information memorandum - skyring · information memorandum part fi important information...

I N F O R M A T I O N M E M O R A N D U MP A R T 1

SKYRING INCOME FUND ARSN 160 006 824

RESPONSIBLE ENTITY: SKYRING ASSET MANAGEMENT LIMITED

ACN 156 533 041 AFS LICENCE 422902

W H O L E S A L E I N V E S T O R S

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TABLE OF CONTENTS

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T 1

IMPORTANT INFORMATION

RESPONSIBLE ENTITY AND ISSUER

This is an Information Memorandum (IM) for the Skyring Income Fund ARSN 160 006 824 (Fund).

The name and contact details of the responsible entity are:

Skyring Asset Management Limited 6 Moorak Street TARINGA QLD 4068

Ph: 1300 73 72 74 Fax: (07) 3363 1299 Email: [email protected] Web: www.skyring.com.au

Skyring Asset Management Limited ACN 156 533 041 (Skyring, Responsible Entity, us, we and our) is the issuer of, and solely responsible for, this IM. This document is Part 1 of the IM and dated November 2017 (Part 1). Part 1, together with the Part 2 with which it is distributed is the entire IM for the issue of units in the Fund (Units).

Each part of this IM must be read in conjunction with the other part. Neither part of the IM will be distributed without the other part.

We hold Australian financial services licence (AFS Licence) 422902, issued by the Australian Securities and Investments Commission (ASIC), which authorises us to act as responsible entity of the Fund.

CAPITAL AND INVESTMENT RISK

An investment in the Fund is an investment in a registered managed investment scheme. An investment in the Fund is not a bank deposit, bank security or bank liability, and is subject to investment risk, including the loss of, or delays in the payment of, income or capital.

Neither Skyring, its related bodies corporate or any of their respective directors or officers, guarantee the repayment of capital from the Fund or the investment performance of the Fund. Investments in the Fund are not guaranteed or underwritten by the Responsible Entity, its related bodies corporate or any of their respective directors or officers.

In particular, some of the risks involved with an investment in the Fund are considered in section 6 of Part 1.

NOT A REGULATED DOCUMENT

While the Fund is a registered managed investment scheme, an offer under the IM is restricted to wholesale clients (as defined in section 761G of the Corporations Act) and sophisticated investors under section 761GA of the Corporations Act (collectively Wholesale Investors).

Accordingly, this IM is not a product disclosure statement for an offer under Part 7.9 of the Corporations Act. Therefore, this IM does not contain information that would be contained in a product disclosure statement prepared under the Corporations Act and does not purport to contain all the information that may be necessary or desirable to enable prospective investors to properly evaluate and consider an investment in Units.

RELIANCE ON IM ONLY

No person is authorised by us to give any information or to make any representation in connection with the offer of Units to you that is not contained in this IM, comprising Part 1 and Part 2, or in Updated Information provided by us.

Any information or representation not contained in this IM or the Updated Information cannot be relied upon as having been authorised by us.

The issue of this IM is authorised solely by us and none of our subsidiaries or related bodies corporate are responsible for any statement or information contained in this IM.

IM AVAILABLE ELECTRONICALLY

If you are printing an electronic copy of this IM comprising Part 1 and Part 2, you must first print all pages including the Application Form. If you make this IM available to another person, you must give them the entire electronic file or print-out, including the Application Form. A paper copy of this IM can be obtained free of charge on request by calling us on 1300 73 72 74.

Units cannot be issued unless you use the Application Form attached to either a paper or electronic copy of this IM. The Application Form included in Part 2 contains a declaration that you have personally received the complete and unaltered IM prior to completing the Application Form. You should read Parts 1 and 2 of this IM in their entirety before completing the Application Form.

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T 1

INVESTMENT OBJECTIVES & HOW TO INVEST BENFITS OF INVESTING

OFFERING RESTRICTIONS

This IM does not constitute an offer or invitation to subscribe for Units in any jurisdiction where, or to any person to whom, it would not be lawful to make an offer. The distribution of this IM in certain jurisdictions may be restricted by law and persons who come into possession of it should seek advice on and observe any such restrictions. If you come into possession of this IM you should comply with all laws of the relevant jurisdiction applicable to an application for Units.

Act 2006 (Cth) (AML/CTF Act). By applying for Units under this IM, you undertake to provide us with all additional information and assistance that we may reasonably require. We reserve the right to apply our absolute discretion and without notice, to take any action we consider appropriate including blocking or delaying transactions or refusing to provide services, to comply with our obligations under the AML/CTF Act.

PRIVACY

Please read the privacy statement in section 10.10 of this Part 1. By signing and returning the Application Form you consent to the matters outlined in that statement.

NO FINANCIAL PRODUCT ADVICE

The information contained in this IM is general information only and does not take into account your individual objectives, financial situation or needs. You should review this IM carefully and assess whether the information is appropriate for you and talk to a financial adviser before making an investment decision.

ANTI-MONEY LAUNDERING LEGISLATION

We may require further information from you from time to time to comply with our obligations under the Anti-Money Laundering and Counter-Terrorism Financing

GLOSSARY, ILLUSTRATIONS AND CURRENCY

Defined terms and abbreviations used in this IM are explained in the Glossary. All references in this IM to ‘$’ are references to Australian dollars unless stated otherwise.

ENQUIRIES

If you have any questions or require assistance with completing the Application Form or additional copies of the IM, please contact us using the details in the Corporate Directory.

IMPORTANT INFORMATION

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T 1

Dear Investor,

On behalf of all the team at Skyring Asset Management Limited, I’d like to welcome you to what we believe to be an exciting income investment.

With the Skyring Income Fund, you’ll be able to partner with an experienced mortgage manager, and participate in quality investment opportunities throughout Australia — opportunities that will fulfil an income solution for your portfolio.

Skyring’s success has been built on three core principles.

1. We put our investors’ interests first. By doing this, we believe we are creating an investment environment that eschews complacency. Our team strives each day to achieve their best and improve your portfolio results.

2. The belief that residential and commercial property and businesses remain the central form of personal wealth creation for the majority of Australians. Skyring is ever vigilant for our investors and borrowers alike, completing thorough due diligence on all opportunities. We work hard to uphold our reputation as a reliable investment and capital partner, helping Australians achieve their goals of financial independence.

3. Economic cycles change continually. Our Board’s experience supports the agility we need to adapt to this change, and it’s one of the key qualities that set us apart. By providing our investors with bespoke, transparent investment opportunities, we believe we’re generating a powerful portfolio of capital-stable assets that will meet our investors’ long-term security, and income needs.

If you’ve invested in one of our Funds already, you’ll know we take these principles very seriously, working in close partnership with you to help you reach the financial goals you’re striving for.

I encourage you to talk further with your financial advisor about this Offer. Alternatively, feel free to call Skyring direct on 1300 73 72 74. We’ll be more than happy to answer any of your questions.

We look forward to welcoming you as a new member of the Skyring Income Fund, or as a returning investor.

DAVID MARDELL

CHIEF EXECUTIVE OFFICER

“ WE BELIEVE BY PLACING OUR INVESTORS’ INTERESTS BEFORE OUR OWN, WE ARE CREATING AN INVESTMENT ENVIRONMENT THAT DOES NOT BREED COMPLACENCY”

CEO’S LETTER

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1 . KEY INVESTMENT FEATURESDESCRIPTION SUMMARY REFER PART 1, SECTION

INVESTMENT STRATEGY & STRUCTURE

Responsible Entity Skyring Asset Management Limited ACN 156 533 041, holder of AFS Licence 422902. 7.1

Investment Strategy The Fund seeks to raise funds from Wholesale Investors to provide loans for residential, commercial, retail and industrial property development, construction or acquisition, and for business acquisition, (each a Loan) where the Loan will be secured by a first ranking mortgage over real property or, for business loans, a first ranking general security agreement over the borrower. The Fund will primarily source loans for property development, construction and acquisition, and business acquisition, where the property or business is located in Queensland, New South Wales, Victoria or the Australian Capital Territory.

Each Loan advanced by the Fund will represent a separate investment opportunity for Wholesale Investors to invest in the Fund (Loan Investment) and we will issue a separate Part 2 in relation to each Loan Investment.

4.2

Investment Options By investing in the Fund, you will be offered exposure only to the Loan Investments which you select.

You can invest in as many Loan Investments as you desire.

A Loan Investment is separate from each other Loan Investment in the Fund. Each Loan Investment will be made up of one or more investors.

4.4

Offer Structure If we accept your application to invest in the Fund, after we receive your application moneys in cleared funds you will be issued General Units. Once your funds (together with the funds of other Wholesale Investors who have successfully applied to invest in that Loan Investment) are advanced to the borrower, your General Units will automatically convert to Units which correspond to that Loan Investment (Loan Investment Units).

Part 1 of this IM provides information about: • the Fund’s investment objectives and structure; • details of Skyring and its Board; • benefits and risks of investing in the Fund; • information on fees and expenses which may be payable by Wholesale Investors; • a summary of the taxation implications of investing in the Fund; and • a summary of the terms of key documents and other information relevant for a Wholesale Investor to consider before applying for Units.

Each Part 2 contains information which is particular to a Loan Investment including details of the borrower, term, applicable interest rates, Indicative Distribution Rate and fees payable by the borrower, and a summary of the key terms of the Finance Documents.

Part 1 and Part 2 together constitute the entire IM and you should read both in their entirety before making your decision to invest.

N/A

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DESCRIPTION SUMMARY REFER PART 1, SECTION

LOAN DETAILS

Loan Amounts Loans will generally be for between $5 million and $20 million.

The Part 2 discloses the Loan amount for the applicable Loan Investment.

N/A (refer to Part 2)

Interest Rates The Fund will provide fixed interest rate loans to borrowers.

The interest rate for a Loan is disclosed in the Part 2 for the applicable Loan Investment.


Lending Policies We have lending policies which set out the criteria under which Loan Investments are made (Lending Policy). 5

Security Each Loan Investment will be made pursuant to a separate loan agreement between the Fund and the borrower (Loan Agreement).

The key terms of the Loan Agreement are summarised in the applicable Part 2.

All Loan Investments will be secured by:

(a) a registered first mortgage over real property; and/or(b) a registered first ranking general security agreement over the assets and undertaking of the borrower,

(each, a Security Agreement).

The key terms of the Loan Agreement are summarised in the applicable Part 2.

Loans may be supported by additional security such as guarantees from the directors or owners of the borrower.

4.3

1 . KEY INVESTMENT FEATURES

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INVESTMENT DETAILS

Issue Price The issue price of each Unit is $1. N/A (refer to Part 2)

Minimum investment $50,000 and then in increments of $10,000. The Part 2 discloses the minimum investment amount for the applicable Loan Investment.


Maximum investment There is no maximum investment amount, subject to our right to refuse to accept any application at our sole discretion or to accept any application for an amount less than the amount indicated on the Application Form.

N/A

Minimum subscription We will only proceed with a Loan Investment if applications have been received for the minimum subscription applying to that Loan Investment. The Part 2 discloses the minimum subscription threshold applying to a Loan Investment.


Maximum Subscription The maximum subscription will represent the maximum amount which will be advanced to the borrower. The Part 2 discloses the maximum subscription threshold applying to a Loan Investment.


Term The investment term of Loan Investments will generally vary from 12 months to three years, depending on factors such as the borrower’s circumstances, security arrangements and the purpose of the Loan.

The term of a class of Units will correspond with the maturity date of the relevant Loan Investment.

The investment term for each Loan Investment is set out in the Part 2 relating to that Loan Investment.


Distribution Rates Distribution rates will ultimately depend on the income generated by the Loan Investment(s) which you invest in.

The Distribution rate for each Loan Investment will be calculated by reference to the interest rate payable by the borrower less Fund expenses and our fees.

An Indicative Distribution Rate for each Loan Investment is set out in the Part 2 relating to that Loan Investment.

The Indicative Distribution Rate is an estimate only and is not guaranteed or underwritten.

4.6

Payment of Distributions Subject to availability, Distributions will be paid monthly in arrears. Distributions will be paid by electronic funds transfer into your nominated Australian financial institution account.

4.7

Withdrawals Funds invested in a Loan Investment will be repaid to you once the borrower repays the Loan corresponding to that Loan Investment.

If a borrower makes early repayments of the Loan principal during its term, funds will be available to be repaid proportionately before the Loan Investment matures.

Other than partial withdrawals due to partial early repayment of a Loan, you will not be permitted to withdraw your investment in any particular Loan Investment prior to the maturity date of that Loan Investment and repayment of the corresponding Loan.

4.8 to 4.14

ASIC Benchmarks and Disclosure Principles

ASIC has developed 8 benchmarks and 8 disclosure principles for unlisted mortgage schemes to assist investors understand the risks, assess the rewards being offered and decide on whether these investments are suitable for them. Please refer to section 3 of this Part 1 for details.

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BENEFIT AND RISKS

Benefits Benefits of investing in the Fund include:

(a) you can choose the Loan Investments in which you invest;(b) you can invest in as many Loan Investments as you like;(c) monthly Distributions (subject to availability); and(d) a defined investment term for each Loan Investment.

6.1

Risks All investments involve risks. There are a number of risks associated with an investment in the Fund. Some of the significant risks include:

(a) borrower default;(b) inadequacy of security; (c) inaccurate valuation;(d) lack of diversification;(e) Loan recovery; and(f) Fund structure.

0


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FEES AND OTHER COSTS

Establishment Fee Nil N/A (refer to Part 2)

Contribution Fees Nil N/A (refer to Part 2)

Withdrawl Fees Nil N/A (refer to Part 2)

Management Fee We are entitled to a management fee and the amount of the management fee may vary between Loan Investments.

We are entitled to charge up to 5% of the value of the applicable Loan Investment. The actual management fee in respect of a Loan Investment is disclosed in the relevant Part 2.

Typically, our management fee is paid from the interest paid by borrowers prior to the payment of Distributions to investors and is not deducted from the amount you invest.


Fund Expenses We are entitled to be paid or reimbursed for all expenses and liabilities in connection with operating the Fund. These expenses are expected to be 0.35% per annum of the Fund’s gross asset value.

Typically, Fund expenses will be paid from the interest payments made by borrowers and not from the amount you invest.


Removal Fee We may also be entitled to be paid a fee if we are removed as responsible entity in recognition of the work performed in the establishment and management of the Fund prior to removal.


Other Fees We may receive fees from the borrower, such as loan establishment fees and early repayment fees. These fees are payable by the borrower and are not paid from the amount you invest.

Further, if a loan is in default and default interest is payable by the borrower, we are entitled to receive up to 50% of any default interest (being interest in excess of the non-default or standard interest amount).

The Part 2 discloses fees we may charge a borrower and the percentage, up to 50%, of the default interest which we may receive for a particular Loan Investment.


Adviser Remuneration If your licensed or authorised financial adviser recommends you invest, or facilitates your investment, in the Fund we may pay your adviser a commission, calculated as a percentage of the amount you invest in the Fund, after your General Units are converted to Loan Investment Units and the Loan is advanced to the borrower. The maximum initial commission for an Offer is disclosed in the Part 2. We will pay such commissions from the application fee we receive from the borrower or otherwise from our own resources. The amount of this fee, up to the maximum specified in the Part 2, can be negotiated between you and your adviser. Also, we may pay your adviser a further commission, calculated as a percentage of the amount you invest in the Fund, with such commission payable under repayment of your investment amount upon completion of your Loan Investment. The maximum further commission for an Offer is disclosed in the Part 2. We will also pay such commissions from our own resources. This amount of this commission, up to the maximum specified in the Part 2, can be negotiated between you and your adviser.



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ADDITIONAL INFORMATION

Cooling-Off A 14 day cooling-off period applies to investments in the Fund. 10.7

Tax Investing in the Fund may have taxation consequences for you. We recommend you seek professional tax advice before investing in the Fund.

8

Reporting to Investors You will receive:

(a) confirmation of your investment;(b) monthly Distribution statements;(c) quarterly performance updates;(d) an annual taxation summary; and(e) an annual periodic statement.

You can elect to be sent, either by post or electronically, annual financial statements for the Fund by marking the appropriate box in the Application Form.

2.4

Complaints Resolution Any complaints can be made:

(a) by post: Complaints Manager Skyring Asset Management Limited 6 Moorak Street Taringa QLD 4068; or

(b) by phone: 1300 73 72 74.

10.4

How to contact us? Call 1300 73 72 74 (within Australia) or +61 7 + 61 7 3363 1200 (outside Australia) or refer to the Corporate Directory. Corporate Directory


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2.1 INVESTMENT OBJECTIVE

The Fund’s objective is to provide investors with regular monthly returns from investing in secured loans made by the Fund. The specific risk and return of an investment in the Fund will depend on the specific Loan Investment(s) you choose to invest in.

The Fund provides Loans for residential, commercial, retail and industrial property development, construction or acquisition, and for business acquisition. Each Loan will be secured by a first ranking mortgage over real property or, for business loans, a first ranking general security agreement over the borrower. The Fund will primarily source loans for property development, construction and acquisition, and business acquisition, where the property or business is located in Queensland, New South Wales, Victoria or the Australian Capital Territory

We, and our officers, associates and their related entities, do not guarantee the payment of income on, or return of capital of, an investment in the Fund.

2.2 HOW DO I INVEST IN THE FUND?

Information about a particular Loan Investment is contained in Part 2 of this IM, including the details listed in this section 4.4 of this Part 1 and the amount to be raised, including, where applicable, any minimum or maximum subscription amounts.

To invest in a particular Loan Investment, and therefore the Fund, please read the IM, comprising both Part 1 and Part 2, and complete and submit the online Application Form, or complete and lodge an original signed paper copy of the Application Form, attached to the Part 2, and pay your application monies, in accordance with the instructions on that form.

When you apply to invest in the Fund, your money is held in trust in an applications account until we accept your application. We have an absolute discretion to decline an application and are not required to give a reason. We will only proceed with a Loan Investment if valid applications have been received for the minimum subscription amount sought under the applicable Part 2.

If your application is declined or the minimum subscription for a Loan Investment is not achieved within the Offer period specified in Part 2 or, in any case, four months of the date of the Part 2 for that Loan Investment, your application money will be returned promptly, with interest (if any) earned on your application money less any fees charged by the bank and any taxes we are required to withhold from the interest paid to you. However, you will not receive less than the amount of your application monies.

Any interest earned on the application money for which Units are issued will form part of the assets of the Fund.

A Loan Investment offered under this IM is restricted to Wholesale Investors only. The Fund will also offer Loan Investments to retail clients (as defined in the Corporations Act, and being those persons who are not Wholesale Investors) and such offers will be made under product disclosure statements issued by us from time to time.

2. INVESTMENT OBJECTIVES AND HOW TO INVEST

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2.3 TRANSFER OF UNITS

You should consider your investment as illiquid as there is no established secondary market (e.g. stock exchange) for the Fund, however, you may transfer your Units to another Wholesale Investors subject to the Constitution. The transferee will need to provide such evidence as we require to demonstrate their Wholesale Investor status.

We will maintain a list of proposed buyers and sellers of Units, and investors, who are Wholesale Investors, can be added to, or obtain a copy of, the list by contacting us. If you wish to sell your Units during the term of your Loan Investment, you will need to contact a potential buyer and privately agree the terms of any transfer, including price, as we will not list buy or sell prices or facilitate the sale or purchase of Units. To transfer your investment, you must find a buyer and send us a valid transfer request signed by both parties. You can obtain transfer forms by contacting us, using the details in the Corporate Directory. If the buyer has not previously demonstrated their Wholesale Investor status, or we need to reconfirm such status, we will also require the buyer to provide such evidence as we require to demonstrate they are, or continue to be, a Wholesale Investor.

2.4 REPORTING

You will receive written confirmation of your investment in the Fund as well as the following regular updates:

(a) monthly Distribution statements;(b) quarterly updates on the performance

your Loan Investment;(c) an annual taxation statement; and(d) an annual periodic statement.

The Fund’s annual financial statements can, when available, be downloaded from our website at www.skyring.com.au. Alternatively, if you wish to receive annual financial statements by mail or email, please tick the appropriate box on the Application Form.

2. INVESTMENT OBJECTIVES AND HOW TO INVEST

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3. ASIC BENCHMARKS AND DISCLOSURE PRINCIPLES

3.1 LEGISLATIVE BACKGROUND

ASIC has developed eight benchmarks and eight disclosure principles for unlisted mortgage schemes, being schemes which have, or are likely to have, at least 50% of their non-cash assets invested in loans that are secured by a mortgage over real property and/or unlisted mortgage schemes.

The benchmarks and disclosure principles are designed to help retail investors to understand the risks, assess the potential rewards and to make an informed investment decision. While the Offer is limited to Wholesale Investors and the IM is not required to include ASIC’s benchmarks and disclosure principles, we have provided this information as we consider it to be useful to Wholesale Investors and will assist you to decide if an investment in the Fund is suitable for you.

For the purpose of keeping you informed about any significant changes to the Fund’s compliance with the benchmarks and disclosure principles, we will report on the Fund’s compliance with the benchmarks and disclosure principles on our website www.skyring.com.au periodically (usually half-yearly). For those investors who cannot access our website, you can request a paper copy of an updated benchmark and disclosure principle report to be given to you (free of charge) by contacting us using the details in the Corporate Directory.

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BENCHMARK STATEMENT EXPLANATION REFERENCE

BENCHMARK 1: LIQUIDITY

For a pooled mortgage scheme, the responsible entity should have cash flow estimates for the scheme that:

(a) demonstrate the scheme’s capacity to meet its expenses, liabilities and other cash flow needs for the next 12 months;

(b) are updated at least every three months and reflect any material changes; and

(c) are approved by the directors of the responsible entity at least every three months.

The Fund is a contributory mortgage scheme and therefore this benchmark is not applicable.

N/A For additional disclosure on this benchmark, refer to section 3.3 of this Part 1.

BENCHMARK 2: SCHEME BORROWING

The responsible entity should not have current borrowings and should not intend to borrow on behalf of the scheme.

The benchmark is met. The Fund does not have any borrowings and we do not intend to enter into any borrowing arrangements on behalf of the Fund.

For additional disclosure on this benchmark, refer to section 3.4 of this Part 1.

BENCHMARK 3: LOAN PORTFOLIO AND DIVERSIFICATION

For a pooled mortgage scheme:

(a) the scheme should hold a portfolio of assets diversified by size, borrower, class of borrower activity and geographic region;

(b) the scheme should have no single asset in the scheme portfolio that exceeds 5% of the total scheme assets;

(c) the scheme should have no single borrower who exceeds 5% of the scheme assets; and

(d) all loans made by the scheme should be secured by first mortgages over real property (including registered leasehold title).


Investors in the Fund have a beneficial interest in the Loan Investments they elect to invest in and not in the Fund’s entire portfolio of assets.


BENCHMARK 4: RELATED PARTY TRANSACTIONS

The responsible entity should not lend to related parties of the responsible entity or to the scheme’s investment manager.

This benchmark is not met. The Fund may make loans to our related parties. Any loans to related parties will be on the same commercial basis as loans to unrelated parties in accordance with our Lending Policy.

For additional disclosure on this benchmark, refer to sections 3.6 and 5 of this Part 1.

3.2 BENCHMARK DISCLOSURE


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BENCHMARK 5: VALUATION POLICY

In relation to valuations of the scheme’s mortgage assets and their security property, the board of the responsible entity should require:

(a) a valuer to be a member of an appropriate professional body in the jurisdiction in which the relevant property is located;

(b) a valuer to be independent;

(c) procedures to be followed for dealing with any conflict of interest;

(d) the rotation and diversity of valuers;

(e) in relation to security property for a loan, an independent valuation to be obtained:

(i) before the issue of a loan and on renewal, for development property, on both an ‘as is’ and ‘as if complete’ basis and, 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 a decrease in the value of security property may have caused a material breach of a loan covenant.

This benchmark is met. The Fund meets the benchmark for Loans secured by a registered mortgage over real property, as we will obtain valuations of real property security as required in accordance with our Lending Policy, which is consistent with this benchmark.

For Loans secured over assets other than real property (such as a general security agreement over a borrower’s assets) we will implement procedures to assess the adequacy of the security provided in accordance with our Lending Policy, as it will generally not be possible for a valuation of those assets to be undertaken by a registered valuer.


BENCHMARK 6: LENDING PRINCIPLES – LOAN TO VALUATION RATIOS

If the scheme directly holds mortgage assets:

(a) where the loan relates to property development – funds should be provided to the borrower in stages based on independent evidence of the progress of the development;

(b) where the loan relates to property development – the scheme should not lend more than 70% on the basis of the latest ‘as if complete’ valuation of property over which security is provided; and

(c) in all other cases – the scheme should not lend more than 80% on the basis of the latest market valuation of property over which security is provided.

This benchmark is not met. Our Lending Policy is consistent with this benchmark for Loans secured by a registered mortgage over real property.

For Loans secured over assets other than real property, we may lend on an LVR of up to 100% of the value of the assets securing the Loan (such as the assets of a business acquired by the borrower).




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BENCHMARK 7: DISTRIBUTION PRACTICES

The responsible entity should not pay current distributions from scheme borrowings.

This benchmark is not met. Distributions will be sourced from interest payments made by borrowers and not from Fund borrowings (as the Fund will not borrow).


BENCHMARK 8: WITHDRAWAL ARRANGEMENTS

For liquid schemes:

(a) the maximum period allowed for in the constitution for the payment of withdrawal requests should be 90 days or less;

(b) the responsible entity should pay withdrawal requests within the period allowed for in the constitution; and

(c) t he responsible entity should only permit members to withdraw at any time on request if at least 80% (by value) of the scheme property is money in an account or on deposit with a bank and is available for withdrawal immediately (or otherwise on expiry of a fixed term not exceeding 90 days), during the normal business hours of the bank; or assets that the responsible entity can reasonably expect to realise for market value within 10 business days.

For non-liquid schemes, the responsible entity should make withdrawal offers to investors at least quarterly.


Investors will only be entitled to withdraw their investment on the maturity date of their relevant Loan Investment, which will be subject to the borrower having repaid the underlying Loan.




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3.3 DISCLOSURE PRINCIPLE 1 – LIQUIDITY

Liquidity is the measure of cash and cash equivalent assets as a proportion of the Fund’s total assets and is an indicator of the ability of a mortgage fund to meet its short-term commitments. Liquidity of a mortgage fund may be viewed as a risk as the underlying assets of a mortgage fund may not be easily realised within the period of time required to meet withdrawal requests or other commitments or expenses.

As a contributory mortgage scheme, the Fund is not required to disclose the information required by this principle. However, we have systems in place to manage the Fund’s cash flows and to ensure that the Fund’s short-term commitments are satisfied.

3.4 DISCLOSURE PRINCIPLE 2 – SCHEME BORROWING

Where a mortgage scheme has borrowings, this principle requires responsible entities to disclose the maturity profile and other information relating to the scheme borrowings, including details of total debts due, why the responsible entity has borrowed the money (including whether the borrowed funds will be used to fund distributions or withdrawal requests), any material loan covenant breaches and the risks associated with the scheme’s borrowing and credit facility maturity profile.

It is important that investors understand the borrowing structure of a mortgage scheme and the risks associated with that structure. Mortgage funds with high levels of borrowing face the risk that distributions will not be paid or withdrawals may be suspended so the fund can pay back the borrowings. Generally, any amounts owing to lenders will rank ahead of investors’ interests.

We do not intend to enter into any borrowing arrangements on behalf of the Fund. Accordingly, we are not required to disclose the information required by this principle.

3.5 DISCLOSURE PRINCIPLE 3 – LOAN PORTFOLIO & DIVERSIFICATION

Portfolio diversification measures the level of concentration risk in the portfolio of mortgages held by the Fund. Greater levels of diversification of mortgages by borrower, size, activity and geographical location, lowers the risk that the Fund would suffer significant loss from default by any one borrower or class of borrowers.

As a contributory mortgage scheme, the Fund is not required to disclose against this principle.

Investors will only have a beneficial interest in the Loan Investments in which they have elected to invest, and not in the Fund’s entire portfolio. Therefore, lack of diversification is a risk for investors in contributory mortgages schemes generally. Further, information in relation to specific Loan Investments, such as the Indicative Distribution Rate and terms of the investment, is set out in the Part 2 relating to that Loan Investment.


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3.6 DISCLOSURE PRINCIPLE 4 – RELATED PARTY TRANSACTIONS

This principle requires responsible entities to disclose their approach to related party lending, investments and other transactions, and how such transactions are assessed and monitored to consider whether the transaction is made with the same rigour and independence as transactions made on an arm’s length commercial basis.

We may make loans to related parties. Any loans to related parties will be on the same commercial basis as loans to unrelated parties and made in accordance with our Lending Policy (refer to section 5 of this Part 1). We are responsible for regularly monitoring the Fund’s compliance with the Lending Policy.

For any Loan that will be advanced to a related party, the Part 2 for that Loan Investment will disclose:

(a) the Loan amount;

(b) the identity of the borrower and the nature of the related party relationship;

(c) whether the Loan is on arm’s length terms or otherwise is exempt from the general requirement for related party transactions involving registered managed investment schemes to be approved by members;

(d) if member approval for the Loan has been, or will be sought, and, if so, when;

(e) the risks associated with providing a Loan to the related party; and

(f) the policies and procedures we have in place for entering into related party transactions, including how we monitor compliance with those policies and procedures.


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3.7 DISCLOSURE PRINCIPLE 5 – VALUATION POLICY

For a contributory mortgage scheme (such as the Fund), this disclosure principle requires the responsible entity to provide investors with information about the valuation of the property securing a loan in which investors have, or are being offered, an interest.

For each Loan which will be secured by a mortgage over real property, the Part 2 for that Loan Investment will, to the extent permitted by the Corporations Act, contain information about the value of that security property, disclose any material inconsistencies between the valuation of the security property and our valuation policy and mention how frequently we intend to obtain a valuation of that security property.

The Lending Policy requires us, for Loans secured by a mortgage over real property, to obtain an independent valuation of security property in respect of a Loan before the issue of the Loan, on renewal of the Loan (if applicable), and within two

months after our Board forms a view that there is a likelihood of a decrease in the value of security property which may cause a material breach of a covenant of the relevant Loan Agreement.

For Loans secured over assets other than real property, our Lending Policy requires us to obtain an assessment of the value of those assets from an accountant, business broker or other person who we consider has suitable expertise to assess the value of the assets having regard to the type of asset, and, in each case, who is independent from the borrower. We will obtain an assessment of the value of such secured assets in respect of a Loan before the issue of the Loan, on renewal of the Loan (if applicable), and within two months after our Board forms a view that there is a likelihood of a decrease in the value of security property which may cause a material breach of a covenant of the relevant Loan Agreement.

Our valuation policy for the Fund is available on our website at www.skyring.com.au or a paper copy is available, free of charge, by contacting us using the details in the Corporate Directory.


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3.8 DISCLOSURE PRINCIPLE 6 – LENDING PRINCIPLES – LOAN TO VALUATION RATIO

The loan to valuation ratio (LVR) is a measure of the amount of the Loan provided to a borrower against the latest valuation obtained in respect of the security property. LVR is an indicator of how conservative or aggressive a scheme’s lending practices are. Generally, the higher the LVR, the more vulnerable the scheme will be to a change in market conditions (for example, a downturn in the property market).

The maximum LVR for each Loan underlying a Loan Investment will be 80% of the value of the security property, unless the Loan relates to property development in which case the maximum LVR for the Loan will be 70% of the value of the security property. For Loans secured over assets other than real property, we may lend on an LVR of up to 100% of the value of the assets securing the Loan (such as the assets of a business acquired by the borrower).

In the case of Loans advanced by the Fund for property development or construction purposes, the Lending Policy requires:

(a) funds to be advanced in stages based on independent evidence of progress;

(b) an independent valuation to be obtained on an ‘as is’ basis and ‘as if complete’ basis;

(c) a maximum LVR of 70%; and

(d) for interest to be payable during the Loan term and not capitalised.


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3.9 DISCLOSURE PRINCIPLE 7 – DISTRIBUTION PRACTICES

This disclosure principle requires responsible entities to explain how the scheme will fund distributions to investors and to disclose any risks associated with current distribution practices.

We anticipate that all Distributions will be sourced from interest paid by a borrower on the Loan. Subject to availability, Distributions will be paid monthly in arrears.

Distribution rates for the Fund are variable between Loan Investments and depend on the interest income received on each particular Loan Investment which you choose to invest in.

For each Loan Investment, the Part 2 discloses the Indicative Distribution Rate and the factors which may impact the Indicative Distribution Rate being achieved. Indicative Distribution Rates for a Loan Investment stated in a Part 2 are indicative only and based on the interest rate charged to the relevant borrower less our management fee and estimated scheme expenses. The actual Distribution rate will be equal to the interest paid by the borrower less actual management fees and Fund expenses.

The key factors that would have the most material impact on achieving the Indicative Distribution Rate for a Loan Investment and the risk to changes in these factors are:

FACTORS IMPACTING INDICATIVE DISTRIBUTION RATES

RISK OF CHANGES TO THESE FACTORS ON DISTRIBUTIONS

SENSITIVITY ANALYSIS BASED ON CHANGES TO THESE FACTORS

BORROWER DEFAULT If a borrower fails to meet interest payments under a Loan Agreement, the Distribution rate paid to investors in the corresponding Loan Investment will be less than the applicable Indicative Distribution Rate.

If a borrower does not make any interest payments during a Distribution Period, investors in that Loan Investment will not receive a Distribution for that period.

FUND EXPENSES If Fund expenses are higher than estimated, the Distribution rate paid to investors in a Loan Investment may be less than the applicable Indicative Distribution Rate.

If Fund expenses are paid from the interest received from a borrower and Fund expenses are 1% per annum higher than anticipated, it may result in the Distribution rate paid to investors being 1% per annum lower than the Indicative Distribution Rate for that Loan Investment.


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3.10 DISCLOSURE PRINCIPLE 8 – WITHDRAWAL ARRANGEMENTS

This disclosure principle requires responsible entities to explain the scheme’s withdrawal policy and the ability of investors to withdraw from the scheme.

You will be entitled to withdraw your investment in a Loan Investment on the maturity date of that Loan Investment, subject to the borrower having repaid the underlying Loan. If a borrower makes an early repayment (in part or full) of their Loan, you will be able to your withdraw your Loan Investment (or part of your Loan Investment, which equates to the portion of the Loan repaid by the borrower).

Apart from withdrawals allowable due to early repayment (in part or full) of the underlying Loan, you will not be permitted to withdraw your investment in any particular Loan Investment prior to the maturity date of that Loan Investment.

Units will be redeemed at a fixed price of $1 per Unit. However, if the borrower fails to repay the entire underlying Loan, or we are unable to recover the entire underlying Loan

upon enforcing our security, then you will receive less than the amount you invested in that Loan Investment.

In such circumstances, Units will be redeemed for less than $1 each and the actual redemption amount will reflect each investor’s proportionate interest in the shortfall in the repayment of the Loan by the borrower.

When a Loan is repaid, we will notify investors in the corresponding Loan Investment and they will be able to redeem their funds or reinvest in another Loan Investment by completing an Application Form attached to the relevant Part 2.

If an investor does not redeem their investment within three months of the applicable underlying Loan being repaid in part or full (and does not instruct us to invest in another Loan Investment), then we may redeem those Units and pay those funds to the investor (to the extent available).


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4.1 WHAT IS THE ROLE OF THE RESPONSIBLE ENTITY

We are responsible for the operation of the Fund including identifying investment opportunities, assessing and approving Loan applications, setting Loan interest rates, administering Loans, preparing Loan Agreements and security documents, collecting interest payments and paying Distributions, repaying investor funds upon repayment of a Loan, and managing the Fund in accordance with our obligations under our AFS Licence, the Constitution, Compliance Plan and Corporations Act.

Our AFS Licence issued by ASIC authorises us to act as responsible entity of the Fund.

4.2 FUND INVESTMENTS

The Fund will predominantly invest in Loans for residential, commercial, retail and industrial property development, construction or acquisition, and for business acquisition, where the Loan will be secured by a first ranking mortgage over real property or, for business loans, a first ranking general security agreement over the borrower. The Fund will not provide second-ranking or mezzanine loans.

However, the Fund may partner with another lender to jointly provide a loan to a borrower, in which case we will enter into an agreement with the co-lender which sets out how the parties, as co-lenders, will exercise their rights under the loan agreement and security documents with the borrower and which requires interest payments and principal repayments from the borrower to be allocated between the co-lenders in proportion to their contribution to the loan.

Each Loan Investment will form a sub-scheme within the Fund and a different class of Loan Investment Units will be attributable to the assets underlying each Loan Investment.

The performance of a Loan Investment is therefore subject to the relevant borrower meeting its obligations under the relevant Loan Agreement.

The terms and conditions of each Loan Agreement are summarised in the applicable Part 2.

Your investment under this IM is specific to each Loan Investment you decide to invest in.

An Offer under this IM is restricted to Wholesale Investors. The Fund will also offer Loan Investments to retail clients (as defined in the Corporations Act, and being those persons who are not Wholesale Investors) and such offers will be made under product disclosure statements issued by us from time to time.

4. INVESTMENT DETAILS

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4.3 LOAN SECURITY

Each Loan will be secured by:

(a) a registered first mortgage over real property; and/or

(b) a registered first ranking general security agreement over the assets and undertaking of the borrower


4.4 LOAN INVESTMENT INFORMATION

Details which are specific to a Loan Investment will be contained in the corresponding Part 2 seeking subscriptions for that Loan Investment. The Part 2 provides the following information in relation to a proposed Loan Investment:

(a) the amount to be advanced to a borrower;

(b) the identity of the borrower and the purpose of the Loan;

(c) the commencement date of the Loan Investment;

(d) the maturity date of the Loan Investment;

(e) the lower and higher rate of interest payable by the borrower;

(f) the applicable Indicative Distribution Rate;

(g) any fees payable to us by the borrower;

(h) a summary of the material terms of the Finance Documents corresponding to the Loan; and

(i) if applicable, a summary of any differences in the terms of the Loan Investment and underlying Loan from those set out in this Part 1.

4.5 GENERAL UNITS

If your application is accepted and the relevant minimum subscription achieved, you will be issued General Units and your application money will be transferred to the Fund’s general account pending the making of a Loan to a borrower. Upon the Loan amount being advanced to the borrower by the Fund, your General Units will convert automatically to the class of Loan Investment Units corresponding to your particular Loan Investment (for example, Loan Investment Units corresponding to Loan Investment ‘A’ would be ‘Class A’ Units).

General Units will earn the applicable commercial interest rate offered by the Fund’s bank. The Indicative Distribution Rate for a Loan Investment only applies from the time that General Units convert to Loan Investment Units.


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4.6 DISTRIBUTION RATE

General Units Distribution rates will be variable and will ultimately depend upon the commercial interest rate offered and paid by the Fund’s Australian banker. We will publish this rate on our website at www.skyring.com.au.

Loan Investment Units Distribution rates will ultimately depend upon the income generated by the Loan Investment in which you have invested, any amounts deducted from that income in order to meet the Fund’s operating expenses and our fees. Both Fund expenses and our fees will be deducted from the income of the Fund prior to Distributions being paid to investors.

An Indicative Distribution Rate is set out in the Part 2 for each Loan Investment.

The Indicative Distribution Rate is an estimate only and is calculated by reference to the interest rate payable by a borrower under the relevant Loan Agreement less Fund expenses and our management fees.

The Indicative Distribution Rate is not a guaranteed return to investors and an investment in the Fund is subject to investment risk, including the loss of capital invested. You should refer to section 6 of this Part 1 for a discussion of the risks of investing in a Loan Investment.

The actual Distribution rate you receive may be higher or lower than the Indicative Distribution Rate. The actual Distribution rate will be dependent upon Fund expenses and whether default interest or other contingency fees are payable by the borrower.

4.7 PAYMENT OF DISTRIBUTIONS

Payment of Distributions will be dependent upon the borrower meeting its obligations and making Loan interest payments in full and on time in accordance with the applicable Loan Agreement.

Subject to the availability of funds, Distributions will be paid by electronic funds transfer into your nominated Australian financial institution account.

The transfer of Distributions to your account will typically occur within 5 Business Days of the end of each Distribution Period (being monthly).


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4.8 REPAYMENT

General Units You can apply to redeem your General Units at any time prior to conversion to Loan Investment Units. We will normally process a redemption request within 5 Business Days of receiving a valid redemption request in a form acceptable to us. You can obtain a redemption request form by contacting us using the details in the Corporate Directory.

If your General Units convert to Loan Investment Units, due to the Loan being made to the borrower under the terms of the Loan Investment you select, prior to us processing your redemption request, your redemption request will not be satisfied.

Loan Investment Units Once your funds have been applied to a particular Loan Investment and General Units converted to Loan Investment Units, you will generally not be permitted to withdraw your investment prior to the borrower repaying the Loan corresponding to your Loan Investment.

Repayment of your investment is dependent upon the borrower repaying the Loan. When the Loan is repaid, we will notify you and you will be able to redeem your funds or invest in another Loan Investment by completing an Application Form attached to Part 2 for a Loan Investment.

4.9 PARTIAL REPAYMENT OF ANY LOAN INVESTMENT

The terms of each Loan Agreement are the same unless otherwise stated in the corresponding Part 2. Under the Loan Agreement, the borrower may make a partial repayment of the Loan during the Loan term. The Part 2 discloses the amount of notice a borrower must provide us prior to making an early repayment and the minimum repayment amount and subsequent increments. .

Where the borrower partially repays the Loan, we will notify you and you will be able to redeem the proportion of your funds which corresponds to the portion of the Loan repaid. If there is a current Offer, you can elect to invest those funds in another Loan Investment by completing an Application Form attached to the Part 2 for a Loan Investment.

4.10 EARLY REPAYMENT OF A LOAN INVESTMENT

Unless the Part 2 for a Loan Investment provides otherwise, the borrower may repay a Loan in full prior to maturity at any time. The Part 2 discloses, where applicable, the amount of prior notice a borrower must give us to repay their Loan prior to maturity and the amount of any early repayment fee payable to us by the borrower.

If a Loan is repaid early, we will notify you and you can choose to:

(a) redeem your funds; or

(b) invest in another Loan Investment by completing the Application Form attached to the Part 2 for that Loan Investment.


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4.11 COMPULSORY REPAYMENT

If:

(a) your funds are invested in General Units for more than three months without being applied to a Loan Investment; or

(b) you have not redeemed your investment, or part of your investment, within 30 days of the Loan being repaid in part or in full (and have not instructed us to invest in another Loan Investment),

then we may redeem those Units and pay these funds to you.

4.12 SUBSEQUENT INVESTMENTS

If you would like to increase your investment, you can do so by investing in another Loan Investment via completing the Application Form attached to another Part 2 (or attached to a product disclosure statement) and paying the application money.

4.13 REPAYMENT OF INVESTMENTS – OUR OBLIGATIONS

You will only be entitled to receive repayment of the capital you have invested once the borrower repays the Loan corresponding to the Loan Investment in which you have invested. If the borrower repays part of the Loan during the term, you will be entitled to receive repayment of the proportionate amount of the capital you have invested.

We maintain lending policies with the objective of protecting the capital invested by investors and facilitating the repayment of capital at the appropriate time. However, we do not guarantee the performance of the investment offered in this IM, including the repayment of capital invested.

Generally, Units will be redeemed at a fixed price of $1 per Unit, unless the borrower fails to repay the corresponding Loan in full. If this occurs, investors who have invested in that Loan Investment may suffer a capital loss. If a capital loss is sustained, the loss will be shared proportionately among investors who have invested in that Loan Investment.

4.14 EARLY WITHDRAWAL BY INVESTORS

Once invested in a Loan Investment, you will not be permitted to withdraw your investment prior to the maturity date of the Loan Investment (except for partial withdrawals due to a partial repayment of the Loan by the borrower).

4.15 BORROWINGS

The Constitution allows us to borrow on behalf of the Fund and to pledge the assets of the Fund as security. However, we do not intend to borrow on behalf of the Fund in relation to any Loan Investment. If we did borrow on behalf of the Fund, the borrowings would be limited in recourse to individual Loan Investments and will be disclosed in the Part 2 for the corresponding investment opportunity.


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LENDING PARAMETERS

LOAN PURPOSE The Fund will provide Loans for residential, commercial, retail and industrial property development, construction or acquisition, and for business acquisition, where the Loan will be secured by a first ranking mortgage over real property or, for business loans, a first ranking general security agreement over the borrower.

The Fund will primarily source loans for property development, construction and acquisition, and business acquisition, where the property or business is located in Queensland, New South Wales, Victoria or the Australian Capital Territory.

The Fund will only provide first-ranking or senior debt loans and will not provide second-ranking or mezzanine loans.

LENDING RATIO (LVR) Prior to the advance being made, a borrower must demonstrate to our satisfaction, that it has adequate property or assets to secure the Loan.

Loans which are advanced for property development or construction purposes will have a maximum LVR of 70%. All other Loans will have a maximum LVR of 80%. For Loans secured over assets other than real property, we may lend on an LVR of up to 100% of the value of the assets securing the Loan (for example, for a Loan to fund the acquisition of a business which is secured over the assets of that business).

INTEREST RATES We will determine the interest rates and fees payable by a borrower having regard to prevailing market rates, the borrower’s borrowing history, the purpose of the Loan and any other matter which we consider relevant on a case by case basis.

Interest rates charged by the Fund will be set at rates which provide an appropriate risk margin over the cost of funds. Loans will typically carry a fixed interest rate.

ACCEPTABLE SECURITY All Loan Investments will be secured by:

(c) a registered first mortgage over real property; and/or

(d) a registered first ranking general security agreement over the assets and undertaking of the borrower,


All Loans advanced by the Fund must satisfy a range of risk management and lending guidelines as set out in our Lending Policy, as varied from time to time. Our key lending parameters are as follows:

5. LENDING POLICIES

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LENDING PARAMETERS (cont. )

VALUATIONS We will obtain an independent valuation over any real property and our Lending Policy requires:

(a) a valuer to be a member of an appropriate professional body in the jurisdiction in which the relevant property is located;

(b) a valuer to be independent;

(c) any real or potential conflict of interest to be dealt with in accordance with our Conflict Policy;

(d) the rotation and diversity of valuers.

Additionally, independent valuations must be obtained:

(a) before the issue of a Loan and on renewal (if applicable);

(b) for Loans secured by a mortgage over real property, where the security property is a development property, on both an ‘as is’ and ‘as if complete’ basis and, for all other real property security, on an ‘as is’ basis; and

(c) within two months after the Board forms a view that there is a likelihood that a decrease in the value of security property may have caused a material breach of the relevant Loan Agreement.

For Loans secured over assets other than real property, our Lending Policy requires us to obtain an assessment of the value of those assets from an accountant, business broker or other person who we consider has suitable expertise to assess the value of the assets having regard to the type of asset, and, in each case, who is independent from the borrower.

We will obtain an assessment of the value of such secured assets in respect of a Loan before the issue of the Loan, on renewal of the Loan (if applicable), and within two months after our Board forms a view that there is a likelihood of a decrease in the value of security property which may cause a material breach of a covenant of the relevant Loan Agreement.

LOAN TERM Loans will generally be of a term of 12 months to three years.

LOAN APPROVALS All Loans require the approval of the Board.

LOAN SERVICEABILITY We must take into account a borrower’s ability to service the Loan having regard to their forecast and historical cash flow statements, access to liquid assets, and any retention of funds advanced to meet interest payments.

DEFAULT MANAGEMENT The mandatory default management procedures in the event of default by a borrower under a Loan Agreement are as follows:

(a) we will immediately contact the borrower to ascertain the reason for the default and determine whether the borrower can rectify the default in a reasonable time;

(b) if the default remains outstanding for 10 days, the default is escalated to the Board;

(c) if the default is not rectified within 28 days, the Board will consider instructing lawyers to commence legal proceedings to recover the Loan;

(d) a decision by the Board on whether to instruct lawyers will be based on what the Board believes is in the best interest of investors; and

(e) the Board will immediately advise the Compliance Committee and, if required by the Corporations Act, investors, of the result of its deliberation.

5. LENDING POLICIES

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6.1 BENEFITS OF INVESTING IN THE FUND AND THIS OFFER

Some key benefits of investing in the Fund are summarised below.

Investment choice and flexibility Investing in a contributory fund (like the Fund) rather than a pooled fund gives investors greater control as it allows you to select a Loan Investment which aligns with your personal investment criteria. You can also invest in as many Loan Investments as you like.

Through the Part 2 corresponding to a Loan Investment you receive specific details of that Loan Investment prior to deciding to invest. Accordingly, as an investor, you have the ability to personally decide which Loan Investments to invest in from time to time based on factors such as the investment term and Indicative Distribution Rate which suit your particular circumstances and objectives.

Experience and oversight Before a Loan Investment is offered to investors, it is assessed under the oversight of the Responsible Entity’s experienced team of officers and senior managers. Refer to section 6 of this Part 1 for details about us and our officers.

Monthly distributions Distributions will be paid monthly in arrears, subject to availability.

Defined investment term Your Loan Investment will have a defined investment term which corresponds to the term of the applicable Loan, which is disclosed in the applicable Part 2. Under the Loan Agreement, borrowers are required to repay the Loan at the end of its term which will enable the Fund to repay your corresponding Loan Investment. You can either elect to redeem your investment or invest in another Loan Investment of your choice.

Direct deposit of Distributions Distributions are automatically deposited to your nominated Australian financial institution account via electronic funds transfer.

Regular reporting You can keep track of your investment with regular Distribution statements and annual tax statements.

6. BENEFITS AND RISKS OF INVESTING

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6.2 INVESTMENT RISKS

Before deciding whether to invest in the Fund, it is important that you understand the risks that can affect your investment. All investments are subject to risk, and investments may not perform as expected resulting in a loss of capital or income to investors or may not ultimately meet an investor’s objectives.

You should give consideration to the following risk factors, as well as the other information contained in this IM before investing in the Fund.

Borrower default risk A key risk is that a borrower may not be able to meet interest payments or repay its Loan in accordance with the terms of the Loan Agreement. Default may be caused by a number of factors including a change in a borrower’s circumstances, significant economic changes, changes to market conditions or other unforeseen events or circumstances.

Construction and development lending Construction and development loans include additional risks when compared to loans over existing improved property, as there is no guarantee that the project will be completed or, if completed, will be worth the value attributed to it at the outset.

Specific risks associated with providing finance for construction and development activities, include:

(a) unforseen increases in building or construction costs or other property development expenses that result in a shortfall between the funds required by the borrower to complete the works and the amount available under the loan provided by the Fund;

(b) the funds we keep in reserve to complete construction and development being insufficient to meet the costs of completion; and

(c) marketing conditions may change during the construction process, which adversely affects the sales rates and prices anticipated by the borrower and consequently, the value of the Fund’s security and borrower’s ability to repay the loan.

While we will obtain an independent valuation for any construction or development property on both an ‘as is’ “ and ‘as if complete’ basis, the ‘as if complete’ value may not be achieved even if the project is completed on time and within budget.

If a borrower is unable to complete a development and we enforce the Fund’s security, we will be required to decide whether the property is to be sold ‘as is’ or to complete the project. Ultimately, such decision will be based on what we consider is in the best interests of investors in the corresponding Loan Investment and whether funds are available to complete the project.

If we are required to enforce our security, or if the development is completed but does not realise the amount determined in the ‘as if complete’ valuation, it may result in a capital loss to investors in that Loan Investment, investors not receiving income returns or both.

Inadequacy of security If a borrower defaults, the Fund will rely upon the security arrangements in place to recover the Loan principal, interest and any other amounts due to the Fund. It is possible that the value of assets secured in respect of a Loan Investment may be inadequate to cover the full amount of money outstanding to the Fund.

This may occur due to a variety of reasons, including a decline in a borrower’s financial position leading to lower cash flows or a lower value attributable to the security

property, and enforcement of the security taking longer than anticipated.

Loan recovery If the Fund is required to enforce the terms of a security arrangement to recover the Loan principal, interest or other outstanding monies, this may involve the sale of security property. The sale of assets may take time and this delay may temporarily leave the Fund with insufficient cash to meet distributions to investors or to repay investments in a timely manner.

Diversification risk Because you are investing in a particular Loan Investment an investment under this Offer does not provide diversification (subject to your ability to invest in multiple Loan Investments, which depending on the terms of each Loan Investment, your circumstances and other assets, may or may not provide diversification).

Valuation risk Although we take precautions to ensure all valuations are accurate and reliably obtained, there is a risk that a valuation will be fundamentally flawed. This can occur, for example, if the wrong methodology is used, if comparable properties or assets relied on are not truly comparable or if the assumptions and data about an asset that the valuer relies upon are false or incomplete.


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If a valuation being relied upon is wrong, then the Part 2 for the applicable Loan Investment may understate the true LVR in respect of a Loan Investment. This can increase the chances of a shortfall of funds from a default sale of a security property to meet the Loan, capitalised costs and any other amounts owed.

We mitigate this risk by having a documented Lending Policy which mandates valuation requirements and procedures and ensuring that the LVR in respect of each Loan Investment is disclosed in the applicable Part 2.

Loan Investment construction The Fund may invest in multiple Loan Investments relating to the same borrower and, at any time, all or a large majority of the Fund’s Loan Investments may involve the same borrower. The Part 2 for each Offer will contain a summary of the Fund’s existing Loan Investments, including details of the concentration of loans to any borrower.

Whilst a Loan Investment is separate from each other Loan Investment, a concentration of Loan Investments among a single, or a small number of, borrowers may increase the risk of investing in the Fund, particularly if you invest in multiple Loan Investments relating to the same borrower.

This is because a default by a borrower in relation to a Loan Investment may result in the borrower also defaulting on its obligations under the loan agreements corresponding to other Loan Investments. This may adversely impact the Distributions (if any) paid by the Fund and result in a capital loss for investors

Fund structure Though each Loan Investment is separate from each other Loan Investment, there is a risk that performance of a Loan Investment may be impacted by other Loan Investments. For example, if a borrower breaches its obligations under a Loan Agreement by failing to pay interest on time, it may impact Loan Investments in addition to the Loan Investment to which that Loan Agreement relates.

This is because the Fund may incur expenses, such as enforcement costs, or there may be general Fund expenses, such as audit costs, which are intended to be deducted from the defaulting borrower’s interest or paid by the borrower. If these expenses are unable to be recovered when payable by the Fund, the Fund may be required to pay such costs from other revenues, including the interest received for other Loan Investments.

Related party and conflict of interest risk The key risk posed by transacting with a related party is that we may fail to sufficiently:

(a) monitor Loans made to or the performance of obligations by;

(b) take action against; or

(c) in the event of a default, enforce our security against,

a related party, to the detriment of investors.

We manage such risks and potential conflicts of interest by adhering to our Conflict Policy and with the assistance of our Compliance Committee (which has a majority of independent members).

Liquidity risk An investment in the Fund should be treated as an illiquid medium to long-term investment because there is no secondary market for Units. If you wish to exit your investment prior to the end of the term corresponding to your Loan Investment, you will need to find a buyer for your Units and the buyer will need to be a Wholesale Investor.

We will maintain a list of proposed buyers and sellers of Units, who are Wholesale Investors, and investors can be added to, or obtain a copy of, the list by contacting us using the details in the Corporate Directory. If you wish to sell your Units during the term of your Loan Investment, you will need to contact a potential buyer and privately agree the terms of any sale, including price, as we will not list buy or sell prices or facilitate the sale or purchase of Units.

Compliance risk If we fail to comply with our AFS Licence conditions, the Constitution, Compliance Plan or Corporations Act it will likely have an adverse impact on you and the value of your investments. This may result in:

(d) the Fund being wound up; or

(e) ASIC taking action to remove us as the responsible entity.

Key personnel risk This is the risk that changes in our management or the loss of key personnel may result in us not adequately monitoring and overseeing the approval, management and enforcement of Loans thus increasing the risk of policies and procedures not being adhered to.


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Regulatory risk There is a risk that changes to the regulatory environment or the financial services industry may, either directly or indirectly, affect the value of an investment in the Fund.

Taxation risk Australian tax laws are constantly in a state of flux with the introduction of various taxation amendments which may affect you.

Tax liability is your responsibility. We are not responsible for the taxation consequences of an investment in the Fund. You should consult your own taxation adviser to ascertain the tax implications of your investments. See section 8 of this Part 1 for further information.

Macro economic risk The general state of the Australian and international economies, as well as changes in taxation, monetary policies, interest rates and statutory requirements may affect:

(a) a borrower’s ability to meet its obligations under a Loan Agreement;

(b) the market value of security property; or

(c) the Fund’s performance negatively and thus the value of your investment.

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7.1 SKYRING ASSET MANAGEMENT LIMITED

Skyring Asset Management Limited is an unlisted public company incorporated in Queensland which holds AFS Licence 422902.

Our AFS Licence authorises us to operate the Fund as a registered Managed Investment Scheme. As responsible entity, we are responsible for the day to day operation of the Fund in accordance with our AFS Licence, the Constitution, Compliance Plan and Corporations Act.

Our key driver is that our job is to help our investors to grow their wealth through a professionally managed investment strategy by a company that upholds the same investor values and continues to innovate.

7. MANAGEMENT

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7.2 DIRECTORS

David Mardell is the Chief Executive Officer and one of the founding directors of Skyring Asset Management Limited.

He and his co-founders established the company in 2011, at which time David brought more that 15 years’ experience in financial services, industry leadership and management experience — expertise that he has since honed further, for the very tangible benefit of his clients and associates.

As CEO, David oversees the corporate direction and strategy for Skyring’s operations. This includes the acquisition and delivery of investor assets through Skyring Asset Management’s Property and Income Funds assets.

David’s commitment to achieving Skyring’s vision for investors, partners, shareholders and stakeholders alike is demonstrated in his determination to help them grow their wealth through the Skyring Income Fund.

Cathy is a Chartered Accountant and Registered Tax Agent. In addition to her roles of CFO and Director on Skyring Asset Management’s Board of Directors, she is a Partner of Mardell Financial Centre. She has a BA in Psychology from The University of Queensland, and a Master of Professional Accounting from The University of Southern Queensland.

Cathy manages the strategic financial management of Skyring’s individual projects on investors’ behalf, and of Skyring Asset Management Limited itself.

Peter Howard has a solid background in information technology with over 20 years’ experience across a number of roles, including senior development and project management positions in Queensland’s public sector.

Along with his leadership and IT management expertise, Peter’s ‘outside the box’ thinking adds further depth to an already impressive team. He brings a fresh perspective, and can rally people from different disciplines to overcome challenges and bring new opportunities to life.

DAVID MARDELL CHIEF EXECUTIVE OFFICER AND DIRECTOR

CATHY HOWARD CHIEF FINANCIAL OFFICER AND DIRECTOR

PETER HOWARD CHAIRMAN

7. MANAGEMENT

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7. MANAGEMENT

7.3 COMPLIANCE COMMITTEE

We have appointed an independent Compliance Committee for the Fund to assist us meet our compliance responsibilities. In particular, the Compliance Committee’s role is to monitor our compliance with the Compliance Plan and Constitution in operating the Fund. The Compliance Committee reports directly to the Board and, in certain circumstances, to ASIC.

The Compliance Committee is required to have a minimum of three members, the majority of whom must be external to the Responsible Entity.

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8. TAXATION

8.1 GENERAL INFORMATION ONLY

Australian tax laws are complex and are subject to constant change. The views in this IM are based on law and announcements current in Australia as at the date of this IM. It does not take into account or anticipate any changes in the tax law or future judicial interpretations of the law after this time, nor does it take into account the tax law of countries other than Australia.

The taxation comments in this section are general in nature by necessity and the taxation implications may vary for each investor depending on their particular circumstances. Accordingly, we recommend you seek your own professional advice regarding the taxation implications associated with an investment in the Fund.

In this respect, the taxation comments below are only relevant for Australian resident investors. They are not relevant for investors who may be subject to special tax rules such as banks, insurance companies, managed investment trusts, tax exempt organisations and dealers in securities.

You may be required to pay tax in relation to your investment in the Fund (generally income tax). However, you may be able to claim some tax offsets or have the benefits of some tax concessions.

Some tax information has been provided for you below. However, although every care is taken, it is never possible to rule out the risk that on a subsequent review, taxation liabilities for the Fund could be increased or the benefit of concessions reduced.

8.2 DISTRIBUTIONS

Under current legislation the Fund will not be subject to taxation provided its taxable income (including assessable realised capital gains) is distributed in full to investors.

The Fund will fully distribute its distributable income, calculated in accordance with the Constitution and applicable taxation legislation, to investors who are entitled to the income under the Constitution. Should realised capital losses arise, they are not distributed to investors but are retained in the Fund to be offset against any future realised capital gains.

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8.3 INCOME TAX

You may be liable to pay income tax on Distributions received from the Fund depending on your total taxable income and your income tax rate.

The tax impact for you in relation to Distributions from the Fund will depend on:

(a) your personal tax position;

(b) your marginal tax rate; and

(c) the composition of the Distribution, i.e. the proportion of income or tax offsets making up the Distribution.

We will send you an annual statement indicating the taxable and non-taxable component of Distributions (including any tax offsets) for the financial year, to assist in the preparation of your income tax return.

8.4 CAPITAL GAINS TAX

There should be no capital gains tax liability for investors as the capital amount returned to investors will generally equal the amount initially invested, except if the Fund suffers a loss.

8.5 TRANSFER DUTY

Depending on the application of relevant State and Territory laws, transfer duty may be payable upon the transfer of Units. Investors should seek professional advice in relation to the application of transfer duty prior to transferring Units.

8.6 TAX FILE NUMBERS – AUSTRALIAN RESIDENTS

You can choose whether to provide your Tax File Number (TFN) on your Application Form. If you do not provide your TFN or claim an exemption, we are required to deduct tax at the highest marginal rate, plus the Medicare Levy (currently 46.5%), from your Distributions. We are authorised to collect TFNs under Australian tax law.

If you are a business taxpayer you may provide us with an ABN instead of a TFN.

8. TAXATION

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8.7 GOODS AND SERVICES TAX (GST)

The issuing and redemption of Units will not be subject to GST.

GST is not payable on a transfer of Units. However, GST may be incurred on services that you acquire in relation to the acquisition, disposal or redemption of Units (such as legal or accounting advice). You should seek advice about whether you are entitled to claim input tax credits in respect of GST on those costs.

GST is not payable on Distributions made to you.

8.8 WITHHOLDING TAX (OVERSEAS INVESTORS)

We may be required to withhold amounts from Distributions paid to overseas investors. Overseas investors should seek independent advice as to the application of withholding tax to their particular circumstances.

8.9 FOREIGN ACCOUNT TAX COMPLIANCE ACT (FATCA)

FATCA is United States (US) tax legislation that enables the US Internal Revenue Service (IRS) to identify and collect tax from US residents that invest in assets through non-US entities.

If you are a US resident for tax purposes, you should note that the Fund is a ‘Foreign Financial Institution’ under FATCA and complies with its FATCA obligations, as determined by the inter-governmental agreement entered into by Australia and the US for the purposes of implementing FATCA. Under these obligations, the Fund must obtain and disclose information about certain investors to the Australian Taxation Office (ATO).

In order for the Fund to comply with its obligations, we require that you provide certain information about yourself, including your US Taxpayer Identification Number. We will determine whether the Fund is required to report your details to the ATO based on our assessment of the relevant information received.

8. TAXATION

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8.10 COMMON REPORTING STANDARD (CRS)

The CRS is a tax reporting regime developed by the Organisation for Economic Co-operation and Development (OECD). Australia has committed to implementing the CRS by signing the Multilateral Competent Authority Agreement with the OECD and passing appropriate supporting legislation enabling tax information to be exchanged between tax authorities.

From 1 July 2017, the CRS requires financial institutions to identify and report foreign resident account holder information to their local tax authority, which will in turn exchange the information with the tax authorities of participating foreign jurisdictions.

8.11 NOT TAX ADVICE

This tax summary is not tax advice. It is provided by us as a general statement relating to high level Australian tax implications for an investor in the Fund. It does not address all tax consequences of an investment in the Fund, or investments by the Fund. Investors should seek their own independent advice as to how an investment in the Fund might affect their personal tax position.

We are not licensed under the tax agent services regime and cannot provide tax advice to investors. This section is intended to be a general guide only and is not intended to be definitive advice, nor relied upon as such. As the taxation outcomes will depend on individual investors’ personal circumstances, it is recommend that all investors consult with their taxation adviser in relation to how these outcomes may apply to them.

8. TAXATION

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9.1 BACKGROUND

We consider that certain documents are material to the operations of the Fund and may be relevant to you. A description of material documents, together with a summary of the more important details of each of these documents, is set out below. The Part 2 for each Loan Investment contains a summary of the key loan and security agreements relating to the corresponding Loan.

9. MATERIAL DOCUMENTS

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9.2 CONSTITUTION

The Constitution establishes the Fund and governs your rights and obligations as an investor in the Fund. Investors are bound by the provisions of the Constitution. The Constitution and the Corporations Act regulate the operation of the Fund and set out the rights and liabilities of investors and of our responsibilities and duties as the responsible entity.

The Constitution includes provisions which relate to:

(a) the responsible entity’s powers, duties and obligations;

(b) the rights and obligations of investors;

(c) the ability of investors to remove the responsible entity;

(d) the issue of Units and the procedure for the redemption of Units;

(e) the transfer and transmission of Units;

(f) the valuation of the Fund;

(g) fees payable to the responsible entity;

(h) the responsible entity’s right to be indemnified by the Fund for expenses, losses and liabilities arising in its capacity as responsible entity providing it has properly performed its duties;

(i) the winding up of the Fund;

(j) meetings of investors;

(k) complaints and procedures in relation to the Fund; and

(l) the responsible entity’s limitation of liability (subject to the Corporations Act).

We may amend the Constitution without investor consent where we reasonably believe the amendment will not adversely affect investors’ rights. Otherwise, the Constitution can only be amended where at least 75% of votes cast by investors (at a meeting convened in accordance with the Constitution and the Corporations Act) vote in favour of the amendment.

We may retire, or be removed as responsible entity by investors, in accordance with the Corporations Act.

Investors may view a copy of the Constitution at our registered office during business hours. A copy of the Constitution may be obtained by searching ASIC records or by written request to us and a payment of a fee (currently $10).

9.3 COMPLIANCE PLAN

We have prepared a Compliance Plan which has been lodged with ASIC. The Compliance Plan is a document that outlines the principles and procedures in relation to the conduct of the Fund that we follow to ensure we comply with the provisions of the Corporations Act, ASIC policies and the Constitution.

The Compliance Plan deals with a wide range of issues including:

(a) that the assets of the Fund are identified as assets of the Fund;

(b) ensuring the Compliance Committee functions properly; and

(c) that accurate records of the Fund’s operations are kept.

Each year, adherence to the Compliance Plan is audited by an external Compliance Plan auditor and the audit report is lodged with ASIC.

The Compliance Plan may be viewed at our offices during normal business hours.

9. MATERIAL DOCUMENTS

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10. ADDITIONAL INFORMATION

10.1 NATURE OF INVESTMENT

The Fund is a unit trust established by the Constitution. When you invest in this Offer you acquire Units that, at the time of acquisition under this IM, are priced at $1 each. Your investment in the Fund entitles you to share in the income generated by your Loan Investment, being the particular Loan you choose to invest in. When you redeem your investment we will redeem the Units you hold in the Fund.

10.2 SKYRING INDEMNIFIED

To the extent permitted by the Corporations Act and the law, we, as responsible entity, are indemnified out of the Fund against any claim, action, damage, loss, liability, cost, expense or payment which we incur or are liable for, provided that it does not arise from our failure to properly perform our duties.

10.3 INVESTOR’S LIABILITY LIMITED

The Constitution seeks to limit the liability of investors to the amount of their investment plus other moneys payable to us or the Fund pursuant to the Constitution (if any). However, because this is a matter which can only ultimately be determined by the courts, no assurance or guarantee is given that investors’ liability will be limited in a manner discussed above.

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10.4 COMPLAINTS

If you have a complaint about any aspect of your investment in the Fund, please write to us at:

Complaints Manager Skyring Asset Management Limited 6 Moorak Street Taringa QLD 4068

Alternatively, you can phone us on 1300 73 72 74

10.5 LABOUR STANDARDS AND SOCIAL, ETHICAL AND ENVIRONMENTAL CONSIDERATIONS

While we do not explicitly take into account these factors and do not have a specific methodology for the extent to which these factors are considered, we may take them into account as one of the components considered in investing the assets of the Fund.

10.6 UPDATED INFORMATION

Where there is a change to information which is not material to investors this updated information will be made available on our website at www.skyring.com.au (Updated Information). If you require a paper copy of any Updated Information please contact us using the details in the Corporate Directory and it will be provided without charge on request.

While this IM and any Updated Information are up to date at the time of preparation, changes may be made to the Fund from time to time. Investors should ensure that they keep up to date with the latest information on the Fund.

To obtain this information either:

(a) visit our website at www.skyring.com.au; or

(b) phone us on 1300 73 72 74 (inside Australia) or +61 7 3363 1200 (from outside Australia).

A paper copy of the most recent information will be sent to you free of charge on request.


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10.7 COOLING-OFF PERIOD

A 14 day cooling-off period applies during which you may change your mind about your subscription for Units and request the return of your money in writing. Generally, the cooling-off period runs for 14 days from the earlier of the time your subscription is confirmed or the end of the fifth Business Day after your Units are issued.

A cooling-off period is not applicable if the Fund ceases to be a liquid managed investment scheme or where rights are exercised in relation to Units during the cooling-off period.

10.8 UNIT PRICING POLICY

We have a policy for unit pricing discretions we use in relation to the Fund for the purposes of class order 13/655. Our unit pricing policy for the Fund and records of the discretions we exercise are available, free of charge, on request and can be obtained by contacting us by email at [email protected] or by phone on 1300 73 72 74.

10.9 DISCLOSING ENTITY

The Fund may become a disclosing entity in which case the following arrangements will apply.

As a disclosing entity, the Fund will be subject to regular reporting and disclosure obligations. Copies of documents lodged with ASIC may be obtained from, or inspected at, an ASIC office. You will have the right to obtain various financial reports lodged with ASIC for the Fund.

We will satisfy our continuous disclosure obligations for the Fund by publishing material information on our website at www.skyring.com.au.

Any material information affecting the Fund will be placed on our website.

Accordingly, given the disclosure of material information will be made on our website, we will not be required to lodge continuous disclosure notices for the Fund with ASIC.


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10.10 PRIVACY

The privacy of your personal information is important to us. We collect personal information directly from you through the Application Form and from third parties who assist us with our business. The purpose of collecting your information on the Application Form is to process your application and manage your investment in the Fund. If the personal information you provide to us is incomplete or inaccurate, we may not be able to work with you effectively, or at all, and may be delayed in performing our business functions.

If you invest in the Fund on the recommendation of your financial adviser, details of your investment and information about you will be provided to your financial adviser.

From time to time, we may wish to advise you about other services and products which could suit your needs. By making an application, you agree that we may disclose your personal information to other corporations specifically, but not solely, for marketing purposes. We are not likely to disclose your personal information overseas.


All personal information collected will be collected, used and stored by us in accordance with our privacy policy, a copy of which is available on request or at our website listed below.

However, if you do not want this information to be used for this purpose, you must exercise your right to instruct us not to disclose any information concerning your personal information. You may do this by contacting us using the details in the Corporate Directory. However, we may still disclose personal information where required by law.

You are entitled to request reasonable access to, and correction of, your personal information. We reserve the right to charge an administration fee for collating the information requested.

For a copy of our privacy policy and for information about how we deal with personal information, including how you can complain about privacy-related matters and how we respond to complaints, please visit our website at www.skyring.com.au.

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10.11 ELECTRONIC IM

This IM, comprising Parts 1 and 2, is available in electronic form at http://www.skyring.com.au. We will send, on request, any person receiving this IM electronically, a paper copy of the IM (and attached Application Form) free of charge during the period of the Offer. Applications must be made by completing a paper copy of the Application Form.

We will not accept a completed Application Form if we have reason to believe that the applicant has not received a complete paper copy or electronic copy of the IM, comprising Parts 1 and 2, or if we have reason to believe that the Application Form or electronic copy of the IM has been altered or tampered with in any way.

While we believe that it is extremely unlikely that during the period of the Offer the electronic version of this IM will be tampered with or altered in any way, we cannot give any absolute assurance that this will not occur. If you are in doubt about the validity or integrity of an electronic copy of the IM you should immediately request a copy of the IM directly from us or your adviser.

10.12 INVESTMENT BY OUR OFFICERS AND EMPLOYEES

Pursuant to the Constitution, our employees and officers are entitled to apply for Units. It is our policy to review any such application, which must be on the same basis as that of other applicants.

10.13 DIRECTOR’S AUTHORISATION

Each of the Directors has consented to, and authorised, the issue of this IM, consisting of Part 1 and Part 2.


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AFS LICENCE an Australian financial services licence issued by ASIC.

APPLICATION FORM the application form attached to Part 2.

ASIC Australian Securities and Investments Commission.

BOARD the Responsible Entity’s board of directors.

BUSINESS DAY a day other than a Saturday, Sunday or public holiday in Brisbane, Queensland.

COMPLIANCE COMMITTEE the committee established by the Responsible Entity in accordance with the Corporations Act, as described in section 7.3 of this Part 1.

COMPLIANCE PLAN the compliance plan for the Fund.

CONSTITUTION the constitution for the Fund.

CORPORATIONS ACT the Corporations Act 2001 (Cth).

DISTRIBUTION the distributable amount that is distributed to investors holding Units during a Distribution Period.

DISTRIBUTION PERIOD means the period to which a Distribution relates, generally a calendar month (subject to availability of Distributions).

FINANCE DOCUMENTS means the Loan Agreement and Security Agreement.

LOAN means a loan by the Fund to a borrower which underlies a particular Loan Investment.

FUND Skyring Income Fund ARSN 160 006 824.

GENERAL UNITS Units issued where investors’ funds remain in the Fund’s bank account pending investment in a Loan Investment.

IM this information memorandum, comprising Part 1 and Part 2.

INDICATIVE means, for a Loan Investment, an estimated Distribution DISTRIBUTION RATE rate calculated as, the interest rate charged to the borrower

less our management fee and estimated Fund expenses, as disclosed in the Part 2.

LENDING POLICY the manual documenting our policies and procedures for the making, monitoring, administration, discharge and enforcement of Loans, as summarised in section 5 of this Part 1.

LOAN AGREEMENT means a loan agreement entered by the Fund in relation to a Loan.

LOAN INVESTMENT means a sub-scheme of the Fund representing an investment opportunity corresponding to a specific Loan, for which a corresponding Part 2 has been prepared and distributed with this Part 1.

LOAN INVESTMENT UNITS Units issued which have a proportionate interest in a particular Loan Investment.

LVR means loan to valuation ratio, and is explained in section 3.8 of this Part 1.

OFFER means the offer of Units under this IM to Wholesale Investors.

PART 1 this document, being Part 1 of this IM, and containing general information about the Fund, the Responsible Entity and Loan Investments.

PART 2 Part 2 of this IM, containing specific details of the applicable Loan Investment.

RESPONSIBLE ENTITY, Skyring Asset Management Limited ACN 156 533 041 SKYRING, US, OUR AND WE AFS Licence 422902.

SECURITY AGREEMENT means an agreement entered by the Responsible Entity on behalf of the Fund with a borrower which secures the Loan advanced by the Fund to that borrower from time to time.

UNIT a unit in the Fund.

UPDATED INFORMATION is explained in section 10.6 of this Part 1.

WHOLESALE INVESTOR means wholesale clients (as defined in section 761G of the Corporations Act) and sophisticated investors under section 761GA of the Corporations Act.

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CORPORATE DIRECTORY

RESPONSIBLE ENTITY Skyring Asset Management Limited ACN 156 533 041 AFS Licence 422902

REGISTERED OFFICE AND POSTAL ADDRESS 6 Moorak Street TARINGA QLD 4068

PO Box 1476 KENMORE QLD 4069

CONTACT DETAILS Phone: 1300 73 72 74 (within Australia) + 61 7 3363 1200 (outside Australia)

Fax: (07) 3363 1299

Email: [email protected]

Website: www.skyring.com.au

FUND AUDITOR KBP Audit Services Level 9, Toowong Towers 9 Sherwood Road TOOWONG QLD 4066

RESPONSIBLE ENTITY’S SOLICITOR McCullough Robertson Lawyers Level 11, Central Plaza Two 66 Eagle Street BRISBANE QLD 4000