Northern Territory Unlike Queensland, the Stamp Duty Act 1978 (NT) (NT Act) does not impose transfer duty on trust acquisitions. [ : _23] _061.docx Product Disclosure Statement Page 65

68 However, as the Fund holds land in the Northern Territory with a current market value of more than $500,000, the Fund will be a landholder for the purposes of the Northern Territory landholder rules. The NT Act imposes landholder duty on the issue of the Units to a Grower, if the Grower makes a relevant acquisition. Sections 56P and 56Q of the NT Act provides that a Grower would make a relevant acquisition if the Grower: (a) (b) (c) acquires 50% or more of the total Units on issue in the Fund; acquires less than 50% of the Units on issue in the Fund, but when aggregated with Units acquired by or held by related persons of the Grower, the total units held by the Grower and the related persons amount to 50% or more of the total Units; or already holds 50% or more of the Units on issue in the Fund and the Grower acquires further units in the Fund. There is a risk of the Northern Territory Commissioner (NT Commissioner) forming the view that the issue of Units to a Grower pursuant to the PDS is a relevant acquisition under (b) above because either: the NT Commissioner forms the view the issue of Units under the PDS arises from substantially one transaction; and/or if the 2007 GSHVT Project and the 2008 GSHVT Project are not wound up by the time the Growers acquire their Units, the NT Commissioner forms the view that each of the Growers are related to Lowell. This is because Lowell is the responsible entity of both the GSHVT Projects and the Growers are beneficiaries of each of the those schemes. Consequently, there is a risk that a Grower will be required to pay landholder duty on the issue of the Units to the Grower. The amount of landholder duty payable will be calculated based on the proportion of the market value of Northern Territory land that the issued units represent. For example, a Unit Holder holding 10% of the total Units in the Fund, would be liable for landholder duty calculated at ad valorem rates on 10% of the current market value of the NT Property at the time of issue which, in the Directors opinion, will be higher than the value applied in the Anticipated Balance Sheet. If the NT Property has a current market value of $1,024,703 then, based on current ad valorem rates, the landholder duty liability would be $2, Unit Holders will need to take their own advice as to the extent of this risk. If a Unit Holder is required to pay landholder duty on the issue of Units to the Unit Holder, the Fund will be jointly and severally liable for the duty payable. This means that if the Unit Holder fails to pay landholder duty, the Fund may be required by the NT Commissioner to pay the landholder duty liability. In these circumstances, Unit Holders will indirectly bear the cost of the landholder duty as an expense of the Fund. [ : _23] _061.docx Product Disclosure Statement Page 66

69 11. Material Documents Summary The following is a summary of material documents relating to the Fund. This summary is not exhaustive and you should refer to (and the following is subject to) the Constitution, Corporations Act, and the general law for further information about the rights attaching to Units. The actual terms of the relevant document will prevail over this summary if there is any inconsistency. The summaries are not exhaustive, as many of the documents are lengthy and complex in nature. CONTRACT PARTIES PURPOSE SECTION Fund Establishment Constitution Lowell and the Unit Holders Sets out rights and obligations of the relevant trustee (Lowell) and beneficiaries (Unit Holders) Compliance Plan Lowell Sets out the compliance arrangements and measures of Lowell in line with s601ha of the Act. Section 11.2 Section 11.6 Property Management Forestry Management Agreement Lowell and the Forestry Manager Sets out the management services that the Forestry Manager will provide to Lowell. Custody Agreement The Custodian and Lowell Sets out that the Custodian will hold the assets of the Fund on trust for Lowell. Section 11.4 Section The Constitution The Fund is governed by a Constitution dated 8 November 2011, as amended by the First Deed of Variation, the Second Deed of Variation and the Third Deed of Variation (which will have been lodged with ASIC by the date this PDS is available to applicants). The Fund is governed by the Constitution and the Corporations Act. The Constitution and any amendments to it have been lodged with ASIC. The Constitution contains provisions relating to: the rights and obligations of Unit Holders and of Lowell acting as the Responsible Entity; the commencement of the Fund; the offer of Units; the rights and obligations attaching to Units (more information about contribution payments and forfeiture is set out in section below); the method for calculating the Issue Price and withdrawal price; the fees and expenses that Lowell is entitled to recover from the Fund (more information on the fees is set out in section 9); Lowell s rights to invest, borrow and grant security over the Fund s assets; the voting rights of Unit Holders; distributions of income and capital; the transfer and valuation of Units; complaints handling procedures; and the liability of Unit Holders (which is limited to the Issue Price of Units held by the Unit Holder, plus contribution payments in respect of those Units, unless Lowell incurs a liability for tax as a result of the Unit Holder s action or inaction) Contribution Payments and forfeiture Lowell will issue annual invoices for each Unit Holder's Contribution Payments. Each Unit Holder must pay the contribution. Where the contributions remain unpaid by the required date, interest accrues. If all or part of a contribution is not paid by the required date, Lowell may apply any amount payable to the Unit Holder to pay amounts unpaid. Units may be forfeited where a Unit Holder does not comply with a forfeiture notice. Lowell may sell the forfeited unit at a price not less than the price required to be paid on the redemption of a Unit, being at Net Scheme Value subject to adjustment for costs incurred in connection with the redemption. A Unit Holder whose units have been forfeited ceases to be a unit holder in the Fund, however the Unit Holder remains liable for satisfying the call, all costs and interest Capacity to raise additional capital At any time Lowell may raise additional capital for the Fund by accepting subscriptions for additional Units in the Fund. Lowell will calculate the application price in accordance with the Constitution. Lowell may enable existing Unit Holders, or third parties, to apply for those additional Units provided that the application price is calculated and paid by the incoming Unit Holder. In other words, existing Unit Holders do not have pre-emptive rights in respect of any such capital raising, unless the Units [ : _23] _061.docx Product Disclosure Statement Page 67

70 are to be issued at a discount to the ordinary issue price Limitation on Responsible Entity s liability Without limiting its liability under the Corporations Act, if Lowell acts in good faith and without negligence, it is not liable in contract, tort or otherwise to Unit Holders for any loss or damage suffered in any way relating to the Fund Indemnities Lowell is to be indemnified out of Fund property for any loss, damage, expense or other liability incurred by it in properly performing or exercising any of its powers, duties or rights in relation to the Fund Termination of the Fund On termination of the Fund, Lowell must wind up the Fund in accordance with the procedure set out in the Constitution or any court orders under the Corporations Act. To wind up the Fund, Lowell must liquidate the Fund property and pay expenses of winding up, pay all other fees, expenses and liabilities of the Fund, pay any preferential payments to Unit Holders in accordance with class rights and, subject to class rights, distribute the balance to Unit Holders in proportion to the number of fully paid units held by them. A copy of the Constitution and the Compliance Plan relating to the Fund, have been lodged with ASIC and may be viewed or a copy obtained from any ASIC office. A copy is also available from Lowell Capital Limited, 8 Chapel Street, Richmond, VIC 3121 or by writing to Lowell Capital Limited at 8 Chapel Street, Richmond, VIC 3121, or by telephoning during normal business hours Compliance plan A Compliance Plan has been approved by the Board for the Fund which sets out operating procedures under the Constitution and Corporations Act and the process by which the compliance committee oversees the Fund s compliance. A copy of the Fund s Compliance Plan has been lodged with ASIC and may be viewed or a copy obtained from any ASIC office. A copy is also available by contacting Lowell during normal business hours on any of the contact details set out in the Corporate Directory of this PDS. Important features of the compliance plan include: Compliance program The Board is directly responsible for compliance matters. As a committee of the Board, the compliance committee assists the Board with the compliance function. The compliance plan sets out the structure of the compliance framework including any functions which Lowell outsources. The compliance plan sets out the duties and responsibilities of Lowell as Responsible Entity, the Compliance Manager and the compliance plan auditor Role of Compliance Committee The Compliance Committee s role is to ensure compliance with the Fund s Constitution and compliance plan. The Compliance Committee consists of at least three members, being a minimum of two external members, one of whom will be the Chairperson, and may include an Executive Director of the Responsible Entity. The Board has adopted terms of reference for the Compliance Committee and each member of the Compliance Committee has entered into a service agreement with Lowell as Responsible Entity. The Compliance Committee meets at least four times each calendar year, unless agreed otherwise, and will report to the Board on compliance matters Compliance plan requirements The compliance plan sets out a table of requirements including the source for compliance, the compliance measure, the responsible person for monitoring compliance and the frequency. The compliance requirements encompass: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) General requirements; Compliance plan audit requirements; Product distribution; Investment management; Trust operations and client services; Accounting and finance; Scheme assets; Appointment and monitoring of custodian; The Constitution; AFSL including breaches; Compliance committee; External service providers; (m) Education and training; (n) (o) (p) Complaints handling; Record keeping; and Risk management Forestry Management Agreement Lowell has appointed the Forestry Manager to provide forestry management services in relation to the Fund on the terms and conditions in the Forestry Management Agreement. The Forestry Manager must provide all necessary property management and silvicultural services in relation to the Properties and the Trees. Key services include assisting Lowell in relation to: (a) (b) caring for the Trees as and when required; organising and arranging for Commercial and Non-Commercial Thinnings, and for the trees [ : _23] _061.docx Product Disclosure Statement Page 68

71 (c) (d) (e) to be clear felled when they have reached harvest maturity; organising and arranging for the pruning of the Trees; preparing a report on the state of the Properties by 30 November each year; carrying out Lowell's obligations under any agreement entered by Lowell for the sale of Plantation Produce. The key terms of the Forestry Management Agreement are: (a) (b) (c) (d) (e) the agreement commences on the date all existing leasehold interests over the Land are terminated and is on foot until the earlier of: (i) (ii) (iii) 1 September 2014 if the Fund does not achieve the Minimum Subscription and the GSHVT Projects have not been wound-up; the agreement is terminated for cause; the Fund is terminated; (iv) 5 years from the Commencement Date, unless renewed by agreement for a further term or third term of 5 years; the Forestry Manager is entitled to a management fee of $60 per hectare plus 5% of Net Sale Proceeds and 25% of net profit attributable to Commercial Thinnings; the Forestry Manager is entitled to be reimbursed for certain costs and expenses, such as taxes or fees payable to regulatory authorities or where those expenses are incurred with Lowell's consent; the Forestry Manager must prepare an annual Management Plan including budget; the Forestry Manager must use its best endeavours to procure an agreement for the purchase and processing of Thinnings and Plantation Produce. The fees payable under the Forest Management Agreement are listed at paragraph Custody Agreement The Trust Company (Australia) Limited ACN has been appointed as an independent custodian to hold all the assets of the Fund on trust The responsibilities of the Custodian include: (a) (b) (c) entering into contracts or effecting transactions in relation to the Fund's assets, on the responsible entity's behalf; holding the Fund's assets on the responsible entity's behalf; opening and maintaining bank accounts to hold moneys of the Fund, including: (i) (ii) cash; application moneys; and (d) (e) (iii) rent and other income of the Fund; providing Security Interests in respect of the Assets of the Fund; and Lowell retains the discretion to appoint or replace the Custodian from time to time. Under the Custody Agreement the Custodian is to be paid a custody fee of the greater of: (a) (b) $25,000 per annum subject to annual CPI adjustment from the date the Custodian first took custody of a trust asset in July 2012; and 2.5% of gross asset value of the Fund's assets Auditor engagement Hayes Knight Audit Pty Ltd ACN has been appointed as the Fund's auditor. Hayes Knight Audit has been engaged to conduct the statutory audit in accordance with the Australian Accounting Standards to provide reasonable assurance as to whether the Fund's financial report is free from material misstatement. The terms of Hayes Knight Audit's engagement are ongoing as regulated by the Corporations Act, which sets out the limited circumstances in which an auditor can resign ore be replaced. The fees payable to Hayes Knight Audit are based on the time required by the individuals assigned to the engagement plus direct out of pocket expenses. The fees for the conduct of the audit were $4,000 for the year ended 30 June 2013 and $2,500 for the year ended 30 June Replacement of responsible entity If it becomes necessary to replace Lowell as responsible entity: (a) subject to the general risks of the Fund identified in section 7, there are few risks to a replacement responsible entity being able to access the resources required to operate the Fund as the Constitution requires that Lowell vest all Fund property in the new responsible entity and the new responsible entity automatically takes on Lowell's rights and obligations under the Forestry Management Agreement; (b) (c) (d) under the Fund's constitution, Lowell is entitled to agree with a replacement responsible entity to be reimbursed by or to receive a benefit from the replacement responsible entity, including by way of consideration for a sale of Lowell's business managing the Fund. There is no fixed method for calculating this benefit; as noted above, a new responsible entity automatically takes on Lowell's rights and obligations under the Forestry Management Agreement; Lowell is only entitled to fees on an accrual basis and its fees will be adjusted on a [ : _23] _061.docx Product Disclosure Statement Page 69

72 (e) proportionate basis where it ceases to perform its duties. There is otherwise no obligation on Lowell to repay any fees already paid to an incoming responsible entity; and as discussed at section 7.7, there is a risk that the Fund, and consequently investors will be required to meet increased expenses resulting from the retirement or removal of Lowell and consequent appointment of the new responsible entity. [ : _23] _061.docx Product Disclosure Statement Page 70

73 12. Additional Information Each of: The Trust Company (Australia) Limited; Hayes Knight Corporate Pty Ltd; Hayes Knight Audit Pty Ltd; John Turner of Forsci Pty Ltd; and AMAT (together, the Named Parties) has consented to being named in this PDS in the form and context in which it is named, and has not withdrawn its consent before the date of this PDS. None of the Named Parties have authorised or caused the issue of this PDS and takes no responsibility for any part of this PDS other than references to its name. None of the Named Parties make any representations as to the truth or accuracy of the contents of this PDS other than references to its name. None of the Named Parties make any representation regarding, or accept any responsibility for, any statements or omissions in or from any other part of this PDS. None of the Named Parties make any representation as to the performance of the Units, the maintenance of capital or any particular rate of return Disclosure of directors interests Lowell has established procedures to ensure that any conflict of interest in respect of the directors is disclosed and appropriately dealt with. Any changes to a director s interests is disclosed at the next available Board meeting and reviewed by all Board members against the conflicts of interest policy to ensure that conflicts are appropriately managed and, if necessary, avoided. Michael Ramsden, a director of Lowell: has an indirect shareholding in, and is a director of, Terrain Capital Limited. Terrain will receive $100,000 for providing advisory services to Lowell in relation to preparation of this PDS, and the proportion of the meeting documents as well as Structural advice and the Offer it describes, and Mr Ramsden may be remunerated by Terrain for the services he provides to Terrain for that purpose; and was formerly a director of AMAT, and now controls (through a related entity) less than 10% of the shares in AMAT Related party transactions One of the Preconditions is for the Growers of the GSHVT Projects voting to wind-up those schemes. Lowell acts as responsible entity of each of the Fund, the 2007 GSHVT Project and the 2008 GSHVT Project. Accordingly, if those schemes are wound up then Lowell will be separately responsible, in its different capacities, for windingup the GSHVT Projects, as well as accepting subscriptions to the Fund. Related party transactions flowing from this will include: Terminating the Head Leases this must be effected by Lowell acting in the dual capacities as responsible entity of the GSHVT Projects on the one hand (as lessees), and responsible entity of the Fund on the other hand (as lessor); Issuing Units to itself as a Unit Holder - Lowell holds 4,615 class A interests in the GSHVT Projects. Accordingly, provided that Lowell pays the Issue Price it stands to benefit from being issued with its proportional entitlement to Units in the Fund. In all cases where the Fund transacts with a related entity, it will either conduct the transaction on commercial terms and at arm s length, that is, on terms and conditions no more favourable than would apply if the other party were not a related party of Lowell, or Lowell will obtain the prior approval of Unit Holders. In general terms, arm s length terms and conditions will be determined in accordance with ASIC Regulatory Guide 76 Related Party Transactions. Lowell's compliance plan in respect of the Fund sets out the processes by which such conflicts must be monitored by the Compliance Committee, mitigated and, if necessary, reported to ASIC Ongoing Disclosure If there are more than 100 Unit Holders in the Fund, the Fund will be a disclosing entity under the Corporations Act and as such the Fund will be subject to regular reporting and disclosure obligations. Copies of documents lodged with ASIC may be viewed on Lowell s website obtained from or inspected at an ASIC office, or obtained from Lowell free of charge upon request. You can request from Lowell, in writing, a copy of: (a) (b) (c) the Fund's annual financial report most recently lodged with ASIC. As at the date of this PDS no annual financial report had been lodged with ASIC; any half-year financial reports of the Fund lodged with ASIC by the scheme after the lodgement of that annual financial report and before the date of this PDS; or any continuous disclosure notices given by the Fund after the lodgement of that annual report and before the date of this PDS. Throughout the life of the Fund, Lowell will maintain a register of Unit Holders at its office. The register may be inspected in accordance with the Corporations Act Supplementary PDS A Supplementary PDS will be issued if Lowell becomes aware of any of the following matters between the issue of this PDS and the date the Units are issued: (a) a material statement in this PDS is misleading or deceptive; [ : _23] _061.docx Product Disclosure Statement Page 71

74 (b) (c) (d) there is a material omission from this PDS; there has been a significant change affecting a matter included in this PDS; or a significant new circumstance has arisen and it would have been required to be included in the PDS Labour standards, and environmental, social or ethical considerations In view of the nature of investment in agribusiness properties, Lowell will not take into account labor standards, or social or ethical considerations in selecting, retaining or realizing investments for the Fund. Environmental issues will be taken into account to the extent required by environmental laws relating to the Fund's land and Trees. As Responsible Entity, Lowell will act in the best interests of Unit Holders and will at all times seek to deal with Unit Holders and all persons associated with the Fund in a fair and ethical manner. Lowell appreciates that native vegetation is a valuable asset, and generally aims to retain this vegetation and existing community plantings in order to promote biodiversity and provide wildlife corridors Privacy The information requested in the accompanying Application Form is used by Lowell for the primary purpose of establishing and administering your investment in the Fund. You may request access to the information held by Lowell about you and your investment. It is your responsibility to advise Lowell of any changes to such information you have provided. From time to time, Lowell may disclose your information (or parts thereof) to external parties who act on Lowell s behalf in the operation of its business. Lowell may also disclose your information to external parties on your behalf, such as your financial advisor or taxation advisor, unless you have instructed otherwise. Lowell and it related bodies corporate may use your information on occasion to advise you about other services or products offered by Lowell or its related bodies corporate, but you may elect to stop receiving such information at any time. Please contact Lowell on if you wish to update or request access to your information or if you have any queries regarding our Privacy Policy. [ : _23] _061.docx Product Disclosure Statement Page 72

75 13. Glossary The following terms are used in this PDS: Additional Contributions AFSL AMAT or Forestry Manager Anticipated Balance Sheet Anticipated Cash Flow Anticipated Profit and Loss Applicant Application Form ASIC Assurance Report Board Closing Date Commercial Thinnings Compliance Manager The Additional Contributions payable over the Five Year Period by each Grower in the GSHVT Projects in relation to Woodlots. These are not payable by Unit Holders, but are relevant to calculating each Grower's entitlement to apply for Units in the Fund. Australian financial services licence. AMA Teak Pty Ltd ACN The Balance Sheet of the Fund as set out in Section 4.5 as anticipated by Lowell for the 12 months to 31 March 2015, assuming that the Preconditions are satisfied and subject to the Stated Basis of Preparation. The Pro Forma Cash Flow statement for the Fund as set out in Section 4.4 as anticipated by Lowell for the 12 months to 31 March 2015 assuming that the Preconditions are satisfied and subject to the Stated Basis of Preparation. The Pro Forma Profit and Loss statement for the Fund as set out in Section 4.3 as anticipated by Lowell for the 12 months ending 31 March 2015, assuming that the Preconditions are satisfied and subject to Stated Basis of Preparation. A person who applies for Units Offered under this PDS. Application form accompanying this PDS. Australian Securities and Investments Commission. The report set out in Annexure 1 setting out an independent limited assurance report on Lowell Capital Ltd HVT Land Scheme historical and pro forma historical financial information. The board of directors of Lowell. 22 August 2014 or such later date as Lowell determines. Thinning the Trees where the sale of the resulting timber thinnings results in a net profit taking into account all costs and expenses associated with thinning and selling the timber thinnings. The person nominated from time to time by Lowell to fulfil this role. Constitution The constitution of Lowell Capital Limited HVT Land Scheme ARSN Contribution Payment Corporations Act CPI The annual contribution payment payable by Unit Holders of the Fund. Corporations Act 2001 (Cth). The annual Consumer Price Index All Groups Weighted Average for the Eight Capital Cities last published by the Australian Bureau of Statistics before 30 June in every year, commencing in Custodian The Trust Company (Australia) Limited ACN Debt Facility Direct Harvesting Costs Eligible Interest Eligible Woodlot Final Date The debt facility with the Lender, which was used by the Fund for the Land Transaction. All costs directly incurred in the harvesting and delivery of timber produce in accordance with the Forestry Management Agreement, including logging, loading, harvest roading and landing construction, cartage, road user charges specific to cartage of forest products, regulatory fees, debarking, sapstain spraying, scaling, branding, port costs and export freight. Includes Eligible Woodlots and Increased Interests. A Woodlot originally issued to a Grower in relation to which Additional Contributions for which the Grower has been invoiced in 2010, 2011, 2012 and 2013 have been paid. The date which is 10 business days after the Closing Date. Product Disclosure Statement Page 73 [ : _23] _061.docx

76 First Deed of Variation Forester's Report Forestry Management Agreement Forestry Manager of AMAT FOS The deed of variation which varied the Constitution, lodged with ASIC on 30 May The report set out in Annexure 2 describing the condition of the Northern Territory African Mahogany plantations. The agreement under which the Forestry Manager is to provide the management services described in Sections 6.6 and 0. AMA Teak Pty Ltd ACN Financial Ombudsman Service. Fund Lowell Capital Limited HVT Land Scheme ARSN Gross Proceeds of Sale Grower GST GSHVT Projects GSHVT Project Creditor Head Leases Increased Interest means the gross amount received by the Responsible Entity (inclusive of GST) from: (a) the sale of timber produce (excluding any Commercial Thinnings) in accordance with the terms of the Forestry Management Agreement; (b) any insurance proceeds received in respect of loss or damage to the Land and Trees. A member of the GSHVT Projects. Goods and services tax. Great Southern 2007 High Value Timber Project ARSN and Great Southern 2008 High Value Timber Project ARSN , and GSHVT Project means one of these, as applicable. Those creditors of the GSHVT Projects with debt outstanding as at the Closing Date. The leases between the Custodian as lessor (as custodian for Lowell as responsible entity for the Fund) and Lowell as responsible entity of the GSHVT Projects, in respect of the Properties, and which Head Leases are to be terminated as one of the Preconditions. Interests relating to increased contributions or interests issued by Lowell equivalent to a Non-Contribution Additional Fee (the fee paid by a Grower who has forfeited their entitlement by failing to pay Additional Contributions). Initial 1 Year Period The 1 year period from 1 July 2014 to 30 June Issue Date 30 June 2014 Issue Price Land Transaction $10.00 per Unit. The acquisition of Properties in July 2012, and the purchase and on-sale of certain properties. Lender Balanced Securities Limited ACN Lessee Lessor Lowell Net Proceeds of Sale Net Scheme Value Non-Commercial Thinnings Non-contribution Additional Fee Lowell Capital Limited as responsible entity for the GSHVT Projects. The Custodian. Lowell Capital Limited ACN in its capacity as Responsible Entity for the Fund, unless otherwise specified. Net Proceeds of Sale means the Gross Proceeds of Sale less Direct Harvesting Costs. This definition is set out in the Forestry Management Agreement. Has the meaning given in the Constitution. Means thinning the Trees where the sale of the resulting thinning results in all the costs and expenses associated with the thinning exceeding the sales revenue. A fee payable under the constitutions for the GSHVT Projects, which is relevant to the calculation of Growers' entitlement to apply for Units under this PDS. The Noncontribution Additional Fee was the cumulative total of rights - forfeited by Growers who did not pay all annual contributions to the GSHVT Projects - to share in net Product Disclosure Statement Page 74 [ : _23] _061.docx

77 proceeds of sale in respect of Woodlots. The right to share in those net proceeds accrued to Growers who paid additional contributions, and to Lowell, in proportions set by the GSHVT Projects' constitutions, and dependent on the number of Growers who paid additional contributions. NT Property Offer PDS Plantation Produce Preconditions Properties QLD Properties Responsible Entity Responsible Entity Fee Second Deed of Variation Shortfall Units Stated Basis of Preparation Third Deed of Variation Thinnings Trees Unit Unit Holder Woodlot You or Unit Holder The Property which is located in the Northern Territory. The offer of Units under this PDS. This product disclosure statement. The timber produce generated from the trees grown on the Properties. The conditions described in Section 2.1 which must be satisfied in order for the issue of Units under this PDS to proceed. The properties owned by the Fund from time to time. The properties owned at the date of this PDS are listed at Section 3. Those of the Properties which are located in Queensland. The responsible entity of the Fund. The fee payable to the Responsible Entity for the provision of responsible entity services. The deed of variation which varied the Constitution, lodged with ASIC on 6 August The Units, if any, which may be available for additional applications, in the manner set out in part 2.6. The stated basis of preparation of the financial information, and the adjustments and assumptions, set out in Section 4.6. The deed of variation dated on or about the date of this PDS which varied the Constitution. The thinning of the Trees undertaken to generate a net return to the Fund. The trees standing on the Properties, being teak in respect of the QLD Properties and African Mahogany in respect of the NT Property. Units in the Fund. Any person who is registered as holding a Unit in the Fund. Any woodlot issued under the relevant GSHVT Project. A person (or in the case of joint Applicants, those persons) who apply(ies) for Units pursuant to an application under this PDS and who remain(s) the registered holder for the time being of any relevant Units; and the expression all Unit Holders means all persons who have applied for Units under this PDS or previously, or have had Units transferred or transmitted to them, and remain the registered holders for the time being of any relevant Units. Product Disclosure Statement Page 75 [ : _23] _061.docx

78 Annexure 1: Assurance Report Product Disclosure Statement Page 76 [ : _23] _061.docx

79 Hayes Knight Corporate Pty Ltd ABN: Level 12, 31 Queen St, Melbourne, VIC 3000 T: F: INDEPENDENT LIMITED ASSURANCE REPORT ON LOWELL CAPITAL LTD HVT LAND SCHEME HISTORICAL AND PRO FORMA HISTORICAL FINANCIAL INFORMATION We have been engaged by Lowell Capital Ltd HVT Land Scheme to report on the historical financial information for the 9 month period ended 31 March 2014 and pro forma forecast for the 12 month period ending 31 March 2015 of Lowell Capital Ltd HVT Land Scheme for the inclusion in the public document dated on or about 23 April 2014 and relating to the issues of 43,089 units in the scheme. Expressions and terms defined in the document have the same meaning in this report. SCOPE HISTORICAL FINANCIAL INFORMATION You have requested Hayes Knight Corporate Pty Ltd to review the following historical financial information of Lowell Capital Ltd HVT Land Scheme (the responsible party) included in the public document: The Statement Financial Performance for the 9 month period ended 31 March 2014 based on management accounts; The Statement Financial Position for the 9 month period ended 31 March 2014 based on management accounts; The historical financial information has been prepared in accordance with the stated basis of preparation, being the recognition and measurement principles contained in Australian Accounting Standards and the company s adopted accounting policies. The historical financial information has been extracted from the accounting records of Lowell Capital Ltd HVT Land Scheme, for the 9 month period ended 31 March The historical financial information is presented in the public document in an abbreviated form, insofar as it does not include all of the presentation and disclosures required by Australian Accounting Standards and other mandatory professional reporting requirements applicable to general purpose financial reports prepared in accordance with the Corporations Act An independent Member of the Hayes Knight Group and Morison International. Liability limited by a scheme approved under Professional Standards Legislation. Associated Offices : Adelaide Auckland Brisbane Darwin Melbourne Perth Sydney

80 PRO FORMA FORECAST You have requested Hayes Knight Corporate Pty Ltd to review the pro forma forecast Statement of Financial Position and Statement of Financial Performance for the 12 month period ending 31 March 2015 referred to as "the pro forma forecast". The pro forma forecast has been derived from Lowell Capital Ltd HVT Land Scheme s forecast, after adjusting for the effects of the pro forma adjustments described in section 4 of the public document. The stated basis of preparation used in the preparation of the pro forma forecast, being the recognition and measurement principles contained in Australian Accounting Standards and the company s adopted accounting policies. Due to its nature, the pro forma forecast does not represent the company's actual or prospective financial position, and/or financial performance. We have expressly not reviewed Lowell Capital Ltd consolidated audited financial statements. We have expressly not reviewed the financial information of Great Southern High Value Timber 2007 and Great Southern High Value Timber We have limited our report to the specific items outlined in the above scope. DIRECTORS' RESPONSIBILITY The directors of Lowell Capital Ltd are responsible for the preparation of the historical financial information and pro forma historical financial information, including the selection and determination of pro forma adjustments made to the historical financial information and included in the pro forma historical financial information. This includes responsibility for such internal controls as the directors determine are necessary to enable the preparation of historical financial information and pro forma historical financial information that are free from material misstatement, whether due to fraud or error. OUR RESPONSIBILITY Our responsibility is to express a limited assurance conclusion on the financial information based on the procedures performed and the evidence we have obtained. We have conducted our engagement in accordance with the Standard on Assurance Engagement ASAE 3450 Assurance Engagements involving Corporate Fundraisings and/or Prospective Financial Information. A review consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain reasonable assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Our engagement did not involve updating or re-issuing any previously issued audit or review report on any financial information used as a source of the financial information.

81 CONCLUSIONS HISTORICAL FINANCIAL INFORMATION Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that the historical financial information, as described in section 4 of the public document, and comprising: The Statement Financial Performance for the 9 month period ended 31 March 2014 based on management accounts; The Statement Financial Position for the 9 month period ended 31 March 2014 based on management accounts; and are not presented fairly, in all material respects, in accordance with the stated basis of preparation as described in section 4 of the document. PRO FORMA FORECAST Based on our review, which is not an audit, nothing has come to our attention that causes us to believe that: the director s best-estimate assumptions used in the preparation of the pro forma forecast Statement of Financial Performance of Lowell Capital Ltd HVT Land Scheme for the 12 month period ending 31 March 2015 do not provide reasonable grounds for the pro forma forecast; and; in all material respects, the pro forma forecast: o o is not prepared on the basis of the directors best-estimate assumptions is not presented fairly in accordance with the stated basis of preparation, being and The pro forma forecast itself is unreasonable. The pro forma forecast have been prepared by management and adopted by the directors in order to provide prospective investors with a guide to the potential financial performance of Lowell Capital Ltd HVT Land Scheme for the 12 month period ending 31 March There is a considerable degree of subjective judgment involved in preparing forecasts since they relate to events and transactions that have not yet occurred and may not occur. Actual results are likely to be different from the pro forma forecast since anticipated events or transactions frequently do not occur as expected and the variation may be material. The directors best-estimate assumptions on which the pro forma forecast are based relate to future events and/or transactions that management expect to occur and actions that management expect to take and are also subject to uncertainties and contingencies, which are often outside the control of Lowell Capital Ltd HVT Land Scheme. Evidence may be available to support the directors best-estimate assumptions on which the pro forma are based however such evidence is generally future-oriented and therefore speculative in nature. We are therefore not in a position to express a reasonable assurance conclusion on those best-estimate assumptions, and

82 accordingly, provide a lesser level of assurance on the reasonableness of the directors best-estimate assumptions. The limited assurance conclusion expressed in this report has been formed on the above basis. Prospective investors should be aware of the material risks and uncertainties in relation to an investment in Lowell Capital Ltd HVT Land Scheme, which are detailed in the public document, and the inherent uncertainty relating to the pro forma forecast. Accordingly, prospective investors should have regard to the investment risks and sensitivities as described in the public document. The sensitivity analysis described in the public document demonstrates the impact on the pro forma forecast of changes in key best-estimate assumptions. We express no option as to whether the pro forma forecast will be achieved. The pro forma forecast has been prepared by the directors for the purpose of to provide prospective investors with a guide to the potential financial performance of Lowell Capital Ltd HVT Land Scheme for the 12 month period ending 31 March We disclaim any assumption of responsibility for any reliance on this report, or on the pro forma forecast to which it relates, for any purpose other than that for which it was prepared. We have assumed, and relied on representations from certain members of management of Lowell Capital Ltd HVT Land Scheme, that all material information concerning the prospects and proposed operations of Lowell Capital Ltd HVT Land Scheme has disclosed to use and that the information provided to use for the purpose of our work is true, complete and accurate in all respects. We have no reason to believe that those representations are false. RESTRICTION ON USE Without modifying our conclusions, we draw attention to section 4 of the public document, which describes the purpose of the financial information, being for inclusion in the public document. As a result, the financial information may not be suitable for use for another purpose. CONSENT Hayes Knight Corporate Pty Ltd has consented to the inclusion of this assurance report in the public document in the form and context in which it is included.

83 DECLARATION OF INTEREST Hayes Knight Corporate Pty Ltd does not have any interest in the outcome of the issue of units. Hayes Knight Corporate Pty Ltd Melbourne Vito Interlandi Director Dated this 23 th day of April 2014

84 Annexure 2: Forester's Report Product Disclosure Statement Page 77 [ : _23] _061.docx

85 5 March 2014 African Mahogany Australia Review of Whatfor Plantation 2014 Dr John Turner Forsci Pty Ltd Qualifications and Expertise John Turner has a Bachelor degree in forestry from the Australian National University and a Doctorate in forest science from the University of Washington, Seattle. He was employed by the Forestry Commission of NSW (subsequently Forests NSW and now the Forestry Corporation NSW) as a forester then Senior Research Scientist for 22 years and then as Director of Research for 11 years. For the last 18 years, he has been Director and Principle Research Scientist in the private forest science company, Forsci Pty Ltd. Dr Turner is an expert on forest soils, nutrition, forest productivity and management, and has over 198 scientific publications. He is a Registered Professional Forester in the Institute of Foresters Australia, a member of several scientific organisations and recipient of the IUFRO scientific achievement award. The proportion of my work with Lowell Capital Limited is 4% of my total work in this area. While Lowell Capital Limited does not require that I maintain professional indemnity insurance, I do maintain it. Project Instructions The project instructions were to visit the Whatfor Khaya plantation, discuss management with the plantation management, prepare a report on its current status and provide comments on options for management. Summary Whatfor plantation was inspected and further information on Land Units and level of stocking was collated. The Land Unit information indicates that the plantation has the potential for acceptable to good productivity. Where there is full stocking in the plantation there is the potential to produce a productive crop through the implementation of weed control, thinning, pruning and fertilizer application. AMA has commenced a the program of weed control, pruning and thinning on selected blocks and it is proposed that foliage sampling be implemented in 2014 to assist in developing plans for fertilizer programs. Some compartments, particularly in the 2008 age class have areas which are fully stocked but there are areas which are poorly stocked or with not trees at all. Where there are blocks of trees these should be appropriately managed but the other areas should only be managed to reduce fire risk. There were some compartment considered failure and these could be prepared for re-planting, or maintained for grazing. Management plans, summarising activities undertaken and those planned for each compartment should be prepared and these can be used as benchmarks for future assessments. 1

86 Introduction Whatfor Station was planted to African mahogany (Khaya senegalensis) by Great Southern Plantations in the 2007 and 2008 planting seasons. Apart from initial treatments, there were no silvicultural activities within the plantation for several years and the inspection of the plantation has taken into account this level of neglect prior to the AMA management. This report reviews the current status of the plantation and the management activities undertaken to improve its condition. As part of this report, the area of land units and areas of potentially acceptable plantation were estimated using remotely sensed data by the company Spatial Solution Experts and part of those data is included. Using the remotely sensed data, slightly different areas were estimated for compartments as were reported on the GSP maps. Ray Fremlin (Fremlin and Associates) undertook an analysis of the plantation in 2013 using the GSP areas and on ground assessments, and that report has also been referred to. Description of the Plantation The plantation was established on cleared (pasture) land in 2007 and 2008 as part of an MIS programme managed by Great Southern Plantations. The mapped areas indicate that seventeen land units were planted (surrogates for soils or sites) but of these, only six were significant in their area (Figure 1). The Land Units are as were described by the Northern Territory Government and are mapped through a combination of landform, geology and some soil assessment. The 2 Land Units are generally rugged terrain with shallow or gravelly soils and usually not cleared. These are small in extent and probably represent a land form boundary. The 3 Units are flat to undulating terrain and 3d (often Tippera soils) should be very suitable for plantation purposes. The 4 group are also flat terrain and usually have the Blain or Claravale soils (deep sandy red earths). These are suitable for plantations, the main issues being erosion potential and rocky outcrops. The 5 group are also on flat areas but soils are more sandy than the 4 group, usually lateritic podzolics and drying out more rapidly. Unit 5g generally has impeded drainage and while suitable for pastures are less so for plantations. The 7 units are probably boundaries as they constitute poorly drained areas adjacent to drainage lines. The units all have different attributes and the units noted as supporting plantations will have differing growth rates and issues (some will be drier and others limited by different nutrients), however, most of the planted area should support productive Khaya plantation. Based on the distribution of Land Units, it is apparent that the best land was planted first, that is, in The 2008 plantings tended to have been established on some of the poorer soils especially in relation to drainage. The compartments within Whatfor and the areas excluded from planting are shown in Table 1 and Figure 2. 2

87 Figure 1. Planted areas in Whatfor according to Land Unit. See text for comments on Land Units. Table 1. Plantation area statement (2013). The comments relate to the condition of the compartments. Year of Compartment Compartment area Planting GSP estimate Revised Total in Total in Grand Total

88 Figure 2. Compartment map of Whatfor plantation showing age classes, compartment areas and locations of genetics trials (as established by Great Southern Plantations). Analysis of the Plantation The effective planting areas were mapped from aerial photographs and results are shown in Figure 3. The blue areas are reported (from GSP) as the 2007 planting year and the red as The compartments in Figure 3 which have solid colour mean that there is essentially full survival of Khaya in that compartment. Other compartments, such as 16 and 19 show areas of poor or no survival down while some compartments, such as 1a, have essentially no survival. 4

89 The differences in stocking provide a number of options for management. Those that are fully stocked should have weeds controlled across the compartment with form pruning and appropriate fertilizer strategies and should produce productive valuable stands. Those compartments with some area of Khaya surviving should have a focus of treatments (weed control, fertilizer) on surviving blocks of suitable area and the remainder of the compartment treated to reduce noxious weeds and assist fire prevention, including introduction of cattle to further reduce fire risks. Those with fragmented survival would best be cleared and re-planted or used for cattle grazing. The site information on these latter areas indicate that properly established they should produce valuable plantations. Figure 3. Compartment map showing fully stocked areas of Khaya plantation by compartment. 5

90 Assessment of the 2007 planted area The areas were inspected in February 2014 but access was limited because of very wet conditions. The notes prepared by R. Fremlin in 2013 were used as a baseline and the following has been noted in The weed reduction program has been commenced through use of cattle to reduce the weed loading and by spraying. The spray applications have been effective in reducing weeds (see Figure 4). Figure 4. Demonstration area sprayed for weeds in the 2007 age class showing effectiveness of control. Non-commercial thinning has commenced and was observed in compartments 4, 6 and 7 (these are all fully stocked compartments - see Figure 3) and is effective in removing the poorer quality trees. Figure 5 shows part of the 2007 age class where weeds are under control but the stand has not as yet been non-commercially thinned or form-pruned. The stocking levels are good (little mortality) and, based on visual assessment, growth is acceptable. Figure 6 shows the genetics trial in compartment 7 which has undergone noncommercial thinning. This shows the remaining crop trees and also the pale colour of the foliage indicating low levels of nutrients. Figure 5. Part of the 2007 age class where weeds have been controlled and will now be noncommercially thinned and then form-pruned. 6

91 The trees in this age class (2007) are showing symptoms of nutritional stress, particularly nitrogen and phosphorus) and after thinning, fertilizer applications are strongly recommended. To identify the most suitable fertilizer, it is recommended that a foliage sampling program be undertaken in the dry. It is most probable that the results from the Wallaroo Thinning x Fertilizer trial are directly applicable to these stands and hence effective treatments can be identified. The thinning has exposed stumps and demonstrates that at this early age the deeper red colour is developing, this being a critical factor in determining quality for veneer or panelling (Figure 6). Figure 6. Genetics trial in the 2007 age class (Cpt 7) which has been non-commercially thinned. Figure 7. Cut stump on 6-year-old tree showing development of colour in the wood. 7

92 Assessment of 2008 planted area The 2008 plantation areas are poorer quality than the 2007 partly as a result of the lack of management in the early years. This has affect survival and growth and some areas which were planted do not warrant additional investment as there is a very low chance of growth response and suitable harvests. Areas, representing parts of compartments, which could be managed through weed control, fertilizer application and pruning can be identified from Figure 3. General Management of the plantation The general management of the plantation is sound. AMA has prepared fire management plans (African Mahogany Australia- Douglas Daly Fire Manual) for the plantations for which they are responsible and this covers Whatfor plantation. They are actively managing fuel loads through cattle grazing and ensuring fire breaks are maintained. The mapped areas of acceptably stocked plantation should be used to identify areas to be managed as productive plantation and appropriate management plans developed for these areas. Other areas should be managed to reduce fire risk. Comments and Recommendations Considering the soil types in the plantation, the potential productivity of the plantation should be generally good but variable, especially taking into account early lack of management. The objectives of management are to protect the resource, maintain or improve productivity and increase the value of the products. The managers are implementing plans to overcome the several years of the plantation not being managed. The objective is to develop a productive plantation recognising that parts will have a poorer outcome than if the plantation had been suitably managed since planting. Several areas are in such poor condition that it is considered they will not yield a commercial crop. Further investment in these areas is not warranted and it is recommended they be removed from plantation management and either cleared and be re-planted or returned to grazing. Examples of this are 1a, 1b and 15. Future assessments on status and progress of the plantation would be assisted by a documented management plan be developed listing the activities undertaken and the scheduling of future activities. Important elements of such a management plan are already being effectively implemented and: 1. Weed control program which has been commenced in order to both manage noxious weeds and reduce the weed completion in the plantation. The weed management is also critical in the fire management plans. 2. Form pruning has been commenced across the productive areas of the plantation to increase value.. 3. A non-commercial thinning program followed by additional pruning has been commenced. 4. The plantation is generally nutrient deficient and a fertilizer program has been proposed. The fertilizers should only be applied when the weeds are adequately controlled and would be most effective after the stands are thinned. A foliage sampling program would be commenced in this dry season with a plan for commencing treatments in suitable compartments and near the beginning of the wet. 8

93 Table 2. Plantation areas (ha) categorised by Land Unit and levels of stocking. Stock class 1 is fully stocked and stock class 2 is poorly stocked. 9